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This article discusses the teaching of social accounting. In the last ten years, the two fields--accounting and economics have been drawn closer together, because professional accountants and professional economists increasingly utilize the same data in their work. The highly technical literature on depreciation policy and inventory valuation is sufficient to indicate that an unequivocal concept of either business income or national income is scarcely possible under current conditions. In other words, an accountant or an economist frequently must outline his own set of definitions, the over-riding consideration being the usefulness of the definitions, with the long-term aim of achieving greater uniformity. In the development of useful accounting principles, the practitioner has not confined himself to transactions made within business enterprise. Generally speaking, practicing and teaching accountants have not devoted enough effort to the bold experiment of correlating their discipline with that of the many-faceted field of modern economics.

During and after the first World War, France, like many other belligerents, failed to meet her current budgetary expenditure from the revenues arising from taxation. The result of the inflation created many problems for the business man. Depending upon the attitude one holds with reference to the quantity theory of money, inflation either created these problems through its effect in bringing about a very rapid increase in prices, or these problems, created by other economic processes, than by action on prices, finally resulted in a marked increase in prices. French accounting theoreticians had the advantage of the earlier German experience and some of the new accounting methods proposed were but adaptations of German inflation accounting theory and practice. The elaboration of these methods by both French and German accounting theorist constitutes a definite contribution to general accounting theory. An understanding of the principles involved may help in settling some of the controverted questions of principle which attract the attention of accountants.

The tenth annual meeting of the American Association of University Instructors in Accounting was especially noteworthy because of the able papers given on the subject "Research Work in Universities." Inspired by these papers the present writer decided to ascertain approximately what graduate work in applied economics the American universities were doing. As there were no data available on this subject, a survey was started. This paper is the result of the survey conducted by the Association. The basic courses in commercial law are so fundamental that practically all graduate schools of business offer them. The commercial law courses are 8.4% of the total applied economic courses in non-urban schools and 6.2% in urban schools. This variation is due to the difference in the total number of courses offered in non-urban and urban schools as the number of commercial law courses offered is practically constant. The unusual number of commercial law courses offered at American University and Pennsylvania University is doubtless due to local conditions, the excellent standing of the graduate law school at the former and unusual complexities of the State law code at the latter. Business management ranks first or is tied for first among the applied economic groups in five out of the twenty-seven schools.

The article presents information on news related to accounting. The Association of Canadian Schools of Commerce and Business Administration held its seventh annual conference June 2, 3 and 4, 1963 at the Faculty of Commerce, Laval University, Quebec. Papers were given on the economy of the firm, education for operations research and developments in behavioral science theory. The thirteenth annual Tulane Tax Institute was held September 18, 19 and 20, 1963, in New Orleans. Current developments in federal taxation, tax planning, tax accounting and oil and gas tax problems were discussed. The University of Hawaii and the Hawaii Society of Certified Public Accountant's jointly sponsored a second annual Conference on Government Accounting at Honolulu May 8, 9 and 10, 1963. The next conference of the Australian Association of University Teachers of Accounting will be held at the Australian National University in Canberra on January 25, 26 and 21, 1964. Papers will be presented on the accounting research studies, on financial mathematics and accounting and on "Accounting in the Administrative Arm of Government-The Scope for Reform." The 21st Annual Institute on Hospital Accounting was held at Indiana University in July.

The purpose of this paper is to examine the nature of the ordinary stock dividend, common shares issued to common stockholders, and to relate the accounting treatment of this type of transaction to the entity theory of corporate accounting. Whether or not entity theory, proprietary theory, fund theory or some combination of theories provides the most useful and meaningful frame of reference for accounting practice, which is a fundamental issue that deserves discussion. Such a discussion is beyond the boundaries of this paper. The issue is circumvented by the assumption that the entity theory is the most useful frame of reference for the following analysis. In support of this approach, current accounting practice may be cited. Today the entity concept is generally used in accounting for corporate transactions. Thus, the underlying concept is that the corporation is an entity separate from any of the parties at interest. Therefore the accounting processes revolve about the corporation and not the stockholders or creditors.

The purpose of the present paper is to ascertain just what graduate courses in accounting are offered by the universities listed by the collegiate department of the United States Bureau of Education as giving graduate work in applied economics. In order to simplify the figures, no distinction is made between a term course and a semester course. Likewise, no distinction is made between courses given only to graduates and those given to both graduate and undergraduates; strictly undergraduate courses are ignored. Data presented in the article shows that the graduate courses in accounting are largely concentrated in the basic subjects. While twenty-one different accounting studies are given, 71.7 per cent of the courses are given in the subjects that a student already familiar with the elementary principles of accounting must pursue. In order to become a professional accountant; and although prospective Certified Public Accountants (C.P.A.) candidates form only a small portion of the total number of accounting students, it still is advisable to offer adequate preparation for the C.P.A. examinations. The relatively weak showing of the subjects not absolutely needed in the professional accounting curriculum is due to the fact that accounting must be studied in logical sequence.

