Showing papers on "Accounting period published in 1970"

The Measurement of Income

Abstract: This chapter focuses on the measurement of income. There are legal and economic reasons why the income of entities must be measured annually for the information of shareholders, creditors, tax gatherers, and others, irrespective of whether the calendar year is a time division appropriate to the production and exchange circumstances of the entity, but the periodic measurement of income for the purposes of public reporting presents accountants with some of their most difficult problems. An obvious approach would be by way of comparison of the net worth of an entity at the beginning and ending of the accounting period. An alternative way of seeking to approximate asset values shown in published financial statements to present net worth is by periodic revaluation of assets to realizable or replacement cost. Procedures of this kind are, in fact, used by some organizations, but they, too, involve a considerable amount of subjective judgment on the part of the accountant, and the usual practice is to base accounting measurements of income on a comparison of the revenue arising in an accounting period with the costs incurred in that, or previous periods, associated with the earning of that revenue.