Knowledge that Transforms

The examination in theory of accounts of the May 1958, Certified Public Accountants Examination took place on Friday, May 16, 1958, in a three and one-half hour session. There are two group of question included. All four questions in the first group were required; three were to be selected from four in the second group. To save candidates the time of computing their own time budgets for each question, notations of estimated time requirements are furnished for each question to be answered separately and in the aggregate for all questions to be answered out of a group where options are involved. The estimated time allowances are approximately proportional to their point value. The decision between "capitalizing" an expenditure relating to equipment and charging it to operations is governed by a number of factors which may have varying relative importance in different situations. To avoid distortion and non-comparability of reported income, it was essential for a sound policy be established and that it be followed uniformly and consistently from period to period.

The article presents findings by the author on the progress made with respect to the distribution of a career pamphlet called "Young Eyes." The Task Committee on Student Personnel of the American Accounting Association was charged with the responsibility of preparing a career pamphlet describing the varied opportunities and depicting some of the challenges offered by the accounting profession. An article with the cooperation of the American Institute of Certified Public Accountants and the Institute of Internal Auditors, was published in January 1958 under the title "Young Eyes on Accounting," in an attempt to show what had been done so far and what it was hoped would be done in the future with Young Eyes. Two phases were decided by the Task Committee for distribution. In the first phase over two hundred editors of selected accounting, educational, and vocational periodicals were contacted and asked to run a news item on the nature and availability of Young Eyes. The second phase was one of following up and trying to maintain, and, wherever possible, increase the interest created during the initial phase. According to the findings 137, 340 copies of the pamphlet were distributed.

Forecasting financial requirements lies at the heart of accounting and financial decisions in the firm. All management decisions deal with the future and forecasting is inevitable. When decisions are made that involve the future, whether recognized or not, an implicit forecast is necessary. In recent years substantial literature on the practices of individual business firms in forecasting their financial requirements has become available primarily from the publications of the American Management Association. There are three main methods for projecting financing requirements. One is based on historical relationships and utilizes statistical methods. The second involves engineering analysis which is a combination of technical know-how and judgment. The third involves an operation analysis, not necessarily technical in nature and relies mainly on judgment and understanding of the kinds of operations the firm engages in. The traditional approach to forecasting financial requirements expresses the firm's needs in terms of the number of days' sales tied up in an individual balance sheet item.

Reviews the book "A Guide to Management Accounting," by H.W. Broad and K.S. Carmichael.

Reviews the book "Fluctuations, Growth and Forecasting," by Sherman J. Maisel.

1. There is significant correlation between the ACE total, quantitative, and linguistic scores and the AIA-I scores. The most consistent covariation obtained in the case of the total score rather than the quantitative or linguistic scores. 2. Students who scored below the median on the ACE total test averaged a higher percentile rank on the AIA-I test than would have been predicted from the ACE score, indicating possible over-achievement. 3. Students scoring above the median on the ACE total test averaged on the AIA-I percentile ranking approximately on par with their average ACE percentile ranking, indicating that achievement was on the level predicted by the ACE test. In conclusion, the ACE is a relatively accurate predictor of achievement in accounting as measured by the AIA-I.

Reviews the book "Basic Auditing Principles," by Arthur W. Holmes.

Since its publication in 1956, the Report of the Commission on Standards of Education and Experience for Certified Public Accountants (C.P.A.) has stimulated a tremendous amount of interest and discussion among practitioners, educators, and others. The Commission regards a college program culminating in a baccalaureate degree as a necessary preliminary to further educational training for practicing public accounting as a C.P.A. The report does not specify the content of the four year undergraduate program but it does recognize that the educational training for certified public accountants should include a substantial amount of cultural and general courses as well as the study of accounting, commercial law, finance, and other related areas of business. Moreover, graduation from a collegiate school of business is not required, but the report does stipulate that the prospective C.P.A. must either be an undergraduate accounting major or obtain the equivalent thereof subsequent to graduation.

Reviews the book "Working With the Revenue Code--1957," edited by James J. Mahon.

The 1957 Statement of the American Accounting Association's Committee on Concepts and Standards Underlying Corporate Financial Statements' makes two specific recommendations regarding the treatment of corporate income taxes in financial statements. (1) With respect to income determination, it states that interest charges, income taxes and true profitsharings are not determinants of enterprise net income. (2) With respect to the differences between reported and taxable business earnings and the tax payment. Although these two recommendations may be independent of each other, the inter-period allocation of income taxes is often associated with the treatment of the tax as an expense. The purpose of this paper is twofold: (1) The first part presents some arguments in favor of including the income tax as a determinant of income in all meaningful concepts of the corporation. (2) The second part presents some arguments to substantiate the inter-period allocation of income taxes and presents an alternative approach which may make the allocation process more palatable to the Committee on Concepts and Standards.