Hatt CttoUcge of Agriculture At (Cornell HmuerattB 3«tsta, ». 1- Kibraqj Cornell University Library HF 5686.I6C7 Cost account for institutions. 3 1924 013 825 355 Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924013825355 COST ACCOUNTING FOR INSTITUTIONS BY WILLIAM MORSE COLE, A.M. PROFESSOR OF ACCOUNTING, HARVARD UNIVERSITY Third Printing NEW YORK THE RONALD PRESS COMPANY 1922' COPYRIGHT, 1913, BY THE RONALD PRESS COMPANY INTRODUCTION The first fact to realize with regard to a plan of cost accounting is that no a priori determination of exact meth- ods can be made for any establishment. No two establish- ments are alike in all details, and a perfect plan for cost accounting in one will fail of perfect fitness in any other. Certain principles are fundamental, however, and may be indicated in a general plan. Discussion of these general principles unattached to a specific organization, on the other hand, would hardly be quite serviceable, for the principles so discussed would lack concreteness and definiteness to readers not already familiar with the application of such principles to specific cases. In this book effort has been made to discuss general principles and to apply them for illustration in certain specific types of institution — usually the most complicated type likely to be found in most com- munities. Yet the application here indicated may not fit exactly any particular institution even of that type, for cer- tain assumptions must be made in the distribution of costs, and not all of these particular assumptions may hold valid in a particular case; but the author hopes that the careful and intelligent reader will be able to adjust the accounting plan here outlined to any particular circumstances of his need. The plan outlined will appear to most persons extremely complicated and abounding in red tape. As expounded here, the plan undoubtedly is so ; but many plans are much more simple in operation than in theory. It may take a page of text to describe a process performed in a few sec- onds of bookkeeping, and many varieties of transaction vi INTRODUCTION must be suggested in such a treatise as this even though only one of them will be applied in any specific case. In order, again, to make the treatment comprehensive, effort has been made in this book to provide for virtually all types of contingency and of variation from the simplest type of organization, and therefore the discussion here is meant to cover at the same time the simple, the somewhat com- plex, and the extremely complex conditions of any estab- lishment. Obviously a treatment intended to be compre- hensive for such conditions must be in itself complicated, even though its application in a single case may be simple both in theory and in practice. A glance at the forms and schedules may, again, sug- gest a vast amount of detail and of clerical labor in the keeping of records ; but if one examines them carefully one will note that, although many of them are used daily or even oftener, others are used only weekly, some only monthly, and others only annually. If they could be ar- ranged so that one would see at once only those in use at any particular time, one would observe that the number is not great, the labor is not prohibitive, and the cost is practically insignificant. If any one should hesitate to introduce a cost-account- ing plan in an institution for fear of the cost, he might substitute, for continuous use of the forms and accounts here indicated, an occasional or periodic use of them and so learn certain averages and standards. If, for instance, it were deemed inadvisable to keep a constant record for each meal of the special or occasional foods consumed, one might well use the forms here shown for certain specified periods, such as one week in a month or four isolated months in a year, and use the results for establishing ratios and averages. Similarly, one might keep temporarily cer- tain subordinate-ledger accounts for details of expense INTRODUCTION vii within departments (such as freight and supplies) and learn about what proportion of the total charges on those scores are attributable to certain departments, and then use those ratios, without further detailed accounting, over long pe- riods. The system here shown, in other words, may be used in part without nullifying its value as a system. It is here made complex only that it may be made comprehensive. The text, again, suggests monthly closing of accounts. The plan is equally workable, though it cannot produce results so satisfactory, if accounts are closed annually. A few illustrations of the possibilities of simplifying the plan shown herein are suggested by observation of the subdivision of many accounts. For hospitals, separate ac- counts are recommended for several kinds of nurses (super- intending, graduate, special, and those in training), for orderlies, and for ward employees. Obviously, if one is not willing to go to the expense of making this separation, one may combine them all into a single account — though this by so much reduces the possibility of making a comparison of costs with hospitals where the conditions of nursing are different or the classification is more detailed. Similarly, separate accounts are shown here to cover maintenance of equipment, in the housekeeping department, for