Knowledge that Transforms

The article presents five problems, which were prepared by the Board of Examiners of the American Institute of Accountants and were presented as the first half of the C.P.A. Examination in Accounting Practice on November 4, 1953. The candidates were required to solve problems 1 and 2 and any two of the remaining three problems. The weights assigned were: problem 1, 15 points, problem 2, 15 points, problem 3, 10 points, problem 4, 10 points, problem 5, 10 points. The time allowed was four and a half hours. A suggested time schedule to solve the problem 1 was 45 minutes, problem 2 was 75 minutes, problem 3 was 45 minutes, problem 4 was 30 minutes and problem 5 was 60 minutes. In problem 1 students were asked to audit the given company's book for the past three years, with the help of data given in the problem. In another problem students were asked to compute the unit sales price with the help of data given in the problem. Full solution of each problem is given in the article with description.

The purpose of this paper is to suggest that both current cost and adjusted historical cost have an accounting role to play, that these techniques are essentially complementary rather than competitive, and that actual cost at the time of replacement a concept which properly should be abandoned for depreciation purposes. In the process of establishing these points one possible approach to depreciation under changing price levels will be developed which utilizes both the current fixed asset cost ("current cost") and historic cost adjusted by a general price index ("purchasing power cost") as bases for depreciation. This approach, considerably simplified for expositional purposes, has as its primary aim a meaningful statement of economic profit, but appears to have advantages for computing taxable profit and taxable gains, and for making replacement, properly considered, possible. The application of this technique would involve certain practical difficulties but they are not insurmountable.

Reviews the book "1954 Guidebook to California Taxes with Special Emphasis on Relationship to Federal Taxes," by Russell S. Bock.

Reviews the book "Basic Accounting," vol. 1, by Homer S. Pace and Edward J. Koestler.

Reviews the book "Audit Working Papers," by William B. Jeneks and Walter C. Burnham.

The article focuses on the objectives and material contents of elementary accounting courses. The objectives and material contents of an accounting course depend upon the emphasis to be placed on accounting in the school. Some liberal arts colleges offer courses in elementary accounting as a part of a well-rounded program. In other schools, this type of accounting is offered as a segment of the preparation for students going into the business world. There are still other schools in which basic accounting is given as the foundation for building professional accountants. The discussion has been divided into three parts based on the three types of schools as previously noted. First, accounting may be a part to complete the whole of a balanced curriculum. In this case, accounting should be highly integrated with other courses on the various fields of study. In a course of this type, emphasis might best be placed on the individual needs for some practical accounting knowledge to enable the student to live more successfully in a business, social, and economic community.

The article focuses on accounting and price level. During the last decade accountants have become increasingly aware of the effects produced on accounting statements by the substantial change that has occurred in price levels. It is reasonable to expect that they should also show some interest in proposals aimed at adoption of a policy of stabilization of the price level, even though implementation of such a policy would call for action primarily in the somewhat alien field of monetary and fiscal affairs. Advocates of this policy maintain that the objective of Federal spending, taxing, borrowing, lending, and monetary operations should normally be maintenance of the purchasing power of the dollar in real goods. One of the fundamental arguments used to support such a program is the effect its announced adoption and actual carrying out would have upon businessmen's expectations and particularly upon their ability to plan future operations without the ever-threatening prospect of being overwhelmed in a sea of deflation or of being buffeted by the storms of violent inflation of their prices and costs.