Knowledge that Transforms

Abstract Flexible budgets and break-even charts have taught business that profit depends more on volume than on the size of the mark-on. When the variable costs remain in a constant ratio to sales or sales value of production-the sound and normal case-it is the fixed charges that mainly determine the cost/profit relationship. While they are more or less fixed in their dollar value, their ratio to sales or sales value of production, in other words, their rate, is a variable just as the profit rate. There is a remarkable interdependence between the fixed charges rate and the profit rate whenever the variable cost rate (variable/sales) is constant. This side of the cost/profit relationship has so far been somewhat neglected, for it is less conspicuous than its other aspects. It is, however, of such importance to profitable management that it deserves a special examination. Through analytical observation, an inversely symmetrical movement of the two rates can be readily detected if their changes are watched through shifting volumes. These observations lead to the following conclusion: The ratio of variable expenses to sales (or sales value of production) being constant, the profit rate is increasing with growing volume in the same ratio as the fixed charges rate is decreasing. With diminishing volume, the profit rate is decreasing in the same ratio as the fixed charges rate is increasing, if the variable rate remains constant.

Abstract Reviews the book "Accounting Systems," by Oscar S. Nelson and Arthur D. Maxwell.

Abstract Of the problems of making education meaningful one of the most important is the careful construction of specific course objectives. This is not a "one time" task, but rather is something which must necessarily confront the educator continuously. Meaningful objectives do not just grow nor, because of the changing social environment, can they be handed down from generation to generation. To be most meaningful, they must be adapted to the needs of students and the needs of society and they must be in harmony with the philosophy of the institution in which the courses are taught. The purpose of this paper is to reconsider what might be the most meaningful objectives for elementary courses in accounting with consideration given to the needs of students and to the needs of society. Further objectives are considered in both contextual as well as behavioral terms. These are, in a sense, ends for the accounting students who will as accountants be called upon to perform or supervise these activities. It is not likely that the other group will have much need to engage in these activities in connection with their major work. For this group, these skills and techniques are but means to an end, the end of understanding and interpreting accounting reports which they as general managers or other specialists will receive and be required to act upon intelligently.

Abstract Reviews the book "Elementary Cost Accounting," by George Hillis Newlove and S. Paul Garner.

Abstract Reviews the book "The Legal Aspects of Business," by Harold F. Lusk.

Abstract The article focuses on the problem of what constitutes the unauthorized practice of law by accountants in tax matters in the U.S. Certified public accountants and attorneys have been attempting to delineate what constitutes the legitimate bailiwick of the accountant since 1935. There has been a failure to produce any satisfactory solution for either of the professions. This professional controversy was intensified by an action brought in the Supreme Court of New York by the New York County Lawyers' Association to punish for contempt and to enjoin the alleged unlawful practice of law by one certified public accountant. The courts have been often confronted with the vexing problem of when an accountant illegally practices law and their decisions present divergent views. Holdings favoring accountants were rendered under the following circumstances. Federal Courts have also passed favorably, from the accountants' view, on the question. It was held that recovery could be had in contract, where tax accountants agreed to prosecute taxpayer's refund claims before the Commissioner of Internal Revenue Service.

Abstract At present, no balance sheet is prepared to show the financial condition of the Federal Government as a whole or of any of its agencies other than those operating business-type enterprises. There are many reasons for the lack of balance sheets but the two principal ones are (1) the use of the cash basis of accounting and (2) the failure to recognize fund distinctions. The purpose of this article is to outline briefly a system of fund accounting for the Federal Government. Such a system will make possible the preparation of fund statements that will reflect the true financial condition and operations of the Government. Although the system will enable the preparation of both fund balance sheets and fund operating statements, this article is limited to balance sheets. The Federal Government should establish three types of funds: (1) a General Fund to be used to account for all assets or other resources owned by the Government, (2) Trust Funds to be used to account for assets held by the Government in the capacity of agent or trustee for others; and (3) Business-Type Funds to be used to account for the transactions of business-type enterprises.

Abstract Reviews the book "Monetary Management," by E. Sherman Adams.

Abstract Reviews the book "Advanced Accounting," by Wilbert E. Karrenbrock and Harry Simons.

Abstract Reviews the book "Business Law—Text and Cases," by Gerald O. Dykstra and Lillian G. Dykstra.