the dining- room, for the bedrooms, and for the general household. In many institutions this subdivision would be hardly worth while. In the accounts for libraries, again, separate wages costs are kept for administrative officers, cataloguers, order clerks, delivery clerks, etc. Commonly this subdivision would not be necessary. Every consolidation of accounts simplifies the accounting process, but by so much limits the information which the accounts may give ; and therefore in this book divisions which under any ordinary circumstances are thought to be worth while are given in detail — not because the division is recommended in every case, but viii INTRODUCTION merely in the desire to have it noted for the case when it is necessary, and with the thought that wherever it is unde- sirable consolidation will suggest itself as obvious. Most of the illustrations used are for conditions likely to arise in hospitals; but most other institutions are subject not only to many conditions similar to those in hospitals, but also to other conditions which, though not similar in outward characteristics, are nevertheless capable of expres- sion in the accounts by the application of similar principles. It is believed that few problems will arise in other institu- tions not capable of solution by the application of the principles indicated for hospitals. Nevertheless certain suggestions are made not only for specific accounts likely to be required in institutions other than hospitals, but also for the content of those accounts. In one or two instances illustrations are given of the method of drawing conclu- sions from such accounts in ways somewhat different from those desirable for hospitals. It would have been possible, of course, to treat every particular of the accounts from the point of view of hospitals, then from that of educa- tional institutions, and lastly from that of hotels or clubs, and to gather into one place all lists of accounts, all forms, and all comments relating to any phase of the account- ing; but that would have produced a treatise which would hardly be usable except for the theoretical student; for the treatment of accounts for no institution would be in connected form. For this reason the illustrations are taken for each chapter as a whole from the circumstances of hospitals, and then variations or additions for other insti- tutions are suggested in a supplementary discussion. No attempt is made in this book to describe the ordi- nary processes of bookkeeping, or to dfrect a person un- trained as a bookkeeper in the method of making entries. Cost accounting cannot be done by persons who cannot INTRODUCTION ix "keep books." So far as any higher type of bookkeeping is required here than that familiar to bookkeepers in institu- tions, the information regarding it should be easily obtain- able from books dealing with the subject. This plan pre- supposes the bookkeeper's knowledge of special-column cash books, of voucher registers, of subordinate ledgers, and of controlling accounts. Some one in any institution should have a general knowledge of bookkeeping and accounting principles; but he needs no more technical or detailed knowledge than can be obtained from the general chapters in the author's book entitled "Accounts: Their Construction and Interpretation," and from the treatment there of one or two special subjects (such as accounting for investments) related to institutional affairs. The general principles here worked out have been recommended by a committee of persons interested in insti- tutional management. Appendix E gives a copy of the report of that committee (on uniform accounting for in- stitutions) at the Lake Placid Conference in June, 19 12. The author is indebted to the persons whose names appear in that report, and to many others, for valuable suggestions. TABLE OF CONTENTS CHAPTER PAGE I General Principles 1 II The Balance Sheet 16 III The Statement of Financial Transactions for the Year 43 IV The Classification of Expense Accounts 63 V The Method of Determining Costs in Detail 97 VI Forms for the Determination of Costs 107 VII Closing Processes 170 APPENDIX A I Alphabetical Index of Symbols of Hospital Ac- counts 197 II Alphabetical Index of Additional Symbols for In- stitutions Other Than Hospitals 206 B Alphabetical Index of Common Items of Hospital Expense, with the Symbols of Accounts Charge- able 211 C Comparison of Accounts of the New York Plan of Accounting for Hospitals and the Plan Advo- cated Herein 217 D The Bookkeeping Entries for Imaginary Transac- tions in a Hospital 220 E Report of the Committee on Uniform Accounting for Institutions 236 Index 243 LIST OF GENERAL FORMS Balance Sheet 28 Furniture and Fixtures 30 Investments 31 Statement of Condition of Special Funds . . 32 Statement of Financial Transactions for the Year .' 51 Earnings, Schedule A 51 Endowment Income, Schedule B 51 Normal Current Income, Schedule C 51 Special Items, Schedule D 52 xi ENERAL SUPPORTING FORM SCHEDULES A I II III xii TABLE OF CONTENTS GENERAL SUPPORTING FORM SCHEDULES PAGE C Summary of Financial Transactions for the Year 54 IV Final Summary of Institution Expenses .... 