Knowledge that Transforms

Abstract There is one major problem confronting the accounting profession that will occupy the attention of the administration of the Association of University Instructors in Accounting in the year 1931. Avenues of entry into the practice of accounting are not clearly defined. It is extremely difficult for a young man who shows some aptitude in this field to determine upon the proper method of preparation to secure admission to the profession. Up to the present time the professional societies have not set forth the qualifications of an accountant or the proper training methods. It seems to the author that the time has come for practitioners and teachers of accounting to attack this problem with a view to establishing a relationship that compares with other professions such as law, medicine and engineering. The present situation perhaps is to be expected in a young and growing profession. Accounting has passed the stage of infancy now and it seems that it should be ready to accept implications involved in being recognized as a profession. There are still some who look upon accounting as a trade or business but most practitioners prefer to be known as professional men and to have their occupation recognized by the public as a profession.

Abstract During the long evolution of bookkeeping, the teaching process has made use of several methods of approach. By the mid of the nineteenth century, more attention was directed to ledger accounts as a preliminary to analyzing transactions into debits and credits. This was the method wherein the purpose of the usual accounts, and their plus and minus characteristics, formed the ground work of instruction. Modern bookkeeping requirements are becoming increasingly complex within a framework of a methodology which was much more adequate years ago. Students of elementary bookkeeping feel the consequent difficulties, although they do not understand them. After considerable effort they manage to learn against perfectly natural impulses to the contrary that expense is not an asset, and that inventory is not an expense although it consists of purchased goods which, in a purchase account, are treated like expenses. The task is not of teaching procedure, but of teaching ways of thinking about business transactions.

Abstract The accountant who looks upon accounting as a relatively finished system of technique and a relatively complete body of theory has his face turned to the past rather than to the future. He is as far out of touch with the actual situation in which we live as the economic theorist who makes the economic man the cornerstone of a supposedly universal system. As business administration becomes more professional and scientific, the relationship which has in the past prevailed between management and accounts places a two-fold burden upon accounting. It is expected to continue its function as a tool of control and at the same time it is called upon to furnish management both the facts and the principles upon which scientific administration must rest. In meeting the latter requirement it becomes essentially a scientific methodology. As such its rôle is to afford a basis for the coördination of business administration with the current scheme of economic and social organization. This discussion has dealt with potentialities of accounting development rather than with so-called actualities. It has been argued that accounts must be readjusted to a new viewpoint of management and that in order to effect such a readjustment fundamental changes of technique and rules of procedure are necessary. It has been suggested that the result desired may be obtained by a decentralization of accounting problems and a thorough functionalization of the accounting system. With our present knowledge of social phenomena, one would be rash indeed to insist that particular developments like those here suggested, must take place. There are some things, however, upon which we can depend with definite assurance. Accounting, like all other institutionalized practices, must adjust itself to a changing environment if it is to survive.

Abstract Standard costs, so-called, had their genesis in the field of production but are being applied more and more in the field of distribution. This paper deals with only one application to the latter field. The technique of the application will be described first then reasons for the method and finally advantages of the plan. The plan might be called "The Key Man Incentive Plan." For point values assigned for weighting sales the first step in the procedure is to establish a scale of points per $1,000 of sales of product for certain spreads of margins of profit over manufacturing cost. A statement is then prepared listing various products or groups of products, their profit margins over manufacturing cost their sales points based upon these margins, any policy adjustments made to the latter in order to determine the final sales points assigned to each product or groups of products. The purpose of establishing these sales points based upon profit margins is to enable one to weight the sales volume so as to indicate the relative desirability of securing business for various products from the standpoint of both normal profit and proper balancing of factory operations.

Abstract Early writers on bookkeeping were intent upon giving instruction in the bookkeeping practice of the day and indulged in very little theorizing. The writers did not enter into explanations of how transactions should be thought out or why one did thus and so, but confined themselves strictly to telling in detail how to perform the acts of record-keeping. An attempt to formulate the early reasoning involved in analyzing transactions into debits and credits must therefore be hypothesized out of the phraseology used and by trying to read between the lines of the practical explanations of how the record was to be made. Just how that record was first expanded to include impersonal accounts is unknown. But it seems not improbable that the impulse came from traders rather than bankers, although the two occupations merged into each other much more then than now. It seems quite reasonable to aspect that when the use of ledger accounts was extended into trade, the incompleteness of the record would become much more apparent.