Knowledge that Transforms

Problems of corporate distributions to shareholders furnish the most fertile field for the study of relations between accounting and law. The paper represents an effort to explore some of these relations rather than to discuss for their own sake the accounting treatment of corporate distributions. No attempt is made to develop the subject comprehensively or systematically. Problems dealt with have been chosen because they afford the best illustrations of the evolution of corporate accounting principles and their influence on corporate financial practice. Much confusion in corporation law and accounting has resulted from an authority frequently granted to corporations issuing no par shares to allocate part of the consideration to paid-in surplus. These statutes have handicapped accountants in their efforts to develop and enforce standards of disclosure as to shareholders' investment and undistributed earnings. Until recently, furthermore, accountants have not generally been astute in marking out their own field of influence in the face of these liberal corporation laws.

Reviews the book "Stock Brokerage Accounting," by Charles H. Langer.

Reviews the book "Auditing," by William H. Bell and Ralph S. Johns

The article focuses on the asset approach to elementary accounting. The paper is an attempt at an evaluation of this method in contrast to the usual modes of development in the early stage of presenting an introduction to accounting. The asset approach was planned, at first, to meet the more general needs of the student in the liberal-arts college. It is of equal merit for the business-administration student and for the student interested in accounting as a profession. Needless to say, the use of this departure from the usual approaches has made teachers conscious of weaknesses in the plan that had been followed and has convinced them of certain very definite gains accomplished. Accountants in public practice are recognizing the significance of the economic characteristics of assets in their influence on costs and are adjusting their procedures to the demands of such an emphasis. The natural starting point for the asset approach is not a condensed balance sheet stated in the form of a mathematical equation, but a study of the assets used by business enterprises in the conduct of their affairs.

Reviews the book "The Business Corporation," by Edward S. Mead, David B. Jeremiah and William E. Warrington.

The article focuses on determining the current financial position of a city. Most of the expenditures of a municipality are inevitable and must be met. A city could not do without police and fire protection, sanitary and health service, relief, etc., even for a short time. It is also essential either to make cash provision through sinking funds for meeting long-term debt, or to retire serial bonds. These expenditures and provisions are just as much a demand upon current resources as are current liabilities. On the other hand, the listed current resources are not the only means of satisfying these demands. Some incomes, such as tax levies, fines, etc., are certain to bring cash into the treasury in the immediate future. They are a logical offset to current expenditure requirements and current liabilities. It is proposed, then, to regard the financial condition of a city as referring chiefly to its ability to meet all current requirements in the form of expenses, current liabilities, and provisions for meeting long-term indebtedness. Current financial position will be regarded as the ability of the city to meet its financial requirements in the immediate future. Particular emphasis should be placed upon the next year inasmuch as requirements are customarily determined for a period of a year.

Reviews the book "Money and Banking," by B. Foster and Raymond Rodgers.

In March of 1940 a stop order was issued by the U.S. Securities and Exchange Commission, suspending the registration statement filed by The Republic Co., an investment trust. The circumstances leading to the issuance of the stop order are of sufficient general interest to warrant an examination of the case. The registrant incorporated on June 21, 1926, in Colorado, under the name of "Protected Bond and Investment Company," with an authorized capital stock of 50,000 no-par assessable shares. It was organized for the purposes of purchasing, improving and dealing in real estate, and functioning as an investment trust. Between 1927 and 1931 the articles of incorporation were amended several times. As a result, the capital structure became much more complicated, and the name of "Republic Company" was adopted. An amendment of September 30, 1931, authorized the issuance of preferred stock at lower dividend rates. The objectives of the new offerings, to reduce the potential cash drain from surrender of savings certificates, and to reduce the dividend rate on preferred stock, were thereby attained.

Reviews the book "The Output of Manufacturing Industries, 1899-1937," by Solomon Fabricant.

Reviews the book "Internal Auditing," by Victor Z. Brink.