IN THE JANUARY issue of this journal Mr. Elliott B. Woolley presented a method of determining a straight-line regression by the summed absolute values of the areas of rectangles formed by the projections of each observation upon the regression line.' The resulting line possesses the usual property of passing through the point of means, and its slope is a simple average of the elementary regression slopes derived by in each direction; it is the geometric mean of the elementary regression coefficients, each referred to the same axis, and has their algebraic sign. It should be pointed out that this is nothing other than Frisch's regression (cf. Statistical Confluence Analysis . . .), and a statistical parameter which has long appeared in the literature. In terms of a correlation surface it represents the major axis of the concentric ellipses of equal frequency. While Mr. Woolley has made an interesting contribution in proving this minimizing property of the diagonal regression,2 his further argument that it is to be preferred in any sense as a method of determining regression lines seems to require brief comment. (a) The lack of consistency between the elementary regressions is a necessary property of a linear multivariate frequency surface. It is expressed in the purely formal statistical law of regression towards the average. The elementary regressions are not thereby illogical. (b) If the aim of the investigation is not simply a characterization of the properties of the multivariate distribution, but rather the search for a hypothetical true (in some sense) linear relationship, upon which has been superimposed a distribution of errors, then no definite method of determining the regression equation can be specified until some assumptions have been made concerning the nature of the disturbing causes. These assumptions must be in the nature of postulates; by no possible method can they be determined inductively from an examination of the data, even in an infinitely large sample. This last statement must be emphasized since some of the recent literature seems at first sight to suggest otherwise. This is because seemingly innocent, but in fact highly restrictive and often arbitrary, assumptions of noncorrela-

This article points out the deficiencies in early cost accounting methods. Early text books on cost accounting commonly carried a graphic presentation of what was known as the cost formula . The formula stated that material cost plus labor cost equals prime cost and prime cost plus manufacturing expense equals cost to make. These propositions and the figure representing them have almost vanished from recent accounting literature, but occasionally they do reappear. It is because of such reappearances that this critique is presented. The earliest attacks on the formula were made by accountants with a economic turn of mind who insisted that few manufacturers were so fortunate as to be able to establish the selling price of their products by adding the desired profit to theft peculiar costs to make and sell. It is certainly true that direct material is no less an asset because it is taken from stores and placed in process or because it is taken from process and placed in finished stock, at least if production is for an existing demand. Without attempting to decide what might or might not be wise business policy relative to producing goods for a market which fails to provide a selling price high enough to cover all costs, it might be noted that the implication of cost priorities does not enjoy universal acceptance.

Scope of the study, 231. — The adequacy of unemployment benefits, 233. — Nature of the labor market studied, 235. — Characteristics of the sample, 239. — Experience after benefit exhaustion, 244. — Limitations of the interview method, 250. — Summary and conclusions, 252.

The Dominion Companies Act of 1934, amended in 1935, and the English Companies Act of 1929 have many sections, which are identical or almost identical, and this is particularly true of the sections that deal with the audit of accounts. Both acts require that the accounts of companies granted limited liability shall be audited by an auditor or auditors appointed annually by the shareholders in general meeting; that the auditor shall report to the shareholders; and that a copy of the balance sheet, profit and loss account, and auditor's report shall be sent to shareholders before their annual general meeting. In practice, of course, the management chooses the auditor, and the board of directors has the power to fill vacancies during the year in the office of auditor, but no change in the auditor can otherwise be made without notice being given in advance to the auditor and to the shareholders of intention to propose a change. The auditor is entitled to attend any meeting of shareholders at which the audited accounts are to be discussed.

Education for a career in accountancy, then, as in all education, has the objective of preparing individuals to act in certain ways with understanding. It, too, is a union of teaching and learning, combined in differing proportions. A complete education will take more time than an incomplete education. An in- complete education can be accomplished with a minimum of formal teaching; a more complete preparation usually leans heavily upon the vicarious processes of learning. Accounting is used in the social interest as an instrument of regulation of business; uniform systems of accounts and reports have been required in some cases; audits may have been prescribed; professional accountants are examined and licensed; accounting provisions are increasing in corporation laws. Such an appreciation approach would seem to be a very appropriate one in many educational situations. Yet this approach is seldom found among the college offerings. Intensely specialized programs of study undoubtedly have a place. Classes after hours and correspondence courses often serve a very useful purpose in this connection. But intensive specialization works under very definite limitations. If used to supplement prior general education, some disadvantage may appear because prior and present subject matter are not well interwoven.

In considering the cost section of the statement of accounting principles underlying corporate financial statements, which was issued by the American Accounting Association in June 1941, the author assumes it is the wish of those who arranged the program for this session that he speaks from the standpoint of the practicing accountant rather than deal with the subject from the viewpoint of pure theory. It may seem trite, but nevertheless necessary for the record, to point out that cost is one of those words which sounds as though it were a very simple concept, but which proves to be anything but simple in many of situations in which cost must be determined or applied. When cost is to be determined for goods which have been sold, the practical questions which arise in a business with modern production methods and with a variety of products and a highly departmentalized manufacturing organization obviously makes the determination of the cost of sales, a process which inherently rests on many different assumptions and sometimes only intelligent guesses.

Reviews the book "The Securities Market and How It Works," by Birl E.Shultz.

At a Chicago, Illinois, meeting in 1926 one session was a roundtable on examinations in elementary accounting and the interest displayed in that program suggested that further discussion of the same topic would be welcomed. This session is therefore devoted to the subject of examinations but will consider examinations at the different levels, elementary accounting, advanced accounting, and the postgraduate C.P.A. examinations. At the Chicago meeting considerable interest was disclosed in the subject of objective examinations in elementary accounting, and it seemed at that time that the department at Minnesota had gone farther than most departments in the use of such examinations. President of the association has therefore asked the author to have a member of the staff present some materials, which they have developed in that form. A good many instructors still feel skeptical about the adaptability of this form to the held of accounting and it is hoped that this discussion will give some idea of the various types of questions which may be used and how the usual criticisms against this form may be eliminated. Objective questions are more difficult to prepare than problems and it takes a number of years of experimentation and improvement to obtain satisfactory questions and to remove flaws which necessarily appear in first attempts in this direction.

If the reserve is established as a percentage of receivables it makes little difference how a bad-debt recovery is treated as a credit to the reserve account or as a credit to an income account. A balance sheet at the end of a period would not be affected by a choice in the method of treating a recovery during the period. To the extent that a recovery is credited to the reserve account during the period the usual addition to the reserve at the end of the period will be less. The final balances in the accounts for outstanding receivables and the reserve will not be affected by a choice in the method of recording recoveries. Furthermore, net profit would be the same in either case. In one case a larger bad debt expense would be exactly offset by the income of bad debt recoveries. If the reserve is on a budgetary basis, increased by a percentage of sales, the question of bow to treat a recovery becomes pertinent because the balance sheet and net profit will be affected by the decision. A credit to the reserve account is conservative but theoretically the answer to the question will depend on how the percentage was determined.