Knowledge that Transforms

Abstract Under the spell of rumored drastic regulations of the federal Securities and Exchange Commission, professional accountants are exhibiting a bad case of nerves. Many damage suits against leading firms of practitioners are already in courts and reports of more and larger suits are rife. Attorneys, preparing hastily conceived opinions and having insufficient knowledge of traditions and conventions of the profession, are emphasizing to its members terrors of the strike-suit racket. And, what is worse still in an emergency like the present, the almost universal dependence of accountants on the views of others offers convincing evidence that the profession is either unwilling or incapable of doing any straightforward thinking on its own behalf. To instructors in accounting, this condition of affairs should offer a challenge. Now, more than ever, the voice of enlightened opinion within the profession is needed. For years it has failed to see problems before it, problems for the complexity of which it alone has been responsible. Years of uninterrupted prosperity for large national firms, with the control of the profession as a natural by-product of their growth, have built up a complacency and sense of security which are now being rudely shaken.

Abstract The primary purpose of accounting is to measure income, and income is the difference between cost and revenue. It follows that the valuation basis for assets which represent future expenses should be actual cost. When unrecovered costs which are also deferred charges to future operations are set up on the books at appraised values, either higher or lower than actual cost, expense in subsequent accounting periods until such unrecovered costs have been properly charged against revenues will reflect to a certain extent fictitious amounts rather than actual cost. This applies to inventories, when based on the popular cost or market formula, and to buildings, equipment, and intangible plant assets, such as patents. In short, it is not conservative to write down the balance sheet valuations of depreciable and amortizable assets below bonafide cost inasmuch as this results in showing a portion of future expense, depreciation and amortization, at less than actual cost, thereby inflating profits.

Reviews the book "Budgetkontrolle in Industriellen Unternehmungen," by Heinz Ludwig.

Abstract This article informs about the 18th annual convention of the American Association of University Instructors in Accounting was held in the Benjamin Franklin Hotel, Philadelphia, Pennsylvania on December 28 and 29,1983. The annual dinner was held on Tuesday, December 28, at 7:00 P.M. Following the introductions, the president appointed an auditing committee consisting of E.J. Filbey, H.H. Baily, and G.E. Lukas, all of the University of Illinois. The secretary-treasurer then read his report for the year, and also reported on the meeting of the executive committee held earlier in the day; the executive committee had instructed him to consult with E.J. Filbey in regard to the safety of the funds of the Association in Building and Loan stock and notes, and, if it appeared desirable to do so, to leave the investing of surplus funds unchanged. The matter of subscription rates was delegated to the editor and secretary. The secretary was instructed to circularize the executive committee for suggestions looking toward an increase in the circulation of the Accounting Review.

Abstract The article focuses on the report and accounting approach. Undoubtedly the most difficult task which confronts the elementary accounting instructor is the presentation of an adequate concept of the balance sheet. The beginning student requires no great amount of imagination in perceiving that the typical business enterprise acquires and owns assets of various types. Furthermore, the thought that these resources may and do become charged with debts is comparatively simple to master. The difficulty arises, however, in distinguishing between the objective realities of assets and liabilities and the subjective reality of the proprietorship element. Again, the student in the first course of accounting perceives readily that the assets do, or should have some value to the concern and that these values are capable of expression in terms of the monetary unit. Furthermore, he has no difficulty in realizing that the initial value placed upon a resource is its purchase price. Difficulty is encountered, however, with the problem of revaluation which arises in the preparation of each periodic balance sheet.

Abstract A course in accounting systems is usually offered by a university which permits students to specialize in accounting. The subject, "Accounting Systems," is at the same time one of the most difficult and the most valuable that the student specializing in accounting is called upon to master. Its difficulty and also its value lies not so much in its content as in its method. A good course in accounting systems is perhaps the most rigorous and comprehensive test to which a student's knowledge of accounting principles may be subjected. From the standpoint of methods followed in teaching accounting systems, there are no doubt many approaches in present use. No study has been made, in so far as is known, of the methods pursued in teaching courses in accounting systems in the various schools of business. In the opinion of the author, however, there are at least three possible approaches. In the first place, one may present the subject as a course in methodology. That is, from the standpoint of the method which should be followed by an accountant in undertaking the preliminary investigation and subsequent installation of an accounting system.

Abstract Beginning students usually find their introduction to nominal accounts and accruals the hardest spot in their first semester. A large part of the confusion may often be due to the undigested condition of illogical material presented earlier, nominal accounts and accruals themselves should not be hard to grasp. But even though they do present difficulty to the student they should be strongly stressed very early because in them is the essence of the accrual basis of accounting which accountants are so anxious to see replace the cash basis. In fact so completely do nominal accounts and accrued items embrace the heart of modern accounting that they might well be made the foundation of the introductory work itself. This would mean a start based upon the Income Statement rather than the Balance Sheet. Instruction in elementary accounting is still very much under the influence of age-old traditional methods of teaching bookkeeping. Bookkeeping instruction traditionally aims at teaching a balanced recording methodology, it appeals to imitative faculties rather than reasoning processes, it over-simplifies a naturally complex subject by artificial rules of thumb, it introduces personal debts very early, presumably merely because external transactions and personal accounts bulked large in early bookkeeping.

Reviews the book "Analyzing Financial Statements," by Stephen Gilman.

Reviews the book "Essays in Biography," by John Maynard Keynes.

Reviews the book "Proceedings of the Fourth International Congress on Accounting."