Knowledge that Transforms

Both accounting and economics professions, deal with the conduct of men in gaining a livelihood. The accountant is concerned with those activities almost exclusively as they manifest themselves in those actual, particular institutions which they call enterprises. With individual human beings he is concerned chiefly to the extent to which they participate in the finances or the operations of the enterprise under review. Whether the accountant is dealing with an enterprise as an entirety or with the individual as a taxpayer both the enterprise and the taxpayer are real. The economist, on the contrary, devotes no attention at all to real individuals or to real enterprises. He may appear to be concerned with what laborers do, or what is done by the suppliers of monied funds or by those who exercise managerial powers. They are functional groupings invested by the economist with standard sets of motives, aims, interests and opportunities. Since both professions are interested in income in the most general sense of that term, both are interested in what is called production. But the interests of the two groups are widely divergent.

The article presents reports on various committee related to accounting and laws. Audit committee have examined the books and records of the Secretary-Treasurer of the American Association of University Instructors in Accounting for the fiscal year ending December 24, 1928, and they believe that the statements submitted accurately set forth the financial condition of December 24, 1928, and the operating results for the fiscal year enhancing on that date. The chairman communicated a plan of attack to the committee members. This was followed on March 21, 1928 by a list of the subscribers to "The Accounting Review" resident in each area. It is remarkable that at that time the libraries of thirteen Institutions represented on the committee were not subscribers. It has been suggested by several members of the committee that better results could be obtained from the circularizing of the practicing accountants and libraries if copies of the review might be used as samples. If this involves too great expense, it is suggested that descriptive folder be prepared to be used in its place.

The most widely enunciated principle of income determination is that income is realized as the result of the sale of commodities or services. Concepts of "income" and "cost" are two of the most difficult in the whole field of economics and accounting to define in precise terms. Many incomes are earned as the result of the joint operations of two different fiscal periods, since only part of the services for which the final price is paid by the purchaser are performed in each period and part of the costs of furnishing these services falls into each. With the wide diversity found in different enterprises in methods of sale, types of sales contract, methods of production, and in collection methods it would seem reasonable to assume that no single test of income realization would meet all situations with the same degree of satisfaction. Accounting texts admit a number of situations which may need exceptional treatment but the number and importance of these situations is seldom accented and usually there is no open admission that another test of income has been applied. The author points out a wider range of business conditions and situations in which the sale test must be modified or other more adequate tests applied to arrive at the best measure of periodic profits, or of changes in economic positions.

Reviews the book "The New Way to Net Profits," by Fred W. Shilbey.

For many years there have been investigations which lay outside the field of accounting and were aimed at showing and interpreting some of the more active factors of business. On the other hand, accountants have been used to examining the financial results of businesses with but little thought to the factors which have combined to produce these financial results. In many cases the analysis and interpretation of financial results in their relation to the going business has been left to the management, the accountant perhaps feeling that the full scope of his responsibility was discharged when he presented the approved balance sheet and results from operations statement. Business fundamentally is a complex structure, based on the three dominant elements of production, sales and finance, each of which is in itself complex. Management is no longer in its usual former position of sole stock ownership. It no longer deals with units so small that they can be effectively administered on the basis of personal knowledge and personal contacts. Its problems are as diversified as its operations, not only geographically, but also functionally.

Reviews the book "Elementary Accounting," by Frank Hatch Streightoff.

Considerable attention has been given during the past decade to methods of valuing no-par stocks for the purpose of financial statements. Very little, however, has appeared as to actual methods in use and the reasons supporting them. To obtain reliable information on these points, an analysis of the methods of valuing no-par stock issues as shown on the balance sheets of nine hundred and fifty-six corporations has recently been made. These studies include practically all corporations whose no-par issues are listed on the exchanges, and a number of non-listed companies. Twelve hundred and thirteen no-par stock issues were included in the studies, of which 972 were common stocks and 241 preferred issues. The studies were divided roughly between utilities and industrials, 614 of the former and 599 of the latter. The conclusion drawn was that there are five basic method. of accounting for no-par issues, which are, in the order of their importance, paid-in or equivalent value, stated value, net worth at date of balance sheet, net worth at date of incorporation or of refinancing, liquidation value.

Reviews the book "Margins, Expenses, and Profits in Retail Hardware Stores," by Horace Secrist and J.A. Folse.

The problem of depreciation has had various interpretations in the course of its evolution in accounting practice and accounting literature. It has been treated as a problem of financing the replacement of fixed assets; as a method of presenting properly such assets in the balance sheet, and as a problem of the allocation of costs in operating statements. The usual practice among current writers appears to be to recognize these different interpretations and to admit their inconsistency. Depreciation is discussed from the viewpoint of the balance sheet and from the viewpoint of the operating statement, frequently with the expressed or tacit assumption that those viewpoints are irreconcilable. It is proposed here to show that a proper treatment of the problem from one point of views entirely consistent with its proper treatment from other points of view that the problem is one problem consistent within itself regardless of relative emphasis placed upon its different aspects. Depreciation originally made its appearance in accounting in the form of an appropriation from net income or surplus as a provision against the time when fixed assets must be replaced. In this form it related to financial administration and not at all to the immediate control of operations. So used, depreciation was, therefore, a financial and not an operating account.

This article focuses on the evaluation of student aptitude and student accomplishment in accounting. The best measure of student aptitude available was the scores on the battery of tests weighted as indicated by the coefficients of regression. The first step in the process was to set up an aptitude score for each of the 850 students in the accountancy course. This score consisted of the results of the battery of tests weighted. Eight groups of twelve students were then found whose aptitude scores indicated that they were approximately equal so far as their possibilities were concerned. There were eight instructors in the course and each one of these groups was composed of students who had studied under a different instructor. The total accomplishment score of the students in each group was taken as the measure of teaching efficiency of the instructors. Furthermore, the whole rating is based upon two fundamental assumptions. The first assumption is that the aptitude score actually measures accounting aptitude, and the second assumption is that the accomplishment test given actually measures accounting accomplishment.