Knowledge that Transforms

Reviews the book "Social Security and Pay-Roll Tax Accounting," by J.F. Sherwood and John A. Pendery.

Accountants have often marveled at the misunderstanding of generally accepted accounting procedure and concepts, which the courts have in the past exhibited. Many decisions not only show misunderstanding but also indicate a failure on the part of the courts to attempt to ascertain the meaning of accounting terminology, which their decisions employ. It is unfortunate therefore to find a court in a recent tax decision turning for guidance to "correct accounting" as set forth in theory and practice only to find lack of agreement on the part of accountants as to theory and even greater disparity between theory and practice. It is only fair to state that the court found a similar lack of agreement on the question in the court decisions it examined. The "sale" of treasury shares can never result in "gain or loss." The question of "gain or loss" arises solely at the time of "purchase," not at the time of "sale." The account "treasury shares," carried on the books when stated capital has not been reduced as provided by law, represents an unallocated reduction and adjustment of shareholders' equities. If the treasury shares are later disposed of, the entire amount received from the new shareholder, should be recorded as any issue of stock, the par or stated value being credited to "Capital Stock" and the difference, if any being adjusted through surplus.

In England the emergence of the limited-liability company as the dominating force in economic life and indeed in public-accounting practice constitutes one of the major business phenomena of modern times. English auditing procedures are fundamentally the concern of practitioners themselves rather than of the law. Minimum requirements for the balance sheet are stated in the Companies Act 1929 and on file at Somerset House is a minimum amount of information in regard to all registered companies, which the public may utilize. English shareholders as a general rule receive more information than that filed at Somerset House. As auditors owe their primary duty to shareholders they are striving to arrive at a formulation of principles underlying the preparation of profit-and-loss accounts, and the accounts and statements of holding companies and their subsidiaries, since the law gives little definition of the principles to apply to these cases. If the profession can lay the groundwork in such matters the law can later embody these principles in amendments to existing legislation, if such a course in the view of all circumstances appears advisable. The English accounting profession endeavors to uphold higher standards than those set by the present laws in order that its protection of the rights of shareholders may be complete and effective.

Reviews the book "North Pacific Fisheries, With Special Reference to Alaska Salmon," by Homer E. Gregory and Kathleen Barnes.

Reviews the book "Time and Labor Saving Ideas in Accounting Procedures," edited by P.S. Seidman.

The article presents accounting case of Gimbel Brothers Inc. Recent financial statements of Gimbel Brothers Inc. disclose several features of interest, which may be discussed under the three general headings of appreciation of fixed assets, handling of earnings of subsidiaries and a group of miscellaneous items of significance, several of them characteristic of a large retail merchandising establishment. The business of Gimbel Brothers, Inc. had its inception in Vincennes, Indiana, in 1842, but the present parent company was not incorporated until August 22, 1922, in the State of New York. The business is primarily of department-store character, including selling of a complete line of wearing apparel, dry goods, and house furnishings in conjunction with the operation of a number of restaurants and other service departments. Books of the corporation reflect two appraisals, both dating back to the early twenties. Immediately after incorporation in 1922, Gimbel Brothers Inc. acquired the net assets of two predecessor corporations and two subsidiary companies.

The article discusses several issues related to the training for the controllership. The approach has been that any discussion of training for controllership must start with a definition of objectives and a division of the problem into sections. Economists have been concerned here with training for the administrative, policy-making responsibilities of the controller and his immediate assistants. Various methods of training have been recognized but a combination of formal academic work with an organized apprenticeship program has been accepted as the most promising. To apprenticeship has been left the task of developing facility and judgment in meeting particular situations. Upon the academic program has been placed the burden of developing depth of analytical thinking, breadth of background, and the proper point of view. For these reasons the emphasis in the academic work has been upon analysis and breadth. The impossibility of including all desirable topics in the curriculum was accepted and a program was developed which was divided into three parts, covering, (1) technical subjects, (2) general business courses, and (3) background work in economics and related subjects. The desirability of undertaking the program as graduate study was advanced.

Reviews the book "Mathematics of Accounting and Finance," by C.H. Langer and T.B. Gill.

The article focuses on accounting for appraisals. If accounting records have been properly established and maintained on the basis of original cost, appraisal values should not as a general rule be used for operating purposes. Any basis other than original cost reflects a condition of values at a particular time and subsequent price fluctuations might so alter the revaluation amounts that they would no more depict the present values at some future time than would the original cost figures. During periods of economic stress, many organizations are forced by conditions beyond their control to alter the principle in order to decrease their operating costs. Write-downs are necessary to account for price changes, extraordinary obsolescence and non-utility or abandonment of the property. Appraisals are made and adjustments accounting for the replacement values are recorded on books with the thought that the price level, at the time books are adjusted, will remain about the same for a long period of time.

The accounting system of the national government is similar in many respects to the systems maintained by various state and municipal governments. One of the primary functions of accounting is to present clearly and promptly all the facts that are essential and necessary to good judgment and efficient administrative action. Municipal accounting is comparable in many ways to commercial accounting, yet the terminology is frequently different, and it is for this reason that municipal and governmental accounting seems rather difficult to the accountant who has not specialized in one of these technical fields. It can be said that Federal accounting presents no more difficulties than commercial accounting. According to the author, the budgetary accounts are separate and distinct from the accounts known as proprietary accounts. Budgetary accounts being in the nature of controlling accounts, whereas proprietary accounts disclose detailed information relative to assets, liabilities, revenues, and expenditures.