The legal concept of realization has developed gradually over a period of about eighty years, and even today is not a completely static idea. It does, however, occupy a place of importance in law as an integral part of the legal concept of income. No income is deemed to arise until "realization" has taken place. The development of this concept may be traced back to the days when income was regarded as the difference in the value of net worth between two points of time. Any increase or decrease in the value of assets between these two points of time thus affected the net income figure. The break away from this point of view came in 1861, at the start of the Civil War, when the federal government passed an income tax law which defined income as the excess of cash receipts over cash payments. Thus a new theory of income computation was established, and with it a theory of realization. Income was conceived of as a "net" figure, which required the evidence of cash receipts. This point of view prevailed throughout the administration of the Civil War tax laws up to 1871. From 1872 to 1909 there was no federal income tax law in effect. Finally in 1909 a federal excise tax based on income was passed. The same concept of income that had prevailed from 1861 to 1871 was embodied in that law. The excess of cash receipts over cash payments was the measure of income. In ensuing years the strict cash requirement was modified. The concept of "cash or its equivalent" came into being, and was followed by the concept of "the completed transaction." Thus, from the requirement that cash alone must be the evidence of realization, it became generally accepted that a valid account receivable was sufficient. The sale became the test of realization for the majority of situations. About 1913, the courts began to express a new concept of income. They began to conceive of income as the "gain derived from capital, from labor, or from both combined."

Accounting assumes continuity, but this means that the financial statements prepared by breaking the continuous stream of activity into periodic segments, even under the most favorable circumstances, provisional in character. Continuity serves to complement and strengthen the concept of earning power, the income statement is a means of making available a section of the continuous flow of cost and revenue to exhibit management's effectiveness in handling available resources. In consequence, it should recognize all special and non-recurring losses and gains, as these elements modify the long run income stream. The basic idea of measured consideration" is broad enough to encompass the entire range of accounting measurements, it is superior to "value" because values bring in measurements of another and different order. Value would include amounts for utilities not measurable except by one's own judgment until a sale confirms this added utility its measurement is not objectively possible. However, the use of money and price as measurement devices should not obscure the fact that the significant element behind the accounts is service potentialities, which, when exchanged, bring other service-potentialities into the enterprise.

Reviews the book "Principles of Public Utility Rates," by James C. Bonbright.

Reviews the book "Price-Level Adjustments of Financial Statements," by Eldon S. Hendriksen.

This article focuses on the implementation of uniform standards of reporting for national voluntary agencies. The purpose of this article is to point out some of the pitfalls that may be encountered in the development and implementation of uniform standards of reporting in voluntary agencies. Since the lack of adequate funds for accounting data is very apparent, a pooling of resources is necessary. This pooling, in the instant case, involved a research study and a development of a computer program, which, after the initial cost of the study and the development of the computer program, allows each individual agency to obtain the cost data it so desperately needs for a relatively low cost. It appears that the approach taken in this article may also be relevant to the study about to be undertaken by the American Institute of Certified Public Accountants and would allow them to develop a workable program which could be implemented without disturbing the underlying accounting records of each voluntary agency for which adequate, uniform data is required.

The allocation of income taxes on financial statements is a relatively new development in corporate accounting. It is an extraordinarily important development because of its significant effect upon the determination of corporate net income and because, also, it seems to represent somewhat of an erosion of certain of our long-tested and long-standing definitions and concepts as to principles of accounting. As a general rule, accounting procedures for the allocation of income taxes have resulted in the placement of certain credit values for deferred income taxes in the balance sheet. The accounts representing these credit values have been called "deferred credits." Since these accounts are not part of corporate net worth they must be liabilities. It is an accepted procedure of auditing that the revenues and revenue charges of a business must be supported by evidence, preferably written evidence. There is no billing by a creditor, no evidence of legal liability, no evidence of the erosion of the accounting value of an asset, and no evidence of the consumption of accounting value. In short, there is no factual evidence, whatsoever, to support the accounting propriety of charging current income with a provision representing deferred income taxes.

Reviews the book "Statistical Cost Analysis," by Johnston J.

In addition to the criteria set forth above, additional sets could be given for the realization of a capital contribution, a capital withdrawal, an investment, a liability liquidation, and a loan. It is felt, however, that those presented illustrate adequately the type of criteria currently used in practice. There are, of course, some instances where they are not strictly followed. The criteria are not thereby discredited, however, they apply in the vast majority of situations, and the exceptions perhaps point to inconsistencies in accounting theory. It should be understood that the writer does not advocate that these criteria necessarily should be followed. They are merely those which seem currently to be in effect. The criteria presented embody the factors of measurability and permanence, and serve as guides to the accountant in determining if a change in an asset or liability is sufficiently definite and objective to warrant recognition in the accounts. It should perhaps be pointed out here that the sale and the purchase are often the signal to the accountant that certain criteria have been met. In the normal situation, the sale is the signal that revenue has been realized and the purchase is the signal that a cost has been realized. They merely serve as prime facie evidence, however, that specific criteria have been met. It can be seen that the judgment of the accountant plays an important part in all these criteria. He must reach conclusions in each case as to the degree of permanence and objectivity present. His decision, one way or the other, will determine whether or not a particular item is to be considered realized.

The further a man goes in accounting, whether public or private, the more his technical knowledge as an accountant merges into and, at times, become an almost indistinguishable part of his knowledge and ability as a businessman or a businessman's consultant. But the qualified professional today can not be merely a technician. He must also be an educated man in the true sense of the word. The formal accounting education courses, i.e. a curriculum at the college level leading to a bachelor's degree with a major in accounting, are intended to qualify the graduate for entrance into the beginning levels of his profession as an accountant. The author opines that formal education in accounting should not be regarded as an end in itself but rather as a quicker and more efficient means of acquiring necessary knowledge. He references the Ford and Carnegie reports and attempts to answer--How great a cost in terms of time and effort can a young man afford to spend in formal education and how much should be left to be obtained through self-education and experience? He also attempts to explore the parts of the desired level of general and technical education that can best and most efficiently be handled formally and the parts, that are more efficiently left to self-education or to experience and on-the-job training?

Reviews the book "Electronic Data Processing and Auditing," by Felix Kaufman.