Knowledge that Transforms

This article presents news note related to American Accounting Association. Leon E. Hay is on leave of absence until August 1961. He is attached to the Industry Division of the U.S. Operations Mission to Guatemala and is teaching cost accounting to business executives. Charles B. Handy has been promoted to assistant professor. Bruce T. Kruse has been granted a leave of absence to work on the doctorate at Louisiana State University. Ernest L. Enke has joined the staff as an instructor. Williard E. Stone assumed duties as head professor of accounting shortly before the beginning of the fall semester. L.J. Benninger held an appointment last summer as visiting professor of accounting at the University of Puerto Rico in Rio Piedras. William F. Crum has been appointed by the Governor of Kansas to a fourth three-year term on the Advisory Board to the Kansas State Public Accounting Board. Clarence L. Dunn was promoted to Professor in September. James M. Owen was one of two professors invited to attend as special academic participants, the nine-week Internal Revenue Agents' School conducted at the office of the District Director in New Orleans during July and August.

American Accounting Association and its predecessor organization, The American Association of University Instructors in Accounting, have had as a primary objective the encouragement and promotion of research in accounting. On December 28, 1935, the regular business meeting of the twentieth annual convention of the American Association of University Instructors in Accounting was adjourned and the assembled members immediately reconvened in a business meeting and the members were shifted from the old organization to the new. The only changes that had been effected were the change of name and the adoption of a new set of By-Laws. The chief activities of the new Association were listed in the By-Laws as "publications and research." The first of the stated objectives of the Association was phrased thus: "To encourage and sponsor research in accounting and to publish or aid in the publication of the results of research."The means by which the American Accounting Association expected to encourage intensive research on accounting subjects was never fully faced. The Executive Committee did suggest a substantial, but very general, list of topics on which it was felt study was needed. It is quite evident that the master's and doctoral programs in accounting were looked upon as a source of research talent and effort which was readily available in quantity.

Almost all universities with accounting major programs are engaged in a sweeping overhaul of their curricula. The subject matter of each course is being carefully studied to determine how well it fulfills the objectives of the course. The objectives themselves are under close scrutiny. With this attention to the course objectives and content it is perhaps a particularly appropriate time to have a look at new developments in methods of teaching accounting. Significant developments are taking place in both methods of teaching and supplemental aids available for the use of the student. Some of the more important areas warrant our consideration. Business games, at their best, are simulations of business conditions which require a sequence of decisions from the players. Results of these decisions are fed back to the players through periodic financial and other reports, and new decisions are then required. Only incomplete information is available and decisions must be based upon anticipation of the probable result of both their own team action and that of competing teams.

Reviews the book "The Capital Budgeting Decision," by Harold Bierman, Jr. and Seymour Smidt.

Reviews the book "Management Accounting," by Robert N.Anthony.

This article focuses on mathematics in the accounting curriculum. In recent years, the curriculum followed by the accounting student has been the subject of much study and discussion. Most of these studies have reached the conclusion that present requirements in mathematics are inadequate. There is little doubt that these requirements need strengthening, but there is a question of how this should be accomplished. Some schools have attempted to meet this problem by increasing tile number of semester hours of mathematics required for a degree, a few requiring one semester of calculus. This seems to be an unsatisfactory solution to the problem. Courses in mathematics have traditionally been designed to meet the needs of those who are following a curriculum in science or engineering. The redesigning of the mathematics curriculum to meet the needs of business students will require the highest level of cooperation between the business and mathematics faculties. The business teachers must help in outlining the courses and the mathematician must be willing to teach this material with examples from business and economics.

This article raises one of the top problems of present-day accounting; this is the purpose of the accountant's work. The question is whether the accountant will continue to operate within a system of his own design with little attention to the effects of the results attained; this reflects the widely held opinion that the accountant's job is to prepare statements and that it is up to those receiving the statements to interpret them in a manner suitable from their point of view. the other approach to the accountants work is to consider it as a vital part of the information system of the enterprise; then it is up to the accountant to integrate his specific system into the broader one and attempt to develop data which should be of greatest value to operating management in its task of making the best possible decisions. The author of this article apparently shares the first point of view. He pays no attention to managerial requirements but proposes a technique which, although consistent in itself, is bound to confuse rather than to clarify the essential issues. His model is interesting from a purely theoretical point of view in the sense that it emphasizes one particular approach to the problem. It was suggested earlier in this paper that there is nothing wrong with this type of model as long as it is used in the realm of theory only. But to apply it to the solution of practical situations without carefully considering the practical needs of management could he very harmful. There is an urgent need to reduce the gap between the task of accounting to serve managerial decision making and the somewhat narrow and self-centered attitude of many accounting practitioners who are in danger of losing sight of those really important tasks of the profession.

Reviews the book "The Appraisal of Capital Expenditures," by C.G. Edge.

As the basis for far-reaching decisions on the capital, labor, consumer and supply market, accounting records influence our economic life to no small degree. These decisions are made of course, upon the assumption that the data recorded in the accounts are relatively correct. In an economy in which the government exercises due care with its fiscal and economic policy and protects the currency from loss of value, the accounting data can generally be relied upon; however, in times of inflation, as well as in times of deflation, the accounting system fails to show correct figures. This unreliability is due to the presupposition upon which the accounting system works: namely, that the unit of currency is always equal in value regardless of time. That this reliance upon historical cost can lead to undesirable results has been demonstrated very well in the Twentieth Century when most of the European countries experienced extreme inflation following World War II. Austria was one of the countries which experienced such an inflationary period. Here, however, sweeping changes were made in the income accounting for tax purposes. These changes had a marked effect upon and were greatly responsible for stabilizing the financial structure which has formed the basis for the greatly improved economy Austria is enjoying today.

Liberal legislative policy has resulted in the enactment of provisions in many states which allow corporations to declare dividends from sources other than earned surplus. Distributions to shareholders from these other sources are of three types: (1) current earnings dividends, which are permitted to the extent of all or a portion of current net income when a corporation has a deficit; (2) depletion dividends, which may be distributed to the extent of the increase in net income which results when the depletion charge against revenue is ignored; and (3) dividends charged to paid-in surplus. In those states which allow current earnings and/or depiction dividends, consistency requires that paid-in surplus be made available as a legal source for cash or property dividends since distributions from any of these sources result in an offset to or direct reduction of paid-in capital.