Knowledge that Transforms

British accountancy as an organized profession is still relatively young when thought of in relation to law and medicine; nevertheless, it has been called upon to shoulder a wide range of important practical duties within a comparatively short space of time. It has been possible to detect a new spirit creeping into tile statement of accounts; the accounting art itself has become discernible as an instrument of truth in the field of economic enquiry. Society has begun to expect published financial accounts to serve all kinds of purposes, and it has asked of them, as a matter of prime importance, such a disclosure of information as will give a clear and orderly picture, which can be readily assimilated and understood, of the working of business enterprise. In England the Institute of Chartered Accountants has formed a Taxation and Financial Relations Committee, which has initiated subjects of accounting principle for the consideration of the Council. In March, 1943, it was recommended that "provision be made in the books and in the annual accounts for proposed profit appropriations, those subject to confirmation by shareholders being so described.

Public accounting is in its infancy as compared with the older professions of medicine, law, and engineering, as of January 1946. The rapid strides made by this young profession within a relatively short time are enough to account for its chronic educational and training problems. Indeed, it is true that many beginners who in the early 1920s were considered well qualified to enter the public accounting field would be judged inadequate by the criteria used today. In the early 1920s, public accounting firms were primarily interested in the bookkeeping ability, business experience, personal attributes, and potentialities of applicants. Although a college background was desirable it was not a requisite. Accounting technique was then considered as something to be learned over the years as an adjunct to experience gained while working on engagements under the direction of competent accountants. This method of entering professional work was not uncommon in the early days of several professions.

This article focuses on components of a model permanent file. The components number fourteen, which fall under three main classifications, governing or fundamental documents, audit guides and synopsis or accounts. The whole of the permanent file should be treated as esoteric, thus providing one more instance of the mystery which should properly attach to any professional man performing before his laity. The seven year plan of audit, however, might well be marked "Top Secret-Not to Fall under Clients' Eyes." In case of accidents, it should not be sidescored for more than one year in advance, and this might well he done during the review of the current audit or during the now-busy season. Compared with the hard work represented by the current file of audit working papers, the compilation and bringing up to date of the permanent file will be found to be almost a pastime. The time spent on its initiation, however, will be found to pay dividends, in time saved in the routine work of the current audit, in reviewing the work, particularly, in obtaining a telescopic view of it, in building up goodwill with the client who is apt to regard with favor an assistant, new to the audit, who will not have to ask so many questions, because by referring to his permanent file he can find the answers.

Accounting is essentially a technical subject. It accumulates, verifies, presents and interprets financial information about operations and properties for business enterprise or about financial activities and resources for government and nonprofit organizations. It deals also with the means and methods of controlling the receipt, possession and disposition of properties to establish personal responsibility, to reduce the possibility of errors and to minimize the opportunity for fraud. Certain phases of accounting study give the student some knowledge of business operations, of the importance of the profit system in an economic society, and of the need for financial information by management, owners, creditors, government, employees and the general public. Accounting courses too frequently do not meet the needs for social, personal and supplementary training in accounting. These needs cannot adequately be met by the content of the usual elementary accounting courses. Not all students can be, nor should they be, fitted into an all-purpose curriculum. Provision should be made for one or more accounting courses especially designed for these purposes.

One who speaks with authority has said that no one should be allowed to write about writer William Shakespeare without a license. The author says he would be tempted to go further than that and omit the last three words. But perhaps a professional accountant has the right to inquire whether Shakespeare wrote about accounting. The word audit is used several times in the plays and sonnets. There is an interesting use of the word also by Anthony Browne, a contemporary writer of Shakespeare. He succeeded to his estates at an early age and when he was twenty-one wrote a book titled "Booke of Orders and Rules" for the guidance of his many servants and retainers which he ordered read aloud to them once each year about the audit time. The state of accounting records in the sixteenth century can safely be said to have been crude, for lack of a stronger term. That Shakespeare came into contact with them can hardly be doubted. His long career in London found him able to retire to Stratford at a comparatively early age with a fortune that at the time was considered large. He had been a member of a company of actors and was the leading and probably the most prosperous group of the period.

Articles in "Journal of Accountancy," have discussed the handling of discount or premium on bonds which are refunded in various issues published as of January 1946. The Committee on Accounting Procedure of American Institute of Accountants in its September 1939 issue of "Accounting Research Bulletin," was hesitant in expressing definite conclusions but, more important, neglected an enlightened approach by refusing to consider it opportune to discuss the theoretical soundness and practicability of adopting an alternative treatment of bonds which would recognize in some respects the nominal character of the terms "principal" and "interest." The mere existence of premium or discount, however, is complete evidence that face value is not the exact principal, and that face value or principal is nominal only. By considering reality much confusion can be avoided, and this is the author's approach. Where others avoid a positive position, the author proposes by mathematical analysis of the facts to indicate the only proper methods.

Today small business binds together many diverse threads of a current problem which is visualized as containing jar-reaching implications, not alone economic but also social and political. Big business is seen as growing ever bigger, more concentrated, and more firmly entrenched, with small business at an ever-increasing disadvantage. The World War is blamed for much of the condition, because the productive power and the know-how in the hands of the larger companies gave them, during that period, an opportunity for tremendous growth and expansion in facilities and permitted them to add materially to their resources. Capital is, of course, essential in some degree to almost any business. In a merchandising venture funds must be available for the purchase of inventories and to finance sales during the period between shipment and collection. The condition of governmental red tape, regulation, and annoyance is a troublesome one for small business. The government of a complex industrial nation like the U.S. must impose controls, limitations, and restrictions on its subjects for the betterment of small businesses in the country.

A committee on selection of personnel was established by the American Institute of Accountants in 1943 in the U.S., to study ways and means of insuring a continuing influx of capable people into the profession of accounting. Obviously, vocational counseling would sooner or later be involved. If counseling could avoid some of the heartbreaking experiences often met in fumbling and stumbling into one's life work, it would surely be worth while to the individual, and no less to the profession. It is clear, too, that counseling could work best if it rested on factual evidence regarding the individual's capability and promise. To furnish some evidence of this kind, tests would be needed that would be revealing, that could be easily administered, and that might be so widely used as to furnish national norms as a standard of comparison. The purpose of the present project of the committee is to define the mental and personal qualities which make for success in professional accounting. It also aims to develop, in collaboration with educational institutions, a procedure whereby promising young men may be discovered and guided towards the profession establish a battery of tests and supplementary techniques.

Reviews the book "The Pattern of Corporate Financial Structure," by Walter A. Chudson.

This article focuses on wage and full employment. The attempt to prepare national accounts shows that the form of accounts used for individual businesses is not satisfactory. This became evident when national income estimates were published "A New Method of Accounts" published in "The Accountant" was suggested by the income estimates. The preparation of national accounts shows that the improved method suggested then requires further modification. The evolution of accounts is not fully recorded and no satisfactory history appears to have been published. Probably the first businessmen to make use of accounts were the merchants of the Middle Ages. The early forms were simple cash accounts usually prepared as an aid to memory. Tally sticks and other early forms of money records were also mainly an aid by which to remember incomplete exchanges. From a national point of view the amount is part of the income of the nation or part of the result of employment. It is not trade-meaning buying and selling, it is not profit-meaning a special gain.