Knowledge that Transforms

Reviews the book "The Lease As a Financing and Selling Device," by Wilford John Eiteman and Charles N. Davisson.

There are three relatively simple methods in common use for determining the rate of interest in installment payment plans. These are known as the Constant Ratio, Series of Payments and Interest at End methods. They have been developed from independent assumption, apparently without any thought that they might be approximations to the more complicated Compound Interest method. In a paper in the American Mathematical Monthly it is shown algebraically that the above methods are approximations to the Compound Interest Method. In order to obtain a better understanding, let us assume temporarily that we know the rate and form a schedule of the payment of the debt. The magnitudes of the rates for the approximate formulas may be compared by means of the areas of the trapezoids. The rate is inversely proportional to the area. The areas for the series of payments, constant ratio, and interest at end methods are in order. This solution is often approximated by means of interpolation in tables. It is the purpose however to compare the compound interest method with the above methods and to present a simple but more accurate approximate formula which can be used without knowledge of the theory of finance.

Accounting instruction must convey to students as many progressive ideas as possible. Simultaneously, time should be taken to show traditional practices more likely to be found in business. Thus overemphasis of new theories that limits or excludes discussion of older business procedures defrauds the student. He may be bewildered when the accounting methods which confront him in his first job are not what he has been led to expect. Unbalanced emphasis in the other direction is even less desirable for the new accountant will not have had a chance to develop in college the background for the creative thinking which can make possible his advancement to executive responsibility. A striking example of the necessity for a balanced treatment of accounting ideas is in the teaching of the net and gross price methods of recording purchases and sales. Fairly impartial presentation of these opposing methods can be achieved in a fifty-minute class period. The simple comparative illustration has been effective in presenting comprehensively both methods despite the writer's admitted preference for the net price method.

This article presents a paper that was undertaken to examine an aspect of accounting that is currently receiving much attention, accounting controls. It is not a new topic for it seems that most of present day methods and procedures have developed to serve the purposes of control. By referring to this branch of accounting as accountability it is intended to lend the sanction of acceptance and to broaden the scope so that some of the ultimate aspects of accountability may be examined. Again let it be noted that accounting is a tool of management but that is not the sole function of accounting. The importance of maintaining the integrity of the methods and procedures required for purposes of accountability should not be overlooked in the rush to change the statements to take into account general variations in the economy. Financial statements of a business enterprise do not reflect the economic condition of the enterprise, but from these statements a skilled analyst may draw information, which will assist him in arriving at conclusions regarding the economic condition of the enterprise. Although statements do not supply all of the information necessary to form a complete picture of the economic condition of an enterprise, statements are portrayals of economic facts and activities selected and arranged to serve practical needs of interested parties.

The article discusses cost accounting for motor freight terminals. It is essential to the efficient operation of a motor freight terminal that management knows the cost of handling each shipment. Shipments may be divided into certain official freight classifications. In the strictly line haul operation no consideration was given to weight groups, because the cost of hauling a given load of ten shipments was the same as the cost of hauling one shipment of ten pieces, if all other things were the same. The same general outline used to develop line haul cost methods is employed to develop terminal cost, but pick-up and delivery, assembling, segregating, billing and loading freight at a terminal, involve many additional complications. In order to distribute the pick-up expenses, it is necessary to list those expenses, which are computed on a mileage basis separately from those, which are not affected, by the number of miles the truck operates. It is customary in motor transportation cost studies to divide shipments into certain weight groups, which conform to the weight groups of the tariff for the area and commodities or classes of property covered by the study.

This article outlines generally the author's ideas as to what the student of accounting should become familiar with during his years in college. In the majority of schools that provide for an accounting major, the accounting student spends approximately one-fourth of his time on accounting courses, and another one-fourth on other courses in business administration. Several of the fields of study, which the student is currently required to take in most universities, have been omitted from this proposed program for the accounting student. This, however, is necessary if the accountant is to be trained to fulfill his duty to his client and to society. It is admitted that, in view of the limited number of courses that can be taken in a four-year curriculum, the student must choose between courses necessary to his professional training and other courses, which might be highly desirable. In such a choice, the decision must go to the program necessary to maintain and improve the standard of the accounting profession.

Reviews the book "Asset Accounting," by William A. Paton and William A. Paton Jr.

Reviews the book "American Monetary Policy," by E.A. Goldenweiser.

In the past few years a score or more of the American colleges have begun to offer courses in internal auditing. Recognizing the increasing importance of this field of instruction, the American Accounting Association in 1951 set up a Committee on Cooperation with the Institute of Internal Auditors. One of the first projects of this Committee was a survey of internal auditing courses based on a questionnaire sent to appropriate persons in a sample of colleges. The World War II years brought about an increasing recognition of the importance of internal auditing in industry, a corresponding need for trained personnel, and, logically, an increasing interest in internal auditing instruction in colleges. Internal auditing courses are now offered in more than a score of American colleges, with several more known to be planning to offer such courses in the near future. The Institute of Internal Auditors and the American Accounting Association are cooperating actively to develop needed teaching materials and to spread information on the subject. Educators should be alert to the possibilities for service in this field of growing importance.

The subject of "Accounting Leadership and Responsibilities in Industry" is extremely broad, but it is also extremely vital. To discuss such a vital accounting subject on the campus of The University of Texas seems fitting because the University and the College of Business Administration are certainly interested in providing business with leaders. There are several areas of accounting responsibility in industry, and there is more than one school of thought as to the scope and extent of accounting responsibility. Also, there are discussions pro and con as to whether accountants can assume the responsibilities that management and industry expect them to assume. The author wish, therefore, merely to express his personal views as to the adequacy of accounting concepts and as to whether these concepts are broad enough to permit the accountant to assume the responsibilities that are his. Such remarks are confined to an outline of a few of the points involved. Accountancy can give credit for its tremendous growth to the advent of the industrial revolution, to the acceptance of scientific industrial management, and in the last two decades, to technological advancement in industry and the growth and predominance of large organizations with wide dispersion of activities, producing many different products.