Knowledge that Transforms

Forty-four states in the U.S. and territories and the District of Columbia have adopted as their written examination for candidates for the certified public accountant certificate the standard examination prepared by the American Institute of Accountants. The committee on enrollment and disbarment of the Treasury Department has recently adopted the Institute's problems in accounting theory and practice as a part of its examinations for candidates for a treasury card who are not members of the Bar nor certified public accountants. The responsibility for producing the standard examination rests with the Institute's board of examiners. The Institute's board believes that the certified public accountant certificate should signify that its holder is qualified to practise public accounting and has passed an examination that tests his practical ability as well as his theoretical knowledge. Members of a number of state boards have suggested that the standard of knowledge and ability properly expected of a candidate for the certified public accountant certificate should be that of a senior staff accountant, and the standard examination is intended to require ability of about that level.

The article presents information about current deficiencies in financial statements. One of the principal functions of the U.S. Securities and Exchange Commission is to make available to investors reasonably complete and accurate information about the business affairs of issuers whose securities are listed on national securities exchanges and issuer whose securities are publicly offered for sale in interstate commerce or through the mails. To this end, the Securities Act requires such issuers to file with the commission reports that are designed to furnish some of the basic information needed in appraising these securities. The Commission's examination of these filings culminates either in their becoming effective without amendment or in the issuance of a memorandum which will either cite deficiencies to be corrected by amendment of the instant filing, or note suggestions to be observed in the preparation of future filings. Failure to correct deficiencies cited may result in stop-order or delisting proceedings.

Reviews the book "Bookkeeping and Accounting," 4th ed., by Arthur H. Rosenkampff and William C. Wallace.

Reviews the book "Foundation of Accounting," by Alfred D'Alessandro.

Reviews the book "Expenses and Profits of Limited Price Variety Chains in 1940," by Elizabeth A. Burnham.

Reviews the book "Applied Business Finance," 5th ed., by Edmond E. Lincoln.

Reviews the book "Public Administration Organisations: A Directory, 1941."

The article presents ways to determine effective rate of interest on series of bonds. The article also demonstrates a rather simple mathematical system, which will give the required rate as accurately as desired and which will eliminate a great deal of the guesswork and labor in estimating charges of this type. No difficulty arises when dealing with one bond, or a group of bonds due on a single date, or in the simpler cases, since Makeham's formula or other methods in current use will serve satisfactorily. An accountant must choose from a number of arbitrary methods and be satisfied with approximations, or resort to a tedious trial and error method for establishing the true rate of interest effective in the case under consideration. A purchaser of bonds may be willing to supply information relative to the basis of his bid of premium or discount, and hence furnish an initial approximation to the rate required. Because of various factors, the information would never be sufficiently accurate for the purposes the accountant has in mind.

The article presents information related to overcapitalization as applied to corporations. It is proposed in this paper to discuss critical analysis of currently accepted definitions of overcapitalization, to point out the fallacies upon which they are based and to consider the possibilities of formulating a definition not subject to these criticisms. A U.S. senate bill introduced in 1911 maintained that the registration of any corporation can be revoked by a commission on the ground of overcapitalization that is to say upon the ground that the par value of the total securities including shares of stock and all obligations running for a term of some years or more, of such corporations, issued and outstanding at any time clearly exceeds the true value of the property of the corporation at that time. In determining such true value the said commission shall consider the original cost of such property, its present replacement cost, its present market value, including the goodwill of the corporation's business and the fair value of the services rendered in the organization of such corporation.

The article presents problems prepared by the Board of Examiners of the American Institute of Accountants, which were presented as the first part of the examination in accounting theory and practice held in the cooperating states on May 15th and 16th. One of the questions requires the students to prepare intelligible columnar work sheets showing the consolidation of the accounts, minority interests, earned surplus at beginning, and profit and loss from the provided balance sheets, profit and loss accounts and other data. Another question provided data for the preparation of a statement of operating results of the Zinc Mining and Milling Company in October that will show the operations on the company's own account and its activities in furnishing milling services to others, both for zinc and for lead concentrates. All supporting schedules had to be presented. Computations were to be carried the third decimal The students were required to observe and offer suggestions concerning, the form and substance of the accounts presented, and the treatment therein of depreciation on appreciation.