Knowledge that Transforms

Reviews the book "Accounting for Savings, Building, and Loan Associations," vol. 1, "Savings, Building, and Loan Bookeeping," by John R.B. Byers.

Reviews two books on accountancy. "Problems in Business Statistics," by Theodore H. Brown; "Laboratory Handbook of Statistical Methods," by T.H. Brown, B.F. Bingham and V.A. Temnomeroff.

Abstract An extended period of reduced business activity, with its attendant financial difficulties naturally refocuses the attention of accountants on the underlying problems of valuation and income and surplus measurement. One of the questions receiving increased attention is the old problem of the distinction between operating costs and non-operating charges or losses. In times of depression such as the present, it is noticeable that many business managements, in their desperate anxiety to make a showing, are waking up to the fact that there is some basis for drawing a line between operating charges and non-operating losses. It is the business of the accountant to preserve every legitimate distinction, to bring out every angle of the situation that has a vital bearing from the point of view of any interest concerned, but it is also his business, as far as lieth in him, to see that no improper use be made of this approach to the treatment of business transactions and their results. Operating costs are charges which can be logically imputed to the regular activities of the enterprise during a particular period.

Abstract If the capital invested in an asset is classified as physical capital, then unrealized "appreciation," which is commonly meant to express the monetary excess of net reproductive cost over net original cost, is all capital. If capital is classified as real capital, then appreciation is capital to the extent of the amount required to express in the current general price level the net original cost of the asset, and the remainder of the appreciation is income. And if capital 18 classified as nominal capital, then the appreciation is all income. Stabilized accounting prefers to restrict the meaning of appreciation to the excess of net reproductive cost over net real cost. If this view is accepted, the orthodox conceptions of appreciation must be rejected. Appreciation becomes converted from unrealized into realized when doubt with respect to its positive existence is dispersed. This happens most often as the result of sale or depreciation of the particular asset. Although the equalized original cost of an asset, and the accumulated depreciation thereon, ought to be shown in some way on the books and financial summaries, the cost of reproduction need not be shown. If, however, as should usually be desirable, it is shown, the excess of the depreciation on reproductive cost over that on real cost is most satisfactorily treated when charged against the unrealized appreciation. But if the depreciation charged to operations must be based upon cost of reproduction, the resulting realized appreciation is, in essence, a correction of current profit and loss although, where necessary, it may satisfactorily be entered in a realized-surplus reserve.

Abstract A controlling account is an account which, contained in the general or some other superior ledger and posted usually in total, contains, in summary, information which is found concurrently, in detail, in ledger records of a subsidiary character. The chief functions of the controlling account are three, of which the first far outweighs the others: it greatly facilitates the process of double-entry bookkeeping by shortening the general ledger trial balance and thus segregating the possible sources of error, it furnishes summary information in cases where detailed information either is not immediately available or is of no importance and it furnishes a basis for maintaining a check upon the activities of the bookkeepers entrusted with subsidiary ledgers. The controlling account controls its subsidiaries simply in this sense: once its balance is established, through a trial balance of the ledger in which it is contained, a very strong presumption is created that the total of the subsidiaries, if they have been properly kept, must conform to its balance. Ultimately, of course, the control runs the other way. No entry in the control is justified except through a similar entry in a subsidiary account.

Abstract The article provides information about personnel changes in various universities and colleges of the U.S., in the profession of accounting. Robley D. Passalacqua, teaching fellow, has left the department to take a position in Sacramento Junior College. E. I. Fjeld of the University of Colorado has resigned as professor of accounting to accept a position as lecturer in accounting in the School of Business and Civic Administration of the College of the City of New York. Geoffrey Carmichael of Indiana University was elected president of the Indiana State Conference of Teachers of Business Subjects for the year 1932-33. R. M. Mikesell is taking an active part in the organization of farm bureaus and other associated organizations dealing primarily with cooperative activities. Wendell E. Beals, a graduate assistant at Northwestern University last year, is teaching accounting and economics in Kansas State Agricultural College. A new curriculum in commerce with special training in accounting has been established. No new courses are being offered but better arrangements of courses have been provided.

Reviews the book "The World's Economic Crisis," by Arthur Salter.

Abstract Despite the fact that business enterprises are experiencing a period of falling prices and costs, the question of whether or not surplus arising from unrealized appreciation of assets is available for dividends is still important. It is of the utmost importance that law and accounting be in agreement in regard to the treatment of a problem of this sort so that the business man can be advised not only as to the logical procedure to be followed, but as to its legality as well. The profit-and-loss-statement group consists of eighteen states whose statutes state that dividends cannot be paid except from surplus profits of the business. Here also courts have had much difficulty in interpreting the statutes, for, in certain cases in this group, it has been made to appear that unrealized appreciation is available for dividends, because appreciation has been included in profits. This occurs when profits are conceived to be the net increase in wealth during a period, that is when assets are valued at present worth and not at cost. Six states give directors of a corporation the option of paying dividends from whatever source they choose, namely, profits or the excess of assets over liabilities and capital stock.

Reviews two books on banking. "Branch, Group and Chain Banking," by Gaines Thompson Cartinhour; "Rural Banking Reform," by Charles Wallace Collins.

Reviews the book "Business Statistics," ed. 2, by Joseph L. Snider.