Knowledge that Transforms

The preparation of young people for careers in business has become one of the major tasks of universities and colleges in the United States during the past two or three decades, judging from the standpoint of enrolment in business colleges and schools. Yet the preoccupation of business educators with the problems of curriculum has not kept pace with the growth in enrolment nor with the expanding responsibility of collegiate schools for the preparation of potential leaders in the study and management of economic affairs in our complex society. As an institution, the university is conservative of the vital traditions of the culture as well as provocative in the critical analysis of these traditions. But in the new field of business education, too little attention has been paid to defining its place in university education; and too much reliance has been placed, on the one hand, on the liberal arts traditions, while overemphasizing, on the other, the strictly vocational preparation of students.

Reviews the book "The Economics of John Maynard Keynes," by Dudley Dillard.

The article presents comments of the author on an article by scholar Gordon W. Stead. The article by Stead is an interesting analysis of accounting ideology accompanied by a preliminary charting of idea interrelations. At the top of the chart stands integrity. It is the author's intention to show how the successive aspects of doctrine derive from this one fundamental concept, it being his view that this dependency is the direction of causation. It will be no detraction from his constructive contribution to the development of the concept of an integrated body of accounting thought to try here for a supplementary pattern one leaning toward a line of discussion he avoids when he chooses to show that rules of conduct derive from immutable principles. In this supplementary pattern it will be the view that principles may have been slowly distilled out of actions. This view would help to express the idea that accounting rules having first been fruits of tentative actions, grew in significance until they became guides to pre-determined actions. As these accounting actions grew increasingly diverse and complex, so did the attendant rules, customs, practices.

The article describes the development of the national accounts or social accounts. The article also summarizes the present economic situation in Western Europe and changes in it which the European Recovery Program is intended to bring out. The significance of social accounts can be described by indicating briefly how they developed out of the study of national income. National income is, of course, the income derived from production by all people and enterprises in the economic system, that is, total wages and salaries, rents, interest and profits. From the earliest days of its measurement, national income has been regarded not merely as a measure of income but also as a measure of the economic system's total output. However, the exact relationship between income and output was clearly seen only when it was realized that national income measurement is best thought of as double entry bookkeeping, involving the consolidation of the operating accounts of all productive enterprises in the economic system, including government. Those parts of the consolidated operating account which are pertinent for purposes of national income measurement are revenue from sales and the disposition of revenue from sales.

The accounting concept of income as the residual of the matching of costs and revenue is one, which appears on the surface to be rather innocuous. Its application, however, is known to be a difficult but also a delusive task. The accountant not only must decide which basis of revenue recognition is appropriate for a given situation and which costs have expired and are to be matched with this batch of revenue, but he must express this matching process in terms of money. Today accountants need only turn to their daily newspapers for a constant reminder that the dollar as a measuring device is not a stable unit. It is the purpose of this article to demonstrate that this limitation of the accountant's measurement of income adds to the confusion that persists in the measurement and administration of income. The almost daily statements in the press to the effect that the matching of historical costs against current revenue does not provide for the replacement of assets are indeed a truism. Certainly the accountant's measurement of income and management's use of the funds provided by revenue are truly independent activities.

Semi-variable expenses cannot be used for budgeting, cost analysis and cost control in their composite form. For these purposes, they have to be broken down into their fixed and variable components. Some of them, as factory supervision for instance, can be analyzed without difficulties from payroll records or from experience, while others are more or less resistant to the ordinary analytical approach. The practice of estimating the size of the fixed and variable parts can yield only approximations and is open to considerable errors. The best and easiest approach is the algebraic method of segregation. It yields much more accurate results than estimating without being more difficult in its application. Heretofore, the method has been used mainly for overall analyses of annual or monthly cost and budget figures with the aid of a formula which discloses the aggregate of the variable components of a given sales cost relationship. The formula is excellent and can, with two supplementary formulas, be applied for the segregation of the fixed and variable parts in every semi-variable expense category.

Reviews the book " Money and Banking ," by Jay L. O'Hara.

Reviews the book "Montgomery's Federal Taxes-Corporations and Partnerships 1947-48," by Robert H. Montgomery, Conrad B. Taylor and Mark E. Richardson.

Reviews the book "How Tax Laws Make Giving to Charity Easy," by J.K. Lasser.

Distinction between auditing standards and auditing procedures is one that has not been at all clear in minds of many who have used the term. Unfortunately, some accountants have not even been aware that there is any distinction. However, this is not too surprising, it was not until February, 1941 that the word auditing standards became a recognized part of the accountant's language. At that time the short form of accountant's report or certificate recommended by the Committee on Auditing Procedure of the American Institute of Accountants was amended to include the sentence "our examination was made in accordance with generally accepted auditing standards applicable in circumstances and included all procedures which we considered necessary." This amendment to the wording of the report was made to meet the U.S. Securities and Exchange Commission's amendment 3 to its Regulation S-X which, among other things, required the auditor to state whether the audit was made in accordance with generally accepted auditing standards applicable in circumstances and whether the audit made omitted any procedure deemed necessary by the accountant under circumstances of the particular case.