Knowledge that Transforms

The article presents comparative rather than absolute limitations, a problem that faces accounting, and deals with purchasing power measurements in accounting. In recent times, two basic economic fears, namely, inflation and deflation have been developed which involve concern about the purchasing power of the dollar, and its lack of monetary stability or shifting of the price level. The general price index, or any one of its broad subdivisions, is admittedly no more than a very general indication of what "package" of goods and services a given quantity of money will buy under certain conditions of time and place. The price index blends indiscriminately the effect of monetary factors with such factors as output, technology, wage bargaining, etc. The problem of inflation may be delimited and treated as involving determination of the cost of goods delivered to customers, determination of the cost of utilization of long-term assets, and measurement for administrative and other purposes of return on capital investment.

The article presents the report of the president of the American Accounting Association for the year closing December 31, 1954. According to the report, The Accounting Review periodical has increased gradually in size during the past five years to about 800 pages annually. Manuscripts have been coming in nicely this past year. Good progress has been made during the past year on the research project, headed by Professor Ralph C. Jones of Yale University, and concerned with the effects of price level changes on financial statements. The growing importance of the association, and the increasing importance placed on accounting education by associations of practitioners, are attested to by the many requests for official representations at meetings of other accounting organizations, both in the United States and abroad. Plans were initiated in 1953 for the Association of University Teachers of Accounting in England and the American Accounting Association to sponsor jointly the publication of a volume of readings in the history of accounting.

Reviews the book "Long Term Leases, Problems of Taxation, Finance, and Accounting," by Albert H. Cohen.

Reviews the book "1955 Federal Tax Course--Students Edition."

The article presents the report on examination of records of the American Accounting Association by the Executive Committee. According to the report, the committee has examined the consolidated balance sheet of the association as of December 31, 1954 and the related statements of income and net worth of the General Fund and Life Membership Fund for the year then ended. The examination was made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures as considered necessary in the circumstances. In the committee's opinion, the accompanying consolidated balance sheet and related statements of income and net worth present fairly the financial position of the American Accounting Association at December 31, 1954 and the results of its operations for the year then ended, in conformity with generally accepted principles of accounting applied on a basis consistent with that of the preceding year.

The article discusses generally acceptable objectives formulated to guide the development of course content, instruction, and curricula for the undergraduate program in accounting. These can be checked for validity by applying the test of reasonableness. This is a widely used accounting test, particularly in cost distributions. This same test is used to evaluate the pronouncements of the Research Committees of the American Institute of Accountants. The Standards Rating Committee has proposed a four-year program, while many hold the viewpoint that either five-year courses, or four years of undergraduate work, and one year of graduate work, are necessary for adequate training. The committee apparently favors a five-year program, but at the same time recognizes the inherent difficulty of such at this time. Specialization is necessary but not at the undergraduate level. A broad foundation will enable the student to become a better specialist. The failure to provide a means which will enable the student to integrate the many ideas received in diverse courses is another deficiency.

The need for regular formalized staff training classes as a part of employee training has been fairly widely accepted by public accounting practitioners. In the article, the author presents his experience related to a large scale audit organization in the conduct of short intensive refresher courses for auditors at the in-charge level. Testing of capabilities of auditors in the application of theory to practice have been tabulated and preliminary inferences drawn from these results. The representative in-charge auditor carried into the courses a strong emphasis on voluminous vouching and checking as the prime means of obtaining adequate audit evidence. There was a marked resistance to change by a significant portion of the men even upon demonstration of the patent unsoundness of some of their ideas about audit objectives. This intransigence required early and intensive diversification of teaching techniques. Statistical measurements of progression superficially support the belief that early application of flexible, well-thought-out plans of instruction can aid in achieving significant improvement even as early as the second day of training.

The yield formulas for irregular installment payments can be used to find the yield or effective rate of interest on an issue of serial bonds. Unequal retirement installments or intervals of payment, deferred first coupons, even maturity premium requirements, with any or all of these the general installment payment formulas will produce a reasonable approximation, usually very close and sufficient for an amortization schedule, to the yield rate. If, however, the serial issue is such that every bond by itself is a simple and complete bond, that is, with no initial coupon irregularities and no premium due on maturity, it is possible to derive a yield formula but which can be used by considering only the maturity payments and ignoring the coupon payments. This will be so regardless of inequalities in amounts and intervals of the serial maturities themselves. The article presents such a formula. The shortening of the summation process can be carried to its limit, and is most easily demonstrated, with a perfectly regular issue, but even with an issue having irregularities, short cuts are still available.

Reviews the book "The Role of Sampling Data as Evidence in Judicial and Administrative Proceedings," by Joel Dean, W. Edwards Deming.

In the article, the author shares his views on price level adjustments. The problems with pricing, and financial statements is discussed. According to the author, the application of price indices is limited by two conditions, the speed of inflation or deflation, and the differentiation between a general price index and individual commodity price indices. In China, a series of changes of currencies, Fapi, Golden Yuan Notes, Taiwan Dollars, etc. create much problem. By statutes, not only the assets and liabilities, but the capital is also required to be revalued. Chinese communists had applied rice prices to the revaluation of assets and liabilities before they occupied mainland China. Afterwards the price index was compiled and applied. The Government moved from the mainland to this island in 1949, and a currency reform was effected in June for the purpose of strengthening national powers. By statute, current assets and liabilities were converted into the new currency on a fixed rate, and fixed assets and capital revalued at the end of that year.