Knowledge that Transforms

Abstract Reviews the book "Elementary Accounting," by George Hillis NewIove, Leo Cecil Haynes, and John Arch White.

Abstract Reviews the book "Specialized Accounting Systems," by H. Heaton Baily.

Abstract The article presents information about the execution of the Federal Budget of the United States. There are three phases in the development of the budget. (1) The Budget Document is the most comprehensive expression of the work of the U.S. Bureau of the Budget. It is based on the Budget and Accounting Act of 1921 that introduced the executive budget into the system of Federal finances. The Act was a long step forward in bringing order out of chaos. (2) A new landmark in the development of the Budget was the Reorganization Act of 1939, which placed the Bureau of the Budget in the Executive Office of U.S. President. (3) Through the reorganization, the emphasis of the work in the Bureau of the Budget has been shifted from the watchdog function into an instrument of management. The new procedures developed in the present emergency period promise to become a regular instrument of national policy in the future. The U.S. Congress may appropriate for what has been called "developmental programs" extending though a period of years, but leaving the timing of actual expenditures to the Executive, within the framework of the law.

Abstract The subject of theory and practice in accounting is usually conceived as one of theory versus practice, thereby implying conflict rather than cooperation. It is a subject about which many misconceptions exist in the minds of those who have given no serious thought to the very close correlation between the two. It is probably not very far from the truth to assert that these misconceptions have arisen because of a failure to distinguish between the ability to accomplish a desired result and the scientific principles and rules of procedure in accordance with which the work must proceed if the desired result is to be obtained. there never can be any conflict. The theoretical aspect of accounting is that which views it as a science, albeit not an exact science (because of the human element) and the theories of accounting are nothing but principles expressing the result of the scientific analysis of the significance of the financial condition or the operating results of a business enterprise and of the methods needed in order that they may be properly expressed and interpreted. The practical aspect of accounting is that which views it as an art, viz., the practical application of the theories of accounting to the solution of the problems of business.

Abstract The purpose of this article is to analyze the weight assigned to accrued depreciation by the Pennsylvania Commission in ascertaining the rate base, and the methods used in determining the amount of accrued depreciation. The Pennsylvania Commission's statement made in 1935, in a case where it determined annual depreciation allowance by the sinking-fund method, that "It is a well established rule as shown by the decisions of the United States Supreme Court, that accrued depreciation must be deducted from a reproduction cost estimate" indicated that the Commission's policy with respect to accrued depreciation where the sinking fund method of accruals was used was founded on the rule of the United States Supreme Court rather than upon a consideration of the economic aspects of the case. In the few cases where the original cost figure was accepted by the Commission as the fair value no deduction was made for accrued depreciation. Numerous cases can be cited which hold that accrued depreciation should be deducted from actual or original cost.

Abstract This article gives a definition of "security." The term security means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or mineral rights, or in general any interest or instrument commonly known as a security, or any certificate of interest or participation in, temporary or interim certificate for, receipt of, guarantee of, warrant or right to subscribe to or purchase, any of the foregoing. Among the more common instruments which have been held to be securities are certificates in a trust estate. Such certificates, though legally very different from corporate stock, are in practical effect very similar to shares of stock. If the stockholders of a corporation permit of a voluntary assessment on their stock, the receipts for money paid may be considered as securities. Similarly, a corporation which before maturity date of its outstanding convertible certificates offered the certificate holders new certificates with a new maturity date, was held to have issued new securities.

Abstract Reviews the book "Corporate Dividends," by Donald Kehl.

Abstract Reviews the book "Commercial Credit and Collection Practice," by Watrous H. Irons.

Abstract The article presents some problems that were presented by the Board of Examiners of the American Institute of Accountants as the second half of the May, 1942 Certified Public Accountants Examination in accounting theory and practice. In one of the question, examinees were asked to prepare a columnar work sheet summarizing the foregoing data in rational manner and form. They were also asked to prepare a concise statement showing the realization of assets, liquidation of liabilities and operations during the receivership; also unsecured creditors' claims and available assets on November 20, 1941. In another question a transcript of "Insurance account" and "note" covering unrecorded liability was given for the period starting from July 2, 1940 and ending December 31, 1941 and examinees were asked to prepare a columnar analysis showing proper distribution of debits and credits. They were also asked to prepare there from the entries that will adjust surplus, profit and loss and other December 31, 1941, balance-sheet headings involved.

Abstract The main aim of this article is to review some of the serious criticisms of cost valuation of inventory and to formulate a concept, which might be considered an "earning power" valuation. The system of income reporting which identifies costs with units of product and matches the cost of individual units with revenues resulting from sale of the units has been said to rest upon an analogy between the determination of the ultimate profit for an enterprise and the periodic computation of income. Proponents of the thoroughgoing cost method recognize this and make partial allowance for it. Since these compromises are made the door is left open for further adjustment of the concept of acceptable accounting procedure. It is difficult to see why a recognizable loss of usefulness, or "earning power," in the case of obsolescence, which is admitted by cost adherents, should be treated differently from a loss of sales value through the change in demand. Merchandise has only one quality significant to accounting: the power to bring in revenue.