The article discusses cash movements and periodic income determination. Conceptually, the determination of income is relatively simple. Income is produced as a result of business operations. The problem of accounting is not, however, the simple measurement of the difference between total revenue and total outlay over the life of an investment, but that of measuring the difference between revenues and expenses for a given segment of that life. Modern accounting breaks up a continuous stream of business activity into artificial segments known as accounting periods. This operation is designated as periodic income determination. This problem of periodic income determination is inseparably connected with that of property valuation. The understanding of the relationships between cash movements, income, and asset value does not, of course, immediately and automatically solve all the problems of profit measurement. The assumption that the value of the measuring unit remains stable is implicit in the foregoing discussion. The price-level problem is therefore an example of an important problem which remains unsolved. This problem concerns differences between real and monetary income and the maintenance of capital.

Accountants are generally agreed that the assumption of the going concern is an essential accounting convention or "principle." It rules out the use of liquidation values in statements and in addition, forms the basis of depreciation accounting, that is, that fixed assets and intangibles should be amortized over their useful life rather than some shorter period. Current practice in regard to the valuation of merchandise, including raw materials and partly finished goods, is curiously inconsistent and illogical. Asset valuation and income determination were based on an incomplete application of the going concern convention tempered by conservatism. The realization convention provided a theoretical justification for the valuation of inventories at cost, a practice that was inconsistent with the going concern convention. The logic of the realization convention requires that assets be valued at cost until the sale is made. The realization convention also affected the concept of income. The area of complementarity between the realization and going concern conventions lies in the area of fixed assets, whereas the area of basic conflict lies in the area of current assets.

Reviews the book "Elementary Accounting," by John Arch White and Marcus H. Bean.

Reviews the book "The Accounting Postulates and Principles Controversy of the 1960s," edited by Stephen A. Zeff.