The article presents information on the concept of developing a relation between economics and accounting. According to the author, the precipice on the economic side is the concept of consumers' cost, whereas the considerably lower precipice on the accounting side is the present limited concept of inventoriable values. Profit has been defined as that increment of consumers' cost value which is ordinarily in excess of the conversion value created for consumers' needs by the merchant or manufacturer. It has been assumed that only those merchants and manufacturers who do create, through their operations, consumers' cost values will remain in business, because business cannot continue without profit. The theory of marginal utility finds its application and, sooner or later, produce a proper balance between the demands for economic goods and the activities that satisfy the demands. The article summarize that finished inventories, or merchandise for sale, should Include all the values created by the business process, except the profit which is the additional value created by the consumer's act of purchase.

In a manufacturing business, according to the author's view, there are only two primary and fundamental activities, which should be made to embrace all operating factors and the costs attached to them, the two activities are those of production and distribution. Management and administration in a manufacturing business or in any other business, are not ends in themselves. In manufacturing the administrative function must concern itself either with problems of production or problems of distribution. Financial activities of an internal nature over which management has control must also be viewed as assisting production and distribution in the proportion that these two fundamental divisions utilize the funds of the business. It is generally admitted that modern cost accounting methods lead to an accurate knowledge of product cost, costs which express themselves in the various inventories of manufactured product, and, of course, in the inventories in process. Cost accounting methods also enable one to recognize and give effect to all the variable production factors that enter into the manufacture of a variety of goods.