Knowledge that Transforms

Standard costs are used for the purposes of control, payment of premiums and measurement of efficiency; but the costs which go into the cost sheets and profit and loss statements are so-called actual costs. The elemental standards, as the name implies, are set for each item of variable expense and do not sum up to a standard amount of money, pre-determined, for a unit of production for the department. In using the elemental standards, the standard expense dollars and standard cost per unit are shown alongside the actual expense dollars and actual cost per unit for each item on the cost sheet. The departmental efficiency is computed by dividing standard cost per unit by actual cost per unit, which reflects the superintendent's effective use of time, labor, machinery and materials. Current or average inventory prices are used for computing the average cost of materials on both standard and actual side of the cost sheet, so that the effect of variation in price is removed in comparing efficiency. Each month the general budget is compared with the actual profit and loss statement in a report to the management and the variation between actual and budget is analyzed for the company as a whole in the same manner as each plant has analyzed its own variation.

Income is the economic benefit coming in during a period of time. It consists of current income and of capital gains and losses. The general accounting habit of regarding income as though it were synonymous with realized income, although of some usefulness in practical affairs because it tends to substitute fact for fancy, should be more dearly recognized as both illogical and generally causative of the compilation of false information. All the income--realized, unrealized, and the total thereof--coming into existence during a period should be credited to that period, but the realized should continue to be separated from the unrealized.

Governmental Accounting is that type which deals with the recording and reporting of transactions for political units, such as municipalities, states and the federal government. The article presents recent attempts in governmental and institutional accounting. These are presented to show that there has been some practical improvement. A recent action has been the study and preparation of a system of uniform financial reports for universities and colleges. Dishonesty and inefficiency cannot exist for long when public opinion is adverse to it and when proper education shows a better and more efficient method. It is frequently held that improvements in all governmental procedures, including accounting, are retarded through the fact that elected officers have a short term of office and therefore, are not interested in exerting themselves for the betterment of procedures. The whole subject of governmental accounting is based upon the transactions of governmental and institutional units and their proper segregation into funds.

Reviews the book "Analyzing Our Industries," by C.E. Fraser and G.F. Dorlot.

This article discusses the basic concepts of depreciation. The fundamental facts of depreciation-- the exhaustion of capital investment due to the physical or functional exhaustion of service capacity and the necessity of recovering capital investment before any profit on a venture could be claimed-have not always been understood by those individuals who regularly engaged in business undertakings. The book "The Elements of Book-keeping," by P. Kelly, published in year 1838, illustrates the inventory method of balancing the fixed asset. The 13th Annual Report of the Boston & Providence Railroad Corporation, describes a tardy recognition of accumulated depreciation, the depreciation from January 1, 1834 to December 31, 1844 being recorded in 1844. During the period, 1849-1867, a considerable amount of experimentation with methods of presenting depreciation data was evident. In the annual report of 1853, figures were inserted in the section headed "Estimated Depreciation beyond the Renewals' and deducted from surplus.

Reviews the book "Accounting Manual for Small Cities," by Carl H. Chatters.

Reviews the book "American Business Leaders," by F.W. Taussig and C.S. Joslyn.

Reviews the book "Credit Policies of the Federal Reserve System," by Charles O. Hardy.

Reviews the book "New York C.P.A. Law Questions With Answers," by A. Lincoln Lavine.

Reviews the book "Foreign Exchange," by A.C. Whitaker.