Knowledge that Transforms

Reviews the book "Analysis of Industrial Securities," by John H. Prime.

Abstract All two frequently a university student begins the study of accountancy with a sample balance sheet. After he has mastered a few questionable definitions, he is introduced to the dynamics of business operations through the statement of profit and loss. Once the form and content of the two schedules are outlined, he may explore the records of bookkeepers at great length. In the end, he may have a comprehensive knowledge of ordinary procedures, but he is not, in any fundamental sense, prepared to appraise the work of an accountant. The accounting for a balance sheet may be explained, but the statement cannot be understood without first conceiving some elementary notion. Accountants do not act as though they believed assets to be property or the subject of property. The former, in its strict legal sense, is "the indefinite right of the user and the disposition which one may lawfully exercise over particular objects or things." The property holder has "rights to the chance of the future services of wealth. Wealth coupled with possession, is "the visible manifestations of invisible rights, the evidence of things not seen.

Abstract No part of the entire corporate mechanism, a vital instrumentality in modern business, investment and speculation, is more complicated or more poorly designed and comprehended than the legal capital requirements and the attempted safeguards against unsafe distributions of assets to the shareholders such as improper dividends, share purchases and distributions following reductions of legal capital. The article presents a brief survey of the prevailing types of statutory restrictions upon dividends with a view to evaluating the efficiency and ascertaining the shortcomings of the standards prescribed. The concept of the legal or "stated" capital are considered, and different varieties of limitations on cash and share dividends, with comment upon the abuses and defects of the existing systems and the need of some further statutory revision are discussed. Whatever restrictions are adopted as to dividends they should be supplemented by a general requirement of the exercise of reasonable care and prudence not merely to ascertain the existence of book surplus or profits, but also needful liquidity and the financial status generally.

Abstract Some concept of income holds a prominent place in the consciousness of every individual. The very essence of economic activity is that of earning and enjoying income. As in the case, however, of many other terms of universal usage both in science and in business, the various concepts involved are confused and often conflicting. Even as a term used in technical economics, the definitions of income found in the writings of the leading authorities show pronounced differences of opinion. Income may be defined as the gain derived from capital, from labor, or from both combined, provided it be understood to include profit gained through the sale or conversion of capital assets. Net individual income is the flow of commodities and services accruing to an individual through a period of time and available for disposition after deducting the necessary cost of acquisition. Income in the broad sense all wealth which flows in to the taxpayer other than as a mere return of capital. Income or profit of a given period may be defined as the increase in proprietorship which has taken place during that period, making due allowances for any part of such increment as may have been distributed.

Reviews the book "Income and Economic Progress," Harold G. Moulton.

Abstract The relation of accounting to economics has been the subject of discussion a number of times, but no program devoted to accounting relationships would seem complete without some expression on the subject of economics. The economist and the accountant have been members of the same family for a number of decades, since the early period in which economics permitted this fledgling to enter the liberal arts colleges under the shadow of its protecting wing. They later became chief partners with business law in the organization of curricula in business and schools of business. However, there are many indications that the two fields are coming closer to a mutual understanding. Economics is developing most rapidly in the field of statistics and statistical method and in this type of study is reaching more and more into fields hither-to largely the habitat of the accountant. Also, finance and marketing, among others, are studying problems closely connected with accounting and in which the accountant is apt to contribute much of the useful material.

Reviews the book "The Law in Business Problems," by Nathan Isaacs.

Abstract The author's general topic is "putting across" the bookkeeping phase of the elementary accounting course. More specifically he is interested in the types of tests or examinations, which can be given to bear directly on the students' acquisition of bookkeeping technique. Perhaps he is being unpleasantly honest when he say that this matter of bookkeeping is a phase of the elementary course which is often unduly slighted in one's eagerness to get at what one consider material more worthy of a college course. Bookkeeping training naturally falls into the first course. To teach it well enough so that the student until after graduation will retain it and in the meanwhile constitute a reliable background for work in other accounting courses, is a task well worth careful consideration. According to the author, the bookkeeping sets used should represent as great a variation of types as is possible from the simplest to those of a considerable degree of complexity. His policy has been to require the students to rule all of their books working from written descriptions, or from suggested blackboard models.

Reviews the book "Auditing Theory and Practice," by Robert H. Montgomery.

Reviews the books "Myself" and "Institutional Economics," by John R. Commons.