Knowledge that Transforms

Reviews the book "Commercial Law Questions," by Wallace D. Cathcart.

Reviews the book "Business Law," by Dwight A. Pomeroy.

The article presents information on the presentation of long term lease liabilities in the balance sheets. The balance sheet is an important statement in its own right, even granting such inadequacies in satisfying certain purposes as recording different fixed assets at different price level. For one thing it is useful in studying the financial condition of a company. A most important point in a study of short-term condition is a consideration of the current-asset and current-liability sections. In a study of long-term financial condition the entire liability side is important in that it represents claims against the company and indicates the source of the funds with which the assets were obtained. All of the information presented on the income statement and balance sheet could he presented in text form. In recent years a new business procedure has been evolving which requires a reappraisal of today's body of conventions and principles. It is the acquisition of plant and equipment through use of a long-term lease rather than through the more traditional method of outright purchase frequently coupled with a long-term mortgage loan.

The article presents information on income statement and it's significance in financial reporting. The development of the corporate form of organization continues to emphasize the primary importance of the income statement in financial reporting. A few years ago the balance sheet was considered to be of primary importance. Even now some think that the submission of a balance sheet is adequate. Those versed in accounting know that both the balance sheet and the income statement are needed in order reasonably to appraise the financial condition of an enterprise at a given moment. Since 1939 thirty-three Accounting Research Bulletins have been issued by the Committee on Accounting Procedure of the American Institute of Accountants and, indicative of the recognition of the importance of the income statement in financial reporting, with a few exceptions they treat primarily of the income statement. The objective has been to narrow the area of difference in practice and to establish a basis of greater uniformity with respect not only to the composition of items included in the income statement, but also as to their presentation. In attaining these objectives, people must recognize that the income statement should be informative and it should reflect the facts in accordance with accepted accounting practice.

The article presents information on the use of two words, surplus and reserve, in accounting. If the word "reserve," now used on both sides of the balance sheet in a number senses, is made to disappear except as the descriptive caption for retained earnings in the net worth section. In this capacity it regains more of its dictionary meaning, shaking off the sundry technical connotations involved in the miscellaneous use to which it has been put. At the same time the word "surplus" disappears from accounting vocabulary, relieved of a use which has long troubled accountants and misled lay readers. It is true that introduction of a new accounting convention calling for descriptive analysis in financial statements of earnings kept for corporate purposes might operate to expose situations in which such retentions were unnecessarily large. In these cases the attempt to assign reserve labels to parts or to the whole amount might prove a give-away to the condition. The suggested new terminology and related technique and convention would doubtless be unwelcome under such circumstances.

Reviews the book "Federal Taxes—Estates, Trusts, and Gifts," by H. Montgomery and James O. Wynn.

The creation of the Commission on Organization of the Executive Branch of the Government by authority of the Congress of the United States is but one of many attempts to reorganize extensively the Executive Branch of the United States Government. The Commission is composed of twelve members representing the President of the United States, the Senate, and the House of Representatives. While the General Accounting Office is an agency of the Legislative Branch, it is impossible to disregard its functions in any study of accounting in the Executive Branch of the government, especially as to the placement of certain responsibilities and avoidance of duplication of effort. The suggestion has just been made that the powers of prescribing methods of accounting disallowing expenditures do not properly pertain to auditing. It is desired also to make certain comments with respect to the audit responsibilities of the General Accounting Office in part from the standpoint of the placement of responsibilities between the Legislative and Executive Branches and in part from the standpoint of indicating that greater benefits may be obtained from independent auditing.

Reviews the book "Applied Bookkeeping," by D. Walter Morton and Ralph E. Berry.

Reviews the book "Accounting Theory," by Harry Norris.

Reviews the book "Developments in Cost Accounting."