In a discussion of corporate income a user of financial
In a discussion of corporate income, a user of financial statements makes the following allegation:
One of the real problems with the income is that you never really know what it is. The only way you can find out is to liquidate a company and reduce everything to cash. Then you can subtract what went into the company from what came out and the result is income. Until then income is only a product of accounting rituals.
Do you agree with the above statement? Explain. What problems do you foresee in measuring income in the manner describes?
What assumptions underlie periodic measurement of income under accrual accounting? Which income approach do you think is more reasonable? Explain.
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