The article explores the goal congruence of net realizable value (NRV). The NRV model would have various properties after the evaluation of a decision at the end of period T to hold an asset. A correct decision was made if the NRV income for period T+1 is positive. The NRV income for period T+1 will be negative if an incorrect decision was made at time T. The decision at the end of period T to hold an asset may have been correct is the NRV income for period T+1 is negative. However, if it was correct, another condition must hold.

According to the author, the topic to which he addresses himself is a challenging one. It is of paramount importance to all concerned with a vital segment of our system of higher education and the continued advancement of the dominant social and economic institution, the business corporation. The author approaches the subject with humility. The author hopes that this paper will serve as a catalytic agent encouraging others to think deeply and perceptively on the role of business schools in a changing environment, and subsequently that faculty of business schools will forget their vested interest and act to make modem education for business the vital force required in the dynamic world economy. Within the business schools one need also to utilize the integrated systems approach that has characterized post-war management. Too often today there is no integration of different functional subject matter. Each discipline is frequently taught as though other business areas don't exist, or if they are recognized, they are assumed to be peripheral. The false barriers of subject matter specialization by traditional functional business areas must be breached; the areas must be integrated into a related systems approach.

The great inflation of the last twenty years has caused, if not a revolution in accounting thought, at least a civil war among accountants. It is not possible in this paper to examine the reasons for this failure among accountants to agree on a course of action that will avoid the pitfalls of conventional practice. In particular, since accounting is primarily a process of classification and measurement, it is necessary to agree on what the accounts are designed to measure and how the measurement may best be carried out. The need for relatively easy measurement is stressed because many of the solutions that are advanced to deal with the price level problems, while reasonably meeting conceptual or theoretical requirements, seem altogether too complicated to apply in practice. One of the major reasons for the confusion that has resulted from the price-level controversy, and the failure of accountants and economists to agree on remedial action, has been the attempt by nearly everyone engaged in the argument to find a unique measure of business surplus-one that will be suitable for all purposes and acceptable to all parties making use of accounting data.

The direction, nature, emphasis and objectives of accounting education, since its beginning at the collegiate level, have been influenced by a number of ideas, conditions, and relationships with other segments of academic work. This paper attempts to outline and assess the roles which the more important of these influences have played in the development of accounting education. The movement for collegiate training for accounting quickly ran aground in some colleges, due to the opposition of departments of economics. The dominant attitude of the economists in this group of colleges was that business courses in general, and accounting courses in particular, had no place in the college catalog. The study of Marshallian economics, it was asserted, was adequate intellectual nourishment for everybody, supplemented perhaps by a half-dozen courses in the periphery of the field dealing with "applied" studies. In other colleges, the movement to establish accounting programs met a different, though equally determined, tactical opposition from the economists.

The article discusses about the planning concepts in the "tentative statements of cost concepts." In this article, a portion of that document is discussed from the point of view of the business manager who would attempt to apply it. It is the purpose of this paper to examine the cost for planning portion of the statement. The business manager has been told that he is to discount future outlays, necessarily measured outlays, at an appropriate rate of interest; again he is later told that future costs, that lend themselves to measurement, are to be discounted at a rate which reflects time, risk, uncertainty, etc., and finally he is told other costs which cannot be measured, but must be "considered." To the business manager's way of thinking, any cost to which a dollar and cents figure is attached has been measured; and in essence he has been told to handle these costs in three quite different ways. All costs in the future, by the very nature of the uncertainty of the future and the time element involved, carry some element of risk which must be allowed for. In conclusion, the authors stated that it is much, much easier to criticize original thinking than to do that same thinking. The tentative statement has certainly accomplished one of its main objectives, i.e., to stimulate further study and discussion of the accounting information needed by management, but also has gone well beyond.

The article focuses on starting a career in public accounting. To make it worth one's while to enter the field of public accounting, one must have a considerable portion of courage, strong ambition and a full measure of persistence. One must be willing and physically able to work hard. A career in public accounting calls for long hours of high quality work, frequently done under pressure. A man without fortitude should look elsewhere for a career. A successful accountant must have imagination. The public accountant is not a human calculator who arranges data fed into him. He is a man with the ability to visualize the abstract, to see as a finished product a work paper, an audit program, a report, an accounting system before it has ever come into existence. Perhaps the thing that one should do that is of the greatest importance is to provide oneself with a sound formal education. There is a trend toward ever increasing the educational requirements for the certified public accountant.

