Knowledge that Transforms

This article focuses on the accounting aspects of rate making in the public utility field. Quite a divergent array of experts participate in rate-making. Included are: economists, statisticians, engineers, accountants, lawyers, and business administrators. It is reasonable that the respective fields should raise conflicting concepts, methods, principles, and procedures. In company of such experts, representing widely differing fields, the accountant must be conversant with all of the facts and some inevitable fiction, if they contribute their share of skill and knowledge toward an equitable determination of whatever issue they is asked to help settle. A return to reproduction cost as a factor in rate-making would be greatly facilitated if the charge that it is cumbersome and misleading can be overcome, or at least materially reduced. Two suggestions come to mind. In the first place, it will be necessary to take a more liberal-and less literal-concept of reproduction cost. Another possibility is to take the original investment in a utility plant and restate it in terms of current purchasing power of the dollar. This approach would at least avoid the time and expense of a detailed inventory of plant items, which is standard procedure in appraisals.

Reviews the book "Graphic Profit Analysis and the Break Even Point," by A.Francis Pillsbury.

Reviews the book "Monopoly and Free Enterprise," by George W. Stocking and Myron W. Watkins.

The impression may have been gained that the author feels there are very distinct limits within which small business can be assisted. This is a correct impression. For the majority of small firms there is little that can be done in the way of aid. They provide uneconomic substitutes for jobs which have not been provided elsewhere in American system and the primary solution to the problem is not to be found in perpetuating this state of inefficiency. The continuance of the American economic system is much more dependent on finding an effective way to employ this manpower and these resources than in attempting to continue people in a state of "free" but marginal uncertainty. Most persons are not good entrepreneurs even for a small firm. Certainly there are many fewer good businessmen than the numbers of those who are attempting to be entrepreneurs. Small business is concentrated in the service trades and retailing, fields in which a small amount of capital is required and which involve types of operation that do not compete with the greater efficiency of the mass production industries.

Reviews the book "Management Accounting."

The article discusses some of the basic assumptions underlying social accounting. The basic idea is simply that the social accounting data must be scrutinized thoroughly before the results of social accounting can be interpreted properly. If this is not done and social accounting data are taken at their face value, they are apt to be misused and misinterpreted because of incomplete awareness of their underlying assumptions. In social accounting, as in private accounting, one must make some initial decisions. Social Accounting, that is, a system of accounts for a community, has three main functions: to provide a running, historical record of the community's economic operations; to measure the efficiency with which the community's economy operates; to provide a periodic inventory. The basic assumption concerning goals of economic activity can thus range from recognizing none except sheer increase of capacity as measured by population and capital to recognizing several so that the flow of several categories of products is taken at their gross value.

This article deals with structural changes and general changes in the price level in relation to financial reporting. It is not possible here to compare in any detail either the techniques which might be involved, or the results which might be obtained from the various bases of adjustment mentioned in the accounting research. The table shows different possible results in the case of a hypothetical corporation whose only asset is a non-depreciable fixed asset. The assumption is made that the asset originally cost one hundred dollars, and that its current market value is two hundred dollars. It is also assumed that the selected index of general prices has risen from one hundred to one hundred fifty between the acquisition date and the current date. The capital stock is considered as having been sold for one hundred dollars on the same day that the asset was purchased. No other transactions have occurred. Specifically, there has usually been a failure to distinguish between a change in the structure of prices and a change in the general price level. A change in the structure of prices involves a change in the prices of certain goods and services relative to the prices of other goods and services, with, therefore, a change in the real economic value of both sets of goods and services. A change in the general price level involves only a proportional change in the prices of all goods and services. If there is a change only in the general price level, this does not in itself imply a change in the value of any good or service, but does imply a change in the value of money and of obligations expressed in terms of a certain amount of money.

Reviews two books. "Advanced Accounting," vol. 2, and "Advanced Accounting Problems," by George Hillis Newlove and S. Paul Garner.

Reviews the book "Fraud under Federal Tax Law," by Harry Graham Balter.

The article discusses some of the current developments in business, that have tended to increase the importance of accounting and throw down new challenges to the profession. Industry is enjoying high dollar profits resulting not so much from its traditio