Reviews the book "The Law of Accounting and Financial Statements," by George S. Hills

The article presents a report on flow of funds. The need for a statement to report changes and movements not clearly reflected. The article presents a report on flow of funds. The need for a statement to report changes and movements not clearly reflected in the balance sheet and the income statement has long been felt. The positive uses of the funds statement and the reasons for the recent upsurge in its popularity are interesting. For one thing, the recent inflationary movement in this country, associated with a high level of business activity and high tax rates, has posed financing problems on a scale so large as to constitute really new problems to American business. A statement of source and application of funds becomes useful in explaining why a net profit of a million dollars is not identical with an increase in funds of the same amount, available to increase dividends or raise wages. Certain other characteristic problems arise in the preparation of a funds statement. It has less obviously but nevertheless just as certainly dictated the form and content of the balance sheet. To judge by published statements, it has also influenced the form and content of the funds statement.

Fundamentally, present price movements create a serious accounting problem because the precise significance of these movements is not known. Ultimately, the extent to which the present inflation was composed of temporary cyclical elements and of more permanent secular trends will be known. But no one should be overly-sanguine as to the derivation of a satisfactory solution on the accounting level until the more basic economic problems arc rendered more manageable.

This article focuses on the inventories and the statement of funds. The statement of funds is one important tool of analysis employed to trace the how of funds as a preliminary to assessing its significance. The need for a statement of funds arises from the fact that present-day accounting procedures are geared primarily to the determination of income and to the correlative movements in costs and values of assets and liabilities, not to the measurement of the now of funds. To produce an analysis of funds, consequently, a device such as the statement-of-funds work sheet is required to transform income-measuring data so as to constitute a reflection of financial circulation. If a statement of cash receipts and disbursements is available, as in budgetary procedure, with receipts classified by source and disbursements by destination, no necessity exists for preparing a statement of funds from modified balance-sheet and income-statement data, because a cash statement of this nature is itself a statement of the flow of funds.

This article presents information on entity approach to consolidated statements. The central premise is that consolidated statements are exhibits in conventional accounting form of the status and the operations of a group of related companies. The substitution of the concept of economic entity for that of legal entity raises the problem of the scope of the consolidation. In principle the solution of the problem, is dear, namely, include all those companies whose policies are controlled by a dominant parent corporation. The entity concept requires the presentation of assets and liabilities at figures consistent with the viewpoint of a single operating unit. The stockholders of the parent company acting through a board of directors to whom power of administration is delegated constitute the controlling or dominant interest. Consequently, assets must be listed in terms of their relation to the dominant interest. Consolidated statements are not prepared for the purpose of informing minority interests of the status of their investments. For this information, minority interests must refer to the statements of the company in which they have an equity.

Pension accounting, Funding of pension, Accrual accounting

Reviews the book 'The History of Accounting,' by Richard P. Brief.

Reviews the book "Case Movements Analysis of the Accounting for Corporate Income Taxes," by Hugo Nurnberg.

Reviews the book "The Rise of the Accounting Profession," vol. 1, by John L. Carey.