I. Statement of the problem, 232. — II. The evidence from some previous studies, 233. — III. The “.6 factor” rule and its application, 234. — IV. Specific evidence in a selection of metal processing and chemical industries, 236. — V. Studies of selected mineral industries, 239. — VI. Conclusions, 242.
The theory of Accounts section of the November, 1958, Uniform Certified Public Accountant Examination was given on Friday, November 7, 1958, from 1:30 to 5 :00 P.M. There were two groups of questions; all five questions in the first group were required; two were to be selected from the three in the second group. To save candidates the time of computing their own time budgets for each question, notations of estimated time requirements were furnished for each question to be answered separately and in the aggregate by all questions to be answered out of a group where options are involved. The estimated time allowances were approximately proportional to their point value, the total of which for this examination is 100 points. Each numbered transaction was to be considered completely independent of the others and its related answer should be based on the effect(s) of that transaction alone.
The article reports that the examination in theory of accounts of the May 1959, Uniform Certified Public Accountants was given on May 15, 1959. There were two groups in the question. The estimated time allowances are approximately proportional to the point values of the questions, the total of which for this examination is 100. The examinee is required to answer all questions in the first group. In group one of the question paper, on a lined sheet of paper the examinee is required to number the first ten lines from 1 through 10. The examinee is to select the graph, which matches the numbered factory cost or expense data and write the letter identifying the graph on the appropriate numbered line. In the second question, in the preparation of the consolidated balance sheet of a hypothetical parent corporation and its subsidiaries a decision must be reached concerning the inclusion or exclusion of each of them as a member of the consolidated group. A common criterion is the percentage of voting stock owned by the parent company. Answers to every question are also given in the article.
In 1825, famous "trust fund theory" was given which states that the capital stock of a corporation constitutes a trust fund for the payment of its debts to creditors. This theory has had important implications for accounting. The accounting treatments accorded the payment of dividends and the purchases by the corporation of its own outstanding stock are representative ones. Others are the accounting for premiums and discounts on the issuance of stock and the presentation of all types of surplus on the balance sheet. The purpose of the trust fund theory of capital stock was to cause the assets originally paid in by the stockholders to remain in the corporation as a buffer for the protection of the creditors' interests. Actually, capital stock itself cannot be a trust or a fund held in trust. Neither can the assets represented by the capital stock account constitute a trust. The corporation is not a formal trustee of the contributions made by shareholders, and the creditors are not beneficiaries. It was never intended that the assets contributed by the stockholders should remain in the corporation in their original physical character.