Knowledge that Transforms

Abstract It is believed that one of the major postwar industrial developments will be the consideration of the subject of overhead as it applies to government contracts. Many types of contracts are being written today to meet the varying conditions of procurement of materials. The principal types which are being negotiated are (1) fixed price agreements, (2) contracts whereby the price is re-determined at some stage of completion or delivery, (3) contracts which provide for reimbursement of all allowable costs, (4) cost plus-a-fixed-fee contracts which are similar to cost reimbursement contracts except that they also provide for a fixed fee, and (5) time and material contracts. The legal and accounting requirements of each type of contract differ. Of the three elements of cost to be reimbursed, the most difficult of application to contracts is usually overhead. There is no rigid formula or set procedure for preparing reports covering overhead studies. The auditor's findings should always be written in clear and concise language and with an orderly presentation of significant information. The scope of the report should include the following: origin of the study, a summary of findings, the scope of the examination, details of the auditor's findings, recommendations and conclusions, and such pertinent exhibits and schedules as may be necessary in each instance.

Abstract The article presents an educational experiment in cost accounting. Introducing the college student to cost accounting is a difficult task, especially as most undergraduate schools of business allot only one semester to this technical phase of accounting. Even those students who successfully complete one semester of this technical subject derive only a shallow and mathematically abstract concept of the field. In an endeavor to blend theory and practice, the author has been conducting an experiment which is now going through its second year in operation. a two-semester course has been instituted commencing with the Fall semester, involving two 2-hour class periods per week. The high spot in the first semester centers upon the case Study the student makes of an individual firm. To prevent duplication and the possibility of annoyance of business executives, the instructor must approve the student's selection before any actual contact is made. Although the exact form of the written report depends upon the student's literary style and ingenuity.

Abstract Reviews the book "Problem Manual in Corporation Finance," by Paul M. Van Arsdell.

Abstract Reviews the book "Taxable and Business Income," by Dan Throop Smith and J. Keith Butters.

Abstract The Harvard Business School and the case method are so commonly associated, that anyone teaching at Harvard should be considered, per se, an expert in the case methods, according to the author. In this article the author describes various aspects of teaching of accounting by the use of case methods. Most proponents of the case method refer to its complete opposite as the lecture method, in which the instructor occupies the center of the stage and sets forth his views as if from on high. The case method of teaching, of course, uses a case as its teaching vehicle and a case has been defined as a written exposition of one or more business problems. Case method teaching techniques do vary widely from the lecturer to the devotee of the non-directional method who acts mainly as a moderator never expressing an opinion. These techniques vary due to the differing personalities and abilities of the instructor as well as with differing course objectives and data. Probably all forms of teaching have as their objectives the imparting of a fund of knowledge and a development of the personal skills and abilities of students to utilize this fund of knowledge.

Abstract This article presents several considerations which suggest the need for more emphasis on the qualitative factor in grading examinations: (1) The speed and accuracy with which students work vary over a wide range. A large group of students, for example, was required to foot, crossfoot, and prove several columns of figures. One man finished in nine minutes while about one fourth of the group was unable to complete the work correctly in two hours. In the face of such variation there is no such thing as an "hour test." (2) The nervous tension, or in a few cases panic, with which students approach formal examinations, particularly in accounting, impairs the validity of the results. These tensions are due largely to the knowledge that a prescribed task must be completed within rigid time limits and that a small error in arithmetic or interpretation can be disastrous. (3) It is better for the morale of both teacher and student to have part of an examination well done than to have the whole examination poorly done even though accumulated point values are the same. (4) A student who knows he does not know the answer to a question deserves more credit than one who thinks he knows but does not.

Abstract Reviews the book "Intermediate Accounting," by Joseph A. Mauriello.

Abstract Accounting teachers can easily be so concerned to help their students grasp technicalities that they may miss the opportunity to drop suggestions now and then regarding the social service rendered by modern accounting. Business activities are such a prominent part of modern life that an elementary understanding of business, such as can be obtained through even a little study of accounting, can prepare the individual to be a more comprehending citizen. For example, business enterprises generate a very large amount of government revenue. Some understanding of enterprise accounting therefore provides some understanding of one of the bases on which modern government stands-government services paid for by revenue derived from business profits. Accounting not only gives us a glimpse of business as a generator of tax revenue but it helps us to realize that business, in one way or another, "is the paymaster of us all." Out of business activities comes wages of workers, wages of capital, wages of management. Business-by division of labor, by use of machine power, by developing mass distribution of products has created vast areas of employment for men and capital.

Abstract Reviews the book "Essentials of Accounting," by William A. Paton.

Abstract The Air Force has been auditing procurement and supply contracts since 1926. In practice, a wide variety of audit work is performed but the major part of procurement auditing affects two general types of contracts-those of a cost-reimbursement nature and those of a fixed-price nature with price redetermination provisions. It is generally agreed that it is appropriate for the Air Force to verify the validity and propriety of claims for reimbursement submitted by contractors under cost- reimbursement type contracts. Obviously, it is impossible for auditors to perform a detailed audit of all transactions relating to the average Air Force contract, therefore, recognized selective audit methods are utilized to the fullest extent practicable. Certain basic factors which auditors are required to consider are: (1) adequacy and reliability of the contractor's accounting system and related internal controls, (2) previous experience with the particular contractor on Government contracts, and (3) the volume of cost to be audited, i.e., the amount of the claim or the amount of the cost statement in relation to the effort and time to be expended on the audit and in relation to the contractor's other business.