Knowledge that Transforms

Abstract Interviews with the top-level financial executives in fifty-one leading corporations have shown them to be seriously concerned with the country's tax depreciation policy. They stress that the administration of the present law by the Internal Revenue Service results in wasteful and annoying haggling over lengths of asset Jives and salvage values. In addition, these executives indicate that adherence to any depreciation method based on historical cost alone fails to adequately meet the problem raised by continuing inflation. However much accountants may desire to restrict depreciation to fixed asset historical cost, the interviews with 150 policy makers have reemphasized management's concern with the problem of replacement of assets in a period of rising prices. Those in management interviewed agreed that, unless a firm has the stability of earnings and credit position which would permit it to acquire or replace plant and equipment by borrowing in perpetuity, funds for replacement and/or betterments can come from only three sources: (1) equity sales; (2) retained earnings (or borrowings, that ultimately must be paid out of retained earnings); and, (3) depreciation accruals. Any long-run augmentation of any one or more of these three sources represents recognized aid in management's solution to the problem of replacement. Concessions in the areas of capital gains and small business benefits were made, at the same time, by these leaders in big business as part of their long-range corporate tax "package." The interviewed executives were in general agreement that favorable depreciation reform is needed for long run modernization and growth of the country's productive machine. An examination of their capital-expenditure decision-making processes has revealed, however, that stimulation is not immediate enough to enable depreciation reform to be used as a tool to fight business cycle recessions. Emphasis was placed on the fact that the results of adequate reform will make themselves felt in the decades which stretch into the future, not in the months immediately following the recognition of a business down-turn. The tax depreciation muddle can only be muddied further by any attempt to use tax depreciation allowances as a means for short-run economic juggling.

Reviews the book "History of Public Accounting in the United States," by James Don Edwards.

Reviews the book "Accounting Systems and Data Processing," by Oscar S. Nelson and Richard S. Woods.

Abstract This article presents problems and their solutions prepared by the Board of Examiners of the American Institute of Certified Public Accountants and were presented as the first half of the Certified Public Accountant examination in accounting practice on November 2, 1960. Candidates were required to solve all problems. One of the question was, "Prior to January 1, 1959, ABC Company, a wholly-owned subsidiary of XYZ Company, conducted a business of importing hemp and fiber for resale purposes. As of January 1, 1959, ABC Company changed its business by entering into an agency agreement with the parent company whereby all transactions of ABC Company would be as agent for the purposes of purchasing and selling hemp and fiber for the account of XYZ Company as principal. The agreement provided, among other things, that ABC Company receive $1.80 a ton for all hemp and fiber purchased for XYZ Company, including the beginning inventory. The beginning and ending inventories were priced at $7.15 and $7.20 per hundred pounds, respectively. The average prices per hundred pounds for purchases, as recorded in the books of account after the adjustment for ending inventory, and sales were $7.18 and $7.27, respectively.

Abstract At the Queen's University, Canada, L. G. Macpherson, president of the Association of Canadian Schools of Commerce and Business Administration, reports that a number of topics of particular interest to teachers of accounting were included on the program of the fifth annual conference of the association held June 12 and 13, 1961 at Sir William George University, Montreal. At the Los Angeles State College, Los Angeles, California, Warren C. Bray has been appointed head of the Accounting Department. Robert H. Cojeen has been promoted to Professor at the Northern Illinois University, Illinois. William A. Paton, Jr. is leaving the faculty to accept a position at Florida State University. The first Montana Institute on Accounting at the Montana State University, Montana, sponsored by the School of Business Administration was held between June 14 and 16, 1961. Eric L. Kohler was the banquet speaker. Donald J. Emblem and Dorsey E. Wiseman spoke on profit planning for small business. Jack Kempner presented a paper, "Development of Accounting and Auditing Standards."

Abstract This article focuses on experience in teaching electronic data processing without a computer. The objective specified in the three courses is lot to train computer operators or programmers. Rather, the courses are intended to give the students enough information so they are able to evaluate intelligently the impact an significance of electronic computers on the type of work for which they are being trained. In the classroom it has been possible to teach the students the principles of flow charting and writing programs of instructions, but one does not get a sense of completeness unless it is possible to carry a problem all the way from definition to actual operation of the computer. In order to do this, arrangements were made with the Rich Electronic Computer Center at Georgia Institute of Technology to use their electronic computers for actual problem solving. Information coming back to the campus from former students indicates that even these introductory courses have had a significant effect on the direction and type of work being done by several of our graduates in business administration.

Reviews the book "Public School Fund Accounting, Principles and Procedures," by Sam B.Tidwell.

Abstract With the development of the modern corporation, accounting reports have become more difficult to prepare and to interpret. Many of the problems are centered in that portion of the balance sheet identified as the net worth, proprietorship, or capital section. There are several explanations for the existence of these difficulties. One arises from the complexity of reporting the effect of such transactions as the issuance of shares, the payment of stock dividends, and the reacquisition and reassurance of shares, when ownership is diffused among different classes of stock each having special features. Another arises from the numerous and varied legal restrictions that directly or indirectly influence the reporting of corporate equities. The recent article by Professor Buttimer concerned with the statutory influence on accounting for treasure stock is an illustration of this problem.' It may be that accounting theory has not developed to the point necessary to define precisely the functions and objectives to he served by each item of information in the stockholders' equity section of the balance sheet. This is another explanation which may account for the wide variety of terminology used and the varied and often vague objectives attempted to be served.

Abstract This article presents information related to career development of professionals and educationists engaged in Accounts in different parts of the U.S. Mary E. Murphy has been promoted to professor. Ramon Jose de Reyna has resigned to enter public accounting. Eta of California Chapter of Beta Gamma Sigma was installed at Los Angeles State College on March 4, 1961, when eleven undergraduates, three graduate students, and one faculty member were initiated. Mary E. Murphy is serving as Chapter President. James M. Frenelen has accepted a position as an assistant professor at the University of Notre Dame and Ray H. McClary will join the staff of Ohio L. Tniversity as an Assistant Professor, both in September, 1961. In September 1961, a five-year program leading to an MBA degree will accept students preparing for a professional accounting career. A number of accounting courses formerly offered at the under-graduate level will be offered only at the graduate level. The total five-year program calls for increased preparation in mathematics and quantitative analysis, and a broader background in liberal arts than was formerly required in the four-year accounting major curriculum.

Reviews the book "Systems Analysis for Business Management," by Stanford L. Optner.