In the October 1951 issue, "The Accounting Review" published the text of Supplementary Statement No. 2 prepared by the American Accounting Association's committee on concepts and standards underlying corporate financial statements. That differences of opinion among members of the Committee relative to the utility of the historical dollar cost convention were not as extreme as those apparently existing among accountants generally is demonstrated by the emergence of unanimous and reasonably definite conclusions. That substantial differences in viewpoint did exist, however, is evidenced by the fact that achievement of unanimous agreement on a statement for publication required more than a year of effort, involving several meetings and very extensive correspondence. Agreement within the committee as to the dynamic nature of accounting practice did not, of course, lead automatically to a decision in favor of change. It was generally conceded that the widespread dependence of our now highly complex economy on accounting information presented a major barrier to radical revisions in accounting procedures.

The differences between taxable and business income are so numerous and important that the two concepts must be regarded as essentially different. These differences are in part "legalistic" and in part administrative, but more importantly they reflect basic differences in the objectives of the determination of taxable income and of business income. The divergencies are not likely to be resolved. Therefore it becomes necessary to abandon the postulate that taxable income should be determined "in accordance with the taxpayer's regular method of accounting." Attempts to maintain a fictional identity of the two concepts can only lead to political determination of business income, as tax pressures are too powerful to be resisted by accounting principle otherwise determined. Taxable income must be recognized as different from business income; accountants should resist efforts to prostitute accounting principles to tax ads; accountants' reports must be determined independently of tax considerations. Reports should include reconciliations of taxable and accounting income and necessary supplementary records should be maintained. Practicing accountants must carefully insulate' their position of independence in preparation of certified statements from the position of advocacy sometimes assumed in tax matters. Recognition of the basic differences in concepts, and differentiation of the two types of professional practice, are required for the maintenance of public confidence in accounting statements and accountants' reports.

Many executives and accounting supervisors have frequently wished for some worthy means of determining the real potentialities of college graduates as prospective employees. Some attempt has been made in this respect by the use of accounting and aptitude tests. This alone has proved to be inadequate. Further, employers often have not been able to place much reliance on or derive much real information from, letters of recommendation prepared by the student's professors. This is often due to the fact that the professor has very little information regarding the student, the recommendations are hurriedly and haphazardly prepared, there are no provisions made to avoid burdening the professor with repetitious recommendations and the requests for letters of recommendation are usually made very near the dose of the year when the number is large and academic activities are at a peak. Accounting professors, particularly those who have had the experience of employing and supervising accountant in industry, have an unparalleled opportunity to judge the possible future effectiveness of the accounting student as an employee.

The three principal requirements usually set for entrance into the accountancy profession have reference to the candidate's educational qualifications, his experience in accounting matters, and his ability to pass an examination covering accounting principles and practices and related subject-matter. Under present conditions, the examination is the major if not the sole test of the candidate's qualifications to practice public accounting. Presumably the purposes of the education and experience requirements are to enable the accountant to acquire skill and knowledge in the science and practice of accounting, and to develop judgment in accounting and financial affairs. The purpose of the examination is to determine whether the accountant has acquired sufficient skill, knowledge and judgment in accounting and financial affairs to be certified by state boards as being one who is "skilled in the knowledge, science and practice of accounting and is qualified to render professional services as an accountant."

The interpretation phase of accounting has been receiving an increasing amount of attention in accounting literature in recent years. While it is true that supporting schedules have been advocated for special purposes, the presentation of interpretive data generally has been neglected. The purpose of this article is to examine the problem of developing and presenting such supplementary data for income reports. The nature of an income report must be that of an activity report in which are reflected, in varying degrees of detail, certain of the activities of a business entity. If the conception of the income report as a presentation of data on the activities of a firm is accepted, it is necessary as a part of the underlying analysis of business reporting to establish an agreement on the nature of an activity in the accounting sense, for the term "activity" is an arbitrary term. The inevitable conclusion falls that accountants must provide supplementary data to facilitate estimations of activities under different concepts of income. But there are additional types of supplementary data, which should be provided.

The System or Theory of the Trade of the World... seem to me capable of answering any Event in Trade.--Isaac Gervaise, The System or Theory of the Trade of the World (London: H. Woodfall, 1720), Preface.