Knowledge that Transforms

Abstract The members of the American Accounting Association have an unusual opportunity for rendering an extremely valuable service to our country, one which, if handled properly, cannot ever be measured in dollars, but which will, from an economic standpoint, contribute materially to the well-being of the United States in the period through which we are now passing and the one which will follow immediately upon the cessation of hostilities. The author has had the opportunity, for the past several years, of practically living and breathing government procurement and contracting. He has spent many days, evenings and nights with representatives of both the War and the Navy Departments in endeavors to aid in the solution of the multitude of contract problems that arise in procurement for war purposes. The major problem of our country today, is, of course, the winning of the war. The second major problem of our country today is the winning of the peace. Closely connected with each and part of both is the transfer of our economic structure from a war basis to a peace basis.

Abstract Reviews the book "Living on the Public Debt. A Tract for the Times," by Hastings Lyon.

Abstract All accountants are acutely aware of the difficulties surrounding the concept of cost, but doubtless many have not had the questionable opportunity of examining the special obstacles peculiar to nonprofit institutions. Since the accountant's expenditure approach to cost is highly objectionable, it may be that the economist's concept of cost can be employed. To economists and many businessmen cost is invariably associated with sacrifice. To this group it seems unreasonable for accountants to insist that interest paid for borrowed funds is a cost while the sacrifice of earnings from funds belonging to the enterprise is not considered cost. Accountants have parried these criticisms by pointing out the need for objective criteria for making entries and by showing that special calculations can be easily prepared for the comparatively rare instances when all economic costs must be included. But with regard to institutional costs it seems, at first sight, that the economic approach has a clear-cut superiority. Unfortunately, the economic concept of sacrifice is itself little, if any, better than the accountant's less sophisticated approach.

Abstract The system of examinations in Canada is an attempt to attain a substantial degree of uniformity within the bounds of a federal constitution, and to retain the practical viewpoint of the profession in various provincial institutes in combination with the centralized administration of a Dominion Association office. The Canadian constitution sets up a federal system under which education, as well as other matters deemed of a local or private nature, is assigned to the provinces. The Dominion Association of Chartered Accountants was incorporated by special act of the federal parliament in 1902, but in its earlier years it was active only to the extent of bringing together those members of the provincial institutes who volunteered to take an additional membership in the federal body. On the whole accountants feel that in Canada they have attained a fair degree of uniformity consistent with the constitutional limitations, and that they reasonably combine the practical viewpoint of those practicing the profession throughout the country with the convenience of a centralized office.

Abstract A system has been defined as the orderly arrangement according to some common law, a collection of rules and principles, or the method of transacting business; an accounting system has been called the chief aid, the indispensable tool of modern industry with which management will understand, control, and direct all operations of the business. The primary function of the system is the compilation of information in order to present it to management for control purposes. The manufacturing procedure and shop methods will lead to a consideration of the type of pay, the control of inventories, the problem of costing tools, dies, jigs, facilities, the methods of collecting hours worked, and many other problems. The creation of a system and a procedure division in many a company indicates that this phase of office activity has gained in creasing recognition and will undoubtedly continue to do so. Only the organized and coordinated effort of all employees, from president to office boy, can assure the successful conduct of the business. The system unites the various links into a continuous chain through all departments and activities.

Abstract The article presents information on averaging income for tax purposes. The purpose of averaging devices is to get away from the segmentation of income into pieces one year in length or, in other words, to lengthen the accounting period for tax purposes. There is nothing very radical about this idea. Yearly income represents an aggregation of 52 weekly incomes and 12 monthly incomes. Tax accounting periods as short as one week and as long as two or three generations are conceivable and in fact, have been suggested. Although taxation is only one of several areas in which the defects of the annual income period are patent, it is perhaps the most important. In preparing income statements for most purposes, relevant facts and expectations outside or beyond the formal accounting figures can be recognized when action is to be taken or decisions are to be made. Moreover, reserves can be set up in the accounts to give a degree of formality to these facts and expectations. In the case of taxation, however, such adjustments are not feasible.

Abstract The article presents information on accounting aspects of contract settlement. Termination of war contracts refers to the termination or cancellation of work under a prime contract for the convenience of or at the option of the government, or of work under a subcontract for any reason. Termination may be complete or partial. However, "termination" does not include cancellation for default of the contractor. Quantity changes under "changes" articles or similar contract provisions or by agreement are considered "terminations." If such changes do not involve substantial or complicated problems, they should be handled under a "changes" article rather than under a termination article. The major problems of termination are the determination of the amount of settlement to be made with the contractor, the disposition of termination inventory and the provision of interim financing for the contractor. This paper is concerned only with the problem of determining the payment to be made to contractors under fixed-price prime or subcontracts. The Act (Contract Settlement Act of 1944) covers the settlement at termination of both cost plus a fixed-fee and fixed-price contracts.

Abstract The article presents problems that were prepared by the Board of Examiners of the American Institute of Accountants and were presented as the second half of the C.P.A. Examination in accounting practice held in May, 1945. The examinees were allowed four and a half hours to solve both problems. One of the question required the students to prepare a summary statement of executors as to principal, showing assets remaining in the estate and a summary statement of executors as to income of the estate of Ben East, deceased from the information as of September 30, 1944. Another question was to prepare a statement showing the estimated cost of producing 13,500 tons of X product for the purpose of bidding on a government contract of Dart Co. from the information provided. Dart Co. manufactures X, a main product, and Y, a by-product. X is produced and sold by the ton (2,000 pounds.). The raw material used in production consists of three ingredients, "H," "I," and "J". The contract for 13,500 tons of X represents 60% of the budgeted 1945 production of X by Dart Co.

Abstract Reviews the book "Handbook of Accounting Methods," edited by J.K. Lasser.

Abstract The writer has no quarrel with cost accountants and their methods, nor is it implied that cost figures, because of their imperfections, are hopelessly useless. By and large, the cost accountant performs well a function that is essential to carrying on accounting in general and basic to the furtherance of intelligent management. There are, however, three general conclusions that may be drawn from the exposition presented in the article; these should be emphasized. First, there is a real need for research directed toward the establishment of principles for cost allocation, especially with regard to the allocation of overhead costs. Second, there is good reason for broadening the concepts that have been applied to the field of cost accounting, to embrace techniques of statistical and mathematical analysis. Third, and most important, the limitations of available methods, the compromises of expediency, and the conflicting objectives that enter into cost calculations should make the accountant more careful as to his terminology with respect to unit costs.