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In view of the unsettled condition of European industry and finance, of the depreciated and fluctuating exchanges, and of the enormously heavy tax burdens, existing or prospective, pressure for prompt payment of either principal or interest at any early date would be most unwise. But eventual payment under a generously elastic funding arrangement is both possible and probable. The burden of settling for past wars will be less irksome than that of earlier days devoted to preparation for future wars, and the disturbance to the international money markets and exchange long since stabilized will be inconsiderable. Though advocating the cancellation of this foreign indebtedness, It should, however be a endeavor to make it at the same time an instrument of reform. It might fairly be required, in return for a gradual and progressive cancellation of these debts, that the debtor nations balance their budgets, that they stop the further emission of paper money and that they apply their resources to economic purposes rather than to armament.

The article presents the author's analysis of the report "An Empirical Study of the Role of Accounting Data in Performance Evaluation," by Anthony G. Hopwood. The author questions Hopwood's claim that almost half of the persons in charge of cost centers were rated as representing nonaccounting styles. Furthermore, the author questions the validity of Hopwood using the term budget in his report. The author believes that Hopwood's paper successfully discusses operating results and budgets, and will be valuable in enabling future research on the topic.

The article presents comments of the author on the paper "An Integrated Evaluation System for Budget Forecasting and Operating Performance With a Classified Budgeting Bibliography," by Y. Ijiri, J.C. Kinard, and F.B. Putney that was published in Spring 1968 issue of the periodical "Journal of Accounting Research." In their paper, the authors Ijiri, Kinard, and Putney proposed a performance measure which takes both, forecasting accuracy and actual level of operations into account. The author states that the purpose of this note is to elaborate on the possible effects of such a performance on the behavior of a forecaster.

The article presents a section of abstracts related to advertising. They include "Newspapers: lagging downtown, new life in suburbs," "Manufacturers to spend 3.1% of sales on advertising in 1955," and "National Industrial Advertisers Association budget study shows how industries spend ad money."

This article presents a commentary on the issue of optimum lifetime distribution of consumption expenditures. This paper has sought to show that there are serious errors in Lester C. Thurow's paper which nullify his empirical results. His assertion that zero-savers are likely to be behaving optimally has been shown to be false. His "scaling up" technique has been shown to depend on a critical and probably false assumption. Finally the authors have developed a simple model which can be used to predict optimal consumption and in which the patterns of the zero-saving income level and of optimal consumption are necessarily different. Preliminary results suggest that the divergence between actual and optimal consumption, at least in the aggregate, is not particularly large.

This paper investigates the potential reduction in decision-making effort in capital budgeting problems obtainable through the use of measures of risk in addition to variance. Specific measures of risk treated are Baumol's lower confidence limit and the maximum probability of loss. The primary purpose of the paper is to present a methodology which imposes certain "constraining relations" on acceptable investment programs rather than one which appeals to a specific utility function as the basis for ordering choices. In this connection a discussion of several different utility functions is presented, along with an analysis of their usefulness when the probability distributions of net present values for various investment portfolios cannot be taken as known. In addition, some of the logical problems involved in constructing a utility function are examined. [ABSTRACT FROM AUTHOR]

The article discusses economic policies of agencies of the Federal government of the United States. The use by the federal government of semi-autonomous corporations and agencies to accomplish certain quasi-commercial tasks has always been controversial. Many of the quasi-commercial and revenue-producing operations of government should be put in the hands of semi-independent, self-financing agencies and kept completely out of the unified Federal budget. This would reduce the size of the budget and, since the expenditures thus made extra-budgetary would very probably exceed the revenues similarly affected, it would also make for a budget surplus. Administratively, there seem to be some major drawbacks to the extra-budgetary idea in general and to the security issuing process in particular. Unfortunate effects on the government securities market may occur when issues are allowed to reach the market from several sources. When the extra-budgetary paper is sold to about the same group of investors as the regular Treasury issues, a certain element of competition could arise. Real financial independence for an agency of the Federal government seems unlikely.

