Knowledge that Transforms

Abstract Mastery of bookkeeping is fundamentally a development of the ability to decide which accounts should be debited and credited in the recording of transactions. Analysis of this type must precede recording. Since this concept is fundamental to all bookkeeping and accounting, it is important that it be introduced early in every bookkeeping course in such a manner that it will be thoroughly mastered. The difference between a $20-a-week book keeper and the much higher salaried auditor is largely in the ability to analyze accounting data. The most common weakness of students from high-school book- keeping classes that enroll in beginning accounting course is their lack of ability to analyze. Their handicap seems to be that though they know something of the "how" of bookkeeping, they do not seem to understand the "why" and thus lack ability to do accounting, for they are not able to deal with new or unusual situations. They need more definite, purposeful training in transaction analysis.

Abstract In 1887 the Interstate Commerce Commission, was established by act of U.S. Congress. The railroad problem was not new in 1887, nor were attempts to solve it unknown. The Congress and the courts had long been troubled by the contentions of railroad companies and the complaints of shippers. It was hoped that by setting up a permanent administrative body with suitable powers the regulatory intent of the Congress might be accomplished more reasonably and effectively. In this way began the experiment with the commission as a device for dealing with economic situations and procedures which are thought to call for government control. The establishment of the Federal Trade Commission in 1913 seemed to indicate that the type of agent to exercise governmental control in the various fields of business would take the form of a Federal commission. Federal commission as the principal agency for the regulation of business, and that any extension of government control of business is likely to result in the granting of new powers to old commissions or in the creation of new commissions. The problems involved in the relation of the commissions to the courts have given the commissions a legalistic procedure which, if undesirable, is still inescapable. The strength of the commission system lies in an adequate and competent staff. It is likely that in the future relationships between commissions will be more important than in the past. That is, the commissions are likely to become a regulatory network rather than simple, unrelated adventures.

Abstract Foreign commodity prices are determined by the so-called "Vergleichzszeit-system" in Germany. This involves a base commodity price on October 17, 1936 and fixes the conditions under which these prices may be raised or lowered. In accordance with the order of July 15, 1937 foreign commodities can be resold only at a price which consists of the purchase price and an economically justified profit. Export commodities from Germany are ordered to be sold at any price, if necessary, even far below production costs, the loss being recovered through the so-called export tax from the "Zusatzausfuhrverfahren." All firms which show a gain from domestic commerce have to pay the export tax to support exporters. After a year of full production under regular audits, permanent control through cost accountants, readjustments of book values to their "real" status, and other control measures or pressures, the producers might show a cost regression and large profits. These were acquired through taxation or bonds, thus securing the means for repurchasing the special drafts. The circle is closed and the credit expansion canceled after having fulfilled the desired task.

Abstract This article focuses on the inventories and the statement of funds. The statement of funds is one important tool of analysis employed to trace the how of funds as a preliminary to assessing its significance. The need for a statement of funds arises from the fact that present-day accounting procedures are geared primarily to the determination of income and to the correlative movements in costs and values of assets and liabilities, not to the measurement of the now of funds. To produce an analysis of funds, consequently, a device such as the statement-of-funds work sheet is required to transform income-measuring data so as to constitute a reflection of financial circulation. If a statement of cash receipts and disbursements is available, as in budgetary procedure, with receipts classified by source and disbursements by destination, no necessity exists for preparing a statement of funds from modified balance-sheet and income-statement data, because a cash statement of this nature is itself a statement of the flow of funds.

Abstract Price Control is made necessary by the conditions which result from a War Economy. Nation's purchasing power increases at the same time the goods available for consumption and use decrease and a "gap" develops between the total expendable incomes and the total goods available in the community. More people are working than in normal times and more goods and services are being produced, but the major portion of these goods and services must be appropriated for military purposes. This gap, then, develops in civilian goods and services, individual incomes increase while the amount of goods available to be purchased becomes less and less. As the military and civilian demands for raw materials and labor increase costs go up and prices begin to rise. Allowed to run its course the "price-cost" inflationary spiral would envelop all sectors of the economy and would end in economic disaster. To combat the danger of inflation national price control has been established. Beginning under the authority of an executive order and operating primarily by means of voluntary agreements to keep prices down.

Abstract The article presents a discussion on testing the ability of the prospective candidate to enter the public accounting field, by examining the certified public accountant (CPA) examination standards in the U.S. The standard examination given by forty-six state and territorial accounting boards is prepared by the Board of Examiners of the American Institute of Accountants. Both educators and public practitioners have a definite part to play in preparing the candidate for the CPA examination. This brings up a very controversial subject, since most educators feel that the college graduate should be permitted to sit for the examination without experience, whereas most public practitioners lean to the belief that a man must have public accounting experience before he should become eligible for the examination. Presenting his opinion the author says that no candidate should be permitted to sit for the CPA examination until he has had a minimum of two years' public experience, or five years' private accounting experience.

Abstract Reviews three books "Final Report of the Committee on Industry and Trade," "Enqueteausschuss—A usschuss zur Untersuchung der Erzeugungsund A bsatzbedingungen der deutschen Wirtschaft" and "Temporary National Economic Committee on the Concentration of Economic Power in the United States."

Abstract This article focuses over the history of inventory valuation. The supposition that early evidence of the use of cost-or-market grew out of tax considerations is subject to other and more general objections. It might be expected that a method designed for tax purposes would include some reference to its purpose. But instead the explanation given is the kind which would appear if there was an accounting policy in effect that sought to recognize economic losses which were soon to be realized through sales-the statement that "their price has gone down." Furthermore, general conditions of what might somewhat inappropriately be called "public finance" in the fourteenth and fifteenth centuries were such as to make such a mild device as cost-or-market for the closing inventory insignificant as a tax-avoidance scheme. The contention has been made that the policy of write-downs disclosed above was an effort at tax avoidance, made in a time when ad valorem levies upon personal as well as real property were heavy, and hence has no general significance for accounting principles.

Abstract The U.S. Federal Government uses both definite and indefinite-quantity contracts, the latter being known also as "term contracts" and "open-end contracts." An indefinite-quantity contract ordinarily is one by which the government promises that, during a stated period, a specified agency or group of agencies will buy certain specified commodities only from a particular supplier. The supplier promises that he will sell to the agency or agencies as little or as much as they wish to buy of those commodities during the period named. A minimum-quantity contract differs from an indefinite-quantity contract only in involving a commitment by the government as to the minimum amount that it will buy. The Procurement Division of the U.S. Treasury Department is the nearest approach which Federal procurement has to centralized buying. It effects or aids in a far smaller percentage of the War and Navy Departments' total purchases than of civilian agencies' total purchases, and at present is of course overshadowed, in importance as a buying agency, by each of the former two agencies' vastly increased procurement.

Abstract Reviews the book "Regulation of Utility Valuation in Pennsylvania," by William Roy Buckwalter.