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are therefore expenses. The common-sense view in family corporations is that these officers virtually engage themselves. And here again we find the treasury department taking the attitude that the test as to whether such salaries are expenses or in whole or in part profit distributions is reasonableness. In other words the department refuses to be beguiled by the proposition that the stockholder as an employee is entirely distinct from the stockholder as a proprietor controlling corporate policies. The dual functions are recognized, but not the dual business personalities.

“Common sense is not recognized as a guide by some accountants," as the editor of the Students' Department points out, but he has tagged the wrong bunch with this label. The accountant who does not recognize common sense as a guide is the man who meticulously follows the two personalities, the proprietor as an employee or borrower and the proprietor as an owner, and insists on maintaining this differentiation in all cases, regardless of the absurdities this practice may lead to in the case of the partnership and the close corporation. Statements of financial operation and condition prepared according to this view will in many cases certainly not be accepted by the courts or the treasury department.

The editor of the Students' Department makes one criticism which is evidently due to an oversight. In speaking of the case where B does not pay interest on his drawings but authorizes a charge to his capital account he quotes from the article in question as follows:

““The concurrent credit in such a case is usually to the interest revenue account, and if this procedure is followed the entries giving effect to this agreement would be: B, Capital

$600 Interest

$600 “ «The credit to interest is ostensibly a revenue item, but a careful examination of the case discloses the fact that no revenue whatever was involved and that the essence of this transaction is simply an adjustment between the two partners. This can perhaps be best shown by an examination of hypothetical balance-sheets as affected by this transaction alone.'” The first balance-sheet is then given and the quotation continues,

Ignoring all other possible transactions, and assuming that A and B share income in proportion to respective investments, the item of interest revenue recognized in the above entries might now be divided and credited to the partners' capital accounts.'"

Here follow the entries and the succeeding balance-sheet, and then the conclusion,

“'A comparison of the two balance-sheets shows very clearly that no revenue whatever has been realized since asset and equity totals remain unchanged ..

In criticism of this demonstration the editor states that "it cannot be too strongly emphasized that a comparison of two balance-sheets does not show anything whatever in regard to intermediate profit or loss," and goes on to show this by bringing in additional transactions and assuming the profits resulting therefrom withdrawn. In view of the italicized statements above (the italics were not, of course, in the original article), which the editor himself quotes, it is evident that this criticism is entirely undeserved. The demonstration given was sound. It is certainly true if balance-sheets were struck immediately before and after a single transaction containing an element of net revenue that the totals of the second balance-sheet would be larger than those of the first by the amount of such net revenue.

Yours truly,

W. A. Paton.

Book Reviews MERCANTILE CREDITS AND COLLECTIONS, by CHARLES A.

MEYER, The MacMillan Co., New York.

A manual for the guidance of credit men and collection departments written from the practical experience of the author. “Practical" is the best word to describe the book, as little space is given to theory or psychology. Part I gives advice to the credit man and part II to the collection department, as to the methods the author has found most useful. Part III contains the United States bankruptcy law. An appendix contains the requirements of each state as to conditional sales contracts, a section probably of more value to public accountants than any other part of the book. There is a good index.

The old saw, "tricks in all trades," is somewhat forcibly brought to mind by the reading of chapter VI, Your Own Collection Agency. The idea of forming a dummy corporation of your own for the purpose of scaring the debtor into paying by carrying out the threat of putting his account into the hands of a collection agency may be pretty well known in business circles, but it is astonishing to find the scheme recommended in so public a form. It will also be unpleasing news perhaps to a victim of this mild form of deceit to learn that it is even possible that he has contributed indirectly to help swell the profits of his creditor through the dummy corporation's share of the collection fees. Of course, no honest debtor should ever find himself subject to this peculiar form of mulcting, and equally of course there is no law to prevent it, but nevertheless this whole chapter has an unpleasant ring.

W. H. L.

HOW TO ANALYZE INDUSTRIAL SECURITIES, by CLINTON

COLLVER, Moody's Investors Service. New York.

Such a competent little handbook as How to Analyse Industrial Securities if widely distributed among investors would increase public demand for high standards of analytical ability on the part of public accountants. The day is coming when stockholders and investors will insist upon reading not only the auditor's certificate but his entire report. What this will mean in increased responsibility for the public accountant is obvious. It will call for the exercise of such keen observation, sound judgment and severe logical reasoning that one foresees a long and arduous apprenticeship for the future aspirant to the front ranks of the profession.

We confess that we took up this book of Mr. Collver's in a somewhat flippant frame of mind. We have seen too many of the "how-to-get-richquick-on-Wall-St.” type of booklet. After reading with particular interest parts IV and V, however, we “remain to pray"—that some happy day in the future may see the elimination of the unflattering opening of chapter XVI

"Too much reliance has been placed upon the indorsement

of public accountants of income accounts and balance-sheets," and further

"Two of the largest firms, whose certificates are found on many large corporations' reports, do not enjoy a good

reputation among accountants." A bit of qualifying consolation is found in the next sentence

"On the other hand the writer has been employou by two of the largest firms in the country whose standing is above

suspicion." Quis custodiet custodies? If the public is warned not to place too much reliance upon our certificates, whom may it rely upon? What is more to the point, whose fault is it? We take it that Mr. Collver' means not to impute moral turpitude (a matter with which the American Institute of Accountants is amply able to deal) so much as lack of training and ability. And that is most emphatically a matter for the serious consideration of every member of the profession.

Though modern accountancy writers touch more or less upon the importance of good analyses of accounts, we do not know of anyone who goes into it so thoroughly and practically as Mr. Collver. We think this book-handy for the pocket, concisely and clearly written, well indexed-a most useful addition to any accountant's library, and particularly adapted as a manual for juniors with ambition.

W. H. L.

Harry Ambs We announce with regret the death of Harry Ambs, associate of the American Institute of Accountants, who died at his home in Brooklyn, December 4th. Mr. Ambs had been on the staff of Price, Waterhouse & Co. for many years.

Henry F. Moore and Charles J. Booth announce the formation of a firm under the name of Moore & Booth, with offices in New York building, Seattle, Washington.

Ward, Fisher, Carpenter & Philbrick announce the opening of an office at 8 Beacon street, Boston, Massachusetts.

Frank Ralph Wheeler announces the opening of an office at 722-3 Stephen Girard building, Philadelphia.

Temple, Webb & Co., announce the removal of their St. Paul office to the Capital National Bank building.

Hood & Strong announce the removal of their offices to Newhall building, San Francisco, California.

Bertram Goldsmith announces the opening of an office at 200 Fifth avenue, New York.

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