192 V Revenue from Institution Sources 56 VI Comparison of Departmental Income and Expense 57 VI Comparison of Divisional Income and Ex- pense 58 VII Subscriptions from Normal Sources 60 VIII Legacies and Other Special Contributions Received 61 D Expense Ledger 110 TABLE OF LISTS OF SYMBOLS Capital Accounts — Hospitals, etc 35 Schools, Colleges, etc 37 Hotels, Clubs, etc 40 Expense Accounts — Hospitals, etc 66 Schools, Colleges, etc 90 Hotels, Clubs, etc 94 Income Accounts — Earnings 56 Other Income 59 Alphabetical Indexes — Hospitals, etc 197 Other Institutions 206 Common Items of Hospital Expense 211 LIST OF FORMS FOR THE DETERMINATION OF COSTS FORM NUMBER 1 Registry Book 117 2 Daily Ward Patient Report 118 3 Ward Record 120 4 Monthly Patient Summary, All Wards 122 4a Annual Patient Summary 125 5 Monthly Discharge and Death Record 127 TABLE OP CONTENTS x iii FORM NUMBER PAGE 5 a Annual Discharge and Death Record 128 6 Monthly Patient Report 130 6a Annual Patient Report 131 7 Time Sheet 132 7x Time Sheet Appendix 135 8 House Tables Requisition 136 9 Ward Diet Requisition 137 10 Summary Patient Diet Requisition, All Wards 137 11 Requisition on the Steward's Department 140 12w Weekly Dietary Summary 142 12 Monthly Dietary Summary 143 13 Calculation of Special Food Costs 145 14w Weekly Summary of Special Food Costs 147 14 Monthly Summary of Special Food Costs 148 15 Calculation of Occasional Common Food Costs 149 16w Weekly Summary of Occasional Common Food Costs. . 151 16 Monthly Summary of Occasional Common Food Costs . . 152 17 Calculation of Regular Common Food Costs 154 18 Summary of Average Food Costs per Day 156 19 House Tables Record 158 20 Distribution of Food Costs 160 21 Engineer's Daily Time Card 161 22 Engineer's Monthly Summary 163 23 Space-Cost Basis 165 24 Space-Cost Distribution 167 25 Monthly Record of Ice 168 COST ACCOUNTING FOR INSTITUTIONS CHAPTER I GENERAL PRINCIPLES Cost accounting attempts to help managers in answer- ing three sorts of questions : first, how may prices be ad- justed to the service rendered; second, does the utmost economy prevail in production and service, and if not how may one trace the waste; and, third, had certain work best be performed in the establishment or outside? Adjustment of Prices to Services Rendered As illustration of the first of these, need arises for some scientific method of fixing prices of rooms in college dor- mitories and in hospitals so that the prices paid shall be adjusted to the comparative value of the rooms furnished. It may be true, of course, that in many cases prices are determined by what in railroading is called "charging what the traffic will bear." Thus, although it would normally seem that in some cases a higher price ought to be fixed, putting the charge on the same basis as that used for other services would in reality make the charge prohibitive, and so adjustment is made to that fact. In such a case the price must be lower than that which ought ordinarily to be charged, and that reduction in price is really in the 2 COST ACCOUNTING FOR INSTITUTIONS nature of a rebate. If the accounting is serviceable, how- ever, it will make note of both facts — that is, that the actual cost of rendering the service is high in that case, and that the price charged does not bear the same relation to cost that price bears in other cases. Unless the accounting takes note of both facts, it fails to tell the truth. It may indeed happen that the price is lower than normal for reasons of policy. In a certain hospital the prices charged for certain private rooms are really lower than on any basis of cost they ought to be. The managers have established such a scale with the distinct purpose of encouraging persons of means to come to the hospital for treatment; for they be- lieve that the service rendered will be deemed so valuable, and the interest aroused in the hospital so great, that these persons will become valuable friends of the institution and their influence will increase subscriptions and endowment. This may or may not be wise policy, but good accounting requires that some note shall be taken of the fact. Economy of Operations An illustration of the second sort of problem which cost accounting should help to solve is economy in laundry work. If it is found in any institution that the cost for laundry is 20 per cent higher than the average for other institutions, the manager is not doing his duty unless he learns why this is so and whether it can be prevented. The conditions may be such that there is no escape. Then the question arises whether it would be cheaper to have the laundry work done outside. Economy of Results As an illustration of the third sort of problem we may take that which arises in many institutions concerning un- used land. Most institutions have a considerable tract of GENERAL PRINCIPLES 3 land for air, light, and prospect, and much of this could be utilized for raising at least some summer vegetables. In many cases where this has been done the apparent cost of food has been much reduced. Yet it is impossible to know whether the actual cost of food has been reduced unless one can know what is the expense for labor attributable directly to the vegetables raised. If the engineer or other employees have much leisure during the summer and that leisure can be devoted to this use, gardening of this sort is likely to be profitable. Only careful accounting can determine just when it is so under these or any other circumstances. Comparison