Knowledge that Transforms

Abstract Reviews the book "Sampling Statistics and Applications. Fundamentals of the Theory of Statistics," by James G. Smith and Acheson J. Duncan.

Abstract In the course of an audit, an auditor may analyze in detail each item in the books. However, in most instances, to arrive at a conclusive opinion in regard to the records, it is unnecessary to collect complete information on each item with which the auditor deals. To overcome the necessity of checking each item in every investigation, accountants and auditors have employed the method of test checking or sampling. From the test check or sample, a relatively small part of the records, the auditor draws a conclusion as to the general accuracy of the accounting details. To appreciate the auditor's problems of sampling, one must know about sampling theory as applied to data which an accountant will probably encounter. Sampling theory is basically related both to the theory of probability and to the likelihood of errors. Whenever each item chosen has the same probability of being chosen as any other item in the group, the relationship between the items may be worked out to a precise mathematical point.

Abstract Reviews the book "Investments and Funds," by Hiram T. Scovill.

Abstract Working capital is the excess of current assets over current liabilities. Current assets are those assets which will generally be converted into cash within one year in the normal course of business. Current liabilities are those liabilities which will generally be paid during the ensuing year. Working capital may be regarded as a reservoir, the level and content of which is constantly being changed by business transactions. The condition of the reservoir at any particular time is shown by a summary of current assets and current liabilities in this article. To show the flow in and out of the reservoir, it calls for another type of statement covering a period of time and showing the sources from which working capital was obtained, and the purposes for which working capital was used. Changes in debits and credits appearing in a worksheet are frequently net amounts. The primary purpose of reclassifying entries is to set out as a separate item on the worksheet each amount making up the net amount. The information needed to prepare such entries is obtained from analyses of the accounts.

Abstract Reviews the book "The Evolution of the Budgetary Concept in the Federal Government," edited by Catheryn Seckler-Hudson.

Abstract Reviews the book "Ohio C.P.A. Problems and Solutions 1940-1944," by William E. Dickerson, William B. Jencks and Richard C. Rea.

Abstract From June, 1917 to November, 1945, in semiannual examinations, the American Institute of Accountants submitted to candidates a total of 724 problems and questions on Accounting Theory and Practice. It is of interest to cost accountants to note that of the 724 problems and questions presented by the Institute 88, or 12.15 per cent of the total, were based on cost accounting or the related subject of inventory valuations, 34 of the 88 being related to inventories. This represents the greatest number of problems based on any one subject. Consolidated financial statements provided the basis for 55 problems and questions, Accounting for Mergers and Reorganizations was the subject of 32 and 32 more were concerned with Municipal Accounting. The obvious inference is that the American Institute Board of Examiners considers the subject of cost accounting to be of in creasing importance. Cost problems encountered in American Institute examinations cover both job order and process cost systems.

Abstract Reviews the book "Code of Higher Accounting and Auditing," by Orlando López-Hidalgo.

Abstract Reviews the book "Elementary Accounting for Colleges," by Fayette H. Elwell.

Abstract One of the most important reports in recent British experience is that of the Company Law Amendment Committee appointed by Great Britain Board of Trade in June 1943, to consider and report what modifications are desirable in the Companies Act 1929, as of January 1946. This document not only provides the best available resume of traditional and contemporary accounting and financial practice in Great Britain but offers eighteen major sets of recommendations for the improvement of company law. Although the detailed testimony of experts appearing before the committee may not merit the consideration of American accountants, specific proposals offered for the improvement of auditing and business procedures provide interesting contrasts between current English and American accounting techniques as well as vital areas open for improvement. Asserting its belief that the system of limited liability is essential to the nation's prosperity, the committee envisages the necessity of protecting the investor and enhancing his control over company managements without imposing unreasonable restraints upon ethical business.