The article focuses on the book "Effect of Circumstances on the Application of Accounting Principles," by R.K. Mautz. The degree of formalization in accounting is quite high, but perhaps it is becoming less so. Increasingly complex economic activity and organizational arrangements, as well as social and political pressures, are making it less possible to clothe all potential accounting situations with preprogrammed solutions. Though accounting remains predominantly governed by rules and procedures, and thus provides Simon-type "programmed decisions," relatively more and more accounting may call for what author James D. Thompson has labeled "judgmental strategies." Alienation, a word which has received considerable attention in the organizational behavior literature of late, has also been linked to formalization, especially where professionals are concerned. There are various stages at which performance may be influenced. It may be through selective recruitment, suitable training and socialization, or control of one's actions on the job. Recruitment into the profession is important and deserves attention.

This article presents a reply to a comment on the study of the audit staff assignment in accounting in the U.S. There are no actual implementations of linear programming in audit staff scheduling. There are lamentably few implementations of linear programming or other quantitative decision models. There is a report of an application of linear or goal programming to audit staff scheduling or other problem. As accounting professionals the responsibility to encourage applications of the proposed models is the priority.

This article presents a study on selected items of information and their disclosure in annual reports in accounting in the U.S. This study has presented the results of a mailed questionnaire survey of financial analysts which sought to determine the relative importance of 38 selected items of information. The extent of disclosure of the 38 items was then measured for a sample of annual reports from 88 small and medium size companies. The results indicated that many of the items were inadequately disclosed in the sample and that the correlation between the relative importance of the items and the extent of their disclosure was small. On the basis of these results, the writer has concluded that an opportunity exists for an expansion of the extent of disclosure in the annual reports of small and medium size companies.

Presents information on a study which applied probabilistic models to management planning and control in accounting. Mathematical expression of nonprobabilistic approach to management planning and control; Problem with the traditional nonprobabilistic approach and probabilistic approach.

Presents a reply to comments made by Barry E. Cushing and Edward B. Deakin on a study about the characteristics of companies that are making accounting changes. Concerns over the size hypothesis; Industry analysis of accounting changes.

The article reports that on a time-state preference simulation model, it has been shown that there is little synergistic effect of combining a net present value objective function with a payback constraint and there is a possibility to increase greatly the performance of a net present value model by assigning projects to two or three risk classes and using a different discount rate for evaluating projects in each risk class. From this, several tentative conclusions may be drawn. First, the increasing use of a payback period as a secondary criterion in capital budgeting is not completely irrational since it does improve the decisions of a straight NPV model in highly uncertain environments. However, the NPV-PBK model in general leaves much room for improvement. Second, the dominant use of the NPV model seems warranted, provided different discount rates are used for different risk classes of projects. From the performance levels when only two or three risk classes are used, it appears that the NPV-RC model provides decisions nearly as good as even the most sophisticated models.

This article describes an educational innovation, computer-generated accounting assignments being developed and reduced to practice at the University of Missouri-Columbia. This instructional aid provides each student in a class with an individual, unique homework assignment on a given topic. Furthermore, it provides the student with the solution to his personal assignment. The traditional teaching aid of accounting, problems-oriented homework assignments, is substantially enhanced. The temptation to copy, inherent in the use of the identical problem for many students for several semesters, is eliminated.

This article presents comments of the author on the article "Present Value Models and the Multi-Asset Problem," by Richard P. Brief and Joel Owen, published in the October 1973 issue of the journal "The Accounting Review." The main conclusion of the article was that the internal rate of return (IRR) is essentially a firm model, not a single-asset model. A corollary of this conclusion is that the appropriate discount rate to use in present-value depreciation models is not the IRR on each individual asset, but the overall IRR on a firm's total portfolio of assets, even where the returns on a particular asset are independent of the firm's other assets. The basic premise implicit in Brief and Owen's analysis is that the accounting model should generate expected periodic income figures that would enable firms to report periodic rates of return on book value equal to the expected IRR on the firm's total portfolio of assets at any point in time. The internal rate of return is commonly defined as the discount rate that causes the present value of cash receipts from an investment over its life to equal the present value of cash outlays related to the investment. Present value methods, in general, are designed as direct valuation models, while the accounting model explicitly recognizes only values that have been verified by exchange transactions.

Presents information on a study which demonstrated a method for computing economic depreciation with income tax allocation. How depreciation is derived; Elements of accounting income.

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.