Knowledge that Transforms

There are two types of investment questions, which involve the method used in distributing partnership profits. These are: (1) The computation of the profit before allowances, which make two methods of profit distribution of equal effect. When this profit figure is determined, it can easily be seen that one method is preferable if profits exceed the figure, while the other method is preferable if profits are less than that figure; and (2) The computation of the effect of an additional investment in the partnership under given conditions. Such a figure can then be compared with the return possible under alternative investment opportunities. When one of the alternatives involves tax-exempt securities, the return after taxes is the more significant figure. Each of the above situations is illustrated in this article by a correspondingly numbered example. One case analyzes options before a partner who is given the option of an increase in percentage of profit/loss, but a decrease in fixed salary. Another case presents investment options before a partner with variable rate of interest.

Reviews several books on business accounting. "Changing Concepts of Business Income"; "An Inquiry Into the Nature of Business Income Under Present Price Levels," by Arthur H. Dean; "Business Income and Price Levels, an Accounting Study," by George O. May.

Reviews the book "The Accountancy of Changing Price Levels."

Reviews the book "The Accounting Mission," by F. Sewell Bray.

Reviews the book "M.A.P.I. Accounting Manual."

The purpose of this article is to call attention to certain fundamental relationships among those basic elements which constitute the distinguishing features of accounting problems involving the admission of a new partner by investment. These relationships are presented against the background of a simple illustrative problem of which the following is a preliminary statement. To explain the case a situation of a partnership firm is cited, in which a new partner is consented to admission by other partners at a pre-assumed equity ratio. The situation that rose due to the inclusion of another partner allows for the emergence of any one of three possible situations. The first presents a condition of no bonus, no goodwill. In other words the situation is termed as "par basis." The second situation entitles the company to a bonus or goodwill. The third situation entitles the new partner to a bonus or goodwill. This article analyzes each situation and compares their results. The investigation on which this article is based produced a number of expressions and corresponding definitions relating to the dollar values of bonus and goodwill.

In teaching the topic of installment sales to students, or in explaining procedures to bookkeepers of enterprises selling for cash as well as by the installment plan, one encounters difficulty in the adjustments brought about by repossessions. The student as well as the bookkeeper is confused as to the percentage to use in the adjustment, the profit or cost percentage. After determination of the percentage, difficulty is encountered in its application. Both the student and the bookkeeper are further troubled by the fact that after clearing the deferred profit account for the percentage of profit contained in the unpaid installment accounts and crediting the repossession loss account which appears on the books, a profit may result on the repossession which should be refunded to the purchaser. The writer has used for many years a method which requires no adjusting entries for repossessions and eliminates the possibility of suits by purchasers to recover the profit, if any, resulting from repossessions under Section 21 of the Uniform Conditional Sales Act.

In 1936 the American Institute of Accountants prepared and published a Bulletin: "Examination of Financial Statements by Independent Public Accountants." The general property tax furnishes the main support for local governments and is used to some extent also by many state governments. It is levied principally on real estate, land and improvements. In some states there are taxes on personal property, also on household goods, jewelry, art collections and the like. In the practice of the last few years, the tendency has changed and increasing attention is being drawn to the significance of the property tax itself. As a characteristic of the new trend, reference is made to the practice by which profit is measured by the ratio of profit to property tax. A comprehensive view of local tax trends can be found in the general increase of the property taxes throughout the nation. The scope of the present study is to outline the auditing procedures applied in the examination of a chain of real estate corporations, where the goal of the corporations is set. The audit program in this study is limited in scope to real estate and personal property taxes. An auditor was hired to gather all the accounting information and the available data for recording.

Reviews three books on accounting. "Lord Plender: Some Writings and Speeches," edited by Lady Plender; "Random Reminiscences," by Arthur Cutforth; "Case Lore or Leaves From the Notebook of a Professional Accountant," by Ernest Evan Spicer.

Reviews the book "Fundamental Accounting," by L.A. Schmidt and W.N. Bergstrom.