Knowledge that Transforms

Perhaps the eventual growth in funds statement usage was inevitable due to the discrepancy that often exists between reported profits and available funds and to the recognition that working capital is the circulatory system of a business organization, with its preservation a primary concern to management. No amount of analysis of the income statement will signal approaching difficulty, although comparative balance sheets, if reviewed carefully, will reveal a diminishing supply of working funds. The location of the funds statement in published corporate annual reports varies from its inclusion with the primary financial statements to its appearance anywhere in the president's letter. Since audit reports are almost never published, accounting firms were requested to indicate the status they gave the statement in their long-form reports. It was probably very difficult for many accounting firms to determine, even approximately, the proportion of their clients which prepared their own statements. Distinguishing between cash and funds appears to cause the greatest amount of difficulty and it is in this area that more education is probably needed.

Reviews the book "Elementary Accounting," by Edwards and Meier Maynard Holmes.

Reviews the book "Appraisal and Management of Securities," by Douglas A. Hayes.

The recent move by the treasury department in furnishing high schools with materials designed to provide students with a rudimentary knowledge of the vagaries of Form 1040 seems a wise if belated recognition of the fact that the ability to determine his annual income tax has become the duty of almost every U. S. citizen. Despite most television comedians to the contrary, the ability to make a self determination of personal income tax due is a task which the avenge literate citizen can perform in an evening's sitting with the aid of an instruction booklet. It is true that an evaluation of some of the major provisions of income tax laws is covered in courses in public finance, and the effect of certain income tax provisions is treated in varying degree in other business administration courses. In developing a course in income taxation to fit the needs of potential business administrators there will be the inevitable temptation to title the course "Tax Management" and to describe it in terms of a study of tax minimization through planning business activities.

Reviews the book "A Primer to the Automatic Office," by William Eustis.

The purpose of this paper is to examine the nature of the ordinary stock dividend, common shares issued to common stockholders, and to relate the accounting treatment of this type of transaction to the entity theory of corporate accounting. Whether or not entity theory, proprietary theory, fund theory or some combination of theories provides the most useful and meaningful frame of reference for accounting practice, which is a fundamental issue that deserves discussion. Such a discussion is beyond the boundaries of this paper. The issue is circumvented by the assumption that the entity theory is the most useful frame of reference for the following analysis. In support of this approach, current accounting practice may be cited. Today the entity concept is generally used in accounting for corporate transactions. Thus, the underlying concept is that the corporation is an entity separate from any of the parties at interest. Therefore the accounting processes revolve about the corporation and not the stockholders or creditors.

The article critically examines the extent to which significantly unique results are obtained when differing concepts of the corporation are made the basis for the analyses of transactions involving changes in the accounts relating to the interests of corporate security holders. In order to limit this presentation, only three such transactions will be considered in this article. Those selected are transactions involving interest charges, income taxes and dividends, transactions which are sometimes held to affect the measurement of income and sometimes treated as distributions of income. There has been considerable controversy in the accounting literature with respect to the nature of these items and their analysis should therefore constitute an acceptable test of the significance of the underlying corporate concept and the validity of the approach here employed. Four concepts of the corporation will be utilized. The first two underlies the proprietary and entity theories of accounting, respectively, as those theories are generally propounded. The third concept is the notion underlying the enterprise theory of accounting. And the fourth concept seems to be the one most frequently reflected in current accounting practice.

The full value of the internal auditor's work can be realized by management only if the findings and recommendations of the auditor are clearly communicated to management. In the early days of internal auditing, reports frequently followed the pattern set by long-form reports of public accountants. In the last fifteen years there has been a remarkable change in the concept of the proper functions of an internal auditor. When a company has sustained a loss in a previous year, this loss may be used to offset taxable income for the succeeding five years. In September, 1950 the Committee on Accounting Procedure of the American Institute of Accountants issued a bulletin dealing with Business Combinations or, as they are more commonly known, pooling of interests. The bulletin dealt with those situations involving issuance of capital stock for assets or capital stock of another company where the transaction might more appropriately be dealt with as a pooling of interest, rather than in accordance with the general rule that such issuances constituted acquisitions of assets, as they would if the consideration given was cash rather than stock.

The trading has hit the retail trades in the U.S. with an impact almost unparalleled in business history. Nearly one out of every two families in the country is collecting these stamps, offered by retailers in return for purchases at their stores, to turn them in for merchandise, premiums, or even cash. In 1956, trading stamps were distributed by over 140,000 retailers throughout the country in conjunction with sales of over thirty billion dollars worth of goods and services. It is therefore surprising to note that, even though these stamps were first issued in 1891, and despite the recent phenomenal growth in their use, they are almost completely ignored in accounting literature. To discover any written clues to the theory and methods of accounting for the stamps, one must turn to the legal decisions which discuss these problems. While the trading stamp comes into legal prominence chiefly through attempts to prohibit, burden with oppressive regulations, or license its use, some of the strongest arguments advanced by those defending the stamp practice are grounded in accounting theory.

Little attention has been given in the typical undergraduate course in Federal Income Taxation to the relationships between taxation and fiscal policies and the application of tax regulations to business problems. Recent trends towards liberalism and more breadth in business school curricula make it evident that the objectives of the accounting program should be two fold in nature. The student of accounting should be trained to become proficient in technical phases of professional and managerial accounting. Core course requirements presumably equip all students of business with a basic minimum of knowledge in many fields. It may be argued that required courses in principles of economics and money, credit and banking or public finance provide all of the background in taxation and fiscal policy required of the student majoring in accounting. The difficulty of requiring major related courses might be solved though improved utilization of the advising system. Conceding that a knowledge of taxation and fiscal policies is essential to the accountant, it becomes important to determine how and when this knowledge should be acquired.