Knowledge that Transforms

Following the general price inflation rafter World War I there was much discussion about accounting errors in the measurement of business profit when conventional or legal dollars were used in reporting historical costs. This discussion reached a climax in 1936 with the appearance of Sweeney's Stabilized Accounting. Now that another wave of general price increase has swept over the country, the discussion has been resumed. The valid objections to the application of index numbers to accounting data for purposes of reporting profits and losses are few. Unless the general price level remains constant, better index numbers should be constructed. An index designed to measure the change in general purchasing power of the dollar is superior for this purpose to any more special index. The index ideally might be one based on all commodities, or it might be one based on the prices of consumer's goods. The use of index numbers gives recognition to the economic realities of a business situation in place of mere legal formality where legal dollars are assumed to have a constant purchasing power.

The third attempt of a committee of the American Accounting Association to prepare a systematic statement of accounting concepts and standards deserves much praise and those who are responsible for the drafting of the material should feel that it has made a real contribution. Most of the propositions can be accepted as valid and as contributing toward more effective corporate financial statements. The organization of the material has been improved, particularly by grouping separately the standards to be applied in the preparation of financial statements so that they can be distinguished from the more basic concepts of asset valuation, income determination and the classification and measurement of the equities. It is hoped, however, that an early revision will be published which will incorporate the changes, few though they may be, which seem to have general support. Also, it would be helpful and interesting if the policy were adopted of presenting minority reports. Surely the statement as it stands must be the result of many compromises of differences of opinion. It is doubtful if the time has arrived when one can subscribe without dissent and exception to as many propositions as appear in this statement.

The article presents a professional question paper for department for students of Accounting. The problems were prepared by the Board of Examiners of the American Institute of Accountants and were presented as the first half of the May, 1950 C.P.A. Examination in accounting practice. The candidates were required to solve problems 1 and 2 and either problem 3 or problem 4. The time allowed was four and a half hours.

The article presents various developments related to professional accounting and accountants in the U.S. Edward J. Kelley has been appointed to succeed the late Myron M. Strain as Dean of the School of Accountancy. Dean Kelley practiced as a Certified Public Accountant in San Jose prior to 1936, during which time and until 1941, he was Dean of the College of Business Administration of Santa Clara University. He has been serving until this appointment as Controller of Hastings Clothing Company in San Francisco. Howard W. Wright has been granted a leave of absence for the academic year 1950-51. Wright has been appointed Assistant to the Controller of Economic Cooperation Administration. The University of Tulsa, together with seven other sponsoring agencies, was host in April to the fourth annual Conference of Accountants. The two-day program was devoted to the general topic "Humanizing Accounts and Accountants." Noted speakers participated from all parts of the United States and representing many specialties related to accounting.

Reviews the book "Accounting Techniques Used in Published Corporate Annual Reports."

Reviews the book "Guidebook to California Taxes with Special Emphasis on Relationship to Federal Taxes," by Russell S. Bock.

Reviews the book "The ABC of the Federal Reserve System," 12ed., by Edwin W. Kemmerer and Donald L. Kemmerer.

The article presents questions and answers to the problems, which were prepared by the Board of Examiners of the American Institute of Accountants and were presented as the second half of the May, 1950 C.P.A. Examination in accounting practice. The candidates were required to solve all problems. The time allowed was four and a half hours. The weights assigned were: Problem 1, 10 points; Problem 2, 10 points; Problem 3, 30 points. A suggested time schedule is given below: Problem 1: 75 minutes; Problem 2: 60 minutes; Problem 3: 120 minutes. You have been engaged to audit the Thomas Trading Company as of December 31, 1949. A summary of the general ledger accounts is presented below. Based on the transactions as stated and the supplementary information, you are to prepare working papers which show in detail "Ledger Balance 12/31/49," "Audit Adjustments," "Profit and Loss for Year," and "Balance-Sheet 12/31/49." Columns for "Surplus Changes" may be included or entries to "Surplus" may be shown in the other columns provided such entries are clearly identified as applicable to "Surplus." Key all audit adjustments and in journal form present the adjusting entry together with a brief explanation of the purpose of or reason for the entry. A worksheet for Balance-Sheet accounts and a separate worksheet for Profit and Loss accounts may be prepared. The article presents the balance sheet in response to this question.

This article presents a review of the recent developments in accounting theory and practice. The term "recent" is unavoidably relative. It would not be appropriate to consider that it restricts a consideration of the subject only to the developments during the current year. Probably the most important recent development in the field of accounting is the rapidly increasing awareness of accountants of their social responsibilities. The financial reports of corporations, for which accounting is responsible, are the principal means, and probably the most important, by which investors and others having an interest can obtain information of their affairs. Accordingly, it is essential that the information so presented be clear and meaningful, truthful, and realistic. That accounting, so far, has failed in its obligation to present adequately the story of business is amply evidenced. One of the greatest criticisms which has been directed against accounting is that financial statements are presented in such a manner as not to be readable or understandable by the average investor or by labor. For some years there have been a few companies that have attempted to meet this criticism by abandoning the stereotyped balance sheet and income statement and the progressive extension of this practice is an interesting development.

Reviews the book "Office Management and Control," by George R. Terry.