Knowledge that Transforms

Abstract The author in the article discusses the progress of the Bureau of Placements of the American Institute of Accountants as he received a number of letters from teachers of accounting which indicate that some are not in entire sympathy with the work of the Bureau. The author attempts to give first a brief summary of the purpose for which the Bureau of Placements was organized and of what it has accomplished to date. He then attempts to answer the questions raised in the letters received from accounting teachers. However, the author also notifies that these comments do not represent the official opinion of the American Institute of Accountants nor of the Committee for Placements, and should be regarded as his personal comments. In a letter to the author, an accounting teacher objects to the statement by the author that "It has been the experience of accountancy firms that men graduated from cultural courses in the liberal arts and science develop quite as rapidly as men who have devoted most of their time to technical accounting study." The author clarifies that this sentence does not refer to men who have had the combined cultural and technical study previously referred to. This statement, moreover, was intended to encourage the academic man with desirable natural qualifications to make an application.

Reviews the book "Principles of Auditing," by E.L. Kohler and P.W. Pettengill.

Abstract Many teachers of accounting feel that the present methods of instruction in their field leave much to be desired. Apparently, the necessity of keeping the content of the curriculum up with the rapid expansion of accounting theory and practice has resulted in less attention to the more purely pedagogic aspects of accepted fundamentals than is desirable. The well-nigh universal acceptance of some variation of the balance sheet approach was an inevitable step in the right direction. Insofar as it gets away from the older apprentice methods of doing without understanding and emphasizes methods of logical presentation it is pedagogically sound. But insofar as it leads toward new methods of understanding without doing it is pedagogically fallacious. It is the author's observation that very few accounting students retain the gist of lecture, reading, or discussion unless the subject matter thereof is also embraced in concrete problems worked by the student. Even careful illustrations in the lecture or reading are apparently of little avail unless immediately backed up by concrete problems worked by the student.

Abstract The use of financial and operating ratios as a means of rendering accounting statements more intelligible and significant is a matter which deserves the consideration it has been receiving of late. This device certainly represents an important angle from which the problem of statement presentation and analysis can be approached and is worthy of every encouragement. And it is a thoroughly natural and appropriate device for the accountant to emphasize. In fact any system of accounts may be conceived as a set-up of business data in terms of their underlying relations. It is clear, accordingly, that in presenting final statements and reports the accountant must not be satisfied that his work is complete with the compilation of masses of debits and credits. Through classification and arrangement, charts and graphs, oral and written explanations, or other means he must see to it that all important relationships are disclosed and this means of course that all significant financial and operating percentages must be calculated and exhibited. On the other hand, the enthusiasm for ratios as such seems at times to go beyond reasonable bounds. What one has here after all is a very commonplace feature of accounting work, long recognized and used and no great good can come from exaggerating its significance and scope.

Abstract The article discusses a teaching device for problems in ratios and turnovers. The teaching device offers something tangible upon which to base a discussion of ratios and turnovers. The solution to the problem is, of course, relatively simple and the problem is designed so that all results are in round numbers. The solution to the problem does require, however, something more than a hazy and indefinite notion of ratios and turnovers. The student in order to answer questions must have a clear idea of the computation and significance of ratios and turnovers. The question can, for the most part, be answered with some degree of definiteness and they offer the instructor almost unlimited opportunity for further elaboration and exposition. All questions demand either a definite computation. It is the belief of the writer that this treatment of the subject is preferable to a discussion of ratios and turnovers in abstract terms. It is entirely possible for the student to be able to define accurately the various ratios and turnovers and to have at the same time very little notion of their significance.

Abstract As the capital asset accounts and the reserve for depreciation provided therefore are cumulative from the inception of the business, the auditor analyzes these accounts for the entire period to ascertain how they were built up. This is necessary even though the appraised sound value at the balance sheet date will be used as the basis for issuing securities because errors either in the asset account or in the depreciation reserve also affect the net profits available for interest and dividends. All increase in physical assets is admitted to be an addition or betterment, provided it does not replace a previously existing asset. If it does, it would seem best to retire the old asset and treat the new one as an addition. If a new machine is purchased solely as reserve equipment the question is occasionally raised as to whether it constitute an addition. While it will not increase plant output, it may be expected to avoid delay in production. Cost includes, in case of purchased property, all expenditures required to install the property ready for use, including invoice price, freight and cartage inward, installation expense.

Reviews the book "An Interpretation of Accounts," by Thomas Alliboke Budd and Edward Needles Wright.

Abstract The article presents information about the role of controller in a business organization. Qualifications and training of the controller may not be out of place. It seems that the primary requisite is that he shall be a business man. While he, of course, must be a skilled accountant that characteristic is secondary to the one just mentioned. Because of demands made on him in the making of records and drafting of reports which shall be usable by all operating executives, it is absolutely essential that he have a sound basic knowledge of all of the functional activities of the business. This means that he must have an understanding of the principal operating problems of the business. Without this he cannot adequately perform duties of his office. Because he is brought in such frequent contact with officials of the company, he must also be a student of men. Coming, as he does, into close relationship with all executives of the business he must know how to get along without undue friction with the men whom he is serving and whose activities it is his duty to control from an accounting standpoint, as distinct from an operating standpoint. It is thus seen that the controller must have a thorough training in business and this should give him a basic understanding of the broad movements of business, as well as a particularly intimate knowledge of the operation of his own business.

Reviews the book "C.P.A. Review," by Clem Wetzell Collins.

Reviews the book "Time and Motion Study," by Stewart Lowry, Harold B. Maynard and John L. Stegemerten.