Abstract The 1955 American Accounting Association Committee assigned to the task of revising the 1948 Statement of Corporate Accounting Standards undoubtedly spent much time and effort in making this revision, and the bulk of their achievement is to be highly commended. However, there is one conclusion that is most surprising and disappointing, and could only cause confusion in the minds of the readers of corporate accounting statements. This is the statement with regard to Part IV, Income Determination, as follows: Interest charges, income taxes, and true profit sharing distributions are not determinants of enterprise net income. The profession is now faced with this surprising and really confusing recommendation of the Committee that corporate net income should not take into consideration interest charges, income taxes or profitsharing distributions. However to argue that interest charges and income taxes are not costs of carrying on a business enterprise and determinants of net income, is to propose a concept of corporate net income which is illogical, contrary to common sense and contrary to universal business practice.

Abstract There is a present need to devise and establish by authoritative recommendations of the profession a set of accounting concepts and standards, which will be generally accepted and adhered to in the determination of corporate net incomes, so that the findings of the accountant as expressed in the annual reports of American corporations with regard to the amount of the income accrued or loss sustained during the fiscal period, will be accepted and relied on by the public and all interested parties as definitive and conclusive and expressing substantially the facts and the result of the events which took place during the period. In the opinion of many accountants such a codification of standards for income calculations would be an important step forward toward allaying the suspicion and lack of faith in the income determinations presented in corporate financial reports. The great usefulness and social utility of such a development in the accounting profession can hardly be questioned, because if it can be achieved it will help to lay the factual foundation for impartial social control if national economy. It is true that in the determination of corporate income for any period of time opinions and estimates play an important part in greater or less degree, depending on the kind of business and the nature of assets.

Abstract Committee of Accounting procedure of the American Institute of Accountants in Bulletin No. 35, dealing with the method of presentation of income and earned surplus, makes the recommendation that the net income for the period be shown henceforth without deductions or additions of items which are properly excluded from the determination of net income. These items consist primarily of charges and credits with respect to the following general purpose contingency reserves, discussed in Bulletin No. 28, inventory reserves, discussed in Bulletin No. 31, extraordinary items which, if included, would impair the significance of net income, discussed in Bulletin No. 32 and excessive costs of fixed assets and appropriations in contemplation of replacement of facilities at higher price levels, discussed in Bulletin No. 33. There is no argument with respect to items mentioned in Bulletins 28, 31 and 32 and it is gratifying that the committee recommends the exclusion of such items in the determination of corporate net income.

Abstract The basic concept in accounting, as in economics, is the concept of income, and accountants are supposed to be experts trained in the procedures of measuring the amount of income earned by or accrued to business enterprises during their fiscal periods. The chief reason for the present-day disagreement in the measurement of income for a given period does not lie in tile necessary use of subjective measurement for certain items of cost, but it does lie in the fact that the basic standards or principles on which the very concept of income rests are not agreed to and generally accepted. If this doctrine of definitive income determination were accepted generally by the profession, it would simplify and make more precise and objective the measurement of annual income. The earnings of American corporations are facts which are strongly affected with a public interest, and the amounts of these earnings have a definite bearing on social and governmental policies, on labor compensation, on taxes and on prices to the consumers. It does not seem to be an overstatement to say that accountancy can become a science once the basic concept of net income is precisely defined and measured in accord with generally accepted principles and standards.

Abstract The great problem in the administration of the cost-plus contract program is the prevention of inflated and unnecessary costs. The fact that the government guarantees to reimburse the contractor for all necessary costs of performing the contract and in addition to pay a fixed fee, has often resulted in a let-down on the part of the contractor of his guard against high costs. It is the purpose of this article to draw attention to the merits and disadvantages of the cost-plus contract and to consider what devices and means can be used to make this type of contract function more efficiently as a method of producing goods. The production of goods under a cost-plus contract bears a similarity to monopolistic production, since the free market is abolished and all costs are recovered from the government. If the cost-plus program, therefore, is to become a vital and successful part of the American economic system, ways and means must be found for injecting efficiency into this type of production.

Abstract Since accounting is the method and means of recording, measuring and interpreting business and economic events, it is evident that accounting like statistics, is a technique and tool of social science, applicable particularly to business enterprises and other accounting entities. The accounting procedure must be used in a scientific manner in order to obtain results, which present true and impartial pictures of economic and business facts. In other words, if accounting is really to fill the role assigned to it as a means of economic control, it must grow out of its traditional, rule of thumb procedures and assume the stature of an objective, impersonal social science. There is considerable evidence today of a growing recognition among accountants that such a development is not only possible but also very necessary and that the time has now come when the practice of accounting ought to be placed on a genuinely objective basis, so that the special desires and interests of individual accountants and business managers will not unduly influence findings of accountants.

Abstract Economists often take the accountants to task for loose thinking, failure to define their terms, not comprehending the nature of income, and in general for being concerned primarily with procedure instead of with the development of a consistent philosophy of accounting. No doubt much of this criticism is justified and there is much need of a more careful use of words and more precise definitions of accounting terms in the writings of accountants. The fact is that many of the writings of economists disclose such a theoretical and academic type of mind, that their ideas are of very little help to the accountant in solving the problems which face him in his daily practice. A school of economic thought has arisen which has developed and elaborated the idea that the work of the accountant is essentially that of valuation, and the balance sheet is in essence a statement showing the present worth's of the expected future services which the assets will yield. The balance sheet is thus a forecast and is not an objective statement of facts. The accountant becomes a forecaster and prepares statements of opinion about what will happen in the future. This idea is surely far removed from the realities of the accountant's daily work.