Knowledge that Transforms

Abstract This article presents a fair illustration of how American accountants develop well defined accounting practices and ignore the underlying theory involved. The acceptance of the relative sales value theory of allocating costs is important because flew opportunities for its application are constantly appearing. If the warrants are detachable, they constitute a case like stock rights except for the fact that the relative sales values at date of issue cannot be used. If the first available and equitable sales values are used, it appears that the relative sales value theory should be used. The study of the use of relative sales values were as a basis of allocating costs by examining cases in which the application of this specific bit of accounting technique has been recommended by well-known accounting authorities. Unless there are reasons to the contrary, the selling price forms the best guide in attaching weights to be used as conversion factors when repricing a commodity after the grading process.

Abstract The article focuses on an interesting paradox pointed in a review by Henry Rand Hatfield, professor of accounting, which drew much attention. If two identical bonds are bought on the same day, one of them at 90 and one at 110, the aggregate cost is equal to the aggregate par and the yield rate on the holding is equal to the nominal rate on the bonds. Hatfield demonstrated that if the buyer separately amortizes the premium on one and the discount on the other by the conventional compound interest formula the aggregate interest earnings thus found in the several periods will diverge from the uniform coupon receipts. The author shows that the paradox can arise from the algebraic properties of the "average yield rate" or single compound interest rate implicit in the cost of an aggregate holding acquired in more than one purchase lot. The author also considers some of the properties of the mean yield rate and makes some comments on the meaning of bond premium and bond discount and puts some question about the theoretical accuracy and the consistency of Hatfield's accuracy.

Reviews the book "Accounting and Finance," by Leon E. Brownell.

Reviews the book "Chain Stores, Their Management and Operation," by Walter S. Hayward and Percival White.

Abstract In this article the author contends that an accurate allowance for depreciation must take into account probable repair costs over the whole life of the assets the value of the asset is affected by both the amount and distribution of expected repair costs, and that, therefore, any accurate calculation of depreciation requires prediction of repair costs as well as prediction of the life of the asset and its scrap value. In order to make an investment in an asset profitable, depreciation must afford returns large enough to cover the replacement of the investment, a competitive net return upon the investment in the asset and repair costs necessary to maintain the efficiency of the asset. If it is known in advance that in some years an asset will not afford its usual income, allowance will be made for that fact in the determination of its present value. Since the value of the asset always is dependent upon expected incomes from it, the calculation of depreciation can likewise be based upon future expectations.

Abstract To get a proper perspective of the development of accounting in any country one must understand the institutions, the characteristics of the people, and the peculiarities of their business practice. In France and Germany as in other European countries they have many hundreds of years behind them. Their institutions are the result of growth through many generations. Society in the United States is not as static and there is more freedom of movement between people in different walks of life. The French business man does not have the proper attitude towards the accountant. The accountant is a necessary evil. The accounting department is regarded as an expense rather than as a part of the organization that aids in the development of efficiency and as an important factor in the success of any large business. Without doubt French law has had some influence on the development of accounting in France. The French accountants have not organized themselves into strong professional societies. Instead of a few strong organizations they have many loosely joined.

Reviews the book "Effeklem als Kapitalbeschaffungs mitel der Unternehmung," by Karl Theisinger.

Reviews the book "Money, Bank Credit and Prices," by Lionel E. Edie.

Reviews the book "Security Syndicate Operations," by Arthur Galston.

Reviews the book "Business First in Accountancy," by O. Wunderlich.