American Institute of Accountants Council Meeting of September 17, 1917. The regular annual meeting of the council of the American Institute of Accountants was called to order at ten A. M., Monday, September 17, 1917. Minutes of the preceding meeting as printed were approved. Upon motion, duly seconded, the council resolved itself into a trial board to hear charges preferred against two members of the institute. The charge against both members, practising as a partnership, was that they had knowingly certified to a consolidated balance-sheet in which certain contingent liabilities were suppressed, and that balances owing by subsidiary companies were included in the current assets without disclosure of the nature of the relationship of the debtors. It appeared from the evidence that in this case no ultimate harm had been done to the public and there had been no failure to meet the liabilities. It was admitted, however, that the balance-sheet had been wrongfully prepared in so far as the above points were concerned and it was resolved that the two members be admonished and suspended for thirty days from September 17, 1917, on two charges: one, that knowing another firm of accountants had declined to certify the balance-sheet without disclosing the facts indicated above they failed to confer with those accountants, and, two, that in full knowledge of all the facts they had signed the balance-sheet of their own volition. It was further resolved that in publishing the report of the proceedings the names of the defendants should be omitted. The trial board adjourned and the council re-convened. The privilege of the floor was accorded to Arthur W. Teele, chairman of the board of examiners, and George O. May, chairman of the committee on endowment. The following reports were received and ordered printed in the yearbook: Report of the treasurer. (It was resolved that the action of the executive committee in approving payments in excess of some of the appropriations of the budget of 19161917 be approved.) Report of the secretary. Report of the executive committee. Report of the board of examiners. It was resolved that action in the case of an applicant for admission as associate concerning whom the board of examiners had not made recommendation should be postponed for further consideration. It was resolved that Carl L. Tewksbury, of Cincinnati, Ohio, an applicant for admission as associate and upon whose application the board had not taken action pending a decision as to the educational degree held by the applicant, should be elected an associate of the institute as of September 1, 1917. It was resolved that approval of the council be given to the proposal of the board of examiners that persons passing C. P. A. examinations, at which the questions and markings were those of the institute's board of examiners, should be given credit therefor if at any subsequent time they should apply for admission to the American Institute of Accountants. The following reports were read and ordered printed in the year-book: Report of the committee on professional ethics. Report of the committee on arbitration. The report of the committee on budget and finance was read and adopted and the sums specified therein duly appropriated for the purposes therein set forth. It was resolved that there should be added to the report of the committee on budget and finance an appropriation of $300.00 for clerical expenses of the treasurer's office. The appropriation of "annual meeting, 1918," was amended to read "annual meeting." The report of the committee on constitution and by-laws was read and referred to the annual meeting on the following day. A summary of the report of the committee on education was presented by the chairman of the committee and the full report was ordered printed in the year-book. The report of the committee on federal legislation was read and ordered printed in the year-book. The report of the committee on publication was read and ordered printed in the year-book. The report of the committee on state legislation was read and with certain amendments was ordered printed in the year-book. The report of the special committee on national defense was read and ordered printed in the year-book. The chairman of the committee on endowment reported orally on the activities of the committee and was followed by the chairman of the committee on collection of the endowment fund, who expressed the opinion that the collection of the fund should take place in the last week of October. It was suggested that if the principal sum could not be obtained in full, an effort should be made to secure a sufficient number of annual subscriptions to bring the income of the fund to an amount of $9,000 per annum for three years. Further discussion of the question was left to the meeting of the American Institute of Accountants on the day following. After consideration of the payment of dues of members in military service it was resolved that the council recommend to the meeting of the institute that action be taken to remit the dues of those in active military or naval service of the United States or its allies. The appointment of delegates to the Chamber of Commerce of the United States of America was left to the president with power. The chair appointed Edward E. Gore to represent the institute at the meeting on the following day in Atlantic City. The Michigan Association of Certified Public Accountants wrote asking re-consideration of the status of a member of that organization who had not been admitted to the American Association