Knowledge that Transforms

Reviews the book "Studies in the Theory of International Trade," by Jacob Viner.

This article seeks the role of capital and income in economics and accounting. Examination of a sample of current accounting literature discloses a much divided opinion as to the relationship between economic and accountancy concepts and theory. The general attitude of accountants seems to be that the economic concepts may be valid in their own field, but they can't be adopted and applied to accounting purposes. It should be observed that the close contact of accountants with the bard realities of business has made more difficult for them the task of formulating logical and consistent concepts for their own use. But, surely it is the highest duty of both accountants and economists, while meeting the legal and practical demands of the moments, to point the way towards true economic conceptions in the law instead of merely passively submitting to its sometimes blundering dictation. The primary and central problem of business and hence of accounting and finance, will always be income. Economists and accountants agree that income is something related to capital.

Reviews the book "Investment Banking," by H. Parker Willis and Jules I. Bogen.

Reviews the book "The Interpretation of Financial Statements," by Benjamin Graham and Spencer B. Meredith.

A policy type of management has come to be characteristic of modern business enterprise. This means that business practices in meeting particular situations and particular problems are being shaped to a constantly increasing degree by general rules formulated in advance. Methods of production and sale as well as relations with employees, consumers and investors are regularly subject to policy control. This trend in management has been necessitated by the increasing size of business units and the increasing complexity of its operations. Activities of a large business organization move forward with so much momentum that they quickly bring on disaster unless a clear track ahead is provided for them. It is a responsibility of the policy type of management to foresee possible disasters and to keep the road ahead clear. The size of current business units, their complexity, their closely knit organization and the necessity for a forward outlook in their administration are all due in a large measure to machine processes used in the technological operations over which business enterprise exercises control.

To maximize the managerial usefulness of a standard-cost system, it is necessary to analyze the variance of actual cost from standard cost. The article suggests a method of isolating a portion of variance which is for the most part noncontrollable, and thus, of calling attention to that part of variance for which management can legitimately be held accountable. By means of multiple correlation analysis of past variance, the portion which can be related statistically to cost factors which are beyond the control of the production executives is isolated and subjected to numerical measurement. By this statistical segregation of presumably noncontrollable variance the portion of cost disparity which is most clearly a function of managerial efficiency is dramatically brought to the attention of the executive so that it can be made the subject of a special investigation. Certain peculiar advantages may be realized by firms which have a very simple type of cost system. Such firms may find in this statistical analysis of variance a cheap substitute for the valuable control devices of a parallel current cost system and a comprehensive flexible cost budget.

Reviews the book "The Value of Money," B.M. Anderson.

The article focuses on the twenty-first annual convention of the American Accounting Association that was held at the Stevens Hotel, Chicago, Illinois, on December 28-29, 1986. In order to increase the scope of usefulness of The Accounting Review periodical, it was voted to ask the authority of the membership to reduce the subscription price for club memberships of ten or more copies to sixty cents per copy. Some discussion was had of a proposal to increase the membership fee to five dollars a year. Since considerable sentiment was voiced against the proposal, it was decided not to recommend the introduction of such a motion in the meeting of the members. The remainder of the meeting was devoted to an expression of opinion by the guests, as to the statement of principles enunciated by the Executive Committee. The first order of business was the reports of officers. The secretary-treasurer discussed the activities of the Executive Committee during the year 1936 and in addition presented the report of membership and the financial condition of the association.

Reviews the book "Expenses and Profits of Limited Price Variety Chains in 1935," by Stanley F. Teele.

This article discusses concepts of income underlying in accounting. Accounting may seem to be the reader of its literature that is mainly concerned with either the capital statement itself or with the sum available for dividends as determined by two capital elements. The use of no-par stock in the nineteen-twenties, brought two new practices; one was that of crediting to stock account a sum which was less than the full consideration received for newly issued shares; this sum is the so-called "stated capital" and takes the place of the usual credit to capital stock or the full consideration for the shares issued. The other new practice was that of crediting a part of the paid-in assets to a so called paid-in surplus account. Bookkeeping has given quantitative expression to various aspects of profit ever since income and expense accounts have been used, and that has been at least for five hundred years. Managerial policies can be made effective through costs and quantitative measures that are translated into action.