Price Variation Accounting-A Rejoinder

Abstract

The differences between Professor Chambers and myself undoubtedly result, as he points out in his most recent contribution to the debate,' from differences in the definition and measurement of income. The particular point at issue is the extent to which changes in the general purchasing power of money should be reflected in the income of an individual firm. In my earlier paper,2 I argued that the full distribution of income as defined and measured in Chambers' system would have the effect of maintaining residual equity in terms of general purchasing power, but that, to the extent that the specific price increase in respect of nonmonetary assets (Nr) exceeds the change in general purchasing power of the residual equity (Rp), the residual equity at the end of the period no longer commands the same quantity of operating assets N at their new prices N(1 + r). Chambers endeavored to refute this proposition by means of the following arithmetical example: