Knowledge that Transforms

The question, whether appreciation is a profit, is not merely the concern of bookkeepers. It is a fundamental point of both business and general economic theory. According as this question is answered there will have to be differences in concepts which prevail in business it regarding profit, capitalized value, price policy, balance sheet theory, tax law and financing. The business man cannot neglect the significance of this question as he is accustomed to do in matters of pure theory on the ground that is far removed from his concern. What he reports as profit to his stockholders depends upon his interpretation of this question. Wage policies are also affected and, of course, the computation of income taxes. Varying concepts of profit will have an even more distinct relation to economic theory. it is clear that the concepts of rent, interest, market value, price, income and capital must vary according to whether one considers as income only the real product produced within a certain period, or whether income is regarded as the surplus increment of value between two points of time. This is, therefore, a basic question of economic science and deserves careful attention.

This article focuses on the editor's comment on the announcement of the Terminology Committee of the American Institute of Accountants. The editor suggests that devising of a definition is a fine art requiring at approach of a radically different character than that exhibited by the Committee's announcement. A woeful lack of correlation exists as between the definitions within group and between groups already published. The editor says that similar terms have been defined without proper reference to each other. Various current meanings of a single term are disclosed, together with an indiscriminate banding together of terms having or involving the same concept. Shades of meaning and fine distinctions, the nicety of which gives a real pleasure to definition-reading, are not revealed in a single instance. The editor further says that the results be more lasting if the Committee on Terminology could confine its efforts to a single concept at a time, and phrase definitions for the terms which the concept underlie. Definition making on the vast scale selected by or thrust on the Committee on Terminology is a prodigal and futile undertaking.

Reviews two books on standards of performance for department stores by Edgar H. Gault. "Monthly Standards of Performance for Department Stores: 1928-1929," "Yearly Standards of Performance for Department Stores: 1928-1929."

The article discusses economic theory in relation to accounting valuations. All items which are included under the term assets may be very roughly divided, for the purpose in hand, into two groups, more or less accurately designated as follows, repositories for funds and summations of costs. In the first may be placed cash in its various forms, account, notes, bonds and other claims for money and securities or rights readily realizable in money if not representing sums to be collected at specified times. In the second group are organization and development charges, land and wasting assets, structures and equipment of all types, long and short-term prepayments and various classes of inventories. As in most classifications there are many doubtful cases, one division shades into the other. Finished goods produced under contract, for example, are from the standpoint of both economic and legal character very closely allied to ordinary receivables. As a rule the valuation of items in the first group is a relatively simple matter, depending primarily upon legal conditions, simple arithmetical calculations and judgments as to good faith and responsibility of debtors. Further, in this group of cases there is ordinarily little to be gained by attempting to apply interpretations and reasoning of economics.

Reviews the book "1931 Tax Diary and Manual."

Owing to the comparative youth of the accounting profession, court decisions affecting its members are few and scattering. However, the importance of these adjudications to the profession in inverse proportion to their number. An attempt is made in this article to state the significant parts of the American and English cases which have been decided during the past half century. Since accounting has attained the dignity of a profession, its members are subject to the same rules in their practice as are the members of other skilled professions. The damages claimed on account of the losses from the defalcations of the clerk and the insolvency of his surety are too remote to recovered, without showing the existence of special circumstances, known to defendants from which they ought to have known that much losses were likely to result from failure to disclose the true condition of affairs. Such losses are neither the natural nor the proximate consequences of the failure of defendants to make a proper audit.

Reviews the book "Budgetary Control in Manufacturing Industry."

Reviews the book "An Accounting System for an Industrial Bank," by Joseph P. Christianson.

Reviews the book "Patent Accounting," by B.L. Klooster.

Reviews the book "1931 Credit Manual of Commercial Laws With Diary."