Knowledge that Transforms

The purpose of external reporting is often assumed to be the aiding of stockholders in their resource allocation. William A. Peterson recommended that realized income be reported, so that it represents prospective net income plus or minus favorable or unfavorable deviations from expectations. In this way it can represent a meaningful index of the current performance of management in its endeavor to make a profit. The rational manager would make his investment decision on the basis of present value calculations. His aim would be to maximize the present value of expected income. For efficient allocation of resources, attention should be focused on assets and on the rate of return to the undepreciated resources employed. In order for the users of external reports to evaluate management performance, the prospective income computations must accurately reflect the decision model. The value of prospective income data remains in doubt. It cannot be an improvement unless it will discourage irrational decisions and reduce the manipulation of external reports.

Reviews the book "Introduction to Modern Accounting," by Norton M. Bedford.

Reviews the book "Accounting Systems: Design and Installation," 2nd ed., by Charles T. Horngren.

The article focuses on the accountability under industrial diversification. A firm manufacturing only a single product would typically engage in numerous productive processes. They might consist of a variety of manufacturing operations, as well as internal transportation, storage, machine maintenance, bookkeeping, and many other efforts. Furthermore, the end product would hardly be produced in a single quality, a uniform color, and in a single size. The author refers to the era of industrial capitalism as the age of specialization. According to him it was a product of the industrial revolution, which had taught that division of labor among individuals provides efficiency. Advances in organization structure, with the development of the multidivisional administrative framework, provided management with effective means for control. When a product line was administered through a separate autonomous division, its manager was made responsible for the operating decisions and the coordination of functional activities within the division.

It is generally suggested by the accounting professionals that the principal objective of management accounting is the influencing of behavior. And in order to accomplish this objective, the management accountant must function with some view of human behavior in mind. The article considers two cases of formalizing the views of behavior into model which could be used for testing the validity and relevance of the accountant's behavioral assumptions. The first of these is termed the traditional management accounting view. The second theoretical model which was considered is not usually associated with either the literature or educational processes of management accounting. Each of these models is based on a set of underlying assumptions about human behavior, and it is these assumptions which determine the character of the model itself. The findings of this field study appear to suggest that many management accountants tend toward a traditional view of behavior and they are not alone in this respect.

Reviews the book "Tax Reform and the Alliance for Progress," by Raynard M. Sommerfeld.

Reviews the book "Business Information and Accounting Systems," by Wallace M. Carrithers and Ernest H. Weinwurm.

Reviews the book "Price Fixation in Indian Industries," by G.P. Kapadia.

Reviews the book "Accounting: Concepts, Systems, Applications," by A.S. Carrington and G.B. Battersby.

Reviews two books by Harold Bierman Jr. and Allian R. Drebin. "Financial Accounting: An Introduction"; "Managerial Accounting: An Introduction."