Knowledge that Transforms

This article provides information on a study that presented an elementary accounting profile in the U.S. during the academic year 1969-1970. During the academic year 1969-1970, a four-page questionnaire relating to elementary accounting was sent to the heads of accounting departments at all schools accredited by the American Association of Collegiate Schools of Business. Administrative matters relate to such things as the number of credit hours to be granted for the course, the level of student to which the course will be offered, and whether or not a special course in elementary accounting will be offered. The schools replying to the questionnaire provided the following information relating to administrative matters. The schools in this study favor the sophomore level for the student's first exposure to accounting instruction. Sixty-seven of the schools teach elementary accounting at the sophomore level, 18 schools teach elementary accounting at the freshman level, while the remaining three schools either did not answer the question or teach elementary accounting above the sophomore level.

Reviews the book "Measurement and Environmental Deterioration," by Boyd Collier.

The article discusses business consulting for credit. A Small Business Assistance Center is in operation at the University of Tennessee through which students provide free business counseling services to small businesses and nonprofit organizations. The services are rendered by upper division undergraduate and graduate students under the guidance of the faculty of the College of Business Administration. The center limits its services to nonprofit organizations, small businessmen and potential small businessmen needing limited professional help. As a rule, those helped cannot afford to hire professional people. The few businesses which can afford professional help that contact us are directed to the appropriate professional group. Thirty business and nonprofit organizations have been helped by the group thus far. Many of those seeking help were minority businessmen. Businesses served include a pharmacy, a restaurant, a private school, a construction company, a landscaping company, a small manufacturer, and an arts and crafts shop operated by handicapped workers. Services performed include accounting system design and implementation, market surveys, cost-volume-profit analyses, statement preparation from incomplete records, and help in applying for Small Business Administration loans. The recipients of these services have been well pleased.

Reviews the book "Using Accounting Information: An Introduction," 2nd ed., by Paul E. Fertig, Donald F. Istvan and Homer J. Mottice.

The article presents a reply to the article "Measurement in Current Accounting Practices: A Critique," by Raymond J. Chambers, published in the July 1, 1972 issue of the journal "The Accounting Review." First of all, the author states that the book is definitely concerned with accounting as it is. Although policy implications are not completely lacking, the primary purpose of the book is to promote a better understanding of the foundations of accounting as it is, or more specifically the foundations of accounting measurement as observed in current accounting practice. Although an objection is raised, no alternative definitions are given in the critique and it is hard to evaluate the definition without comparing it with an alternative. It seems most natural to consider objectivity in measurement as the degree of independence of the measure from variations in the personal characteristics of the measurers. The author believes that the above responses cover all of the major issues raised in the critique. Because of space limitations, the author had to omit some responses to the remaining questions and comments in the critique, although such responses have been communicated.

The article reports that the efficient market hypothesis (EMH) is a descriptive theory of the institutional nature of the securities market (NYSE). The reaction of the market to accounting data which is systematic and unbiased does not only reflect the properties of the market but indicates also the relevance of accounting data. It does not imply, however, that such accounting data is generated by an optimal process or procedure. Nor does it indicate that the market will react exactly in the same way and magnitude if the accounting process were different, even though the reaction will still be efficient indeed. One ought not to confuse the two issues: the quality of the market and the quality of the accounting numbers. The latter affects the former only if it is known. The research undertaken by many accountants on the subject pinpoints a strong relationship between accounting information and the EMH. The market absorbs and assimilates accounting data and reacts to it systematically and without bias. For example, a change in the supply and demand functions of the market after earnings announcements can be interpreted as a reaction of the market to such an accounting signal.

The article highlights the report of the Committee on Courses in Managerial Accounting of the American Accounting Association. The problem is to analyze our present-day environment to determine the information needs of users and then relate managerial accounting to the information-need environment. The role of accounting within an organization has changed and will continue to change. For instance, accounting was primarily defined as "the art of recording, classifying, summarizing and reporting financial data." Presently it is defined in terms of the measurement and communication of economic data. Originally, most organizations began formalizing an information system to meet an external reporting requirement. In order for students to fully comprehend management accounting, they must acquire a requisite foundation in underlying concepts. These reporting requirements included the Internal Revenue Service, Securities and Exchange Commission, other Federal, State or Local government units, creditors and absentee owners requirements for information. While the product of a management accounting system should always be evaluated in terms of some informational content, the concept means different things to different people. Thus, with certain reservations these basic concepts are assumed to represent those foundation components essential to the student's understanding of managerial accounting.

Reviews the book "Financial Reporting for Security Investment and Credit Decisions," by Morton Backer.

The article highlights the report of the Committee on Information Systems of the American Accounting Association. The charge to the committee on Information Systems is to assess the developments that are likely to occur over the next ten years that will have a significant impact on the design and operation of information systems and to develop a report on it. The accounting function is one of the most important information systems in an organization. A major socio-political development likely to have a significant impact on the design and operation of information systems over the next decade is an increasing emphasis on social responsibilities, not only by federal, state, and local government, but by industry, not-for-profit organizations, and private citizens as well. Finally, since there appears to be a trend toward more community involvement by the private sector, information for coordinating the private and public sector efforts will be required. There is an extensive literature in economics on macro-economic concentration, industry concentration, and individual firm size as they relate to efficiency and competition. Inputs to the educational system include students, faculty, and financial resources. Developments in information systems are rapidly affecting pedagogy. Technical developments in communication and information systems have and will continue to provide additional educational capabilities.

Reviews the book "Valuing a Company: Practices and Procedures," by George D. McCarthy and Robert E. Healy.