The Accounting Review Vol. 34 No. 4 1959
DEPRECIATION: LEFT OR RIGHT?
Abstract
The article presents views of professor Sidney I. Simon on accumulated depreciation that should not be deducted from the assets, but shown on the other side of the balance sheet as a reserve. He recalls that, in the days before it was generally realized that depreciation ought to be recorded consistently and systematically, there was a tendency to allow it only in years of good earnings. It was also customary at that time to post the credit directly to the asset account. It is therefore a great pity that the conferring of a title such as reserve or provision, or allowance should induce many to attribute to this collection of credits some sort of independent existence. Accumulated depreciation is not too different from a surplus reserve because failure to record depreciation costs would overstate profit and surplus, and tempt directors to dissipate assets in dividends. Failure to record any cost would overstate profit. Simon refers to the danger of misleading the layman if the asset appears in the balance sheet at the net figure, which he believes may be interpreted as the "true value" of the asset.
- DOI
- 10.2308/tar-7057842
- Volume
- 34
- Issue
- 4
- Pages
- 570-571
- Language
- en
- Sources
- openalex crossref