Knowledge that Transforms

Reviews the book "Accounting and Business Fluctuations," by Dalmas D. Ray.

Accounting students often find it difficult to understand the allocation of combined net income of a parent company and its subsidiary to controlling and minority interests when a reciprocal affiliation exists. This difficulty may be attributed, in part at least, to two causes, first, the problem of accurately defining the symbols employed in the conventional algebraic solution, and second, in the selection of a two-step process for computation rather than a single-step process. The problem has been clarified with the help of an example in which company P owns 90% of company S, and company S owns 20% of company P. The net income figures for the current year for Companies P and S are $60,000 and $20,000 respectively. The purpose of this paper is to point out the limitations in the conventional algebraic solution to combined net income allocation problems in reciprocal affiliations, and to suggest a method designed to overcome these limitations. Modification of the conventional algebraic solution makes possible the use of a one-step process in which the interests of the controlling and minority stockholder groups in combined net income are directly computed.

This article focuses on the statistical error concepts related to accounting. Both statistical sampling and accounting involve the processing of numbers. Although their means and ends differ, statistical science might serve as a useful point of departure for accounting research. The errors to be surveyed include unknown and unintentional differences from the true value. The intrusion of deviations into statistical procedures leading to estimation, testing hypotheses, and the latter's extension, decision-making, has long been recognized. Accordingly, sampling results are usually reported as "estimates" with "confidence limits." In contrast, the term, "actual'' is often employed to describe the amounts used in accounting for measurement, control, and, again, decision-making. This article raises the question whether accountancy could benefit from a formal theory of errors such as employed in statistics. This article has mentioned three types of unintentional errors primarily associated with measurement and three with control. They are recapitulated in the accompanying outline. Perhaps as an immediate benefit such a structure could be a means for the prevention of material errors.

This article presents the findings of the report of the committee, appointed by President Charles J. Gaa as a task committee operating under the Joint Committee on Education, to receive and review the Ford and Carnegie reports for the American Accounting Association. The two reports--"Higher Education for Business" by Gordon and Howell, and "The Education of American Businessmen" by Pierson were financed and sponsored by The Ford Foundation and the Carnegie Corporation of New York respectively. The authors of Ford and Carnegie reports, in their extensive surveys found glaring examples of bachelor's degrees given for programs of study, overloaded with business in general or with accounting in particular. The Committee urges that the faculty of each school should read the entire reports so that by carefully trying on each shoe of criticism they may find those, which fit their particular situations. It is also expected that the Ford and Carnegie reports will have an impact on collegiate education for business.

This article presents information on the 60th annual meeting of the American Accounting Association. The meeting was held during August 29-31 on the campus of the Ohio State University, Columbus, Ohio. It was one of the largest and most successful conventions of the Association. At the Plenary sessions on Tuesday and Wednesday, the following speakers discussed the topics indicated: H.G. Nelson, Ford Motor Company, William W. Werntz. The following subjects were discussed at the round tables held on Tuesday and Wednesday: "The Ford and Carnegie Reports," "Accounting Research," "Scope and Content of the Filth Year of Collegiate Education for Accounting," "Recent Developments in Income Tax Legislation and Education," "Integration of Managerial Accounting into Traditional Accounting Courses," "Television and Accounting Instruction," "Mathematics and Accounting Instruction," "Certified Public Accountant Regulations and Accounting Curricula," "Professional Development of Accounting Personnel in Government Service," "Scope and Content of First Course in Cost Accounting," Accounting Developments Abroad."

Reviews the book "The Television Business: Accounting Problems of a Growth Industry," by Warde B. Ogden.

Reviews the book "Probability, an Introduction," by Samuel Goldberg.

Reviews the book "Essentially Equivalent to a Dividend," by Paul D. Seghers, William J. Reinhart and Selwyn Nimaroff.

Reviews the book "Accounting for Stock Options," by Daniel L.Sweeney.

This article points out briefly the aspect of the theoretical relationship between total depreciation allowances and the fixed property accounts. It is assumed that the assets are carried on the books at historical cost and at the end of their life cycle are to be replaced by similar assets having a much higher cost figure because of a sustained period of rising prices. The decision when to replace the asset is one for management to make. Obsolescence may have taken place as a result of technological improvements, and the asset should be retired even before the eight year period, or even at the end of five years. The asset, on the other hand, may be performing its task well and need not be replaced for several years after it becomes fully depreciated on the books. In the former case the depreciation charge has been understated and in the latter over-stated. Depreciation, whatever method may be applied, is nothing more than an estimate. Today, however, it is recommended as a conservative policy to write off the asset as quickly as possible because technological advances are being made at such a rapid rate that obsolescence is regarded as a more important factor than the physical character of the property.