of Public Accountants. It was resolved that the application could not be considered, as the matter had received the full consideration of the American Association of Public Accountants and was outside the jurisdiction of the American Institute of Accountants. The secretary reported the resignation from the board of examiners of Frank G. Du Bois and W. D. Whitcomb. A letter from Herbert Hoover, food administrator, was read and referred to the executive committee for action. A motion that a committee should be appointed to consider the advisability of the creation of local chapters of the American Institute of Accountants was lost. The meeting adjourned. Meeting of September 20, 1917. The regular meeting of the council of the American Institute of Accountants was called to order at ten A. M., Thursday, September 20, 1917. The following were elected to the executive committee: H. S. Corwin, R. H. Montgomery, E. W. Sells, J. E. Sterrett, W. F. Weiss. The following committee on professional ethics was elected: Carl H. Nau, Chairman. J. D. M. Crockett, J. Porter Joplin, T. Edward Ross, Charles H. Tuttle. Vacancies on the board of examiners were filled by the election of the following members: For the term of three years: Charles S. Ludlam, Waldron H. Rand, H. Ivor Thomas. For the term of two years: George O. May (to fill the unexpired term of Frank G. Du Bois, resigned). For the term of one year: John B. Niven (to fill the unexpired term of W. D. Whitcomb, resigned). A. P. Richardson was re-elected secretary. E. W. Sells, chairman of the committee on budget and finance, moved that $1,000.00 be appropriated for the payment of dues of members and associates of the institute serving in the army or navy of this or allied countries during the period of the war and also that $2,500.00 be appropriated for the expenses of the statistical bureau and library, being the estimated revenue from the interest on the fund, it being understood that the expenditures must not exceed such revenue. The resolution was carried. It was resolved that the investment of the endowment fund be left to the executive committee and the committee on endowment, acting jointly. Upon re-assembling in the afternoon the council convened as a trial board to hear charges preferred against a member. The charges were to the effect that the member in question had certified to a statement of financial condition in which there had been gross inflation of inventory and to which the only attention drawn was in the form of a note in the narrative of the report. The alleged offense was committed in 1911. After consideration of the evidence presented by the defendant and counsel for the defendant, it was resolved that "the complaint be and it is hereby dismissed, but that this action is not to be construed as approving the acts complained of as admitted, or that they were in accord with the standards of accounting practice at the date upon which they occurred." It was resolved that the name of the member concerned be omitted in the published report of the proceedings. The meeting adjourned. Students' Department EDITED BY SEYMOUR WALTON, II In attempting to answer the questions set by the American Institute of Accountants at the June, 1917, examination, it must be distinctly understood that no official standing is to be inferred, merely because the answers appear in this department. The board of examiners is in no way responsible for these answers and, as far as we know, may not even agree with them. ACCOUNTING THEORY AND PRACTICE-PART 1. 1. A, B and C formed a partnership. A agreed to furnish $10,000, B and C each $7,000. A was to manage the business and receive one-half of the profits; B and C were each to receive one-fourth. A supplied merchandise worth $8,500, but no additional cash. B turned over to A, as managing partner, $9,000 cash, and C turned over $5,500. The business was conducted by A for some time, but without keeping exact books. While managing the business A purchased additional merchandise amounting altogether to $75,000 and made sales of $100,000. The cash received and paid out for the partnership was not kept separate from A's personal cash. In order to straighten out matters, B took over the management. He found receivables amounting to $20,000, and of these he collected $4,500. The merchandise still on hand he sold for $500. These receipts he deposited in a bank to the credit of the firm. The remaining accounts proved worthless. The outstanding accounts payable amounted to $2,000, of which $1,500 had been incurred in purchasing merchandise and $500 for expenses. These accounts he paid. A presented vouchers showing that during his management he had paid other expenses of $2,400. By mutual agreement B was held to be entitled to $100 on account of interest on excess capital contributed and A and C were to be charged $75.00 each for shortage in contribution of capital. (a) Prepare trading and profit and loss accounts and accounts of each of the partners, indicating the final adjustment to be made in closing up the partnership. (b) Show how the above final adjustment would be modified if A proved to have no assets or liabilities outside the partnership. Solution.-Skeleton ledger accounts will have to be set up which would be debited and credited for each transaction, but these are not asked for, nor are the working papers required. The steps taken are indicated in the trial balance statements. There are two periods to be covered-the trading period under the management of A and the liquidating period after B took charge. |