Knowledge that Transforms

Abstract Accounting for depreciation is in itself a procedure whose desirability is generally considered to be unquestionable. A policy, of course, must be judged by comparing the results which it actually achieves with those which were expected of it. The policy of accounting for depreciation was designed to accomplish the maintenance intact of the capital sum invested in an enterprise by preventing its impairment through the distribution of dividends to the full extent of profits computed without regard to the diminution of the value of its capital assets as the result of wear, tear and obsolescence. The policy was imposed upon corporations doing business for profit by courts acting at the insistence of creditors determined to enforce financial policies which would afford them maximum security for their credits and investors anxious to guard against being deceived as to their own financial position by the return of their savings in the guise of income. Both were seeking to preserve the capital upon which each depended for security.

Reviews the book "Federal Tax Handbook, 1934-1935," by Robert H. Montgomery.

Abstract The Federal income tax chart for 1936 has been devised as an aid in visualizing the effect of the rates of income and excess-profits tax applicable to corporations for fiscal periods ending after November 20, 1936. A new declared value for capital stock and surplus is to be made as at June 30, 1936 and because the rates of excess-profits tax have been increased from 5 percent to 6 percent, the minimum amount at which such value should be declared warrants careful study. Each $1,000 of declared value will be taxed at $1.40, a failure to declare the necessary minimum means an excess-profits tax at $6 or $152 for each $11 ,000 deficiency of declared value. The chart defines the various brackets in which the possible combinations of income and adjusted declared value will fall. In each bracket appears a formula from which the computation of the total tax may be made. Vertical lines represent adjusted declared values in thousands of dollars, the ratios of net income to adjusted declared values.

Reviews the book "The Investment Policy of Trust Institutions," by N. Gilbert Riddle.

Reviews the book "America's Capacity to Consume," by M. Levan, H.G. Moulton and C. Warburton.

Reviews the book "Legal Reserves in American Banking," by Robert G. Rodkey.

Abstract The nineteenth annual convention of the American Association of University Instructors in Accounting was held in the Palmer House, Chicago, Illinois on December 27 and 28, 1934. On December 27, the topic of the convention was "Methods of Teaching Accounting." Several speakers from different universities of the United States read papers. On December 28, the topic of the convention was, "Accounting Relationships." Professor H.F. Taggart from the University of Michigan, professor J.B. Heckert, from Ohio State University, etc, read papers related to various issues on accounting. The annual meeting of the Executive Committee was held on December 27. The committee first heard a brief preliminary report of finances by the Secretary-Treasurer. E.J. Filbey, H.H. Bailey, and G. E. Lukas, all certified public accountants of Illinois, were appointed as auditors of the Secretary-Treasurer's books for the year. The committee ordered that the report of the auditors be published in the March 1985 issue of the journal The Accounting Review.

Abstract The statement that a teacher is satisfied with the results obtained in his course should be regarded as news, comparable, perhaps, to the statement that a man bites a dog, according to the author of this article. What he has to say, therefore, is not news, for he is thoroughly dissatisfied with the results obtained in the courses in auditing in his university. This should not come as a shock to teachers of accounting, for the author thinks, educators will all agree that the course in auditing is the most unsatisfactory course in the accounting curriculum from the teacher's viewpoint as well as from the student's. What the author has to say on this subject is not intended as a criticism of auditing textbooks. A textbook has limits, and within those limits the authors of the standard books have done an excellent job of presenting the fundamental principles of auditing and the methods of preparing audit working papers and reports. However, a need exists for something to supplement the textbook if teachers are to give the student a real grasp of the subject.

Reviews the book "Expenses and Profits of Variety Chains in 1933," by Malcolm P. McNair.

Abstract There are many questions asked related to information reported to stockholders. There is no generally accepted answer to these questions. Activity on the part of the United States Securities and Exchange Commission in promulgating rules for registration of new issues and for permanent registration of "listed" securities is directing attention to this vital question. Stockholders may be divided into two classes: "controlling" and "investing." Controlling stockholders are in a position to know what is happening. Such stockholders combine personal ability and judgment with their capital investment, thereby becoming entrepreneurs. Other stockholders are more nearly pure investors though legally they are owners. They possess the legal right to vote on certain matters, but practically, theirs is solely a function of the decision to "buy, hold, or sell." In order to make a sound decision to buy, hold, or sell, an investor must have a comprehensive knowledge of the forces at work tending to expand or contract general business. He needs to have an opinion also of the trend of interest rates.