Knowledge that Transforms

Abstract The past few years have given birth to a remarkably increased attention to the form and content of corporate reports to stockholders. Despite the interest in this area, very little research has been inaugurated to determine exactly what type of information stock holders desire. In a general way everyone knows that a stockholder wants the financial statements i.e. balance sheet and profit-and-loss statement. Beyond this, however, is a vast unexplored, uncharted wilderness. The additional information contained in the annual reports has ranged from absolutely no additional information to reports containing hundreds of pages of supplementary data. The annual reports of the Diamond Match Co., for example, range from 150 to 250 pages each year. This research was undertaken with a dual objective. First, to determine what information the investor desired in an annual report of a corporation and secondly, to formulate a "check-list" based upon the results of such a survey which might act as a guide to officers and direction in their yearly task of reporting to the stockholders.

Abstract The article focuses on professional examinations for students of accountancy. The following problems were prepared by the Board of Examiners of the American Institute of Accountants which were presented on November 13, 1941, as the first half of the Chartered Public Accountants (CPA) Examination in accounting theory and practice. The examinees were allowed six hours to solve these problems and weights were assigned as follows: problem 1, 12 points; problem 2,4 points; problem 3, 16 points; problem 3,16 points; problem 4, 14 points; problem 5, 6 points. A suggested time schedule is given below; Problem 1,60 minutes; Problem 2,15 minutes; Problem 3,120 minutes; Problem 4,90 minutes; Problem 5, 30 minutes. A depreciation schedule for auto trucks of a company was requested by an income-tax revenue agent soon after December 31, 1940, showing the additions, retirements, depreciation and other data affecting the taxable income of the company in the four-year period 1937 to 1940 inclusive.

Abstract The U.S. Investment Company Act of 1940 brings one more branch of private finance within the fold of governmental regulation. The accounting provisions of the Investment Company Act do not ignore the specific weaknesses which were disclosed in the Securities and Exchange Commission's (SEC) study of the industry. The Act emphasizes the public aspects of investment company accounting and reporting practices and in most cases leaves to the SEC the drafting of definite standards to correct known weaknesses. Many of the sections of the Investment Company Act touch upon accounting practices and reports, and numerous financial practices are permitted only if certain tests are satisfactorily met. Such tests are usually based upon the results shown by accounting reports. The impression created by the accounting provisions of the Investment Company Act is that investment accounting and reporting standards are improving, and that the function of the SEC is first to bring the stragglers up to the minimum found adequate for investors, and then to encourage improvements. These aims will require numerous rules and regulations.

Abstract Accounting teaching can be divided into two phases, the classroom phase and the textbook phase. For many years accounting has been taught by the lecture method, the laboratory method, or by some combination of the two. Accounting teachers are indifferent to method. This is, perhaps, less true of high school teachers than of collegiate instructors, for the former have been exposed to "methods" courses in qualifying for teachers' certificates. Microfilm offers the first substantial contribution to accounting teaching in many years. There are, of course, certain limitations or disadvantages to accompany the benefits. Greatest is the limitation upon the amount of material which can be placed in one of the film "views." Writing or printing in illustrations must be somewhat larger than ordinary handwriting, so that when photographed and projected it will be legible for a reasonable distance. Other disadvantages are the cost, time involved in preparation of materials for photographing, and the necessity for adapting a classroom for projection.

Abstract To the student of history, there is hardly a more interesting phase for study than the transition from early days of fetish-worshipping to later years of creed-formulation; when mere blind belief, the sole support of fetish, gives way to reasoning, or at least attempts at reasoning which develop into creed, somewhat analogous, it is present transitional period in accounting thought, in which people are critically analyzing certain conventions which are at least suggestive of fetishes, in struggle to formulate a creed called "Accepted Principles?' And, as in history, transition takes time; ready-made decalogues are not the rule. The discussion has to do with one of the episodes in that transition the tentative pronouncement on inventories by the Research Department of the American Institute of Accountants, a document which is one of the steps in the story of creed-formulation in respect to inventories; and inventories constitute a subject which certainly has not been free of fetishes.