The accounting course for economics concentrators can and should integrate accounting concepts with those of economics. No attempt is made in this paper to consider the equally important problem of how integration with economics may be brought to accounting courses taught for concentrators in business administration, accounting and other subjects. If one turns to the authors of textbooks one gets little more help. Among the multitude of accounting textbooks while there are a few written from a management point of view there is none that attempts to integrate accounting with economics or even to present those aspects of accounting which are especially important from the point of view of economics. Before accounting and economics can be studied together, a knowledge of the rudiments of each must be acquired. The economics concentrator normally studies accounting after at least one semester of elementary economics. To supply a background in accounting, the accounting course must start with a brief training in bookkeeping technique.

The title of this paper, College Education As a Requirement for Public Accountants in New York State, is rather ambiguous. It suggests that all public accountants practicing in New York must meet certain scholastic requirements. Of course, this is not true. There is no law in New York State restricting the practice of public accounting to certified public accountants (CPA). The college education requirement mentioned in the title refers to the New York CPA law which became effective from January 1, 1938. This law specifies that candidates for the examination leading to certification must be graduates of colleges or schools of accountancy registered by the State Education Department as maintaining satisfactory standards. To meet satisfactory standards, a school must offer a four-year course, or its equivalent, in cultural and business subjects including 24 hours of accounting, 8 hours each of business law and finance, and 6 hours of economics. This law, which for the first time set minimum scholastic requirements at college level, did not become effective until January 1, 1938.

Two considerations led the author to accept the invitation to prepare a paper on education for nontechnical students. The first was the great importance of the subject. The second consideration was a conviction that the opportunity and the responsibility must be shared by those who teach and those who practice accounting. A part of the task is to consider our responsibility for providing education that will result in the production of the best financial statements that can be devised. Another part is to promote recognition of the fact that the significance of such statements is both very great and definitely limited. Education upon this latter point is needed not only by businessmen and investors, but also by lawyers, economists, administrators, in fact, by all who occupy responsible positions in the national economic life. Failure to recognize the importance of the part played by accounting in the complex affairs of today is scarcely more common than a disposition to attach to accounts' significances which they cannot possibly possess.

1. SUMMARY IN two previous papers [1] [12], a family of normative models of the individual's economic decision problem under risk were presented. At the same time certain implications of these models with respect to individual behavior were deduced for a class of utility functions. In a separate article [7], it was demonstrated that these models also give rise to an induced theory of the formation and operation of firms under risk for the aforementioned class of utility functions. In the present paper, it will be shown that the same models, developed with the individual in mind, have as further off-spring an induced theory of accounting for all firms so formed. In Section 2, the basic approach of the present study to the development of normative accounting theory is discussed. This section also considers some of the relationships of the present paper to other studies concerned with the development of prescriptive theories of accounting. In Section 3, the various components of the basic decision model used in the present paper are constructed. The individual's objective is postulated to be the maximization of expected utility from consumption as long as he lives and from the bequest left upon his death; his lifetime is presumed to be a random variable. The individual's resources are assumed to consist of an initial capital position (which may be negative) and a noncapital income stream. The latter, which may possess any time-shape, is assumed to be known with certainty and to terminate upon his death. In addition to insurance available at a "fair" rate, the individual faces both financial opportunities (borrowing and lending) and an arbitrary number of productive investment opportunities. The interest rate is presumed to be known but may have any time-shape. The returns from the productive opportunities are assumed to be random variables, whose probability distributions may differ from period to period but are assumed to satisfy the... [ABSTRACT FROM AUTHOR]

The article presents information on information economics and its implications for further development of accounting theory. In 1966 the American Accounting Association (AAA) issued, "A Statement of Basic Accounting Theory," in which it said, essentially, accounting is an information system. More precisely, it is an application of a general theory of information to the problem of efficient economic operations. It is the purpose of this paper to take the AAA Statement seriously, and to examine whether useful developments might take place in accounting theory if one forced an interaction between it and the economic theory of information. The paper begin by setting out the assumptions that will be used throughout. Many people will find that they cannot accept some or all of the assumptions used in this paper, nevertheless it seems sensible to try for lucidity in setting forth the assumptions, since it permits the reader to have his reservations consciously evoked. Otherwise, there is the danger of ending up in arguments over conclusions that are in reality arguments over premises. After these preliminaries, the study turns to an exposition of the Information Economics model and the same framework is then adapted to an examination of the accounting model as a special case. This provides the opportunity to make some brief comments about accounting systems as seen from this new vantage point.

The purpose of this article is to apply modifications of Newton's method for approximating the root of an equation to the solution of bond problems which require very accurate determination of the interest rate. Repeated applications of Newton's formula will give any desired degree of accuracy. However, it is not practical to apply Newton's formula more than once since the value obtained by the first application will usually give a value of the interest rate for which the corresponding function can not be found in the table. It is desirable to find a formula which will give in a single application greater accuracy than Newton's formula and which has the advantage of using tabular values obtained from the original estimation of the interest rate. has been developed in several papers in mathematical journals but its value in solving bond problems has not received sufficient attention. The use of Newton's method is explained in an article by N. Lecher.

