Knowledge that Transforms

Reviews the book "Economic Development in Modern Europe," by Clive Day.

The article focuses on the Clark Plan of retail accounting. In March, 1934, the Board of Directors of the National Retail Dry Goods Association voted favorably on the adoption of the Clark Plan, embodying what have been called radical changes in Retail Accounting. The plan as finally adopted is not as radical a departure from present methods as was the original plan proposed by a controller, Carlos B. Clark. While the Clark Plan is optional, every inducement will be made to have stores adopt it. Since the Clark Plan is thought by some to be a revolution in retail accounting, comparing in importance with the adoption of the retail inventory system some years ago, accountants and particularly teachers of accounting should be somewhat familiar with it. The following comments, while not an exhaustive treatment of the subject should serve to clear up some misconceptions and also to define some of the issues involved. The effect upon business generally of recent laws and administrative policies of the government at Washington D.C. has been far-reaching.

Reviews the book "What Everybody Wants to Know About Money," edited by G.D.H. Cole.

Reviews the book "The Economics of the Recovery Program," by Joseph A. Schumpeter.

This article discusses some current problems in administering the retail inventory method. The retail method was created to meet the inventory valuation problems of department and specialty, women's apparel, stores, which constitute a distinct type of trading enterprise with valuation problems quite different from those of manufacturers, public utilities, railroads, and other kinds of business organization, and even from those of some other types of retail concern. Department and specialty stores buy and sell merchandise, but for the most part do not compound or process merchandise. The retail inventory method involves the recording of beginning inventories and purchases at both cost and retail prices, the marking of prices on the goods at retail only, the recording of all price changes, the taking of inventories at retail prices only, and the reduction of inventory valuations to cost basis by use of the avenge mark-up percentage. The keeping of complete records, of course, implies that a book inventory may be arrived at any time.

There are, indeed, several transitional periods of a business failure, for a failure usually does not occur as quickly and unexpectedly as an accident may, but has generally passed through several stages. A failing business enterprise may be likened to that of an individual suffering from a minor illness which, if not properly remedied, may develop into a serious disease, perhaps death itself. The first stage, for a want of a better name, may be called, in a pathological sense, the period of incubation. At this point one or more unfavorable conditions are quietly or insidiously developing. The owner of the business may not be aware of them, just as an individual is often unaware of the presence of a certain disease slowly developing in his constitution. These deep seated, slow-acting causes may not be recognized now, but later on they will become apparent. The second step is the financially embarrassed stage. During the life of any normal business enterprise there may be one or more times when a firm urgently needs cash to meet its maturing obligations. The third stage, termed financial insolvency occurs when a concern is unable to procure much-needed funds to meet its maturing or pressing obligations. The fourth stage, known as total insolvency occurs when liabilities exceed physical assets.

Reviews the book "Henry P. Davison, a Biography," by Thomas W. Lamont.

Publishers of books are frequently prone to look upon footnotes as added and unnecessary expense. But this can be no more true of books in the field of accounting than in the many other fields of thought. Furthermore, it may be stated that no writer would permit a publisher to delete from his treatise those thoughts which he felt were essential thereto; by the same argument he should refuse to permit the publisher to omit footnotes and references if they are material to his contribution. Publications in other fields have survived the desires of publishers to economize; accounting can do the same if writers see the merit of references and insist on them. In the long run, and for its own best welfare, accounting cannot be judged in the light of its limiting circumstances such as enumerated above. It must be judged in the light of its true possible social value and its position relative to other sciences. If accounting writers are not prepared to uphold the standards ordinarily exacted in other fields, it is accounting that must suffer by comparison.

One of the most bitterly contested provisions of the Securities Exchange Act of 1934 was the provision relating to marginal transactions and maximum loanable values of securities. Two different provisions were incorporated in the bills of the House and Senate, the resulting act being a modification of the House bill. Marginal transactions have long been the subject of reform movements. The Hughes Committee of 1909 was requested, specifically, to inquire into margin trading. A Federal judge furnished the Senate Committee with instances from his long experience on the bench, indicating that a large proportion of business failures, embezzlements and even suicides in recent years were directly attributable to losses incurred in speculative transactions. Measures were suggested during the last session of the U.S. Congress to abolish margin trading and the Senate Committee deemed the radical step unwise only because of the deflationary consequences which might follow. Marginal transactions involve the buying and selling of securities with the aid of borrowed money. The amount of money which the purchaser or seller must advance has in the past been a matter of agreement between the customer and the brokerage house. Funds advanced by the customer represented an advance for the protection of the brokerage house, not for the protection of the customer.

Reviews the book "Methods of Statistical Analysis," by George R. Davies and Walter F. Crowder.