Knowledge that Transforms

Abstract Almost all standard textbooks in accounting, as teachers well know, open with a chapter devoted to the field of accounting and its relationship to law, engineering, economics and the social order in general. Unfortunately in their haste to get to the condition statement, the operating report and the mechanics of debit and credit many teachers devote a small part of the organizational period to such broad relationships and thereafter uniformly neglect the material of formal economics. It is probably not unfair to add that many instructors who later refer to economics do so in a manner that is unenlightening if not downright objectionable. The lack of agreement among economists leads to such diverse positions that the problem of rapid integration becomes almost impossible. The two comparatively recent revolutions in economics have added to the difficulty of integration. The Keynesian revolution of the late nineteen-thirties placed emphasis on the problem of employment and its determinants.

Abstract The Annual Business Meeting of the members of the American Accounting Association was conducted as part of two regularly scheduled sessions of the 1951 Convention. During the banquet session on September 6, 1951 officers for 1952 were elected. The remaining business was handled during the regular business session on September 7, 1951. Mr. A. C. Bekaert, Vice President of the Colorado Fuel and Iron Corp. addressed the members and guests at the banquet on the subject of clarification of terminology used in financial statements. It was announced that registrations at the convention made through the middle of the first day were 302 men and 102 ladies. The total attendance at the several sessions was about 500. Mr. Harvey Meyer of the University of Tennessee, Knoxville, Tennessee presented the report of the nominating committee. The new officers were introduced and George R. Husband of Wayne University, Detroit, Michigan made an acceptance speech, on behalf of elected members. The report of the committee on by-laws was presented by chairman Harvey Meyer; it proposed an extensive editorial revision of the language of the by-laws in the interest of clarification, plus a few minor substantive changes. After some discussion, the report of the committee on by-laws was approved unanimously.

Abstract There is much interest still evidenced by many teachers of accounting on the subject of tests, and specifically, on the advantages and disadvantages of so-called objective tests. It is hoped that this report of some of experiences with these tests will be of help to those currently working with the problem. In his article, "Construction of Objective Examinations," Professor Wallace V. Schmidt did an admirable job in summarizing many of the advantages, which are obtained through the use of objective tests. A conscientious effort will be made here not to duplicate the cogent arguments he offered, but rather, to examine further some of the points he developed and to elaborate on some aspects of objective testing which seem to be most commonly misunderstood. To do this, an attempt has been made here to clarify terms, and to present illustrative materials taken from the direct experience. Specific illustrations may help dispel the common misconception that these objective tests can only be fruitful in fairly narrow circumscribed areas.

Abstract In the October 1951 issue, "The Accounting Review" published the text of Supplementary Statement No. 2 prepared by the American Accounting Association's committee on concepts and standards underlying corporate financial statements. That differences of opinion among members of the Committee relative to the utility of the historical dollar cost convention were not as extreme as those apparently existing among accountants generally is demonstrated by the emergence of unanimous and reasonably definite conclusions. That substantial differences in viewpoint did exist, however, is evidenced by the fact that achievement of unanimous agreement on a statement for publication required more than a year of effort, involving several meetings and very extensive correspondence. Agreement within the committee as to the dynamic nature of accounting practice did not, of course, lead automatically to a decision in favor of change. It was generally conceded that the widespread dependence of our now highly complex economy on accounting information presented a major barrier to radical revisions in accounting procedures.

Abstract On writ of Certiorari to the District Court of Appeal, Fourth Appellate District of California. Mr. Chief Justice delivered the opinion of the Court on Whether a corporate entity can be ignored, even though the corporation is actually engaging in business and Whether a corporation, with no other stockholders than another corporation, the stock of which corporation in turn is owned by a corporation, and so on, add infinitum. Prior to December 31, 1951, respondent Edgar Lear was controlling stockholder of each and all of the respondent corporations. As of that date each of the corporations acquired stock in one or more other of the corporations, in such manner and to such effect that if the group of corporations were consolidated, no capital stock would be outstanding. The undisputed objective of the plan was to lessen the taxes of Edgar Lear-both the income tax and the estate tax-while keeping in the hands of Edgar Lear and his family the actual control of all of the respondent corporations.

