Knowledge that Transforms

Abstract Reviews the book "Standardized Accountancy in Germany," by H.W. Singer.

Abstract Cost accounting is fundamentally an analytical approach to the development of useful and necessary specialized management information. Techniques are only chosen methods of analysis and reports are a device to report results. Whether or not formal accounting routines and records are used is a matter of convenience and internal check. One of the first difficulties met in teaching cost accounting is the fact that there is not even a single fundamental definition or idea of cost which will meet all requirements. Cost has many different meanings, with only an extremely indefinite unifying idea to justify the application of the same term in such widely varying senses. The economist has long recognized this fact and carefully differentiates different meanings he attaches to the word. The basic business approach to cost was one of financial outlay. As developed by accountants, the businessman's primary idea of cost has been one of a normal average amount, determined as the sum of an accumulation of direct factory outlays and of a reasonable proration of indirect factory outlays. By outlay he means actual use or consumption of goods or services for which he has paid or is obligated to pay cash. The future of industrial cost analysis is bright, for it is a vitally essential business service. It has shown and can be expected to continue to show a rapid development in the quality of its service to industry. There is a need for better-trained juniors to enter cost accounting as a career.

Abstract Training for the public accounting profession is a continuing process. An accounting curriculum that is not up to date and does not provide men who are qualified to meet the current problems of public accounting practice is one to be avoided at all costs. Many public accounting firms today show more real concern over their social responsibilities and opportunities for real service to business than could be found in a group of typical accounting professors. The leading public accounting firms are today looking for men who have been broadly trained, who have a full understanding of the social responsibilities and standards of conduct which are required of those who enter the public accounting profession, and who are qualified to render to clients real services far beyond the scope of the ordinary audit. The author thinks that the public accounting profession may now be at that stage of growth and maturity where it would be glad to have the teaching profession provide training for various levels of public accounting responsibility and a limited amount of training along more specialized lines.

Abstract One of the chief problems that concern the average taxpayer in the U.S. is that dealing with income taxes. The satisfactory solution of his Federal income tax puzzle will, of course, have its favorable concomitant effects on other related taxes and business problems. If the taxpayer can avail himself of a bona fide transaction whereby the net profits can be divided, the resultant saving to the recipient, arising through the application of lower graduated surtax rates, becomes obvious. One tax-saving expedient often encountered is the legitimate family partnership. Spreading the taxable income invariably results in tax saving. The author has offered suggestions which may be helpful on the subject of acceptable intra-family arrangement as a tax-saving device. One suggestion is that a partnership certificate should be drawn with meticulous care and be duly executed according to legal requirements. Copies of returns for income and all other tax purposes relative to the partnership business should be available.

Abstract The article presents information on statistical uses of accounting data. The distinction between bookkeeping and accounting is a significant one. Bookkeeping can be defined as the procedure used in recording business transactions. Accounting is the organization and analysis of the records. From the statistical point of view this division of labor can be compared first with the posting and computations of statistical data, and second with the collection and interpretation thereof. Many other valid parallels can be drawn between accounting and statistics. Both deal with figures, both require analytical skill, both apply to their data highly specialized techniques. Accounting demands that debit and credit entries balance to the last cent. Statistics is content with nearest thousands or even million depending upon the size of the figures, because the statistician's work is largely estimating for the purpose of formulating policies and action. The accountant, trained to exactitude, may not understand the statistician's tendency toward approximations.

Abstract The article discusses the advisability of discarding a fixed asset which can still be used and which may still be capable of earning profits and substituting for it a newer model. The author further states the fact that depreciation and obsolescence are sometimes treated as separate problems. If it is no longer wise to use an asset because new methods produce greater profits, then that asset has only a scrap value, it may have depreciated in use or it may have been used hardly at all, but it is obsolete, and must be written off. An asset is obsolete if the prime costs of using it are greater than the total costs of equivalent production using a new asset in its place. Businessmen may hesitate before scrapping an asset because it has become obsolete in the sense in which the word is defined above. Conditions may change and, unless the margin of benefit is considerable, it will be advisable to wait until the benefit appears to be permanent. In competitive industries, a failure to scrap old equipment may lead to heavy loss because a lower selling price will soon be fixed, based on the costs of production by the new method.

Abstract The installation of efficient statistical accounting procedures in an aircraft factory poses problems for the solution of which a consideration of what is being done in other lines of business is of primary value. There are certain fundamental theories which apply to all classes of industries. The aircraft industry is only a specific case in the application of these fundamentals. The problems of the aircraft industry are not unique, they are merely variations of the production problems found in many other industries. The aircraft industry is best represented by a combination of the automobile business and a job shop business. The aircraft industry manufactures a small quantity of a large variety of parts. In addition to this small quantity production, the aircraft industry must be ready, at a moment's notice, to change the design of the product for tactical reasons. Another item that affects the aircraft industry more than any other is the weight of the product. Parts are often made at great expense just to reduce weight. It is thus readily apparent that cost methods of different manufacturers require the application of different manufacturing accounting techniques.

Abstract Reviews the book "Depreciation of Group Properties," by Robley Winfrey.

Abstract Reviews the book "Ways to Teach Bookkeeping and Accounting," by Harvey A. Andruss.

Abstract In 1796, writer Edward Jones's "The English System of Book-keeping" was published in Bristol. The first edition contains a list of over 4,000 subscribers resident in all parts of Great Britain. The Bank of England and the Honourable East India Company each subscribed for five copies. The author is said to have profited to the extent of 25,000 pounds from his invention. His system is stated to have been widely used in both Great Britain and the U.S. It gained an international reputation in a short while, and is probably the only English work on accounting. The publication of the book was preceded in 1795 by "An Address to Bankers, Merchants, Tradesmen and others, intended as an introduction to a New System of Book-keeping." This address contents reproduced as an Introductory Address in the main work, sets out in the author's compelling style faults, demerits and positive dangers of the existing bookkeeping methods, both by single and double entry, without so much as giving a foretaste of the magnificent new system about to be made known to the long suffering commercial world.