Knowledge that Transforms

An attempt has been made to demonstrate the possibility of giving such a controversial subject as "the allowance for doubtful accounts" a mathematical treatment. Principles of binomial probabilities have been applied to develop relationships and matrix algebra is used to solve actual situations. The subject has been given the simplest possible form and probabilities are shown graphically in order to allow the reader to visualize possible situations and encompass the concept. The method is expected to play a role in future credit management and the philosophy behind it is a belief in the need for a conversion of approach from a status of art to science in applied business administration,

The 1963-64 Committee on Auditing Instruction has recommended that an auditing course should be required as a part of an undergraduate major in accounting and that this course should appear toward the end of the accounting program. Although the Committee's recommendations were based on the premise that an auditing course should be so designed to serve all students in accounting it is assumed that the course envisioned here is designed primarily for the student who is interested in following a career in public accounting. Consequently, these remarks are generally applicable to an auditing course which is of a professional nature. The Committee then proposed certain objectives of a first course in auditing and stated that techniques should be included only insofar as they assist in developing and emphasizing auditing principles and theory. Apparently, the Committee has placed undue emphasis on concepts and objectives and appears to de-emphasize techniques in favor of principles and theory.

Reviews the book "Profitability Accounting for Planning and Control," Robert Beyer.

Reviews the book "Accounting in Small Business Decisions," by James L. Gibson and W. Warren Haynes.

The article focuses on problems and solutions that were prepared by the Board of Examiners of the American Institute of Certified Public Accountants and presented as the first half of the Certified Public Accountant examination in accounting practice on November 6, 1963. Candidates were required to solve 5 problems within a maximum time period of 270 minutes. The first problem comprised of a set of 20 multiple choice questions. The second problem asked for the preparation of a statement on the accrual basis of the total expense of taking and processing blood by Hillcrest Blood Bank. The third question asks for assistance in filing a loss claim under the Zuba Manufacturing Company's business interruption insurance policy. The fourth question asks of the preparation of a statement of account for the increase in cash for the year ended October 31, 1963 for the General Medical Institute. The last question calls for making of computational schedules for various costs, contracts, income tax provision and liability for the Zuba Manufacturing company.

Reviews the book "Principles of Accounting--Introductory," 6th ed., by H.A. Finney and Herbert E. Miller.

Reviews the book "Budgeting and Cost Analysis for Hospital Management," by Leon E. Hay.

The article informs that accountant's role in wage negotiations arises whenever financial data are used in the negotiations. The relevance of particular financial data may vary from case to case, but in general the data that are germane relate to the firm's "ability to pay." The accountant who is engaged to participate in wage negotiations should exhibit the same degree of independence and objectivity as an independent auditor. Functions the independent accountant may perform in wage negotiations can be classified as verification, interpretation, and communication of financial data. A controversy that arises frequently in wage negotiations, when "ability to pay" is an issue, is discussed in this paper. The controversy, which deals with the relationship of depredation to reported profits, is presented as an example of the contribution the independent accountant can make to wage negotiations. Financial data may be used to obtain public, as well as employee and union support. Collective bargaining is becoming more public and less private in our con temporary society. There has been increasing government intervention in wage negotiations through the use of fact-finding boards. These boards, at times, rely heavily on the use of financial data of the firm.

While professors come under the regular rules pertaining to all individual taxpayers for Federal and California Income Tax purposes, certain kinds of reportable income and deductible expense require special attention in the U.S. A professor who has income in addition to his salary may deduct some types of expenses before arriving at adjusted gross income. These expenses, being necessary to the earning of this income may include such things as the cost of a portion of his residence as a study where he did the work, depreciation of a typewriter, office furniture, and other equipment, supplies and car, and other travel expenses in connection with research or lectures. Professional income and expenses are computed on a separate schedule and the resulting net income or loss is also being tabulated. The deductible expenses have also been mentioned. Advice has been requested concerning the deductibility for Federal income tax purposes of research expenses, including traveling expenses, incurred by college and university professors in their capacity as educators.

The emergence of a marketing oriented management during the post-war era has created a need for a change in the basic philosophy of accounting. Management must be aided by the accountant through the interpretation of quantitative internal data which will enable management to make effective decisions. Pricing, product planning, and other forms of sales analysis are greatly benefited through the establishment of a system which effectively controls and analyzes distribution costs. Distribution cost analysis represents a challenge to the accounting profession which must develop accounting systems and techniques that will meet the needs of business. The sophistication of management has improved and accounting must reflect the dynamics of change. The article presents a case study on the Hypothetical Paint Spray Company, which manufactures a single-unit paint spray machine for industrial use. This company is a wholly fictitious entity which has been used to illustrate the application of a simplified system of distribution cost analysis to a small sized organization.