Knowledge that Transforms

Reviews the book "Performance of Department Stores," vol. 4, by Edgar H. Gault.

Abstract Presents the short story "Fable," by Henry R. Hatfield.

Abstract This article presents the need for a research program in accountancy. A longer-range objective is the application of research findings to actual accounting situations, in the hope that they may be helpful in establishing better standards for both accounting training and accounting practice. From suggestions submitted by the accountants consulted in this connection it is evident that the word research must be taken in a broad sense to cover the activities proposed. The task is not one of merely collecting facts, or even of suggesting interpretations and applications of such facts. Many of the problems which are most in need of solution call for a coordination and rationalization of existing current thinking and practice in respect to various aspects of accounting. Thus it seems that a research program in accountancy must include not simply studies in the theoretical and economic aspects of accountancy but also in the legal and social aspects of its practice. The word practice, too, is here used in its broadest sense, to include not merely the professional activities of public accountants but also the duties and responsibilities of accountants at work in the service of government and of private business.

Abstract A few year ago, particularly 1925 to 1930, certain tendencies in corporation finance were much under discussion among both accountants and lawyers. The accountants, by defining Earned Surplus, have indicated their approval of the subdivision of surplus into Earned Surplus and Capital Surplus and the lawyers, through Section 25 of the Uniform Statute, have shown that they favored a required subdivision of surplus which will produce separate accounts for paid-in surplus, revaluation surplus and surplus profits. Statutory provisions make it clear that accountants and lawyers still believe that the consideration given for shares of stock is an important indication of "capital," and that they still think of dividends as realized profits and not as capital returned. The most generally accepted use tends to associate the word surplus with profits or at least with the amount available for distribution. Therefore Paid-in Surplus will sound to most people like paid-in profit and Revaluation Surplus like revaluation profit and both will seem as if they should be distributable as dividends.

Reviews the book "Credit Manual of Commercial Laws with Diary, 1932," by George E. Bennett.

Reviews the book "Applied Accounting Principles," by Emmett R. Sanford.

Abstract When the board of directors of a corporation declares dividends it generally makes them payable at a future date and when that date arrives the distribution to the stockholders usually is made according to the terms of the resolution. However, between the date of declaration and the time set for payment, the corporation may have reverses which leave it in such condition that conservative financial policy would decree that nothing be paid to the shareholders. It has been held that the declaration of cash dividend severs the amount from corporate funds and creates a debt on the part of the corporation in favor of its stockholders and this debt cannot be rescinded against the will of any stockholder so far as he is concerned. But if a board of directors should declare a cash dividend and make a public announcement of the fact, the courts have held that thereafter the board has no right to reconsider and rescind its action. Insolvency of the corporation occurring before payment made no difference in the obligation of the company to carry out its dividend declaration and gave the concern no right to rescind the unpaid dividend debt.

Abstract This article describes legal and economic concepts of the balance sheet in Germany. he balance sheet is essentially a scheme for classifying property and capital, and is not vitally concerned that different amounts of property came in to the business at different dates. Therefore those who hold to these views are faced with no problems of valuation. Knowledge of current values for assets and capital is not absolutely essential to management. Although for certain purposes current values may be needed, it is more important to have a proper classification of the items of property and capital and to preserve the comparability of successive statements. A dynamic balance sheet must be supreme for the use of the manager because his decisions are dictated by his struggle for profit. The clear and concise ideas of writers who take the management point of view of accounting point out the proper course to follow. Legal requirements are obviouslyto be satisfactorily met, but the manager'svaluation problems can be best solved bythe application of economic principals.

Reviews the book "Gold, Credit, and Unemployment," by G.D.H. Cole.

Abstract The article presents information about capital and revenue profits and losses. A profit is an increase in value. It may result through the sale of an asset, in which case the asset is replaced by cash, or an obligation to pay cash, of a greater value. A profit may also arise through an increase in the value of an asset itself, when viewed from a certain standpoint. The asset is not sold, but is simply regarded as being more valuable. In this case it is an unrealized profit, not being represented by cash in any way. There is one asset which obviously must be excepted from this rule, and that is cash itself. If a concern has cash abroad, a change in a rate of exchange can make a very real and immediate profit or loss. Profits and Losses are divided into those of Revenue, and those of Capital. Revenue profits and losses arise out of regular operations of the concern, which will be buying, manufacturing, and selling its products, or simply buying and selling merchandise of some kind. Capital profits and losses arise out of a transaction in a capital asset or liability, and accordingly one outside of the regular operations of the company.