The purpose of this paper is to examine the progress made by the Accounting Principles Board in attempting to solve the reporting problems of the accounting profession, up to and including the American Institute of Certified Public Accountant (AICPA) Council action noted above and to speculate upon the future status of the profession. In order to put the problem in perspective, the origins and history of the Accounting Principles Board are briefly presented. Then, certain implications of the October, 1964, AICPA Council action are discussed. Finally, some speculations are advanced concerning necessary steps to be taken in the future. The Accounting Principles Board had its origins in the report of a Special Committee on Research Program of the AICPA, rendered in September 1958 and unanimously adopted by the AICPA Council in April 1959. This committee was appointed in December 1957 to consider a new approach to the means whereby accounting research should be undertaken, accounting principles should be promulgated and adherence to them should be secured.

This paper is an attempt to discredit the general price-level adjustment proposal on theoretical grounds. It is argued below that general price-level adjustments are inconsistent with the nature of the business enterprise and the function of financial statements of the business enterprise. They are used to measure the comparative value of the monetary unit at different dates. A dollar at one date may be a larger or smaller percent of a dollar at another date in terms of value represented. The same value at two points in time may cost different amounts of money. For example, $1.00 one year ago is the value equivalent of $1.05 today if the general level of prices has increased live percent during the year. The essence of the general price-level adjustment process is to restate the $1.00 entry of one year ago to $1.05. In this manner the chronological series of original dollar amount entries to the accounts of the firm are converted into value quantities of a unit equal to the current value-size of one dollar. Most explanations for this serious breach between accounting theory and accounting practice stress the many practical problems of making and reporting general price-level adjustments.

Accounting theory in the measurement of an economic entity's income and wealth involves the discovery and in some sense the verification of principles or rules which will make the practice of accounting in the actual tasks of measurement more effective. The importance of the task and the inherent fascination of the subject have combined to make this among the most intensively discussed topics in accounting. In fact, some consider it the subject of accounting theory, and refer to the theory underlying the measurement of income and wealth. Broadly speaking, economics is concerned with explaining and predicting the behavior that man engages in to satisfy his material wants, and the behavior or characteristics of physical objects as instruments for the satisfaction of these wants. Topics of interest include such diverse phenomena as the price and output of a commodity, the functioning of trade unions, the impact of seniority and business pension plans on the mobility of workers, the dividend policy of corporations, and the conditions which favor change in the technology of production.

The scheme of social accounts presented and discussed in this paper has made provision for subsistence and family production but has done so within the framework of a separate and segregated sub-sector. Likewise the same scheme of proposed accounts provides for the segregation and separate reporting of barter transactions. As a consequence of the above, provision is made for separate and segregated reporting of all items which have to be based on estimate and imputation and which consequently are subject to a considerable degree of possible error. This facilitates interpretation and evaluation. The remaining segments of an industrially backward economy should be subject to the same scheme of social accounting as that for the Western nations. [ABSTRACT FROM AUTHOR]

The article presents a discussion on the topic, College Education As a Requirement for Certified Public Accountants, The New York Experience. This is the second time that the author has been invited to present a study related to the topic. He discusses the result of the examination of 180 candidates from fifteen schools in several states of the U.S. and of ten times as many from New York State schools. This convinces the author, that students who have spent four years in the day classes or six years in the evening classes in the schools have been exposed to a quantity and quality of instruction which should have prepared them for the examinations in Commercial Law, Theory of Accounts, and the theoretical parts of auditing. The author does not believe, that schools were or could be prepared to teach successfully the subject of Practical Accounting or the practical part of auditing. A high school diploma does not insure that the holder has satisfactorily completed a four year course in that school.

From the point of view of the methods of exchange, there were three main stages of economic development the prehistorical or early medieval stage of natural economy, where goods were exchanged against other goods; the later medieval stage of cash money economy, where goods were bought for ready money; and the modern stage of credit economy, where commercial exchange was based on credit. If credit has played its important role for so long, then surely the history of book-keeping should supply further evidence on the point. Credit without written reckoning is almost impossible; the first and most fundamental reason for keeping accounts is to aid in remembering what one has trusted to their debtors. Early bookkeeping records fall into two groups, namely, the accounts themselves, and textbooks on accounting. A bad monetary system was still no unusual thing-even England did not put her coinage onto a moderately sound basis until 1696. But the plight of the New England colonies was exceptional. Nominally, their money consisted of pounds, shillings, and pence, each of these units being (in Massachusetts) worth about three-quarters of its British namesake.

