Knowledge that Transforms

Business is getting an increasing insight into its cost mistakes. It is analyzing their causes and taking preventive action. One means of taking preventive action is through financial analysis. Financial analysis is a service performed by the accountant for management. Every day a business enterprise is faced with alternatives. Choosing between these alternatives is the decision-making process that means the life of the business. Financial analysis cannot be done by the amateur. Every business man is a selfstyled analyst and, in large corporations, this function is assumed by nearly every department head and division manager, by heads of sales, scientific research and production. It is the job of the accountant, as financial analyst, to uncloak even the most obsecure aspects of proposals calling for capital expenditure, to remove any camouflage that may exist and to reexpress them in common language and format, using similar definitions and measurements and adopting as a common denominator a comparable formula for investment, return and profit.

Reviews the book "Accounting Principles and Control," by Lawrence L. Vance.

Reviews the book "The New Inflation," by Willard L. Thorp and Richard E. Quandt.

Reviews the book "Programming Business Computers," by Daniel D. McCracken, Harold Weiss and Tsai-Hwa Lee.

Reviews the book "New Forces in American Business," by Dexter Merriam Keezer.

Professional accountants are accustomed to having their function misunderstood. Perhaps it is because of their relative youth in truly professional activity that accountants are still often equated with the old green eyeshade and all it implies. However, even many of those quite familiar with accounting practice today are unsure of the extent of public accountants' capacities. Not even practicing certified public accountants (CPAs) are agreed upon what their title gives them license to do. For the good of both the public and the public accounting profession, the term CPA as a professional designation needs to be defined and delimited. The individual accounting firm gains its professional reputation-undoubtedly its most valuable asset from two sources. One of these is the standing the firm name which has acquired in its immediate sphere of influence, whether that be one small community or the entire nation and beyond. This of course depends on the integrity, competence, and reliability of the firm personnel, partners, and staff. The other source, however, is a profession-wide characteristic, the title "CPA" which guarantees to the public minimums of education, experience, and integrity of those who bear this designation.

The article focuses on the classification of inventories in the balance sheets of corporations. A balance sheet is primarily an array of the unexpired costs or a listing of the costs of the assets that have not yet been consumed in the operation of the business. the balance sheet is an attempt to record current or replacement values, the proponents of price level adjustments notwithstanding. This definition of unexpired costs however, applies more specifically to the plant and equipment since these are usually recorded at historical cost and amortized periodically as their usefulness depreciates. There is another combination of assets ordinarily classified as the permanent investments. These assets are not normally consumed in the operation of the business so that no periodic write-off is appropriate. These are usually recorded at historical cost and with the passage of time historical cost varies from its current value. The third major classification, current assets, contains those properties which are already liquid or will be liquidated during the normal operating cycle of the business.

This article focuses on the influence of salvage value upon choice of tax depreciation methods. It is found that on should use double-declining balance depreciation method for tax purposes whenever salvage value exceeds 13.52 percent of cost. For such a rule to stand there must be an examination of the underlying assumptions, law, and mathematics. The fundamental assumption underlying preference for this method of depreciation is that the taxpayer would rather have a tax deduction now than later. The assumption of preference for a present rather than a future tax deduction is based on assumptions. Pre-depreciation income in the current and near-future years is large enough to yield a tax benefit from the largest allowable depreciation deduction. It does not seem sensible to plan to reduce basis and to incur a tax loss in order to get net operating loss carry-oven. There may be certain cases where such is desirable, but a tax deduction is certain whereas one in the future is not certain. Although a deduction for depreciation has been allowed since the inception of income tax laws, there is no certainty that it will continue in the present form.

Reviews the book "Federal Income Taxation," 1st ed., by Robert S. Holzman.

The work described above with the Turkish accountants represents only one phase of the technical assistance rendered by the American advisers. The American advisers are also teaching in Turkish educational institutions. In these institutions their responsibilities include the development of new accounting courses and the preparation of better teaching materials. These functions are extremely important, but the most rewarding work has come from working with the Turkish accountants who now have the means in their hand to organize and advance the profession of accounting. During the trying periods of this work the American advisers had the constant encouragement of the Heads of the NYU Group in Ankara, namely, Dr. Henry Stanford, now President, Birmingham-Southern College; Professor Lorentz Adolfson, Director of Extension Division, University of Wisconsin; and Donald MacDonald, formerly Chief of Public Services, International Cooperation Administration, Ankara. If anything has been accomplished in Turkey it is due to the assistance of these men and their understanding of the many problems.