Knowledge that Transforms

The article describes stock dividends from the viewpoint of the declaring corporations. The article focuses on three types of stock dividends namely, common on common, preferred on common and common or preferred on preferred. The first of these types of stock dividends, common on common, is of course, the one most frequently met with. It consists of the issue, gratis and ratably, of additional common shares to the common stockholders. Preferred shares issued to common stockholders, constitutes in effect a division or split-up of the total common stock interest into two parts, one of which is converted into, or reclassified as, a prior stock interest, and the other of which continues as the remaining common stock or residual interest. As the number of common shares is not affected by such stock dividend, each of these shares is the same fraction or aliquot part of the net corporate property as before the dividend. Another stock dividend is common or preferred stock issued to preferred stockholders. Strictly viewed, this type includes two sub-types.

Under accounting theory, it should not matter whether bad-debts account is treated as a deduction from sales, a selling expense, an administrative expense, or a nonprofiting item. However, to follow this theory necessitates an admission that the detailed arrangement of profit-and-loss statement has little significance and this might lead to the idea that a simple statement of debits and credits would be sufficient. The more recent trend of thought is in favor of making corrections through the profit and loss of the period in which the error is recognized in order that the total of the periodic net profit charges will be more correct. The view is that since it is too late to change past figures, the net profit should be changed in order to make the total of the past and present profits correct as shown by the series of periodic statements. If bad debts have been calculated by a method that bases the amount of the estimated uncollectibles upon outstanding accounts, there will be little need for subsequent adjustments since all errors are automatically corrected at the end of each period and cannot accumulate from period to period.

Accounting principles and practices, being pragmatic in origin and conditioned by reality, resist codification into hard and fast rules. Yet like all parts of culture these principles and practices manifest the social lag and do not quite keep up with all the rapid changes that occur in the economic scene. Impatient critics sometimes wish to scrap more of these principles and practices than is required for necessary adaptation. They forget that much in the current scene was developed from the past, that the past is always with everyone and that many of established practices have the same cogency today as yesteryear. Business expansion in the form of new capital equipment mainly takes place during an upswing. It augments and accelerates the upswing and perhaps helps create it. The expansion may occur for any number of reasons, technological, psychological, political, economic or for random causes. When management builds a plant anticipating a certain series of schedules of production, the value of that plant is measured by what it costs.

Reviews the book "Elementary Cost Accounting," by George Hillis Newlove and S. Paul Garner.

Reviews the book "Expenses and Profits of Limited Price Variety Chains in 1939," by Elizabeth A. Burnham.

Reviews the book "Business Reports," 2ed., by Alta G. Saunders and Chester R. Anderson.

The article presents information about the twenty-fifth annual convention of the American Accounting Association was held at the Blackstone Hotel in Chicago, Illinois, on December 27-28, 1940. The Chairman of the first session was Howard C. Greer, Vice President, Kingan and Co. in Indianapolis, Indiana. Papers discussed in the first session includes "Determining the Current Financial Position of a Municipality," by Arthur N. Long, University of Washington "The Accounting Provisions of the Investment Company Act of 1940," by Frank P. Smith, University of Rochester. The second session was headed by Victor H. Stempf, Toucher Niven and Co., New York City, and President, National Association of Cost Accountants. Papers that were discussed in the second session included "Stock Dividends," by Thomas York, The Ronald Company, New York City. President of the Association introduced the guests of the Association and read a telegram from the President of the New York State Society of Certified Public Accountants congratulating the Association on the twenty-fifth anniversary. Secretary-Treasurer of the Association presented a report of the membership and of the financial condition of the Association which is included in the auditor's report.

Obviously it is impossible to approach every economist and ask him if he knows enough about accounting to use accounting material. Only about 20% of the economics departments of universities granting degrees in economics have any semester hour requirement in accounting. These requirements affected only 15% of the philosophy of doctorate graduated in the period. Where course hours in accounting are required, the work usually need not be of graduate character. The group that has had such training has probably not had enough to make full use of the available accounting data. While less than twenty per cent of the economics department members above the rank of instructor are prepared to teach accounting at the college level, about sixty per cent of heads of these departments feel that teachers of accounting should be so trained that they may be able to teach economics at college level. The distinction between accounting and economics is more apparent than real and forces are at work to bridge the gap between the two disciplines.