Changes in the economy have prompted changes in the information needs in all areas of accounting. New cause and effect relationships develop and new concepts emerge which must be given accounting expression. The accounting profession is therefore faced with a need for accounting data which must be accommodated. The magnitude of the challenge reveals the magnitude of the opportunity. There is every reason to believe that socio-economic accounting will provide the thrust necessary to tremendously expand the world of accounting. In this connection, there is an old Hindu saying which seems appropriate here, that "There is no door, but only a small window, that leads to a great new world." However, the saying requires a bit of paraphrasing for, actually, in this case, there is no window. Nevertheless, accounttants do have access to, perhaps, a key hole. The light provided by this small key- hole reveals that there are numerous answers to the challenges posed by socio- economic accounting and they all focus on research. [ABSTRACT FROM AUTHOR]

The article presents an analysis of the nature of empirical theories for the purpose of providing a relief for some current and proposed theories of accounting. The process of theory construction is imperfectly understood. Even though it is not clear how theories are constructed, however, one can note that a new theory usually arises as a result of "anomalies" in the old theory. The purpose of the new theory or the modified theory is to make the unexpected expected, to convert the anomalous occurrence into an expected and explained occurrence. Theories are expressed in a language, and therefore the study of language is pertinent to the study of theories. A theory of empirical science may be divided into two parts, first, a Formal System which is composed of abstract symbols and a set of syntactical rules for manipulating those symbols; and second, an Interpretation of the formal system which connects certain symbols to observations via semantical rules. One of the difficulties encountered in accounting theory construction and verification is that different accounting theories are often theories about different subject matters.

Recently, professors Karl Kafer and V. K. Zimmerman presented an excellently documented paper on the evolution of the funds statement in the U.S. and in Europe. Following extensive exploration, they pointed out some significant deficiencies of the funds statement. The main purpose of this article, however, is to present a different format for the construction of this flow statement. It is hoped that a structural change in this flow statement will throw some additional light on the study of flows of economic resources at the business-enterprise level. In addition to recognizing the distinction between financial and nonfinancial flows of business operations, it is important to analyze their interplay. Productive activities may be financed internally, externally, or both. A detailed presentation of the financial activities of an enterprise will show not only how additional productive resources are acquired, but will also provide a basis, in part at least, for analyzing expansion and future income flow. The conventional balance sheet and income statement are deficient in depicting financial activities of a firm and in relating theft relationship to the firm's productive activities. It must be remembered that net income is "attributable to the whole process of business activity" and that the operations involves continuous movement of productive and financial resources. The resources-flow statement should not be treated as a supplementary device. It is a basic statement in its own right. With two basic types of flows, the need for at least two flow statements is quite dear. In addition, the resources-flow statement is much more than a statement of financial flows.

The article reports that the question of selecting among financial reporting alternatives is viewed in the same manner as any other information choice problem. That is, one moves from the system, to the signal, to the actions induced by the signal, to the consequences that stem from the actions, to--ultimately--the evaluation of these consequences. Two difficulties, however, emerge. First, the consequences affect a number of individuals. As a result, developing a model of these consequences becomes a nontrivial task. This problem was approached by focusing on a general equilibrium setting and assumed that interequilibria movements would not only occur, but would occur without cost. Second, evaluation of consequences ultimately must entail trading off one person's gains for another's. One cannot collapse the evaluation, question into a generally usable, straightforward preference relation without imposing how these trade-offs are to be accomplished. This imposition may take the form of a direct and obvious imposition or selection of some institutional method of choice, such as reliance on information markets, voting, or social control agencies.

The article discusses the applications and limitations of multiple regression analysis on cost behavior. The author asserts that regression analysis is not only a valuable tool but a method made available, inexpensive and easy to use by computers. When one considers that costs often are caused by many different factors whose effects are not obvious, one recognizes the great possibilities of regression analysis. In addition, this method must not be used in cost situations where there is not an ongoing stationary relationship between cost and the variables upon which cost depend.

Many accountants hold profit maximization as the objective of the corporation. It is argued that this assumption implies equating stockholders' interest to the corporate interest, equating profit generation to corporate self-sufficiency, and equating economic theorems to corporate motivation, On all three points, references are cited from various disciplines to suggest the inadequacies of this assumption. On the other hand, the hypothesis of survival and growth has been defended from logical, biological, and sociological points of view. Although profit as a basic objective is rejected, its role as a subordinate objective in the implementation of survival is recognized. The need for further research in exploring the implications of this hypothesis to accounting is acknowledged. [ABSTRACT FROM AUTHOR]

