Abstract Notwithstanding the diversity of content and emphasis in the first-year course in accounting among different schools, it should be generally agreed that a major object of the introductory course is to enable the student to acquire significant skills in utilizing financial statements as analytical tools. The author in the article emphasize on one of the most significant inherent limitations of conventionally-prepared financial statements, the misstatement of historical cost as a consequence of creeping inflation, which should be forcefully demonstrated to all beginning accounting students. The magnitude of the entire price-level problem is too great to be ignored in the first-year course. It is important to anyone who expects to use financial statements-particularly in a day when published statements contain no hint that large profits and doubly large earning rates are creatures of a failure to make explicit correction for year-to-year changes in the potency of the monetary unit. Such financial statements can entrap the unwary, and it certainly should be an object of any introduction to financial accounting to warn the student of misleading accounting data. Most likely, at the present state of accounting development, the price-level issue should be scheduled as one of the last topics in the introductory-course discussion of financial accounting.
Stephen A. Zeff (Sun,) studied this question.