Knowledge that Transforms

Reviews the book "Credits and Collections in Theory and Practice," by Theodore Beckman.

Reviews the book "Fundamentals of Accounting," by J.F. Sherwood.

Abstract This article focuses on the editor's views about the social significance of accounting. Accounting is utilized as one means of exercising social control, that is, control by the government or by governmental agencies over institutions touched with a public interest. The right to inspect the accounts of private business enterprises is illustrative of this point. Bank examining is organized in the public interest, the audits being made for the protection of the depositors. Through the field audits of the U.S. Income Tax Bureau and the Bureau's accounting regulations, the federal government exercises an indirect control over numerous accounting policies. Another illustration is found in the power to prescribe uniform accounts. Usually one is inclined to relate the purpose of bookkeeping and accounting to the individual business enterprise. But here is a plain indication that the effect of poor bookkeeping extends far beyond the individual. Good bookkeeping, it seems, must be of some concern to society since the lack of it is so definitely associated with the great losses which attend bankruptcies.

Reviews the book "A System of Accounting Procedure for Livestock Ranches," by Frederick W. Woodbridge.

Abstract This article focuses on the author's view about earned surplus. The author says that the general course of the reasoning which led to the final definition will prove to be of even greater interest than the expected applications of the definition. The Committee on the Definition of Earned Surplus, reappointed hopefully each year by the president of the organization American Institute of Accountants, faced a task of no mean proportions. First was the obstacle that many common terms in use in the world of business, especially terms appearing on financial statements, have no fixed meaning, and can be made intelligible only through the aid of explanatory phrases. Second was the apathy, if not the actual resistance of business itself, toward more exact usages. The astonishing growth of interrelations between business enterprises has prevented the precise formulation of the scientific truths that are presumed to underlie the various manifestations of economic endeavor. Third was the multiplicity of state laws and court decisions bearing on the questions of dividends and maintenance of capital.

Reviews the book "Raw Materials of Industrialism," by Hugh B. Killough and Luch W. Killough.

Reviews the book "Stock Speculation and Business," by George L. Hoxie.

Reviews the book "University and College Accounting," by Lloyd Morey.

Abstract Doubtless the cash account is one of the oldest of accounts. Business operations have revolved round the cash account from the very beginning of business. It follows that the technique of accounting and the operation of business organizations can hardly hope to get away from so fundamental concept. One cannot expect the statement of cash receipts and cash reimbursements to be displaced even if all businesses were to be placed on the accrual basis of accounting. One might well question the accuracy of the small business man who regards his bank balance as his indicator of profits, but one cannot too quickly criticize his judgments on fundamentals. Perhaps the accrual basis of accounting is partly to blame for the shift of emphasis from the funds involved to the net income produced. At any rate, it seems that we have gone too far in leaving out of the picture the significance of the shift in funds which occurs with business operations. This statement applies almost equally to textbooks on accounting and to the work of auditors and interpretative accountants. That one has failed to appreciate the fact that shift of funds in a business is still of major importance, is evidenced both by the relative newness of the Funds-Provided-and-Their-Application Statement and the lack of its wide use and development.

Abstract Anyone who indulges in a mental résumé of major topics of accounting discussion for recent years would probably emerge with one or the other of two convictions, either one is rapidly drifting away from moorings of older conceptions of basic elements of accountancy, or that one is growing with considerable rapidity in new directions. The word capital for example, has long been used as a term to indicate the investment brought into a business by proprietory interests. It was distinctly associated with contribution. Statutory regulations concerning limited liability corporations further emphasized this concept by requiring that the proposed sum of capital be definitely stated from the very inception of the organization, that it be fully paid in and that it be maintained intact against the encroachment of dividends. Capital stock was considered by legislatures and courts as representing owners' contribution, the amount dedicated to purposes of the business by those controlling the concern's affairs and enjoying residual profits, if any. Is accounting thought drifting away from this and other basic conceptions, or is it is merely growing out of garments in which it has for so long been clothed? No-par stock has brought occasional presentations of financial structures in which original contribution was divided between capital stock and initial surplus.