Knowledge that Transforms

Accounting is a useful art which probably needs to be used more than it is, but it is possible to do too much accounting and thus waste resources. An example of what appears to be accounting for accounting's sake is the prescription for the world-wide accounting and reporting in the Department of Defense of Departmental Census of Housing constructed with the Commodity Credit Corporation (CCC) foreign currencies. It should be eliminated along with its attendant intricate accounting and reimbursement procedures by the Department of Defense (DOD). A simple reimbursement procedure at Departmental level would provide an inexpensive way of doing business. In order that the U.S. military departments retain trained and skilled personnel, important consideration must be given to morale. A significant facet of maintaining this morale factor among military personnel is the provision of adequate and suitable family housing. This is especially true in overseas areas where dependents are authorized to accompany the military member.

Accountants appear to have backed off a bit from the "forgetting of income" movement of the "dirty surplus era" and to be content merely with deferring the recognition of income. Postponement of the recognizing of income or profit is attainable by means of several techniques, which have been developed over the years and which have gained varying degrees of prominence in the literature of accounting. In this paper, the author proposes to examine some of these techniques and to explain a relationship among them. This examination requires the clarification of a few terms. Some accountants have described aptly the term-deferred income as a misnomer. Profit deferral or income deferral, however, are understood to mean the process of postponing or deferring the recognition in the accounts of some arithmetic difference between revenues and expenses. Thus, deferral of income does not mean a delay in the obtaining or acquiring of income such as is the case when an individual is unemployed or a business makes no sales. To some accountants, the concept of optimeasurement which results in income deferral and presumably tax avoidance currently conflicts with a possible desire of management to show in some periods higher profits than optimeasurement would provide.

Multiple correlation analysis will not seriously compete with established costing practices, but under some circumstances will prove useful for developing cost estimates not determinable by other means. This article presents a simple example in order to give accountants a glimpse of the technique and to enable them to recognize potential applications. Consultation with a statistician or a good textbook is urged. Statistical analysts have long been acquainted with multiple correlation, but few accountants recognize it as a device for estimating unit costs. If total dollar costs for a number of time periods are known, along with quantity information about the various items which are related to the total cost, then multiple correlation analysis can furnish individual unit costs. The simplified illustration in this article is followed by a brief discussion of the circumstances under which the technique may be useful, as well as by a description of the analytical process itself. Multiple correlation analysis can furnish useful unit cost estimates only if certain prerequisites are available.

This article reports some of the findings of intensive research on management's use of accounting in decision-making. The core of the research is 44 case studies of decision making in small firms. In recent years, the issue of accounting in decision making has received considerable attention, but there is a dearth of large scale empirical evidence to suggest how managers actually use accounting data. Accordingly, the objectives of this research were, to describe how managers use accounting data in decision-making, to evaluate the consistency of accounting data with the logic of economic analysis, and to prescribe the role of accounting data in decision making. Because of space limitations, the descriptive element will be emphasized here. The case studies indicate that management uses accounting data as a means of recognizing the need for a decision and for comparing alternative courses of action. The remainder of this paper discusses those factors which influence the extent of management's use of accounting data in each of the two phases and concludes with suggestions for a general framework of thought concerning managerial accounting.

Reviews the book "Studies in Accounting Theory," edited by W.T. Baxter and Sidney Davidson.

It has come to be considered high praise of any field to call it a science, and conversely, few epithets are stronger than unscientific. Part of this prestige of science is of course due to the great achievements of the natural sciences, and a further explanation is provided by the typical looseness of popular usage of language: unscientific has become a synonym for sloppy. But without attempting to deprecate science in general, it is worth mentioning that the grounds for the prestige of science are nebulous. Surely usefulness is not the criterion, for cooking is more useful than astronomy; nor is aesthetics, for most men prefer music to chemistry. The difficulty of the subject matter of sciences is undoubtedly a factor, but here two things may be said. On the one hand, no subject is difficult to those with aptitudes and training in that direction--a modern Gauss could master higher mathematical analysis much more easily than an ordinary city dweller could learn to farm. And on the other hand, difficulty is a most ambiguous concept--there are many more men who can understand modern physics than can run 100 yards in 9.8 seconds. In sum, to say that economics is a science is a description, not an encomium.

Security analysts, not always noted for their grasp of accounting principles and procedures, seem to be suffering from an acute attack of "cash-flowitis," manifested especially by their fondness for per-share calculations of "cash-flow," in company with or superseding figures for net earnings per share. Writers on corporate finance, including authors of textbooks, are also becoming bewitched by the lure of such determinations, although seldom if ever does such a writer give clear evidence of an understanding of the measurements he is discussing and touting. In commenting unfavorably on the current "cash-flow" hullabaloo the writer has had no intention of belittling sound cash and fund analyses for various purposes, including preparation of forecasts and budgets, formulating financing programs, developing dividend policy, and working out plans for plant improvement or expansion. Cash or equivalent is a key business asset in that it is the only resource that can be readily exchanged for any desired commodity or service, or used to liquidate obligations and effect distributions to investors, and hence it is highly appropriate that this resource be a focus of concern and study in financial administration.

Reviews the book "Computer Language," by Harry Colman, Clarence Smallwood and George W. Brown.

Since 1948, the American Institute of Certified Public Accountants has published an annual edition of Accounting Trends and Techniques. This has been a most useful indicator of current accounting practices. Although the practicing accountant can thus be well aware of what others are doing, the accounting educator as a rule is aware of the current practices in accounting education at only a small handful of other educational institutions. Because of the rather limited information currently available about accounting educational practices in the nation's colleges and universities, it was felt that additional information on these subjects would be of value and interest not only to accounting educators because of their direct concern with these subjects but also to employers and training directors because of their interest in the formal accounting education which their new employees have received. There was no single elementary textbook which has had many more adoptions than others. Even the three most widely adopted texts are in use in slightly less than half of the schools surveyed.

Reviews the book "Using Accounting In Business," by Robert H. Van Voorhis, Clarence L. Dunn and Fritz A. McCameron.