of Results All three of these purposes of cost accounting demand that costs be known as exactly as possible; and the second of these demands that a manager shall know not only the cost in his own institution but in a great many others, for only then can he make comparisons between his own estab- lishment and others, and learn whether his costs are ex- cessive. One encouraging feature in institutional service as compared with commercial service is the fact that the only rivalry that can be acknowledged — at least with a good face — is rivalry in efficiency. Every good institution is interested in institutional progress, and is glad to conduct experiments and share results with other institutions. In- deed, institutional progress would have been far slower if there had not been something of a professional spirit at work. Professional ethics demand that each person in charge of an institution shall have not only something of scientific eagerness to learn how things can best be done, but also altruism enough to help others to benefit by his experience. In order to make possible comparisons of in- stitutions under somewhat similar conditions, a uniform scheme of accounting is essential. This means, moreover, 4 COST ACCOUNTING FOR INSTITUTIONS something more than a uniform scheme of accounts; for even institutions with accounts of identical names may have results which are not at all comparable; uniformity must extend to the content of the accounts even more than to their forms and names. Before results can be made at all comparable, we must be sure that in all institutions under consideration exactly the same kinds of things are charged to each account. Uniformity of Accounts Virtually every institution manager who is subject to trustees or other superiors is eager for additional funds, for he believes that work can be done more economically or at least more satisfactorily with larger capital. The most efficient instrument for inducing trustees to supply needed funds is a statement of financial results which shows not only the exact cost of each kind of service rendered, but also how each cost is related to the corresponding cost in other institutions. Trustees are usually business men who know the value of a dollar. They wish to know definite facts about the yield of the dollars entrusted to them, and they are far more interested in these than in any hypotheses and managerial ambitions. Every institu- tion has some advantages over other institutions, and every institution has some handicaps ; but the good manager will attempt to learn by concrete figures exactly what are his handicaps and what they cost, and what are the actual sav- ings from his advantages. He should not allow the handi- caps for which circumstances — or the trustees — are responsi- ble to swallow up the gains for which the credit is prop- erly his. Until uniform accounting, or at least something approaching it, becomes common, no manager will be in a position to make clear to his trustees just what are the GENERAL PRINCIPLES 5 handicaps under which he is working and just what are the economies that have resulted from his management. As an illustration, a certain hospital turns away paying patients for lack of room, and yet gives its superintendent private quarters which, if let to private-room patients, would yield several hundred dollars weekly; total costs in this hospital are not only far above its income, but high in comparison with those of other hospitals of its class. Another hospital nearby, practically self-supporting, gives its superintendent quarters worth not half so much; yet the hospital giving its superintendent expensive quarters shows by the books a lower administrative cost than the other. The books very clearly do not show the facts. The objection is not necessarily to the spacious quarters, but to the fact that the accounts take no cognizance, in the ad- ministrative cost, of anything but salary, and therefore the result of this extravagance of space does not appear, and a comparison of the two sets of accounts is sadly mis- leading. Comparisons of accounts when the method of accounting is different are worse than useless, for they may show an advantage where there is really a handicap. It should be understood, moreover, that accounting has nothing whatever to do with questions of policy. To give palatial quarters may be wise, but the purpose of account- ing is to tell about business transactions the truth as ex- actly as it can be learned, and the determination of the truth should be without respect to persons, prejudices, or policies. Determination of Costs — Direct Charges Let us now turn to the methods of learning costs. First, the accounts for each department having an exclusive function should be as far as possible distinct from those for every other department. The steward's department, for 6 COST ACCOUNTING FOR INSTITUTIONS illustration, is concerned with food in a more or less raw state — except, perchance, so far as food is purchased neces- sarily in a cooked state, as are shredded wheat and nu- merous other cereals. It may chance that in some institu- tion the purchasing is careless and therefore the costs high, and yet the cooking is extremely economical. In such a case, unless a distinction is made between the steward's department and the