This paper reports an empirical test of the usefulness of a prediction method for multivariate budgets suggested by Theil. The method, based on information theory concepts, is described in the first three sections, and results of the test are presented in the remaining sections. These results show that the suggested prediction method outperforms both the actual forecasts made by the firms who provided the data and two naive forecasts. [ABSTRACT FROM AUTHOR]

The article looks at interim reports and discusses the paper "Towards a Theory of Interim Reports," by David Green. Particular focus is paid to the interim profits reporting of business enterprises affected by seasonal markets. External interim reports, according to Green's paper, are used to predict the outcome ultimately appearing on the corporation's annual report. Green also uses seasonalized direct and absorption costing in his discussion paper. Seasonalized absorption costing allows the articulation of the quarterly report with the annual report relating to the changes of inventory levels each year.

State universities are budgeted by their respective states based upon the number of students in attendance at each university. The university must often make a forecast of enrollment for budgetary purposes two years in advance because of various administrative and legislative procedures. When the university underpredicts enrollment, upon which state appropriations will be based, there will be a subsequent shortage of funds. On the other hand, an overprediction of enrollment entails the return of funds to the state unless the overprediction is within some limit prescribed by the state. It is the purpose of this paper to suggest methods to determine optimal budget requests in the situation described both under risk and under uncertainty. [ABSTRACT FROM AUTHOR]

The article comments on budgeting principles and budget-auditing standards. Budget audits are similar to audits on audits in the sense that the central task of both types of audits is to check whether reasonable inferences were made in preparing budgets or in preparing audit reports, and not to make inferences by auditors themselves. The budgeting principles and procedures can be divided into two parts, one concerning predictions of events and the other the recording of predicted events. The latter deals with the ordinary accounting procedures after certain events are predicted according to the former. Therefore, if the budgets are to be reported in the form of projected financial statements, accountants may simply quote the generally accepted accounting principles and procedures and state that the predicted events must be recorded according to them. Thus, the cost principle, the realization principle, the matching principle of revenue and costs, etc., will all be observed. In addition to budgeting principles and procedures, a set of budget-auditing standards and procedures must be prepared in order to define methods of examining budget working papers and related evidence which support inferences as well as the extent of examination. They must also provide reporting standards for budget audits. The main purpose of budget audits is to make sure that budgeting processes are carried out as specified by budgeting principles and procedures.

The purpose of this paper is to relate the accumulation and presentation of costs and revenues, both historical and projected, to three basic managerial functions: planning, motivation of employees, and control. Two major problems arise in this connection. First, accounting information must be presented according to the management function which it is to assist. Thus the accountant may find himself confronted with the necessity of compiling cost and revenue data in several different classifications. Secondly, the budgeted figures must be set at the level appropriate to each function: expected costs and revenues for planning, desired goals for motivation, and ideals for control. This problem indicates the use of separate budgets for separate purposes. Both of these problems are discussed in this paper in relation to planning, motivation, and control. Each of the three functions of management discussed requires cost and revenue data compiled and presented according to the purpose for which it is to be used. Correspondingly, each function requires budgets set at different levels of costs and revenues. The planning function is served by a coordinated master budget, which is composed of a number of subsidiary budgets, all set at the level of expected results. Incentives to employee performance indicate the use of fragmentary budgets set at the level of short-range goals. Flexible departmental budgets which compare ideal and incurred costs serve the purpose of control. [ABSTRACT FROM AUTHOR]

This paper considers a one-period multi-item inventory model where the objective is to minimize a function of item backorders subject to a budget constraint. Two functions are considered: the sum of expected item backorders and an expected joint backorder criterion. A main result is a proof that the joint backorder criterion is convex for arbitrary, twice-differentiable demand distributions. The rest of the paper is devoted to comparing the solutions one obtains with the two criterion functions. [ABSTRACT FROM AUTHOR]

