Knowledge that Transforms

The article focuses on corporate surplus policy as a function of monopoly. Two primary conditions prompt inquiry into the problem of corporate surplus policy in its relation to monopoly: the nature of antimonopoly attacks on corporate surplus policy and practice and the recent singular lack of progressive and constructive literature on corporate financing. In general the antimonopoly offensive has not been focused on corporate surplus entrenchment; in particular instances, however, the attack has precisely sought out corporate practice with respect to retention of earnings or surplus accumulation as its objective. The social reform role has been a principal factor inducing the criticism of earnings retention by corporations. The second condition, which prompts inquiry into this subject, is related, perhaps closely, to the social-reform nature of objections to surplus retention. Corporate surplus arises primarily by retention rather than disbursement of earnings; from an accounting view it constitutes the excess of corporate assets over corporate liabilities and capital stock.

College teachers and administrators everywhere are very sensitive to real or imaginary inequalities in their teaching loads. Among them probably none is more justified in expressing concern over this matter than the teacher of accounting. He is keenly aware that his elementary courses are the backbone of most business administration programs, while the advanced offerings in his field are perhaps more truly professional than any other single group of business college courses. The almost universal practice is to measure faculty loads in terms of the semester hour, or, a modification of the student credit hour in combination with clock hours for the non-teaching load. In search of a successful method of teacher load evaluation for accounting and other subjects, the writers first reviewed the literature in the field and then turned to an examination of industry's techniques for applying scientific methods to problems of personnel. Authors appreciate that many readers may feel that the scientific advantages of this proposed method of teacher load evaluation suggested here are more than offset by the demands on both time and care required for its successful use.

Reviews the book "Illinois Tax Problems."

The recent history of the Centrifugal Pipe Corp. includes some interesting points in connection with accounting for patents as wasting assets, as well as the effect of the present war in curtailing the scope of the operations of some American companies. The Centrifugal Pipe Corp. is a Delaware corporation, organized in 1923 for the purpose of holding and licensing certain patented processes for casting iron pipe by a centrifugal process. The Centrifugal Pipe Corp. holds the United States patents, while a wholly owned Canadian subsidiary, International De Lavaud Manufacturing Corporation Limited owns the patents for most of the rest of the world. The stockholders on December 20, 1939, approved the two structural changes in capital stock, and the writing down of investments and the declaration of a partially liquidating dividend followed this action. The nature of patents as wasting assets, and the similarity of experience of the Centrifugal Pipe Corp. to a mining company which does not replace its property as it is exploited, is quite evident. This parallel extends to the distribution of liquidating dividends and the gradual contraction of the scope of operations as the stage of exhaustion is approached.

In its study of accounting problems the United States Securities and Exchange Commission has a much broader objective than many other governmental agencies whose work requires the use of financial data and the proper application of accounting principles. The primary responsibility of the Commission under the Securities Act of 1933 and the Securities Exchange Act of 1934, in respect to the financial data required to be filed with the Commission and made available to the public in accordance with the provisions of these Acts, is to insure that such information constitutes a disclosure fully adequate for the protection of investors." Accounting research in the Securities and Exchange Commission is guided by the very practical purpose of insuring that financial statements supplied to investors shall be presented on a consistent basis and in accordance with sound accounting principles. Optional accounting treatment of business transactions may be accepted only so long as the results obtained by such methods result in clear and unambiguous financial statements. The law requires this and the rules, regulations, and opinions of the Commission have been and will continue to be dictated by the necessity for disclosure fully adequate for the protection of investors.

The article focuses on the definition and measurement of income. There has long been need for a greater degree of agreement among economists, accountants and statisticians regarding problems of defining and measuring income. Although some differences are probably inevitable, because of various problems in the three fields, the amount of overlapping of subject matter is large and a common approach would add clarity to each discipline as well as strengthening the interrelationships between them. The accountant is interested primarily in the business unit and his chief function may be held to be the accurate measurement of periodic income as it accrues to the firm. As is well known, complete accuracy in the measurement of business income may be realized only upon the expiration of the firm's life, at which time the entire income, for the whole life of the enterprise, may be determined without error, assuming complete and accurate accounting records. But the practical problem is that of measuring the income of a going concern for short periods with speed, precision, and minimum expense. The economist may be led to the problem of defining income by many paths.

Reviews the book "The Analysis and Control of Distribution Costs," by J. Brooks Heckert.

The article focuses on accounting exchange. There are many fields in which useless survivals in custom continue for an almost indefinite period; perhaps the stock illustration is found in buttons on a man's cuff, which once had a distinctly utilitarian purpose. Bookkeeping is particularly subject to instances of atavistic survival. Some of them have disappeared. One such universal custom, which even today is occasionally found in textbooks, is that of using the broad column in the conventional ledger to record the name of the contra account. In recent years, the custom of recording the contra account has very generally been abandoned except in textbooks. This in part was due to the introduction in the early 17th century of compound journal entries with the consequent meaningless entry, "Sundries," as no single account represented the amount credited. The curious fact is that while the broad column is generally left vacant there still appears as a last item the word "balance." Such an account no longer exists in American ledgers.

The article presents problems that were presented by the American Institute of Accountants on May 16, 1940, as the first half of the examination in accounting theory and practice. Candidates were required to solve all problems in six hours. The following weights were assigned, problem 1, 10 points; problem 2, 15 points; problem 3, 20 points; problem 4, 20 points; problem 5, 35 points.

It goes without saying that the Federal government because of the huge size of its annual budget needs to utilize the most approved, modern, and scientific systems of accounting, financial reporting, and auditing. Methods, which were reasonably satisfactory years ago when expenditures were relatively small, may be wholly inadequate today. The present financial administration of the Federal government was subject to strong criticism in the reports of the committees of the U.S. Congress and the President on government reorganization in 1937. There is serious need for the improvement of the accounting, reporting, and auditing of the Federal government. The evidence indicates that in many respects the accounting methods and practices are not up-to-date, and do not provide the essential financial data to the departmental executive officers, the President, the United States Bureau of the Budget, the Congress and to the public. The improvement of the accounting systems of the departments and bureaus will require constant and continued expert attention and study. The road to such improvement would appear to lie in building in each major governmental unit a competent accounting office, headed by a trained and experienced accountant, who is made responsible for departmental accounting.