Journal Article A Note on the Theory of Price Index Numbers Get access A. P. Lerner A. P. Lerner London Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 3, Issue 1, October 1935, Pages 50–56, https://doi.org/10.2307/2967571 Published: 01 October 1935

It has been frequently contended that there is no such thing as prepaid interest. Cash is designated by amount only and any cash to the specified amount is as proper for business transactions as any other cash of the same amount. This is not true of other tangible assets. Usually Rent Expense would be debited and Cash credited but in this situation a building is being borrowed and its use is being paid for by what is called rent. However, when money is borrowed an entry is made debiting Cash and crediting Notes Payable. The fact that cash is fungible, that any cash the same in amount may be returned at loan maturity and the fact that buildings are not fangible and may be returned only in exactly the same properties, cloud the issue but do not change it. When payment in kind is indicated it refers to the payment for the use of an asset in the same form as the asset used, as the payment for money borrowed with money, or the payment of rent for a building used in the form of another building. If rent has been paid in advance and the prepaid rent account has been debited and if the lease is broken by agreement, the rent may be reduced as easily as the interest may. This is no more consistent than the other arguments.

During the past eighteen months two proposed changes in department store accounting procedure have attracted the attention of controllers and other executives in large-scale retail enterprises. Both these proposals originated with Carlos B. Clark, Controller of the J.L. Hudson Company in Detroit, Michigan. By reason of his long service and noteworthy contributions to the field of department store accounting, Clark is virtually the dean of department store controllers. His suggested innovations in the usual retail accounting procedure have therefore been widely discussed. From an economic standpoint, Clark reasons correctly about the relation of an individual selling department to the store as a whole, and he is on firm ground in suggesting a line of thought which executives should follow in deciding whether to add or discontinue departments. But it is by no means the sole purpose of departmental cost finding to furnish data for the use of executives on the occasions when such decisions are necessary.

Reviews the book "Control of the Retail Units of Chain Stores," by E.H. Gault.

Reviews the book "Income and Economic Progress," Harold G. Moulton.

Reviews the book "International Raw Commodity Prices and the Devaluation of the Dollar," by M.T. Copeland.

Reviews the book "Liquid Claims and National Wealth," by A.A. Berle and Victoria J. Pederson.

Reviews the book "Federal Securities Act Procedure," by J.K. Lesser and J.A. Gerardi.