Knowledge that Transforms

Reviews the book "The Theory of the Cost-Price System," by Arnold J.W. Keppel and introduced by J.A. Hobson.

Abstract The remainder of this article is addressed to the task of considering a course of this kind which is adapted to the use of university schools of business administration, a course to meet the needs of both advanced undergraduate and graduate students. The method which is described here uses several different means of instruction. One way in which a text book has been used to good advantage by the writer in the instruction of his students has been to assign to them the entire book to be read rapidly during the first week, indicating to them the parts which can be skipped at this first reading as well as the parts which should be glanced at more thoroughly than the others. It is often satisfactory to assign readings therein and then give the students a chance to ask questions in class about any of the points which have bothered them. It will often be found that such questions show that the students have failed to read the text with sufficient care aid directions to look up the answers to their own questions.

Reviews the book "Business Balance Sheets," by Francis R. Stead.

Reviews the book "Federal Tax Practice," by R.H. Montgomery.

Reviews the book "Accounting by Machine Methods," by H.G. Schnackel and Henry C. Lang.

Reviews the book " Bookkeeping and Accounting," by James O. McKinsey.

Reviews the book "Der betriebswirtschaftliche Gewinnbegriff in seiner historischen Entwicklung," by Franz Josef Dusemund.

Abstract There is an evident tendency nowadays to crystallize accounting standards and essentials of business and financial practice in the form of explicit legal statement. State corporation acts, for example, have been steadily becoming more exhaustive and technical with respect to such subjects as form of capitalization, issuance of shares, dividends, valuation of assets, sale of property, and so on. The following is an outline of points which may well be covered in the dividend code or which should, at any rate, be carefully considered by those charged with the duty of framing the dividend section or sections of the act. The source and measure of dividends is profit, current or accumulated, or,.in special cases, increase in value of assets not yet converted through sale or other disposition. Disbursements by corporations in excess of this measure are reductions in capital and should be labeled as such, and should be charged to stated capital or to a special contra account modifying stated capital. There should be no exception to this definition in the case of wasting enterprises such as mines.

Abstract Replacement-cost is the basic value which properly expresses business capital and income. It is not always easily determined, at times can only be approximated. But even the arguments in favor of other bases of valuation are predicated on the assumption that they are very near to replacement-cost. The replacement-cost of an asset is the estimated expenditure necessary to secure another similar in nature and equivalent in economic value. It frequently is more or less than original cost, usually it varies from sale-price, which is the amount realizable through disposal. The importance of replacement-cost in the balance sheet and the statements of business operations will be illustrated with respect to the accounting entities namely merchandise inventories, fixed assets, trading profit and fixed charges. The replacement-cost of merchandise is the price for which merchandise of similar kind and sales value could be brought into the stock rooms of an enterprise. It is the so-called market-value contemplated in the widely quoted and applied cost-or-market rule of evaluating merchandise inventories.

Abstract The attention of economists, accountant and business men has of late been directed more and more to the behavior of overhead costs, and in particular to those consequences which result from the fixed character of a large part of them. Everyone is familiar with the fact that an increased volume of output results in a decreased unit cost, as far as overhead is concerned. But another economists used the term differential costs to indicate those specific increments of expense which will accompany any specific increment in the output. Before analyzing this theory, or presenting any practical applications of it, the relation of differential costs to other economic concepts ought to be considered. Another economic concept which is related to differential costs, though inversely so, is the idea of quasi-rent. This term is employed to include all those extra earnings derived from the possession of rare natural abilities on the part of a business man. It follows that producers will be earning high quasirents when their production costs are low and low quasi-rents when their production costs are high, thus making an inverse ratio between quasi-rent and costs.