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90 HASKINS & SELLS December Deducting the Deficit EV I D E N C E that accountancy practice is emerging, figuratively speaking, from the darkness of the Middle Ages is plentiful in many quarters. The dawn of a Renaissance begins to light the professional sky. Every now and then, during the past two or three years, the profession has received a shock from some lawyer, engineer, credit man, banker, or author, who has vied with the others in expounding the philosophy of accountancy. Steeped in the dogma of tradition, accountants at first found it difficult to believe that any one outside of their own ranks could tell them anything about their chosen subject. Gradually, if somewhat slowly, has come a realization that professional accounting service, in order to succeed, must take cognizance of substance as well as form, of collateral as well as direct relations with clients, and of common sense in the application of scientific principles. As a result, more and more frequently some courageous progressive startles the professional world with some novel act of procedure which, when properly appreciated, makes one wonder why it was so long forthcoming. But accountants are still somewhat stupid about certain things. They are still too prone to regard a balance sheet as a contrivance to effect equilibrium instead of a figure-picture of financial condition. That the two sides are in agreement, in so far as the figures are concerned, seems to be the limit of comprehension. To tell the story of those relations which are incident to condition; to set forth facts which will serve to guide the judgment in policymaking; to make the statement pulsate with life and interest; these and other necessities of constructive procedure seem never to have made any impression on the consciousness of some individuals. Involved in the matter of balance sheet-making is the question of how a deficit should be treated. Stated briefly, "Should a deficit be shown on the asset side as a balancing item, or deducted on the right-hand side, or liabilities section, from the invested capital account?" The question is more than an academic one, and therefore an attempt to answer it may only be made after consideration from a practical angle. In other words, "What will be the meaning, in either form of treatment, to the reader of the balance sheet?" Conceptions may differ as to what is a deficit, and it must be admitted that the term has different meanings at different times. For the purpose of this discussion it may be regarded as that condition wherein, from one cause or another, there has been some encroachment on the invested capital. Deficits from operations may arise occasionally, or continue over a series of years, but until there has been an accumulation of such net operating losses sufficient to exceed any previously earned
Object Description
Title |
Deducting the deficit |
Author |
Anonymous |
Subject |
Financial statements |
Citation |
Haskins & Sells Bulletin, Vol. 06, no. 12 (1923 December), p. 90-92 |
Date-Issued | 1923 |
Source | Originally published by: Haskins & Sells |
Type | Text |
Collection | Deloitte Digital Collection |
Digital Publisher | University of Mississippi Libraries. Accounting Collection |
Date-Digitally Created | 2009 |
Identifier | HS Bulletin 6-p90 |