Knowledge that Transforms

The article presents a reply to a comment on the use of historical records in accounting education. In no way, the author expects students in elementary courses to dissect the technological intricacies of medieval accounts. That level of approach is, of course, reserved for the graduate courses in accounting history where one customarily deals with these technical matters. It has been the author's experience that bright undergraduates very quickly gain an appreciation for the antiquity of some of the basic accounting ideas, and also derive intellectual excitement from the notion that accounting reports often give clues to some of the characteristics of the society or social unit which produced them. This historical approach, even at the beginning of accounting studies, often provides a lingering perspective which helps students "put it all together." It would be equally interesting for students to have available accounting reports drawn from the American Colonial and post-revolutionary periods.

The article comments on professor Joe J . Cramer's paper on the nature of bad debt expense. The classical treatment of bad debts as an operating expense is inconsistent with proper classification criteria for operating expired costs. This is so because no service is received in exchange for this cost expiration. It would seem reasonable for any treatment of the bad debts issue to include a careful statement of which aspect of the problem is being addressed. The Accounts Receivable adjustment is truly a transfer payment which should be treated as a correction of an error in revenue recognition. For those who believe that the matching convention has relevance in accounting theory, the selection between these methods has direct impact on the measure of performance for a time period. The implication of this assertion is that the selection between these methods has no impact on the information content of financial statement. The direct charge method is an example of no attempt to match. No assertion is made here regarding the appropriateness of the matching concept; however, if one accepts matching as an important accounting theory consideration (as Cramer apparently does), then the selection issue is of critical importance.

The article reviews the book "Behavior Patterns in Internal Audit Relationships," by Frederic E. Mints.

The article presents the author's views on federal taxation studies incorporated in the accounting program in the U.S. It is possible to develop a conceptual course in taxation which is in line with the standards imposed by the certified public accountant test, the American Institute of Certified Public Accountants, and the American Association of Collegiate Schools of Business. Such subject should form part of the first course in taxation. The author said that the second course should be a study of individual and business income taxation, while the third course should be a planning course.

Reviews the book "Accounting: The Basis for Business Decisions," 3rd ed., by Walter B. Meigs, A. N. Mosich and Charles E. Johnson.

Reviews the book "Mathematics of Finance," Fourth Edition, by Robert Cissell and Helen Cissel.

The article reviews the book "Using Accounting Information: A Simulation," by Gary M. Cadenhead and Wayne A. Label.

Reviews the book "Accounting and Administration," by William A. Paton and William A. Paton Jr.

Reviews the book "An Introduction to Taxation," 2nd ed., by Ray M. Sommerfeld, Hershel M. Anderson and Horace R. Brock.

The article comments on professor Ronald V. Hartley's article on linear programming models of a joint cost problem considered in managerial accounting textbooks. Unfortunately, linear programming models do not readily admit demand functions into their structure. The result is that the optimal production schedule arising from such a model is conditional on a particular set of prices and that the demand function must be accommodated in a separate analysis which Hartley calls a "price-demand analysis." The question is how the effect on profit of such overproduction can be represented in the decision model. Hartley notes another case that cannot be completely accommodated by a linear model. It is the case in which all or part of the excess production will be taken by the market if the price on all units of that product is lowered. This paper recommends reformulation of the joint cost problem as a nonlinear programming problem in which a demand function is given explicit representation. The nonlinear model simultaneously determines the optimal price and output policies, and its application is less likely to lead to confusion and error.