ABSTRACT
"Accruals" is one of the four fundamental accounting concepts listed in Statement of Standard Accounting Practice, Number 2, issued by the Accounting Standards Committee in 1971. Unlike many Standards, "Disclosure of Accounting Policies" provoked little or no controversy, probably because the accounting statements published by British companies have broadly complied with these fundamental concepts for many years. However, this was by no means always the case. For example, cash rather than accruals was initially used as the principle basis for financial reports. According to Lee, cash-based charge and discharge accounting remained dominant until at least the sixteenth century, and was "applied until well into the nineteenth century to all operations on many large estates, including the working of collieries and other industrial enterprises".( 1 ) In a similar vein, Hudson has observed that "estate accounting methods were also transferred to some of the early factory industrial ventures. This resulted in the virtual absence of capital accounts - purchases of fixed assets being treated as costs to revenue for the year or accounting period. This led to gross distortions when profitability came to be examined....It was thus difficult to isolate and assess returns on investments."( 2 )
