Knowledge that Transforms

Abstract Accounting is not a science; it is an art. The general ledger of an accounting system is a picture of a business enterprise in action, but it is not a photographic picture. Rather it is cubistic or surrealistic, and therefore symbolical in nature. It visualizes, for the management and others, one link in the chain of economic activity whereby man makes his living. Put all accounting systems together in a chain, and the totality of economic effort would spread like a mighty mural before our eyes. There sometimes is a look about the eyes of accountants that has mistakenly been compared with the cold stare of a fish. It does not come from eye strain from unemotionally looking too hard at figures. Instead, it comes from mentally seeing far-off places and far-off activities. For accountants look with an inner eye at commerce and industry-a scene which is one of the mightiest and most complex to be viewed by man. The accountant can glimpse the whole panorama. The pen, the ledger the ink are his artist's brush, canvas, and paint with them he captures some phases of each dramatic movement of the scene.

Abstract The evaluation of inventories is of considerable importance for purposes of both the balance sheet and the income statement. In the former, the inventory evaluation influences the current-asset total, the grand total of all the assets, and the surplus figure; in the latter, the inventory evaluation materially influences the figures for cost of goods sold and for net profit. The general rule for purposes of balance-sheet evaluation is that assets should be exhibited at cost, whereas for purposes of the income statement the general rule has held that evaluations should be on such a basis that profits (and operating business losses) will be taken up only on the basis of sales. These rules are interrelated, as well as consistent with the concept of historical accounting. Departure from them represents a violation of realized, experiential accounting and must be Justified on other grounds. Notwithstanding these general rules it has long been. Considered good practice to evaluate the inventories on the basis of cost or market whichever is lower, thus frequently exhibiting the asset at less than cost.

Abstract If an example were sought from accounting to show that living language changes, the word "surplus" would be a good one to use. It was not originally a bookkeeping term, having come rather late into accounting from earlier use in law. Its antecedent in bookkeeping was profit. But before the noun "surplus" became as prominent in accounting as is the noun "profit," it passed through a long chrysalid stage in law as an adjective in the phrase "surplus profits." After the middle of the nineteenth century the term "surplus assets" appears in court cases, especially cases in Great Britain. In 1869 "whole surplus" was used in referring to assets of an enterprise in dissolution. Surplus assets, it was said, must be distributed pro rata. In 1889 the courts referred to dividing the surplus after payment of liquidation expenses. In 1896 a court tried to link the two terms by saying that surplus assets means surplus profits, and then explained that surplus assets are those remaining after payment of debts and recoupment of capital. It was perhaps not well understood until more recently that the word "profits" always carries within it a reference to "surplus assets," but that the phrase "surplus assets" does not always connote "profits."

Abstract Reviews the book "Cost Accounting," by W.B. Lawrence.

Abstract Reviews the book "Progress in Development of Basic Concepts," by Thomas H. Sanders.

Abstract As the orthodox realization and liquidation account does not adequately present the affairs of a company under liquidation in bankruptcy or one being reorganized under a receiver, repeated attempts have been made to improve the reporting for such concerns, as of January 1946. Some of these attempts have adapted the ordinary interim work sheet by inserting additional columns so that the trading transactions may be distinguished from the non-trading transactions. The other method of attacking the problem adapts the principles of the articulation statement in that the money amounts involved are sorted into columns according to the types of transactions and sorted to lines according to the titles of the accounts affected. The article presents some general rules for the preparation of columnar realization and liquidation statements. First rule is to classify transactions according to the columnar headings and determine whether the entries should be recorded as debit or credit according to the effect the transactions have in the accounts named on the lines. Also, record all cash collections as realizations of assets and all cash disbursements as payments of liabilities.

Abstract Reviews the book "Accounting Manual for Small Cities of the State of Washington," by Arthur N. Lorig.

Abstract There should be a mutuality of interest, and therefore a certain coordination, between the teacher of accountancy and the practitioner. Both are interested in the same student product. But the emphasis in this relationship rather naturally tends to be one-sided; the emphasis is almost exclusively upon financial accounting. Without counter poise, it tends to perpetuate an unbalance which is now present in the structure and content of accounting education where, particularly in the large schools, the focus in one way or another is largely upon the public accountant and the practices of public accounting. The point is clear. If financial accounting is "hidebound and unimaginative" and college training in accounting is largely dominated by the conventions of financial accounting, then evidently educators and their institutions are not doing the best possible job for their students or for their future employers. A change in the direction of balanced emphasis is needed.

Abstract The article presents a discussion on the topic, College Education As a Requirement for Certified Public Accountants, The New York Experience. This is the second time that the author has been invited to present a study related to the topic. He discusses the result of the examination of 180 candidates from fifteen schools in several states of the U.S. and of ten times as many from New York State schools. This convinces the author, that students who have spent four years in the day classes or six years in the evening classes in the schools have been exposed to a quantity and quality of instruction which should have prepared them for the examinations in Commercial Law, Theory of Accounts, and the theoretical parts of auditing. The author does not believe, that schools were or could be prepared to teach successfully the subject of Practical Accounting or the practical part of auditing. A high school diploma does not insure that the holder has satisfactorily completed a four year course in that school.

Abstract Reviews the book "Special Items Arising Out of the War," by George D. Bailey.