Knowledge that Transforms

The article focuses on the importance of the knowledge of general economics for an accountant. It is insisted in this article that students of accountancy should do more work in general economics, and in advanced economics courses which are not very directly related to the field of accountancy, than they now do. Many accountants argue that economic principles and theories depend upon a great number of assumed conditions, many of which exist most imperfectly, in actual economic life, these principles and theories therefore seem to apply to some other world than this one and seem to have little significance for practical men who must concern themselves with economic life as it actually exists. According to the author this attitude toward economic theory, probably results from inadequate teaching in theory courses, poor textbooks, or some deficiency on the part of the students themselves. Economic theory is, of course, interested in the general aspects of economic phenomena and their typical relationships, properly and necessarily abstract and deductive.

In the general accounting field, underlying principles emerged more or less naturally because of the wide circulation of certified, published financial statements. A statement of the generally accepted principles underlying cost accounting, however, must be derived from much less promising conditions, first, because such "general acceptance" does not at present exist, and, second, because the cost practices of individual concerns are not publicly circulated. Once the job is started, however, there should be no lack of assistance and support. In distinguishing cost accounting from general or financial accounting, one of the more commonly emphasized points is that cost accounting is carried on primarily as an aid to internal management. Because of this special purpose, cost accounting has tended to develop within each organization in accord with the problems of the particular situation. Since these situations include many thousands of industrial and governmental organizations it is certain that variations in cost accounting practices are numerous. The fact that cost data are usually considered confidential tends to preserve the variations in practices and procedures

Reviews the book "Preparing for Business," by Charles W. Hamilton, J. Francis Gallagher and Charles Fancher.

In this article the author anticipates on the procedure of business management in the post-war era in the U.S. According to the author there are two points of view. One holds that there will be no problems for managers, the bureaucrats of government will have all the answers to all the questions, industrialists will look in the statute books rather than in their ledgers to determine their costs, and their merchandising plans will be based not upon market analysis but upon government directives. The alternative point of view is that the business administration will face additional complexities. Technology changes, changes in consumer's buying behavior and business organization changes can be expected. The author insists that in the light of knowledge that business management will, in the future, need more detailed information about those factors within the sphere of accounting, one shall do well to consider some of the recently developed tools which accountancy can supply. He suggests the consideration of graphic analysis of expense by using the break-even chart as an illustration of recently developed tools in accounting.

War conditions as in 1917 and 1918; have again focused considerable attention upon obsolescence. Most of this attention is directed to obsolescence as it affects income taxes. In 1918 the Bureau of Internal Revenue first permitted the accruing of ordinary or normal obsolescence through the depreciation rate. During the present conflict the granting of war-necessity certificates and the use of accelerated depreciation rates result in part from the recognition of the desirability of accruing obsolescence, even though such accrual is merged with physical depreciation. Conversion of facilities to the manufacture of war supplies, and other changes which have been required in manufacturing processes forcibly bring to the attention of accountants and owners certain factors which are present in a lesser degree at all times. If a product or service is no longer in demand, then producers are forced to abandon equipment at once. This condition would cause compulsory obsolescence. However, in the case of improvements or the appearance of new techniques in production, a producer may often exercise the choice of using the old equipment for a longer period of time or of substituting the new equipment at once.

Reviews the book "Introduction to Managerial Statistics," by Harry Pelle Hartkemeir.

Reviews the book "Auditing Theory and Its Application," by Arthur Warren Hanson.

Reviews the book "Introduction to Accounting for Students of Economics," by C.A. Ashley.

Reviews several books. "Basic Financial Statement Analysis," by Alexander Wall; "Financial Statement Analysis," by John N. Myer and "Analysis of Financial Statements," by Harry G. Guthmann.

Reviews the book "No Royal Road: Luca Pacioli and His Times," by R. Emmett Taylor.