Knowledge that Transforms

Abstract The article focuses on management practices with respect to internal transfer pricing in large manufacturing companies. Intracompany transfer pricing has achieved wide-spread but not universal use among large manufacturing corporations. As a management tool it may fulfill different roles and in addition, there exists various pricing methods, the choice of which is influenced by factors both within and external to the individual company. A mail survey was undertaken to provide an insight into the role played by intra-company pricing as a management tool and the related management practices, developed more or less independently by manufacturing companies. The most important factor influencing the adoption of a particular transfer pricing method, market, cost, or negotiated price is the existence of a market for the product. Other factors include organization structure of the company, the volume of intracompany transfers, operations in both extractive and manufacturing stages, the history of a particular company and individual preferences of corporate officers.

Reviews the book "How to Solve Introductory Accounting Problems," by W. Rogers Hammond.

Reviews the book "Arm's Length Transactions," by Robert S. Holzman.

Abstract The purpose of this article is to describe a method of reducing the time required for preparing a statement of source and application of funds. It consists of substituting two T-accounts for the formal working papers commonly used in source and application of funds preparation. The method is especially useful in examinations because of the great saving of time effected in organizing the information required for the statement. Of the two T-accounts, one is used to accumulate information for determining and explaining the amount of funds provided by operations. The second T-account is used to list funds provided and funds applied, the balance, of course, representing the change in working capital as shown in detail by the statement of working capital changes or determined in some other manner. In preparation of the formal statement of source and application of funds, if time is limited, the student may be allowed to show funds provided by operations as a single figure, since he has already shown the details in his T-account.

Reviews the book "Annual Reports of Companies," by R. Keith Yorston and E. Stanley Owens.

"The Committee on Public Finance," a collaborative writing group consisting of sixty-six professors teaching at colleges and universities, have produced the latest in the long series of text books in public finance. Pooling their scholarship and teaching experience they have sought to meet the wants and needs of public finance instructors for a broad and comprehensive text "implicating the larger problems of freedom, justice, and the nature of individual and social well-being." The strong points of the book are its scope and organization which seek to fit the various phases of public finance into a single and unified process. The Committee deserves congratulations for its efforts to show the process of financing governments as one which involves economics, accounting, political science, administration, law, history, and sociology. The new text should help students to appreciate the complex and growing place of public finance in modern society, and instill a greater concern for the orderly administration of the public sector of the economy. It can make no greater contribution.

Abstract The article focuses on a comparative study of certain accounting institutions and practices in England and the U.S. The knowledge that the average accountant possesses of his profession is almost exclusively restricted to institutions, principles and procedures in his own country. The fact that relatively little research has been done on the subject of foreign accounting is cause for some concern. Areas of accounting and auditing in the U.S. and in England, which were selected for comparative study were: the legal position of the profession, codes of professional conduct, the professional examinations, professional education, objectives of auditing; and audit programs for inventory and for accounts receivable. An evaluation of major aspects of these areas concluded the study. In England, three methods have been adopted for admission into the professional accounting institutes: under articles of clerkship, under bylaws of institutes; and under the university scheme. In the U.S., admission to the practice of public accountancy is regulated by state law.

Abstract This article focuses on the cost and inventory values in the glue industry. The manufacture of glue is so old an industry that its origin goes back into antiquity. It can be traced back 3,300 years to the sculptures of Thebes in Egypt, which depict a workman applying a piece of rare wood of a reddish color to a yellow plank of sycamore with the use of glue. Near him with his tools is a pot on a fire for melting glue and a piece of dry glue yet to be melted. The plant here used as a case illustration is a glue plant of Consolidated Chemical Industries, located at Bayshore, California. Consolidated Chemical Industries has been in business under various names since 1878. Recently it was merged with Stauffer Chemical Company, also dating back to 1885, and now operates as a division of Stauffer. The chemical industry, especially in heavy chemicals, considerable inventory verification is done by estimation. The cost factors used by Consolidated Chemical Industries at its Bayshore plant are basically, raw materials, chemical supplies and containers, labor, fuel, water, repairs and maintenance, depreciation, fixed overhead, and variable overhead. An average cost is determined by a continuous process costing method.

Reviews the book "Montgomery's Federal Taxes," edited by Philip Bardes, James J. Mahon, John McCullough, Mark E. Richardson.

Abstract In January 1957, the Executive Committee of the American Accounting Association appointed the first committee on management accounting; the primary charge being "to clarify just what is meant by the term management accounting. In recent years there has been a growing awareness of the potential utilization of accounting data by management for internal purposes. At the same time there has been an increasing recognition of the limitations of accounting as it exists today in meeting these needs. Management accounting is the application of appropriate techniques and concepts in processing the historical and projected economic data of an entity to assist management in establishing a plan for reasonable economic objectives and in the making of rational decisions with a view toward achieving these objectives. It includes the methods and concepts necessary for effective planning, for choosing among alternative business actions and for control through the evaluation and interpretation of performance. Management accounting concepts are especially important in that they deal with the fundamentals of maximizing return on investment, a primary objective of the business entity. This is especially true in the field of marketing where the broad and complex problems of pricing, methods of distribution, marginal cost and product mix must be met and solved.