Reviews the book "Price Level Changes and Financial Statements: Case Studies of Four Companies," by Ralph Coughenour Jones.

Reviews the book "Price Level Changes and Financial Statements--Basic Concepts and Methods," by Perry Mason.

The article focuses on price level changes and financial statements. In the January 1955, issue of the journal "The Accounting Review," Professor Raymond C. Dein criticizes severely proposals that adjustments be made to correct accounting statements for shifting dollar values. A prominent object of his attack is Supplementary Statement Number 2, Price Level Changes and Financial Statements, promulgated in 1951 by the Committee on Accounting Concepts and Standards of the American Accounting Association, of which the writer was a member. No doubt the Statement is subject to criticism and disagreement. This article is written, in reply to Professor Dein's criticisms. Professor Dein states that the literature of accounting since the end of World War II must certainly be unique among professional literatures in at least one respect, that the vehement insistence by respected members of the profession, both practicing and academic, that accounting reports in this period of rising price levels have been and continue to be incorrect and misleading.

The article focuses on the entity concept in accounting. Of necessity accounting is practiced within a framework of basic assumptions. These condition in various manner the resulting product. Holding primary rank in the framework of assumptions is the view that the business undertaking is an entity. As commonly set forth the entity view holds the business enterprise to be an institution in its own right, separate and distinct from the parties who furnish the funds, which make possible its operation. Strongest support for the institution in its own right assumption is held to exist in the case of the corporation to which the state grants the right to hold legal title to property, which the state taxes as an individual, and which holds the legal right to sue or be sued. The accounting concept of entity does not wholly rest upon the existence of legal entity, however. The entity point of view is held to be equally applicable to sole proprietorships and partnerships which lack the characteristic of legal entity. In the case of consolidated statements, also, the entity whose status and whose success or failure are depicted is an economic entity whose scope often encompasses numerous separate legal entities.

The desire to use only objectively recorded figures has had great influence in the development of the rationalized modifications. To accomplish adjustment of the income measurement what appears to be needed under currently accepted accounting thinking is ingenious argument supporting manipulation of the use made of recorded figures. When in the twenties and thirties management in response to pressures, endeavored to reflect on the books and in the statements the replacement values of assets, the accountant, to say the least, was disturbed. In the current experience, although he prides himself that he is maintaining traditional appearances, the accountant has to considerable extent capitulated. The capitulation, however, is subtle in that it is accomplished through modification of the older procedures, within the overall cost process. it is now said that accounting is a historical process but the history which the statements summarize is a rationalized history and not the history of the items and the events which the statements are intended to depict.

This article presents a report by the retiring president of 1952 of American Accounting Association. The president said that the Association's members need to play an active role in the development of the profession, not only because they have much to contribute, but also because their own vitality is thereby increased. It is requisite that the Association's members active in the field of education be integrated into the profession and the profession's progress. No profession is satisfactorily developed without a soundly integrated educational foundation. The Association represents a vehicle through the medium of which accounting educators can express themselves, can make contributions to accounting progress, and can secure a high degree of professional integration. The Association continues to enjoy cordial relations with other professional organizations active in the accounting area. Effort was made during the past year to develop somewhat closer working relationships between the Association's committees and the committees of other professional organizations. A substantial number of new members has again been added to the Association's membership list, although associate memberships, reflecting the decrease in enrollments, continue to decline.

The article focuses on the usefulness of training programs for the public accountants staff. During the period of the world wars both the armed forces and industry made extensive use of special training programs to meet the challenge of new demands and to solve the problems created by the sudden loss of experienced employees. It was demonstrated that by the use of proper training methods individuals could be brought to the stage of respectable performance in relatively short periods of time. Millions of individuals were trained to meet the multiple demands of a modern army and millions of others with little or no experience in the mechanical arts were trained to take their places in industry. This was done with such efficiency that in a period little longer than that which it normally takes an individual to acquire a college degree an important part was played in defeating an experienced and seasoned enemy. While it is true that assistance was given by pressures and incentives that do not ordinarily exist in more normal civilian activities, accomplishments in many situations were little less than phenomenal.

The evaluation of inventories is of considerable importance for purposes of both the balance sheet and the income statement. In the former, the inventory evaluation influences the current-asset total, the grand total of all the assets, and the surplus figure; in the latter, the inventory evaluation materially influences the figures for cost of goods sold and for net profit. The general rule for purposes of balance-sheet evaluation is that assets should be exhibited at cost, whereas for purposes of the income statement the general rule has held that evaluations should be on such a basis that profits (and operating business losses) will be taken up only on the basis of sales. These rules are interrelated, as well as consistent with the concept of historical accounting. Departure from them represents a violation of realized, experiential accounting and must be Justified on other grounds. Notwithstanding these general rules it has long been. Considered good practice to evaluate the inventories on the basis of cost or market whichever is lower, thus frequently exhibiting the asset at less than cost.

This article says that income in general, is a variable concept concerning which there has been considerable debate without a great deal of final agreement. Within the framework of historical accrual accounting, however, if allowance is made for variations in procedure and for different methods of computation, the concept of income appears to be accepted as indicative of something fairly specific. There is ground for believing, nevertheless, that this is not an entirely satisfactory concept of the income situation. In economics and in the vernacular the term "income" usually refers to goods and services. The emphasis is upon assets, often more specifically upon cash, rather than upon the resulting technical accounting increase of a specific equity. Expense and revenue items, in their deeper meaning, have reference to cash effects. From the standpoint of historical accounting, gross income, in this sense, is the amount of cash received and to be received as a result of the period's sales.

Because of its relation to both law and economics accounting contains a number of challenging problems. In the solution of these the accountant is influenced largely by the requirements of the basic philosophy and the purposes underlying and supporting his own field of endeavor. In some instances the legal point of view may dictate the decision, as for example in the division of corporate invested capital into capital stock and capital surplus; in other instances the economic or business point of view may be the influential factor, as when a building purchased on the contract plan is recorded as an asset even though title has not been acquired. In the main, however, accounting has its own story to tell. Where that can be done without too gross a violation of either of the supporting lines of endeavor the path of action appears to be clear. The accountant is at least free to go behind the formalistic and somewhat mechanical interpretation of the twin handmaiden to accounting that he represents.