Knowledge that Transforms

Recognition in the corporate accounts of statutory provisions prescribing a permanent reduction in retained earnings for treasury stock purchases requires a major departure from conventional net worth accounting. The acquisition and disposition of its shares by a corporation are totally unrelated events. The purpose of the paper is to analyze statutory provisions of this type and to suggest applicable accounting procedures. The particular emphasis will be placed on the California statute. First, accounting for the acquisition of treasury shares will be discussed. It will be shown that a Treasury Stock account is not needed, and that charges arising from treasury stock purchases should be applied directly to retained earnings. Thus, treasury stock purchase and disposition transactions are completely divorced. The remainder of the discussion will be devoted to an investigation of the methods of accounting for the various treasury stock disposition transactions, i.e., sale, retirement, and reissue as a stock dividend.

This article discusses the nature and treatment of dividends under a entity concept of corporate residual equity. It was hypothesized that the main objective of the corporation after its inception is to survive, and that the corporation strives to maintain both economic and financial competence in implementing this objective. It was argued that the only significant representation made by the corporation in soliciting stockholders' capital contributions was its agreement to pay dividends when and if declared, and that capital thus contributed becomes the corporation's equity. It was advanced that the treatment of several persistent problems in corporation accounting might be rendered more consistent if the nature of corporate residual equity as thus analyzed were accepted. The corporation, in soliciting stockholders' capital contributions, agrees to pay dividends when and if declared. This suggests that both the timing and the amount of dividends are at the corporation's discretion, and that stockholders cannot force the corporation to pay dividends even though earnings are ample.

Reviews the books "Ordinary and Necessary Expenses," by William K. Carson and Herbert Weiner and "Repairs vs. Capital Expenditures," by James C. Wriggins and George Byron Gordon.

In most works on cost accounting the topic of variance analysis is handled by multiplying the current value of one variate by the change in the other variate, subtracting this product from the total variance, and then attributing the difference to the second variate. Two-variate analysis is appropriate when any two factors are multiplied to produce a result. Variance in gross profit from one period to another is the change in net sales minus the change in the cost of goods sold. The sales are composed of units sold multiplied by prices per unit. The variance in sales may be subjected to two-variate analysis; so may the variance in the cost of goods sold. When a laborer's performance is compared with predetermined standards, his variance from a predetermined standard may be attributed to the hours worked and the efficiency with which he performs. In any consideration of the economics of price, the two basic variates are the unit price and the quantity. However, the quantity may be correlated with advertising outlay, selling effort, sums spent on product research, or any other desired variate.

Reviews the book "Business Experience With Electronic Computers," by B. Conway, J. Gibbons and D.E. Watts.

Reviews the book "The Annual Income of an Enterprise and Its Determination," by Jaakko Honko.

Reviews the book "Practical Business Statistics," by Frederick E. Croxton and Dudley J. Cowden.

Reviews the book "Differential Costs and Management Decisions," by D.R.C. Halford.

Reviews the book "Auditing Principles and Procedures," 5th ed., by Arthur W. Holmes.

The significance of survey sampling as a useful tool for accounting has become more apparent in recent years. There is increasing evidence that accountants should become familiar with the characteristics of the various sample designs. It has been argued that the methods of statistical sampling can benefit accountants and auditors in two ways. First, the methods permit them to make' mathematically supportable estimates of Universe characteristics and second, because sampling is used in lieu of 100 percent count or itemization, the timeliness of reports to management can be increased. This article reports on one such instance, the verification of a physical inventory of motor vehicles of the U. S. Air Force by the Auditor General of the U. S. Air Force. The system for controlling and reporting vehicles within the Air Force is quite strong if it is followed. Essentially, the system requires that, at the time of procurement, a registration number will be assigned by the vehicle prime depot and a permanent registration card will be prepared in triplicate.