Reviews the book "Handbook of Modern Accounting," by Sidney Davidson and Roman Weil.

ABSTRACT: Mutually satisfactory allocations are agreements among users of a common facility to share the facility's cost. Accountants may assist negotiation of these agreements by providing characterizations of allocation methods under consideration or by recommending allocation methods that possess properties desired by collaborators. This paper examines a class of mutually satisfactory allocations implied by a particular list of properties. Acceptance of the properties implies an allocation function that is an average of expansion path allocations. When the number of collaborators is large, computation of the allocation is difficult, but the computational burden is reduced greatly when the cost function takes one of several specific forms. Moreover, the resultant simplifications of the allocation function take the form of familiar allocation rules.

Reviews the books "Management Accounting: Text and Cases" 5th ed. and "Management Accounting Principles," 3rd ed., by Robert N. Anthony and James S. Reece.

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.

ABSTRACT: Recently the Auditing Standards Board withdrew its proposal to clarify the language of the standard short-form audit report. This paper examines the responses by preparers, auditors, and users of financial statements that precipitated the withdrawal. Although the extent of unfavorable general reaction does not provide a complete explanation for the withdrawal, the differing reactions of various groups to its specific proposals suggest that a less ambiguous report may require a broader consensus concerning the functions and responsibilities of auditors.

Reviews the book "Survey of Published Accounts 1979," edited by L.C.L. Skerratt.

Auditing, Sampling, Substantive test, Compliance

Reviews the book "Accounting Trends & Techniques," 13th ed.

Common dollar financial statements add a second time dimension to financial reporing that beginning students of accounting mag find difficult to grasp. The authors find that students' difficulty in understanding the roll-forward adjustment and the distinction between monetary and nonmonetary items is alleviated when common dollar statements are introduced with a two-dimensional display. The two-dimensional display accommodates the money time dimension as distinguished from statement time, the monetary/nonmonetary distinction, the computation of income and the reconciliation of equity accounts as between statements based on common dollar magnitudes.

Presents a letter to the editor about the use of discriminant analysis as an aid to employee selection.