Knowledge that Transforms

Reviews the book "Industrial Accounting in a War Economy."

The purpose of this article is (1) to point out the trend in delegating to business a greater and greater share of the burden of tax collection through the medium of withholding taxes on wages; 2) to describe the effects of such a policy on business and (3) to evaluate this development in the light of possible alternatives. Although in the past government has called upon business for assistance in collecting revenue, such activity has been of relatively minor importance in affecting the accounting routines and the operating expense of each particular business involved. Record-keeping detail expanded with the advent of the Social Security Act. Wages exempted from the act were to be recorded separately from those covered by the act. Totals of taxable wages and totals of taxes withheld from wages were to be computed for individuals and for the firm as a unit. Receipts were to be furnished to employees periodically and reports made to the government quarterly, annually and at separate dates. State unemployment laws which required the reporting of specified data at frequent intervals added to the record keeping burden. Thus arose the universal need for more complicated and detailed pay-roll records and equipment.

In placing contracts for tremendous quantities of equipment and materials needed to meet requirements of war, the United States Navy Department, as well as other government departments, used the cost-plus-fixed-fee type of contract extensively. This type of contract requires continuous audit of costs incurred by the contractor as a necessary part of the procurement and payment procedures. The performance of this audit work for all Navy cost-plus-fixed-fee contracts constituted the major portion of the work-load of the Cost Inspection Division. In organizing to meet this responsibility three primary phases required attention, the development of a sound plan of organization structure for the Washington office and for the field offices in the various Naval Districts of the country. It also required the recruiting of experienced and unqualified accounting personnel and the preparation of a codified and understandable manual of instructions for the guidance of cost inspection personnel.

Accounting is involved in practically every stage of termination. This must necessarily be so, since accounting is the science of income determination and capital valuation. Whenever profits or values are involved accounting is a must. In termination settlements, the government has adopted a liberal and practical attitude. Accounting principles need not always be rigidly applied in the final settlement. Cost principles governing termination settlements are not applied in the same manner as in settling claims under cost-plus-fixed-fee contracts or facilities contracts. The settlements are more liberal. Furthermore, termination settlements are not complicated like income tax and renegotiation. It is the desire of the government in the U.S. that war contractors, receive speedy and equitable final settlement of claims under terminated war contracts. This desire is expressed by the U.S. Congress in the Contract Settlement Act of 1944 which became effective on July 21, 1944. Provisions in the Act indicate the determination of the government to be fair and square in the settlement of terminated war contracts.

The article comments on aptitude tests for accounting students. Aptitude tests may be divided into two types. One type constitutes a miniature job-trial under standardized conditions. This type is well illustrated by typing tests, in which the candidate for a position is given a representative typing job to do and the results are carefully evaluated in terms of criteria set up in advance. This type of test is most appropriate if the individual has had some training in the field and if a combination of present achievement and aptitude is desired. An analogous but more costly approach is one in which the individual is given a trial for several weeks on the job before a decision is made about his permanent employment. Another type of aptitude test is one in which the individual is given a number of specific tasks to do under standardized conditions, tasks which have no apparent relation to the work required on the job or to the educational program, but which have been found to possess high predictive value.

Reviews the book "Managerial Control Through Internal Auditing," by Victor Brink.

Reviews the book "The Elements of Statistics," by Elmer B. Mode.

Reviews two books on trade. "Quantitative Trade Controls: Their Causes and Nature," by Gottfried Haberler and Martin Hill; "Trade Relations Between Free-Market and Controlled Economies," by Jacob Viner.

Cost accounting as such is of comparatively recent origin. Cost concepts are intermingled with expense in general, with value concepts, with economic theory, with legal decisions and statutory expression and with war emergency directives to the extent that basic cost accounting, if such there be, becomes increasingly difficult to untangle from the confused, related, but not identical strands. Costs chargeable to purchases of materials should include invoice costs plus incoming transportation, insurance, customs taxes and duties, and similar direct charges, in so far as they can be identified with the material. If they cannot be so directly identified, there is no point to forced artificial identification and they should be listed with other unidentifiable costs as part of the overhead. Returns and allowances and trade discounts are proper deductions about which there is not so much controversy. Purchases discounts should be deducted in entirety, or on all amounts above a reasonable percentage for prompt payment, say one per cent, or not deducted at all.

There is a great variation in the methods and extent of administrative supervision over local finance in the different states of the U.S. Each of the states exercises supervision to some extent. The purpose of this article is to examine the systems in use that are indicative of the better present-day conditions. It is planned to deal with only four phases of financial administration, namely, budgeting, accounting, auditing and reporting. It should be noted that there is a great variety in the name of the supervisory agency, in the appointment of the supervisory officer, in the term of office and in the salary. In most states the supervisory agency is in one of the already existing departments which is under the direction of either the State Auditor or the Comptroller. Since the agency is often in one of the department, the supervising officer is named after the department. The salary, the term of office and the method of selection all depend upon the state and upon whether the supervisory agency is a department in itself or is in connection with another department.