Knowledge that Transforms

This article presents information the teaching methods of accounting. Beyond the first few weeks of the elementary course, too little emphasis is placed on the fundamental accounting equation. As a result the student threads his way through the first year of accounting at best understanding certain relationships in vacuo but probably in most cases accepting them on faith. He then proceeds to memorize these relationships and hopes that the examination situation will be sufficiently similar to the one he learned by rote so that he can cope with it. Perhaps the ideal solution to this difficulty is one which places greater stress on the equation in the first course in accounting, but this probably would require a fundamental revision of course structure with the concomitant sacrifice of other worth-while materials. One result that follows from this lack of stress on the equation is the necessity to spend the first part of the second course in accounting on a general review of the basic accounting process.

Today no one is permitted to practice accounting as a profession, which includes the right to represent client or employer on accounting matters before any public body or to hold himself out as a public accountant, who has not been licensed by a state board of accountancy. There are some 262,000 individuals who have secured this license which goes by the old initials of C.P.A. but stands for Certified Professional Accountant and not Certified Public Accountant. This designation appears to have been a compromise as a result of the non-C.P.A. group's aggressive action in attempting to force all types of accounting practice under the licensing power of the states. Auditing as a technique and as a profession had reached the age of maturity. Auditing standards which had been discussed profusely and followed about as each practitioner pleased, in the middle of the 20th century, had become rules of practice any deviation from which was grounds for prompt disciplining of the offender. Inasmuch as the public had never fully understood how the C.P.A. could be independent on one engagement such as an audit, and yet serve in the capacity of a solicitor in a tax engagement or a consultant on matters of management services, every report must now state whether the engagement was conducted on the basis of that of an independent accountant or otherwise.

This article presents views of the author on various activities carried by the American Accounting Association in the year 1953. According to the author this has been an active year for the American Accounting Association. It has gone forward on many fronts to meet not only the objectives set out for ourselves but the responsibilities which it must assume. The work of the Association this year has been based upon the recognition that accounting education with all of its ramifications is the primary task of our group. As steps toward accomplishing this purpose it has reorganized the committee structure, expanded accounting research efforts and increased attention to Association publications. Association activities have been carried on by many members. The activities of the association in the past few years expose problems for the future course of the Association and in doing so they reveal some of the challenges of the future. The Association must be a vital force of leadership in developing and integrating accounting education and research within the widening responsibilities of the accounting profession.

The article focuses on business behavior and the theory of the firm. The contrasting purposes and concepts of the economist's theory of the firm with accounting practice and analysis must be considered in light of what each group is trying to accomplish. The analysis of the firm may be made on at least three different levels or approaches. First, the accountant must provide necessary financial accounting. Tax returns must be prepared and financial reports must be submitted to the owners of the business. Here, all data must be given on a quantitative basis and in accordance with generally accepted practices. The accountant generally is not concerned with a concept or principle which relates to the whole economy and not to the firm. Second, with an entirely different approach, the economist by using the firm as a producing unit of the economy and assuming the principle of maximization, seeks to provide a satisfactory theoretical explanation of the firm behavior under different circumstances and environment. There is also an intermediate ground of analysis of management, profit planning, and business decisions.

The article focuses on the accounting education in Australia. Upto the year 1954, only the University of Melbourne, Melbourne, Victoria, had a well established curriculum of accountancy. A full-time student normally takes four subjects a year. The honors course is a four-year one in which the compulsory subjects are covered in the first two years, after which the student enters the final division, comprising special honors lectures and seminars, with examination at the end of the fourth year of his studies. During this last year he is also required to submit a thesis on a subject within a specialized field of his own choice. The first of these courses is regarded as an introduction to accounting method, with students required to maintain a small set of double-entry records. It covers the theory of accounting and interpretation of transactions, ledger, journal and its subdivisions, trial balance, control accounts and subsidiary ledgers, preparation of reports, balance day adjustments, unsystematized records, non-trading enterprises, partnerships, joint stock companies, closing accounts of vendor, funds statement, departmental accounts, branch accounts, consignments, joint ventures, columnar accounting, analyzed journals and auditing.

Reviews the book "Business Forecasting," by Wilford J. Eiteman.

Reviews the book "A Standard Classification of Municipal Accounts."

Reviews the book "Fundamentals of Corporation Finance," by Joseph F. Bradley.

Reviews two books on economics. "Defense and the Dollar," by Albert G. Hart; "Economic Controls and Defense," by Donald H. Wallace.

The article presents five problems, which were prepared by the Board of Examiners of the American Institute of Accountants and were presented as the first half of the C.P.A. Examination in Accounting Practice on November 4, 1953. The candidates were required to solve problems 1 and 2 and any two of the remaining three problems. The weights assigned were: problem 1, 15 points, problem 2, 15 points, problem 3, 10 points, problem 4, 10 points, problem 5, 10 points. The time allowed was four and a half hours. A suggested time schedule to solve the problem 1 was 45 minutes, problem 2 was 75 minutes, problem 3 was 45 minutes, problem 4 was 30 minutes and problem 5 was 60 minutes. In problem 1 students were asked to audit the given company's book for the past three years, with the help of data given in the problem. In another problem students were asked to compute the unit sales price with the help of data given in the problem. Full solution of each problem is given in the article with description.