Knowledge that Transforms

Abstract Arkansas State College recently experimented with a somewhat unorthodox first auditing course. At the end of the semester, students rated the course as substantially more interesting than a comparable group of students had rated the traditional auditing course the previous year. Students evaluated both courses via an unsigned questionnaire, which included the question, "How interesting is the course material?" The five possible responses ranged from 'among the most interesting' to 'among the least interesting.' The experimental course received 92.2% of maximum possible points based upon a tabulation in which the responses were valued on a 4-3-2-1-0 basis. The previous year students rated the material of the traditional course at only 74.4% of maximum. The same professor taught the two courses. The first week of the experimental course covered basic audit objectives, procedures, and techniques, as well as the organization of a certified public accountants firm. There was no additional direct study of the how of auditing. No practice case was worked. Auditing standards received a great deal of attention several weeks. A number of short-form reports from corporation annual reports were presented via an overhead projector to illustrate reporting standards.

Abstract This article presents information on issues related to various accounting bodies in the United States. Some of officers who were elected at the annual meeting of the American Accounting Association (AAA) at Bloomington, Indiana on September 1, 1964 are Robert K. Mautz of the University of Illinois, Herbert E. Miller of Michigan State University and Wilton Anderson of Oklahoma State University. The membership of the AAA at the convention voted, upon recommendation of the executive committee, to change the dues structure of the association effective from January 1, 1965. Dues for full members are now $10.00 per year, for associate members, $3.00 per year and for foreign members, $6.50 per year. The twenty-sixth annual conference of the Institute on Accounting was held at the Ohio State University, Columbus, Ohio, on November 6, 1964. The National Association of Estate Planning Councils held its first annual meeting on September 25, 1964 in New York City. The Association's membership is made up of accountants, attorneys, life underwriters and trust officers.

Abstract This article has a negative point of view about the current state of the accounting art. While taking this negative position, the writer must admit to having an overall point of view, which is on balance favorable to the current state of accounting practice favorable in the sense that progress has been made through the years and that useful data can be obtained from published financial information. Researchers generally know the basis of recording the information and researchers know that the certified public accountant has reduced the possibility of fraudulent information to a reasonable minimum. The state of the art could be much worse. Taking a more optimistic position, there have been changes in accounting thought and practice through the years and there will be additional changes in the future. Accounting is an inexact art, primarily concerned with measuring financial position and income. Accountants have to a great extent established confidence in the honesty of the information presented. The next step is to broaden the accountant's mandate and encourage him to exercise more leeway in deciding which economic events are susceptible of measurement. Even assuming that the present form of financial information is retained, supplementary statements prepared on different bases could be presented jointly with the conventional information.

Abstract In the October 1964, issue of the journal "The Accounting Review," professor Neil Churchill presented four applications of matrix algebra in cost allocation situations. Where functional relationships between allocation sources and destinations are determinable and stable, linear algebra is shown to be a convenient tool for getting the cost allocation job done. Churchill presents a technique that is finding increasing use as accountants become more experienced with formulative methods. However, the artful economy of wording and symbolism that makes his presentation compact is also a source of frustration for one who bootstraps his way to an understanding of such matters. As long as the allocating relationships and proportions remain stable, Churchill's foreshortened approach works very well. The same matrix approach can be expanded to allocations of larger dimension, and of more than one layer. While the problem appears frightening when viewed in its entirety, a step-by-step venture through it will lead eventually to placement of all costs in the service using departments. The utility of such allocations, from a cost-control viewpoint, can be questioned, but that is an entirely different question with which researchers do not propose to engage here.

Abstract This article presents the results of a recent study of a financial report that has been virtually ignored by most accountants. This report, the published interim report, has been strongly advocated by the U.S. Securities & Exchange Commission, the New York Stock Exchange and various other stock exchanges. In addition, it has been strongly demanded by financial analysts as a necessary part of systematic, orderly flows of financial information. In spite of the increased demand for such reports, many accountants of all types, both industrial, professional and academic, have either ignored or opposed them. This paper is also intended to remedy that situation somewhat. As one know, accountants and financial reports are completely interrelated. Communication of financial information is the essence of accounting. Financial reports are the obvious media of this communication and since published interim reports have become a significant part of the financial reporting practices of many corporations, accountants must take cognizance of them.

Abstract One of the more troublesome hurdles facing the student in his first exposure to common dollar accounting is the reconciliation of changes in converted Retained Earnings. Even when he has satisfied himself of the way in which the converted net income figure is obtained, the gains and losses arising from holding monetary items during a period of price instability are apt to puzzle him. It is not only that their computation is initially hard to follow. Worse than that, these gains and losses are the one sort of item on the converted financial statements that does not correspond in a one-to-one fashion with an item already on the conventional, unconverted financial statements. Even when he has partially mastered the mechanical problem of calculating the related gains and losses, he will often be engaging in a sort of ritual rather than obtaining any real insight into what he is doing. In cases of this sort, it is sometimes helpful for the student to have an alternate way of looking at the thing that troubles him, a chance to see it emerge in another role.

Abstract This article presents information on cash movement, which should be the foundation of periodic income measurement. It is contended that most people think that periodic business net income or loss is closely linked to certain of the movements of cash into and out of the business, and that, while a simple periodic matching of cash receipts and disbursements rarely gives a meaningful measure of net income, cash movement can be objectively measured and is a far better starting point for income determination than value, a highly subjective matter. It is further contended that even if the proposals to link value changes closely to income measurement were sound in principle and feasible, the likelihood of their gaining widespread understanding and acceptance is negligible. If these contentions are valid, it is incumbent upon accountants to stray no further than absolutely necessary from cash movement in calculating periodic business income. It is noted that problems rarely exist in cases where there is a very close correlation between cash movement and revenue and expense realization or recognition.

Reviews the book "The Search for Accounting Principles: Today's Problems in Perspective," by Reed K. Storey.

Reviews the book "Effective Use of Statistics in Accounting and Business," by John B. O'Hara and Richard C. Clelland

Reviews the book "Business and Professional Income Under the Personal Income Tax," by C. Harry Kahn.