Robert C. Dye

Publication Date


Document Type


First Advisor

Eiteman, Dean S.

Degree Name

M.S. (Master of Science)

Legacy Department

Department of Accountancy


Financial statements--Terminology


One of the main objections to financial statements is the lack of comparability among them. This study pointed out that the three main factors which contributed to this lack of comparability were: (1) a lack of a uniform set of generally accepted accounting principles, (2) a lack of uniform terminology, and (3) a lack of uniform presentation methods within the statements. The primary purpose of this study was to find a solution to the latter two of these factors. To determine where specific problems existed, a sample of sixty-seven corporate financial reports was studied. After various terminology and presentation problems were revealed, the information was used to prepare a questionnaire. The questionnaire was sent to a group of Certified Financial Analysts who were chosen because they were considered the most important users of financial statements. The results of the questionnaire indicated that, in many cases, the preferences of the financial analysts disagreed with the usage generally presented in the financial statements. From these findings, the study made specific recommendations concerning terminology and presentation problems. These recommendations are summarized as follows: 1. The titles of the three basic financial statements should be: a. Balance Sheet b. Statement of Operations c. Source and Application of Funds 2. The form of the basic financial statements should be more detailed than often presented in current practice. a. The Statement of Operations should show important sub-totals such as gross profit, net operating profit, etc. b. Inventories and fixed assets should include details within the body of the statement, rather than in accompanying footnotes. 3. Terns that should be used within the Balance Sheet are: a. uncollectible trade receivables TERM: Reserve for uncollectible accounts b. depreciation taken on the statement TERM: Reserve for depreciation c. the current income tax liability TERM: Income taxes payable d. the owners' equity section TERM: Stockholders' Equity e. excess money paid in by stockholders over par value ERM: Paid-in surplus f. earnings not paid out in dividends TERM: Retained earnings Furthermore, the study concluded that the accounting profession must improve financial statement comparability, working specifically on the problems of uniformity of terminology usage and presentation methods. Two possible alternatives were suggested. One solution is that the views of financial statement users (especially financial analysts) should be considered when making recommendations concerning terminology and presentation problems. It is proposed that this is the best method of solving these problems. A second solution is that two types of financial statements could be presented. One report would be a simple form for presentation to the general public, while the other would be detailed statements for use by financial analysts. This second solution is not favored, however, because accountants may find it exceedingly difficult to prepare two types of financial statements.


Includes bibliographical references.


vi, 63 pages




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