Knowledge that Transforms

This article focuses on joint cost analysis as an aid to management. In this particular instance the joint costs of production are allocated between the joint products according to the value method. In the short run certain expenditures management, buildings and machine, etc. are fixed--their incurrence is compulsory whether or not economic activity is undertaken. On the other hand, there are some expenditures which, in the same period are variable with output. The inclusion of a proportion of fixed or overhead expenditures in short term cost calculations is merely an attempt to bring the long term into the short. The expediency of transferring resources from less to more profitable lines of economic activity is unquestionable. The difficulty which arises in this particular case is of deciding which is more profitable. This approach would indicate the more profitable of the two alternatives, but even though the purchase of the machine may appear more economic, a further consideration remains, namely, whether the resources released by discontinuing the special processing of product are sufficiently great to proceed with the planned scale of investment.

This article focuses on accounting in executive programs. Teaching of accounting in these management programs has required and will continue to require something of a redefinition of what it is that we are teaching and for what end. A partial solution to the problem of obtaining a balanced approach to the accounting segment of these programs seems to lie in the fact that management personnel bring real on-the-job experiences to the classroom. According to the author, much of the content of accounting can be effectively taught apart from marketing or personnel administration. But in a discussion of planning or control, accounting is only one of the many elements involved. Obtaining a working familiarity with accounting involves the absorption of a fairly substantial and reasonably well organized body of knowledge. The teaching of accounting should come from illustrations used in the marketing, production, and other areas. The author regards all accounting data as basically a reflection of a variety of business operations.

Reviews the book "Appraisal and Valuation Manual," by Maurice R. Scharff, Stuart F. Kosters, John L. Vaughan, Jr., Sigmund Rothschild, Myron L. Matthews, Larry Smith, Karl Van Leuven, Jr., Nelson E. Finch, Leon W. Ellwood and S.O. Kaylin.

The problem of the proper determination of stockholder income hinges upon the concept of the nature of the corporation. In the years that followed, the idea that the corporate form of enterprise constituted an artificial being, in itself apart from its constituent members, grew to a preponderant position not only in legal status, but in accounting and economic thought. If economic significance is measured in terms of total dollars of assets committed to corporate enterprise, the close or private corporation occupies a distinctly secondary position. It is rather the public or widely owned corporation with which we must concern ourselves. The relationship between the corporation and most individual stockholders is in the case of the public corporation only an indirect and ephemeral one. A few owners of concentrated stockholdings exert, as members of the board of directors, a direct influence on management; stockholding for most individuals, however, is just another form of investment. The corporation's financial independence is demonstrated by the fact that about two-thirds of corporate funds are derived from internal sources, undistributed profits, and depreciation and depletion reserves. Furthermore, individuals own not all stock. Corporations own stock of other corporations and often form complex networks of affiliation.

The article discusses the goodwill aspect of valuation of items appearing on the financial statements of a business concern. The definition of goodwill as presented by accountants and the courts have been given consideration. Among them is the definition given by T.H. Sanders, H.R. Hatfield and U. Moore in "A Statement of Accounting Principles," as the excess of the total value of the assets of a going concern over that part of the value which can be allocated to specific assets. All legal cases on the subject agree that the goodwill of a business, though intangible, is property which may be sold as a legitimate asset if it is substantial and may be paid for in capital stock. A cardinal principle in the accounting for goodwill is that it should be shown on the books only when purchased, and then at no more than such purchase price. The article discusses the question whether the cost of extensive advertising, expected to yield benefits for a long period may be capitalized as an asset. It discusses the accounting principle that in transactions the value of goodwill is based on an accurate estimate of prospective net earnings and the amortization of goodwill after its acquisition.

Reviews the book "Statistical Methods," 3rd ed., by Frederick C. Mills.

This article focuses on accounting for guaranteed wage plans. Most of the wage leveling plans are basically employee withholding plans whereby some of the earnings of the employee are withheld and are paid to him later when his earnings are low. The obvious disadvantage of this plan lies in the employee's reluctance to having part of his earnings withheld. The majority of wage leveling plans have therefore created little employee enthusiasm, for they are little more than savings plans, supervised by the company. A major difference between the leveling and the minimum-guarantee type of plan is the number of employees that are covered. Where the wage process is primarily one of leveling wages, there is no excessive cost to the employer for time not worked. One of the most complex accounting problems arising out of recent developments in guaranteed wage payments is concerned with the special exemptions allowed for the payment of overtime premiums under the Fair Labor Standards Act. The record-keeping process is further complicated if the company is to take advantage of the overtime premium relief provisions of the Fair Labor Standards Act.

Reviews the book "Government and Business," by Vernon A. Mund.

Reviews the book "Cost Accounting and Costing Methods," by Harold J. Wheldon.

Reviews the book "Federal Tax Practice," by Laurence F. Casey.