Knowledge that Transforms

Abstract This article is a description of a system of cost and general accounting which was installed by the writer for the Hartwell Iron Works Inc., a company incorporated and organized under laws of the State of Texas and located in Houston, Texas. This plant consists of a foundry, machine shop, structural steel or plate shop and a pattern shop. Each department is fully equipped and the establishment is prepared to handle all classes of general foundry, machine work, or structural and plate fabrication work. The Company undertakes a great deal of general jobbing work and also manufactures for stock such items as cast iron ventilators, ash doors, water and gas fittings and general ornamental or structural castings. Buildings of the Company are well arranged with respect to the routing and handling of orders. The machine shop is housed in one building along with the office and stock room. The foundry is located at the back of the plant adjacent to the scrap yard, this arrangement facilitates the handling of the old iron and other second-hand material that is commonly used in the manufacturing of grey iron castings. The pattern shop and the plate or structural steel shop are located in two adjoining buildings. A storage room is included in one of these buildings.

Abstract it is sometimes said that the basic principles of bookkeeping have not changed since the origin of double-entry in the middle ages. The statement is true if the term "basic principles" be closely construed but the casual reader is likely to interpret it broadly and thus carry away the impression that bookkeeping has to all intents and purposes stood still for 500 years. That idea would be erroneous, of course, because the forces of evolution act upon man's tools as well as upon man himself. Fundamental ideas regarding the nature of business transactions and theft recording have not changed in centuries but that is not equivalent to saying that progress has been absent or that evolution has not been at work. It is with the idea of noting the direction of some of these developments that a series of ledger accounts extending over nearly 500 years is studied here. A few of the available examples come from old ledgers, more of them are from the textbooks of the day. The illustrations given in such books are accepted as reasonably dependable examples of the then current practices, and in but few cases is there more than a fifty-year break in the date sequence of the texts examined.

Reviews the book "Elements of Accounting," by Frederick W. Woodbridge.

Abstract The article presents views of the author about a work which appeared in publications of the American Association of University Instructors in Accounting. I pointed out that the term cost, the meaning of which is by no means standardized, is used to refer primarily to three things, money costs, economic costs and business costs. Money cost is the sense in which the term is popularly used. Most persons think of cost in money terms, it is the price that is paid for goods and services. Scholar Alfred Marshall employed the phrase expenses of production to designate such payments. Since cost in this sense is equivalent to the money payments for goods and services, it follows that the total money paid by all consumers for wages, rent, interest, and profits must be equal to prices paid by all consumers for the satisfaction of their wants. Money costs to the consumer essentially represent selling price, or sales, they are what the consumer pays. The concept of economic cost is very different from that of money cost, as the term is used by the average man, whether consumer or producer. Economic cost is subjective, it is cost in terms of labor, exertion, sacrifice, or disutility. Some writers have called it pain cost and it is measured in irksome labor or reluctant waiting.

Abstract At the annual meeting of the American Association of University Instructors in Accounting in Pittsburgh in 1921, one of the prominent accountants of the U.S. read a paper entitled "The Need of a Broader Conception of the Work of the Accountant." Early in his discussion this accountant stated that all of his firm's work was built about its annual and periodical audits. He proceeded to say that practically all of the work done in constructive accounting, public utility accounting, tax work and industrial engineering, resulted directly or indirectly from these audits. A partner in another accounting firm, which does work of an entirely different nature, and the partners of which, presumably, have little interest in the auditing aspect of accountancy, recently stated that it was a real problem whether or not the auditing work would largely supersede the other accounting activities in which the firm was more interested. These two examples, taken from the experience of firms who are not primarily interested in auditing, tend to emphasize the importance in the work of almost every accountant of the annual or periodic audit. The constructive audit is and probably will continue to be, the most important part of the public accountant's work.

Abstract Since "The Accounting Review" is published by and for a group of teachers, it seems .fitting that occasional attention be given to the pedagogy of accounting. In what does the pedagogy of accounting consist? Essentially the answer will be identical to that given in response to a question of the same nature applied to any science. One must lead the novice carefully from the known to the unknown, one must continually stimulate him with the own eagerness and zeal for the science. One must relate the theoretical to the practical, and one must unceasingly drill on fundamentals. All teachers of accounting are trying to put across the subject in a way that will result in a minimum of confusion on the part of the student as to what it's all about and a maximum of concrete results gained. To be more specific, one of the problems is expeditiously and with the least use of the forceps to extract a number of false conceptions from the mind of the average student, coming, as he does, untrained but many times with certain definite preconceived notions regarding income, surplus, accruals, controlling accounts, reserves, expenses and many other accounting concepts.

Reviews the book "Profits, Dividends and the Law," by Prosper Reiter.

Abstract The tenth annual meeting of the American Association of University Instructors in Accounting was especially noteworthy because of the able papers given on the subject "Research Work in Universities." Inspired by these papers the present writer decided to ascertain approximately what graduate work in applied economics the American universities were doing. As there were no data available on this subject, a survey was started. This paper is the result of the survey conducted by the Association. The basic courses in commercial law are so fundamental that practically all graduate schools of business offer them. The commercial law courses are 8.4% of the total applied economic courses in non-urban schools and 6.2% in urban schools. This variation is due to the difference in the total number of courses offered in non-urban and urban schools as the number of commercial law courses offered is practically constant. The unusual number of commercial law courses offered at American University and Pennsylvania University is doubtless due to local conditions, the excellent standing of the graduate law school at the former and unusual complexities of the State law code at the latter. Business management ranks first or is tied for first among the applied economic groups in five out of the twenty-seven schools.

Abstract In these days of business dissection and analysis, much emphasis has been put on the inferences leading from the financial position of a given enterprise in relation to its past records and to the achievements of similarly situated organizations. It is also true that comparisons of balance sheets are vital to significant financial and operating ratios and to the determination of credit indices and cyclic trends. But the lack of uniform balance sheets and uniform principles has hampered the progress of the analysts and has made more than one of them qualify his published results with such remarks as "one wishes the sources of financial data could be called reliable" or, more directly, "the reader will appreciate that the information which can be derived from published balance sheets leaves much to be desired." Most accountants have limited their excursions into the field of valuation to attempts to decide for themselves-and perhaps others-whether inventories should be valued at cost, cost of reproduction, market price, and even selling price, whether receivables may appear at present values on the balance sheet, whether bond discount must be retired on a straight-line or investment basis, whether it is proper to write off depreciation on the equal installment or sinking fund plan, whether cash discounts to customers reduce sales or increase selling or financial expenses, and so on.

Abstract One who undertakes to audit the books of real estate concerns is apt to run afoul of situations as complicated and obscure as it is possible to imagine. The most ingenious inventor of Certified Public Accountant questions could furnish no worse tangles than are to be found in the accounts of this type of business. The examiner is under the handicap of having to produce most, at least, of the salient facts in plain black and white, whereas the details of much that goes on in a real estate office are hidden away in the terms of some lengthy contract, or, worse, lie buried in the memories of the several persons who took part in the transactions, each one of whom may have a different recollection of what took place. The process of determining the true history of the deal was so like fitting together the irregular sections of a picture puzzle that simile may conveniently be used. In two respects this puzzle was more difficult than the ordinary one. In this case the parts had first to be found before they could be placed in the proper juxtaposition. Furthermore, while the usual puzzle is accompanied by a completed picture showing what the result will be when the pieces are correctly placed, this feature was lacking in the present case. All that was to be had was the assurance that when the pieces were found and brought together in the proper manner a picture would result.