Knowledge that Transforms

Accounting has long been one of the most popular courses offered in our colleges, and this in spite of the difficulty of the subject matter and the high percentage of failures among the students. With a proper course of study and with competent instructors, the study of accounting offers many real benefits to the serious and diligent student. Accounting as a subject contains a great amount of factual information of value to students interested in general economic affairs and business practices. Then too, accounting is a scientific method of analysis and study of business activities. Accounting provides a valuable discipline and method of study requiring a careful and accurate analysis of business situations, neatness and precision in recording the effects of transactions, and logic and integrity in presenting and interpreting the results of financial activities. Accounting combines the mental discipline of mathematics and logic and at the same time offers a course rich in practical information.

The effect of inflation on accounting procedures, and in particular the determination of income, has elicited voluminous literature concerned with the general aspects of the problem. Accountants, in general, have approached the problem with a measure of restraint caused by the confines of basic accounting principles, others have agreed to make the break from conventional accounting practices but have, for the most part, offered nothing more than theoretical considerations while admitting the need for experimentation with methods designed to reflect price level changes. The major emphasis of the problem of measuring real earnings as contrasted to book earnings has centered upon the accounting treatment of two types of assets, inventories and fixed assets. The experimental case study discussed in the article, concerned only with fixed assets, presents a method and indicates the need for adjusting the historical cost of land and depreciable assets and their corresponding depreciation reserve for price level changes. The objective of the presentation is not only to effect a methodology but also to show the significant difference between cost measured in historical dollars and cost measured in units of purchasing power.

The article focuses on the various role of public accountant in helping with the various jobs of the management. Management has three main jobs. These are to operate its enterprise at a profit, to make its enterprise a good place in which to work and to operate its enterprise and govern its own conduct so as to serve society most effectively. If the public accountant is to be of most possible aid to management he must help, if he can, with all three jobs. For management, and for the accountant too, this raises questions of training, of competence, and of desire to do all three jobs equally well. In considering the public accountant's general role in helping with these three jobs, there are two premises which underlies the discussion. The first is that any socially undesirable feature in the free enterprise system preferably ought to be alleviated through self-improvement, and the public accountant has a social role in expediting such self-improvement, particularly in order to forestall further governmental restrictions. The second premise is that the concept of independence is the most important consideration in this social role of the public accountant.

The article focuses on depreciation accounting. With the marked price fluctuation of the past 15 years, there has been a wealth of material written by the economist, the accountant, and the business executive concerning the adequacies and inadequacies of presently accepted accounting methods of determining income. In regard to this problem, a study was made in order to determine the consequences of price level changes on one element of cost-depreciation and thereby their effect on net income. An effort has been made to demonstrate how net income would have varied for a few representative firms if depreciation had been calculated on a current dollar basis rather than a legal dollar basis. In the selection of industries for the study, the author strove to select a group of firms that would be representative of a diversified segment of the economy rather than a group which would be representative of a proportional share of national output. The year 1937 was chosen as the initial date and the assumption was made that all fixed assets that appeared on the annual statement of December 31, 1937, were acquired in 1931 or purchased at a time when the price level was comparable to that of 1937.

Reviews the book "Statistical Inference," by Helen M. Walker and Joseph Lev.

The article presents an analysis of the implications social concept of the firm upon accounting theory and suggests a supplementary method of income reporting. In common with other economic organizations, the enterprise purchases input factors and produces goods and services which in turn are sold in the market. As has been developed previously, if the enterprise is considered to be an institution, its operations should be assessed in terms of its contribution to the flow of output of the community. If the income generated in the enterprise is to be analyzed on the basis of social considerations, then the traditional type of income statement is insufficient. The purpose of the value added concept of enterprise income is the measurement of the flow and its division among the participants in the organization.

Reviews the book "Profit Measurement and Price Changes," by K. Lacey.

Reviews the book "Monatt's 1954 Guidebook to New York State Income Tax," by Samuel M. Monatt.

The article focuses on fund statement practices in the context of the U.S. and Canada. Textbooks almost unanimously have adopted the concept of funds as synonymous with working capital. The funds concept has been variously conceived as encompassing cash, marketable securities, quick assets, net free cash, current assets, net working capital, or all balance sheet changes. The funds statement is the only major accounting report that is not predicated on the income approach. Conventions of permanence of the accounting entity, or of a static monetary measurement device do little harm to its basic framework. The funds statement is predicated on the funds basis with income considerations essentially alien to it. The funds basis is concerned with the availability and use of current purchasing potential by the company. Differences of opinion as to what best represents this current purchasing power have led to the use of various concepts of funds. Differences in objectives have been partially responsible for the extensive use of alternative concepts, since the funds concept used must be consistent with the objectives of reporting.

The article focuses on the concept of uni-fied accounting. The accounting problems of small and medium-size business cannot be solved by gimmicks. The techniques used in many large firms are still too costly, too experimental, too dependent upon a degree of routinization not yet achieved to be adaptable to the needs of small and medium-size business. It is in this area that the concepts of what has been termed Uni-fied or Simplified Unit Accounting have developed. Production costs were reduced in our factories, and distribution costs in wholesale and retail establishments, through utilizing certain techniques. In production, a basic technique has been to use a minimum number of uniform parts to form a maximum number of differentiated products. Both process and product have been organized to this end. In both areas, a certain degree of work organization and specialization of functions has helped cut cost. The concepts of Uni-fied accounting are merely a restatement of concepts utilized in manufacturing and distribution.