CHAPTER 2B--ARB NO. 43
Combined Statement of Income and Earned
surplus
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Over the years it is plainly desirable that
all costs, expenses, and losses, and all profits of a business...be included
in the determination of income.
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If this principle could be carried out...perfectly,
there would be no charges or credits to earned surplus....
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This is an ideal upon which all may agree, but
because of conditions impossible to foresee, it often fails of attainment.
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Charges and credits are made to surplus which
clearly affect the cumulative total of income for a series of years, although
their exclusion from the income statement of a single year is justifiable.
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There is a danger that these excluded items
will be overlooked, or at any rate not given full weight, in computing
a company's long-run income or income-earning capacity.
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