Knowledge that Transforms

Reviews the book "The Recovery Problem in the United States."

The executive committee of the American Accounting Association prepared and distributed in June 1936, a Tentative Statement of Accounting Principles underlying corporate financial statements. The committee attempted to set forth some of the bases upon which accounting statements rest. It was hoped that their publication would arise discussion and that a more comprehensive formulation will develop. The statement is an attempt to formulate theory, which will explain facts of accounting practice. The committee did not attempt to cover every phase of accounting theory. They limited themselves to special problems of the preparation of financial statements of the private corporation. Moreover they treated only three aspects of corporation accounting, which they classify as: the determination of costs and values; the measurement of income and the differentiation of capital and surplus. The entire statement consists of twenty propositions. Many accounting practitioners and writers have argued that it was illogical to use discounted future income as the basis of accounting valuation.

Reviews the book "Money, Credit and finance," by G.F. Luthringer, J.G. Smith and D.C. Cline.

Reviews the book "Introduction to Accounting Procedure," by John A. Schur and Manford M. Haskell.

This article focuses on the accounting for stock dividends paid. It says that legal reasoning in relation to stock dividends is drawn in part from heir known effects and implications in business practice. These considerations constitute the central subject-matter of the present study. The plan is, first, to examine the subject from the standpoint of fundamental principles, and second, to use the principles as the basis for a rational theory of stock dividends. The present article deals with the payment of stock dividends, a subsequent article will be concerned with the receipt of stock dividends. Cash dividends paid must be well under annual earnings, thereby permitting accumulation of profits in the business. In a growing business, partial retention of earnings is generally forced upon the company. This is because expansion creates need for additional funds and earnings provide a readily available source of such funds. Moreover, partial retention of earnings is a necessary accompaniment to the introduction of senior capital under a system of conservative financing.

Reviews the book "Accountants' Certificates," by James H. Wren.

Reviews the book "How Profitable Is Big Business?," by Alfred L. Bernheim.

This article presents cases which are resumes of situations of interest to accountants, arising in the work of the Securities and Exchange Commission. In each instance, a problem appears together with the solution brought about by recommendations of the Commission's staff. The names of registrants do not appear, but if further study of any one or more cases is desired, the names may be secured from the editor of the "Review." The balance sheet of a distilling company showed "Fixed Assets: Property," plant and equipment at cost. The notes and schedules referred to indicated that, of this amount, $48,343.81 represented property "purchased on a lease-purchase contract," was payable as rent, in monthly installments and "at the expiration of the ten-year period legal title is to pass to the purchaser." In the opinion of the Commission's staff, because of the nature of the contract, it was improper to designate on the balance sheet any part of the amount to be expended under the lease-purchase contract as "Property, plant and equipment" before the expiration and fulfillment of the contract.

The article discusses the need for accounting principles. The income statement for any given period should reflect all revenues properly given accounting recognition and all costs written off during the period regardless of whether or not they are the results of operations in that period. The wide distribution, of corporate securities, the inability of the vast majority of investors to judge the value of their investments by any close-range view and their dependence upon information contained in published financial statements, has placed a responsibility upon the accountants to which many of them have not yet become adjusted. According to the author, procedures so generally followed among accountants as to constitute substantial precedent are not always fundamentally sound. The extent to which a particular practice is generally accepted is hard to measure. Those who depend upon precedent are usually content with finding a number of cases to support their position without substantial effort to ascertain the extent to which other practices are followed.

Reviews the book "The Common Stock Theory of Investment. Its Development and Significance," by Chelcie C. Bosland.