Abstract Reviews the book "Behavioral Experiments in Accounting II," edited by Thomas J. Burns.

Abstract The article discusses the proper method of disclosing all executory contracts into which a firm has entered. Such contracts, also known as future contractual commitments, are agreements between two or more parties in which no party has yet performed any of the acts required of him by the agreement. In accounting texts such agreements are usually illustrated by purchase commitments or lease agreements, transactions where the single most salient feature is usually considered to be one firm's potential cash obligation. When a firm enters into an agreement to receive service potentials of varying types in return for cash, another must agree to provide the service potentials at some future date in return for the promise to pay. This emphasizes the potential liability of the firm. All executory contractual commitments that are material ought to be disclosed wherever and whenever possible. Contingent assets, like, a significant backlog of unfilled orders, are as important to the shareholders of the firm receiving the order, as the contingent liability is to the investors of the firm ordering them. Both rather than just one facet of the transaction should be disclosed.

Abstract Recent researches' have emphasized that accounting exists to communicate in summary form those economic events affecting the reporting unit. Accounting is not an end in itself, but simply a method of bridging the gap between an economic unit, the entity, and some party or parties, either internal or external, who require information about these events. Thus, the utility of an accounting system is not derived from its elegance, but rather from its ability to communicate the relevant data. The idea that accounting is designed to report economic data to those groups desiring it is important for two reasons. First, and more basic, the accounting system ought to be designed to meet the informational needs which led to its creation. Second, the term economic data is used to denote data which are useful in decision-making and for control. The purpose of this paper is therefore, twofold. First is to stress the need for utilizing such an approach in accounting reports. Second, to illustrate how such an approach can be implemented in a specific instance, the presentation of common shareholders' equity on the balance sheet.

Functional fixation, Reporting variance, Inventory valuation, Learning effects