Knowledge that Transforms

Accountants come in contact with protective provisions in industrial preferred stocks on three occasions. First, the accountant has to record certain aspects of these protective provisions such as the recording of retirement fund transactions. Secondly, the accountant, as an auditor, may have to verify certain transactions as being in accord with protective provisions as stated in the charter. Thirdly, the accountant may be called upon as a consultant to give his opinion on such matters as the amount of adjustment required in conversion prices in cases where the corporation engages in acts which dilute the conversion right. The three protective provisions selected for analysis are retirement funds, restrictions on paying dividends to common stockholders, and conversion rights. Preferred stock retirement funds are of interest to accountants on two main scores, namely the recording aspects of retirement fund transactions require that the accountant be familiar with the charter provisions pertaining to the retirement fund, and auditing duties often require that accountants verify the sums set aside as being in agreement with the provisions in the charter for the establishment of the fund.

The article presents information on governmental accounting in the U.S. In fact, certain procedures established by in the federal fiscal system are still in use. Little of the kind of accounting today recognized as adequate, however, went on prior to 1910. Hence the history of the governmental accounting-federal, state, and municipal taken together-may be thought of in terms of the current forty Years. The most significant contribution of the 1910 decade was the publication of the "Handbook of Municipal Accounting," by the New York Bureau of Municipal Research. During the same period numerous states took steps to establish budget systems and fiscal organizations for budgetary operation and control. Thus the states generally were in advance of the federal government in their progress in this field. The next period, 1920 on, is significant for the amount and character of important literature on governmental accounting and financial procedures which it produced. The decade beginning in 1930 brought about developments of outstanding importance. The various national organizations of public accountants and public finance officials joined together in forming the National Committee on Municipal Accounting. The period from 1940 on has been largely an extension of movements inaugurated in the preceding decade. In spite of the war much progress has taken place in all fields. The proposals of the National Committee on Municipal Accounting were refined and promoted.

Reviews the book "The Functions of the Executive," by Chester I. Barnard.

Reviews the book "Office Management," by John H. MacDonald.

Accounting for governmental and institutional bodies is a means to an end and is not the end by itself. Recent criticism of the field of governmental accounting has resulted because, as so often happens in commercial accounting, heads of accounting departments think that as a result of the control vested in them, their department is the final governing body. One authority states that it believes governmental administration does not require the use of involved accounting systems, procedures, or techniques except in occasional, special situations. In general accounting it is necessary to account for all costs and to allocate those costs to revenues for a particular period to determine net income. In governmental accounting the records kept are those of revenues and expenditures, and furthermore, the cost of a building, a bridge, or equipment is just as much an expenditure as the cost of labor or supplies. Generally speaking, the revenues are allocated to expenditures in governmental accounting rather than applying costs to revenues which is found in general accounting. Profit-making ordinarily is no concern of a governmental administrator, and almost all theory regarding accounting for profits is excluded from a governmental accounting system.

Six of the nation's outstanding accounting authorities have been invited to prepare papers expressing the views for and against the proposition that depreciation need not be restricted to the amortization of historical cost. While accountants have long realized that their basic standard of measurement, the dollar, is a varying one, they have, with one conspicuous exception, declined to recognize, as generally accepted accounting procedures, departures from cost because of changes in the purchasing power of money. In the list obstacles to good accounting is the misconception, often entertained, and blindly fostered by many accountants, that an income statement should reflect earning power or be confined to current operating performance. By moving depreciation expense up or down, according to predictions of the moment, a more accurate earning power or operating performance is said to be reflected in the net result. A good deal of mumbo-jumbo necessarily attaches to the process, for to them earning power or operating performance is a nebulous thing, visible only to initiates such as forceful corporate managements and accountants of discernment.

Business leaders are beginning to realize that it is just as important to have highly trained accounting technicians on their accounting staffs as it is to have lawyers on their legal staffs and engineers on their engineering staffs. These business leaders have learned through costly audits, system installations, federal tax assessments, and the like, that the old type "bookkeeper" who knew little more than a debit from a credit was, despite his low salary, a costly investment. They have found that their business will fail to prosper as it should unless their accountants can grow with it, assume new responsibilities, revise systems to meet operations, and help guide the business through the intricacies of modern government taxation and regulation. The disadvantages of a small concern are usually the advantages of a large one, and vice versa. In the large firm, probably a comparatively greater number of well paid accounting and other positions are open to the accountant there is theoretically no job ceiling below the president and there is a much broader field of business activity in which to acquire experience.

Reviews the book "Hotel Accounting," by Ernest B. Horwath and Louis Toth.

The basic objective of this article has been to stimulate the continued study and discussion of accounting standards and their periodic restatement, thereby assisting in the orderly development of accounting concepts and their wider acceptance both among accountants and among others in any way influenced by or interested in the findings of accountants. So many decisions are dependent on interpretations of corporate reports that uniform, objective, and well-defined standards have become a requisite for the use of the reports by the person. The assets or economic resources of an enterprise are its rights in property, both tangible and intangible. The most commonly useful financial statements report the origin and disposition of the assets of an enterprise in terms of costs established and recorded at the time the assets are acquired. The importance of costs as a record of the accountability of an enterprise for its resources makes it essential that their determination be based on available objective evidence.

Reviews the book "Accountants' Writing," by John Mantle Clapp.