Knowledge that Transforms

The purpose of this article is to review some of the accounting principles effecting the equitable distribution and allocation of costs of a public utility corporation that furnishes electric, gas and steam services within the same general area. Its rate regulation comes under the jurisdiction of a State Public Service Commission, as all of its revenues and costs arise from within the borders of the state. In order to establish fair and reasonable rates for both utility and consumer alike, accounting principles pertaining to the distribution of costs must also be fair and reasonable. Total revenues in the long run must cover total costs. Costs must be matched against the revenues of the company for a particular period of time, usually on a monthly, quarterly or annual basis. The aim of the utility is to furnish service to its customers in the most efficient and economical manner possible and at the same time to earn a fair rate of return on its capital investment. Considerable judgment and care must be employed to choose the proper data and to select the best method of allocation in order to justify a cost distribution which will meet the standard of being fair and reasonable.

The article focuses on a study of the accounting graduates of five selected Albama schools of higher education from 1946 to 1955. The purpose of the study was to obtain occupational data and opinions relative to their training from graduates who have majored or concentrated in accounting. Those accounting majors who graduated during the ten years 1946 to 1955 from the 5 institutions of higher education have been included in the study. Questionnaires were mailed to 1,152 accounting majors, all those whose addresses were known. The data collected are grouped into personal data, occupational data, non-occupational activities, opinions and comments by respondents. The characteristics of the entire group of respondents are discussed as well as the differences within the group. Roughly three-fourths respondents were from Alabama high schools. Approximately three-fourths of the respondents were first employed after graduation in accounting positions and, at the time the questionnaire was completed, about the same numbers of them were still employed in accounting positions, or jobs closely associated therewith.

This article focuses on the qualifications for accounting students to meet the needs of business firms. Since the future of men and business is dependent upon the requirements of the university, it would seem natural that businessmen should be able to voice their opinion as to how they would like an accountant to be educated. Up to the present time the presentation of these opinions from the future employers of accountants has been heard only indirectly through informal talks with those who direct the affairs of college life. Since the grade-point average receives the most consideration in employing an accountant, then the next step was to allow the businessmen to state the minimum acceptable grade. The question was followed by a listing of letter grades and the participants were required to circle one of them. It is felt by the profession that an internship should come after most of the formal educational process has been completed to be the most beneficial to the student and to the firm which may provide the training.

Reviews the book "Manual for Parish Treasurers," by George Gibbs.

The procedures and methods of professional accountants embrace a multitude of alternative courses of action. Many of these are predicated on considerations other than conformance to accepted theory. Accountants in their efforts to frame a useful definition of materiality have produced many illustrative applications and proposed criteria for measurement but have suggested little in specific identification or delimitation of the concept itself. The central theme of most of these gives emphasis to relative importance or relative magnitude, dependent in large measure on individual value judgments. The interdependence of accounting education and professional practice is conceded and the benefits which accrue to each are compounded by their mutual indebtedness. Formal accounting education may be regarded as an interim experience of comparative short duration which introduces a more lengthy professional work experience. The accounting teacher is encouraged to weigh carefully the collateral effects of its emphasis and to give appropriate recognition also to the importance of precision as a valuable mental discipline.

Reviews the book "Introduction to Law and Law of Contracts, Unit I," by William R. White.

A corporation's taxable income is seldom the same as its reported income before taxes. The calculation of taxable income is only a step in the calculation of a tax assessment and the assessment of taxes involves political, economic, and administrative considerations, which are not relevant to the calculation of income in accordance with generally accepted accounting principles. The differences that occur in any one-year can be divided into two categories, those that are permanent and those that arise from attributing revenues and expenses to some years for taxation purposes and to other years for accounting purposes, and that balance out over the entire lifetime of a business. Income is measured in accounting by first determining what the revenues for the year are and then charging against those revenues the expenses that were incurred in earning them. An economist could argue that the corporation is concerned income taxes are less of an expense than dividends, that both interest and dividends represent costs of obtaining funds with which to operate while income taxes represent a distribution of the residual profit left in the hands of the corporation, the corporation being an individual separate and distinct from its stockholders under the law.

In an attempt to promote more general familiarity with statistical approaches to testing accounts receivable, the article is designed to reduce to a minimum the statistical background necessary for an understanding of an application of statistical sampling and to substitute prepared tables for terms and formulas so that the accountant need use only basic mathematical processes. The purpose of an audit of accounts receivable or any other asset is to prove to the auditor's satisfaction the existence, ownership, valuation, accuracy of record and fairness of presentation of the account. The auditor usually witnesses the physical existence of the asset, at least on a test basis. Ownership by the client at financial statement date must also be carefully determined and valuation should be in accordance with generally accepted accounting principles consistently applied. Any inaccuracies in the records are noted, corrected if material, and brought to the attention of management which has primary responsibility for the accounting records.

Featured here are problems that were prepared by the Board of Examiners of the American Institute of Certified Public Accountants (CPA) and were presented as the first half of the CPA examination in accounting practice on May 13, 1959. Examination pattern involves the division of the whole duration of the paper among three divisions. The first division of questions involve objective type of questions aimed at measuring the skills of the examinee related to federal income taxes under the U.S. Internal Revenue Code, 1954. The second division is aimed to test the examinees skills in the maintenance of check book and cash book of a law firm whose owners have decided to dissolve their partnership. Information regarding capital investments, profits and expenditures have been provided. Another question requires the examinee to calculate inventory costs transferred from different product lines; for a company manufacturing different industrial products. Questions demanding the preparation of a balance sheet and working capital fund are also presented.

The subject of this paper is closely related to one's philosophy of education. Those who favor a curriculum which provides for breadth of outlook will differ in the means by which their objective may best be achieved, but some attention to national income accounting is merited. To provide its students with as wide a knowledge and understanding of the world they live in as is possible by the time they finish their formal education is an aim worthy of a school of business--in common with the university of which it forms a part.