Knowledge that Transforms

Reviews the books "Myself" and "Institutional Economics," by John R. Commons.

Reviews the book "Economic Reconstruction."

Reviews the book "Experiments in Credit Control: The Federal Reserve System," by Caroline Whitney.

The importance of understanding income and profits is readily apparent when one regards them as means to ends which men hold desirable. Statements are made and questions asked everywhere concerning the nature of income and profits and their interrelationships, the amounts and kinds of goods and services actually produced and the amounts and kinds which should and could be produced, the causes of increases and decreases in production and profits and the manner and ratio of the distribution of production among men. It appears that in the U.S., there are yet no good statistical analyses or measures of income with which with confidence to answer these questions. In the accounts of profit-making corporations, partnerships trust estates and so on, the amounts designated by accountants as profit or income may in most cases correspond in a rough fashion to what economists would term profit and as a practical matter it seems acceptable and harmless to consider them as such. What is harmful is the habit of thinking of profit as income and of wages, rent and interest as costs.

Reviews the book "Truck Selling, Simultaneous Selling and Delivery in Wholesale Food Distribution," by Lars J. Sandberg.

Through the cooperation of some of the members of the accounting association a list of accounting theses for a master's degree has been compiled. Requests for titles approved during the past five years were sent to 46 universities represented in The American Association of Collegiate Schools of Business. Thirty-eight answers were received. Ten of those replying indicated that no graduate work in accounting, as a major field, has been done. Four more indicated that the thesis requirement has been abolished or waived. Twenty-four replies listed titles numbering more than 415, but the excess over that number represented subjects approved prior to 1919, doctors' dissertations, or bachelors' honors reports. Elementary, intermediate, and advanced or special courses such as cost accounting, auditing, income tax, budgeting, accounting systems and problem review must be made a part of the equipment of the graduate accounting student who would carry on research in his chosen field. Probably nothing, which the average graduate student must do is as difficult for him as the selection and statement of his thesis subject.

The problems of depreciation accounting are limited to the periodic determination of costs and expenses and to the amortization of the corresponding asset accounts, but the financial aspects of depreciation accounting present some important problems, and various misconceptions of the actual effects and relationships are widespread. The recording of depreciation as such has no effect upon the amount of assets which come into the business except that in so far as the selling price of a product may be based upon its cost of production, depreciation, as one of the costs of production may be said to help determine the gross income. The financial aspects of depreciation accounting may be utilized in the administration of the financial budget. The amount of depreciation included in the budget of expenses may ordinarily be considered as available funds in the financial budget and may be appropriated for any purpose. If it is feasible or desirable to make replacements with borrowed capital, the funds made available by the depreciation accounting might well be used to retire the original indebtedness or other original investment.

Adopting Professor Henry Rand Hatfield's broad statement of the function of accounting, the possible objectives of accounting research are almost unlimited. Professor Hatfield once stated that the function of accounting is "to place responsibility, to prevent fraud, to guide industry, to determine equities, to solve the all essential conundrum of business. In order to perform this function adequately it is essential for accountants to take full cognizance of the outstanding characteristics of modern business life, to develop and to use effectively available tools of analysis and to recognize in all respects their social responsibilities. The author in this papers confines himself to a series of observations regarding the weakness of present-day accountancy, which will readily bring to mind certain desirable objectives to be attained through accounting research. According to the author, with accountants becoming business advisers, exponents of good financial practice, and fiscal agents of stockholders, the objectives which he had suggested to be attained through accounting research, in view of certain shortcomings of present-day accountancy, may even be too narrow rather than too broad.

This article attempts to describe the essence of stabilized-accounting procedure as the writer has developed it from the rather rudimentary stage in which it was left at the termination of the inflation period in Europe. The stabilizing procedure is based upon the index of the general price level. Stabilized accounting, by its use of price index numbers, estimates the reproductive or replacement costs of merchandise and fixed assets as at any dates for which reliable indexes are available. Stabilized accounting treats common stock and other investments in a business by its equity owners as real-value items, stabilizing them by the general index in order to show the current equivalents of the general purchasing power originally invested. When the accounts of a concern are stabilized, such restatement of capital stock does not mean, of course, that any stock records need be altered in any way. Stabilization on the basis of both original cost and reproductive-cost is shown in order to indicate how the two differ from each other and from accounting figures prepared from the books in the regular way.

Reviews the book "Wholesale Accounting and Control," by J. Brooks Heckert and Irving J. Stone.