This paper develops an analytic model that evaluates the expected number of aircraft not operationally ready at a random point in time because of supply (NORS). The model was developed for application to the F-11I aircraft for a multilevel problem, where demand on a first-level line replaceable unit (LRU) eventually causes second-level demands for one or more modules that are components of the LRU. The model is for a single base. Since it is evaluative in nature, the inputs include item stock levels as well as item demand rates, average repair times, and resupply times. An optimization model to determine stock levels that minimize the num. ber of NORS aircraft subject to a budget constraint would be preferable to the evaluation model. The paper shows, however, that an optimization model is not mathematically tractable because the criterion function is not separable into independent item calculations. But an example using F-Ill data indicates that if the METRIC model [see Opns. Res. 16,122-141 (1968)] is used to optimize stock levels, the resulting number of aircraft NORS is within 1 percent of the minimum number of aircraft achievable with the same budget. Finally, the well-known formula of Erlang for the M/G/s service system with no queue allowed is generalized to the case where demand rates and repair rates may be a function of the number of units already in repair. This enables us to examine the sensitivity of the optimal allocation of budget across a group of items when expediting may take place. Though expediting improves system performance, the conclusion is that the optimal allocation is virtually the same as the METRIC allocation. [ABSTRACT FROM AUTHOR]

This paper considers a two-sided war game in which one side (the defender) must first deploy its defenses, consisting of both a passive defense (shelters), and an active defense (anti-missile missiles); the other side (the attacker) then decides how to aim its missiles. The defender is constrained by budget limitations, while the attacker is constrained by the number of missiles available. The payoff is in term of fatalities. The paper uses a convex duality theorem to change the min-max problem to a pure minimization problem, and obtains a solution that obeys the no-soft-spot rule. An example shows the effects of attack and budget sizes, as well as of the costs of ABM defense. [ABSTRACT FROM AUTHOR]

The article presents audit report of the American Sociological Society for the year ended November 30, 1949. The accounting system of the Society is limited to a cash receipts and disbursements basis, only cash journals being used to record financial transactions. Verifications in connection with the Society's assets other than cash and security investments, liabilities and capital have been omitted. The only cash receipts confirmed by reference to other sources were bond interest, dividends on stocks and security redemption proceeds. No tests were made to ascertain that all membership dues, American Sociological Review subscriptions and sales, Review advertising and other types of receipts were entered in the cash receipts journal, although all receipts recorded therein were properly deposited in the banks. No steps were taken to ascertain that cash disbursements for expenses were within approved budget appropriations or that cash disbursement for other purposes were authorized. In addition, the receipts were not traced out from members for subscriptions to other journals to the disbursements made to the affiliated Societies therefore.

The article presents a response by the author on the rejoinder by scholar Albert Gailord Hart on his article "National Budgets and National Policy." To facilitate references I shall adopt both his order of topics and his headings. Of course, an hypothesis cannot be proved by statistics, but can only be tested for consistency with the data. This is a basic proposition in elementary statistics and elementary logic and I know of no occasion in which I have denied it. Comments on my use of undeflated figures for the consumption function are a bit off the main track. Hart's original paper did not even contain a reference to this point, because it treated the model builders as representing a common school of thought and attempted to deal only with those shortcomings which they were thought to have in common. Since the other model-builders had used deflated figures and had obtained results essentially similar to mine, this defect, if it be one, obviously could not be attributed to any school. As I have pointed out twice already, conclusions derived from models do not in any way depend upon the use of undeflated data. Had I been interested in the consumption function per se, I might have used the deflated figures.

