Knowledge that Transforms

Abstract This article focuses on governmental accounting education in the U.S. The position of the 1937 Committee on Education of the American Accounting Association appears to have been so widely misunderstood that a brief statement of clarification seems proper. Particularly, the failure of the committee to include governmental accounting in the syllabus, except under the Maximum Program, has been rather sharply criticized. An elaboration of such additional graduate work was not attempted at that time and no further statement has been made since. It was the opinion of the committee, however, that the place of governmental accounting lies somewhere in the senior elective area or in the graduate years. It is hoped that a further development will come through a study of offerings of universities and colleges whose graduates are presumed to have been prepared for the profession of accountancy. A grading, and classifying of curricula of various educational institutions should be undertaken, and the committee doing such work should be widely representative. It would, however, be futile to attempt such a task until the syllabus has been subjected to the most severe criticism.

Abstract The article presents a discussion on the application of accounting principles to governmental-accounting practice in the U.S. Problems of governmental accounting may be divided into three groups, first are problems in accounting for transactions of the Federal government and its agencies; second, problems in accounting for affairs of the several states; third, municipal accounting problems and those of other political subdivisions of The U.S. states, such as counties and districts. This article will confine itself to the application of accounting principles to practice only in municipalities and other political subdivisions of states. Fifteen such principles have been set forth by the National Committee on Municipal Accounting as recommendations or suggestions to be followed as a guide in establishing governmental accounting systems. The article concludes that emphasis must be given to the human or personal difficulties involved in making changes in governmental accounts. In order to install a uniform accounting system, it is essential that the legislative body and, at least, the major executives of the city be in sympathy with the project. without cooperation in the budgeting, purchasing, departmental reporting, and even in the departmentalizing of the city, it is difficult to install a system which is based upon the recommended principles.

Abstract In this article, the author tries to examine time as a factor in determining debt-paying ability. This consideration has led on to other related problems and considerations, and finally to a certain amount of experimental research in debt payment. It has seemed that in the great majority of cases the focal point of business mortality is the actual or prospective inability of a concern to pay its debts. If this simple hypothesis be accepted it seems that the financial health of a business may be measured in terms of the distance that a concern is from this focal point of mortality. As a corollary it would also seem that definite evidence of financial ill health is indicated when a business is unable to pay its debts when they are due. The author reports that in the great majority of cases even the most rigorous classification of current assets and current liabilities fails to reveal whether a business can actually pay its short-term debts when they are due because it does not indicate whether the realization of assets will be sufficiently rapid to meet the agreed liquidation dates of the liabilities.

Reviews the book "Audit Practice Case," by Harvey G. Meyer.

Reviews the book "Accounting Principles," by James O. Mckinsey and revised by Howard S. Noble.

Reviews the book "The Dynamics of Automobile Demand," by S.L. Horner, C.F. Roos, Victor Von Szeliski, A.T. Court and S.M. DuBrul.

Reviews the book "New York Laws Affecting Business Corporations."

Abstract The article presents problems from the first half of the Certified Public Accountants Examination in accounting theory and practice, presented on May 16th and 17th 1939 in those states using the questions prepared by the Board of Examiners of the American Institute of Accountants. Candidates were required to solve all problems. From a comparative summary and additional information given, a statement of application of funds was asked to be prepared. The Sulphur Company, organized January 1, 1934, was formed to mine, refine, and sell sulphur. To that end it secured a twenty-year lease on 500 acres of known sulphur deposits, referred to as section A, and 500 acres, referred to as section B, of potential but undiscovered sulphur deposits. It was estimated after engineers' survey that there were 5,000,000 tons of sulphur under section A at the time of acquisition. Mine reports showed the number of tons taken out by years. A statement was prepared by the company's bookkeeper. The statement is correct and all accounting requirements have been met, except that the company has never provided for amortization or depletion since, in the words of the company's president, "it had discovered from prospecting more new deposits than it had mined."

Reviews the book "Intermediate Accounting," by Jacob B. Taylor and Hemann C. Miller.

Abstract This article focuses on the relation between depreciation and rate base. Depreciation of capital assets and depreciation accounting in public utilities have long been the source of much controversy between the utilities and the state. The problem has been complicated by the unwillingness of some to recognize depreciation at all and by the insistence on the part of others that reproduction cost should be the fundamental element in the rate base determination, and in the decision made relative to the amount of the depreciation charge. It has been still further complicated by using one amount of depreciation for total charges to operating expenses and another, a smaller amount, or none at all, for deductions in calculating the rate base. A generalized statement of sound procedure has been hard to formulate, because the application to specific companies is so varied. One approach to the problem of understanding the relationship between depreciation and the rate base, consists of presenting thirteen examples which may be looked upon as thirteen cases handed down by a commission and which call for adjudication. Some of these examples represent undepreciated rate bases, some depreciated rate bases and some bases for which no names are given. Some follow the retirement method, some the depreciation method and some both the retirement and the depreciation methods. By no means are all of these examples equally satisfactory or typical. In fact some are quite the reverse.