Knowledge that Transforms

Reviews the book "Audit Practice Case," by Harvey G. Meyer.

Reviews the book "Accounting Principles," by James O. Mckinsey and revised by Howard S. Noble.

Reviews the book "The Dynamics of Automobile Demand," by S.L. Horner, C.F. Roos, Victor Von Szeliski, A.T. Court and S.M. DuBrul.

Reviews the book "New York Laws Affecting Business Corporations."

The article presents problems from the first half of the Certified Public Accountants Examination in accounting theory and practice, presented on May 16th and 17th 1939 in those states using the questions prepared by the Board of Examiners of the American Institute of Accountants. Candidates were required to solve all problems. From a comparative summary and additional information given, a statement of application of funds was asked to be prepared. The Sulphur Company, organized January 1, 1934, was formed to mine, refine, and sell sulphur. To that end it secured a twenty-year lease on 500 acres of known sulphur deposits, referred to as section A, and 500 acres, referred to as section B, of potential but undiscovered sulphur deposits. It was estimated after engineers' survey that there were 5,000,000 tons of sulphur under section A at the time of acquisition. Mine reports showed the number of tons taken out by years. A statement was prepared by the company's bookkeeper. The statement is correct and all accounting requirements have been met, except that the company has never provided for amortization or depletion since, in the words of the company's president, "it had discovered from prospecting more new deposits than it had mined."

Reviews the book "Intermediate Accounting," by Jacob B. Taylor and Hemann C. Miller.

This article focuses on the relation between depreciation and rate base. Depreciation of capital assets and depreciation accounting in public utilities have long been the source of much controversy between the utilities and the state. The problem has been complicated by the unwillingness of some to recognize depreciation at all and by the insistence on the part of others that reproduction cost should be the fundamental element in the rate base determination, and in the decision made relative to the amount of the depreciation charge. It has been still further complicated by using one amount of depreciation for total charges to operating expenses and another, a smaller amount, or none at all, for deductions in calculating the rate base. A generalized statement of sound procedure has been hard to formulate, because the application to specific companies is so varied. One approach to the problem of understanding the relationship between depreciation and the rate base, consists of presenting thirteen examples which may be looked upon as thirteen cases handed down by a commission and which call for adjudication. Some of these examples represent undepreciated rate bases, some depreciated rate bases and some bases for which no names are given. Some follow the retirement method, some the depreciation method and some both the retirement and the depreciation methods. By no means are all of these examples equally satisfactory or typical. In fact some are quite the reverse.

The first question an accounting student should put to himself or herself, is, why he is thinking of preparing for and of engaging in the practice of public accountancy? Not many years ago some may have decided upon public accountancy because of the idea that its rewards in money were above the average, in some cases quite exceptional. But a professional life is not the most promising occupation to one imbued with the ambition of acquiring great wealth. There are notable exceptions in law and medicine, and some other professions. In accountancy fewer than 25,000 certificates have been issued. Probably there are less than 20,000 certified public accountants (CPAs) in practice and perhaps two or three times as many who are not certified. The number of those who have accumulated what could be considered as even approximating wealth is very few. Others may have thought of accounting as offering opportunities for reaching positions of distinction in the community. In politics, at least one CPA has gone to U.S. Congress and several have reached the legislatures. Perhaps there have been instances of accountants being elected or appointed to other important governmental positions. But for the positions for which accountants would seem to be especially fitted, the treasureships, the auditorships and the heads of departments of taxation, banking, insurance and the like, the selections of accountants have been very infrequent.

Reviews the book "Auditing— Theory and Procedure," by J.F. Sherwood and Roy T. Culey.

This article aims to select from the everyday business of the U.S. Securities and Exchange Commission some frequently recurring situations not as yet controlled by well-defined accounting principles. A very simple example of the problem is the case of a recovery of bad debts and balances in closed banks written off at the date of the reorganization. The registrant had credited these items to earned surplus and profit and loss while our examiners of the statements felt that the credits should have been to capital surplus. A much more important case involving several problems was that of a large investment company holding substantial blocks of stock of several companies. This company restated its capital and wrote down the values of its securities to market, first eliminating earned surplus and charging the balance partly to capital surplus and partly to reserve for investments which had been created from capital surplus. If investments representing control are held by the reorganized company, a question is raised as to the proper treatment of the surplus of the subsidiaries existing at the date of the quasi-reorganization.