Knowledge that Transforms

Reviews the book "Accounting Principles," by Howard S. Noble.

The article focuses on the determination of the most efficacious way of valuing assets on a consistent basis in accounting. A primary function of accounting is to provide entrepreneurs and other interested persons with useful data upon which to base their decisions. This objective can logically be attained best by valuing assets in real terms by adjusting their monetary expressions to changes in the general price level. The shift of emphasis from the balance sheet to the income statement during the preceding two decades has spotlighted the inherent fallaciousness of the doctrine of conservatism. The understatement of an asset in the balance sheet of one account big period means an overstatement of profit in another period when the asset is physically consumed in the process of production. One way of retaining conservatism in the balance sheet, and of avoiding the perils of profit overstatement, has been suggested by the proponents of the base-stock method and of Last-in, First-out method.

Reviews the book "Introduction to Business Cycles," by Asher Achinstein.

This article presents a checklist for an accounting library and has been compiled from a variety of sources over a period of two years. It is intended to be more inclusive than exclusive, though necessarily some discrimination has been exercised. The purpose is to present, not a definitive bibliography nor on the other hand a complete index to the literature, but rather to make available a fairly comprehensive selection of materials to consider in building, expanding or appraising an accounting library for a college or University offering a wide variety of undergraduate and graduate work. There are sixteen subject classifications: (1) Bibliographies; (2) Periodicals; (3) Accounting: General works, "classics," and modern popular texts; (4) Auditing and Internal Auditing; (5) Budgeting and Controllership; (6) Cost Accounting; (7) Examinations; (8) Fund Accounting: governmental, municipal and university; (9) History of Accountancy; (10) Mathematics of Accounting and Finance; (11) Profession of Accountancy; (12) Reports and Statements; (13) Special Problems and Miscellaneous; (14) Systems-General Works; (15) Systems-Specialized; (16) Taxes and Tax Accounting.

In a previous article in the Accounting Review, attention was paid to the problem of what should be done when a utility shifts from retirement, or retirement reserve, accounting to depreciation accounting. Consideration was given to the formula for the rate base itself and, as well, to the procedure to follow when property was retired from service. Public service commissions are faced with still other problems. Some utilities have carried on, at least for some of their properties, a procedure which may well be referred to as replacement or betterment accounting, and which may have ramifications quite different from either retirement or depredation accounting. In following replacement accounting, assets are set up on the books at cost whenever they are acquired and are retained on the books at these figures indefinitely. Whenever replacements are made "in kind," the entire cost of the replacement, whether at higher or lower prices than at the outset, is charged to current operating expenses. Thus the investment account remains stationary unless the asset is retired and not replaced, in which case the investment account is written down. On the assumption that prices remain constant retirement accounting and replacement accounting give the same basic results. It is when prices change that the two part company. When replacements are not in kind, adjustment of the investment account is made.

Now that the U.S. Federal Trade Commission and the Department of Justice have become more active in their attack upon big business, it seems appropriate to analyze the relative efficiency of large-scale enterprise. The existence of this efficiency has been accepted by certain business groups and set forth as one if not the major justification for the continuance of such large corporations, while evidence to the contrary has been seized, at times enthusiastically and rather uncritically, as sufficient reason for demolishing the giants. Efficiency is a word which is used more often than it is understood. Perhaps this is because it can be employed in different ways which do not have a common meaning. As an economic term efficiency is necessarily related to cost, and that business is most efficient which has the ability to produce and market goods or services at the lowest cost possible under the environmental circumstances lacing the management. It should be quite obvious that comparability as to external circumstances is of primary significance. When businesses are operating under such conditions it is reasonable to conclude that the one with lowest cost is the most efficient. This low cost, however, is significant only if continued for a period of years, so that it is clearly based on efficiency of operation rather than on some unusually fortunate circumstance or accounting adjustment.

Reviews the book "Preparation and Certification of Financial Statements," by B. Bernard Greidinger.

Reviews the book "Parish Accounting," by Dumas Leon McCleary.

A study of the development and progress of governmental accounting theory in the U.S. indicates that there are three important concepts upon which it is based. These concepts are fund accounting, accrual accounting and budgetary accounting. Almost without exception, when individuals or organizations consider governmental accounting theory, their consideration centers around one or more of these concepts. In as much as these three concepts have such an important position in governmental accounting, it would seem to be worth while to look at them more carefully. As additional control becomes desirable, accounting theory must be considering constantly the ways and means by which accounting practice can be changed in order to provide better control. Before intelligent changes can be proposed, the present technique used in governmental accounting must be thoroughly understood. The purposes of this study are to present some ideas about the theory of governmental accounting and to provoke additional discussion out of which understanding may be advanced.

The article presents accounting problems prepared by the Board of Examiners of the American Institute of Accountants and presented as the first half of the November 1949, Certified Public Accountants Examination in accounting practice. The candidates were required to solve first problem and two of the remaining three problems in four and a half hours. he weights assigned to the problems were :problem 1, 14 points; problems 2, 3, and 4, 18 points each. The first problem is related to federal income tax. The second problem is related to adjustments for errors and omissions in capital accounts of partnership firms. The third problem is on the manufacturing firm. The third problem is related to computation of the amount of an insurance claim for fire loss of raw materials in a manufacturing firm. The fourth problem deals with revision of the balance sheet of the given city in accordance with acceptable methods of government accounting and provide and analysis of the changes in surplus funds of the given city. The answers to the given problems are provided at the end of the article.