Knowledge that Transforms

Abstract The article focuses on the restoration of fixed asset values to the balance sheet in accounting. The subject matter of this debate is given current importance at this time because of the procedures followed by many companies in accounting for the amortization of facilities acquired under certificates of necessity issued pursuant to Section 124 of the Internal Revenue Code. Surprisingly little attention has been given to the treatment of fully depreciated assets in accounting literature. This is probably due to the fact that the difference between the aggregate net book value of depreciable assets actually carried in the accounts and the amount that would have been had there been more accurate estimates of depreciation been followed is not sufficiently great to have a significant effect upon the statements in any but the most exceptional cases. Generally, an excessive rate of depreciation is noticed before the matter has gone so far that it cannot be remedied satisfactorily by reducing the charges during the remaining life.

Abstract Companies in the aviation industry, particularly those manufacturing or assembling airplanes and major subassemblies, have adapted to their use a job-lot type of cost accounting based on specific numbers of planes or parts in a "lot" or "release." During the recent war period an individual lot might represent hundreds of units costing many millions of dollars. Production of such magnitude will probably not be required in the postwar years, but the cost procedures developed for such production can be utilized to meet current accounting requirements. The lot or release system of determining costs of airplanes is becoming increasingly important as a result of the inclusion of price redetermination provisions in many government contracts. Such provisions are of many different types. In some cases the price of a plane or part is redetermined at completion of a specific number of units; in some cases a particular item of cost, for example, overhead, is redetermined at a specific point of time; in other cases the price is redetermined at completion of a specified percentage of an entire contract. All redetermination provisions are intended to provide for the renegotiation of price, or types of cost, on the basis of actual experience. This is likely to be of particular significance during the years immediately ahead as companies in the aviation industry undertake to produce new types of planes and to meet specifications and tests undreamed of in the prewar years.

Abstract Reviews the book " Financial Statements," by Ralph Dale Kennedy.

Abstract Reviews the book "Price-Quality Interactions in Business Cycles," by Frederick C. Mills.

Abstract Reviews the book "The A B C of Accounting," by Stanley Edwin Howard.

Abstract The purpose of this article is to describe the U.S. War Department account classification and to show the use made of each element of the code, as of July 1947. It must be remembered that the War Department comprises only one component of the U.S. government and, consequently, must necessarily follow accounting procedures prescribed by the U.S. Bureau of the Budget and the U.S. Treasury Department. At the same time it must prepare its accounts to suit the eagle eye of the U.S. General Accounting Office which is to audit the accounts of the approximately twelve hundred army disbursing officers. Consequently, War Department account classification is a result of normal federal procedure plus additions required by operating conditions within the department. The complete classification explained in this article is designed to provide a basis for budgeting, accounting and reporting, designating accountability and responsibility, and exercising managerial control over finances. Each transaction of the U.S. government is related to some one fund of which there are three major categories, namely, the general fund, special funds and trust funds.

Abstract A professional qualifying examination such as a state bar examination for lawyers or the Certified Public Accountant (CPA) examination for accountants, can have one, or both, of two purposes. The examination can be designed for the purpose of determining those whose basic technical knowledge and ability are adequate to warrant their being qualified as members of their chosen profession and held out by that profession as: members; or the examination can be designed arbitrarily to restrict membership. Few, if any, professional examinations are deliberately planned for the latter purpose, but in so far as the form or content of any qualifying examination is such that the resuits do not give a fair evaluation of the real professional abilities of the candidates, to that extent it is serving no purpose other than to restrict membership. The CPA examinations have been honest, in good faith, attempts to qualify as Certified Public Accountants only those candidates having a thorough knowledge and grasp of approved concepts, techniques, and procedures of their profession.

Abstract In accounting as in almost no other field can the extremes of good and bad education be illustrated. Education in accounting should be subjected to the test of a critical theory. Former theories of education stresses the classical in the sense of the literary, linguistic and the so-called cultural disciplines. Education was conceived as specific training for the work to be undertaken after graduation from school. Great danger lies in this educational philosophy. For purposes of professional education the subject matter should be classed in two categories. While the difference may be one of degree, the distinction at some level is not only sound, it is indispensable. First, there is the skill or knowledge which the student can postpone learning, in the interest of total cost and economy in learning, until he needs to use it. Most of this training is more specific and extensive than colleges can reasonably hope to undertake. Second, there is the skill or knowledge which the student can learn with profit long in advance of his need to use it. Great economy in education can be attained generally if education on the higher professional level is confined to the latter.

Abstract Reviews the book "Management of the Federal Debt," by Charles C. Abbott.

Abstract The question of the accountant's responsibility was discussed in an article titled "What is the Accountant's Proper Responsibility?," which was published in the November 1946 issue of "Journal of Accountancy." In that article attention was directed to the fact that up to the present an accountant may dodge the responsibility of stating that his examination lacked some of the standard auditing procedures carefully developed over the past fifty years. He may state that he did this and that in the way of verification and omitted something else, but, how is the layman to know whether what he did constitutes an audit on which reliance may be placed. The expression of an opinion by an accountant in connection with financial statements means that it is a financial picture upon which management and third parties may rely. Punishment may be inflicted if he gives this opinion without an adequate examination. But the accountant who makes a superficial examination and who wishes to dodge responsibility for it may hide in a fog of words.