R. Bentzel, B. Hansen; On Recursiveness and Interdependency in Economic Models1, The Review of Economic Studies, Volume 22, Issue 3, 1 January 1954, Pages

Journal Article Marketing Structure and Economic Development: Comment Get access Allan G. B. Fisher Allan G. B. Fisher Washington, D. C. Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 68, Issue 1, February 1954, Pages 151–154, https://doi.org/10.2307/1881923 Published: 01 February 1954

Efforts to induce accountants to give recognition to the distorting effect of inflation in the financial statements and reports that they prepare have met with little or no successs. Proponents of the inclusion of such information in financial reports might advance their cause more effectively if they joined in the advocacy of steps that do not digress very far from established and conventional practice. It is suggested that such a first step might be the inclusion in financial reports of a com- paratively non-technical, brief explanation of the extent to which inflation has distorted conventionally-calculated net income. Such an explanation might include mention of any loss from the depreciation of net working capital, and any gain from the liquidation of noncurrent liabilities. The source and application of funds statement (if properly amended) will serve to provide many of the figures that need to be adjusted in order to estimate the magnitude of the inflationary-caused distortions of reported operating results. A revision of the statement to exclude inventories and current prepayments from the definition of funds (net working capital is recommended. The results of the computations of the type suggested cannot be regarded as mote than reasonable estimates. Their credibility is less likely to be challenged if they are reported (in round amounts) are no more than this. Accountants who profess to pay allegiance to the principle of full disclosure can do, at least this much.

The article focuses on business-type statements in the budget of the U.S. Business-type statements are printed in the budget for Government-owned corporations and other revolving funds established by law or regulation. Accounting and budgeting for business type operations have definite characteristics not generally found in many of the ordinary government-type fiscal procedures. The statement of sources and application of funds in the business-type presentations is the counterpart to the schedule of amounts available for obligation used in the budget for funds subject to appropriation controls. The purpose of the statement is to show the amounts made available to the fund and how these amounts have been used. Funds applied to operations reflect amounts used for acquiring fixed and other long-term assets, expenses incurred that involve working capital items, and the net increase in working capital other than the U.S. Treasury cash for the fiscal period. The "funds applied to" and "funds provided by" financing show the changes in amounts of money relating to transactions with the treasury.

Reviews the book "Effects of Taxation--Investments by Individuals," by Keith Butters, Lawrence Thompson and Lynn Bollinger.