Knowledge that Transforms

Abstract The article focuses on the asset approach to elementary accounting. The paper is an attempt at an evaluation of this method in contrast to the usual modes of development in the early stage of presenting an introduction to accounting. The asset approach was planned, at first, to meet the more general needs of the student in the liberal-arts college. It is of equal merit for the business-administration student and for the student interested in accounting as a profession. Needless to say, the use of this departure from the usual approaches has made teachers conscious of weaknesses in the plan that had been followed and has convinced them of certain very definite gains accomplished. Accountants in public practice are recognizing the significance of the economic characteristics of assets in their influence on costs and are adjusting their procedures to the demands of such an emphasis. The natural starting point for the asset approach is not a condensed balance sheet stated in the form of a mathematical equation, but a study of the assets used by business enterprises in the conduct of their affairs.

Abstract Reviews the book "The Business Corporation," by Edward S. Mead, David B. Jeremiah and William E. Warrington.

Abstract The article focuses on determining the current financial position of a city. Most of the expenditures of a municipality are inevitable and must be met. A city could not do without police and fire protection, sanitary and health service, relief, etc., even for a short time. It is also essential either to make cash provision through sinking funds for meeting long-term debt, or to retire serial bonds. These expenditures and provisions are just as much a demand upon current resources as are current liabilities. On the other hand, the listed current resources are not the only means of satisfying these demands. Some incomes, such as tax levies, fines, etc., are certain to bring cash into the treasury in the immediate future. They are a logical offset to current expenditure requirements and current liabilities. It is proposed, then, to regard the financial condition of a city as referring chiefly to its ability to meet all current requirements in the form of expenses, current liabilities, and provisions for meeting long-term indebtedness. Current financial position will be regarded as the ability of the city to meet its financial requirements in the immediate future. Particular emphasis should be placed upon the next year inasmuch as requirements are customarily determined for a period of a year.

Abstract Reviews the book "Money and Banking," by B. Foster and Raymond Rodgers.

Abstract In March of 1940 a stop order was issued by the U.S. Securities and Exchange Commission, suspending the registration statement filed by The Republic Co., an investment trust. The circumstances leading to the issuance of the stop order are of sufficient general interest to warrant an examination of the case. The registrant incorporated on June 21, 1926, in Colorado, under the name of "Protected Bond and Investment Company," with an authorized capital stock of 50,000 no-par assessable shares. It was organized for the purposes of purchasing, improving and dealing in real estate, and functioning as an investment trust. Between 1927 and 1931 the articles of incorporation were amended several times. As a result, the capital structure became much more complicated, and the name of "Republic Company" was adopted. An amendment of September 30, 1931, authorized the issuance of preferred stock at lower dividend rates. The objectives of the new offerings, to reduce the potential cash drain from surrender of savings certificates, and to reduce the dividend rate on preferred stock, were thereby attained.

Abstract Reviews the book "The Output of Manufacturing Industries, 1899-1937," by Solomon Fabricant.

Abstract Reviews the book "Internal Auditing," by Victor Z. Brink.

Abstract The article presents problems presented in the second part of the November 1940, C.P.A. examination prepared by the Board of Examiners of the American Institute of Accountants. One of the problems asked was, the will of E. M. Dodd, who died on December 31, 1933, provided cash bequests of $40,000 to Mrs. Dodd and $15 ,000 each to two children, the residuary estate to be divided equally among the three beneficiaries. Mrs. Dodd was appointed executrix and trustee without fees or other emoluments. By court order Mrs. Dodd was to receive a family allowance of $4,000 a month, commencing January 1, 1934, payable from income or from any cash principal available if the income should be inadequate. The estate never had enough cash available to pay up the full allowance nor could any part of the cash bequests be paid. Accordingly a considerable liability to Mrs. Dodd had accumulated toward the end of 1939 for the unpaid portion of the family allowance. The students were asked to prepare adjustments to the trail balance, columnar worksheet showing the trial balance before and after adjustment.

Abstract In the face of all the exciting and absorbing economic, military, and political aspects of the defense program, it is difficult to confine a talk to the prosaic and humdrum affairs which are supposed to be of interest to accountants. One of the obvious effects of the defense program of interest to accountants is the increased demand for accounting services. One of the important questions faced by those who are charged with making defense expenditures is how to contract for the necessary commodities and services. The traditional governmental purchasing technique is by competitive bidding, with very few exceptions. This method is intended to give the government the lowest possible price and to eliminate favoritism and collusion in the award of government business. However, it is slow and cumbersome, and it works best when the quantities of goods ordered are small enough to fit into production programs without too much of an upset. The advantages of negotiation are speed and flexibility. Work on many contracts can actually be gotten under way before all plans, specifications, quantities, delivery dates, and other features of the deal are completely worked out. Also the negotiated contract makes it possible for the contracting officers to take into consideration many matters other than price which have seemed important to the Defense Commission.

Abstract With acquisition and disposition prices measuring both the efforts to produce results and the results produced, the principal concern of accounting is the periodic matching of costs and revenues as a test reading by which to gauge the effects of the efforts expended. This concept of "matched costs and revenues" is the main concept discussed here. The standard is simple indeed in its nature: to get a true picture of periodic results of operations, there must be charged against revenues received the actual cost incurred in the process of receiving these revenues. Before the two elements can be "matched," they must be put in some common form so that they will be comparable. The elements are both expressed, therefore, as "price-aggregates." But although costs are handled as price-aggregates it is not just to speak of them as merely price-aggregates. Costs are in reality a measure of efforts expended to produce a product. In the same way it is not enough to speak of revenues as mere price-aggregates; but they must be viewed as a measure of business accomplishment.