The article presents information on accounting curriculum. In the past several years, reform of the collegiate curriculum in business administration has developed into a modern Crusade. The acknowledged enemy is stultifying specialization; the sanctioned goal, a liberal education. Unfortunately, as in most such movements, the participants have often disagreed over just what or who the enemy is, as well as the shortest and safest route to the objective, which is only vaguely defined. As a result, more than a little confusion has attended our deliberations on a worth-while cause. Due to the necessary lack of precision in the sciences dealing with human conduct, an inductive, empirical approach to the problem is impossible. Instead, proposals for changing the old order have had to make the best of fragmentary factual data and theories from educational psychology. In a few cases ethical considerations have been introduced, despite the extreme hazards involved. The arguments of the innovators often fail to carry their conclusions. Only time can finally clarify all the issues involved and judge the adequacy and wisdom of the many changes which have been frequently proposed and occasionally adopted.

The article presents information on the difference in treatment by tax laws in various types and amount of income. As long as the income tax laws make a distinction between the taxation of ordinary income and capital gain, there is the difficult problem of determining the real nature of oil and gas as it is severed from the earth. On the other hand, the production of oil is a business and business income is considered to be ordinary income. Replacement Value, on the other hand, if oil is considered to be stock in trade, then percentage depletion provides a benefit. One method to assure the oil investor a return of his invested capital tax-free would be to charge all net profits to a reserve for depletion until the aggregate amount in the reserve equaled the amount of investment in the property; then no further depletion would be allowed. This would serve to reduce considerably the depletion now allowed the lessor. The tax laws are full of instances of differences in treatment for various types and amounts of income, due as much to political considerations as anything the. Percentage depletion is one more example of the conflict between proper determination of net income and the measurement of taxable income.

Readers of current accounting literature may have noticed of late the reappearance of a malady which seems to spring up every so often. Past experience indicates that it is contagious and may develop into an epidemic. For want of a better name it will be called "Value-ITIS" because it causes its victims to become enthralled with the importance of objective proof of subjective values. For example, it causes an investor to pay an unwarranted price for a share of stock because others with the same disease have purchased enough of the same stock to force the market price up. In the accountant, and particularly the academic theorist, this condition seems to be brought on by overexposure, malnutrition and neglect, exposure to economic theory, malnutrition from a diet lacking in economic realities, and neglect of the lessons taught by history. It seems to be most virulent among the relatively young, but will also attack the oldsters who have lost the immunity they developed in the early 1930's.

The article discusses the revolution in the area of accounting which gives the beginners a firm foundation upon which to build a consistent, meaningful structure of accounting theory. Primarily, the "revolution" involves a willingness, whenever necessary, to modify the orthodox historical cost and realization "principles" of accounting. In addition to emphasizing the forward-looking aspects of accounting, a complete revolution will emphasize the importance of economic theory, historical accounting development, and a consistent theoretical construct. The utility of using the economists' forward-looking approach, when prices rise as well as when they fall, must be compared with the difficulties and possible errors of so-doing. Bases for a rational choice of methods, however, will have been developed. Choice will no longer have to be made solely on the basis of custom or reference to authority. The accountant, hopefully, will be prepared with an independent, analytical, approach to solving important accounting problems. A host of decisions, not just managerial decisions, may then be made by various groups in society, based on relevant data and sound, consistent accounting theory.

The aim of this article first to indicate very broadly the principal areas of systematized learning, and secondly to compare and contrast accountancy and economics within the framework of these areas. Methodology and content are two integrated aspects of any area of systematized learning, so it should be made clear that sometimes dichotomizing accountancy and economic studies into either their content or methodology is merely an analytical device. It has been clarified that economics is mainly concerned with the study of behavior, while accountancy is concerned with the study of the quantification and analysis of the resultants of behavior. Metaphysics may seem a far cry from either accountancy or economic studies, yet the basic postulates of science, including the postulate of the orderliness of natural and social phenomena, stem from metaphysical analysis. Epistemology embraces studies of the nature and criteria of human knowledge, including the role of definitions, postulates, as well as inductive and deductive analyses. Both accountancy and economics have some stake in the development of metaphysics, but much more stake in the development of epistemology. In the area of accountancy the ethics principal is most often that of the practicing accountant. On the other hand, the problem of ethical behavior in economics almost always involves the behavior of others, namely the behavior of the makers of economic policy.

In recent years, discussion of the measurement of income has been largely colored and dominated by problems created by changes in the value of money. Serious as these problems are, they are really secondary ones, for they pre-suppose some basic agreement about the nature and measurement of income during a period of stable prices. Between accountants and economists, it need hardly be said, no such agreement exists. Command over capital resources would seem to be a much fairer guide to the subject's ability to pay taxes, and also to the demand made by the individual on various governmental services such as defense and law and order at the beginning. There is no doubt that when, as individual salary-earners and investors, we think of our personal income for a year, we commonly do not tiunk of it in this way, but rather as a stream of prorated receipts, unaffected by any changes in the value of the tangible assets with which we started the year and certainly as having nothing to do with any change in our future prospects-in our goodwill, in other words-which may take place during the year.

