Abstract In view of the purpose and nature of business operation, the conventional cost theory of value stands well the test of logic and should be maintained. The disparity between cost and revenue caused by changes in the value of money does not Affect the validity of cost but gives rise to the problem of conversion of cost figures to the current dollar level. The primary purpose of conversion of cost is, therefore, to bring cost into identical dollars with revenue so that real income in the sense of increase of economic well-being may be reflected and that figures of cost and revenue may continue to be relied upon as barometers of operating efficiency. This being so, revenue which sets the limit to income need not be converted as sometimes recommended, except for purpose of comparison between periods. The accounting effect of cost conversion is a segregation from income of what represents, in the case of rising price levels, but a recovery of current dollar cost necessary to maintain the integrity of economic capital. Conversion of all forms of "investment" assets such as buildings, machinery, equipment and inventories is desirable for a correct statement of value of resources in terms of current dollars and incidentally also, placing the costs of successive acquisitions of assets, especially fixed assets, to homogeneous dollar nines as basis for cost computation.
J. M. Yang (Wed,) studied this question.