Knowledge that Transforms

The leaders of the accounting profession in the U.S. have frequently expressed the fear that the profession may some day be subjected to onerous statutory control. The profession in the Great Britain at the present time does practice under a more detailed statutory control than that imposed upon accountants in the U.S. This situation provides a clinical case worthy of study. The time period selected for study is that beginning in 1844 and ending with the present time. The year 1844 was selected as the beginning date because in that year the modern era of business incorporation methods came into existence, i.e., a business could be incorporated merely by a formal process of registration. That the quality of an audit of a complex set of transactions is likely to be no better than the qualifications of the auditor performing the audit would appear to be a sell-evident truism. Yet this is a quite modern concept that has emerged in comparatively recent times. Prior to 1844, the general body of proprietors tended to elect two groups of representatives. The one, designated as the managers, operated the enterprise, the other, called the auditors, ascertained that the results of the managerial activities were properly reported back to the main body of proprietors.

It is maintained that an international accounting problem exists and that this problem is the outgrowth of three economic phenomena of our time, namely growth of international business investments, regionalization, and economic development efforts. In scope, the problem might be smaller than one would expect at first. Financial reporting, financial accounting, and legislative influences appear to be the major aspects of the problem. In an approach to a solution, previously published comment was summarized and briefly evaluated. Finally, discussion about the problem and inquiry into its particulars is urged upon the profession.

Reviews the book "Concepts of Depreciation," by Louis Goldberg.

This article focuses on the accounting curriculum of the School of Business at the University of Colorado, Boulder, Colarado. The faculty of the School began to take a long, hard look at the curriculum which it was offering. Undoubtedily this has been done almost universally by the faculties of schools of business across the U.S. since the publication of these two studies. After long and careful study by the faculty of the School of Business at the University of Colorado, several basic changes have been instituted in the course of study. In order to appreciate the changes which have been made, it will first be necessary to explain the program as it stood originally. The School of Business is a two-year, upper-division school with students being required to take 60 semester hours of work outside of the School, and another 60 semester hours of work within the School in order to fulfill the requirements for graduation.

This article focuses on the financial reporting of purchase contracts used to guarantee large investments. long-term contracts have become an important basis for the acquisition of production factors. Purchased power, capital equipment, and raw materials are examples of production factors which are now being contracted for on a long-term basis. Accounting principles underlying financial reporting to investors have, for the most part, been developed without regard for these sorts of contractual arrangements. A contract transaction, such as a long-term purchase contract or a lease, is usually not recorded in the accounts or reported in the body of the financial statements. Transactions must usually be accompanied by an "exchange" such as a payment of cash or transfer of other assets between the contracting parties before they are reflected in the financial statements. Hence, a rental payment or a payment on receipt of inventory is recorded and shown in the statements, but the fact that contract exists is not. The contract is usually reported only in footnotes to the statements.

This article presents news events related to the field of accounting as of January 1963. An International Conference on Accounting Education was sponsored by the Department of Accountancy and held on the Urbana campus of the University of Illinois, Urbana-Champaign, Illinois in October 1-3, 1962. Participants numbering 101 included 59 Amen- can educators, 16 other American and 26 foreign accountants. Thirteen countries were represented. The program consisted of morning sessions on the nature of accounting education, the university and accounting research, and on teaching methods; afternoon round tables were held to discuss the issues raised at the first two morning sessions. Beginning with its spring, 1962, issue, "Business Horizons," a publication of the School of Business of Indiana University, will run a regular feature entitled "Re- search Clearing House." It is hoped that all major business-related research currently in progress or recently completed will be covered in the new section. Persons doing such research are invited to report it to James M. Patterson, Editor, School of Business, Indiana University, Bloomington, Indiana.

Reviews the book "Finite Mathematics with Business Applications," by John G. Kemeny, Arthur Schleifer, J. Laurie Snell and Gerald L. Thompson.

Considerable progress has been made recently in clarifying the different effects on the business firm and on financial accounting of changes in general prices on the one hand and of changes in specific prices on the other. Changes in prices in general are assumed to reflect changes in the general value of the dollar and in general purchasing power. Changes in specific prices are assumed to reflect changes in the structure of prices in the economy without changing the general level of prices. The importance of this distinction between general and special price changes stems from the relevancy of at least two concepts of net income, enterprise net income computed on the basis of a common dollar and net operating income excluding gains and losses arising from the holding of assets while theft specific prices change. The latter concept requires adjustments of both general and specific price changes when movements are occurring in the level of prices as well as in the structure of prices, the effect of specific price changes cannot be measured unless the accounts are first adjusted for changes in the general price level.

This paper will show direct costing, as a product costing and inventory valuation technique, to be unsatisfactory on three grounds: (1) the weakness of historical cost as a basis of asset valuation, (2) the lack of foundation for the fixed cost assumption, (3) the failure of direct costing to distinguish between wastage and utilization of productive capacity during a reporting period. Essence of cost accounting is cost classification. Some common bases of cost classification are responsibility, object of expenditure, product or service tuned out, and behavior relative to volume. These bases of classification contribute information for answering common questions regarding costs in any enterprise. One of the most widely misused terms in accounting is cost. It is one thing to say that an asset is measured by its cost; to say that an asset is a cost, or vice versa, is a distinctly different pronouncement. Adjusted historical cost means the original amount of money paid for the asset adjusted for the change in the size of the measuring unit between the acquisition date and the statement date.

Reviews the book "Management Through Accounting," by Richard L. Smith.