Knowledge that Transforms

Reviews the book "Mathematics of Investment," 3rd ed., by William L. Hart.

Reviews the book "Audit Practice Case," by Arthur W. Holmes and Francis E. Moore.

The article presents an introduction to the art of accounting. The art of accounting has long been the subject matter of study by those who would become accounting technicians-controllers, auditors, public accountants, cost accountants and the like. For the purposes of this type of study, objectives have been formulated, teaching methods have been devised and a substantial body of text and other material has been developed. As a result the education of accounting technicians goes forward on a reasonably adequate basis although by no means without numerous possibilities of betterment. At the same time popular education in the art of accounting has been woefully neglected. For many of those who are not interested in becoming accounting technicians only inadequate inducement has been offered and only inadequate reasons have been given, for the study of accounting; for those who have evinced an interest in the art, despite their lack of desire to become technicians, the opportunities for study have, for the most part, been limited to the courses and procedures available for prospective technicians.

The article focuses on the importance of professional ethics in accounting. Many accounting teachers have recognized the desirability of including professional ethics as part of the subject matter of instruction of students who are preparing for the professional practice of public accounting. However not much has been done about it. It is good form to talk about the importance of ethics but subconsciously many practitioners and some teachers too are disposed to consider the subject of little practical significance. There is a disposition to relegate ethics, as a subject for active study and discussion, to that pigeonhole reserved for the abstractions which it is diverting to talk about in leisure time, but which are of no immediate concern in the daily business of life. This is a sad mistake. Leaders of the profession recognize and are saying with increasing frequency, that the future opportunities of public accountants depend on maintenance of public confidence. There is much more talk about public relations and public information but the codes of professional ethics and their enforcement are an essential part of the foundation for good public relations.

The article focuses on the restoration of fixed asset values to the balance sheet in accounting. The subject matter of this debate is given current importance at this time because of the procedures followed by many companies in accounting for the amortization of facilities acquired under certificates of necessity issued pursuant to Section 124 of the Internal Revenue Code. Surprisingly little attention has been given to the treatment of fully depreciated assets in accounting literature. This is probably due to the fact that the difference between the aggregate net book value of depreciable assets actually carried in the accounts and the amount that would have been had there been more accurate estimates of depreciation been followed is not sufficiently great to have a significant effect upon the statements in any but the most exceptional cases. Generally, an excessive rate of depreciation is noticed before the matter has gone so far that it cannot be remedied satisfactorily by reducing the charges during the remaining life.

Companies in the aviation industry, particularly those manufacturing or assembling airplanes and major subassemblies, have adapted to their use a job-lot type of cost accounting based on specific numbers of planes or parts in a "lot" or "release." During the recent war period an individual lot might represent hundreds of units costing many millions of dollars. Production of such magnitude will probably not be required in the postwar years, but the cost procedures developed for such production can be utilized to meet current accounting requirements. The lot or release system of determining costs of airplanes is becoming increasingly important as a result of the inclusion of price redetermination provisions in many government contracts. Such provisions are of many different types. In some cases the price of a plane or part is redetermined at completion of a specific number of units; in some cases a particular item of cost, for example, overhead, is redetermined at a specific point of time; in other cases the price is redetermined at completion of a specified percentage of an entire contract. All redetermination provisions are intended to provide for the renegotiation of price, or types of cost, on the basis of actual experience. This is likely to be of particular significance during the years immediately ahead as companies in the aviation industry undertake to produce new types of planes and to meet specifications and tests undreamed of in the prewar years.

Reviews the book " Financial Statements," by Ralph Dale Kennedy.

Reviews the book "Price-Quality Interactions in Business Cycles," by Frederick C. Mills.

Reviews the book "The A B C of Accounting," by Stanley Edwin Howard.

The purpose of this article is to describe the U.S. War Department account classification and to show the use made of each element of the code, as of July 1947. It must be remembered that the War Department comprises only one component of the U.S. government and, consequently, must necessarily follow accounting procedures prescribed by the U.S. Bureau of the Budget and the U.S. Treasury Department. At the same time it must prepare its accounts to suit the eagle eye of the U.S. General Accounting Office which is to audit the accounts of the approximately twelve hundred army disbursing officers. Consequently, War Department account classification is a result of normal federal procedure plus additions required by operating conditions within the department. The complete classification explained in this article is designed to provide a basis for budgeting, accounting and reporting, designating accountability and responsibility, and exercising managerial control over finances. Each transaction of the U.S. government is related to some one fund of which there are three major categories, namely, the general fund, special funds and trust funds.