Knowledge that Transforms

Abstract This article presents two fables to illustrate some principles of accounting. A natural series of events described in one fable put into the hands of a character, called T, the characteristic elements of real double-entry book- keeping. This man, intelligent and observant by hypothesis, could not have been long in finding out that every transaction gave rise to a double recording, that every sum written in the debit of one of the two accounts figured also in the credit of the other, and that as a consequence, the total of the debits were equal to the total of the credits, and finally, that the debit balance of one of the two accounts was in reality, and of necessity, equal to the credit balance of the other. The principles of double-entry were thus clearly formulated at first without the men who conceived them comprehending their significance. The other fable tells that there was in the old Roman law, a very definite procedure of contracting a binding debt and a set form of preliminary conversation. There was an equally definite procedure for transferring a debt to a third party.

Reviews the book "How to Read a Financial Statement," by Herbert G. Stockwell.

Abstract The article presents information on the concept of developing a relation between economics and accounting. According to the author, the precipice on the economic side is the concept of consumers' cost, whereas the considerably lower precipice on the accounting side is the present limited concept of inventoriable values. Profit has been defined as that increment of consumers' cost value which is ordinarily in excess of the conversion value created for consumers' needs by the merchant or manufacturer. It has been assumed that only those merchants and manufacturers who do create, through their operations, consumers' cost values will remain in business, because business cannot continue without profit. The theory of marginal utility finds its application and, sooner or later, produce a proper balance between the demands for economic goods and the activities that satisfy the demands. The article summarize that finished inventories, or merchandise for sale, should Include all the values created by the business process, except the profit which is the additional value created by the consumer's act of purchase.

Abstract The article presents information related to students preparing for the Certified Professional Accountants examination in the U.S. It has been viewed that the ideal accounting problem should be free from vague, obscure, and ambiguous statement; it should not be too lengthy; and it should permit of solution within the allotted time. Problems prepared by university instructors usually meet these requirements and are, therefore, excellent teaching material for the preparation of students for the accounting profession. But, because of their very virtues such problems are often not suitable as preparatory material for the professional examination; for, on such examinations, the candidate is usually confronted with problems which contain vague and contradictory statements, or mathematical errors, or are so lengthy as to be impossible of solution within the specified time. In a course In accounting problems planned to meet the needs of students, equal emphasis should be placed upon the application of accounting principles as applied to various businesses and upon the art of solving problems. It is not the function of a university to prepare its students for examinations into such professions as law, accounting, or medicine. The aim of the collegiate school of business is usually to prepare its students for business or for some special field of business.

Reviews the book "Auditing Procedure," by William B. Castenholz.

Abstract The accounting course is distinctive in four respect. Probably the least important of these lies in the nature of the departmental organization. The business courses are divided into two departments, based on operating and non-operating business functions. The former include marketing, purchasing, and production, the latter, accounting, statistics, and finance. One have found that the general subject matter in the department of accounting and finance harmonizes with excellent effect, aid that courses are given with a minimum of overlapping material. Internal statistics are the product of the system of records in any given business. External statistics are largely the product of records of other companies. In discussing problems in business finance, therefore, such things as financial conditions, ratios and application of funds, and bond issues, are studied without the usual handicap of distinguishing between accounting method and financial policy. In the introductory course of the department the students get training in the preparation of a budget, the keeping of accounts, and the use of banking facilities.

Abstract The purposes of accounting instruction in universities and colleges, although manifold and dependent upon innumerable circumstances, may be grouped into two major classifications. These two classifications are the social purposes and the private purposes. Some might point out a third group of purposes, that is, those growing out of the needs of particular institutions as affected by their character and location, but ordinarily these latter facts merely influence the social and private purposes and do not form a third group. Of the two groups, the social purposes should be considered the more important. To bring out the social function of the subject should be the most important purpose of accounting instruction. Accounting instruction not only serves the two private purposes, the vocational and professional, directly, but it has an additional private purpose. The accounting instruction is a foundation stone in any course in commerce or business administration. Thus persons enrolling in a commerce course, and whose ambition is to become business men, partake of this instruction and can use it later to their own individual advantage.

Reviews the book "Elements of Accounting," by Edmund Berrigan.

Abstract Transactions variously described as trades, exchanges, or "deals" are very common in the real estate business. The difficulties which such transactions present for the accountant are due to a number of circumstances. In the first place, these dealings follow no rules. Each one is a law unto itself. They do not readily fit into any system of bookkeeping, no matter what preparations have been made to care for every possible contingency. Very often they involve immediately neither cash receipts nor disbursements. Sometimes they are not even evidenced by a formal agreement between the parties, although they always should be. Even when the agreement exists, it is often ignored in some details. Thus it is sometimes very difficult to find out what actually has happened. A common occurrence is the assumption of liabilities the precise amount of which is determinable only in the future, so that the original entry for the transaction must be tentative, either estimating the amount of the liability in order to obtain the cost of the property exchanged and hence the profit or loss on the transaction, or waiting until such time as the liability is determined before attempting a reckoning of the final results. One of the chief difficulties is that the agreements cannot ordinarily be taken at face value for accounting purposes, even if to the letter they are carried out. This article presents several cases which highlight these issues.

Abstract According to the article author, the term "bookkeeping approach," is a misnomer. Much more is involved than the term implies. It should be called the accounting foundation, without which no real worthwhile accounting superstructure can ever be built. The subject of bookkeeping approach really resolves itself into a question of bookkeeping method. Book-keeping method and pedagogy constitute the "open forum" in commercial work today. There is an increasing feeling among book- keeping teachers that "all is not well in educational Egypt." Many of the most progressive teachers are realizing that we have never got to first base in the development of a mound bookkeeping pedagogy. Bookkeeping is to-day an acknowledged factor in secondary education. It has acquired its present permanent footing in the face of determined criticism and opposition on the part of many educators. And very few subjects have in so short a time obtained such a firm and universal footing in high school curricula. In the beginning, the high school Inherited the textbooks, the teachers, and the methods of the business college. Measured by present educational standards, all of these were extremely inadequate. Thanks to a number of conditions, the teaching element has greatly improved.