Knowledge that Transforms

This brief survey will serve to indicate that cost accounting is not a newly developed off- spring from its parent, the accounting process, but rather has been going through its "growing pains" for many decades. In view of its long and interesting evolution, the Committee feels that cost accounting now occupies such a prominent place in the business community that it is opportune and highly desirable for its principles and concepts to be stated in tentative form. Or, to express it differently, the Committee believes that cost accounting has now "grown up" sufficiently to warrant the serious attention which the Committee has given to its area and purposes. The present paper, therefore, will attempt to set the stage for those to follow, and show that many of the cost accounting developments which are often considered to be modern have their genesis in many past decades. It should be emphasized, however, that only the highlights of this evolutionary aspect of cost accounting can be presented in the brief time available. Elaboration on these highlights must be postponed to some future time.

Reviews the book "Management of the Federal Debt," by Charles C. Abbott.

The increased adoption of employee bonus plans by business corporations and the increased amounts paid out under such plans warrant consideration of the nature of these payments and the proper method of reporting them in the income statement. The possible variety of employee bonus plans is almost endless, and it is therefore difficult to consider them in the abstract. Hence the following assumed bonus program, patterned somewhat after an actual case, is presented as a more concrete basis for analysis. This program calls for four separate bonuses paid to four different, but in one case overlapping, employee groups as follows: (1) Factory Workers' Bonus:-a semi-annual bonus to all qualified factory workers (the qualification requirement under all four plans is six months of uninterrupted service) based upon ability and length of service. (2) General Employee Bonus:-an annual bonus to all employees including factory workers but excluding employees covered under the general staff and executive bonus plans. (3) General Staff Bonus:-an annual bonus to all executive officers and department heads except the president and the chairman of the board of directors. (4) Executive Bonus:-an annual bonus to the president and the chairman of the board of directors.

There is no doubt but that the importance of the services which professional accountants are capable of rendering to the community is not fully appreciated in the United States. While there has been substantial improvement in this connection during the last twenty years, much remains to be done. The paper argues that one important reason why accountants are not better recognized is that they have not been rendering all the public service of which they are capable. In particular, they have as a profession, and as individual members of it, been backward in advising the public of facts of which our practitioners should be more cognizant than any other segment of the population. The remarks up to this point relate to the kind of additional activities which might be undertaken to increase the accountant's standing in the community-and hence their prestige with young men about to choose a career. This sort of thing can help accounting only over the long future. For the immediate objective, it is necessary to give additional publicity to the importance of the work which accountants now do. It is particularly necessary that it should be done in terms that will add some atmosphere of glamour to the work of the profession.

Reviews the book "Elements of Economics," by Edmund Whittaker.

Reviews the book "Elementary Statistics," by Hyman Levy and E.E. Preidel.

In this article, the emphasis will be on the pioneers of the recent past and of the future rather than on the great names of previous centuries whose contributions to accounting methods and thought have been so well covered in English. The article also points to three ways-not new ways, but ways not yet fully accepted-in which the business world can be helped to see more clearly its position and its responsibilities. First, business executives and the public should be disabused of the idea that the money values in a balance sheet are a measure of productive capacity. Second, the article suggests that we must search for and devise within our own field ways of convincing the business world that the money profit figure is not in itself a measure of successful operation. We have seen recently a great development resulting from the combined efforts of engineers and accountants in the field of cost accounting. It is suggested that as careful thought applied to the field of human engineering would bring as great a development, and charged that this is a field in which we may not wait for the demand to arise before we try to give the service.

An examination of the statements of condition published by twenty-five representative Chicago banks as of December 31, 1946 reveals the continued publication of condensed statements with stereotyped arrangement and terminology which compare most unfavorably with the published financial reports of industrial and commercial concerns. The arrangement and terminology of these statements are undoubtedly influenced materially by the current regulations, instructions, and uniform forms prescribed by the U.S. Comptroller of the Currency. But, to explain the paucity of data, one must probably look to the influence of heritage, traditions, and customs on the current practices of the modern commercial bank. Since the qualitative and quantitative features of the reported financial data correspond closely to those found in the pocket-sized folder usually distributed to depositors, the published statements may be judged fairly in the light of their services to the interests of the depositors as well as the stockholders.

The analysis of costs for use in equipment replacement decisions is not a new topic, for much has been said and written on the subject. However, one who reads this literature finds advocated a confusing diversity of formulas and methods for computing and comparing costs. The objective of this article is therefore to examine these differences and to develop an approach to the problem which will be logically sound and also workable in the solution of practical business problems. It will be limited to methods of determining and comparing costs for use in deciding whether or not to replace an existing piece or type of equipment with a new or different machine capable of performing the same function. The first step in developing a method for analysis of costs to be used in decisions as to replacement of equipment must be a clear statement of the principle underlying the comparison of alternatives in the selection of equipment. From this it is possible to determine what facts are needed and with this in mind one can proceed to collect the data. A cost comparison can then be made with assurance that the results will be reliable within the limits of the precision with which the cost figures have been measured. It will also be found that this approach can simplify a problem the solution to which has often been made complex and confusing.

The article focuses on the group method of depreciation in accounting. The vast amount of accounting literature written on the subject of depreciation fails to include but a bare mention of the group method of depreciation. This is quite unfortunate in view of the wide use of the procedure. The writer became interested in the group method in early 1941 and found it to be widely used and accepted in the petroleum industry. The regulatory commissions seem to have pioneered in the study of the requirements of the group method of depreciation. In the early 1920's the Interstate Commerce Commission began a study of depreciation rates and methods. During this period the Commission discussed interest and straight-line methods of computing the depreciation charge and recommended the straight-line method because it thought that this method gave a more accurate statement of the profit and loss. The unit plan of depreciation seems to have been the preference of the Commission until about 1933, when it began specifying the use of the group plan.