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(j) Journal entries on home-office books taking up branch net profit, when nominal account balances are converted at current instead of average rates : London branch current account

98,815.00 London branch profit and loss account

.274,385.00 London branch profit and loss account.

373,200.00 To credit branch profit and loss with: Sales

£75,000 @ 4.665 349,875 Inventory Dec. 31 5,000 @ 4.665 23,325

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To charge branch profit and loss with:

Inventory Jan. 1. £ 4,000 @ 4.64 18,560
Mdse. from h. o. 50,000 @h. o. bal. 232,500
Expenses

5,000 @ 4.665 23,325

Total

274,385

To charge branch current with profit

98,815

The current account on the home-office books would now stand: Balance before closing (per trial balance)

249,750.00 Add profit

98,815.00

Total debits ...
Less remittances

348,565.00 279,000.00

Balance

69,565.00

London branch current account

575.00 Reserve for exchange fluctuations

575.00 To raise current account balance to conversion value of net assets at branch.

When a reserve for exchange is kept it is on the theory that the apparent profit represented by the exchange adjustment may be apparent only and

that it may be reduced or wiped out by future adjustments when the exchange rates are not favorable. Hence instead of passing the credit through profit and loss it is thrown into a reserve where it will be available to absorb possible exchange losses in future. Assuming that no reserve is kept, the adjustment would be made as follows: (k) Closing entry for exchange adjustment if no reserve is kept. London branch current account

575.00 London branch profit and loss account

575.00 To adjust current account to conversion value of net assets at branch.

London Branch Profit and Loss Account

(On home-office books) 1919

1919 Dec. 31. Inventory, Jan. 1... 18,560 Dec. 31. Sales

..349,875 31. Shipments from

31. Inventory, Dec. 31.. 23,325 home office ..232,500 31. Expenses

23,325 31. Profit per br. books 98,815

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F. W. Hilditch & Co. announce the removal of their offices to 17 east 42nd Street, New York.

William G. Adkins announces the removal of his Chicago office to 37 south Wabash avenue.

Waldman, Schoolman & Co. announce the removal of their offices to 511 Fifth avenue, New York.

Edward A. McAllister announces the opening of an office at 2 Rector street, New York.

William H. Willis announces the opening of an office at 1400 Broadway, New York.

Max Meyer announces the removal of his office to 253 Broadway, New York.

David B. Jacobs announces the removal of his office to 217 Broadway, New York.

EXCESS PROFITS TAX PROCEDURE, 1921, by ROBERT H. Mont

GOMERY. The Ronald Press Co., New York.

To the future historian the excess-profits-tax laws of 1917 and 1918 (the latter with some modifications extending to 1920) will prove an interesting and perhaps amusing revelation of the congressional mind. Ostensibly passed purely for revenue purposes, it was no secret that congress not only sought to prevent capital from securing inordinate war profits but also to restrict all r Sts regardless of their source. It produced revenues beyond all ex vocations, but it utterly failed to prevent huge war profits. The law of 1917 was so badly drawn that it was incomprehensible and unworkable in spots, but it was successful as a revenue producer because the treasury department had the courage to interpret its terms liberally, even in practical defiance of the law itself, strictly construed. Applying the old-time freight-rate maxim of the railroads, "all the traffic will bear"-a maxim anathema to Washington statesmen since the '80s-congress loudly proclaimed its intention to tax all classes in accordance with their ability to pay. But the corporation-baiters could not resist the opportunity to discriminate against corporation profits in the 1917 law, and in the 1918 law openly threw the entire burden of the excess-profits tax upon the corporations. The result was that many small corporations were unjustly burdened while individuals and firms with equal profits escaped entirely. Finally, the 1918 law was not enacted until February, 1919, fourteen months after its effective date of January 1, 1918, and only nineteen days before the returns for 1918 were due to be filed. Considering these salient facts and adding the many confused and obscure provisions of the laws, provisions which have needed thousands of treasury decisions and departmental rulings to explain them, the historian may well marvel at the level of congressional intelligence thus indicated.

In spite of glaring inequities and injustices, the American business man paid—and paid cheerfully. It was part of his bit to win the war. Even since the armistice it is recognized by all intelligent men that heavy taxation is inevitable, only it is expected that congress will as soon as possible readjust the burdens so they will bear equitably upon all. But what did and does exasperate the average taxpayer is the obligation to prepare returns under laws which take the combined skill of lawyers and expert accountants to interpret. It was bad enough at the beginning, when each did the best he could, but it became aggravating beyond endurance when there came a flood of treasury letters demanding further details, followed by re-assessments galore. Tales of the large increase in the working forces of the treasury made necessary by the tremendous influx of complicated returns made the taxpayer uneasy at the growing cost of administration. The last straw seemed to have been added when thousands of business men and corporations received the treasury letter naively asking them to waive

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their statutory limitation rights under the 1917 law because, forsooth, with all its increased force (from 3,000 to 38,000 during the war) it had not been possible to complete the task of passing upon the returns for 1917 alone! In many cases this letter was the first intimation to the taxpayer that he might yet have to reopen matters which he supposed were settled long ago.

