Confidence interval financial statements have been suggested as a means to convey the uncertainty surrounding the items on the financial statements. Albrecht [1976] provided a conceptual framework within which the uncertainty of income statement items can be computed and then illustrated the degree of uncertainty that existed in one firm's earnings computations. This article further develops Albrecht's conceptual framework by discussing types of accounting error, the methods of quantifying accounting error, the period(s) used to derive the distribution on accounting error and the level of aggregation at which accounting error is quantified.

The article presents reply by authors to comments by I. Solomon and P.J. Beck, in a paper titled "A Comparison of General Price Level and Historical Cost Financial Statements in the Prediction of Bankruptcy: A Comment," published in the July 1980 issue of the journal "The Accounting Review." According to authors, Solmon and Beck correctly indicated that other uses of general price level (GPL) information must be examined. Perhaps the focus of future research should be to determine whether GPL information is useful in assisting investors and creditors in predicting future cash flows in light of FASB's current focus. However, Solmon and Beck failed to illustrate that conclusion of authors of the present article related to GPL and HC "does not actually follow from the analysis and results." Authors also did not prove any serious deficiencies in the methodology used to reach those results. Authors of the article continue to contend that if the criterion of usefulness is the ability to predict bankruptcy, their study showed that GPL financial statements are equally useful as, but not more useful than, HC financial statements.

ABSTRACT: The objective of this study is to compare the prediction of bankruptcy based on ratios computed from GPL financial statements to the prediction based on ratios computed from traditional historical cost financial statements. A sample of an equal number of bankrupt and non-bankrupt firms was chosen, and the financial statements were adjusted for the effects of general price level changes. Financial ratios were computed from both the traditional and GPL financial statements. Discriminant analysis was used for the bankruptcy classifications. The authors found that both GPL and traditional ratios exhibited the ability to predict bankruptcy. In spite of the sizable differences in magnitude that existed between GPL and historical cost financial statements, little difference was found in the bankruptcy predictions. GPL data were shown to be consistently neither more nor less accurate than historical data for predictions of bankruptcy.

ABSTRACT: This article describes the results obtained when an admission test was developed and used at Northern Illinois University as an accept-reject device for our first intermediate accounting course. The results indicate that it is possible to develop an admission test, that the test need not be lengthy, and that acceptable levels of correlation exist between the admission test scores and success or failure in the first intermediate accounting course.