Knowledge that Transforms

Reviews the book "Federal Taxes on Estates, Trusts and Gifts," by Robert H. Montgomery and Roswell Magill.

Reviews the book "Money and the Economic System," by E.M. Benistein.

Professor Littleton's paper seems especially timely in view of the present day ideas accounting as a record of original prices and widely fluctuating prices as a normal pattern-there seems to have come the conviction that accounting for outlay cost can no longer be considered a dependable guide to those who look to accounts for essential information. And the conclusion then follows that account keeping or financial statement practice must be modified to suit the new background. The assumption that problems of income distribution dividends, income tax, speculative security profits are of more importance than problems of the measurement of the income generated by the creation of new wealth or the rendering of acceptable services. The assumption that accounting has a more important obligation to supply data useful in managerial pricing policy than it has in facilitating the comparison of past input of services costs with past output of services revenues. The assumption that accounts and statements are merely tabulations of statistical data related to social income and as such are open to any desired manipulations by statistical methodology, such as weighting by index numbers, reduction to averages, elimination of seasonal variations, etc.

The substance of this article is presented as a test of the hypothesis that inadequate bookkeeping is causally related to business failure. Lest the word causal result in the raising of eyebrows, the author hastens to explain that this word is used merely in the sense of an investigation into whether there exists a concomitant variation between adequacy of records and survival or non-survival in business. No study of business failures within the past five years has been complete without statistics on the proportion of bankrupt firms keeping adequate records of account and no lists of causes of bankruptcy has been complete without inadequate records as one. This is partly because it seems somehow meaningful, in a field so chaotic and so theoretically undeveloped, to present all factors that come to mind and are countable. It is partly too, because the bankruptcy act sheds a legal significance upon the subject by asserting that the judge shall grant a discharge unless the bankrupt has failed to keep books of account, or records, from which his financial conditions and business transactions might be ascertained; unless the Court deems such failure or act to have been justified under all the circumstances of the case, an assertion which at present carries with it little more than formal legal consequences.

Reviews the book "Money--The Principles of Money and Their Exemplification in Outstanding Chapters of Monetary History," by Edwin Walter Kemmerer.

Reviews the book "The Mathematical Theory of Finance," by Kenneth P. Williams.

The article focuses on cost accounting and the classification of municipal expenditures. According to the author, financial accounting relates the expenditures to the various activities. Cost accounting goes further. It relates the expenditures to the amount of work done. Each activity is divisible into operations which, in turn, are measurable. The costs are first allotted to the activities or operations. The direct costs are chargeable directly; the indirect costs are necessarily apportioned to arrive at the true costs as accurately as careful estimation makes possible. The specific uses or purposes of municipal cost accounting help to indicate its nature. The information used in cost accounting comes for the most part from the general accounts. So intimately are they related that the cost accounting may and usually should be "tied in" with the general accounts. For the activities to which cost accounting is being applied, it is convenient to locate the detailed classification of expenditures by object in the cost accounts rather than the general accounts.

The article explains that surplus has been defined as the amount of the net worth in excess of the par value of the capital stock outstanding. In the case of corporations with no par value stock, it is sometimes defined as the amount of the net worth in excess of the net amount realized from the sale of the stock. There are many kinds of surplus, however, because it arises from so many sources. It may be created by donations to the corporation, by earnings, by the issue or purchase of the corporation's own stock for more or less than par, and by many other transactions. Likewise the surplus may be decreased by a number of transactions, such as operating deficits, dividends, and the sale of fixed assets for less than the value at which they are carried on the books and losses on the abandonment of properties. The purpose of the present article is to show to what extent corporations, in the iron and steel industry publish information showing what entries have been made in their surplus accounts and what types of entries are made.

The article focuses on financial statements of national wealth and national income. According to the author, an article published in the "Journal of Political Economy," by Morris A., points out that the national income statement has relationships to the statement of national wealth or national balance sheet which are analogous to the relationships of a corporate income statement to the corporation's balance sheet. This observation intrigues the accountant. The possibilities of setting up financial statements for the national income and the national wealth are for the most part unexplored in published works on these subjects. The interrelationship between the income sheet and the balance sheet is here especially important. Most of the previous studies of national income in the United States have necessarily made use of accounting data, both as found in census reports and as secured directly from business enterprises. Some of the previous studies have attempted estimates both of the national income produced, and of the national wealth, classified by industries.

Reviews the book "Expenses and Profits of Limited Price Variety Chains in 1934," Stanley F. Teele.