Knowledge that Transforms

Abstract The paper explains the development of formula, based upon historical costs, for computing the setup time. By accounting for setup time in the costing of various parts, a more realistic price for the product may be established. In the evolution of the formula, a basic assumption is made that unit machining time for a part, excluding setup time, remains constant and that the variations are explained by divisions of the setup time for smaller and for larger quantities of parts manufactured. Under present day cost procedures, standard variations are adequately accounted for, so that steps may be taken to improve the company's manufacturing efficiency. However, when the objective of a cost system becomes not only a means of calling the management's attention to variations from standards set for material, labor, and indirect expenses, but also a tool for pricing special repair parts, such formulas are derived to interpret and evaluate the costs. This formula, developed to establish standard costs based on various quantities of production, gives the accountant a most useful tool in analyzing costs.

Abstract The article discusses professional accountancy in South America. In Argentina, at the present time, the profession is regulated by an act passed in March, 1945, by which those possessing a university diploma are entered in an Accountants' Register. Non-graduates also can be entered in this register, if they submitted an application in 1945 and were active as independent accountants before December 31, 1944. An accountant can serve in a public capacity only if his name was mentioned in the register. In Brazil, to follow the accounting profession, it is necessary to obtain a diploma from a recognized college, subject to inspection by the Ministry of Education. This diploma must then be registered at the Superintendence of Commercial Teaching and at the appropriate regional council of accountancy. In Chile, accountancy is in its initial stages as a profession. British Chartered Accountants established offices in Valparaiso as early as 1912, and branches have been set up in Santiago, Concepción, and other cities.

Abstract Under the entity concept, the corporation is an institution in its own right and a competent party to contract. In contracting for capital supplied by stockholders, the only significant representation made by the corporation is for it to agree to pay dividends when and if declared. From this, it is deduced that, in a stock issue, the offering price constitutes consideration for the right to receive future dividends. Furthermore, it is argued that stockholders do not have a claim to capital thus supplied so long as the corporation remains a going concern, an implicit assumption of the entity concept. From these, it is concluded that capital supplied by stockholders becomes the equity of the corporation. It is also argued that the acceptance of this view will not retard the stockholders' supplying capital to the corporation and that the payment of dividends is consistent with the corporation's striving to survive and to maintain an attractive investment atmosphere. On the contrary, the acceptance of this view tends to remove an area of inconsistency related to the treatment of retained earnings under the entity concept.

Abstract This paper emphasizes these points: 1. The minority interest is a stockholder equity interest and should be shown as such. 2. The variety of classifications presently used in showing the minority interest indicates that doubt exists as to its nature--liability, quasi-liability, or stockholder equity. 3. If the majority interest point of view is adopted, statements can be prepared from this standpoint and the minority can be brought along as a special stockholder equity interest. 4. Particularizing the minority share in retained earnings appears to be unnecessary since the total earnings is the same in the method described, and control over its disposition remains in the majority.

Abstract The following problems were prepared by the Board of Examiners of the American Institute of Certified Public Accountants and were presented as the first half of the C.P.A. examination in accounting practice on November 4, 1959. One of the major problem includes The Hale-Haworth-Nye Partnership was formed in 1950 with partner Hale contributing the major portion of the capital, and partners Haworth and Nye providing the knowledge and experience necessary for the operation of the business. The Unstable Furniture Company commenced business operations on January 1,1957. All sales are made on installment contracts and inventory records are on a periodic basis. Contract receivables are kept separate by years. At the end of each year adjustments for unrealized and realized gross profits are made through a Deferred Gross Profit on Installment Sales account. The Stanger and Theeler Company established a non-contributing profit-sharing trust for its employees, effective January 1, 1956. Contributions to the trust have been determined to be allowable as a deduction on the company tax return.

Abstract The article discusses a fallacy in accounting for spoiled goods. Spoiled goods arise as a result of imperfections in manufacturing processes. The condition of the goods is such that it would not be economically feasible to correct the imperfections. As a consequence, the goods are sold as seconds at a loss. A loss due to spoilage may be charged to the job or production order on which the loss occurred or it may be absorbed indirectly by all jobs through charging such loss to manufacturing overhead control. If spoilage loss is not normal or a loss can be easily traced to a job which may be special in character, the loss should be charged to the job on which the loss occurred. If spoilage is normal because of the nature of the manufacturing process but irregular in amount from job to job, the loss arising from spoiled goods should be absorbed by all jobs by means of a predetermined manufacturing overhead rate. An exception may be taken to the treatment found in cost accounting publications whereby spoilage loss is absorbed indirectly by all jobs through charging such loss to manufacturing overhead.

Abstract The article presents an algebraic model for working capital. The balance sheet equation in slightly expanded form can be utilized algebraically to demonstrate all the potential increases or decreases in working capital. There are four mathematical equations to demonstrate these changes in balance sheet. The first mathematical equation is asset is equal to the sum of liability and owner's equity. The second equation is that sum of the values of current assets and fixed assets is equal to sum of current liabilities, fixed liabilities and owner's equity. The third equation is that difference in current assets and current liabilities is equal to the difference of the sum of fixed liabilities and owner's equity with fixed assets. The fourth equation is the working capital is equal to the difference in sum of fixed liabilities and owner's equity with fixed assets. Fourth equation defines working capital in terms of three general classifications of accounts and actually equates working capital to their algebraic sum.

Abstract The article focuses on the financial reporting to shareholders. According to the author, it is startling to realize how very little the ordinary run-of-the-mill stockholder knows about the financial affairs of the company he partly owns. The author places substantial blame of this regrettable affair on the shoulders of the accounting profession. In the presentation of financial facts accountants continue to cling blindly to tradition, to the classical forms of balance sheet and income statement as the vehicles for disclosure in annual and other reports and in prospectuses. It is extremely easy for a lay investor to mistake a dollar statement of earned surplus for actual cash on hand. He is likely to make the mistake of believing that, should he purchase an investment in the company, he would be buying a share in an earned surplus having a present value equivalent to the amount set forth in the balance sheet. These and other conventional accounting concepts, reflected in the accumulation of figures called the balance sheet, add up to an unassembled jigsaw puzzle to the non-professional.

Abstract The paper describes the training of accountants in Great Britain, first discussing the situation in England and Wales and later mentioning ways in which the Scottish training differs. The Institute of Chartered Accountants in England and Wales has virtual control over the admission of people into the public accounting field in those two countries. There is no separate licensing of public accountants by a government. Membership in the Institute is comparable to holding a state license to practice as a certified public accountant in this country. Members are allowed to described themselves as "chartered accountants" and to use the abbreviations F.C.A. for fellows and A.C.A. for associates. Businessmen are accustomed to seeking the services of Institute members for their professional accounting needs, and "by far the most important part of professional accounting work is carried out by chartered accountants." To become a chartered accountant one must become an articled clerk under Institute regulation and supervision for a prescribed period of years, pass examinations prepared, administered, and graded by the Institute, be accepted by the Institute council for membership.

Reviews the book "The General Property Tax: Findings of the 1957 Census of Governments," by Frederick L. Bird.