Knowledge that Transforms

Reviews the book "Accounting Manual for Small Cities," by Carl H. Chatters.

Reviews the book "American Business Leaders," by F.W. Taussig and C.S. Joslyn.

Reviews the book "Credit Policies of the Federal Reserve System," by Charles O. Hardy.

Reviews the book "New York C.P.A. Law Questions With Answers," by A. Lincoln Lavine.

Reviews the book "Foreign Exchange," by A.C. Whitaker.

The article illustrates through an example in a coaching class the fallacies of assumptions in problem solving demonstrations by teachers of accounting. An experience of many years as an accounting teacher plus an experience of some years as an examiner for the licensing of accountants has convinced the author that the fallacy of assumption is one of the things responsible for the heavy toll exacted of the candidates who attempt professional examinations. Apparently, assumption is believed to provide an easy, or lazy person's way out of what seems to be at least at first glance a perplexing situation. A trial balance given in a problem does not balance. This fact alone affords no reason for the student or candidate assuming that the difference must be adjusted through some account like notes or accounts payable, or through some other account as far fetched. Perhaps a careful study of the situation will show that the requirements may be met almost completely by ignoring the discrepancy.

The accountant of today must be particularly firm in his contention that costs incurred in a given year must be charged to that year and carried forward only in those cases where they will definitely benefit the future. This applies to cost of idleness and would prohibit its deferral by any such process as omitting the charge for depreciation because the equipment was not productive. It is also inadvisable to charge the costs of idle equipment direct to surplus on the grounds that such costs were not an element in the production of that particular period's income. One of the principal features of the current order of things which raises accounting problems is the lowered price level. Accounting involves both the establishment of a correct income estimate and the periodic showing of the financial condition of the concern for which those earnings are estimated. For such purposes, replacement values have a place unless the statement is to be merely historical in character. In a period of rising prices the use of a depreciation charge based upon cost leads to an overly optimistic attitude by the persons relying upon our estimates whether they be managers, investors or creditors. In periods of falling prices the effect is undue pessimism.

Reviews the book "The Bank for International Settlements at Work," by Eleanor Lansing Dulles.

Reviews the book "Kalkulation und Kostengestaltung im Warenhandel," by Erich Kosiol.

In attempting to relate what is being done for the general business student in the field of accountancy or to hazard an opinion as to what should be done, one's first problem is probably that of discovering the amount of time usually available for the work that is to be undertaken. In the case of the four-year commerce course, it is customary for all students, regardless of special interests, to register for courses in accountancy during the freshman and sophomore years. Usually this amounts to three hours per semester or its equivalent. A few institutions require five hours per semester for either three or four semesters. After the general business student has completed his first year of accounting work he can be described as being "one up and one to go." For either the accounting major or the general business student, the principles of accounting must have as a major division, the principles of cost accounting. The fourth semester of the course of the general business student should be his and his alone, designed to meet his needs, taught in such manner as to make it of greatest advantage to him. It should not be a part of the work of the accounting major.