Knowledge that Transforms

Reviews the book "Analyzing Financial Statements," by Stephen Gilman.

Reviews the book "Auditing-An Introduction to Practice," by George E. Bennett.

As a group, teachers of accounting have contributed largely to the literature of accounting in the way of general treatises and of special studies on particular phases of the subject, but, in so far as published material may he taken as evidence, have given comparatively little attention to the problems which arise in the teaching of accounting. It is true that at least one institution gives a course in the college curriculum in accounting for six weeks during the summer and that a number of articles have been published on one phase or another of college courses. The material, however, is scanty at best, and the writer does riot know of any attempt to give a complete statement of the problems which confront the head of an accounting department in a collegiate school of business. The present paper, however, is not concerned especially with discussing the problems of the individual teacher, but it is designed to raise the question of the responsibilities of the head of a department of accounting in directing the instructional work of his department. The writer feels that the department head should take an active part in planning the courses, in encouraging and aiding his instructors to do their best work, and in providing conditions which will pave the way for effective teaching.

Under regulations prescribed by the Commissioner with the approval of the Secretary, a person who regularly sells or otherwise disposes of personal property on the installment plan may return as income there from in any taxable year that proportion of the installment payments actually received in that year which the total profit realized or to be realized when the payment is completed, bears to the total contract price. The solution of the problem is so simple that there would be no excuse to raise a discussion of the subject were it not for the published decisions of responsible revenue officers. Every beginner in accounting understands or should understand the use of suspense and deferred revenue accounts. Accordingly it is not difficult for him to appreciate that what is received in one accounting period may be income of a different period, just as a cost incurred in one period may be an expense in another.

Reviews the book "Accounting Systems--Their Design and Installation," by William Rodney Thompson.

This article is a description of a system of cost and general accounting which was installed by the writer for the Hartwell Iron Works Inc., a company incorporated and organized under laws of the State of Texas and located in Houston, Texas. This plant consists of a foundry, machine shop, structural steel or plate shop and a pattern shop. Each department is fully equipped and the establishment is prepared to handle all classes of general foundry, machine work, or structural and plate fabrication work. The Company undertakes a great deal of general jobbing work and also manufactures for stock such items as cast iron ventilators, ash doors, water and gas fittings and general ornamental or structural castings. Buildings of the Company are well arranged with respect to the routing and handling of orders. The machine shop is housed in one building along with the office and stock room. The foundry is located at the back of the plant adjacent to the scrap yard, this arrangement facilitates the handling of the old iron and other second-hand material that is commonly used in the manufacturing of grey iron castings. The pattern shop and the plate or structural steel shop are located in two adjoining buildings. A storage room is included in one of these buildings.

Abstract it is sometimes said that the basic principles of bookkeeping have not changed since the origin of double-entry in the middle ages. The statement is true if the term "basic principles" be closely construed but the casual reader is likely to interpret it broadly and thus carry away the impression that bookkeeping has to all intents and purposes stood still for 500 years. That idea would be erroneous, of course, because the forces of evolution act upon man's tools as well as upon man himself. Fundamental ideas regarding the nature of business transactions and theft recording have not changed in centuries but that is not equivalent to saying that progress has been absent or that evolution has not been at work. It is with the idea of noting the direction of some of these developments that a series of ledger accounts extending over nearly 500 years is studied here. A few of the available examples come from old ledgers, more of them are from the textbooks of the day. The illustrations given in such books are accepted as reasonably dependable examples of the then current practices, and in but few cases is there more than a fifty-year break in the date sequence of the texts examined.

Reviews the book "Elements of Accounting," by Frederick W. Woodbridge.

The article presents views of the author about a work which appeared in publications of the American Association of University Instructors in Accounting. I pointed out that the term cost, the meaning of which is by no means standardized, is used to refer primarily to three things, money costs, economic costs and business costs. Money cost is the sense in which the term is popularly used. Most persons think of cost in money terms, it is the price that is paid for goods and services. Scholar Alfred Marshall employed the phrase expenses of production to designate such payments. Since cost in this sense is equivalent to the money payments for goods and services, it follows that the total money paid by all consumers for wages, rent, interest, and profits must be equal to prices paid by all consumers for the satisfaction of their wants. Money costs to the consumer essentially represent selling price, or sales, they are what the consumer pays. The concept of economic cost is very different from that of money cost, as the term is used by the average man, whether consumer or producer. Economic cost is subjective, it is cost in terms of labor, exertion, sacrifice, or disutility. Some writers have called it pain cost and it is measured in irksome labor or reluctant waiting.

At the annual meeting of the American Association of University Instructors in Accounting in Pittsburgh in 1921, one of the prominent accountants of the U.S. read a paper entitled "The Need of a Broader Conception of the Work of the Accountant." Early in his discussion this accountant stated that all of his firm's work was built about its annual and periodical audits. He proceeded to say that practically all of the work done in constructive accounting, public utility accounting, tax work and industrial engineering, resulted directly or indirectly from these audits. A partner in another accounting firm, which does work of an entirely different nature, and the partners of which, presumably, have little interest in the auditing aspect of accountancy, recently stated that it was a real problem whether or not the auditing work would largely supersede the other accounting activities in which the firm was more interested. These two examples, taken from the experience of firms who are not primarily interested in auditing, tend to emphasize the importance in the work of almost every accountant of the annual or periodic audit. The constructive audit is and probably will continue to be, the most important part of the public accountant's work.