This paper assesses the role program evaluation can play in assisting decisions on public programs. The author looks at evaluation from the standpoint of decisionmakers interested m finding out the "right" answers about their programs. The discussion focuses on the assistance that various types of evaluation can give to program managers and to policymakers concerned with legislative changes and budget levels. The paper includes recent examples of relevant evaluation work. The concluding section analyzes some of the problems decisionmakers face in trying to get reliable, useful evaluation. [ABSTRACT FROM AUTHOR]

It is the main argument of this paper that an efficient allocation of the development budget is a very different sort of a problem from the efficient conduct of a current operation. We attempt to show that the problem is essentially not one of choosing among specific end-product alternatives, but rather a problem of choosing a course of action initially consistent with a wide range of such alternatives, and of narrowing the choice as development proceeds. The implications, for the analyst, of viewing the development problem as this kind of problem are sketched in the concluding section of the paper. [ABSTRACT FROM AUTHOR]

The article discusses the abstracts of several papers on economics published in the October 1965 issue of the journal "Econometrica." The first article "Money and Economic Growth," by James Tobin, considers monetary debt of the government as one alternative store of value and shows how enough saving might be channeled into this form to bring the warranted rate of growth of capital down to the natural rate. The second article is "A Survey of the Theory of International Trade: The Neo-Classical Theory," by John S. Chipman. Two conditions for the correct use of the concept of community indifference are analyzed: that individuals have identical homothetic utility functions; that individuals have homothetic utility functions and resources proportionate to the country's aggregate resources. The third article is "An Empirical Analysis of Household Durable Goods Expenditure," by De-Min Wu. The fourth article is "Using Full Duality to Show that Simultaneously Additive Direct and Indirect Utilities Implies Unitary Price Elasticity of Demand," by Paul A. Samuelson. It opines that the indirect utility function gives the maximized value of consumer's ordinal utility in function of the prices and income that are given to define budget constraint.

The author [1], [2] has given an algorithm for finding that stratified allocation which minimizes the posterior variance of the overall population mean subject to a budget constraint under a model in which a normal prior distribution and independent normal sampling distributions were assumed. The budget constraint assumed a variable per unit cost of observation. In the present paper these results are extended to cover the case where there are fixed costs, as well as variable costs, associated with sampling in the ith stratum. The resulting algorithm is noted to be applicable in finding the optimal allocation of sampling effort (with fixed and variable sampling costs) under a variety of distributional assumptions. An interpretation is also given to two and higher stage design questions when there is differential prior information regarding the first stage units. [ABSTRACT FROM AUTHOR]

The article presents comments of Gerhard Colm on the paper regarding postwar federal budget written by W.L. Crum. According to Colm, professor Crum's estimate of the federal budget total for the annual average of the postwar decade is 22 to 36 billion dollars. This estimate will come as a shock to those who have relied on the much lower estimates of other students of postwar finance. Even more important in accounting lot the comparatively high level of expenditures foreseen by Crum is his inclusion of what he calls "discretionary" expenditures. These include foreign capital investments; public works; subsidies and aids to industry, transportation, and agriculture; payments under additional veterans' legislation; additional social security outlays; relief; etc. Crum's budget predictions cover a ten-year period with an average national income and price level assumed for the whole period. There is no relationship between his budget forecasts on the one hand and general economic conditions on the other hand. By this method he avoids hypothetical or alternative estimates.

In this article the author reviews the research paper "Setting National Priorities: The 1974 Budget," by Edward R. Fried, Alice M. Rivlin, Charles L. Schultze, and Nancy H. Teeters. This is the fourth installment of the annual series in which the Brookings Institution uses the government's proposed budget as a means of presenting some alternative budgetary configurations. The budget is divided into two main sections: civilian expenditure and military expenditure. Examined is civilian income redistribution, conditional grants in aid, grants for environmental programs, and general revenue sharing. The topics in military spending are also discussed.

In this article, the author remarks that he has developed two basic biases which are germane to the discussion of reinforcement contingencies in the budgeting process, which are that he thinks that it is both efficient and more fun to address issues which concern many people a great deal, and that second, he thinks that the experimental method offers some unique advantages in studying problems when experimental findings can be brought to bear on issues which were once the sole province of management philosophers and case writers. The primary experimental variables are reinforcement contingencies and participative decision making, subjects which are stimulating to both curious academicians and enlightened managers.