The purpose of this article is to analyze and to appraise the entity approach to business accounting with the objective of determining whether this approach enables accounting to meet the responsibilities placed upon it. Various historical concepts of the firm are reviewed, and the current concept of the firm as an entity separate from the owners is explained. A brief survey is then made of other current concepts which interpret the business unit as either an association, a social institution, or a fund of capital. Through supporting assumptions, the entity concept is incorporated into an accounting system. The following assumptions are examined for an over-all appraisal of the entity approach which is made with reference to selected criteria considered appropriate for an adequate system of accounts. First, accounting should be suited to the social and economic setting of the time and place. Second, accounting should be adaptable to the types of institutions employed by the society. This involves an effort to recognize the business units and to identify and portray the relationships existing within them. Third, accounting should provide information about the business units that is needed as a basis for rational decisions.

There is definite evidence in accounting periodicals of an increasing interest in the uses of statistics, especially statistical sampling techniques, in accounting. The proponents of the use of statistical techniques in accounting have presented their arguments so convincingly that many have accepted as a logical extension the idea that accounting and statistics should be merged or integrated. The courses offered as a result of such a merger are generally designed for presentation to students in the early stages of the business education. These courses seem to have as their objective the acquaintance of the student with accounting and statistical techniques so that he might apply these techniques in certain business situations. Probability, the normal curve, correlation and time-series analysis, and statistical forecasting are the statistical techniques usually included. As to having a separate statistics course for accounting students, there should not be much of a problem involved. Marketing people have their courses in marketing research, including a wealth of statistical applications. Economics departments have statistics courses for economists.

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.

Accounting deals with the transactions and events involving a specific economic entity. This economic entity is of concern, in different ways, to its management, its stockholders, its long and short-term creditors, its employees, and various regulatory and taxing bodies. All except the regulatory and taxing bodies are more concerned with the future of the entity than with its past. The past is important as it affects specific obligations, but is primarily important as it foreshadows the future. An economic entity is basically an economic relationship among persons. Accounting, in turn, "is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results thereof. "Accounting must obviously be done from the viewpoint of the economic entity involved in the transactions. It must deal with the transactions, or with the events involving the economic entity.

The indispensableness of a national position statement in addition to the national income accounting system for macroeconomic analysis can scarcely be overemphasized. But this hardly seems to be recognized by most economists who seem to have placed greater emphasis on income accounts than on stock accounts. Indeed, students of economics have failed to visualize the vantage of combining position and income statements in their analytical work. It is clear that to use but one of the two statements to analyze an economy is at best a partial study. Moreover, the macroaccounting mechanism will become an incomplete system without a balance sheet. In the application of accounting to economics it should be pointed out that the national balance sheet alone cannot furnish all the information needed for national position analysis. For a penetrating study a combination with other branches of macroaccounting seems desirable, such as regional and sector balance sheets, national income accounts, input-output tables, moneyflows, and balance of payments. In order to explore fully the functions of national position statement, a series of statements covering a period of several years will give a more meaningful study than the use of any single statement.

This article focuses on the relationship between accounting and economics. There are at least two, perhaps three, main areas of economic theory. One is microeconomic theory, in which the unit of analysis is relatively small, the central problem is the allocation of scarce resources among alternative uses, and the principal variables are quantities and prices of factors of production and finished products. The second area is macroeconomic theory in which the unit of analysis relatively large, the central problem is the level of employment of resources, and the principal variables are employment, national income, money, interest, and aggregate consumption, savings, and investment. The usefulness of economic theory is not limited to its applied aspects in social accounting. Such theory obviously has a substantial import apart from social accounting. Accounting for monetary phenomena sometimes takes the form of accounting for flows, sometimes of accounting for stocks. Irving Fisher's theory stressed the matching of money flows against the transactions of real goods and services. Keynes' monetary theory stressed the liquidity preferences of holders of money balances.

Accountancy and economics have the same objectives of cognition. Both branches examine the individual economic cell as well as the entire economic body of a country. In the center of these studies are the administration of scarce resources and the determination of income and production volume. It is often emphasized that the economist assumes the national, community or social point of view while the accountant is limited to the individual enterprise. But actually both branches have sections which deal with the national economy, that is, with the economic organism as an entity, or with the link between two or more national economies and both have sections dealing with firms, that is, with the ultimate bricks of this more highly organized structure. Business accounting can be regarded as that part of accountancy which is engaged in the studies of the firm, and microeconomics is its counterpart in economic analysis, while national accounting on one side, and macro-economics on the other, are dealing with the over-all picture of the economy.

