ACCOUNTING THROUGH INCOME OR SURPLUS.
Two basic statements have been developed in accounting to disclose the financial structure of an enterprise: the balance sheet which reflects the condition of a company at a given date and the operating statement covering transactions of a certain period. The profit-and-loss statement and the balance sheet are closely linked by the fact that the result of the operations of a fiscal period, determined in the income statement, is transferred to the balance sheet account, earned surplus. The balance sheet emphasizes the amount of surplus; the operating statement gives information as to the source of surplus and the reason of changes therein. It has been argued that the decision of whether certain items should be included in the income statement or should be carried directly to surplus is "a matter to be determined by sound business judgment, made upon all the facts of the particular case and guided by the principle of conservatism. The surplus viewpoint can be identified with the common law way of thinking, whereas the income viewpoint, claiming categorically that all gains and losses should be reflected in the income statement resembles more the civil law approach.
- DOI
- 10.2308/tar-7042413
- Volume
- 17 (3)
- Pages
- 294-302
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref