Knowledge that Transforms

The article describes the detailed accounting procedures particularly those in effect in classifying and controlling expenditures in the U.S. Navy Department in general and the Navy Bureau of Ordnance in particular, as of January 1946. During the last two years, the Navy Department has been studying various phases of its accounting procedures with the intention of revising these procedures wherever it seemed appropriate. As a result of this study certain revisions in accounting for the expenditures of the Navy Department were placed in effect as of July 1945. No attempt will be made in this article to compare to any extent the old and the new procedures for expenditure accounting, but the procedures in effect since July 1945, will be described. The author informs that the expenditures of a federal department are subject to various controls outside the department itself. Such controls include those over the accounting classifications used to report money expended, as well as the usual control over the amount of money expended. Exclusive of the General Accounting Office, which is essentially an organization to audit expenditures of the U.S. government, the principal extra-agency controls for expenditures of the Navy Department arise from the U.S. Congress and from the U.S. Bureau of the Budget.

Reviews the book "Business Leadership in the Large Corporation," by Robert Aaron Gordon.

This article presents questions on accounting which were prepared by the Board of Examiners of the American Institute of Accountants. These questions were presented as the first half of the certified public accountant examination in accounting practice on November 7, 1943. Time limit and rating of each question is also given. In the first question, from the information given, examiners had to prepare income statements on the accrual basis for the fiscal year ended January 31, 1944, and for the seven months ended August 31, 1944. The second question asked the examiners to prepare working sheet showing balances of accounts of Municipal Garage Revolving Fund of Rhodes City as at February 28, 1945. The third question read that Johnson Meat Packing Co. desired to study its distribution costs which in the aggregate constitute 65% of the total cost of doing business. From the information given in the question, examiners had to prepare an exhibit showing the allocation of total distribution cost per hundredweight of meat products for each size-class of order. The article also provides solutions to these problems.

Reviews the book "Intangible Assets," by Walter A. Staub.

The following problems were prepared by the Board of Examiners of the American Institute of Accountants and were presented as the second half of the Certified Public Accountant (CPA)examination in accounting practice on November 8, 1945. One of the questions asked was to prepare a consolidated balance-sheet of Holding Co. and its wholly-owned subsidiary as at July 31, 1944. The response to this began as; on June 30, 1944, A &Co;, partnership (profits and losses shared equally), and X Corp. consummated a consolidation agreement pursuant to the terms of which Consolidated Co., newly organized and incorporated with an authorized capital of 20,000 shares of $100 par value common stock, acquired for its common stock issued in the amount of $950,000 to A &Co; and $550,000 to X Corp. certain net assets of the companies. A &Co; All net assets (including buildings at an appraised sound value of $1,100,000), excluding notes payable X Corp. All net assets excluding buildings. The article includes the balance sheet as response to the question.

The human side of the auditor is remembered by the client or the persons affected long after the detail of the audit is forgotten. One may not be the best auditor in the world, but he can try to be the most helpful. And, if he makes a sincere effort in this direction, his friendliness and his helpfulness will endear him to the persons involved regardless of the nature of the report he renders. When the author became an auditor, it became his duty to render a report which in effect severely criticized the head of a department because of deficiencies and irregularities existing within his organization. Almost immediately after the report had been submitted, a separate situation arose within his own department in which it was imperative that the help and favor of that same department head be secured. To a friend who knew the course of both events, the author could not refrain from voicing his belief that the two jobs were in utter conflict and that eventually he would be compelled to sacrifice one duty so as to fulfill the other. The case did not work out as he expected, however.

Reviews the book "Taxable Income," by Roswell Magill.

Man's desire to create some mechanical means for aiding him in carrying out simple arithmetic processes dates back to very early times. Computing machines are not a product of this century. Most modern mechanical calculating machines have really nothing basic in them. Of course, many refinements have been introduced but the fundamental idea was never changed. However, these machines were not used and known very widely as it was still impossible to duplicate parts and still achieve reliable results as is now done by modern processes of fabrication. When the modern tabulating machine with its punch card was introduced, it had a tremendous influence upon business and financial procedure. If, today, reliance still had to be placed on long-hand methods, the scope and complexity of present-day business problems would be practically impossible. This new arithmetical technique has been so widely adopted that over 10,000 tons of punch cards are used each year in the U.S. Refinements in the punched-card method have included use of electrical contacts through the holes instead of mechanical connections.

Reviews the book "Industrial Relations and the Social Order," by Wilbert E. Moore.

During the twentieth century the approach used in the teaching of accountancy that has become almost universally accepted is that commencing with the balance sheet. Not only is the balance sheet the first topic discussed in the usual course in accountancy, but it is made the end and aim of all accounting and almost every step in the development of the accounting technique is taught with reference to its effect on the balance sheet. Although the balance sheet approach is convenient in teaching the mechanical details of accountancy, it does not equip the student with an understanding of the subject that will enable him later to interpret the results of the accounting processes. Elementary textbooks on accountancy, after commencing with a discussion of assets, liabilities, and net worth, proceed to explain how these are shown in a statement called the balance sheet. Probably the best explanation of a balance sheet is that it is a list of the balances of the accounts in the ledger of a business enterprise when its books of account have been closed. Such a definition it is, of course, impossible to give to the beginner since he presumably knows nothing about balances, accounts, ledger, or closing the books.