Knowledge that Transforms

Abstract Reviews the book "Taxable Income," by Roswell Magill.

Abstract Man's desire to create some mechanical means for aiding him in carrying out simple arithmetic processes dates back to very early times. Computing machines are not a product of this century. Most modern mechanical calculating machines have really nothing basic in them. Of course, many refinements have been introduced but the fundamental idea was never changed. However, these machines were not used and known very widely as it was still impossible to duplicate parts and still achieve reliable results as is now done by modern processes of fabrication. When the modern tabulating machine with its punch card was introduced, it had a tremendous influence upon business and financial procedure. If, today, reliance still had to be placed on long-hand methods, the scope and complexity of present-day business problems would be practically impossible. This new arithmetical technique has been so widely adopted that over 10,000 tons of punch cards are used each year in the U.S. Refinements in the punched-card method have included use of electrical contacts through the holes instead of mechanical connections.

Abstract Reviews the book "Industrial Relations and the Social Order," by Wilbert E. Moore.

Abstract During the twentieth century the approach used in the teaching of accountancy that has become almost universally accepted is that commencing with the balance sheet. Not only is the balance sheet the first topic discussed in the usual course in accountancy, but it is made the end and aim of all accounting and almost every step in the development of the accounting technique is taught with reference to its effect on the balance sheet. Although the balance sheet approach is convenient in teaching the mechanical details of accountancy, it does not equip the student with an understanding of the subject that will enable him later to interpret the results of the accounting processes. Elementary textbooks on accountancy, after commencing with a discussion of assets, liabilities, and net worth, proceed to explain how these are shown in a statement called the balance sheet. Probably the best explanation of a balance sheet is that it is a list of the balances of the accounts in the ledger of a business enterprise when its books of account have been closed. Such a definition it is, of course, impossible to give to the beginner since he presumably knows nothing about balances, accounts, ledger, or closing the books.

Abstract A study of recent accounting literature discloses a very limited use of ratios and percentages to determine the effect of changes in costs and output on the final unit cost. Most of the literature, especially in the case of budget forecasting, approaches the problem by showing the changes in costs and output in terms of absolute amounts. For this article the problem and solution method is believed to be the most succinct manner for presenting this material. The first problem will show the effect on unit cost of various changes in total cost and unit output, the second will deal specifically with the determination of unit meal cost when changes are contemplated in total meal costs and number of meals served, and the third will show the unit output necessary to cover increased costs of production if unit cost is to remain the same. In all these problems, unit costs will vary in inverse proportion to output. Cost and output relationships can be measured by percentages and ratios. The article presents a formulae, which can be used as an expedient device to determine the effect of variations in cost and output relationships.

Abstract Reviews two books "New Auditing Techniques" and "Audit Programs and Working Papers," by Maurice E. Peloubet.

Abstract This article focuses on education for public accounting on the collegiate level. There is little opportunity ordinarily for comparing an accountant to an apple dumpling or to a can of tomatoes, but it can be said without hesitation that in either case the quality of the raw material can have a great effect on the finished product. In the case of the accountant, however, there are some qualities which are very difficult to detect or evaluate by casual observation, and which are nearly impossible to create if they are not present in the undeveloped material. Either an institution or an individual in outlining plans for offering or receiving an education for public accounting should think of the objectives of the educational processes. The objectives can be assembled after one has given much thought to the types of duties and contacts of the accountant in his professional world from day to day. In literature, sciences, and some of the social sciences, however, the accountant will find it necessary to renew his acquaintance with some phases thereof from time to time in order to feel at home in a discussion that might arise in some of his numerous contacts.

Abstract The Smaller Practitioner; This thinking gives support to George O. May's statement that "Accounting has developed from a service department of business to become a social force." It also suggests that public accountants are aware they must accept new obligations to society as their technology becomes a social force. They have clearly accepted the duty to get qualified people into the profession. The support given to university education in the subject and to the work of providing suitable technical examinations and of fostering effective legislation is a part of this activity. So too, is the stress now placed upon selective recruiting and the development of a program of personnel testing. It is also a social obligation, as well as sound firm policy, to aid staff people to attain full competence. To this end some firms provide special training for beginners and diversify the experience as an aid to their professional growth. These small firms, located for the most part in the smaller business communities, would often prove to be missionaries for good accounting in business.

Abstract Since business first adapted for its own use the budget idea which had been developed as a means of organizing and controlling the financial affairs of governments, several types or styles of budgets have been developed. To a limited extent, the appropriation type of budget common to governmental budgeting has been carried over into business. This type of budget involves the appropriation of a definite amount for a prescribed purpose and the limitation of expenditures to the amount appropriated. Based on a recognition of the difference between fixed and variable costs, the flexible or variable budget is a control device which recognizes that different expense allowances are necessary for different rates of activity. Comparison of the budget figures thus determined with the costs actually incurred provides a closer control than is possible when the cost allowances are based on forecast volumes which differ from the volumes actually attained. The flexible budget idea has been applied principally to the control of departmental overhead.

Abstract When the accountancy graduate obtains his first job it is most likely that his employer will tell him to forget what he learned in college and to get adjusted to accountancy as it is practiced. This statement by the employer is, of course, only a conversational exaggeration, for he does not really mean that everything taught in the accountancy courses is wrong. But from observing the equipment of the college graduates in his employ he gets a pretty definite impression that what goes on in college courses is far from what might be desired. It is the opinion of the writer that there are two causes for the current discrepancy between the academic world and the business world, faulty text material, and lack of standards for teacher qualifications. The existing textbooks either were written about a quarter of a century ago or were modeled after those written at that time. The fundamental defect in these texts is that they are governed by the fallacies inherent in the balance-sheet approach. The most important qualification of a teacher of accountancy is the ability to explain and expound accountancy as it is practiced.