Knowledge that Transforms

Abstract The following accounting problems were prepared by the Board of Examiners of the American Institute of Accountants and were presented as the second half of the Certified Public Accountant examination in accounting practice on May 15, 1947. The candidates were allowed four and a half hours to solve problem 1 and either problem 2 or problem 3. Problem 1 was given a weight of 30 points and 20 points was assigned to either problem 2 or problem 3 From the following information, prepare a balance-sheet as at December 31, 1944, in accordance with the authorization of board of directors referred to below. The adjustments should be clearly keyed by letters or numbers on working trial balance. The Construction Corp. is engaged in a variety of construction work under contracts, the collections on which are made on the basis of engineering and architects' estimates as to stage of completion. Customers usually retain a percentage of the amount of each estimate pending completion of the contract. Gross profit on contracts has been shown in the books and financial statements in the year of completion.

Abstract This article focuses on the changes that can be made to accounting textbooks so that they can be made more educational and student-friendly. Textbooks should all be published in loose-leaf format. Thereby they may readily be kept up to date. Many publishers gloss over income tax problems; others omit all taxation, because tax laws change so frequently that the book is too clearly dated. To bring out a new edition involves a lot of work and expense. Changing a page or a chapter is simple and cheap. Of course, the initial cost of publishing will be slightly increased; metal ring binders seem to cost more than permanent binding. Also, the publishers would have to insert, on all title pages, the street and number where they do business; so that the purchaser could order new material as it appears. Even the most elementary texts should stress taxation. Authors should take the utmost pains to stress the difference between good accounting and income tax accounting; and the means of keeping books to conform to both. The chapters on Social Security, and Withholding of Income Taxes, should appear in the front of the book, immediately followed by a chapter on Sales Taxes. The loose-leaf system would permit the omission of the last from books shipped to those happy states like New Jersey and Texas which are free from the inequities of sales taxes. The loose-leaf system would also permit separate chapters, each written by a local expert, on the peculiarities of the tax system of each state specifically applied to the small proprietor or partnership.

Abstract In approaching the subject of audit technique, the matters which will be discussed will be confined to those applicable to an examination of financial statements wherein the public accountant's responsibility is limited to expressing his opinion of a balance sheet and income statement to be used for purposes of general publication, as distinct from the more detailed examination incidental to the verification of recorded receipts and disbursements or other individual transactions for the purpose of establishing their propriety and authenticity. A realistic concept of audit technique is generally acquired through basic scholastic training in the technical procedures of conducting an audit, careful study, and intensive research, supplemented by intelligent application of academic training to the situations encountered when this knowledge is put to the test in actual business practice. However, the technical knowledge obtained by study and actual experience will lack full effectiveness unless coupled with the indispensable exercise of imagination, alertness, vision and common sense.

Abstract The article focuses on the usefulness of training programs for the public accountants staff. During the period of the world wars both the armed forces and industry made extensive use of special training programs to meet the challenge of new demands and to solve the problems created by the sudden loss of experienced employees. It was demonstrated that by the use of proper training methods individuals could be brought to the stage of respectable performance in relatively short periods of time. Millions of individuals were trained to meet the multiple demands of a modern army and millions of others with little or no experience in the mechanical arts were trained to take their places in industry. This was done with such efficiency that in a period little longer than that which it normally takes an individual to acquire a college degree an important part was played in defeating an experienced and seasoned enemy. While it is true that assistance was given by pressures and incentives that do not ordinarily exist in more normal civilian activities, accomplishments in many situations were little less than phenomenal.

Abstract The article presents information about surplus reserves. In recent years, published statements have reflected a rather significant expansion in the use of those reserve accounts which are typically presented either within the net worth section or immediately above that section under a "Reserves" caption. In an attempt to acquire an impression of their nature, a number of these reserve accounts were analyzed. For this purpose, the financial statements of ninety-three business corporations, filed with the Securities and Exchange Commission during the six-year period 1937-1942, were examined. No attempt was made to select a "normal" period. However, it did seem desirable to include several pre-war years. The ninety-three companies selected for analysis are among the largest business corporations in terms of total assets, accounting for approximately 30% to 35% of the total assets in the manufacturing, trade and service industries. This bias toward size is believed to be justified because the statements of larger corporations are frequently used as examples of acceptable accounting practices and in this way exert an influence on corporate accounting.

