Knowledge that Transforms

This article is a discussion which is a continuation of the article entitled, Working Paper for Preparation of Cash-Flow Statement, published in the January 1963 issue of the journal, the Accounting Review. The same comparative data, operating detail, and supplementary data has been used for illustrative purposes. In addition, the funds statement and cash-flow statement will be compared to show the relationships between the components of the two statements. The funds statement, known by other titles such as the source and application of funds statement and statement of application of funds, as conventionally prepared, is an analysis of working capital. It is generally accompanied by a schedule of the items making up the working capital, which by definition is the difference between current assets and current liabilities. Current assets and current liabilities are regarded as the funds, that is, working capital, and it is the purpose of the funds statement to describe the causes for the total change in the working capital for the reporting period such as a month, a year, and so on.

Reviews the book "Intermediate Accounting," by Glenn A. Welsce, Charles T. Zlatkovich and John Arch White.

Reviews the book "Kaheikachi Hendo Kaikei," by Ichiro Katano.

A market economy is characterized by a high degree of individual freedom over a wide range of economic activities. Individuals, the implementers of such activity, are, within a broad framework of legal and social constraints, free, singly or in consort, to enter or exit from enterprises of their choice. Further, they are largely free to distribute the resources they possess among alternative employments. Yet, because these resources are scarce and often versatile, any attempt to maximize their long- run contribution to society involves an allocation problem. Each resource holder making decisions regarding the timing and the employment of each resource held effectuates the allocation task. To achieve rational decisions it is reasonable to assume that the individual resource holder will have need for the factual data necessary to delineate and evaluate various alternatives. Commonly, in the case of capital, the resource allocation procedure will pass through several stages with the final step being the selection of an investment opportunity by individuals acting collectively.

Reviews the book "Accounting for Economists," by Russell Mathews.

The article presents some problems on accountancy, which were prepared by the Board of Examiners of the American Institute of Certified Public Accountants (CPA) and were presented as the second half of the CPA examination in accounting practice on November 7, 1963. Candidates were required to solve problems 1 through 4 and either 5 or 6. The suggested time allowances for each problem are also given in the article. In one question, details of a hypothetical company, the Jarman Corp., which adopted a pension plan for its employees on January 1, 1961, are provided. A trial balance of records of the plan at December 31, 1962 and provisions of the plan are also given in the article. The examinee is required to prepare a schedule, computing the corporation's contribution to the plan for 1962, prepare a schedule computing the vested interests of participants terminating their employment during 1962, prepare a schedule showing the allocation of the corporation's 1962 contribution to each participant and to prepare a schedule showing the allocation of the plan's 1962 income on investments and forfeitures by terminated participants.

This article, resulting from a two-year study at one large Midwestern University, purports to illustrate evidence related to greater evaluation and modification in course offerings and content with respect to the course offering of Principles of Accounting. Principles of Accounting had been traditionally taught at this university to sophomore students as a two-semester course of eight credit hours. The faculty of the College of Business Administration, in re-evaluating its total four-year undergraduate curriculum, elected to transfer this fundamental course to the freshman year. The most compelling argument for presenting accounting in the sophomore year is to be found in the work of two writers R.A. Gordon and F.C. Pierson titled "Gordon and Pierson Reports" that was published in 1959, which gave rise to a great number of literature on radical change in collegiate schools of business. In rebuttal to the argument presented by writers, authors consider the fact that the vast majority of students have only four years to spend in college and that the two most limiting factors to further formal education are academic abilities and financial resources.

Reviews the book "CPA Problems and Approaches to Solutions," 2nd ed., vol. 1, "Problems and Approaches," and vol. 2, "Solutions," by Charles T. Horngren and J. Arthur Lee.

Reviews the book "Working Capital," by Colin Park and John W. Gladson.

The article focuses on the national flow-of-funds analysis. The flow-of-funds accounts indicate whether the proceeds of a sector's saving were used for capital formation or for acquisition of financial assets, whether a sector's capital formation was financed by saving or by borrowing and they also depict the financial channels by which one sector's saving is made available to another for investment. In the flow-of-funds accounts, the economist casts a systematic body of statistics in an accounting framework utilizing such accounting tools as debit and credit and fund flow analysis and summarizes the results in accounting statements of sources and applications of funds. The appearance of "A Quarterly Presentation of flow of Funds, Saving and Investment" in 1959 and "Flow of Funds Seasonally Adjusted" in 1962 marked the third and fourth milestones respectively in the American development of the flow-of-funds system of national accounts. The 1959 version of the flow-of-funds accounts gave evidence of considerable reconstruction and came closer to conformity with the concepts of national income and product accounts. By way of contrast, the 1962 presentation did not introduce any major change in respect to basic concepts.