Introduction, 680. — I. Marshall's treatment examined, 681. — II. Doubts as to its usefulness: (1) the assumption of free competition, 685; independence of the cost of labor and capital, 690; effect of public expenditures, 695; the assumption that an industry obeys one law of cost throughout, 698; "boxing" an industry, 701. — III. The "statistical" method of analyzing tax-price relationships, 703. — The "theoretical-statistical" method more promising, 706.

I. Railway rate theory developed to explain and justify rates not based on cost, 168.— Early analysis an overhead-cost theory, 173.— Terminology, 174.— Development of overhead-cost theory, 178.— Joint-cost explanation, 182.— Criticism of the analogy, 184.— Monopoly explanation, 185.— Grouping of later writers, 186.— The attack on the joint-cost theory, 189.— Back hauls, 197.— Defenders of the joint-cost theory, 199.— Classification of recent writers, 203.— Discrimination not always possible, 206. II. Do preferential rates burden other traffic? 208.— Charging what the traffic will bear and monopoly profits, 214.— Value of service leading to excessive rates, 220.— Arguments for cost of service, 224.— Are cost allocations practicable? 225.— The assumption of unused capacity, 228.— Differential charging will persist, 229.

T HIS is not an appropriate time for entering into refinements in describing the agricultural situation. The essential facts in it are of such striking character that the details can largely be ignored. What is needed instead is a reasonable interpretation of the outstanding facts. That such an interpretation is not easy to make is emphasized by two divergent interpretations. A Special Committee of the Association of Land-Grant Colleges and Universities, composed of three Deans or Directors and three farm economists, after reviewing the facts in the case concluded as follows: In I927, the agricultural situation was characterized by moderate improvement in prices and income from the postwar collapse of I920-2I, but an unfavorable position in comparison with other groups still persisted.... Evidencing the incomplete recovery, land values were still moving downward, and the net shifts in population were toward the cities, where better opportunities seemed to prevail.... Even though all other groups have experienced reduced income (since then), the farmers' share of the national income in 1930 and I93I has been lower than in any preceding year, and the farmers' rewards for labor, management, and capital, have been placed on a still lower plane in relation to the returns of other groups. The report then affirms that restoration of agricultural prosperity is vital to the welfare of the nation and urges that a comprehensive program of relief be undertaken, even including improving prices of farm products through special price raising measures.' On the other hand, Dr. Joseph S. Davis of the Food Research Institute, who has given much attention to agriculture in the past ten years, in a paper before the American Farm Economic Association in Cincinnati in December, questions whether general disparity between prices of farm products and other prices has been proved, or that special price raising measures to correct such alleged disparities are needed or desirable.2 Surely it will not be easy to evaluate a situation lending itself to such divergent interpretations; and I shall not expect to accomplish this to the satisfaction of the parties named. The elements in the situation to be considered are production, prices, income, population, land values, and mortgage debt.

The accountant of today must be particularly firm in his contention that costs incurred in a given year must be charged to that year and carried forward only in those cases where they will definitely benefit the future. This applies to cost of idleness and would prohibit its deferral by any such process as omitting the charge for depreciation because the equipment was not productive. It is also inadvisable to charge the costs of idle equipment direct to surplus on the grounds that such costs were not an element in the production of that particular period's income. One of the principal features of the current order of things which raises accounting problems is the lowered price level. Accounting involves both the establishment of a correct income estimate and the periodic showing of the financial condition of the concern for which those earnings are estimated. For such purposes, replacement values have a place unless the statement is to be merely historical in character. In a period of rising prices the use of a depreciation charge based upon cost leads to an overly optimistic attitude by the persons relying upon our estimates whether they be managers, investors or creditors. In periods of falling prices the effect is undue pessimism.

This article discusses the three-fold presentation of an accounting problem. The obstacles that confronts a layman eager to attain a good understanding of principles of accounting are limited knowledge of applied business practices, a group of terms, easy of spelling and pronunciation, but difficult of comprehension, a particular mechanism of thought, based upon certain phases of logic and an unavoidable drawing together of the conclusion of a selected example in relation to the probable past and future financial history of the business unit. The principal divisions of a plan proposed consist of – a statement of fact, an accounting interpretation of two parts, journalized form and T-form and observations as may be set out in trial-balance form. The consideration of the three-fold presentation of an accounting problem may depend upon its usefulness as a teaching device in bringing together in concise form certain implied facts and business and accounting relationships and offering a unique method of reviewing in a progressive manner basal principles and materials which form the essence of instruction.

Accounting for no-par stock issues during the years 1930-1932, where changes have been made in the methods of stating capital stock valuations in those years, presents several most interesting contrasts with the period 1921-1929. During the past three years business conditions have been, for most corporations, just the reverse of the period prior to 1929, and these reversals in financial conditions are being rapidly reflected in the changing methods of accounting for no-par issues, capital surplus, earned surplus and related accounts, as of March 1933. In the period prior to 1929, the par-value security was rapidly giving way before the newer and so-called advantageous no-par security. Properties were being appraised, the added value was credited to some surplus or no-par stock account, and the sum total used as an excuse to make stock split-ups, carry stock values at the net worth without a differentiation between types or sources, and so on. Where in 1918-1929 corporation valuations went wild in one direction today undoubtedly they are going wild in the other.

Effectiveness in teaching, because of the vast amount of material offered in the average course in accounting, may be determined by the approach selected and the material emphasized during a period of instruction. The importance of this statement is the reason that efforts are constantly made to learn of new methods which may in some degree increase the student's general comprehension of the science, as of March 1933. In this article a skeleton-plan consisting of five accounting concepts and detailed explanation of three aspects of the accounting mechanism is presented. The proposed plan is made up of three parts. The first part consists in sketching in the early lectures a general view of the field by aid of five basic concepts which, with adequate refinements, begins with the account and ends with the financial and income statements. The second part consists of intense study of the account, the accounting equation, the accounting records, the accounting period and the work sheet. The third part, which reviews in a general fashion the foregoing, consists of thorough analysis and explanation of the accounting equation, inventories and the adjusting entries section of the work sheet.