kitchen department, the gross cost for table board, if only that figure is preserved, may be normal, and so hide the fact that one department is well managed and the other ill. The kitchen should be charged for the cost of cooking food and for that alone; this should in- clude the cost of fuel, labor, repairs, etc. The serving of food, again, should not be confused with purchase and cooking, for in some cases there is very great wasteful- ness in the unfortunate arrangement of the establishment, so that the cost of service brings up the total cost of food in spite of the fact that both the purchasing department and the cooking department are well managed. Costs should be found for each department. The expense of the purely housekeeping items, such as sweeping, dusting, and scrubbing, should not be confused with other expenses. Where some of this work is done by persons employed primarily in other departments, as is often the case in hospitals where the nurses have charge of patients' rooms, an attempt should be made to distinguish between that part of the nurses' wages which is for pro- fessional care of patients and that which is for house- keeping. At least it is true that the cost of taking care of the general rooms, such as halls, stairways, reception rooms, assembly rooms, etc., should be carried distinct from the cost of the care of private rooms. Laundry charges should be carried distinct from all others, and should in- clude fuel, soap, starch, labor, etc. GENERAL PRINCIPLES 7 The cost of the care of grounds should be separately determined ; this would ordinarily include the care of flower beds, the mowing of lawns, shoveling snow from walks, etc. This appears on its face to be a small item, but obviously an institution having large grounds with many walks has a very much heavier charge in this respect than others, and a manager who is judged by his total cost per resident- day is handicapped as compared with a manager who has no expensive grounds to care for; he should be able to point out to the trustees of his institution just what it costs to maintain its external attractiveness. Separate ac- counts should be kept for maintenance of buildings and for maintenance of equipment. Of course, as in all busi- ness operations, separate accounts should be kept for taxes, insurance, water, gas, electric light, legal expenses, etc. Determination of Costs — Indirect Charges Such accounts as those just mentioned may be called "primary accounts." They require nothing more than sim- ple bookkeeping. We must next pass to matters less ob- vious, for we must make an analysis of transactions and provide for the distribution of indirect charges. In order that we may know what are the exact costs for various kinds of service, we must learn not only the total direct costs, but the cost of each of many separate items, some of which may be indirect and apparently remote. We must dis- tribute most of what are commonly called "overhead" costs — that is, costs incurred for several services in common — ■ also called "burden," and "joint costs," among the various departments. To say that we must know the difference in cost for employees between a seven-by-seven bed-room and a ten- by-twelve bed-room is not to recommend the seven-by- seven bed-room; it is only to say that we must know what 8 COST ACCOUNTING FOR INSTITUTIONS we are getting for the money spent. All the costs which are indirectly incurred for any department should be ulti- mately carried to the accounts of that department. It will cost more to do the laundry work in an establishment paying its laundresses such high wages that they can live comfortably in rooms which they must hire in the neigh- borhood at normal city lodging-house prices than in an institution where the laundresses are boarded on the prem- ises; and if the accounts in both of these cases charge to the laundry department only the actual money-wages paid, one will show a high labor cost and the other a cost singu- larly low. Before any comparison can be made between the two cases, therefore, the laundry accounts must be brought to a common basis, and the cost figures for laundry work must include not only the obvious primary costs, like fuel, supplies and wages, but also a charge for laundry space, for laundresses' rooms, for food (including cooking and serving) served to laundresses, for lighting, for heating, etc., and we must realize that the cost of the rooms should include not only their care but a share of insurance, taxes, depreciation, etc., on the cost of the building. This sort of indirect cost prevails throughout most institutions, and the importance of provision for its distribution should not be slighted. Classification of Cost Figures Figures of cost should be classified not on the basis of the objects with which they happen to be identified, but on the basis of the purpose which the expenditure was in- curred to serve. The purpose of an institution is to serve guests, or students, or patients, or inmates. We wish to know, as our final figures, the cost, per capita, for food, for shelter, for laundry, etc., for those residents for whom the institution is maintained. Services performed for em- GENERAL PRINCIPLES 9 ployees are incidental, as a part of wages, to the prime function of the institution. The accounts should be kept