Knowledge that Transforms

A study of recent accounting literature discloses a very limited use of ratios and percentages to determine the effect of changes in costs and output on the final unit cost. Most of the literature, especially in the case of budget forecasting, approaches the problem by showing the changes in costs and output in terms of absolute amounts. For this article the problem and solution method is believed to be the most succinct manner for presenting this material. The first problem will show the effect on unit cost of various changes in total cost and unit output, the second will deal specifically with the determination of unit meal cost when changes are contemplated in total meal costs and number of meals served, and the third will show the unit output necessary to cover increased costs of production if unit cost is to remain the same. In all these problems, unit costs will vary in inverse proportion to output. Cost and output relationships can be measured by percentages and ratios. The article presents a formulae, which can be used as an expedient device to determine the effect of variations in cost and output relationships.

Reviews two books "New Auditing Techniques" and "Audit Programs and Working Papers," by Maurice E. Peloubet.

This article focuses on education for public accounting on the collegiate level. There is little opportunity ordinarily for comparing an accountant to an apple dumpling or to a can of tomatoes, but it can be said without hesitation that in either case the quality of the raw material can have a great effect on the finished product. In the case of the accountant, however, there are some qualities which are very difficult to detect or evaluate by casual observation, and which are nearly impossible to create if they are not present in the undeveloped material. Either an institution or an individual in outlining plans for offering or receiving an education for public accounting should think of the objectives of the educational processes. The objectives can be assembled after one has given much thought to the types of duties and contacts of the accountant in his professional world from day to day. In literature, sciences, and some of the social sciences, however, the accountant will find it necessary to renew his acquaintance with some phases thereof from time to time in order to feel at home in a discussion that might arise in some of his numerous contacts.

The Smaller Practitioner; This thinking gives support to George O. May's statement that "Accounting has developed from a service department of business to become a social force." It also suggests that public accountants are aware they must accept new obligations to society as their technology becomes a social force. They have clearly accepted the duty to get qualified people into the profession. The support given to university education in the subject and to the work of providing suitable technical examinations and of fostering effective legislation is a part of this activity. So too, is the stress now placed upon selective recruiting and the development of a program of personnel testing. It is also a social obligation, as well as sound firm policy, to aid staff people to attain full competence. To this end some firms provide special training for beginners and diversify the experience as an aid to their professional growth. These small firms, located for the most part in the smaller business communities, would often prove to be missionaries for good accounting in business.

Since business first adapted for its own use the budget idea which had been developed as a means of organizing and controlling the financial affairs of governments, several types or styles of budgets have been developed. To a limited extent, the appropriation type of budget common to governmental budgeting has been carried over into business. This type of budget involves the appropriation of a definite amount for a prescribed purpose and the limitation of expenditures to the amount appropriated. Based on a recognition of the difference between fixed and variable costs, the flexible or variable budget is a control device which recognizes that different expense allowances are necessary for different rates of activity. Comparison of the budget figures thus determined with the costs actually incurred provides a closer control than is possible when the cost allowances are based on forecast volumes which differ from the volumes actually attained. The flexible budget idea has been applied principally to the control of departmental overhead.

When the accountancy graduate obtains his first job it is most likely that his employer will tell him to forget what he learned in college and to get adjusted to accountancy as it is practiced. This statement by the employer is, of course, only a conversational exaggeration, for he does not really mean that everything taught in the accountancy courses is wrong. But from observing the equipment of the college graduates in his employ he gets a pretty definite impression that what goes on in college courses is far from what might be desired. It is the opinion of the writer that there are two causes for the current discrepancy between the academic world and the business world, faulty text material, and lack of standards for teacher qualifications. The existing textbooks either were written about a quarter of a century ago or were modeled after those written at that time. The fundamental defect in these texts is that they are governed by the fallacies inherent in the balance-sheet approach. The most important qualification of a teacher of accountancy is the ability to explain and expound accountancy as it is practiced.

This article focuses on the private or public accounting. Colleges offering courses in accounting have lately been besieged by applicants for admission. For the most part those desiring to enroll are honorably discharged veterans whose educational programs were interrupted by induction into the services. Among those accepted many are taking refresher courses and all are faced with the perplexing problem of choosing sooner or later between a position in the accounting division of a business, institutional, or governmental activity and a career in public accounting. Any statement regarding the advantages and disadvantages of the two accounting fields must be related to the temperament dandy the ultimate goal of the aspirant In business organizations accountancy-trained persons find their principal work opportunities in positions leading to cost accountant, internal auditor, chief accountant, credit executive, controller, and treasurer. In governmental departments investigative accountants, tax auditors, and analysts are in demand. The ultimate vocational opportunity in practice is that of staff supervisor and principal.

This article says that accounting and accountants had their beginning in bookkeeping and bookkeepers. Modern bookkeeping apparently first came into general usage in the fifteenth century in response to the rapidly growing commerce and trade conducted by proprietorships and partnerships in the Italian republics. The bookkeeping of that time, although basically the same as present-day bookkeeping, was very simple, as suited the needs of business, and was based on a few simple rules of debit and credit and recording procedure. Theory and accountants did not exist, it was necessary only that bookkeepers of the time be accurate, methodical, and attentive to application of the rules. Although the profession of accounting, even in its early days, included among its members many men with broad liberal education, mans' of its members for the first quarter of the twentieth century were self-taught as to the technical aspects of their profession. With the growth of large corporations and the increasing intricacies of corporate accounting, the larger corporations found that the accounting problems incident to their operations required employees, such as comptrollers, auditors, and treasurers, with a higher type of training and education than the bookkeeper.

In this article the authors comment on an article related to placement of taxes in income statement, which was published in an earlier issue of the journal "The Accounting Review," as of January 1946. There are several kinds of revenue deductions which are nonetheless broadly in the same pew when it comes to the over-all calculation of net corporate income. First of the three classes of deductions is cost, in the sense of goods and services definitely consumed in the process of production. Second is losses, in the sense of outlays of one sort or another which have lost all significance so far as future operations are concerned, even though not having made any recognizable contribution in the past operations and last is taxes, which is payments to governmental units as computed on various bases and representing services only in the vague general sense in which government makes a contribution to the carrying on of the particular business enterprise. All of these classes of deductions are in the same boat when it comes to the question of determining profits.