Knowledge that Transforms

The article informs that the purpose of this article is to discuss the viewpoints expressed in, "A Critical Study of Accounting for Business Combinations," AICPA Study No. 5, by Arthur R. Wyatt. This review will concentrate on the recommendations rather than the basic text. The role adopted will be, in a sense, that of "devil's advocate." Using Wyatt's criteria, most business combinations would fall under his recommendation 1 and therefore be classified as purchases. Stress is put on the independence of the contracting or combining parties. Thus, if the groups about to combine deal at arm's length and independently, the proposed combination will be a purchase unless the constituents are roughly the same size or were "formerly related entities." While two parties to a combination might be viewed as independent before the combination, they do not want to retain their independence after the transaction.

One of the most important advances in the field of managerial accounting has been the development of the notion of the standard cost system. The use of such a system, however, has thus far been limited not because of any limitations inherent in the system itself, but because accountants have failed to appreciate its versatility and exploit it for managerial control and decision making. By definition costs that are not quantitatively traceable to products or operations for every unit of service used at a particular moment of time, are some type of joint costs. This implies complementarities between products and operations at any moment of time and over lime, and a lot of uncertainty in planning and control. The longer the time span over which such complementarities exist the greater the difficulty not only because one cannot predict as well, which is a great impediment to decision making, but also because the statistical population from which one needs to draw for generalizations is small. Furthermore, to the extent that these decisions are made discontinuously and infrequently, one cannot depend on the manager's memory for all the relevant inputs to subsequent decisions of similar nature.

Accounting is a great profession being dedicated to integrity, independence, objectivity, high personal performance, and service. It tends to bring out the best in an individual. Since education is central to the accounting profession, as it is to all of the professions, accounting educators must give the educational aspects serious and continuing attention if they are to meet their responsibilities to the students and to the accounting profession generally. Within the context of a rapidly expanding social and economic complex, question has been raised as to whether accounting can meet an implicit challenge that will be ever-expanding. Hopefully, accounting will be commanded by highly educated men of vision and ingenuity, so that it will be transformed into an even greater force through expanding services. Accounting educators have a singular responsibility to both recognize and surmount the challenges facing accountancy and accounting education. These challenges have short and long-run implications, the latter clearly being more fundamental, and unfortunately less demanding at any given moment.

In recent years the California State Board of Accountancy has devoted considerable time to various problems that are involved in improving reporting standards. The California Board of Accountancy consists of eight members comprising of five certified public accountants, two public accountants and one public member not licensed or registered by the Board. The Board has only those powers and duties conferred on it by the Accountancy Act. These powers and duties are required in the administration of the Act. The Accountancy Act empowers the Board to adopt the rules and regulations necessary to carry out its responsibilities. Upon analysis it is obvious that the rule involves almost all of the basic background in the theory of auditing. Thus, accountants must be familiar with the literature of the American Institute of Certified Public Accountants to understand the meaning of auditing standards and to keep abreast of the changing concepts related to these standards. Rules of professional conduct that have been established as a result of the authority vested in the Board, are found in Article 9, Chapter 1, Title 16 of the California Administrative Code.

The article reports that the provisions of the Internal Revenue Code of 1954 with regard to depreciation is the permitted switch from a declining balance method to the straight line method. The calculations of the deductions in each year are made clear in accounting texts by specific examples. The problem of switching for group properties is treated in a article published in the periodical "The Accounting Review." An interesting result of the calculations is that for a useful life of up to 60 years it is never profitable to switch from double declining balance if salvage is as much as 15% of depreciable cost. Similarly, if the taxpayer starts on the 150% declining balance method for life up to 60 years he would never switch if salvage is 25% or more.

Reviews the book "Financial and Managerial Accounting, an Introduction," 2nd ed., by Harold Bierman.

Reviews the book "Contemporary Accounting Problems: Text and Cases," by Leonard E. Morrissey.

Reviews three books on accounting. "Accounting Practices in the Netherlands"; "Accounting Practices in Sweden"; "Accounting Practices in Argentina."

The article analyzes the method of teaching of the funds statement. It is believed to be the most confusing subjects of the accounting. The article informs that a woeful lack of conceptual understanding of this subject seems to be as prevalent with the advanced student as well as with the student studying at the elementary level. The basic reason for this general lack of understanding, as well as appreciation, of the Funds Statement seems to be that the textbook' presentation of this material ignores previously learned accounting concepts and explores techniques which are unrelated to the students' accounting background. Now that the Funds Statement is considered complementary, rather than supplementary, to the Statement of Income and the Statement of Financial Position, accounting concepts should be stressed as much with the Funds Statement as with the other correlative statements. The funds statement is a statement of the change in equity as it relates to working capital-no more, no less. The difficulty in preparing a funds statement arises from the process of converting data kept on a completely accrual basis to data reflecting only working capital transactions.

The article presents some questions of theory accounts. The theory of accounts portion of the November 1963, Uniform Certified Public Accountants (CPA) examination was given on November 8, 1963. Suggested time allotments for questions are given in the article. Answers, which follow are intended to typify those submitted by well-prepared candidates writing within the time limits prescribed. They do not necessarily include all elements for which credit might be given by the Advisory Grading Service of the American Institute of CPA or by the various state accountancy boards charged with responsibility of issuing CPA certificates. In first section, all questions are compulsory. In the appropriate space on the separate answer sheet, candidates are required to blacken the space of the letter of the answer choice that best completes each statement. Candidates should use the special electrographic pencil for marking the answer sheet. Candidate has to mark only one answer for each numbered statement.