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Some issues in the measurement of profit Accountants versus economists

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  • Hasan, Zubair

Abstract

This paper discusses a topic rarely addressed in the literature on profit theory over the decades. In empirical work on subjects like growth, efficiency and welfare in mainstream or Islamic economics business profits at times appear as one of the determinants. Such studies perforce use profit data reported in the accounting records. This data is invariably at variance in important ways with the economists’ theoretical view of profit. The cause of divergence is the cosmopolitan forward looking ex ante view of entrepreneurism the economists take in the matter as opposed to the narrow conservative ex post focus of the accountants needed to protect the interest of business proprietors who pay them for the job. There is a need to narrow this gap to improve the results of empirical explorations. This paper identifies and examines some issues like maintenance of capital, evaluation of inventories and the impact of conservatism as causes of divergence as focal points for reducing the gap. It concludes that the economists are obliged more to take cognizance of accounting compulsions than the other way round in the reconciliation process.

Suggested Citation

  • Hasan, Zubair, 2017. "Some issues in the measurement of profit Accountants versus economists," MPRA Paper 83546, University Library of Munich, Germany, revised 30 Sep 2017.
    • Handle: RePEc:pra:mprapa:83546
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    File URL: https://mpra.ub.uni-muenchen.de/83546/1/MPRA_paper_83546.pdf
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    References listed on IDEAS

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    1. Bryer, R. A., 2000. "The history of accounting and the transition to capitalism in England. Part one: theory," Accounting, Organizations and Society, Elsevier, vol. 25(2), pages 131-162, February.
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    3. Bryer, R. A., 2000. "The history of accounting and the transition to capitalism in England. Part two: evidence," Accounting, Organizations and Society, Elsevier, vol. 25(4-5), pages 327-381, May.
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    More about this item

    Keywords

    : Business profits; Efficiency; capital maintenance; inventory evaluation; Conservatism;
    All these keywords.

    JEL classification:

    • M0 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting

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