Knowledge that Transforms

The article focuses on the historical development of ledger balancing procedure, adjustments and financial statements during the 15th, 16th and 17th centuries. Economist Enrico Viganó published a monograph on trial balance procedures as they appear in the manuscripts of the early Italian writers who devoted their efforts to double entry bookkeeping. This is a comprehensive treatment of balancing procedures, which covers the trial balance, the controversial summa summarum, the use of informal and formal balance accounts, and the introduction of the use of financial statements. It is generally held that double entry evolved and spread throughout Europe not because of the arithmetical controls of ledger accounts which this system immediately permitted but because it afforded merchants a means of determining changes in their invested capital as a result of operations. Of course, double entry is not essential for this, since the same results can be achieved with a system of single entry, which, in fact, was the first system to evolve historically. Double entry developed when it became necessary to tie the accounts together in a systematic fashion and, as a result, bookkeeping controls by means of balancing procedures evolved.

Reviews the book "Investment in Human Capital: The Role of Education and of Research," by Theodore W. Schultz.

Reviews the book "Cost Accounting," by W. Asquith Howe.

Reviews the book "Decision Theory," by D. J. White.

Reviews the book "Auditing Principles," 3rd ed., by Howard F. Stettler.

The article focuses on exposing first-semester accounting students to accounting periodicals. Since many introductory accounting courses include a substantial amount of bookkeeping-type work, students often develop a conception of accounting as a dry and unstimulating field. This viewpoint can often be radically altered by exposing first-semester accounting students to the activities of professional accountants. In order to expose the first-semester introductory accounting students to the activities of accountants and to give them a much broader perspective of accounting than can be derived from their textbooks, each of the students are required to select an article from one of several accounting periodicals and prepare a written report on the article. Students are encouraged to select articles that are both interesting and understandable to them. They are asked to avoid overly technical articles such as those dealing with complex tax matters. Most students are able to find suitable articles in recent issues of The Journal of Accountancy. Other recommended sources of accounting articles are The Accounting Review, Management Accounting and The Federal Accountant.

Reviews the book "Self-Review in Intermediate Accounting," Vol. 1, by Glenn A. Welsch.

Reviews the book "The Accounting Model," by J. E. Smyth.

The article focuses on business combinations. Economist Baruch Lev commented on risk reduction as a motive for conglomerate mergers and the use of a game theoretic approach-proposed by economist Jan Mossin in the determination of exchange ratios for business combinations. In essence, Lev argued that conglomerate mergers may have no economic justification, the argument stems from the possibility that investors may be able to attain the risk and rate-of-return objectives of a proposed merger via the process of making adjustments in their personal portfolios. As a corollary, it was suggested that economically unjustifiable mergers may impose unnecessary transactions costs on the stockholders of the merging firms. Although these arguments have appeal, it should be noted that they appear to ignore some evidence on the efficiency of the capital markets. The efficient markets hypothesis states that market prices fully reflect available information which is implied by the statement that prices adjust instantaneously and unbiasedly to new information.

The article estimates the economic effect of varying certain information practices in a specific firm under a specific set of circumstances. The major features of the simulated decision context are a large number of decision variables, over twenty that are centrally determined with a global, but imperfect, optimization model, and implemented by a number of semiautonomous individual decision makers. These individual decision makers, in turn, have access to certain local information and can marginally influence implementation of the centrally determined decision variables. While the production aspects of the linear program model focus on determining the optimum mix to produce a specified number of each main product, the marketing aspects focus on how many of each main product should be produced and sold. Implementation effects may be viewed in terms of resultant variations in the parameters in the central linear program model and in the levels of the decision variables that the individuals are instructed to implement. Such variation may be controllable, and may be desirable.