In all these dark clouds of confusion and doubt there was one fairly bright spot on the horizon for professional accountants, public and private: the series of books on federal income tax and excessprofits-tax procedure by Colonel Montgomery. The colonel has a record for personal war service, of which we as fellow-members of the profession are proud, but undoubtedly if he were called upon to answer the famous war-time poster query “What did YOU do during the great war?” his proper reply would be “I saved thousands of accountants, business-men and corporation officers from mental breakdown and nervous prostration." And that is no joke, either. Only recently a newspaper item recorded the incarceration in an asylum of a taxpayer insane from worry over the 1917 return.

Many a professional accountant, who can without boasting claim to be fairly skilled in the science of accounting, cheerfully acknowledges his indebtedness to Colonel Montgomery's manuals of federal-tax procedure. With the reasonable, though perhaps not certain, assurance that congress will soon repeal the fearful and wonderful excessprofits-tax measure, this review takes on the character of a valedictory. Unless the courts of the treasury department make unexpectedly radical and substantial changes in rulings and interpretations of the 1917 and 1918 laws, it is doubtful if a new edition of this volume will be needed. Barring that and with the law repealed, this 1921 volume will be a safe and standard guide for those who will be struggling for the next five years over the excess-profits assessments for 1918 to 1920.

It goes without saying that this book, unlike the Federal-IncomeTax Procedure, to which it is really a supplement, appeals to a limited class—the professional accountant, public and private. It is hardly necessary to describe it to that class which is already familiar with and uses it. To the average business man with a superficial knowledge of higher accounting it cannot be much more intelligible than the law itself. He may be helped to understand the principles upon which the procedure is based, but he will find it difficult to apply them to the details of his own business. It is somewhat analogous to business law. Every business man certainly should be familiar with the fundamental principles of business law, but he consults a lawyer when he enters litigation. Similarly in nine cases out of ten the business man who reads with understanding Colonel Montgomery's exposition of the excess-profits-tax law turns to the professional accountant for aid when he realizes the complexities and confusions with which he must struggle.

The section on federal capital-stock (excise) tax has been transferred to this volume from Income-Tax Procedure for 1921 to save

space in the latter volume and presumably will be restored to it in future editions. In some respects this section covers points fully as obscure and difficult as in the excess-profits sections. It offers even a larger field for the skilled accountant, in that all capital employed must be considered, not merely that which the law defines as “invested capital.” It is probably too much to hope that congress will take any steps to simplify this law. Being purely an excise tax it is difficult for the non-congressional mind to see why the basis upon which the tax is levied should not be simply the par value of the capital stock (amount paid in, in case of no par value) plus the surplus and borrowed capital according to the corporation's annual reports to its stockholders. We should then have a stabilized basis for the assessment of the tax, and if the operation of the law should lead to more conservatism in capitalization, so much the better. The gain would be in reducing the amount of detailed work now required in making up the three-fold return. Two-thirds of that work is obviously wasted time and effort, as the government levies the tax on the highest value of stock thus shown. But, after all, why an excise tax on corporations at all? Why not add enough to the corporation income-tax rate to produce the additional revenue raised by the excise tax?

The hearty thanks of the profession are due to Colonel Montgomery for his series of books on the excess-profits-tax procedure; nevertheless the reviewer bids what he hopes is a lasting farewell to them' in this edition of 1921!

W. H. LAWTON,

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NEW YORK STATE INCOME-TAX PROCEDURE, 1921, by ROBERT

H. MONTGOMERY. The Ronald Press Co., New York.

The description of procedure to be followed in the case of the individual income-tax law of New York is along the same lines as the author's Federal Income Tax Procedure. The New York law being based on the federal it naturally follows that much of the procedure in this book is taken verbatim from the federal volume, but there are enough differences in the laws and regulations to require careful study on the part of the practitioner who prepares both federal and state returns. One might think the differences in the state law and procedure might perhaps be covered in the federal volume in the form of notes or an appendix, but considering that the federal procedure is in demand all over the country while the New York is of interest to those only within a limited area, the wisdom of a supplementary volume is apparent. Other states have and will have similar income-tax laws, and we may confidently look to enterprising members of the institute to compile similar procedures for their respective states.

Part II of the New York Procedure is devoted to the franchise tax on corporations doing business in the state, which is in effect a tax on their incomes. Not all corporations are subject to this tax, there being six classes which are taxed under specific sections of the law of 1909 and two classes which are exempt, but practically the tax is levied on all manufacturing and trading corporations, domestic and foreign, doing busi

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