Knowledge that Transforms

Reviews the book "A Reconstruction of Economics," by Kenneth E. Boulding.

This article analysis a questionnaire sent to 1000 alumni of the University of Illinois, College of Commerce. The question as presented to the alumni on this topic was adopted from one of similar type and purpose drafted by the American Council on Education in a survey it made several years ago on Business Education at the Collegiate Level. Of the 1000 questionnaires sent out 471 complete replies were received and 40 were returned because of unsatisfactory addresses. Of the 471 replies received 424 or 90% listed principles of accountancy, 394 or 84% listed written English, and 391 or 83% listed principles of economics as of primary importance. Another substantiation of the point of view of the alumni relative to the first five subjects in importance is the fact that they were also the ones recognized as the most indispensable. Not even one of the 471 respondents marked principles of accountancy or business law as of doubtful or no value and only one each marked principles of economics, written English and oral English in that category.

A course of the seminar type in accounting theory is needed for graduate students in accounting because (1) sound theory is the basis for good practice, and (2) there is a lack of emphasis on theory in most of our curricula. Students in related fields need a means of achieving an understanding of the basic philosophy of accounting without taking numerous courses stressing techniques. The course should be outlined from the developmental or history of accounting theory point of view. It should cover the following major topics: (1) early history: (2) economics and accounting; (3) fundamental accounting concepts; (4) statements of principles; (5) accounting and the price level; (6) accounting for individual balance sheet items and theft relationship to income determination; (7) financial statement content and structure. Certain topics not otherwise covered could be presented in the form of oral reports if time permits. Materials for reading assignments will be drawn mainly from the volumes of Tim: ACCOUNTING REVIEW and The Journal of Accountancy, plus certain other periodicals, monographs, books, and pamphlets. The course should be conducted as a seminar, employing the discussion method and without extensive written reports. Examinations may need to be given only where the size of the seminar makes student evaluation by other means difficult.

Reviews the book Reviews three books about business cycle. "New Facts on Business Cycles," by Arthur F. Burns; "Statistical Indicators of Cyclical Revivals and Recessions," by Geoffrey H. Moore and "Cyclical Diversities in the Fortunes of Industrial Corporations," by Thor Hultgren.

The article focuses on recommendations presented by the American Accounting Association's Committee on Concepts and Standards, regarding the use of term "reserve" in accounting. The committee recommended that the term reserve should not be employed in published financial statements of business corporations, appropriations of retained income should not be made or displayed in such a manner as to create misleading inferences, and the reserve section in corporate balance sheets should be eliminated and its elements exhibited as deduction-from-asset, or liability, or retained income amounts. In general usage, outside of accounting, a reserve is a fund of cash or other assets. In accounting the term has been used to caption a variety of balance sheet items including segregated retained income, segregated asset, asset valuation and asset amortization amounts, and liabilities. It has been recommended that the word reserve be restricted to captions describing appropriated retained income. The committee believes that the popular understanding of financial statements, and the thinking of the profession, would be promoted by abandoning the term.

The purposes of cost accounting has been stated as to assist in the minimization of costs of performance within the business unit, to provide information basic to the determination of net income and financial position, and to aid in the solution of specialized problems of business management. The article analyses the last two of the stated purpose, which have been the criteria for a long and vigorous debate on the method and extent to which costs should be classified by products in the accounts. If these costs are classified by product, should the allocations be at each stage in the process of production with reciprocal and multi-step distributions of service department costs and with different distribution bases for each type of cost, or should less elaborate methods be used? At one time it was considered adequate for control objectives to establish and incorporate in the system standard product costs. A product cannot be persuaded to explain its variance, instructed to take corrective action, or fired and replaced by a product that would meet standards. For control the accounting system must provide costs classified by organization.

Reviews the book "Cotton Textile Costs," 2nd ed.

This article presents problems that were prepared by the Board of Examiners of the American Institute of Accountants, and were presented as the first half of the May 1951 Certified Public Accountants Examination in accounting practice. Time limit set for the examination was four hours. Questions were provided unequal weightage. Candidates are required to solve all the problems provided in the examination. Question provided in this examination fall under four categories. In the first category, the examinee is asked to calculate the book amount of inventory destroyed by fire in a wholesale firm. The candidate is also asked to assess the amount due from insurers of the company in settlement of the total loss of assets, by estimating the book value of furniture and fixtures. Another problem requires the candidate to estimate the bonus for workers based on their production records. There is another problem asking the candidate to prepare cost allocation and prospective profit for a particular product fully manufactured by a particular firm, based on some financial information.

This article focuses on the orientation and visual aids in the teaching of auditing. Involved more with practical application than with pure theory, courses in auditing from the beginning have been permitted into university curricula somewhat grudgingly and on restricted basis. Traditionally, such courses have been cramped and limited in scope, and relatively seldom have they been able to burst original bounds. To compound this difficulty on the other hand, subject content and legal responsibilities facing the practicing auditor have been on a constant expansive march resulting from new and developing problems and procedures, and from findings and promulgations of the American Institute of Accountants, the Securities and Exchange Commission, the Courts Orientation, not peculiar to the subject matter of auditing alone, may be used to advantage in teaching any subject consisting of a large, intact system or pattern. It is the sound pedagogical approach of moving from the general to the particular. Such technique finds reflection in the financial statement approach employed so commonly in textbooks on elementary accounting.

Reviews the book "Principles of Engineering Economy," by 3rd ed., by Eugene L. Grant.