The U.S. Investment Company Act of 1940 brings one more branch of private finance within the fold of governmental regulation. The accounting provisions of the Investment Company Act do not ignore the specific weaknesses which were disclosed in the Securities and Exchange Commission's (SEC) study of the industry. The Act emphasizes the public aspects of investment company accounting and reporting practices and in most cases leaves to the SEC the drafting of definite standards to correct known weaknesses. Many of the sections of the Investment Company Act touch upon accounting practices and reports, and numerous financial practices are permitted only if certain tests are satisfactorily met. Such tests are usually based upon the results shown by accounting reports. The impression created by the accounting provisions of the Investment Company Act is that investment accounting and reporting standards are improving, and that the function of the SEC is first to bring the stragglers up to the minimum found adequate for investors, and then to encourage improvements. These aims will require numerous rules and regulations

Time and again the prosperity malpractices of corporate management were the subjects of erudite discussions. Moreover, the courts have always had a tendency toward setting up rules of law which they felt would protect the small absentee owner. Perhaps this depression philosophy may be said to be accountable for the desire to limit the capital raising activities of those large corporate entities in future prosperity periods, who had demonstrated themselves to be given to faulty procedures during the prosperity era of the twenties. But it must be emphasized that there was a trend toward such financial regulations even during the preceding prosperity period. Furthermore, during this period there were evidences indicating that the accountants responsibility would likewise expand and increase under this financial control philosophy. Perhaps the first forecast of accountants' increasing responsibility was the Ultra Mares case which began early in 1924. After 1922, however, corporate management turned to selling securities in order to secure the capital needed

Business management must establish policies to distinguish between capital and revenue expenditures in order to maintain and successfully operate an accounting system, which provides for the classification and control of depreciable fixed assets. Certain standards must be devised by accounting or engineering department in order to separate capital from expense items. The adoption of such policies and standards is more important now than ever before because of management problems involved in fulfilling defense contracts. Accurate costs have to be determined whether or not the type of governmental supply contract is described as a fixed-price, cost-plus-a-fixed-fee, or cost-plus-a-percentage-of-cost contract. Emergency facilities, including land, buildings, machinery and equipment, used for the purpose of completing a defense contract can be amortized over a period of 60 months if certain government regulations and requirements ate followed. Therefore, it becomes necessary for the management to distinguish carefully between costs coming under a supply contract and costs involved in capital expansion

The article discusses the basis for accounting principles. The concept of a government of law as contrasted with a government of men is one of the best expressions of the role of principles in human affairs. However, this familiar legal dictum refers to a highly specialized application of principles. It assumes a systematized body of law which applies only to those relations between human beings which are regulated by the authority of a politically organized society. At the back of any such system of law lie general principles which were formulated so early in the evolution of human society that we cannot determine their origins. These general conceptions or principles serve as standards for the judgment of human conduct. Some of them are justice, fairness, truth, kindness, friendliness and beauty. There are many of them. They are so general in character that they defy exact definition. Systems of law and types of government come and go; the things which men believe to be just and beautiful change, but these general conceptions persist from age to age