Knowledge that Transforms

Abstract The article presents the importance of a common terminology in languages. The author was discussing the handling of municipal expenditures in the operating statements with an official of a large city. Complete agreement was not reached until the official was asked to define "expenditures" and the author discovered that they had been talking about the same thing. This incident illustrates the value of a common terminology, particularly its importance in written communication. For in conversation, if it is not clear what the speaker means, one can question him, but a reader cannot do this. Not only has the value of uniform terminology long been recognized but even the necessity of preparing concise definitions and presenting them in a compilation as one of the means of achieving uniformity is well established. There are two principal classes of terminologies: those prepared for general use and those related to a particular publication. General dictionaries like the Webster's New International Dictionary and the terminologies of the American Institute of Accountants and the Dominion Society of Chartered Accountants are examples of the first class.

Abstract Reviews the book "Speed Methods of Statistics," by Donald E. Church.

Abstract Time and again the prosperity malpractices of corporate management were the subjects of erudite discussions. Moreover, the courts have always had a tendency toward setting up rules of law which they felt would protect the small absentee owner. Perhaps this depression philosophy may be said to be accountable for the desire to limit the capital raising activities of those large corporate entities in future prosperity periods, who had demonstrated themselves to be given to faulty procedures during the prosperity era of the twenties. But it must be emphasized that there was a trend toward such financial regulations even during the preceding prosperity period. Furthermore, during this period there were evidences indicating that the accountants responsibility would likewise expand and increase under this financial control philosophy. Perhaps the first forecast of accountants' increasing responsibility was the Ultra Mares case which began early in 1924. After 1922, however, corporate management turned to selling securities in order to secure the capital needed.

Abstract Since accounting is the method and means of recording, measuring and interpreting business and economic events, it is evident that accounting like statistics, is a technique and tool of social science, applicable particularly to business enterprises and other accounting entities. The accounting procedure must be used in a scientific manner in order to obtain results, which present true and impartial pictures of economic and business facts. In other words, if accounting is really to fill the role assigned to it as a means of economic control, it must grow out of its traditional, rule of thumb procedures and assume the stature of an objective, impersonal social science. There is considerable evidence today of a growing recognition among accountants that such a development is not only possible but also very necessary and that the time has now come when the practice of accounting ought to be placed on a genuinely objective basis, so that the special desires and interests of individual accountants and business managers will not unduly influence findings of accountants.

Abstract Reviews the book "Accountants' Index."

Abstract Since the Tentative Statement of Accounting Principles was published in 1936, a considerable critical and explanatory literature has developed on the general subject. No doubt the time will come when this discussion will inspire a reexamination and perhaps a revision of the original statement. With this in mind, the article reviews the Tentative Statement. Several general conclusions may be drawn from an examination of the published criticisms of the Tentative Statement. First, several of the propositions are considered by the critics as being applications of principles rather than principles in themselves. Second, the critics seem to offer no objection to the inclusion of what are essentially definitions and rules. Third, the implication is made that the Statement would have been better constructed, not as a series of equally important propositions, but as principles and corollaries. Fourth, some of the propositions, although challenged, are left in rather an uncertain state because the critics disagree as to whether there is sufficient reason to reject them. Fifth, the wording in many cases has been described as vague, ambiguous, and inconsistent proposals are made for new and additional principles not included in the Tentative Statement.

Abstract The article focuses on a court case involving Metropolitan Edison Co. related to restriction on dividends on common stock. A recent release of the U.S. Securities and Exchange Commission under the Holding Company Act raises several significant issues with respect to the reclassification of surplus and the legality and financial advisability of dividends on common stock. The Metropolitan Edison Co. is a Pennsylvania corporation and a public utility operating company doing business in eastern Pennsylvania. It is a direct subsidiary of NY PA NJ Utilities Co., which is controlled by the Associated Gas and Electric Corp., which in turn is controlled by the Associated Gas and Electric Co. A series of resolutions adopted by the board of directors of the Metropolitan Edison Company resulted in the transfer of $6,111,333.00 from earned surplus to stated value of common stock between 1925 and 1931. The Securities and Exchange Commission on December 1, 1939, issued an order to the Metropolitan Edison Co. to show cause why an order should not be entered to prevent the declaration and payment of dividends on its capital stock.

Abstract The article presents information about the use of realizable value as a measure of gross income. The point at which the income stream is most properly and conveniently measured is a question which has received considerable attention from economic, legal and accounting writers. The economic definition of income is usually in terms of consumers' goods; it may be defined as their output, or the purchase of them, or the amount consumed, or the reaction of the consumer to the utilization of such goods. Probably most economists regard the latter as the proper concept of income but discard it as a workable concept because of the impossibility of its satisfactory measurement. They, therefore, find it necessary to fall back on a definition in terms of the value of the services rendered to individuals and of the value of the goods consumed by them. The measurement of the income stream at this point is then assumed to be somewhat representative of the human reaction or satisfaction that results from consumption.

Abstract Reviews the book "Mathematics of Statistics," by John F. Kenney.

Abstract Reviews the book "Municipal Indebtedness: A Study of the Debt -to-Property Ratio," by Leroy A. Shattuck, Jr.