Knowledge that Transforms

Early in 1951 the Executive Committee of the American Accounting Association approved a suggestion proposed by its Committee on Selection of Personnel that a survey be conducted among the departments of accounting in schools and colleges throughout the country to determine the use being made of the accounting testing materials prepared by the Committee on Selection of Personnel of the American Institute of Accountants. In undertaking this assignment the Committee prepared and distributed about 625 copies of a questionnaire designed to cover what were thought to be the most important points of the entire testing program. The Committee decided to send the questionnaires to a mixed list of selected schools and colleges consisting of some which had never used the tests, others which had discontinued using them, and those which were using the tests at the time of the survey. In those cases where the schools had never used the tests, or where they had discontinued using them, the Committee wanted to know the reasons why. In analyzing the results of this survey, the members of the Committee have very definite impressions that the accounting testing program is not being used effectively in the majority of the schools and colleges where the tests are given.

Reviews the book "Crime Loss Control."

The film is an intangible value and it is impossible to measure its value directly. Since it is an article liable to very rapid depreciation, film amortization is a key factor. An appraisal based on anticipated earnings is the method used to measure the value of a film. Any difference in the relative value of released films results from the difference of writing such values off from time to time. As films are frequently marketed on a deferred payment basis and production costs are written off on a deferred charge basis, this contravenes good bookkeeping, which says profits should not be taken on the books until earned. As a result of better inventory methods and accounting techniques films are inventoried at production cost. The production or negative costs include studio and staff overhead, location, film, title, effects, lighting, props, set, wardrobe, acting, star, directing, scenario, and miscellaneous costs. Involved is the accumulation of all the expenses incidental to making a film and, from an accounting point of view, they represent a sizable amount of deferred charges, even though they are included in current and working assets.

An important element in the rehabilitation and sound growth of Japanese industry destroyed by the Pacific War, is the determination of the financial position and earning power of business enterprises. This prerequisite to the introduction of foreign capital, democratization of security investment, and equitable taxation, requires the improvement and unification of corporate accounting. Accounting in post-war Japan made an extraordinary development. More emphasis in corporate accounting has come to be laid on the income statement rather than on the balance sheet. The central problem of accounting in pre-war Japan, influenced by the regulations in the Commercial Code that aimed at the protection of creditors, was found in the study of the balance sheet, the items indicated and their valuation. In the development of profit and loss calculation, a noteworthy aspect is the abandonment of the all-inclusive principle, under which all costs and revenues were entered on one profit and loss statement.

Reviews the book "Inkomst--och Utgiftsbegreppen i Förvaltningsborföring och Affärsbokföing," by Nils Västhagen.

The suggestion is frequently made that only by experiment under actual field conditions can the validity of statistical sampling methods in auditing be established. Certainly experimentation can throw light into corners of the subject, which the theorist may not have noticed, or adequately emphasized, and facilitating devices developed by individual practitioners may be of general interest. The assurance of randomness in the samples was a very important factor in this result. For these reasons the following brief description of procedures developed in two successive audits of the same client are presented. The auditors are happy about the sampling for these reasons: (1) more care in each step of the sampling is encouraged, (2) the random sample covers more areas of the accounts, and (3) a very graphic picture of sampling results is given, especially when a working paper tabulation of them is made. These results flow partly from the smaller sample size and partly from the random selection. The client was also pleased with the results.

To some groups, price stabilization is a matter of profit or loss and perhaps of adjustment within one business or industry. To the U.S. Office of Price Stabilization the subject is exceedingly complex. People must consider not just costs, profits or losses of a single group, but also their relationship to other businesses and industries, as well as to the nation as a whole. Now when Office of Price Administration (OPA) was set up, there was for most goods a general balance between supply and demand. There were sufficient unused production facilities to make supply quite sensitive to changes in demand. OPA's job, therefore, at first was merely to control the price of a few commodities whose demand was beginning to outrun supply because of defense requirements. Actually, this was not inflation control, but war cost control. The present emergency caught us at a time when there was very little slack in the economy to permit a self-adjusting between supply and demand. The sudden expansion of defense buying had an immediate effect upon prices.

Reviews the book "Selected Readings in Accounting and Auditing," edited by Mary E. Murphy.

The purpose of this article is to set forth in rather elementary fashion some of the more fundamental differences between the business and national income concepts. The contrast of concepts is presented in terms of certain widely accepted standards and postulates underlying the measurement of business income. The national income accountant is concerned with the creation of product, not alone with its subsequent sale. The national income and product concepts are measures of output within the economy. Income is attributed to all productive processes and is not associated solely with the event of sale. National income is expressed in terms of the cost of the factors of production, while gross and net national product are measures of the market value of production. Thus a fundamental difference between enterprise and national income accounting lies in the difference in timing of recognition of revenue on the one hand and product on the other. Gains from exchanges of assets other than stock in trade are generally regarded as components of business revenue and are therefore given accounting recognition according to the same principles as other revenues. However, the realization of gain on the sale of a capital asset does not necessarily imply any contribution by the seller to the social product during the period of realization.

Reviews the book "Eleventh Annual Report of Stockholder Activities at Corporation Meetings," by Lewis D. Gilbert and John J. Gilbert.