Abstract This article focuses on the influence of salvage value upon choice of tax depreciation methods. It is found that on should use double-declining balance depreciation method for tax purposes whenever salvage value exceeds 13.52 percent of cost. For such a rule to stand there must be an examination of the underlying assumptions, law, and mathematics. The fundamental assumption underlying preference for this method of depreciation is that the taxpayer would rather have a tax deduction now than later. The assumption of preference for a present rather than a future tax deduction is based on assumptions. Pre-depreciation income in the current and near-future years is large enough to yield a tax benefit from the largest allowable depreciation deduction. It does not seem sensible to plan to reduce basis and to incur a tax loss in order to get net operating loss carry-oven. There may be certain cases where such is desirable, but a tax deduction is certain whereas one in the future is not certain. Although a deduction for depreciation has been allowed since the inception of income tax laws, there is no certainty that it will continue in the present form.

Abstract Thirty years ago footnotes in annual reports to stockholders were rare; today, published statements seldom are without them. Not only are footnotes frequent and numerous, but also they maybe very important in the interpretation of the statements. Footnotes must be read, not because all footnotes are important, but because one may be vital. Some seem to me to contradict what is said on the face of the statements. Others replace that which is ordinarily on the statements. The purpose of this article is to present the results of my analysis of the notes in the statements of one hundred sixty different companies and to offer some suggestions for improving our presentation of financial statement information. Many of the footnotes to financial statements seem to contradict what is said on the face of the statements. Generally accepted accounting principles require disclosure of the facts, yet today's common conventions do not get all the facts onto the statements. These problems are discussed in detail in the article.

Abstract The need for more efficient utilization of the teaching staff is particularly pressing today, as of April 01, 1959. The student body is expected to double in less than fifteen years yet a doubling of the teaching staff is not in sight. Education is far broader than the mere presenting of information which the student is expected to memorize and to write down on some test. All subject matter cannot be acquired merely by reading. Listening to the story, discussing the matter, witnessing a demonstration and practicing are also useful learning devices. Lecture and demonstration can be done before very large groups with mechanical aids. Practice under supervision can be done in large groups if there are assistants roaming the room to help where needed. Discussion groups when kept small and adequately handled can achieve remarkable results. An area to consider for achieving better utilization of manpower is to abandon the time-honored subdivision of subject matter into many small categories. From these, today's student selects a menu of about five courses a term for eight terms.

Abstract The article reviews the economic concept of net income and the accounting procedure in a number of specific business situations, and then suggests a principle, which is compatible with economic theory and at the same time coordinates most current accounting practice. The matching of cost and revenue has grown during the past fifteen or twenty years into a cardinal principle of accounting. Economic theorists since the days of Adam Smith have spoken of land, labor, and capital as the three factors of production. Compensation to these factors has been known as rent, wages, and interest. Under a perfectly functioning system, these three factors receive all the income. Any residual that remains in an actual case is due to the imperfections of the system in the individual case at the particular moment of time. Later economists acknowledged a fourth factor of production: entrepreneurship. Its compensation is known as profit. Profit is the reward for bearing risk; the risk of enterprise, the risk of venturing in business, the risk of owning something in hope of selling it later.

Abstract The article presents some formulae for the calculation of depreciation using declining balance method (DDB) and sum-of-years-digits method. These formulae will enable the non-mathematician accountant to compute such future provisions and reserve balances directly. These formulae may be used for calculating isolated items without the necessity of calculating the intervening items. The auditor can use them to test depreciation provisions computed by his client on a year-by-year basis. The tax planner can use them to see just what depreciation he will have left in later years. Many other similar applications will occur to the reader. In addition to these computational uses the formulae may be used for theoretical computations of behavior in the general case. Since the formulae are applicable in all instances, general rules may be proved. It is commonly stated that shortly after the mid-point of life it is advisable to switch from DDB to straight-line depreciation. To base this statement on observations of a number of specific examples is dangerous.

Abstract To dealer antiques, coins, stamps and other collectors' items have two special problems in inventory tasking and control. One is associated with identification of units and the other with determining cost. The problem of identification arises because the dealer seldom has two items alike. Consider, for example, stamps. To the untrained person two stamps may appear alike if they are of the same color, denomination, and design. To the more informed person, however, watermark in the paper, size of perforations, and minute details of design will distinguish one stamp from another. Moreover, if two stamps should be identical as to issue, they will still differ as to potential resale price and hence inventory value because of condition factors. Similar problems appear in other collectors' items. As a result the dealer in these items must identify each item carefully and probably will have but one of each. The problem of determining cost is a combination of the problems of retail method and of joint products. The usual way of acquiring antiques and other collectors' items is to buy a number of items at a time for a lump sum, as when a collection is bought from someone no longer interested in it or when a bunch of stuff comes from someone's attic.

Abstract The article presents information on the presentation of long term lease liabilities in the balance sheets. The balance sheet is an important statement in its own right, even granting such inadequacies in satisfying certain purposes as recording different fixed assets at different price level. For one thing it is useful in studying the financial condition of a company. A most important point in a study of short-term condition is a consideration of the current-asset and current-liability sections. In a study of long-term financial condition the entire liability side is important in that it represents claims against the company and indicates the source of the funds with which the assets were obtained. All of the information presented on the income statement and balance sheet could he presented in text form. In recent years a new business procedure has been evolving which requires a reappraisal of today's body of conventions and principles. It is the acquisition of plant and equipment through use of a long-term lease rather than through the more traditional method of outright purchase frequently coupled with a long-term mortgage loan.

Abstract Reviews the book "Accounting for Oil and Gas Producing Companies," Part 1, "Exploration, Acquisition, Development, and Production," by Horace R. Brock, John P. Kungstedt. and Donald M. Jones.

Abstract This article presents information on the undergraduate auditing course at Indiana University. One of the departures is in the computer work, which is included. The School of Business has instituted a new required computer course for sophomores, but the problem orientation of the experience is likely to remain predominant In the auditing course. In an effort to make the computer lecture material meaningful to the students, a data processing computer problem was developed and used this past semester. The computer problem is used as an aid in teaching data processing controls, test decks and flowcharting. The problem employs a payroll processing routine to illustrate the various types of controls. The payroll example was selected because most of the students are familiar with computerized payroll checks and the program offers the student personalized feedback in the form of a simulated paycheck. The feedback feature encourages the students to try to "beat the system," and in so doing explore the controls built into the program.

Reviews the book "Auditing, an Introduction to the Work of the Public Accountant," by Eric L. Kohler.