Knowledge that Transforms

Governmental Accounting is that type which deals with the recording and reporting of transactions for political units, such as municipalities, states and the federal government. The article presents recent attempts in governmental and institutional accounting. These are presented to show that there has been some practical improvement. A recent action has been the study and preparation of a system of uniform financial reports for universities and colleges. Dishonesty and inefficiency cannot exist for long when public opinion is adverse to it and when proper education shows a better and more efficient method. It is frequently held that improvements in all governmental procedures, including accounting, are retarded through the fact that elected officers have a short term of office and therefore, are not interested in exerting themselves for the betterment of procedures. The whole subject of governmental accounting is based upon the transactions of governmental and institutional units and their proper segregation into funds.

Reviews the book "Analyzing Our Industries," by C.E. Fraser and G.F. Dorlot.

This article discusses the basic concepts of depreciation. The fundamental facts of depreciation-- the exhaustion of capital investment due to the physical or functional exhaustion of service capacity and the necessity of recovering capital investment before any profit on a venture could be claimed-have not always been understood by those individuals who regularly engaged in business undertakings. The book "The Elements of Book-keeping," by P. Kelly, published in year 1838, illustrates the inventory method of balancing the fixed asset. The 13th Annual Report of the Boston & Providence Railroad Corporation, describes a tardy recognition of accumulated depreciation, the depreciation from January 1, 1834 to December 31, 1844 being recorded in 1844. During the period, 1849-1867, a considerable amount of experimentation with methods of presenting depreciation data was evident. In the annual report of 1853, figures were inserted in the section headed "Estimated Depreciation beyond the Renewals' and deducted from surplus.

Reviews the book "Accounting Manual for Small Cities," by Carl H. Chatters.

Reviews the book "American Business Leaders," by F.W. Taussig and C.S. Joslyn.

Reviews the book "Credit Policies of the Federal Reserve System," by Charles O. Hardy.

Reviews the book "New York C.P.A. Law Questions With Answers," by A. Lincoln Lavine.

Reviews the book "Foreign Exchange," by A.C. Whitaker.

The article illustrates through an example in a coaching class the fallacies of assumptions in problem solving demonstrations by teachers of accounting. An experience of many years as an accounting teacher plus an experience of some years as an examiner for the licensing of accountants has convinced the author that the fallacy of assumption is one of the things responsible for the heavy toll exacted of the candidates who attempt professional examinations. Apparently, assumption is believed to provide an easy, or lazy person's way out of what seems to be at least at first glance a perplexing situation. A trial balance given in a problem does not balance. This fact alone affords no reason for the student or candidate assuming that the difference must be adjusted through some account like notes or accounts payable, or through some other account as far fetched. Perhaps a careful study of the situation will show that the requirements may be met almost completely by ignoring the discrepancy.

The accountant of today must be particularly firm in his contention that costs incurred in a given year must be charged to that year and carried forward only in those cases where they will definitely benefit the future. This applies to cost of idleness and would prohibit its deferral by any such process as omitting the charge for depreciation because the equipment was not productive. It is also inadvisable to charge the costs of idle equipment direct to surplus on the grounds that such costs were not an element in the production of that particular period's income. One of the principal features of the current order of things which raises accounting problems is the lowered price level. Accounting involves both the establishment of a correct income estimate and the periodic showing of the financial condition of the concern for which those earnings are estimated. For such purposes, replacement values have a place unless the statement is to be merely historical in character. In a period of rising prices the use of a depreciation charge based upon cost leads to an overly optimistic attitude by the persons relying upon our estimates whether they be managers, investors or creditors. In periods of falling prices the effect is undue pessimism.