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TESTS FOR PRINCIPLES.

A. C. Littleton
The Accounting Review 1938 13(1), 16-24
Abstract The article focuses on test for principles. The word principles has been extensively used by both accounting practitioners and academic writers with little discrimination in the context between the truths of accountancy and the practices of accountants. In a treatise for educational use, inclusiveness may be necessary so that accounting will be presented as a whole. But the student cannot be well trained in clear thinking unless the elements out of which the subject matter is constructed are clearly distinguished one from another. There is a growing movement, in the interest of clear thinking and orderly practice, toward the formulation of concise propositions regarding accounting. Each of these aspects is complementary to the other, and both need to be held in mind for true comprehension. But it is a task of some moment to classify numerous propositions as either rules or principles, for none of them can be both. To do so one needs more than dictionary definitions. A test by which to recognize a proposition as a statement of accounting principle is needed. Those propositions which do not meet the test may be useful statements of accounting rules.

ACCOUNTING FOR STOCK DIVIDENDS RECEIVED.

Harry D. Kerrigan
The Accounting Review 1938 13(2), 166-173
Abstract In considering the effect of a stock dividend upon its recipient it is first necessary to inquire into the fundamental meaning of the terms "income" and "capital," and the distinctions, if any, between income to the corporation and income to stockholders. With a working understanding of these matters in mind, it will then be possible to discuss the nature of stock dividends from the recipient's standpoint. Discussion of economic matters is frequently confused by a failure to distinguish between interpretations of a particular phenomenon in business practice and the underlying facts and principles of the phenomenon as interpreted by economists. The difference lies in the theoretical level at which underlying facts and principles necessarily are kept in the economist's analysis. The theoretical level is used because the assumptions upon which the reasoning rests may not obtain to the degree required for its validation on the practical level. And the economist's assumptions fall short of conformity to reality because they are virtually impossible of full verification.

ACCOUNTING AND THE S.E.C.

The Accounting Review 1938 13(1), 99-103
Abstract The article focuses on accounting and the Securities and Exchange Commission. Five new cases have been supplied by the Securities and Exchange Commission illustrating various points in registration and annual statements submitted to the Commission by business corporations. In each case an issue of accounting procedure is raised in which the administrative staff of the Commission has recommended changes. While these cases do not necessarily establish precedents, their effect on accounting practice is unquestioned. Names of the corporations involved will be supplied to any reader who desires further study of the cases. The financial statements of a utility company when originally filed included an auditor's certificate which explained that the company followed the retirement-reserve method of providing for electric and water-department properties retired from service, and that the provisions for retirements deducted from earnings were substantially less than the amounts deducted for depreciation in Federal income tax returns, which amounts were computed on the basis of age and estimated life of depreciable properties.