Knowledge that Transforms

Abstract This article presents accounting problems which were prepared by the Board of Examiners of the American Institute of Accountants and were presented as the first half of the Certified Public Accountants examination in accounting practice on May 15, 1946. It gives an information and asks to prepare an income statement showing therein appropriate manufacturing cost variances of Bunson Co., for January, 1946, supported by journal entries of transactions for the month. The Bunson Co. makes unit M. The manufacturing of unit M is based on three successive and continuous operations in which the manufacturing cost of such unit is developed. The Eunson Co., operates a cost accounting system based on standard costs which are incorporated in the manufacturing cost accounts. The differences between standard costs and actual costs are reflected in appropriate variance accounts, namely, material price, material usage, direct labor rate, direct labor time, and over-all manufacturing overhead. The material price variance is assumed to be realized at the time of purchase, irrespective of time of usage.

Abstract In making an approach to the problems connected with the correlation of costs to financial statements, it might be pertinent to give some thought to the evolution which has occurred, over the course of many years, in the concept of the principal function of accounting. However, the emergence of the industrial era, with the resultant broadening of capital risk attendant upon the formation and operation of large industrial enterprises, marked the beginning of a new concept of the use of accounts. As the corporate form of enterprise, often comprising a large number of stockholders became more prevalent, there was consequently created a class of investors were not active in management of the business in which they had invested their capital. Thus was evolved the practice of the periodical statement of earnings, usually covering, as a matter of convenience, a period of a year, and supported by a statement of financial condition, or balance sheet, as of the end of the period for which the report of progress was made.

Abstract Reviews the book "The Social Problems of an Industrial Civilization," by Liton Mayo.

Abstract The Committee on Cost Accounting Principles has held one meeting and contemplates holding a second meeting before the end of 1946. A basic outline of the cost accounting subject matter has been prepared as a starting point in the search for fundamental principles and the ideas of the committee members have been consolidated through correspondence. The charge of the committee was to explore the feasibility of expressing general principles in the field of cost accounting, and, although the committee is not prepared to report definite conclusions at the present time, it is believed that further exploration will prove fruitful. During the year 1945 a number of manuscripts were given consideration as potential monograph material and it is to be hoped, barring continued shortage of paper and printing labor, that one or more research projects can be published during 1946. A project which has been in process for some time, the preparation of a complete index for the first twenty volumes through 1945 of the journal "The Accounting Review," is now practically complete and printers' bids are being received.

Abstract For years, there has been a pronounced conflict of opinion between the Internal Revenue Department of the U.S. Treasury and business management in general as to the propriety of different rates of depreciation allowances for physical assets. This conflict, which at times has reached the stage of an active dispute, has been costly to all. Management has been anxious to take deductions against taxes when it was known that there were taxes to absorb them. The Revenue Department has at all times had a natural desire to get taxes when profits were available to tax. The Department has been guided in its thinking by a conservative approach. The Department has been careful to act in a manner that would result in like treatment for all. Influenced perhaps to some extent by a desire for simplicity of administration, the Department has set simple rules and applied them pretty generally to all alike. To an important degree the Department has undoubtedly been influenced by the responsibility placed upon it to collect taxes justly due.

Abstract Reviews the book "Long Term Liabilities and Capital Stock," by George O. May.

Abstract Reviews the book "Directors and Their Functions," by John Calhoun Baker.

Abstract This article presents several problems prepared by the Board of Examiners of the American Institute of Accountants in the U.S. and were presented as the second half of the Certified Public Accountants examination in accounting practice in May, 1946. The candidates were required to solve both problems. The weights assigned against each problems were specified. The time allowed was four and a half hours. A suggested time schedule was also provided. One of the questions is related to the preparation of a corrected balance-sheet of the Acme Trading Company as at December 31, 1944. Another question is related to taxable net income of Mart Co. Inc. for purposes of the 1945 corporation income tax return in the U.S. Mart Co. Inc. is a dealer in personal property and, for purposes of the U.S. income tax, reports gross profit on sales on the installment basis. Accordingly, gross profit realized and reportable each year is X dollars Worthless accounts are deducted in the year of default, a provision to a reserve for bad debts may not be deducted. With respect to repossessions, a deduction may be taken to the extent of the excess of the unrecovered cost over the salvage value of the repossessed merchandise.

Abstract The relationships between costs and volume of output have long constituted an important segment of business policy, accounting, and economic theory, specially in the U.S. Analyses of these relationships are utilized in value, price, and distribution theory as well as in business policy development and economic planning. In spite of the importance of these relationships, few actual data are publicly available for studying them since the materials must be derived from a detailed analysis of the books of account of industry. In a world of private business, such data are not commonly available for publication. The Agricultural Adjustment Administration, in 1933, obtained under oath and in sufficient detail for cost and output analysis, the balance sheets and operating cost statements of a representative group of milk pasteurizers and distributors operating in thirty-five important milk markets. These financial statements, which were obtained in view of the preparation of milk-marketing agreements, were audited and expressed in a standard form by the accountants of the Administration.

Abstract During World War II the United States Office of Education authorized many of our leading universities to conduct intensive courses in connection with the Engineering, Science, and Management War Training Program. Air Transportation Management was one of the selected subjects. The students eligible to take this course were, for the most part, employees of various airlines who were selected by university registrars as most likely to benefit from a course of this type. Through this undertaking, our government endeavored to promote the usefulness of airline employees at a time when the airlines were handling numerous war contracts. Air transportation is carried out today through the operation of approximately fifteen major airlines. Yet this type of transportation is relatively small in comparison with transportation by land, or water. Airlines are subject to a greater degree of control than most private business corporations. The control lodged in the Civil Aeronautics Board over air carriers is similar in many respects to tile control vested in the Interstate Commerce Commission over railroads and other common carriers by land.