Knowledge that Transforms

Reviews the book "Some Modern Business Problems," edited by Arnold Plant.

Abstract The article focuses on the effect of direct charges to surplus on the measurement of income. One of the principal functions of accounting is to measure income. It is widely recognized by those who have thought on the problem that the determination of the income of a corporation in a particular year is in part an expression of judgment or rather the result of a series of judgments on varied and often complex problems. The accuracy with which income is measured is determined by the quality of judgment and the nature of the accounting principles applied in the solution of these problems. Five areas are of primary importance in income determination. These are inventory valuation, depreciation, certain features of consolidation and inter-corporate relations, the policy in writing off expenses and asset revaluations to surplus, and the handling of investment portfolios. These vary in importance depending on the circumstances of particular corporations. Frequently other factors assume major importance, such as the determination of reserve for bad debts.

Abstract The article focuses on business-law training for students of accounting. Faced with the ever increasing complexities of modem civilization, society has relied very largely on the device of specialization for the solution of its problems. This specialization has given rise to a problem of its own, and without in any way detracting from the splendid achievements of specialists, venture to suggest that there is a serious need in the social organization of today for the coordination of the activities of the various specialists. The respective problems of the legal and accounting professions indicate the author's point, and because of the close relationship between the two professions in certain lines of endeavor, it is essential that the respective viewpoints of the two professions be coordinated. This necessity has been universally recognized in the inclusion of law study in the curricula in the schools of business administration, and recognize to a certain extent by a display of interest on the part of law schools in the teaching of accounting.

Reviews the book "The Federal Reserve Bank of San Francisco," by Parker B. Willis.

Abstract The article focuses on professional examinations for students of accounting. Five problems have been presented from the Certified Public Accountants examination prepared by the Board of Examiners of the American Institute of Accountants. These problems constitute the second half of the examination in accounting theory and practice and were used by the examining boards in thirty-eight states and three territories on November 19, 1937. The candidate was required to solve problem 1, problem 2, problem 3 or 4, and problem 5. The weight given to the various problems has been given. In one question details of a hypothetical company, Miracle Chemical Company manufactures two products, Mirachem and Corim has been given. Both are made from the same raw materials in the same proportions. The plant of the company is divided into four departments. The expenses of the different departments have also been given. From the data given in the various problems the students are required to prepare a statement of profit and loss.

Abstract Since the beginning of income-tax legislation in the United States, the concept of the annual accounting period has been accepted per se in the calculation of the income tax. But before entering into a fuller discussion of the concept of the annual accounting period, the article diverges to inquire into the government's aim in levying the tax. Is it to receive as great a yield as possible, or is it to burden each taxpayer equitably according to his ability to pay? If the former is the aim, then the government must be condemned because a much more successful and complete shakedown of the taxpayer is possible; but if the latter is the aim, then the government must be condemned because of the gross inequities that arise from the use of an annual accounting period. Significant to observe is that the use of the annual accounting period does not cause only the taxpayer to be the loser. For the use of such an arbitrary period is equally the cause of diminution in the size of the receipts to the State. The article presents illustrations of both classes of inequities.

Reviews the book "The Co-operative Banks of Massachusetts," by Donald H. Davenport.

Reviews the book "Business Organization and Procedure," by Elvin F. Donaldson.

Abstract Almost four years have passed since the enactment of the Securities Exchange Act of 1934, creating the U.S. Securities and Exchange Commission and transferring the administration of the Securities Act of 1933 from the Federal Trade Commission. Both Acts, viewed as a framework of regulation, implicitly assume the validity of traditional economic premises of securities distribution and trading, and the usefulness of the forms and mechanisms which had been developed to accommodate securities transactions. The legislation did not seek to fashion new instruments of investment procedure nor the alteration of basic concepts of the function of the investment banking process in the national economy. The process was to be invigorated and fortified by dissemination of information relating to the merchandise circulating in the markets. Administrative responsibility under the statutes is phrased in terms of protection of investors, and administrative authority, broadly speaking, is phrased in terms of disclosure.

Reviews the book "Studies in Current Tax Problems."