Knowledge that Transforms

This article presents information on socio-economic accounting. Several possible dimensions of socio-economic accounting have been suggested, including national income accounting, evaluation of social programs, the role of accounting in economic development and efforts to develop an index of social progress. This paper explores yet another dimension of socio-economic accounting-the recognition and measurement of external diseconomies, or social costs and the resulting implications for the accounting profession. The most complex and controversial, link in the assessment process is the determination of the social costs-monetizing the external diseconomies. Accountants are likely to resist involvement in such efforts because of the uncertainty involved, but such resistance is not justified. Cost determination is more the forte of accountants than of engineers and economists. Assuming that actual social cost estimation will be done by public agencies at some level of government, it then seems not unlikely that the accounting profession will be called upon to attest to such estimates.

This article deals with the dual objective of presenting a framework in which research can be evaluated and which will stimulate and improve accounting research from a pedagogical stand-point. The framework developed views research as a decision problem and thus touches upon many of the concepts of decision theory. A methodological decision tree is presented as a useful technique for the planning and controlling of one's research strategy. Before the methodological decision tree approach can be adequately presented, several conceptual distinctions should be made, including a distinction between research methodology and research technique. It will be useful to consider methodology as the meta-decision process underlying selection of a particular research design. Whereas by research techniques, the notion of those analytical and technical tools available for research implementation is suggested. Consistent with these definitions "scientific method" is at the methodology level whereas statistical techniques such as regression and factor analysis are at the technical level.

The article reports that the evaluation of the cost control procedures applied to a process is facilitated by viewing the control objective as minimizing a whole set of costs including the efficiency cost incurred in the operation of the process and all of the control procedure costs. Thus, proposed changes in control procedures can be evaluated by determining their net effect on the total of this set of costs. Two approaches to controlling efficiency cost were discussed along with some indication of the types of procedures required by each. The first approach, that of preventive controls, has its primary effect on efficiency cost through the frequency of occurrence of operating problems. The second approach, that of detection-correction controls, has its effect on efficiency cost by influencing the length of time operating problems are allowed to exist in the process. It can be argued that budget performance reporting, a major contribution of the accountant to process cost control, serves both control approaches.

Reviews the book "Behavioral Experiments in Accounting," edited by Thomas J. Burns.

Evaluation of wage incentives in some cost accounting texts emphasizes the significance of reductions in unit fixed costs. By placing the emphasis on unit fixed cost reduction rather than on the increase in total variable contribution margins, however, students are encouraged to focus on the wrong elements of the problem. An alternative incremental approach is illustrated in this paper along with a "breakeven" variation which can be used to lessen the data requirements of the full incremental model.

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

Reviews the book "Financial Performance of Conglomerates," by Harry H. Lynch.

Reviews the book "Understanding Accounting," by John A. Tracy.

This article presents news briefs related to accounting and various universities in the U.S. C. David Baron joined the faculty at the University of Arkansas in September 1971 as Associate Professor of Accounting. Victor H. Tidwell will join the faculty at the beginning of the Spring Semester, 1972 as Associate Professor of Accounting. Bernard B. Goodman addressed the Chartered Accountants' Student Society of London at Cambridge University to establish the "Hartford-London Bridge," an exchange program between University of Hartford accounting students and English accounting students. The Third Annual University of Hartford Tax Institute was conducted by the Department of Accounting on October 22-23, 1971. James Don Edwards will serve as Dean, School of Business Administration and participate in accounting instruction and research at the University of Minnesota. Frederick Jacobs and John Cumming have been appointed to the staff as Assistant Professors. Richard K. Ferguson has joined the faculty of Fairleigh Dickinson University as Instructor of Accounting. Arnold Kaufman who completed doctoral work at New York University was promoted to Professor of Accounting.

The article highlights the report of the Committee on Accounting Valuation Bases of the American Accounting Association. The charge of this committee is to define the parameters and usefulness of valuation bases in accounting in light of existing theoretical studies, to identify a model by which these parameters could be applied to real-world situations, and to test the application of this model in one or more case studies. This report has four major sections. First section explores the concept of valuation, examine its various dimensions, and then propose a formal model of the valuation process. The question of alternative asset valuation bases raises a second issue not usually faced by the researcher. Financial statements should include plant and equipment at the amount of cash the firm would realize if they sold them through normal channels less any costs of sale, taxes and an allowance for interest where deferred payment is contemplated. While these forecasts are not part of the published financial statements, the existence of auditing procedures gives credence to the feasibility of such statements in the normal course of external financial reporting.