Knowledge that Transforms

Abstract The article discusses the municipal accounting system in which fixed assets of a municipality are not used in utility operation. There are some practical reasons for the existence of this situation. These are discussed under the heads of municipal credit, depreciating value, and replacement. When a major fixed asset is acquired by a municipality it is usually financed through a bond issue. The security for these bonds is most often the general credit of the city. The financial condition of the city at the time of issuing the bonds, during the life of the bonds, and at the time of payment of the bonds, is not dependent upon the value of the fixed asset involved. In other words, from the financing point of view, there is nothing which causes the municipal officials, bondholders, or general public to need property accounts. Municipalities should keep fixed property accounts for the sake of control, historic value, and completeness, and these property accounts should be kept in a separate set of balanced accounts to preserve their unity, and to maintain the fundamental purpose of other funds already in existence.

Reviews the book "Money and Banking," by J.I. Bogen, M.B. Foster, M. Nadler and R. Rodgers.

Abstract The practical conclusions to be arrived at from the foregoing analysis can be briefly summarized as follows. A method is given of calculating the most economically advantageous period of use for a machine installation, and in particular of ascertaining on correct theoretical lines when a given machine will be due for replacement, the latter by stating the correct depreciation value on which to base a comparison of the increased capital costs from a new machine with the simultaneous saving in maintenance and running costs. It is also shown how depreciation should be theoretically allocated to the different years of the service period; and the close approximation in replacing the theoretically correct procedure by calculating the constant annual depreciation in such a way that depreciation is complete after % of the estimated optimum service period.

Reviews the book "The Recovery Problem in the United States."

Abstract The executive committee of the American Accounting Association prepared and distributed in June 1936, a Tentative Statement of Accounting Principles underlying corporate financial statements. The committee attempted to set forth some of the bases upon which accounting statements rest. It was hoped that their publication would arise discussion and that a more comprehensive formulation will develop. The statement is an attempt to formulate theory, which will explain facts of accounting practice. The committee did not attempt to cover every phase of accounting theory. They limited themselves to special problems of the preparation of financial statements of the private corporation. Moreover they treated only three aspects of corporation accounting, which they classify as: the determination of costs and values; the measurement of income and the differentiation of capital and surplus. The entire statement consists of twenty propositions. Many accounting practitioners and writers have argued that it was illogical to use discounted future income as the basis of accounting valuation.

Reviews the book "Money, Credit and finance," by G.F. Luthringer, J.G. Smith and D.C. Cline.

Reviews the book "Introduction to Accounting Procedure," by John A. Schur and Manford M. Haskell.

Abstract This article focuses on the accounting for stock dividends paid. It says that legal reasoning in relation to stock dividends is drawn in part from heir known effects and implications in business practice. These considerations constitute the central subject-matter of the present study. The plan is, first, to examine the subject from the standpoint of fundamental principles, and second, to use the principles as the basis for a rational theory of stock dividends. The present article deals with the payment of stock dividends, a subsequent article will be concerned with the receipt of stock dividends. Cash dividends paid must be well under annual earnings, thereby permitting accumulation of profits in the business. In a growing business, partial retention of earnings is generally forced upon the company. This is because expansion creates need for additional funds and earnings provide a readily available source of such funds. Moreover, partial retention of earnings is a necessary accompaniment to the introduction of senior capital under a system of conservative financing.

Reviews the book "Accountants' Certificates," by James H. Wren.

Reviews the book "How Profitable Is Big Business?," by Alfred L. Bernheim.