Knowledge that Transforms

Reviews the book "Branch Banking, Its Historical and Theoretical Position in America and Abroad," by John M. Chapman and Ray B. Westerfield.

This article presents problems which were presented by the Board of Examiners of the American Institute of Certified Public Accountants as the first half of the November, 1942, certified public accountants' examination in accounting theory and practice.

Reviews the book "Statistical Cost Functions of a Hosiery Mill," by Joel Dean.

This article focuses on the nature of financial accounting process. Accounting has been defined by a committee of the American Institute of Accountants as "the art of recording, classifying and summarizing, in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results thereof." It is an art, not a science, but an art of wide and varied usefulness. The purely recording function of accounting, though indispensable, concerns only technicians. Its analytical and interpretive functions are of two kinds. One type of analysis is intended to afford aid to management in the conduct of business and is of interest mainly to executives. The other type leads to the presentation of statements relating to the financial position and results of operations of a business for the guidance of directors, stockholders, credit grantors, and others. This process of financial accounting, therefore, possesses a wide importance for persons who are neither accountants nor executives.

Reviews the book "Introductory Accounting," by Donald D. Kennedy, George R. Esterly and William J. Von Minden.

In this article the author presents accounting profits as an institution. According to the author the numerical estimates of profit become a business necessity with the expansion of the market and a corresponding increase in uncertainty. Such estimates are provided by accounting which attempts a quantitative clarification of the results of the utilization of productive forces. From the relatively simple record-keeping of an earlier period there have emerged the now highly complex, specialized functions of purchasing and marketing. Increasing problems also give rise to the expansion of interests concerned with personnel, managerial techniques, publicity, and other features. With the passage of time, increasing accounting requirements and techniques have been accompanied by the development of a body of highly involved doctrine. Public control is a further factor contributing to this result. Meanwhile, there is an ever-growing attempt on the part of accountants to arrive at a body of principles or standards which can be generally accented. In these tendencies the place of accounting profits as an institution manifests itself.

This article focuses on the structural fundamentals of financial statements. Financial analysis sometimes goes astray in assuming that the balance sheet at the year-end represents the average condition prevailing throughout the year, a condition which in some respects is usually not the case. An average balance sheet for the entire year would provide a better basis of comparison. Consistent treatment of the various classes of elements in all financial statements would soon lead even the casual reader to a better appreciation of the basic financial aspects of business activities and their results. The primary relationship expressed in accounts is that of equality. Entries are equations, ledgers "balance." Accounting starts, then, with the primary proposition that this equals that. Naturally many accounting statements stress this feature of "equality of factors." In the balance sheet attention is directed to the fact that property is equaled by ownership. A cash statement may show that the opening balance plus receipts equals disbursements plus the closing balance.

Reviews the book "The Theory of Competitive Price," by George Stigler.

The State of New York in operating its many and varied governmental activities for its 14 million inhabitants places the responsibility for the conduct of its financial affairs upon the State Comptroller, who is elected by the people for a term of four years. In American democracy, the State's business is everyone's business, and the inevitable consequence of failing to make some person specifically responsible for the conduct of definite phases of its affairs is that everyone's business becomes no one's business. In many spheres of governmental activity, such as policing, administration of justice, and supervision over banks and insurance companies, the failure to establish offices and officials responsible for these activities would be disastrous. In other types of governmental activity, the failure to establish responsibility causes confusion and opens the gateway for waste and high costs. The State Constitution designates the State Comptroller as chief financial officer of the State and specifically outlines his duties which are set forth in even greater detail in the State Finance Law. These duties are, to audit all official accounts; to audit all vouchers before payment; to audit the accrual and collection of all revenues and receipts and to prescribe methods of accounting.

Reviews the book "Practical Accounting," by Edwin L. Theiss and Jay L. Hunter.