Knowledge that Transforms

Today small business binds together many diverse threads of a current problem which is visualized as containing jar-reaching implications, not alone economic but also social and political. Big business is seen as growing ever bigger, more concentrated, and more firmly entrenched, with small business at an ever-increasing disadvantage. The World War is blamed for much of the condition, because the productive power and the know-how in the hands of the larger companies gave them, during that period, an opportunity for tremendous growth and expansion in facilities and permitted them to add materially to their resources. Capital is, of course, essential in some degree to almost any business. In a merchandising venture funds must be available for the purchase of inventories and to finance sales during the period between shipment and collection. The condition of governmental red tape, regulation, and annoyance is a troublesome one for small business. The government of a complex industrial nation like the U.S. must impose controls, limitations, and restrictions on its subjects for the betterment of small businesses in the country.

A committee on selection of personnel was established by the American Institute of Accountants in 1943 in the U.S., to study ways and means of insuring a continuing influx of capable people into the profession of accounting. Obviously, vocational counseling would sooner or later be involved. If counseling could avoid some of the heartbreaking experiences often met in fumbling and stumbling into one's life work, it would surely be worth while to the individual, and no less to the profession. It is clear, too, that counseling could work best if it rested on factual evidence regarding the individual's capability and promise. To furnish some evidence of this kind, tests would be needed that would be revealing, that could be easily administered, and that might be so widely used as to furnish national norms as a standard of comparison. The purpose of the present project of the committee is to define the mental and personal qualities which make for success in professional accounting. It also aims to develop, in collaboration with educational institutions, a procedure whereby promising young men may be discovered and guided towards the profession establish a battery of tests and supplementary techniques.

Reviews the book "The Pattern of Corporate Financial Structure," by Walter A. Chudson.

This article focuses on wage and full employment. The attempt to prepare national accounts shows that the form of accounts used for individual businesses is not satisfactory. This became evident when national income estimates were published "A New Method of Accounts" published in "The Accountant" was suggested by the income estimates. The preparation of national accounts shows that the improved method suggested then requires further modification. The evolution of accounts is not fully recorded and no satisfactory history appears to have been published. Probably the first businessmen to make use of accounts were the merchants of the Middle Ages. The early forms were simple cash accounts usually prepared as an aid to memory. Tally sticks and other early forms of money records were also mainly an aid by which to remember incomplete exchanges. From a national point of view the amount is part of the income of the nation or part of the result of employment. It is not trade-meaning buying and selling, it is not profit-meaning a special gain.

This article presents accounting problems which were prepared by the Board of Examiners of the American Institute of Accountants and were presented as the first half of the Certified Public Accountants examination in accounting practice on May 15, 1946. It gives an information and asks to prepare an income statement showing therein appropriate manufacturing cost variances of Bunson Co., for January, 1946, supported by journal entries of transactions for the month. The Bunson Co. makes unit M. The manufacturing of unit M is based on three successive and continuous operations in which the manufacturing cost of such unit is developed. The Eunson Co., operates a cost accounting system based on standard costs which are incorporated in the manufacturing cost accounts. The differences between standard costs and actual costs are reflected in appropriate variance accounts, namely, material price, material usage, direct labor rate, direct labor time, and over-all manufacturing overhead. The material price variance is assumed to be realized at the time of purchase, irrespective of time of usage.

In making an approach to the problems connected with the correlation of costs to financial statements, it might be pertinent to give some thought to the evolution which has occurred, over the course of many years, in the concept of the principal function of accounting. However, the emergence of the industrial era, with the resultant broadening of capital risk attendant upon the formation and operation of large industrial enterprises, marked the beginning of a new concept of the use of accounts. As the corporate form of enterprise, often comprising a large number of stockholders became more prevalent, there was consequently created a class of investors were not active in management of the business in which they had invested their capital. Thus was evolved the practice of the periodical statement of earnings, usually covering, as a matter of convenience, a period of a year, and supported by a statement of financial condition, or balance sheet, as of the end of the period for which the report of progress was made.

Reviews the book "The Social Problems of an Industrial Civilization," by Liton Mayo.

The Committee on Cost Accounting Principles has held one meeting and contemplates holding a second meeting before the end of 1946. A basic outline of the cost accounting subject matter has been prepared as a starting point in the search for fundamental principles and the ideas of the committee members have been consolidated through correspondence. The charge of the committee was to explore the feasibility of expressing general principles in the field of cost accounting, and, although the committee is not prepared to report definite conclusions at the present time, it is believed that further exploration will prove fruitful. During the year 1945 a number of manuscripts were given consideration as potential monograph material and it is to be hoped, barring continued shortage of paper and printing labor, that one or more research projects can be published during 1946. A project which has been in process for some time, the preparation of a complete index for the first twenty volumes through 1945 of the journal "The Accounting Review," is now practically complete and printers' bids are being received.

For years, there has been a pronounced conflict of opinion between the Internal Revenue Department of the U.S. Treasury and business management in general as to the propriety of different rates of depreciation allowances for physical assets. This conflict, which at times has reached the stage of an active dispute, has been costly to all. Management has been anxious to take deductions against taxes when it was known that there were taxes to absorb them. The Revenue Department has at all times had a natural desire to get taxes when profits were available to tax. The Department has been guided in its thinking by a conservative approach. The Department has been careful to act in a manner that would result in like treatment for all. Influenced perhaps to some extent by a desire for simplicity of administration, the Department has set simple rules and applied them pretty generally to all alike. To an important degree the Department has undoubtedly been influenced by the responsibility placed upon it to collect taxes justly due.

Reviews the book "Long Term Liabilities and Capital Stock," by George O. May.