ABSTRACT
The profit-and-loss account and the calculation of periodic profits acquired a new status in the course of the nineteenth century in company accounting. As the payment of dividends affects the liquidity of the company, there was a tendency to link the profit figure reasonably closely with the increase in the net current assets becoming available from business operation. Provided accounts were drawn up in good faith in the interests of the company and approved by auditors, the Courts were loath to intervene. The application of the accepted conventions necessarily left a fairly wide area of accounting discretion to company managements and auditors. The accounting conventions and practices underlying the preparation of accounting reports for company shareholders have their roots in the nineteenth century. The more recent re-valuations effected in the accounts of some public companies represent a renewed interest in a neglected aspect of financial reporting to absentee shareholders, though even here considerations of the profit calculation might be paramount.
