Knowledge that Transforms

Reviews the book "Management and Corporations 1985," edited by Melvin Anshen and George Leland Bach.

Reviews the book "Management Organization and the Computer," edited by George P. Schultz and Thomas L. Whisler.

Abstract This article focuses on the research program of Controllers Institute Research Foundation. The Controllers Institute Research Foundation is the research arm of the Controllers Institute of America. It is natural therefore that its research program should be based on the objectives of the parent organization. Among the objectives of the Controllers Institute are the following: First, to develop a progressive concept of controllership adequate to meet the requirements of modern business, second, to educate business management and the public in understanding this concept, third, to assist the controller to give full expression to this concept in his own organization. The research policy of the Research Foundation has been reviewed by the Trustees of the Foundation and the Directors of Controllers Institute from time to time. Special reports were made in 1952 and again in 1957 making recommendations for revising the policy, program arid method of operation. One of the most important aspects of the research effort is the participation of members of the Controllers Institute in the entire program. Not only do they and their companies support it financially, but they participate in various ways. The trustees are a dedicated group giving time and thought to our plans and the studies themselves. Panels of experts from among the members make themselves available to those conducting the research.

Abstract Accounting education has burgeoned almost out of control, and it is small wonder that it has been subject to so much questioning. There is little discussion of theory either by the instructor or by the students. The "why" is subordinated to the "how." Students are not encouraged to understand, to apply their knowledge to differing situations, or to use accounting as a tool rather than as an end in itself. Instructors sometimes are lazy, or preoccupied with graduate work, or spend considerable time on outside engagements. Sometimes instructors do not take an interest in their students or their problems. They have too many students and a student tends to become a statistic or a name in the gradebook, rather than an individual human being. Many students are of average ability, but regardless of ability their attitudes toward effort and hard work are not strengthened or stimulated by the environment of the college or the accounting classroom. The author concludes that most significant problems in accounting profession do not grow out of the deficiencies as many institutions, instructors, and students are meeting these challenges. But the problems grow out of diversities.

Abstract The period cost concept divides cost data into two broad categories, firstly, "Period" costs which are those costs related to time, i.e., those costs which expire with the passage of time rather than with the volume of business activity, and secondly, "product" costs which include those costs which relate to the product being produced, i.e., those costs which are directly affected by the volume of business activity. Under the period cost concept as it relates to income measurement only variable manufacturing costs are considered inventoriable while fixed manufacturing costs as well as selling and administrative costs are period costs. In general the accounting profession does not accept for income measurement purposes the treatment of fixed manufacturing costs as period costs. Conversely the accounting profession has accepted for many years a period cost approach to the handling of selling and administrative costs. In this article the authors will show that the period cost concept is not appropriate for purposes of income measurement. It is the intention of this article to show that categorizations of cost such as period costs vs. product costs are not relevant to the process of income measurement.

Abstract This article focuses on the income taxes and income tax allocation under the entity concept. Corporate income taxes under the entity concept are commonly viewed as a distribution of income. The following statement, by a Committee of the American Accounting Association, is a representative expression of this view. If the management does nothing, other things being equal, the reported net income for subsequent years will drop, assuming the wage rate in effect in each year is the basis for computing labor cost. Income taxes, as a cost, are subject to managerial control and reduction. From management's standpoint, an effective way to reduce income taxes is through a continual program of plant modernization. So long as it follows such a program, the amount of income tax cost will he and should be low. If and when it abandons such a program, the amount of taxes will be and should be high. The amount of income taxes, in other words, is a reflection of management's effectiveness in controlling income taxes as a cost.

Abstract The Middle Atlantic Association of Colleges of Business Administration (MAACBA) has consistently maintained a deep interest in and concern for the practice of public accounting, and the preparation of students therefore. The subject of accountancy preparation has occupied a prominent place in the programs of the Association's meetings. Individual members have rendered distinguished services on boards and committees on a state, regional and national scope. During the past three years, the New York State Education Department has been conducting studies to account for the alleged high rate of failures on the Certified Professional Accountants (CPA) Examinations in this state. One of the proposals arising out of these studies has been the inclusion of a fifth year in the accounting curriculum which would lead to a graduate degree and better prepare a candidate for the CPA Examination. The MAACBA comprises forty-four members, in four states, a Federal District and a Territory, including a wide variety of schools differing in size, organization, control and prestige. Some schools offer both graduate and undergraduate programs, other schools only one program. The Association urges the continuing study of proposals designed to improve the practice of public accounting and all aspects of the preparation therefore.

Reviews the book "Investments," 7th ed., by David F.Jordan and Herbert E.Dougall.

Abstract Successful decisions are the hope of every manager. Snap decisions indicate a disregard for scientific thinking and reliance upon intuition and chance, or an unusual mental ability to simulate the problem, determine the strategic factors, and evaluate the alternatives. Historically, accounting has developed as the result of a specific need. The balance sheet model was presented to satisfy a need for financial information. Each ledger account is a model, or method, of measuring all transactions (the relevant factors) of a business which are relevant to the respective ledger account as it is specifically defined and by a method recognized as generally accepted by the accounting profession. To identify a specific ledger account as meaningful, the account must be defined in terms of the relevant business transactions which the model (ledger) will summarize, as well as the specific method or methods by which these relevant transactions will be measured. Finally, the specific ledger account must be defined as a relevant factor in the total accounting system, including its relationship to all other relevant factors of the system. Thus the accounting system itself, as we identify it, consists of a model summarizing the relationships of a large number of smaller models presumably for some specific purpose.

Abstract In selecting a measure of activity to be used in applying manufacturing burden to product, a typical cost accounting text includes a few brief remarks about direct labor hours, direct labor cost, machine hours, and units of product. The fact that machinery is the main factor in production does not necessarily mean that machine hours is a measure of activity which provides more accurate costing than does direct labor hours. Cost accounting texts, in their discussion of machine hours versus direct labor hours, frequently seem to avoid the real issues. Very often, unless the instructor amplifies the textbook statements considerably, it is likely that the student will not get a satisfactory answer to the basic question. One of the issues which has not received its fair share of attention is the general superiority for product costing purposes of rates established by machine cost centers which include only homogeneous equipment over a single rate established for a department which includes heterogeneous equipment. It has been argued that machine hours is a better basis than direct labor hours under the following conditions, the process is a relatively continuous one; and cost responsibility centers include heterogeneous equipment and burden rates are established by cost responsibility centers.