so as to distinguish the incidental from the functional. So the figure of compensation for all employees should in- clude not merely wages but everything else in the nature of compensation, such as board, lodging, and laundry. On the final summary of patient-day costs, or guest-day costs, should appear all the costs for each group of expenses, such as administration, professional care, lodging, board, and laundry; and these are made up in part of items in lieu of wages for employees in several departments. These items not only should get into the departmental costs, and thence indirectly into the patient or guest costs, but should not get into the direct costs for patients, guests, etc. The cost of food for a laundress is not guest-food-cost, but a guest-laundry-cost; and the cost of laundry for a cook is not a guest-laundry-cost, but a guest-cooking-cost. It is absurd that an institution having many servants and a rather scanty commissary should show as high a cost for food as an institution having few servants and a much bet- ter standard of living; and yet, if we fail to distinguish between the board of employees and that of guests, a large number of servants would raise the figure naturally inter- preted to represent the cost of supplying guests with food, without in the least resulting from better or more abun- dant food supplied to guests' tables. Requirements of Cost Accounting This sounds very complicated, and the reader may look with much skepticism upon the desirability of doing so much accounting. It is true that many bookkeepers are not com- petent to devise systems which shall give a v great mass of detail without an inordinate amount of time and manu- script. It is very difficult, on the other hand, for a person not familiar with bookkeeping processes to realize that a IO COST ACCOUNTING FOR INSTITUTIONS great deal of information may be recorded and correlated and preserved with very little labor — if the bookkeeping system is adapted to the specific needs of the case. Ade- quate accounts cannot be kept without adequate bookkeep- ing, and no one should think for a moment that a proper system of accounting can be introduced in any sort of in- stitution merely by the addition of a little untrained labor. The person in charge of the accounts must know not only what are the common labor-saving devices of bookkeeping, but also what fundamental accounting principles must be observed in drawing final conclusions from the records. With such supervision, however, it is possible to devise a plan which can be carried out by persons not particularly skilled in the handling of accounts, and to get results, for .various institutions, that make possible a really valuable comparison between them. When a good system has once been devised, it is not a laborious task to make proper charges for direct costs or to make proper distribution of secondary costs, and no extensive bookkeeping is involved. An outline of the method is given, in connection with the desired accounts, in the pages following. Distribution of Space Costs When the primary accounts have been charged with the obvious items of cost, we have merely to subdivide the total of those which stand at the foundation of the whole institu- tion and distribute them on an equitable basis among the various departments. For illustration, insurance on build- ings, taxes on buildings, depreciation of buildings, and repairs of buildings, are shared by the various departments in the ratio of the building space occupied. Commonly the square foot of floor space is a satisfactory unit for distri- bution — unless, indeed, it chances that some stories are higher than others or some buildings are less expensive GENERAL PRINCIPLES n than others. It is obvious that if the first story has a height of twelve feet, the second ten, and the third eight, it is hardly fair to distribute room costs on the basis of floor space alone, for the expense of the structure lies in height quite as well as in horizontal dimension. Ordinarily, too, an upper floor is less desirable than a lower. In the matter of cleaning, window space and wall space may be quite as important as floor space. The actual distribution must be determined in every case by the circumstances of that case, and when the principle has once been recognized there is likely to be very little serious discrepancy as between insti- tutions. Distribution of Food and Service Costs The most complicated figure to distribute between de- partments is likely to be that for food costs — at least in an institution supplying several kinds of diet. In a hospital, for instance, there is likely to be a table for house offi- cers, at which may or may not be served the same sort of food as that served ordinarily to patients in private rooms ; next in order is likely to come the regular house diet for patients in wards and for nurses ; next may come the coarser diet for non-professional employees; and last, the fever or liquid diet. Many institution managers will say that the attempt to learn just how much food goes to each of these groups of diet would cost more than the value of the infor- mation would warrant. Others have learned it and profited at small cost, for much of the needed information is — or should be — at hand. In any accounting worthy of the name careful store