DEPRECIATION AND PROFIT DETERMINATION.
The article focuses on relationship between depreciation of assets and profit determination. In seeking guidance as to appropriate wage, price and allocation, and taxation policies, earnings reports in terms of individual firms, industries, and all business have taken an undisputed position of importance. There are widespread current expressions that the profit figures shown in these statements are inflated or overstated. The holders of this view contend that basing depreciation charges on original cost in periods of marked change in prices contributes to a distortion of the profits figure. There is general agreement among economists and accountants that business income is measured by the excess of revenues over the cost of producing those revenues. One of the costs of producing revenues is, of course, the gradual consumption of the service-rendering ability of capital assets that is described as depreciation. The central purpose of depreciation accounting is to allocate the cost of these long lasting assets to the periods of use in a reasonable and orderly fashion.
- DOI
- 10.2308/tar-7064413
- Volume
- 25 (1)
- Pages
- 45-57
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref