This article describes legal and economic concepts of the balance sheet in Germany. he balance sheet is essentially a scheme for classifying property and capital, and is not vitally concerned that different amounts of property came in to the business at different dates. Therefore those who hold to these views are faced with no problems of valuation. Knowledge of current values for assets and capital is not absolutely essential to management. Although for certain purposes current values may be needed, it is more important to have a proper classification of the items of property and capital and to preserve the comparability of successive statements. A dynamic balance sheet must be supreme for the use of the manager because his decisions are dictated by his struggle for profit. The clear and concise ideas of writers who take the management point of view of accounting point out the proper course to follow. Legal requirements are obviouslyto be satisfactorily met, but the manager'svaluation problems can be best solved bythe application of economic principals.

Good accounting records which show exactly what has happened in a given business are of interest as historical documents, but for years it has been apparent that they alone are not sufficient for the management under the intensely competitive conditions which have to be faced. The situation in industry following the World War made it still more noticeable that well- prepared plans for the future, based on accounting records and all other pertinent material, were fully as necessary as a knowledge of what had passed. The budget, which had been used in public finance and by some few businesses, now attracted more attention from industry than ever before. Indeed it was even hailed as a thing entirely new which would prove to be a panacea for the ills of business. During the past decade its development has been fairly rapid and widespread. The industrial groups whose trade associations have been most active in promulgating the budget idea have made the most progress in budgetary control. Some concerns still have no formal budget, others attempt to budget only part of their activities, whereas still others endeavor to budget all operations in detail.

If the capital invested in an asset is classified as physical capital, then unrealized "appreciation," which is commonly meant to express the monetary excess of net reproductive cost over net original cost, is all capital. If capital is classified as real capital, then appreciation is capital to the extent of the amount required to express in the current general price level the net original cost of the asset, and the remainder of the appreciation is income. And if capital 18 classified as nominal capital, then the appreciation is all income. Stabilized accounting prefers to restrict the meaning of appreciation to the excess of net reproductive cost over net real cost. If this view is accepted, the orthodox conceptions of appreciation must be rejected. Appreciation becomes converted from unrealized into realized when doubt with respect to its positive existence is dispersed. This happens most often as the result of sale or depreciation of the particular asset. Although the equalized original cost of an asset, and the accumulated depreciation thereon, ought to be shown in some way on the books and financial summaries, the cost of reproduction need not be shown. If, however, as should usually be desirable, it is shown, the excess of the depreciation on reproductive cost over that on real cost is most satisfactorily treated when charged against the unrealized appreciation. But if the depreciation charged to operations must be based upon cost of reproduction, the resulting realized appreciation is, in essence, a correction of current profit and loss although, where necessary, it may satisfactorily be entered in a realized-surplus reserve.

An extended period of reduced business activity, with its attendant financial difficulties naturally refocuses the attention of accountants on the underlying problems of valuation and income and surplus measurement. One of the questions receiving increased attention is the old problem of the distinction between operating costs and non-operating charges or losses. In times of depression such as the present, it is noticeable that many business managements, in their desperate anxiety to make a showing, are waking up to the fact that there is some basis for drawing a line between operating charges and non-operating losses. It is the business of the accountant to preserve every legitimate distinction, to bring out every angle of the situation that has a vital bearing from the point of view of any interest concerned, but it is also his business, as far as lieth in him, to see that no improper use be made of this approach to the treatment of business transactions and their results. Operating costs are charges which can be logically imputed to the regular activities of the enterprise during a particular period.

Reviews the book "Introduction to Accounting," by Dallas S. Bolon and George W. Eckelberry.

Reviews the book "Principles of Auditing," by Eric L. Kohler and Paul W. Pettengill.

Reviews the book "Accounting for Savings, Building, and Loan Associations," vol. 1, "Savings, Building, and Loan Bookeeping," by John R.B. Byers.

Reviews the book "Encyclopedia of Banking and Finance," by Glenn G. Munn.

Reviews the book "Real Estate Valuation," by Frederick M. Babcock.