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The Role of Liquidity in Exchange Valuation.

Robert R. Sterling; Richard E. Flaherty
The Accounting Review 1971 46(3), 441-456
The article focuses on the role of liquidity in exchange valuation. The method of assigning values to goods at the event of exchange under the historical cost system has been described. The historical cost system as a given and attempt to generalize the exchange valuation rules of that system has been taken. An exchange is a two-way flow of goods. An acquisition is accompanied by a sacrifice. Thus, an exchange has a double effect, an increment in one good and a decrement in another, which requires a double entry on the books of account. The operations necessary to make the entry may be analysed in general terms. The entry is meant to reflect the underlying flow of goods. An exchange is an increment in one good accompanied by a decrement in another good. Neither of these goods necessarily has a value attached, instead value is assigned to them. In most cases this assignation of a value is done intuitively, that is without an explicit consideration of the process. The simplest cases are cash exchanges in which the value of cash is set equal to the quantity of cash.

Readability: A Measure of the Performance of the Communication Function of Financial Reporting.

James E. Smith; Nova P. Smith
The Accounting Review 1971 46(3), 552-561
The article focuses on readability as a measure of the performance of the communication function of financial reporting. Financial reports are prepared for a specific purpose. The premise adopted in this article is that the function of financial reporting is to communicate selected financial information. If this communication function is not performed, then financial reporting is nonutilitarian. Communication has been long recognized as a function of financial reporting. Communication occurs in financial reporting only if the meanings intended by the information source are assigned to the financial statement messages by the destination. Proper meaning assignment necessitates that the information source encode and transmit the selected messages such that the destination is capable of assigning the intended meanings. Ideally, the information source should be able to objectively measure the degree to which the intended meanings will be assigned to the selected financial statement messages. No such objective measure exists that can be applied to the entire financial statements. However, an objective measure does exist that can be applied to the footnotes to the financial statements. This measure is termed readability.