Knowledge that Transforms

Reviews the book "Mathematics of Accounting and Finance," by C.H. Langer and T.B. Gill.

The article focuses on accounting for appraisals. If accounting records have been properly established and maintained on the basis of original cost, appraisal values should not as a general rule be used for operating purposes. Any basis other than original cost reflects a condition of values at a particular time and subsequent price fluctuations might so alter the revaluation amounts that they would no more depict the present values at some future time than would the original cost figures. During periods of economic stress, many organizations are forced by conditions beyond their control to alter the principle in order to decrease their operating costs. Write-downs are necessary to account for price changes, extraordinary obsolescence and non-utility or abandonment of the property. Appraisals are made and adjustments accounting for the replacement values are recorded on books with the thought that the price level, at the time books are adjusted, will remain about the same for a long period of time.

The accounting system of the national government is similar in many respects to the systems maintained by various state and municipal governments. One of the primary functions of accounting is to present clearly and promptly all the facts that are essential and necessary to good judgment and efficient administrative action. Municipal accounting is comparable in many ways to commercial accounting, yet the terminology is frequently different, and it is for this reason that municipal and governmental accounting seems rather difficult to the accountant who has not specialized in one of these technical fields. It can be said that Federal accounting presents no more difficulties than commercial accounting. According to the author, the budgetary accounts are separate and distinct from the accounts known as proprietary accounts. Budgetary accounts being in the nature of controlling accounts, whereas proprietary accounts disclose detailed information relative to assets, liabilities, revenues, and expenditures.

On August 27, 1919, the Phillips-Jones Corp. was incorporated in New York, succeeding Phillips-Jones Co. Inc., which had been organized in 1914. The business, dating back to 1887, consists of the manufacture and sale of fabrics, men's shirts, Van Heusen Co. collars, pajamas, and underwear. An examination of the financial statements of the corporation for the past few years reveals a striking transformation in surplus, from a substantial earned surplus and no capital surplus to an even more substantial deficit and a large capital surplus. The marked transition, which occurred in 1938, can be traced through the Statement of Profit and Loss and Deficit for the year ended December 31, 1938. The special charges and adjustments included an inventory adjustment of $326,041.17 arising from a change in the valuation of inventories whereby the basis of the lower of cost or market, was adopted. Another adjustment was necessitated by a change in policy as of December 31, 1938, whereby the outstanding stock of five subcontracting companies was transferred to the Phillips-Jones Corp., and the notes of these companies for which the stock had been held as collateral were canceled.

Reviews the book "Secretarial Accounting," by J.F. Sherwood and Clem Boling.

The profession of accountancy holds a place of honor in England, ranking with the ministry, medicine and the law. Its traditions have been built up over years of practice and they display a general air of austerity and conservatism. The English accountant should be viewed in relation to the activities of his profession, and in relation to the economic and social aspects of his country. To a marked degree his effectiveness is conditioned by existent legal and financial philosophies. Although the profession of accountancy in England is inextricably bound up with the various Companies Acts it is of interest to note that practicing accountants actually preceded their enactment. English economists and accountants constantly refer in their writings to the separation of ownership from control of company property and the necessity for an accounting to be rendered to the real owners of limited liability companies yet English law appears to be behind social and economic change as it does not, to any important degree, reflect this separation and its implications. The incorporated accountants are generally in favor of English Company Law reform particularly with reference to the profit-and-loss and holding company accounts.

Reviews the book "The Taxation of Small Incomes: Social, Revenue and Administrative Aspects," by Paul J. Strayer.

Those who use cost data often discuss cost finding as though it were possible to ascertain one true or actual cost figure which, once found, can be used for any and all purposes. There are as many different kinds of costs as there are points of view from which to analyze a given business problem. Hence, as a step preliminary to intelligent consideration of cost problems and the choice of a method for computing cost figures, it seems essential that the accountant should possess a clear understanding of the different needs for cost data within a business organization, the cost concepts that are available to meet these needs, and which of these concepts of cost is appropriate under the circumstances. After the cost that is sought has thus been clearly defined and its relevance established, attention may then be turned to ways of assembling the figures. In general, it may be said that method of measurement used is a basis of cost classification that has a great deal of significance to the accountant, for he is directly concerned with formulating and applying techniques for cost measurement.

A number of papers in the March 1940 issue of the journal The Accounting Review, dealing with Federal accounting and auditing, have been prepared by persons familiar with practices now being followed and are both descriptive and critical in character. These papers will furnish a background for accountants who desire to know something about Federal accounting procedures, and it is hoped that they may in some degree crystallize the broad criticisms which have frequently been leveled at theories of Federal fiscal responsibility: many of which have been inherited from the days of intellectual Alexander Hamilton. The Budget and Accounting Act of 1921 placed the responsibility for the accounting systems of the government in the hands of a Comptroller General who as head of the United States General Accounting Office was made independent of current administrations. But the U.S. Congress neglected to provide adequate machinery to control the activities of the Comptroller. Under existing law, it may be worth noting that the person accountable for expenditures of Federal departments is not even the administrator but the lowly "disbursing officer," an employee of the administrator charged with the duty of paying obligations incurred by others.

Reviews the book "Turning Points in Business Cycles," by Leonard P. Avres.