The author comments on the paper "Money in a Static Theory of Optimal Payment Arrangements" by Professor J. Niehans. The author explains that Niehans' article analyzes some properties of payment arrangements that are optimal in that they minimize transaction costs subject to two sets of constraints, which are budget constraints for the individual transactors and bilateral balance requirements for any two traders in the system. The authors argue that such restrictions do not necessarily assure feasibility of his optimal payment arrangements since the endowments of individual traders may be insufficient to support the bilaterally balanced exchanges implied by the payment arrangements.

The article presents a method for capital budgeting under conditions of uncertainty. The author's approach assesses the budgeting process with regard to the firm's security market value. Stockholder wealth is the criterion for judging investments, and the authors show that only a capital project whose expected present value exceeds shareholders' "required" present value is permissible. A notable implication of this approach is the significance of the proposed investment's risk on the firm's market risk.

The article discusses a theory of advertising elasticity developed by Arne Rasmussen. According to the author, a firm will reap greater profits when their advertising budget is computed by a concise estimate of the relationship between advertising and sales. The author notes that businesses can be run more efficiently when management has more precise facts about advertising at their disposal with which to base decisions on. Also noted is the author's belief that the Percentage-of-Sales Method is a faulty theory.

This paper presents a method of assigning tolerances to components so that (a) assemblies composed of the components meet specified functional requirements and (b) the cost of manufacturing all the components to their respective tolerance is minimised. Methods of obtaining tolerance equations from functional equations are briefly reviewed; the "method of extremes" is explained in detail. A relationship between cost and tolerance is derived, based upon published data.
A method of assigning least-cost tolerances to a single tolerance equation is then developed. [ABSTRACT FROM AUTHOR]

This paper offers a heuristic algorithm for the allocation of resources both in physical space and in time. The algorithm, to be implemented by a computer, will seek out good, if not optimum, combinations of items, namely, schedules and arrangements with respect to more than one payoff function. The algorithm has application in such diverse fields as the time scheduling budget allocations, courses of study in training programs, transportation, interdependent projects, and allocation in two or three dimensional space of production, service and/or warehousing facilities. [ABSTRACT FROM AUTHOR]

The article presents Anthony G. Hopgood's response to critiques made on his report "An Empirical Study of the Role of Accounting Data in Performance Evaluation". The author explains that his report showed that the network of managerial behaviors can be evaluated using his methods of analysis and measurement. He defends his use of the term budget, and addresses the criticisms made about his use of the terms profit-conscious manager, his methods of managerial evaluation for leaders of cost centers, and his methods of measuring and validating the evaluation of behaviors.

The article presents the author's comments on the report "The Relationship Between Managers' Budget-oriented Behavior and Selected Attitude, Position, Size, and Performance Measures," by Robert J. Swieringa and Robert H. Moncur, the authors' study concerning the interaction between the budget process and employee performance and attitudes. The author discusses the study's weaknesses such as not accurately defining the methodologies used, but complements the way the Swieringa and Moncur discussed policies on budgets and budgeting to create a study helpful in observing managerial accounting and behavior.

This article evaluates financial reports in terms of accuracy in predicting tbe final annual outcome. Efficient methods of data processing enable the firm to prepare one or two pro-forma financial reports during the year. One of the most important objectives in preparing these reports is the forecasting value which they contain. In order to measure the predictive content of various financial reports concepts taken from information theory were used. Empirical comparisons are made of data drawn from a sample of kibbutz settlements in Israel. Information theory for the evaluation of two accounting reports applied in this paper are the budget and an interim financial report. The forecasting accuracy of the report measures the performance of these teams.

