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 over-state 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).
B. B. Howard and M. Upton, Introduction to Business Finance (McGraw-Hill 1953) chs 3, 4.
F. W. Paish, Business Finance (Pitman 1965) ch. 5.
H. Rose, Disclosure in Company Accounts, Eaton Paper (Institute of Economic Affairs 1965).
Report of the Company Law Committee, Cmnd 1749 (H.M.S.O. 1962).
A. S. Ashton, ‘Investment Planning by Private Enterprise’, Lloyds Bank Review (Oct 1962).
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© 1969 K. Midgley and R. G. Burns
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Midgley, K., Burns, R.G. (1969). Some Accounting Problems. In: Business Finance & the Capital Market. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-15309-1_8
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DOI: https://doi.org/10.1007/978-1-349-15309-1_8
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