Journal Article Economics and Insurance Get access L. T. Little L. T. Little London Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 5, Issue 1, October 1937, Pages 32–52, https://doi.org/10.2307/2967578 Published: 01 October 1937
Journal Article Note on Uncertainty and Planning Get access T. W. Hutchison T. W. Hutchison Bonn. Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 5, Issue 1, October 1937, Pages 72–74, https://doi.org/10.2307/2967582 Published: 01 October 1937
The article discusses the statement of accounting principles, published in the June 1936 issue of the journal The Accounting Review. It involves the entire question of income determination, the most fundamental of all accounting problems. In the first place earnings, earned surplus, capital surplus, and capital represent important conceptions which are necessary to be kept distinct, in spite of the constant interchange among them. Changes in the accounts representing these four different things should accordingly be kept equally distinct. The income statement should be marked off in three stages showing income of the year, income adjustments for prior years, and realized capital gains and losses. Second, corrections of the costs and income of past years are not costs and income of this year. Earned surplus is the account containing the present resultant of all past income charges and credits, and it is the account to be used for subsequent corrections therein. Third, substantial capital losses and gains are certainly not proper items for the income account of any year. It is necessary to be clear at the outset that they really are capital losses and gains.
Questions on treasury stock may be resolved into two fundamental issues, both of which concern the right of a corporation to acquire shares of its own capital stock and which, from that circumstance, are frequently presented without adequate distinction. The right of control incident to ownership is a right which civilization has made an inherent part of itself. "It is mine; I can do with it what I will." This theory applied to the funds of a corporation expresses a natural right of a corporation to acquire shares of its own capital stock. Can a corporation legally acquire shares of its own capital stock? It is understandable that the judges of the state courts during the early years of the nation, having varying degrees of legal education and historic perspective, should have decided this question yes and no. Two contiguous states, whose citizens had very similar social and ancestral backgrounds, took opposing views on this question. In both states the English principles of jurisprudence predominate.
A striking development has taken place in recent years in the growth and expansion of commercial departments in small liberal-arts colleges. As a result of this development many of these colleges have incorporated business courses. It is the purpose of the paper to examine the nature of this development and to indicate the place of accounting courses in the expansion of business curriculum. Accounting in a liberal-arts curriculum has had considerable discussion in recent years by men interested primarily in the teaching of accounting. It will be of interest to notice the relationship between the stated purposes of business departments in liberal-arts college and aims and purposes of the liberal-arts college itself. It is being recognized in a greater degree that courses in accounting and other business subjects meet the generally accepted purposes of a liberal-arts curriculum and in meeting the general requirements of the liberal-arts college by examining offerings of small liberal-arts colleges and noting the relative emphasis placed upon accounting courses in the curriculum.
This article presents problems and their solutions prepared by the Board of Examiners of the American Institute of Accountants, which were used in the C.P.A. examinations of thirty- eight States and three Territories on November 18-19, 1937. These problems constitute the first half of the examination in accounting theory and practice and are reproduced by permission. In the preparation of the solutions which follow the problems, the total time allotted has been kept in mind, in the hope that those who find this material of interest will gain some idea of the form and content of papers that may reasonably be expected under examination-room conditions. It also says that other selections from the Institute examinations and from the examinations held elsewhere will be presented in future issues of the journal "Review."