Accounting in Small Business Decisions PDF
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ACCOUNTING IN SMALL BUSINESS DECISIONS Small Business Management Research Reports Prepared by the University of Kentucky for the Small Business Administration, Washington 25, D.C. PUBLISHED UNDER THE UNIVERSITY OF KENTUCKY STUDIES PROGRAM This page intentionally left blank ACCOUNTING IN SMALL BUSINESS DECISIONS By JAMES L. GIBSON Assistant Professor of Business Administration, Arlington State College and W. WARREN HAYNES Professor of Economics, University of Kentucky Prepared by the UNIVERSITY OF KENTUCKY under the Small Business Administration Management Research Grant Program Proiect Director: JAMES W. MARTIN Director, Bureau of Business Research UNIVERSITY OF KENTUCKY PRESS Lexington, 1963 Copyright © 1963 by the University of Kentucky Press University of Kentucky Printing Division Library of Congress Catalog Card No. 62-19376 FOREWORD This study has been conducted and prepared under the direction of James W. Martin, project director for the University of Kentucky. The research was financed by a grant made by the Small Business Administration, United States Government, under the authority of Public Law 699 (85th Congress). Only a limited number of copies of this report have been printed. It is available for reference in any of the Small Business Administration offices throughout the United States or at many reference libraries. Copies of the report also may be purchased directly from the University of Kentucky Press, Lexington, Kentucky. Summaries of this study are being printed and will be available in reasonable quantities. These summaries may be secured from SBA field offices or from the Small Business Administration, Washington 25, D. C. The Small Business Administration assumes no responsi bility for the accuracy of the data contained herein, nor does it necessarily endorse any opinions, conclusions, or recom mendations which may be a part of this report. JoHN E. HoRNE Administrator Small Business Administration This page intentionally left blank ACKNOWLEDGMENTS This study results from the efforts of a great many people. We are indebted to the managers of small firms who con tributed their time and interest; without their cooperation the descriptive findings could not have been gathered. We are indebted to Bernard Davis, Lawrence Goodman, Robert Haun, Dale Osborne, and Martin Solomon, Jr., who, with us, comprised the research team which collected and analyzed the case studies. James W. Martin's excellent editorial assistance and Mrs. Judy Shewmaker's unsurpassed secretarial skills must be acknowledged. Finally, various members of the University of Kentucky faculty read and commented on early drafts; their attention saved the authors from many errors of logic and detail. We assume full responsibility for any short comings of the study which remain. JAMES L. GIBSON w. wARREN HAYNES This page intentionally left blank CONTENTS FOREWORD, by John E. Horne page v ACKNOWLEDGMENTS vii INTRODUCTION 1 1. ACCOUNTING AND ECONOMICS: THEIR RELATION TO DECISION MAKING 4 Accounting and Business Decisions 5 Recognition of the need for a decision 5 Assembly and organization of relevant information 9 Managerial Economics in Business Decisions 14 The principles of managerial economics 15 A variety of cost concepts 18 Economists' criticism of traditional accounting 20 2. GARDEN AND LANDSCAPE NURSERIES 23 Some Generalizations 25 Why cost accounting is not used 27 A note on nursery cost accounting literature 30 A Prescriptive Model for Nurseries 30 Certainty model: plant mix decisions 31 Certainty model: pricing decisions 33 Certainty model: other decisions 34 Cost considerations 34 Significance of the present value approach 35 Removal of simplifying assumptions 36
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