Abstract
The normal accounting profit may not be synonymous with the real profit. There are different methods of depreciation and valuation of stocks, and the figure for profit will vary according to which of these methods are used. Conventional methods of depreciation and valuation tend to overstate profit in times of rising prices, and understate it in times of falling prices. The inclusion of overhead costs in the valuation of closing stocks of work-in-progress for a particular year will lead to a higher figure for profit than would be the case if these are excluded. The method of taxation affects business behaviour and the level of investment.
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Further Reading
W. T. Baxter and S. Davidson (eds), Studies in Accounting Theory, 2nd ed.(Sweet & Maxwell 1962)
M. Bourn (Editor), Studies in Accounting for Management Decision (McGraw Hill 1969).
B. B. Howard and M. Upton, Introduction to Business Finance (McGraw-Hill 1953) chs 3, 4.
K. Midgley and R. G. Burns, Case Studies in Accounting (Macmillan 1972).
F. W. Paish, Business Finance (Pitman 1965) ch. 5.
H. Rose, Disclosure in Company Accounts, Eaton Paper (Institute of Economic Affairs 1965).
Edward Stamp and Christopher Marley, Accounting Principles and the City Code (Butterworths 1970).
Report of Company Law Committee Cmnd 1749 (H.M.S.O. 1962).
Methods of Financial Reporting used by 300 Major British Companies The General Educational Trust of the Institute of Chartered Accountants in England and Wales 1970.
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© 1972 Kenneth Midgley and Ronald G. Burns
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Midgley, K., Burns, R.G. (1972). Some Accounting Problems. In: Business Finance and the Capital Market. Palgrave, London. https://doi.org/10.1007/978-1-349-01829-1_8
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DOI: https://doi.org/10.1007/978-1-349-01829-1_8
Publisher Name: Palgrave, London
Print ISBN: 978-0-333-14657-6
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