Knowledge that Transforms

Reviews the book "Financial Intermediaries in the American Economy Since 1900," by Raymond W. Goldsmith.

This article presents information regarding the activities of several universities and colleges of Accounting. In the Claremont Men's College, George Gibbs has been elected to the Board of Examiners of the American Institute of Certified Public Accountants (CPAs) for a term of three years. Gibbs continues his membership on the California State Board of Accountancy. In Northwestern University, Erwin E. Nemmers, formerly of the University of Wisconsin, has been appointed associate professor in the Graduate School of Business Administration. The members of the accounting department met with partners and managers of Arthur Andersen & Co. at a dinner meeting in January 1958, to discuss matters of common interest to educators and practitioners. In the Long Island University-C. W. Post College, Charles H. Zwicker has been appointed lecturer in accounting. The college is now for the first time offering a major in accounting. In the New York University, Bruce Futhey has been appointed to membership on the committees on Education-Personnel and Governmental Accounting of the New York Society of CPAs.

Reviews the book "The National Economic Accounts of the United States."

The proof of surplus accruing to the parent company as presented in the article deals with two types of problems: the parent company owns a controlling interest in a subsidiary company for a portion of a year and the subsidiary owns no stock of the parent, and the parent company owns a controlling interest in a subsidiary company for a portion of a year and the subsidiary company owns a portion of the stock of the parent company for a greater portion of the same year. When the cost method of carrying the investment account is used, the investment account remains unaffected by profits, losses, and dividends of the subsidiary. While increases and decreases in subsidiary net worth as a result of profits and losses are disregarded on the books of the parent, the declaration of a dividend by a subsidiary is recorded on the books of the parent company by a debit to dividends receivable and a credit to dividend income or earned surplus. Receipt of the dividend from the subsidiary results in a debit to cash and a credit to dividends receivable.

Distribution costs have certain unique characteristics that resist the refined tools of production accounting. Production accounting deals with quantitative, mechanical functions capable of physical measurement. Distribution accounting is confronted by qualitative functions incapable of finite measurement. The challenges confronting distribution accountants are the selection of functions, the allocation of primary expenses to functions, and the determination of service units. The selection of functions depends on the degree of cost control and cost responsibility desired. Accountants and distribution executives should determine the functions jointly. The task of subdividing primary expenses into functions becomes involved when an expense is common to one or more functions. This accounting trouble-area is frequently labeled "joint-cost problems." The application of production accounting tools to distribution problems proved inadequate and exposed the need for specialized distribution accounting techniques.

Reviews the book "Interpretation of Accounts," by F. Sewell Bray.

In this article the author discusses about the importance of American Accounting Association for accounting institutes. The author shares that the association has grown rapidly in size and in prestige. It represents an intellectual influence in accounting far greater than mere relative numbers would indicate. He proposes that in any event, the nature of accounting profession, along with that of medicine and law, is such that universities will be the main reliance for organized, methodical teaching of technical subject matter. This is one reason why the universities and the teachers of accounting are increasingly important to practitioners. He further adds, that another reason why this association is important to the institutes of accounting is that it helps in dealing with a variety of problems. The demands for the services of certified public accountants have widened more rapidly than most of us foresaw. At the same time, the quality of the service has increased in depth. Consequently, the belief as to what is true regarding the profession's growth can easily lag behind the dynamic reality.

In this article the author, a practicing accountant, gives his views on need of an accounting court. As an accountant his work in reporting income to owners of businesses is so practical that it is equivalent to food and rent to the people he reports to. The author also states that the financial statements of a company must be said in a brief paragraph. Usually the companies are very critical of accounting principles when these so called principles are unrealistic, inconsistent, or do not protect or distinguish the scrupulous management from the unscrupulous. Shareholders want the financial statements prepared on a basis comparable with other companies in the same industry or in other industries. Thus, the idea that accounting principles meet the test of public needs, even though they are not consistently applied among companies, violates the very purpose for which the statements are used. According to the author, a practicing accountant must have a definite explanation of the utility of every accounting principle to be observed if he is to serve a professional purpose. There is no place where the basic criteria of accounting principles can be brought to issue. This is the reason for the need of an accounting court.

The article discusses the content of a training program in internal auditing. An internal auditor is an employee of a particular firm. The internal auditor helps assure the accuracy of financial reports. He functions as an element of management control, reviewing and appraising other management controls to make sure they are operating according to plan and in an effective manner. Textbooks, case problems, and other materials with which to teach a course in internal auditing have been prepared over the years by The Institute of Internal Auditors and its members. Current practices are reported in the Institute's quarterly journal, The Internal Auditor, and in the published proceedings of its annual conferences. The available material is more than adequate to provide a challenging course in internal auditing. Moreover, many teachers who recognize the desirability of the accounting student learning something about internal auditing are convinced that the required amount of knowledge can be presented in a lecture or two in the basic auditing course. Such coverage may possibly be sufficient to alert the prospective public accountant to the existence of the internal auditor and the necessity of reviewing his program on an audit assignment. But it is insufficient to present the philosophy and responsibilities of the growing field in internal auditing.

Reviews the book "Historie et doctrines de la comptabilite," by Joseph H. Vlaemminck.