ABSTRACT
The normal method of dealing with fixed assets is to ignore fluctuations in price, to apportion their cost as equitably as practicable over their estimated useful lives and to regard the figures in the balance sheet, not as the values of the assets, but as expenditure to be charged to future operations. In general, the readers agree with the recommendations issued by the Institute of Chartered Accountants in England and Wales. In the event of the historical costs being the basis on which annual accounts should be prepared, it will be necessary to analyse the profits and to separate the real profits from the sham profits. It is possible, if only the economist can provide a suitable ‘index of inflation’, to prepare accounts in a period of fluctuating price levels that are quite as satisfactory as are orthodox accounts in a period of steady price levels.
