Abstract The article discusses the goodwill aspect of valuation of items appearing on the financial statements of a business concern. The definition of goodwill as presented by accountants and the courts have been given consideration. Among them is the definition given by T.H. Sanders, H.R. Hatfield and U. Moore in "A Statement of Accounting Principles," as the excess of the total value of the assets of a going concern over that part of the value which can be allocated to specific assets. All legal cases on the subject agree that the goodwill of a business, though intangible, is property which may be sold as a legitimate asset if it is substantial and may be paid for in capital stock. A cardinal principle in the accounting for goodwill is that it should be shown on the books only when purchased, and then at no more than such purchase price. The article discusses the question whether the cost of extensive advertising, expected to yield benefits for a long period may be capitalized as an asset. It discusses the accounting principle that in transactions the value of goodwill is based on an accurate estimate of prospective net earnings and the amortization of goodwill after its acquisition.

Abstract The principle of valuing current assets in general, and inventories in particular, at "cost or market, whichever is lower" has been thoroughly damned, and still remains "firmly fastened on modem accounting." The fact that it is logically inconsistent, aids in distortion, and is often actually un-conservative, is almost as much neglected by accountants. No one familiar with accounting theory or practice needs to be reminded of the inconsistencies and distortions caused by blind adherence to valuations at the lower of cost or market. Many textbooks advocate, but few companies practice, the reduction to a lower market value by means of a reserve for decline in inventory and a charge to an extraordinary loss, rather than swallowing the reduction in cost of sales. This is recommended in an effort to eliminate the misconceptions and the misleading effect, on the results of the following year, of cost or market valuations. More often, however, the inconsistencies and distortions have been ignored or rationalized because of the supposed need for the application of the rule on conservative grounds.

Abstract More than six years have passed since the Subcommittee on Terminology of the American Institute of Accountants recommended the discontinuance of the term surplus in accounting. This pronouncement has had considerable effect in accounting circles, and a definite trend away from the use of the condemned term can be perceived. It is true the economic meaning of surplus is different from its accounting signification. To the economist, surplus represents unearned income due to the inelasticity of the supply of any productive factor, conceptually more or less the same as the economic rent of land. The literature of both professions contains many articles comparing the dissimilar meanings of homonymic words common to the two disciplines, so that no student of either should be unduly misled by a different signification of the term surplus in the other profession. Certainly the economist has no greater claim to use of the term than has the accountant. With reference to the problem of the inclusion in capital or paid-in surplus of premium paid on capital stock, the major discussion in the legal decisions revolves around whether such premium on stock is available for dividends, each case interpreting the statute of a particular state.