Knowledge that Transforms

Training for the public accounting profession is a continuing process. An accounting curriculum that is not up to date and does not provide men who are qualified to meet the current problems of public accounting practice is one to be avoided at all costs. Many public accounting firms today show more real concern over their social responsibilities and opportunities for real service to business than could be found in a group of typical accounting professors. The leading public accounting firms are today looking for men who have been broadly trained, who have a full understanding of the social responsibilities and standards of conduct which are required of those who enter the public accounting profession, and who are qualified to render to clients real services far beyond the scope of the ordinary audit. The author thinks that the public accounting profession may now be at that stage of growth and maturity where it would be glad to have the teaching profession provide training for various levels of public accounting responsibility and a limited amount of training along more specialized lines.

One of the chief problems that concern the average taxpayer in the U.S. is that dealing with income taxes. The satisfactory solution of his Federal income tax puzzle will, of course, have its favorable concomitant effects on other related taxes and business problems. If the taxpayer can avail himself of a bona fide transaction whereby the net profits can be divided, the resultant saving to the recipient, arising through the application of lower graduated surtax rates, becomes obvious. One tax-saving expedient often encountered is the legitimate family partnership. Spreading the taxable income invariably results in tax saving. The author has offered suggestions which may be helpful on the subject of acceptable intra-family arrangement as a tax-saving device. One suggestion is that a partnership certificate should be drawn with meticulous care and be duly executed according to legal requirements. Copies of returns for income and all other tax purposes relative to the partnership business should be available.

The article presents information on statistical uses of accounting data. The distinction between bookkeeping and accounting is a significant one. Bookkeeping can be defined as the procedure used in recording business transactions. Accounting is the organization and analysis of the records. From the statistical point of view this division of labor can be compared first with the posting and computations of statistical data, and second with the collection and interpretation thereof. Many other valid parallels can be drawn between accounting and statistics. Both deal with figures, both require analytical skill, both apply to their data highly specialized techniques. Accounting demands that debit and credit entries balance to the last cent. Statistics is content with nearest thousands or even million depending upon the size of the figures, because the statistician's work is largely estimating for the purpose of formulating policies and action. The accountant, trained to exactitude, may not understand the statistician's tendency toward approximations.

The article discusses the advisability of discarding a fixed asset which can still be used and which may still be capable of earning profits and substituting for it a newer model. The author further states the fact that depreciation and obsolescence are sometimes treated as separate problems. If it is no longer wise to use an asset because new methods produce greater profits, then that asset has only a scrap value, it may have depreciated in use or it may have been used hardly at all, but it is obsolete, and must be written off. An asset is obsolete if the prime costs of using it are greater than the total costs of equivalent production using a new asset in its place. Businessmen may hesitate before scrapping an asset because it has become obsolete in the sense in which the word is defined above. Conditions may change and, unless the margin of benefit is considerable, it will be advisable to wait until the benefit appears to be permanent. In competitive industries, a failure to scrap old equipment may lead to heavy loss because a lower selling price will soon be fixed, based on the costs of production by the new method.

The installation of efficient statistical accounting procedures in an aircraft factory poses problems for the solution of which a consideration of what is being done in other lines of business is of primary value. There are certain fundamental theories which apply to all classes of industries. The aircraft industry is only a specific case in the application of these fundamentals. The problems of the aircraft industry are not unique, they are merely variations of the production problems found in many other industries. The aircraft industry is best represented by a combination of the automobile business and a job shop business. The aircraft industry manufactures a small quantity of a large variety of parts. In addition to this small quantity production, the aircraft industry must be ready, at a moment's notice, to change the design of the product for tactical reasons. Another item that affects the aircraft industry more than any other is the weight of the product. Parts are often made at great expense just to reduce weight. It is thus readily apparent that cost methods of different manufacturers require the application of different manufacturing accounting techniques.

Reviews the book "Depreciation of Group Properties," by Robley Winfrey.

Reviews the book "Ways to Teach Bookkeeping and Accounting," by Harvey A. Andruss.

In 1796, writer Edward Jones's "The English System of Book-keeping" was published in Bristol. The first edition contains a list of over 4,000 subscribers resident in all parts of Great Britain. The Bank of England and the Honourable East India Company each subscribed for five copies. The author is said to have profited to the extent of 25,000 pounds from his invention. His system is stated to have been widely used in both Great Britain and the U.S. It gained an international reputation in a short while, and is probably the only English work on accounting. The publication of the book was preceded in 1795 by "An Address to Bankers, Merchants, Tradesmen and others, intended as an introduction to a New System of Book-keeping." This address contents reproduced as an Introductory Address in the main work, sets out in the author's compelling style faults, demerits and positive dangers of the existing bookkeeping methods, both by single and double entry, without so much as giving a foretaste of the magnificent new system about to be made known to the long suffering commercial world.

It would be a serious mistake to underestimate the importance of money substitutes in medieval and early modern times. The Italians especially were clever in replacing specie by other devices in the settlement of debts. Among merchants the setting over of debts was a common practice despite the absence of negotiable instruments. Local payments were often made by transfer in bank or by transfer of credit on books of an ordinary merchant or a merchant-banker. Transfer orders were given not in writing but by word of mouth. Such banks existed in most parts of Europe however, places where no transfer banks existed, prominent merchant-bankers comprising of foreigners sometimes accepted deposit accounts for clearing purposes. The use of oral commands to pay was rather satisfactory for the purpose of making local payments, but this method was not suitable for the purpose of making funds available in a distant place. In foreign trade, the use of written instruments was therefore a necessity. The bill of exchange became at an early date the principal instrument by which funds were transferred from place to place without shipping any specie.

The article focuses on the meaning of public accountants. It has different meaning for different individuals. The author is of the opinion that since some of the work of a public accountant is affected with a public interest, a definition suitable for use in a statute may be needed. But the best of definitions necessarily have their limitations. They will indicate the name of a larger group of which the item defined is a part and they will indicate one or at most a few characteristics which help to differentiate this item from other items in the larger group. It may be interesting, and possibly useful, therefore, to explore the historical background of the term public accountant as reflected in the literature of accountancy in the U.S. The administration of first Certified Public Accountant law was placed with the Regents of the University of the State of New York. To make effective the provisions of the new law, the Regents created the Board of Examiners for Certified Public Accountants that was authorized by Section 2 of the Act.