Motivating employees to work for the goals of the firm has long been one of management's most important and vexing problems. The search for methods that motivate effectively, that induce the employee to work harder for the firm's goals, led to experimentation with a wide diversity of devices. In recent years, several writers emphasized that the firm's accounting system has a direct influence on the motivation of managers. This paper (a) surveys the available findings of research done in the behavioral sciences and organization theory as they bear on motivation and (b) critically examines the accounting system and reports in the light of such findings. Decentralization contributes to effective motivation. The firm's accounting system facilitates decentralization and hence has an indirect but important impact on motivation. The direct use of accounting reports, such as budgets, for motivation can result in reduced performance, if the budget is imposed on the department manager. The accounting system facilitates decentralization, which is conducive to effective motivation. Furthermore, the careful use of accounting reports can directly contribute toward effective motivation by expressing goals and by supplying knowledge of performance.

This research paper focuses on the use of accounting data for a specific purpose of "Control". The very first question arises "What does the control process consist of?" A survey of the accounting and management literature seems to indicate the control process generally thought of in one of three ways. Sometimes it is defined as the analysis of present performance in light of some standard or goal in order to determine to what extent accomplishment measures up to the plan or standard. Sometimes it is defined as a process of securing conformity to a plan, and sometimes as an idea of information feedback i.e. data collected as part of the control process might be reported systematically and used in future planning decisions. According to the author the second concept of control (without feedback) is probably the most widely accepted concept and much improvement in the control process can be made by giving greater emphasis to the feedback idea. Hence the author examines several different accounting control techniques with a view toward implementing the concept of information feedback and attempts to show some areas of possible improvement that can be made in order to use accounting data more effectively in the control and planning process.

At the University of Pennsylvania, an accounting plan has been developed which fundamentally arrives at a deficit or surplus for each department, which in turn is closed into the general deficit account. One obtains figures upon the instructional salaries, other salaries and wages, and departmental current expense and distribute the general overhead of the various departments upon various bases, so that the cost system, which appears on the surface to be quite an elaborate set-up is in reality very simple. It is realized that budgeted expenses do not necessarily have any relation to the income or receipts of any school or department due to the inter-relationship of the several faculties of instruction. It may be also noted that the budgets of the various departments do not include a charge for the building expense, general expense, or for instruction furnished by other school or departments. Separate budgets are of course prepared under budget administrators for building expense, and the various items finally closed into general university expenses. Later in this paper is a discussion of the method of charging the instructional expenses to the various schools and departments.

The recent apparent abandonment of the principle of annually equating federal revenue levies to concurrent total expenditures is in accord with the currently much advocated suggestion that balancing the budget over the business cycle would tend to stabilize private economic activity. For such a policy to succeed the budgetary authority must have a revenue system which permits: 1) access to broad and stable tax bases; 2) highly reliable prediction at long range of the revenue yield to be expected from a given set of tax rates; and a) a distribution of tax burden in accordance with the will of the legislature. Our present revenue system--in particular, our federal income tax--does not fulfill these conditions. In this paper a mode of measuring taxable income and of making levies upon it is suggested which will fulfill the necessary conditions, viz., differential rates on "real income" or "final objective income." [ABSTRACT FROM AUTHOR]

The article presents information on the Photoduplication Service of the Library of Congress. The Photoduplication Service was established in 1938 with the aid of a grant from the Rockefeller Foundation, which made possible the purchase of equipment and the creation of a revolving fund. Before the establishment of this service, the Library had possessed only very meager photo reproduction facilities for public use, and the scholar or research worker who wished to use the resources of the Library of Congress was compelled for the most part to visit the Library if the particular work desired was not available through inter-library loan.

The article presents information on fiscal policy and fiscal preference. The Keynesian and post-Keyneslan argument for deficit creation via the expenditure side of the budget was based en the allegedly greater leverage effects of this policy. As compared with tax-rate changes, comparable shifts in expenditure will exert a somewhat larger multiplier effect on total spending in the economy. Those who have argued for primary reliance on tax-rate changes suggest the desirability of making basic expenditure decisions independently of the macroeconomic state of the economy.