Combined statement of income and earned surplus;

              Accounting Research
BULLETINS
No. 8
Issued by the Committee on Accounting Procedure, American Institute of Accountants, 270 Madison Avenue, New York 16, N. Y.
copyright 1941 by American Institute of Accountants
Combined Statement of Income
and Earned Surplus
IN RESEARCH BULLETIN No. 1 the committee called attention to the "increased recognition of the significance of the income statement" and the resulting "tendency to regard the balance-sheet as the con-necting link between successive income statements and as the vehicle for the distribution of charges and credits between them." This led to a suggestion that the committee should give consideration to the general form of the income statement, with particular reference to the question of the influence of form upon effective presentation in the light of the enlarged conception of the functions of the statement.
The term "income statement" will be used throughout this mem-orandum though the committee recognizes that in some cases the term "profit and loss" is used instead of "income," and "account" instead of "statement." These differences in usage are under consider-ation by the committee on terminology.
The committee has noted, from examination of the published state-ments of a selection of 500 corporations, a considerable tendency toward the practice of closely combining the annual income statement with the statement of earned surplus. For the year 1939 the income statement was presented as a single integrated statement, running from sales to earned-surplus balance, in 19 per cent of the cases ex-amined. In another 32 per cent the income statement and surplus statement were shown as two related exhibits on a single page of the published report. In 32 per cent of the examples the income state-ment and surplus statement were shown as separate exhibits but with their close relationship emphasized by presentation on facing pages of the report. In only 17 per cent of the cases were the earned-surplus analyses shown otherwise than as incorporated with or adjacent to the current operating data. Appendix A shows a tabulation of these data for 1939 and 1938.
There are decided advantages in such combined statements, but also some disadvantages. The committee therefore feels that a useful purpose will be served if it expresses approval of the practice where it is found feasible, without recommending its general adoption; at the
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February 1941