Comments on Third Statement of Accounting Concepts and Standards.

Abstract The Third or 1948 statement of accounting principles underlying corporate financial statements is a worthy successor to previous editions by the American Accounting Association. Written in concise and generally clear style, it has restated the principal concepts of accounting in the light of the economic developments of the past seven years. Especially commendable are the emphatic and clear pronouncements on those post-war accounting practices which have tended to distort the significance of income for the period. These statements of concepts and standards provide, reserves may not be created by charges to revenue except in recognition of expense, the income statement for a period should provide an exhibit of all revenue and expense given accounting recognition during the period, reserves created from retained income should be returned undiminished to retained, income when the need for such reserves has passed, the balance sheet should contain no special section for reserves and a permanent distinction should be maintained between paid-in capital and retained income. Perhaps no committee could write a statement of accounting principles without some differences of opinion. Origins, uses and implications of accounting data are much too broad to expect unanimity of opinion.