Abstract The article presents a critical analysis of statutory renegotiation. Since it's inception in 1942, statutory renegotiation of the overall profits of contractors engaged in war business has been the subject of extended discussion. Business interests at first vilified but later grudgingly accepted renegotiation while government spokesmen in and out of the U.S. Congress have praised it most highly. Principal comments in the past have come from those who had an axe to grind on one edge or the other but it is now possible to evaluate critically the results of this legislation. Any evaluation of the accomplishments of renegotiation must first consider the background and intent of the Renegotiation Acts as well as the nature and scope of the avowed aims and then examine the degree to which these purposes have been fulfilled in actual practice. In the first World War, a major public scandal resulted from the excessive profits realized by corporations and individuals and as the production of war goods expanded in 1941, it became increasingly evident that tremendous profits would again be realized.

Abstract In the fifty years since the first law was enacted to license certified public accountants, there have been increasing efforts toward standardization within the profession. For the most part, the progress toward uniformity has been on a national scale through the efforts of national organizations. From a theoretical standpoint, at least, it would appear that the education and training of accountants for the profession should also approach uniformity on a national scale. The important question for CPA examiners is: "What type and how much training must a candidate have before he can be allowed to practice?" This question, of course, includes formal education or training in accounting schools or colleges, as well as what is termed "practical experience" in accounting work, and particularly in public accounting. Theoretically, the answer to this question should be the same in one U.S. state as in another. And it is reasonable to believe that approximate uniformity in answering the question will affect the degree to which high standards of public accounting practice are adopted and maintained throughout the U.S.. If, in some states, little or no training is required before candidates enter the profession it is possible, but by no means certain, that some will obtain additional education and practical training before practicing on their own account. But others, having the stamp of approval from a CPA board, will plunge into engagements for which they are not qualified and will make mistakes which a longer training period would have prevented.

Abstract Reviews the book "Foremen's Unions: A New Development in Industrial Relations," by Carl J. Cabe.

Abstract Comprehensive auditing of government corporations had its inception in Section 5 of Public Law of the Seventy-ninth Congress. This law was originated as the George Bill. It was passed February 24, 1945. On December 6, 1945, a second law was enacted concerning corporations which contained somewhat similar provisions as to auditing but also provided for budgetary and other controls. This was the Government Corporation Control Act. The first fiscal year for which audits were to be made was that ended June 30, 1945. Reports are addressed to the Comptroller General and transmitted by him to the Congress, one copy to each house. That to the House of Representatives is sent to the Speaker of the House. That to the Senate is sent to the President of the Senate. Copies go to the President of the United States, the corporations, the Treasury Department, and the Bureau of the Budget. Each report is printed, and a limited number of copies may be obtained from the House Document Room. Whenever there is public demand for as many as 500 additional copies of any report, the Government Printing Office will print an additional supply for sale at from ten cents per copy up, according to the size of the report.

Abstract The article presents questions and answers to the problems, which were prepared by the Board of Examiners of the American Institute of Accountants and were presented as the first half of the C.P.A. examination in accounting practice in November, 1946. The candidates were required to solve both problems. The weights assigned were: problem 1: 30 points; problem 2: 20 points. The time allowed was four and a half hours. A suggested time schedule is given as: Problem 1: 90 minutes; Problem 2: 120 minutes. It has been asked by the president of Novo Kitchen Aids, Inc., manufacturer of home appliances, to review the company's capital, surplus and reserve accounts and to make such proposals for their revision and balance-sheet presentation as good accounting may suggest. (a) Draft a work sheet, and brief notes or adjusting entries which will indicate and explain the changes in form or content you would recommend, and (b) draw up the reserve, capital stock, and surplus sections of the balance-sheet as at April 30, 1946, as they should be presented. In response to this question, the work sheets and balance sheet are given in the article.