Abstract Accounting and economics are generally considered to be social sciences and accounting is generally regarded as a branch of economics. Wealth is the subject-matter of both sciences, but whereas economics is thought of as the science of wealth, accounting is restricted to the devising of records which will reflect the status of wealth and changes which take place in wealth of a given business unit-whether sole proprietorship, partnership, or corporation. The difference in the manner in which wealth is considered by these two sciences undoubtedly accounts, to a large degree, at least, for the seeming inconsistencies which appear in their literature. With allowance for exceptional cases economist and accountant agree that most expenditures and most efforts placed on the production of commodities result in income. An accountant keeps records for one individual or enterprise. Income is produced during the manufacturing process, but title to this income cannot be said to rest definitely in any individual or group until the goods manufactured have been sold.

Abstract The article presents information related on the independent accountant in the accounting profession. The requirement that financial statements prepared in connection with the issue of securities be certified by an independent accountant was incorporated in the Securities Act of 1933. The act provides that a detailed balance sheet certified by an independent public or certified accountant of a recent date must be submitted as a part of the registration statement. A profit-and-loss statement similarly certified must also be submitted, showing expenses and income for the latest fiscal year of the registrant and for each of the two preceding fiscal years. If the date of filing the registration statement is more than six months after the close of the last fiscal year, a statement must be submitted covering the period from the dose of the fiscal year to the date of the most recent balance sheet filed. If he is to discharge his obligations to the public, the accountant who certifies the financial reports must be independent because the reports are largely a matter of considered opinion. To perform his function of certifying the balance sheet and the statement of profit and loss, the accountant must investigate the financial condition of the company from a detached and independent point of view.

Abstract The article describes stock dividends from the viewpoint of the declaring corporations. The article focuses on three types of stock dividends namely, common on common, preferred on common and common or preferred on preferred. The first of these types of stock dividends, common on common, is of course, the one most frequently met with. It consists of the issue, gratis and ratably, of additional common shares to the common stockholders. Preferred shares issued to common stockholders, constitutes in effect a division or split-up of the total common stock interest into two parts, one of which is converted into, or reclassified as, a prior stock interest, and the other of which continues as the remaining common stock or residual interest. As the number of common shares is not affected by such stock dividend, each of these shares is the same fraction or aliquot part of the net corporate property as before the dividend. Another stock dividend is common or preferred stock issued to preferred stockholders. Strictly viewed, this type includes two sub-types.

Abstract Under accounting theory, it should not matter whether bad-debts account is treated as a deduction from sales, a selling expense, an administrative expense, or a nonprofiting item. However, to follow this theory necessitates an admission that the detailed arrangement of profit-and-loss statement has little significance and this might lead to the idea that a simple statement of debits and credits would be sufficient. The more recent trend of thought is in favor of making corrections through the profit and loss of the period in which the error is recognized in order that the total of the periodic net profit charges will be more correct. The view is that since it is too late to change past figures, the net profit should be changed in order to make the total of the past and present profits correct as shown by the series of periodic statements. If bad debts have been calculated by a method that bases the amount of the estimated uncollectibles upon outstanding accounts, there will be little need for subsequent adjustments since all errors are automatically corrected at the end of each period and cannot accumulate from period to period.

Abstract Accounting principles and practices, being pragmatic in origin and conditioned by reality, resist codification into hard and fast rules. Yet like all parts of culture these principles and practices manifest the social lag and do not quite keep up with all the rapid changes that occur in the economic scene. Impatient critics sometimes wish to scrap more of these principles and practices than is required for necessary adaptation. They forget that much in the current scene was developed from the past, that the past is always with everyone and that many of established practices have the same cogency today as yesteryear. Business expansion in the form of new capital equipment mainly takes place during an upswing. It augments and accelerates the upswing and perhaps helps create it. The expansion may occur for any number of reasons, technological, psychological, political, economic or for random causes. When management builds a plant anticipating a certain series of schedules of production, the value of that plant is measured by what it costs.