records are kept. Everything going into the store-room is debited, and everything going out is credited. Many things go out of the store-room for use in all four classes of diet mentioned, and many others go out for the use of only one of them; but it is always some- 12 COST ACCOUNTING FOR INSTITUTIONS one's business to know the destination of everything issued. The housekeeper or dietitian or someone else must regu- larly provide a list of foods required, as a guide in the preparation of meals, and the only labor necessary for learning costs is that of entering the amount consumed, the price, and the product. The calculation may, of course, be made at convenient intervals in the general office, and each department may then be charged for its share. We may learn kitchen cost by taking the sum of the space cost of the kitchen, cooks' wages, fuel cost, rooms and board of cooks, etc. Serving cost, housekeeping cost, laundry cost, and dormitory costs may be similarly learned. The sum of these gives us the total cost per resident-day, in the terms of cost for each particular service rendered. This is obviously our final figure, the ultimate thing sought — for all the departments are subservient to the residents. As we go along, however, we determine for each depart- ment its own cost, in order that we may know whether it is most economically managed. Subdivision of Accounts Under the method of primary and secondary accounts outlined above, any number of subdivisions may be made; and even with uniform accounting an institution desiring to trace any detailed costs may make as many subdivisions as it likes without destroying the uniformity, if only its subdivisions are based on the uniform plan — that is, are capable of combination to produce a total identical in sig- nificance with that of the institutions which have not made subdivisions. The minute subdivisions would ordinarily be kept for purposes of comparison one year with another within the institution, whereas the figures for groups as a whole would ordinarily be kept for comparison with those for other institutions. It is not ordinarily possible to com- GENERAL PRINCIPLES 13 pare detailed figures with those for other institutions, for conditions are widely different. Total laundry costs per resident-day, for instance, may well be compared between institutions, but the cost of fuel is likely to be useful chiefly for comparison within the institution itself; for one laun- dry may use coal, another wood, another gas, another oil, another electricity, and another steam. Conditions of Effective Cost Comparison Accounting is something more, however, than determin- ing mere financial facts. Statistics are of great importance in making it possible to learn why differences in costs per- sist. With regard to food, for instance, it is true that in- stitutions in some places are able to buy meats much more cheaply than others, but suffer a considerable loss in com- parison with others in the purchase of groceries. Differ- ences are very great with regard to dairy products. If, then, we are going to compare food costs and get results worth anything, we must know something of the condi- tions under which each institution operates. We need to know not only what prices it is forced to pay, but also what is the prevailing tendency in that institution with regard to the kind of diet furnished. For this purpose it is well to keep statistical figures for the average price of several groups of food — such, for instance, as beef, mutton, lamb, fowl, butter, milk, eggs, etc. To these may well be added the average price per pound for certain staple articles like flour, sugar, tea, coffee. Lastly, in order that the records may show the relative importance of various classes of food in the total cost of diet, the total expenditure in each of many groups should be reported. This suggests the need of maintaining many detailed accounts for food costs in the steward's department. Conclusions from these accounts show surprising differences between different institutions. I 4 COST ACCOUNTING FOR INSTITUTIONS If any establishment shows a conspicuously low purchasing power of money, that fact should stand out so clearly that the reason is sure to be investigated. Innumerable other statistics not burdensome to compile are valuable as guides in determining comparative costs. For illustration, the number of pieces of laundry work, dis- tinguishing the character — as by separate count for sheets, towels, pillow slips, etc. — is important if per capita costs are to be compared. The area of garden plots, of lawn to be mown, and of walks to be kept free of snow, are con- venient figures. The area of floors swept weekly per capita gives a hint as to the comparative cost of housekeeping labor. Many of these figures) such as areas and ratios of area, are practically unchanging, and calculations once made are good for months or years. When ratios need to be applied to changing monthly totals, calculating devices like the slide-rule and adding machines may be utilized so as almost to eliminate clerical cost. Institutional Products Question often arises as to the treatment of construc- tion work performed or product raised within the institu- tion itself — as by carpenters or by gardeners or farmers. Shall these be debited to the proper accounts