Knowledge that Transforms

The article discusses the disposition of special post-war reserves at the close of World War II. In the article, interest was centered primarily in only one of several types of reserves. What 134 large manufacturing corporations did with the special reserve created to cover post-war reconversion costs has been shown. In recent years there has been some criticism of methods and motives used in the creation of reserves, especially those set up for contingencies. Accountants are beginning to suggest that, because earned surplus is itself available for contingencies, there is no reason for creating a contingency reserve. While there was no need for the unused reserves and those created as a matter of conservatism, the post-war reserves that were used properly would not be subject to the above criticism. The purpose of the post-war reserve is quite different from that of contingency reserves. The purpose of the post-war reserve is the proper assignment of costs to periodic revenue. If costs are assigned properly to periodic revenue, there will be less distortion of annual income. A reserve created for such a purpose and used properly, is undoubtedly a necessary accounting procedure.

Reviews the book "Survey of Accounting," by Leonard W. Ascher.

Reviews the book "Investment Advice for Professional Men," by Howard A. Bolton and Wilford J. Eiteman.

The tenor of this discussion seems to demonstrate that the accounting profession is involved in more than technical changes confined to a refinement of methods and the adaptation to larger and more complicated economic units, it marks rather the reaction of the profession to the forthcoming recognition that accounting has outgrown its formerly historical function of recording "given data" only, that its closeness to business administration involves it in the responsibilities of management with respect to the national economy, since most economic operations are transacted by business enterprises, that, in other words, the accounting profession performs not merely a clerical service, but also an important social function. These and similar recognitions of days, together with the necessity to keep in line with ever changing conditions, must be accepted by the accounting profession as its share in the "permanent revolution" with which people are confronted. Evaluations and judgments can be derived from fixed standpoints only. In order to gain these, a line has to be drawn between primary interests of the enterprise as an economic unit, and secondary, often conflicting interests of the various types of participants in a given business.

The revenue Act of 1951 in the U.S. provided changes in the income tax, the excess profits tax, the gift tax, the estate tax and excise taxes. The gift and estate taxes were modified only a very slight bit and the rates were not altered. Excise tax rates were increased on some articles and were reduced for others. Individuals, trusts and estates, and corporations are all affected by changes in the income tax law. In general, the Revenue Act of 1951 increased taxes for 1951, and even more heavily for the next few taxable years subsequent to the calendar year of 1951. An additional income tax return and excess profits tax return are required of corporations with taxable years ending after March 31, 1951 and before December 1, 1951 to take care of changes introduced by the 1951 Act which were made effective retroactively to April 1, 1931. The new return must be filed between October 20, 1931 and January 15, 1952, inclusive, according to the 1951 Act. However, in December, 1951, the Treasury granted a general extension of time to and including March 13, 1932 for the filing of returns and payment of tax for taxable years ending after March 31, 1951 and before December 1, 1931.

The approach to courses for all fields of accounting, public, private, cost, tax and governmental, represents something of a paradox today. Viewed by some as too practical for admission to the cultural-centered liberal arts curriculum, by others as a field of graduate study, these courses on many campuses have been sustained largely by the intellectual prowess of faculties and the ever-increasing demand of students for practical training in areas of employment arising from the war and post-war economics. Even the most cursory glance at recent college catalogues reveals that accounting courses appear under a variety of departments, most frequently under business administration or social science, but sometimes correlated with instruction in mathematics, statistics or secretarial studies, and less frequently as part of the pre-engineering or pre-law curriculum. Teachers of all phases of accountancy in liberal arts colleges, and indeed in other institutions of higher learning, have made a valiant, if at times a somewhat ineffectual, effort to train students to cope with the rapidly shifting economic climate, and to relate the complex technical knowledge of this age to human progress.

In a world torn apart by two conflicting concepts-capitalism vs. communism, one should place the economic facts before one's own people so clearly and concisely that they may understand them without question. Only then can they determine of their own free will that the enterprise system – however imperfect – still operates to create more human satisfaction than any other system yet devised. The United States has become a nation of capitalists in the broadest sense of the word in that all Americans are generally possessors of property, no matter how small, with which they can do as they see fit. It is clear that financial reporting must be done in such a manner that the vast majority of stockholders will want to read and fully digest the financial statements sent to them annually, or on rare occasions, quarterly. True, not all owners will study the report with the dose attention of a security analyst. Nor can we ever expect to prepare reports so simplified that they will be understood fully by every stockholder in a corporation that has many thousands of owners. But it is one of our first responsibilities to create as many informed stockholders as possible.

Reviews the book "Fundamentals of Top Management," by Ralph Currier Davis.

Reviews the book "Common Carrier Pipe Line Operations and Accounting," by Paul J. Graber.

The article presents a report on examination of accounting records of the American Accounting Association (AAA). Certified Public Accountants examined the balance sheet of the AAA as of December 31, 1951 and the related statements of income and expense and of changes in net worth for the General Fund and the Life Membership Fund for the year then ended. It was found that records have been kept very conservatively. Fixed assets also have been charged to expense when acquired. They found that their records have been kept very conservatively. Fixed assets also have been charged to expense when acquired. In their opinion, the accompanying balance sheet and statements of income and expense and of changes in net worth present fairly the financial position of the Association and the results of its operations for the year then ended, in conformity with generally accepted accounting principles. Office salaries, supplies, printing and other expenses applicable to the office of the Association, together with the audit fee, were apportioned between the General Fund and the Membership Fund on the basis of the approximate ratio of the income of each fund to the total income of both funds.