Knowledge that Transforms

Abstract The government procurement agencies are encouraging their contractors to plan for termination of their war supply contracts in advance. This type of preplanning consists of several methods as advocated by the contracting agencies. Already several agreements have been entered into between the government and the contractors participating, wherein definite and stated terms have been agreed upon by both parties as to how certain problems that will arise at termination will be solved. The writer, being particularly familiar with the textile industry, will attempt to present some of the major problems facing this industry in settling its termination claims. Pretermination studies may seem to be an unnecessary and useless way of spending money, wasting executives' time and tying up personnel. However, an examination of the termination problems affecting the textile industry reveals one factor which alone necessitates these studies the uncertainty of both industry and government as to just what a termination in a textile mill will involve and what fundamental policies of termination will provide the most equitable settlement. Several cardinal points have developed as the result of a study of the worsted industry.

Abstract Reviews the book "Effect of Federal Taxes on Growing Enterprises."

Abstract Reviews the book "Internal Auditing— Philosophy and Practice."

Abstract The article presents information on accounting administration of unemployment insurance. The social security act does not prescribe the type of administration that any state should establish; however, certain minimum requirements had to be fulfilled before the Board would approve a state law. This leeway in the Federal law allowed each state an opportunity to select an administrative agency in harmony with its peculiar needs, fitted into the composition of the state government and the demands of local public opinion and adapted to the plan of administering other state labor laws. A review of the essential functions indicates clearly the heavy burden resting upon the administrative units for the successful carrying out of the purposes of unemployment compensation legislation. One of the early functions is the establishment and maintenance of an adequate public relations and information service. Interpretation and clarification of the state law becomes an important task of the administrative agency. Office management, planning and supervision of the budget are also duties of administration. Forms must be drafted; reporting procedures must be determined; accounting equipment and records must be selected and proper routines for the collection, recording and processing of information must be established.

Abstract The original cost provision for plant accounts, now incorporated in the uniform system of accounts prescribed for most electric utilities, was advanced by certain regulatory authorities as a "requirement of sound accounting practices" and as an "expedient to effective rate regulations." The present program of the Federal Power Commission, as revealed in "original cost" proceedings which followed the initiation of this system of accounts, shows conclusively that this system of accounts, together with the arguments advanced for its adoption, were, to this authority, within the shell of which was concealed an economic philosophy utterly foreign to the American system of private enterprise. Does it not seem that the attempt of this authority to apply this radical economic philosophy to public utilities, as a regulatory policy, may represent the first step in a well-prepared plan to revolutionize the whole American economy and that it may represent the spearhead of an attack on the American system of free enterprise? The distinguishing feature of "original cost" accounting is found in the provisions for the analysis of costs incurred in the acquisition of operating or going concerns, or in the purchase of an earning entity.

Abstract Contrary to belief in some quarters, cost accounting is not management. It can only record and report facts, and, to a certain extent, interpret them to management. It can show the effects that variations in activity, changes in engineering, new methods of production, shifts in managerial policies, and so on have on the costs of the functional steps in production. Like the barometer, it can only reveal the conditions of the moment. Just as the barometer records the facts from which action in preparation for fair or foul weather should result, so also the cost system can reveal the facts from which managerial decision and action should follow. The barometer does not cause storms nor bring fair weather; neither does good cost accounting cause or improve the conditions, which it reveals. It should be evident that the primary objective of cost accounting should be to furnish factory management with reliable data relative to the costs of services and of the functional sequences of production. It should also be evident that certain aspects of factory management can be no better than the functional cost data upon which it relies, and that the only adequate information for management is truth, or as near to truth as is possible.

Abstract Reviews the book "Regression Analysis of Production Costs and Factory Operations," by Philip Lyle.

Abstract Reviews the book "Lectures on Fire Insurance Accounting."

Abstract The article presents information on accounting for depreciation. Depreciation may be defined as an accounting cost which is arrived at by the use of methods which do not "attempt to measure the exhaustion which actually takes place within a given period," we thereby divorce the depreciation problem from the everyday world of business experience in which managerial decisions are made. Unquestionably, managements in their selection of depreciation methods have sometimes had purposes in mind other than an accurate accounting for depreciation. They have sometimes been motivated by an undue regard for financial conservatism. Even aside from the selection of methods, their depreciation policies have sometimes brought accounting results which have been positive misrepresentations of the facts. However, the accounting profession cannot afford to countenance such practices and still less can accountants afford to make them a basis for their own analysis of the problem of depreciation. The fact that managements have used methods of depreciation with different ends in view does not mean that the different methods rest upon basically different assumptions.

Abstract It has been inferred by critics of the Federal Administration that Federal taxes have been imposed for some reason other than revenue. While there is enough truth in this inference to make it generally acceptable, still it must perhaps be admitted that revenue has been the primary purpose for Federal taxes. The charge has been made, and fairly, that "New Deal" taxes have brought about bad economic results. The cure for these bad results has been suggested to be "Taxation for revenue only" which suggestion carries the inference that tax laws should be framed without consideration of anything but the revenue to be obtained. The fallacy here is plain. It has been suggested recently from more than one quarter that the general welfare would be enhanced if accountants would take a more active interest in the field of economic thought and exert a benevolent influence on legislation affecting national and international economics. It should be recognized that productive enterprise is "the goose that lays the golden egg," and that capital investment is the fundamental element of this enterprise. Federal income taxes should not be discriminatory in their effect on such enterprise, rather enterprises should be encouraged to expand to the end that employment, goods, and services adequate to satisfy human needs and wants shall be provided.