Knowledge that Transforms

Abstract In connection with its continuing study of the concrete meaning of "business entity," the Committee on Concepts and Standards of the American Accounting Association has selected the area of consolidated financial statements as one of importance. The basic principles of consolidated financial statements include that firstly, in the absence of special circumstances, consolidated statements are useful representations of financial position and results of operations when a dominant central financial interest in two or more companies exists and is accompanied by administrative control of their activities and resources. Secondly, in so far as practicable, the consolidated data should reflect the underlying assumption that they represent the operations, resources, and equities of a single entity. The first principle is a statement of policy, of objective, defining broadly the entity or area of consolidation, the second principle sets forth a general guide to the procedures of consolidation.

Abstract The late 1880's, in the U.S., represented a period of undoubted development and advancement in accountancy both in better knowledge of the profession and its requirements. Another trend that tended to further the development of the profession was the incorporation of industrial concerns under the laws of the various states. The securities of these corporations were issued and offered to the investing public. In many of these corporations, public accounting firms were employed to make examinations and reports on the financial condition and earnings of these corporations before their securities were offered for public subscription. The first industrial firm so incorporated whose securities were offered to the public with an accountant's certificate attached to the prospectus was the firm of John B. Stetson and Co. of Philadelphia, Pennsylvania. By 1909, the accountancy profession had gained such favor among businessmen that corporations of the better class were of their own volition adopting the practice which had become obligatory in England under the Companies Act of 1900, of retaining public accountants to make periodic audits.

Reviews the book "Internal Auditing," by W.W. Bigg and J.O. Davies.

Abstract The article presents the problems prepared by the Board of Examiners of the American Institute of Accountants that were presented as the second half of the certified public accountant examination in accounting practice of November 4, 1954. The first problem of the examination presents a case in which books are kept on a cash basis. An apartment house purchased for $75,000 in June 1937, was sold on February 28, 1954 for $135,000. On account books, the accumulated depreciation to the date of the sale was $32,500. The escrow statements applicable to the buyer and the seller are shown in the article. The student is required to Prepare a journal entry to record the transaction on the seller's accounts books, prepare a journal entry to record the purchase on buyer's books, and prepare a schedule showing the gain to be reported by seller for federal income tax purposes. Multiple-choice questions are also provided in the examination. The students are required to select one correct answer for each question and to indicate their choice by placing an X in the appropriate space on the printed answer sheet.

Abstract Accountants often use the horizontal form of working trial balance. Their choice of this form is frequently due to the limitations they find when using the adjustment columns of the conventional form of the work sheet. Very few textbooks on accounting or manuals on working papers have properly set forth the use of the adjustment columns of the conventional working trial balance, that accountants have been reluctant to use the latter form when its use would be advantageous. Textbook illustrations of the entries in the adjustment columns of the conventional working trial balance usually show a few routine items which are of a very simple nature. As every accountant knows, some accounts may require half a dozen or more adjustments. It is because accountants are following an abbreviated procedure for the proper use of the adjustment columns of the conventional working trial balance that difficulties arise. To save time, the plan can be modified somewhat. The accountant can post the first and succeeding entries for account directly to the "T" account sheet.

Reviews the book "Realistic Depreciation Policy," by George Terborgh.

Reviews the book "Corporation Accounting," by Homer St. Clair Pace and Edward J. Koestler.

Abstract The Commission on Standards of Education and Experience for Certified Public Accountants (CPAs) was organized in 1952. The commission is independent of the American Institute of Accountants or any other one body. Its membership includes professors of accounting, deans of university schools of business administration, practicing CPA's and members of state boards of accountancy. The commission hopes to set goals which the state boards and schools might strive to approach over a reasonable term of years, together with suggestions for interim procedures which may be practical to follow in approaching what it is hoped may be accepted as longer-range objectives. Since the commission is concerned primarily with uniformity of standards, the CPA examination which has now been adopted by all jurisdictions in the U.S. may be said to be a subject of secondary importance to the commission. Any improvement or standardization of educational or experience training for the profession, however, is bound to lead to some consideration of the level and content of the written examinations.

Abstract Cost accountant and industrial engineer, both professions work side by side, gathering and analyzing manufacturing cost data. The disinterest of the cost accountant in the work of his engineering colleague is not at all reciprocated by the latter. The reason is that the curricula of industrial engineering schools include study of the principles of both general and cost accounting, so that the engineering graduate is fairly well versed in costing principles from every angle. As a rule, the services of the cost accountant are properly considered indispensable in the keeping of records, distribution of overhead, allocation of costs to jobs or processes, and so on, and the smaller manufacturer is more likely to have on his payroll a cost accountant than an industrial engineer. Under the circumstances, the accountant who is not familiar with atleast the principal procedures of the time-study analyst may find he has become a sort of glorified clerk, unable to furnish his employer vital cost data.

Reviews the book "Rikshuvudboken dv dr 1623," by Per V.A. Hanner.