Just as accounting is an indispensable tool for business executives and researchers in finance and management, so also is it becoming more and more important to economists in both industry and government. Over the past thirty years a new branch of accounting has been developed, in which the transactions of a nation rather than a business enterprise are pictured. Data from these accounts are valuable in assessing the overall business picture, the prospects for full employment and prosperity, the strength of foreign markets, the approach of currency convertibility, and a host of other facts vital to businessmen and economists alike. National income accounts appear in courses in income and employment or business cycles, while balance of payments accounting is dealt with in the study of international trade. The present article is intended to point out areas in which accounting departments can be of service to liberal arts students, particularly economics majors, who are learning the social accounts.

The article focuses on business behavior and the theory of the firm. The contrasting purposes and concepts of the economist's theory of the firm with accounting practice and analysis must be considered in light of what each group is trying to accomplish. The analysis of the firm may be made on at least three different levels or approaches. First, the accountant must provide necessary financial accounting. Tax returns must be prepared and financial reports must be submitted to the owners of the business. Here, all data must be given on a quantitative basis and in accordance with generally accepted practices. The accountant generally is not concerned with a concept or principle which relates to the whole economy and not to the firm. Second, with an entirely different approach, the economist by using the firm as a producing unit of the economy and assuming the principle of maximization, seeks to provide a satisfactory theoretical explanation of the firm behavior under different circumstances and environment. There is also an intermediate ground of analysis of management, profit planning, and business decisions.

The approach to courses for all fields of accounting, public, private, cost, tax and governmental, represents something of a paradox today. Viewed by some as too practical for admission to the cultural-centered liberal arts curriculum, by others as a field of graduate study, these courses on many campuses have been sustained largely by the intellectual prowess of faculties and the ever-increasing demand of students for practical training in areas of employment arising from the war and post-war economics. Even the most cursory glance at recent college catalogues reveals that accounting courses appear under a variety of departments, most frequently under business administration or social science, but sometimes correlated with instruction in mathematics, statistics or secretarial studies, and less frequently as part of the pre-engineering or pre-law curriculum. Teachers of all phases of accountancy in liberal arts colleges, and indeed in other institutions of higher learning, have made a valiant, if at times a somewhat ineffectual, effort to train students to cope with the rapidly shifting economic climate, and to relate the complex technical knowledge of this age to human progress.

In a recent article accountant Hugh K. Stelson found the yield on a bond by use of a modified or improved correction formula, apparently published only a few years ago. The new formula is an extension of the long-known Newton's formula for finding the root of an equation by successive corrections to progressively closer. First point, The initial trial rate should meet two standards: it should be as close as possible to the true rate, and it should be a tabular rate, so that the labor of computing can be avoided. If a bond table is also available, use of the formula is still easier. The table should have a rate interval no larger than half percent. The benefits of an initial error no larger than .000625 lie not so much in the digits "625" as in the three zeros. For there is a rule of thumb for Newton's formula in one of his texts on the theory of equations to the effect that if h begins with k zeros, the computation should be carried to 2k decimal places. The foregoing discussion is applicable to short-term bonds, up to say 30 or 40 periods.

The article focuses on the determination of the most efficacious way of valuing assets on a consistent basis in accounting. A primary function of accounting is to provide entrepreneurs and other interested persons with useful data upon which to base their decisions. This objective can logically be attained best by valuing assets in real terms by adjusting their monetary expressions to changes in the general price level. The shift of emphasis from the balance sheet to the income statement during the preceding two decades has spotlighted the inherent fallaciousness of the doctrine of conservatism. The understatement of an asset in the balance sheet of one account big period means an overstatement of profit in another period when the asset is physically consumed in the process of production. One way of retaining conservatism in the balance sheet, and of avoiding the perils of profit overstatement, has been suggested by the proponents of the base-stock method and of Last-in, First-out method.

The article focuses on the 1948 revision of the American Accounting Association's statement of principles. The proposal of the committees, masquerading under the label "concepts and standards," is precisely in line with the idea that the private owner is entitled to nothing more once he has as a matter of bookkeeping-written off his costs. It is precisely in line with the accounting ideas of those who have been campaigning for the impairment and minimizing of private property rights in every possible way and the concurrent glorifying and maximizing of the so-called public interest in property, looking toward the goal of complete suppression of private rights and complete state ownership, or socialism. It seems to echo the arbitrary accounting policy of one of the agencies participating in this campaign, the Federal Power Commission, which provides for writing off recorded assets and the related equity of investors, retroactively for an indefinite period, on one flimsy excuse or another, and at the same time insists that under no circumstances can there be any restorations or adjustments in the other direction, as this would constitute that terrible thing labeled "reaccounting" by members of the Commission's staff.