Knowledge that Transforms

Abstract Publishers of books are frequently prone to look upon footnotes as added and unnecessary expense. But this can be no more true of books in the field of accounting than in the many other fields of thought. Furthermore, it may be stated that no writer would permit a publisher to delete from his treatise those thoughts which he felt were essential thereto; by the same argument he should refuse to permit the publisher to omit footnotes and references if they are material to his contribution. Publications in other fields have survived the desires of publishers to economize; accounting can do the same if writers see the merit of references and insist on them. In the long run, and for its own best welfare, accounting cannot be judged in the light of its limiting circumstances such as enumerated above. It must be judged in the light of its true possible social value and its position relative to other sciences. If accounting writers are not prepared to uphold the standards ordinarily exacted in other fields, it is accounting that must suffer by comparison.

Abstract One of the most bitterly contested provisions of the Securities Exchange Act of 1934 was the provision relating to marginal transactions and maximum loanable values of securities. Two different provisions were incorporated in the bills of the House and Senate, the resulting act being a modification of the House bill. Marginal transactions have long been the subject of reform movements. The Hughes Committee of 1909 was requested, specifically, to inquire into margin trading. A Federal judge furnished the Senate Committee with instances from his long experience on the bench, indicating that a large proportion of business failures, embezzlements and even suicides in recent years were directly attributable to losses incurred in speculative transactions. Measures were suggested during the last session of the U.S. Congress to abolish margin trading and the Senate Committee deemed the radical step unwise only because of the deflationary consequences which might follow. Marginal transactions involve the buying and selling of securities with the aid of borrowed money. The amount of money which the purchaser or seller must advance has in the past been a matter of agreement between the customer and the brokerage house. Funds advanced by the customer represented an advance for the protection of the brokerage house, not for the protection of the customer.

Reviews the book "Methods of Statistical Analysis," by George R. Davies and Walter F. Crowder.

Reviews the book "New York Laws Affecting Business Corporations," edited by J.B.R. Smith.

Abstract The article focuses on operating deficit and paid-in surplus. There are two distinct but closely allied problems in connection with the relation of operating deficits and dividends. The first is whether dividends may be paid from subsequent profits despite the existence on the books of an operating deficit. This question has been answered in both ways by statutory provisions and by accountants. If the answer is in favor of allowing dividends despite a previous operating deficit, the second question is immaterial. But if it is held that dividends may not be paid out of subsequent earnings in face of an existing operating deficit shown on the books, there still remains the second question. In estimating the net profits available for dividends, must the deficits of a past year be carried over to the profit and loss account of the following year or may a past operating deficit be removed through charging it against paid-in surplus, so that the deficit has no effect on the showing of profits available for dividends in subsequent years.

Abstract The article presents a survey report of the status of the cost accounting in the colleges throughout the U.S. To secure the opinion of those actively engaged in the work, a number of letters were sent out to men in charge of the cost accounting work of large industrial establishments. The answers received are probably more confusing than those of the college instructors. A summary of the replies received from nine cost accountants shows that three out of the nine concerns think that a practical training in cost accounting cannot be given in the college classrooms. In answer to the question of how cost accounting instruction was defective in their collegiate or business education, the cost accountants unanimously condemned work because theory was not combined with practice. In view of this present confused status in the content of cost accounting instruction in collegiate schools of business, it seems desirable that the Association of University Instructors in accounting, appoint a committee to collaborate with the National Association of Cost Accountants in preparing suggested system to meet the varying needs and conditions under which cost accounting is taught.

Abstract The article focuses on creditor's protection and stockholder's responsibility. The extent and nature of the responsibility of stockholders is determined very largely by their own contractual agreements with the corporation and by the contracts between creditors and the corporation. Along with changes in the evolution of the corporation there have been equally significant changes in these contracts. Notable among these in recent years have been those accompanying the employment of no-par stock for both preferred and common securities. No-par stock with its greater flexibility has presented many new problems in stated capital and stockholder responsibility-creditor protection. These, too, reflect changes in the contractual relations of stockholders and corporations and whether agreeable to creditors or not, they affect creditors' margin of protection. Although no-par stocks may appear as a distinct phase in the evolution of corporation securities, this may well be doubted. As pointed out later, they simply carry out the natural trends.

Abstract At the University of Pennsylvania, an accounting plan has been developed which fundamentally arrives at a deficit or surplus for each department, which in turn is closed into the general deficit account. One obtains figures upon the instructional salaries, other salaries and wages, and departmental current expense and distribute the general overhead of the various departments upon various bases, so that the cost system, which appears on the surface to be quite an elaborate set-up is in reality very simple. It is realized that budgeted expenses do not necessarily have any relation to the income or receipts of any school or department due to the inter-relationship of the several faculties of instruction. It may be also noted that the budgets of the various departments do not include a charge for the building expense, general expense, or for instruction furnished by other school or departments. Separate budgets are of course prepared under budget administrators for building expense, and the various items finally closed into general university expenses. Later in this paper is a discussion of the method of charging the instructional expenses to the various schools and departments.

Reviews the book "Kemmerer on Money," by Edwin W. Kemmerer.

Abstract Failure to set standards may succeed in postponing the day of reckoning, but not for long. Regulation of the U.S. Securities and Exchange Commission affecting corporate reports, no matter how wise may be the language in which they are couched, will cause the accountant many perturbations. The accountant will not be ready for them. The accountant will again consult his attorney. A committee of the American Institute of Accountants will protest mildly the Commission's unnecessarily harsh and untrustful attitude toward the profession. There will be a revival of talk to the effect that after all the old order was best, the securities act and the securities exchange act need drastic modification. But nobody will come forward with concrete suggestions as to the precise nature of the modification needed. And the failure to accept the public generally as a third party to every accounting engagement will continue for as long a time as possible. Lawyers and accountants will cry unrestrainedly on each other's shoulders. But regulations will be followed and thus a new era will dawn for the accountant, however weakly and fatuously he may resist its coming.