Abstract Two needed virtues of any accounting report are simplicity and accuracy. Simplicity is essential in a report to convey to the reader the meaning with the least possible inference or interpolation from his own predetermined notions on the matter involved. The break-even chart is just such a summary report. Its simplicity enhances its ability to communicate the relation of sales less variable and fixed costs at different levels of operation quite forcefully to financial analysts outside the company and to the management group within the company. In such a function its use to convey the information in the master budget is undisputed. In plotting sales as a function of volume on a break-even chart it is assumed that sales equals production which, obviously, is not entirely true because of the accumulation or depletion of inventories. Inventories, though, are usually very small in comparison to total production and, for practical purposes, are ignored in computing sales at various levels of production. Since the break-even chart is based on accounting data and is used as an accounting report, it customarily ignores the cost of the investment used to obtain the production and distribution of a company's output.

Abstract The article focuses on various problems that were prepared by the Board of Examiners of the American Institute of Accountants and were presented as the second half of the November, 1951 Certified Public Accountant Examination in accounting practice. In one of the question the balance sheet of the company on September 30, 1951 was given and examinees were asked to compute the book value of a share of common stock as of September 30, 1951. They were also asked to compute tax rule as to stock rights and to show the computation and treatment of the transaction if the person sells his rights for $800. In another question, from the information and summary of the transactions for the year ended December 31, 1950, examinees were asked to prepare work sheets, showing by appropriate funds all information needed for a statement of income and expense for the year and a balance sheet for each fund as of December 31, 1950. Changes in surplus accounts or in fund balances were to be shown in additional columns unless all such changes are clearly identified in the balance sheet columns.

Reviews two volumes the book "Montgomery's Federal Taxes." Vol 1., "Corporations and Partnerships, 1951-52," by Robert H. Montgromery, Conrad B. Taylor, Mark E. Richardson; vol. 2, "Estates, Trusts and Gifts, 1951-52," by Robert H. Montgromery, James O. Wynn, C. Harold Blattmachr.

Abstract Because the major job of constructing weapons is generally publicized as the primary function of the U.S. Atomic Energy Commission, (AEC) people in general do not realize how many other facets there are to AEC activities and few accountants know what a challenge it has presented to their profession. 'The Atomic Energy Act of 1946 provides that, "subject at all times to the paramount objective of assuring the common defense and security, the development and utilization of atomic energy shall, so far as practicable, be directed toward improving the public welfare, increasing the standard of living, strengthening free competition in private enterprise, and promoting world peace." Fortunately, these broad objectives are related. Most of the accomplishments of AEC are useful not only for defense but for peacetime purposes. Much accounting effort is required for the various types of research undertaken through AEC financing. Although this research is directed primarily to improving the processes for producing the materials that AEC is in business to manufacture, large sums are also expended for medical research and basic scientific research.

Abstract The article presents problems that were prepared by the Board of Examiners of the American Institute of Accountants and were presented as the first half of the May, 1952, C.P.A. examination in accounting practice. The candidates were required to solve problems 1 and 2 and either problem 3 or problem 4. The time allowed was four and a half hours. Some of the questions included in the paper are. The board of directors of the Nelson Company authorized a $1,000,000 issue of 5% convertible 20-year bonds dated March 1, 1948. Interest is payable on March 1 and September 1 of each year. The conversion agreement provides that until March 1, 1953 each $1,000 of bonds may be converted into 6 shares of $100 par value common stock and that interest accrued to date of conversion will be paid in cash. After March 1, 1953 the bonds are convertible into shares of common for each $1,000 of bonds. The company sold the entire bond issue on June 30, 1948, at 98 and accrued interest. Deferable costs incurred in making the sale amounted to $8,320. The company adjusts its books at the end of each month and closes them on December 31 of each year. Interest is paid as due. On February 1, 1950, a holder of $20,000 of bonds converts them into common stock.