Knowledge that Transforms

Reviews the book "Industrial Psychology and Its Social Foundations," by Milton L. Blum.

Solution of application of funds statement problems seems to be accomplished by many students more as a result of their memorization of rules and processes than because they have a basic understanding of what the statement seeks to accomplish. The student who understands the essential nature of the funds statement is not baffled easily when confronted by a unique situation, which his previous homework or classroom demonstration problems did not parallel. In an effort to achieve the desired sound grounding in fundamentals of funds statements the writer has reduced his first class discussions to a very elementary level. The result has been more satisfactory than previous efforts to teach the topic by conventional and more erudite approaches. The extreme simplification process is presented primarily on the blackboard. The writer has found that after use of this technique and a few transitional remarks the average student better understands the usual application of funds worksheet and works problems from reason and not by rote.

New Stock of a private corporation may be issued for cash or other consideration payable immediately or it may be offered for subscription, with the provision that payment is to follow at a later date. If a subscriber to capital stock does not pay for his shares at the time when such payment is due, his shares may be forfeited to the corporation, depending on the law of the state of incorporation, the provisions of the corporation's charter, and on the particular situation. Various accounting methods have been designed to record the transactions incidental to such forfeiture of stock subscriptions on the books of the issuing corporation; however, the treatment of these cases is not uniform. The main difficulty lies in the fact that statutory law largely governs the procedure for forfeiture of subscriptions and that the statutes of the different states contain different rules on the subject. This situation is further complicated in that some of these rules are open to different interpretations, in that certain questions of law have been decided differently by different courts even under the same statute. Finally, difference of opinion as to how far accounting procedure should be adapted to statutory rules may lead to different results.

The article presents a solution of process cost problems. Students visualize and solve problems in process cost accounting more readily if they are taught to use a simple bar diagram. Actually the diagram is a restatement of the cost-of-goods-sold equation taught in elementary accounting. The cost of the beginning inventory plus the material, labor and overhead put into production during the period equals the cost of the finished goods plus the work in process at the end of the period. This statement is true whether or not there has been any spoilage or shrinkage during the processing period, because the loss is absorbed by the good units produced. After the instructor has introduced and illustrated the concept of finished unit equivalents, he is ready to work a simple problem. In solving this problem, the student can immediately see that the value of the finished units plus the work remaining in process at the end of the period must total $188,000. How should this amount be divided between finished goods and work in process? Then compute the finished unit equivalent, which simply means the number of fully finished units that would have been manufactured if there were no beginning or ending inventories of work in process.

Reviews the book "Company Annual Reports," by Thomas H. Sanders.

Reviews the book "Cost Accounting ," 2ed., by John G. Blocker.

The article presents information about teaching methods in accounting systems. Any student with normal intelligence and aptitude can comprehend the general topics of elementary and advanced accounting and their associated relationships. However, when the student advances to specialized accounting courses, such as cost accounting, accounting system design and installation and auditing, he often loses perspective and fails to grasp the associated relationships present in the specialized courses. Often a student is half way through a specialized course before these relationships comprising the complete course are unfurled in fairly clear fashion. If the student is confused on this matter in the classroom, then how much more confused is he going to be when he takes an accounting position in a going concern? While it is true that the student first of all must know the why of it in all accounting courses from an academic viewpoint, it is also equally true that he must know the how to do it when he obtains a position after graduation. This latter point is particularly true if the student is to make rapid advancement in his chosen work.

The author focuses attention on the peculiar aspects of the role of the accounting curriculum in the university, and in the professional school of business. The first characteristic that should be noted is the fact that much of the professional concentration in accounting is dominated by the focusing effects and the control exercised by preparation for the certified public accountants (CPA) examination. Another factor that needs to be noted as an important molding force, is the widespread importance exerted by opportunities in tax and government accounting, particularly for income tax purposes. The importance of the livelihood furnished by this work, together with other widespread opportunities for immediate employment by a wide range of employers, serve undoubtedly to attract many students as majors whose prime concern may be to select a field in which job opportunities are most plentiful. Many of these are not immediately interested in working for the CPA label, although this may become a basic interest later on for purposes of professional advancement.

The American Institute Committee on terminology has recently advocated a study of possible substitutes for "surplus," and it may be that the 1948 executive committee has found an acceptable answer. The 1948 statement includes a section on financial statements wherein are gathered all observations on. the form and content of income statements and balance sheets. Many of the same comments were made by the 1941 statement, but they were scattered throughout the text under other headings. Several of the 1948 suggestions are new, however, and deserve particular attention. The remark that "the income statement should reveal the amount of cost assigned to expense by reason of any reduction of an inventory to its recoverable cost" may be applauded. Two considerations should be kept in mind. The first is that it is most difficult to distinguish between the judgmental errors of accountants and those of management. The second consideration is that the accountant is continually accused of being unrealistic, dogmatic, and academic.

Reviews the book "A Federal Tax Program to Promote Full Employment."