Knowledge that Transforms

Abstract The article presents the application of the Monte Carlo method to inventory problems involving uncertainty of demand and or lead-time. A general statement defining the Monte Carlo technique would be that it is a process whereby data are generated by the use of some random number generator, such as a random number table. In essence, the Monte Carlo method consists of simulating the real world to determine some probabilistic property of a population of events by the use of random sampling applied to the various components of the events. All inventory situations have certain general characteristics, each involving some aspects of cost, service and usage. One characteristic is that as an inventory increases, the cost of storing those goods will also increase but the cost resulting from an inability to fill orders will decrease. Hence, one aspect of the inventory problem is to find an inventory level, which minimizes the sum of the expected holding and shortage costs. The objective of the article is to consider a set of decisions, which will minimize total cost and provide an acceptable level of goods to satisfy the anticipated or expected demand rate.

Reviews the book "Intermediate Accounting," by Walter B. Meigs, Charles E. Johnson and Thomas F. Keller.

Reviews the book "The Theory and Management of Systems," by Richard A. Johnson, Fremont E. Kast and James E. Rosenzweig.

Reviews the book "A Dictionary for Accountants," by Eric L. Kohler.

Reviews the book "Management Decisions for Cash and Marketable Securities," by Harold Bierman and Alan K. McAdams.

Abstract The article presents examination by the author on one aspect of the conventional accounting funds statement and the schedule of working capital, with particular regard to their value for analysts other than accountants. The central idea which the author has tried to develop is that a certain type of transaction which traditionally has been interpreted by accountants as simultaneously increasing and decreasing the total "funds" by equal amounts may properly appear in both the sources and the applied sections of the funds statement. The proposals for improving the statement do not include this principle and on the whole, it appears that the long-established forms of Exhibit. It must still be regarded as the standard practice. There does not seem to be any inevitable reason why the type of transaction in question must be interpreted in the traditional manner. A more imaginative approach would enhance the capacity of this statement to reveal significant information in a comprehensible form.

Abstract The Revenue Act of 1962 provides for an "investment credit" which is generally seven per cent of the qualified investment in depreciable property acquired after December 31, 1961. The "investment credit" may be deducted directly from the amount of federal income tax otherwise payable for the year in which the asset was acquired. For any asset on which the credit is given, the basis of the asset is reduced by the amount of the allowed investment credit for the purpose of determining the amount that may be written off as depreciation over the life of the asset. The investment credit, to the extent that it is fully utilized, should be regarded as a reduction in the tax expenses. This statement is based on the fact that the credit is allowed because of provisions of the revenue act and because it can be of benefit to a company only if there is tax, resulting from taxable revenue, from which the credit can be deducted. The net result of the suggested method and its variations is that a company can take advantage of the income tax law related to the investment credit and still present financial statements which are not unduly affected by the amount or the timing of these tax benefits.

Reviews the book "Use and Meaning of Market in Inventory Valuation," by Gertrude Mulcahy.

Reviews the book "Managerial Accounting," by Mary E. Murphy.

Abstract The article focuses on the differences between commercial and institutional accounting. Increasing importance of the role of higher education in the economy have provided a challenge to all members of the accounting profession. Much of the theoretical knowledge relative to commercial accounting practice must be reassessed when accounting for institutions of higher education. There is truly a separate and distinct set of generally accepted accounting principles for colleges and universities. At the same time, it is interesting to conjecture that as more emphasis is placed on the idea of dollar's worth for each dollar spent by colleges and universities, and with such measurement devices as performance budgeting, these non-profit organizations may be moving toward profit and loss applications. Meanwhile, as large business enterprises become more service oriented, they appear to be assuming trusteeship aspects similar to those in institutional accounting. Just as it may be true that institutional accounting can benefit from commercial accounting, the reverse is equally likely.