Knowledge that Transforms

The article focuses on legal decisions on accounting reserves. The hundreds of recent annual corporate reports which include one or more reserves in their statements of financial position, indicate that the condemned man is still eating a hearty breakfast. Despite the fact that indiscriminate use of the term 'reserve' in accounting was strongly criticised by committees of the two leading societies of professionals and educators in the field about five full years ago, one has only to notice in their reports for 1953 the 'General Reserve' which incorporated of over twenty-two million dollars. The opinions of accountants on the subject of reserves and their use is fairly well known. It was felt that an interesting investigation could be made, however, to determine what is the feeling of the law, as expressed by court decisions, on accounting reserves and to see what treatment the legal cases give to the generally recognized accounting principles involved. One of the reasons for the denunciation of the loose use of the term 'reserve' to cover a variety of different types of accounts is because in general usage, outside of accounting, a reserve is considered a fund of cash or other assets which is held or retained for a specific purpose.

In recent years accounting literature has been replete with suggested modifications in accounting and financial reporting to overcome the effects of changing price levels. The tenor of most of such writings has been that "something must be done" to make accounting results more meaningful, more useful, and less misleading. There have been widely varying remedies suggested, from sweeping overhauls of fundamental approaches to adamant adherence to the status quo. This article makes an attempt to delineate the reasoning underlying the security analysts negative attitudes toward proposed price level adjustments to financial statements. When the price level was relatively stable, reported income was a meaningful mirror of overall increments in business resources. The price level dispute becomes the most vivid in the area of fixed asset accounting. It is self-evident that in capital goods industries depreciation is almost always a significant amount. But even where depredation is a small fraction of total expenses, it may be an important figure in comparison to net income.

Reviews the book "Expense Center Accounting Manual."

Reviews the book "Cost Accounting," by Clarence B. Nickerson.

This article focuses on applicability of the realization principle to money claims in common dollar accounting. Common-dollar accounting refers to the branch of accounting that attempts to remove the distorting effects of changes in the general level of prices by stating all accounting magnitudes in terms of dollars having the same purchasing power. Such procedure is to be sharply distinguished from the adjustment of only depreciation and inventory charges. It is true that depreciation and inventory consumption charges may be converted into figures having more current significance than the original dollar figures. A very important difference between common-dollar adjustments and other methods of adjustment for inflation arises in the case of "money-value items" or "money claims," as they will be called throughout the remainder of this paper. It is much more difficult to determine the flow applicable to a bank balance. It is not possible to scrutinize the debits appearing on a bank's books to tell to what credits they refer.

The article focuses on management thinking concerning corporate annual reports. An act of communication can be separated into five steps. The scientific study of any communication process tends to emphasize one or another of these five analyses. This article deals with the concepts, philosophy and thoughts guiding the 'who' or communicator of the annual report-top management. The purpose of this survey is to acquaint interested readers with top management thinking concerning annual reports of corporations. By so doing, a better understanding of management's problems will be developed by those people to whom top managements communicate. Such an understanding should provide more effective communication in annual reports. Better communication by those responsible, like controller, financial vice-presidents and presidents will help to solve some of the problems confronting our economy by supplying information to stockholders, creditors, employees, governmental agencies and the general public. These are the people who use the annual report.

This article focuses on the need for college courses in internal auditing. The need for college courses in internal auditing is a much debated subject. While college educators hesitate to add special courses to an already crowded curriculum, those interested in the field of internal auditing see the need for a higher grade of training for the internal auditor than is currently available. This need stems, primarily, from the broader responsibilities assigned to the internal auditor, and the increasing range of services he is required to render. Each company making use of internal auditing created this function in accordance with its own concepts and particular needs. In those cases where all operations were established at one location, were controlled by one accounting system, and were subject to close management supervision, the clerical type of internal auditing generally prevailed. While normal management problems have been constantly increasing over the years, World War II brought a pyramid of new problems.

Reviews the book "The Case Method at the Harvard Business School," by edited by Malcolm P. McNair.

The article focuses on coordinating sections of courses in elementary accounting. With college enrollments on the increase, many schools are having to offer more sections of elementary accounting courses. As the number of sections of any course increases, problems of planning and coordination are likely to arise or to become more acute. Different solutions to these problems have been attempted, with varying success. At the University of Alabama, Birmingham, Alabama, a somewhat unusual method of coordination has been developed for the second semester of the elementary accounting course. Its successful operation over the past three years suggests that others might find it beneficial in their schools. One difficulty, where seven instructors are teaching sections of the same course simultaneously, lies in keeping the pace of the work somewhat uniform. Some schools attack this problem by having a weekly lecture for the entire group, followed by discussion and perhaps laboratory periods in smaller sections. Many teachers feel, however, that the lecture to the large group is almost a complete waste of time, and refuse to adopt this expedient.

Reviews the book "Determining the Business Outlook," by Herbert V. Prochnow.