Knowledge that Transforms

Reviews the book "Fundamentals of Electronic Data Processing," by Kenneth L. Inman.

The Division of Public Accounting offers instruction for students who desire a career in accounting and it is particularly oriented towards the public accounting profession in the United States. The students in the Division of Business Administration desire a broad, general business education and do not intend to make a career of accounting. The method of instruction and course content has proven very satisfactory for the public accounting students but quite inadequate for the business administration students. The public accounting students are anxious to learn how to solve specific, technical income tax problems and how to perform detailed tax computations and analyses. This kind of work will make up an important part of their assignments in the field of public accounting. All of the students in the Division of Public Accounting have studied many accounting subjects before enrolling in the federal income tax course. Of course, the study of federal income taxes comes much easier and more quickly for students who have a good accounting foundation than for those who do not.

This article discusses a study on the management decisions based on accounting reports using a method of inventory valuation and the effects of inventory methods. The issues raised by current research on the effects of inventory valuation methods are not new. As alternative accounting methods have been proposed, developed, and put into use, the profession has always engaged in discussion of the relative advantages to be derived from a change in methods as well as the disadvantages, which accrue from diverse practice. Discussions of inventory valuation methods have been an important part of the accounting literature for many years, and there have been many serious attempts to ascertain the validity of arguments raised in support of particular methods or in opposition to them. The research methods used in previous studies have failed to provide conclusive evidence on the effects of alternative inventory methods on decisions. Differences in reported values resulting from the use of different methods have been demonstrated, but empirical support for conclusions about the effect of these differences on business decisions has not been obtained.

One of the continuing unsolved problems of accounting is that of joint costs of production. Generations of accountants have struggled in the definitional morass of joint products, major products, co-products, minor products, by-products, and scrap, waste, spoiled or defective products. For their part, economists have been quick to point out that, in many cases, cost allocations to joint products are arbitrary and thus unjustified. Be that as it may, for a number of mundane reasons well known to accountants, such as the preparation of balance sheets and income statements, evaluation of inventories, preparation of tax returns and public regulation. Some allocations are required and must be made. It proposes to relate accounting to economic theory and in so doing to make a very limited advance on the problem. In a joint cost situation, one input serves to produce two or more products, these two or more outputs may issue from the production process either in fixed proportions or in variable proportions.

The accounting profession today does not fear change. It welcomes it with optimism and deliberate enthusiasm. Because of the developments of operations research and electronic data processing on the one hand, and of global business expansion on the other, all accounting mores are being challenged and attacked. The idle technological and man-power capacity already in existence and still being increased can he effectively put to use if some means could be developed to improve the cooperation of the public and private sectors of the economy. This does not mean more government interference with business. It means more mutual respect and consideration for one another's problems and objectives, and cooperation one with the other when such cooperation is in the best interest of all. In the U.S. Federal Reserve System and the banking industry one have such a working together of the public and private sectors of the economy. Experience showed that society and technology were changing too rapidly, more was needed. Positive steps were then taken to upgrade and substantially revise the courses at universities.

The code and regulations concerning partnership activities are among the most complex laws and rules in the field of taxation. The article focuses on the effects of the U.S. Internal Revenue Code while discussing the importance of the tax effects to be considered during the formulation of original partnership agreements and later timely modification thereof which can eliminate some inequities that might arise among partners. An agreement should be arrived at among partners as to the treatment of certain aspects of contributed property. If the agreement is silent as to the depreciation of the contributed property, the depreciation would be treated as if the property had been purchased by the partnership. Cash payments in liquidation of a partner's interest in a partnership or to successors in interest of a deceased partner's interest can raise some tax consequences. A distinction in the tax law between payments in liquidation of a partner's interest in partnership property and other liquidating payments should be carefully considered before an agreement is reached between a retiring partner and the remaining partners of the partnership.

Reviews the book "Accounting for Human Assets," by Roger H. Hermanson.

Reviews the book "The Impact of Valuation Requirements on the Preferred Stock Investment Policies of Life Insurance Companies," by Alden C. Olson.

A full understanding of the pattern of responsibilities and authorities for accounting by business enterprises in the United States requires knowledge of the political and economic history since the establishment of this nation. While such knowledge is presupposed for the purposes of the inventory, it is pertinent to observe that both governmental and economic institutions reflect systems of checks and balances against abuses of power and other human weaknesses. In line with this pattern, the responsibilities and authorities for accounting and financial reporting of business enterprises constitute a mosaic in which the primary responsibility and authority of the board of directors is supplemented by secondary responsibilities and authorities of stock exchanges, regulatory commissions, the U.S. Securities and Exchange Commission and independent Certified Public Accountants (CPA). The nature of the responsibility and correlative authority of each of these groups is described in considerable detail in the inventory. The responsibility and authority of the CPA are dealt with both in respect to the individual practitioner or firm and with respect to the Accounting Principles Board of the Institute.

Reviews the book "Second Annual Conference on Management Advisory Services of Certified Public Accountants."