of bonds, preferred stock, etc.
When used for some of these purposes, oftentimes condensation is made
a convenient method of bringing about a misrepresentation of true
condition. Of course, no justification can be found for this.
Emphasis has already been placed on the necessity of choosing titles
and captions which shall indicate clearly the nature and content of the
transactions or data recorded thereunder. Statements of condition which
are misleading, whether with intent or by chance, are to be condemned.
As H. R. Hatfield[10] so well summarizes, the lack of clearness and
consequent misunderstanding of the balance sheet are due in the
main to three causes: (1) vagueness of terminology; (2) purposeful
misrepresentation; and (3) the very nature of accounting itself
which so largely rests on estimates rather than on facts of definite
determination. Some of these troubles have their origin in the form of
the balance sheet, the manner of showing the items; while the others
inhere in its content. It is to a study of the content of the balance
sheet from the standpoint of the statement of values, with the emphasis
on quantitative analysis, that we now turn.
[10] In “Modern Accounting.”