FIXED ASSETS AND CURRENT COSTS.

The concept of business income is dependent on the ends served by the use of the income measurement. There is no one correct method of computing net profit. The question of which procedure to use can be decided only on the basis of the purpose or purposes for which the figures are to be used, not on an abstract basis. Hence, the result will vary according to the purposes for which the calculations are being made. The income statement as prepared by the accountant is used for a variety of purposes. It is used by management in decision making. It is used by the officers and directors of a corporation as a report of stewardship to stockholders on the results of operations and availability of dividends. It is used by regulatory bodies in determining rates and regulations. It is used by labor in formulating its wage demands. It is used by economists in preparing national income statistics and in economic analyses. These are also some of the more important uses for accounting results. The accounting procedures to determine net income relate only to money values and do not undertake to produce results in terms of real values. The accountant's failure to attack the problem of price change is sufficient reason for a complete re-examination of these two main concepts of income. This re-examination may serve as a guide to the interpretation and understanding of accounting figures as presently calculated and possibly as an aid in bringing about a reconciliation of the two theories and the two practices.