Knowledge that Transforms

Abstract The accepted principles of cost accounting may be applied to the transportation of property by motor trucks in such manner that the cost of hauling each class will be determined. At the present time motor freight carriers, both common and contract, are required by governmental regulatory commissions to maintain uniform systems of accounts and to submit annual reports. While these accounts are very detailed with minute divisions and subdivisions of both revenue and expense, they do not reveal the cost of transporting property, because there is no method of apportioning or allocating the expenses to the particular service being rendered. The statement of profit and loss by classes is only tentative, because there are many other relevant factors to be considered. The percentages of load will vary. Also, the percentages of expenses to be assigned to the various classes will change. However, when a sufficient number of actual studies have been made to supply factual data, standard percentages can be determined. When these standard percentages are applied to expenses, the cost of transporting merchandise over a line haul can be established.

Abstract The article focuses on accounting for fixed asset and their amortization. Accounting for the acquisition and construction of the fixed assets required in the production and distribution of goods and services is important to business managements and to the accounting profession. There have been changes in the past fifty years of kaleidoscopic economic and political events and social movements. Since the fixed assets and the related amortization accounts are continuing historical accounts, the present balances have obviously been affected by any changes made in accounting practice over the years resulting from changes in business conditions, in the purposes of the accounts and in mode of thought of various managements and their accounting advisors. The principal accounting points discussed regarding fixed assets and their amortization includes accounting entity, monetary basis for carrying fixed assets, cost, close relationship between tangible and intangible fixed assets and their amortization.

Abstract The article focuses on relationship between depreciation of assets and profit determination. In seeking guidance as to appropriate wage, price and allocation, and taxation policies, earnings reports in terms of individual firms, industries, and all business have taken an undisputed position of importance. There are widespread current expressions that the profit figures shown in these statements are inflated or overstated. The holders of this view contend that basing depreciation charges on original cost in periods of marked change in prices contributes to a distortion of the profits figure. There is general agreement among economists and accountants that business income is measured by the excess of revenues over the cost of producing those revenues. One of the costs of producing revenues is, of course, the gradual consumption of the service-rendering ability of capital assets that is described as depreciation. The central purpose of depreciation accounting is to allocate the cost of these long lasting assets to the periods of use in a reasonable and orderly fashion.

Abstract Reviews the book "Business and Government," by Charles C. Rohlfing, Edw. W. Carter, Bradford W. West and John G. Hervey.

Abstract Reviews the book "Corporate Finance and Regulation," by Chelcie C. Bosland.

Abstract The article focuses on the improvement of present curricula and methods of accounting teaching. The author argues that the there is a need for improvement in the methods of examinations. The greatest opportunity for improvement lies in the direction of a strong trend toward greater objectivity in those examinations. Accounting, like mathematics, lends itself naturally and easily to the objective techniques. The argument for the objective technique is usually based upon the ease and sureness with which it serves this grading function. Many early efforts at objective examining run into student resistance. Such resistance is often at least partially justified because most early attempts in the new medium are likely to include a few bad items, and students, especially the best ones, are quick to spot such ambiguous, unanswerable items. The cure for this is item-analysis of the results of every test. The ability to analyze and organize is basically the ability to recognize and appraise significant relationships among insolated factors each of which is by itself a simple statement of fact.

Abstract The "cost of goods available for sale" is generally understood to consist of (1) the costs incurred in acquiring goods in the current period plus (2) any acquisition costs deferred from preceding periods. The allocation of such acquisition cost to cost-of-goods-sold and ending inventory may be accomplished by several methods, including the "retail" method and the "gross profit" method. The similarities and dissimilarities of these two methods seem to have been neglected or overlooked in accounting textbooks. It may be observed that both of these methods are similar in that they reduce the sales price related to a group of units by an amount of estimated gross margin, with the resulting figure in each case being used as the basis for making an allocation of the cost of goods available. But the two methods differ in that "gross profit" method starts by reducing selling price of units sold, while the retail method begins by reducing the selling price of unsold units. The article presents illustrations to aid in explaining these two methods of pricing inventory activity.

Abstract The discussion of the accumulation and analysis of cost data for production and investment decisions raises a question about the basic procedure for accumulating the original cost data. Cost and production data are used for a variety of purposes: valuing inventories, determining profits or losses on individual orders or groups of products or operations, measuring efficiency of production, establishing prices, selecting the best of alternative methods of producing, measuring obsolescence and many other purposes. No single cost figure is equally satisfactory for all managerial decisions-some decisions require partial costs, others, such as the determination of obsolescence, require imputed cost such as interest. The central fact is that some of the decisions of management require a segregation of costs according to the extent to which they vary in total with the rate of output. A corollary of this is that none of the other decisions of management requires that cost and production data be accumulated on a basis inconsistent with the distinction between fixed and variable costs.

Abstract Reviews the book "Audit Working Papers," by Maurice E. Peloubet.

Abstract The article focuses on the financial reports for creditors. Creditors are those individual or business organization which deliver goods , wares, or services, or lend their money, to a debtor in exchange for a promise to pay at some time in future. The creditor's confidence in receiving payment in the future is based upon the history, reputation, and character of the debtor, supported by adequate accounting reports. Accounting reports are the creditor's principal tool. They consist of reports of independent accountants, reports of management to stockholders, and special financial and statistical analyses. The factor which distinguishes the creditor from the stockholder or other groups is primarily the use to which he puts the reports, and the approach he takes to becoming or continuing to be a creditor. Creditors can be classified into three broad groups. First are the trade creditors who sell merchandise, materials or services to the debtor. Second are the bank creditor who lends money to the debtor on an institutional basis for more or less short periods. The third class of creditors is security holders, who lend money to the debtor for a long period of time.