Knowledge that Transforms

The 1953 annual meeting of the members of the American Accounting Association was one of the most successful in its history. Since the July 1953 issue of "The Accounting Review," included the complete convention program, only a few brief comments need be made here concerning it. As a departure from usual practice, there was a full day of preconvention social activities. On Monday, August 31, several bus loads of people visited the Chesterfield Cigarette factory in Durham and the beautiful campus of neighboring Duke University. The ladies' program, in addition to the activities provided on Monday, included a bus tour of Raleigh, lunch at the Carolina Country Club, and "A Trip to the Moon" in Morehead Planetarium. At the business meeting and luncheon on Tuesday, brief reports were given by the editor of "The Accounting Review," regarding finances and membership statistics. Leslie James Buchan, Director, Commission on Standards of Education and Experience spoke on the work of that group at the luncheon on Wednesday.

Reviews the book "Dictionary of Business and Industry," by Robert J. Schwartz.

Reviews the book "National Accounts Studies."

It is difficult to consider the graduate curriculum entirely apart from the undergraduate curriculum. The graduate curriculum must allow considerable adjustment to the needs of individual students. This is even more true of graduate students than of the undergraduates in view of their greater diversity of background. Applicants to the graduate school will range all the way from the man who was an accounting major as an undergraduate, to the liberal arts graduate who majored in mathematics or English or to the law school product of twenty years ago. Some hopeful graduate students, therefore, may need to concentrate on "broadening" their training. Others who have had their share of this diversification will desire and will need to devote most of their time to accounting. Of one thing one can be reasonably certain about the graduate students: few, indeed, will have moved very far in their undergraduate days toward developing their capacity in communication and in independent, critical thought. In these modern times it seems students just cannot get time for those fundamentals in the first sixteen years of training in school.

The ultimate point of reference in any mathematical development in the field of installment finance is or at least ought to be the compound interest method. It is not implied that pure actuarial theory should be introduced into practical day-to-day usage in installment transactions. But it is asserted that the mathematical relation between pure theory and the various practical short-cuts and simplified methods in use should be clearly established in the literature on the subject. Several of the common formulas for determining the rate of interest in installment payment plans have been shown to be approximations to the actuarially determined rate. The present paper relates the so called "Rule of 78" method of figuring rebates in pay-offs, to the theoretically equitable rebate found by the compound interest method. The "Rule of 78" method has that name because on a 12-payment loan the sum of the integers from 1 to 12 equals 78. It is also known as the "Sum of Digits" method.

The article focuses on the evolution of accounting functions. During the last hundred years the roles of accounting have undergone changes as startling as the developments in methods and techniques of production. These changes in accounting functions, however, are less obvious to the untrained observer than the giant industrial strides which have made The U.S., the economic envy of the world. Yet the evolution of the two are closely related. The roles which accounting has played at various times have been directly related to the needs of the businessman. It is this thesis which will be explored in the following paragraphs. Unquestionably, many ideas and procedures in accounting have developed fortuitously or have been the result of theorizing which was entirely independent of any pressing requirement of the moment. It is also readily apparent that the pressure of government upon accounting development has been significant. With the current public regulation of many business activities, the administration of economic affairs has transcended the management of the individual enterprise. When this change has taken place, accounting has followed management into the broader area with the development of a social control function of accounts.

The growth in the importance of evidence has been reviewed, factors affecting the amount of evidence the auditor should obtain have been set forth, and major classes or types of evidence have been suggested, as follows: physical evidence, documentary evidence originating outside the client's organization, evidence originating within the client's organization, the client's books of record, and ratios and comparisons. In general, some indication of the reliability of an item of evidence is apparent from the classification into which it falls, but there is great variation in the reliability of items within any given classification and some of the factors governing such variation have been suggested. The determination of how much evidence the auditor should obtain, and the matter of the reliability of the evidence he obtains are both important in relation to the generally accepted auditing standard that sufficient competent evidential matter must be obtained to afford a reasonable basis for an opinion regarding the financial statements under examination.

The article focuses on accounting changes brought about by the Revenue Act of 1954. Though the general rule for accounting methods under the Internal Revenue Code of 1954, as set forth in section 446, is substantially the same as the general rule under the Internal Revenue Code of 1939, there are a number of specific types of accounting problems which are singled out for special treatment in the new Code. For the most part, these special provisions represent an effort on the part of the lawmakers to bring tax accounting into closer accord with generally accepted accounting principles. Under the various revenue acts prior to 1939 and under the Internal Revenue Code of 1939, there were many differences between the accounting for certain transactions for tax purposes and for commercial purposes. Some of the major differences could be explained on the grounds of public policy, as in the case of the peculiar treatment of capital gains and losses and in the allowance of percentage depletion, to name only two. Others could be said to result from the necessity of determining taxable net income rather than business net income, as in the case of the allowances for expenses of a purely personal nature and the credits for personal exemptions.

This article reports on the examination of the balance sheet of the U.S.-based American Association of Accounting as of December 31, 1953. The related statements of income and expense and of changes in net worth for the General Fund and the Life Membership Fund for the year then ended have also been examined. The examination was made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting re- cords and such other auditing procedures that were considered necessary in the circumstances. Following past practice, inventories of Association publications are not included in the balance sheet. The costs of publication have been charged to operations in the year of printing. The accompanying balance sheet and statements of income and expense and of changes in net worth present fairly the financial position of the American Accounting Association at December 31, 1953, and the results of its operations for the year then ended, in conformity with general accepted accounting principles applied on a basis consistent with that of the preceding year.

Reviews the book "Examination of Insurance Companies," edited by Adelbert G. Straub.