at cost, or at market price (crediting, of course, the producing depart- ments) ? In view of the fact that the purpose of accounting in institutions is usually to get costs, the former is the logical answer ; but, in view of the difficulty, in many cases, of learning costs, the latter is often the practical answer. Possibly the hardest costs to learn in all enterprises are farm costs, for they are singularly interwoven. To learn costs in an institution owning farms might mean a com- plicated accounting system within a system. In such a case, unless the farms are of sufficient importance in themselves GENERAL PRINCIPLES ig to be worth a complete cost-accounting system, the obvious practical method is to charge departments for products at market prices and credit the farms with the earning. When, however, the product is incidental, like vegetables or fruit raised on land otherwise idle, it is well to charge the cost of cultivation to the accounts representing the product — as fresh vegetables, or fresh fruit. Advantages of Comparison The advantages of uniformity should not be neglected. No man ever progressed far if he relied wholly on what he learned by his own experience. It is absurd to spend time and money learning for oneself what one's neighbors learned years ago — or even what they are now learning. If they are conducting experiments in some lines, one can most profitably conduct experiments in another. Then a comparison of notes teaches each what the others have learned. Only with uniformity, however, can one ever com- pare significant notes with one's neighbor and profit by the other's experiments. CHAPTER II THE BALANCE SHEET It has sometimes been said that it is not only unneces- sary but undesirable for institutions having a charitable nature to show capital accounts; for the prime purpose of such institutions is not to show solvency, but to show ac- complishment, and the prime purpose of a balance sheet showing capital accounts is to indicate that the corporation is able, either immediately or ultimately, to pay its debts. One may even go so far as to say that such an institution should always show a deficit, for it always should do a little more than it can afford to do — and so make the public see its needs. This is true, but other considerations make it desirable to show detailed capital accounts. Purpose of the Balance Sheet The purpose of a balance sheet is not merely to show solvency, but quite as much to show accountability, and an institution is responsible not merely to produce results in the way of service and product, but also to show that for everything entrusted to it, especially for endow- ment or other capital funds, it has something of value. In order, moreover, to show whether the amount of capital invested is out of proportion to the amount of product or service rendered, and whether that investment is of a type properly subject to one or another rate of depreciation, it should indicate not only the total amount of capital invest- ment, but the various subdivisions of that investment among 16 THE BALANCE SHEET \y the various departments of the institution. It has happened often that an institution has suffered a high operating cost because it has been inadequately supplied with facilities; it has been obliged to pay heavily in wages for work done by hand that might much more economically have been done by machinery. It has occasionally happened, on the other hand, that an institution has enjoyed a very low operating cost because work has been done in large part by expensive equipment employing little hand labor. A proper judgment between these two methods of operation can be made only when interest,* depreciation, and other charges due to cap- ital investment, are considered in the ultimate costs of oper- ation; and since we must have a basis for figuring interest, depreciation, etc., we must know the value of the equip- ment in each department; this should be shown either on the balance sheet or on a schedule appended to that sheet. For these reasons it is desirable that every institution shall maintain a complete balance sheet indicating what it has to show for all property entrusted to it, what it has invested in various types of institution property, what it has invested in interest- or dividend-bearing securities, and finally what current items go to make a complete statement of resources and liabilities. Publication of Balance Sheets Whether the institution shall publish such a sheet, how- ever, must be determined by policy. If an institution now exempt from taxation, because it is rendering a public serv- ice, is misjudged by a group of citizens who clamor for tax- ation of it, the publication of a balance sheet might be un- wise; similarly if the institution is supported in large part by persons who have no idea of the cost of large enter- prises, publication of the amount of assets — because likely to make people think it much better supplied with funds * See page 103. 18 COST ACCOUNTING FOR INSTITUTIONS and facilities than it really is — would be unwise; yet, on the other hand, if it is supported by intelligent people who know the nature of its need, the publication of the full bal- ance sheet might lead to the raising of more adequate funds because of the obvious discrepancy between available capital and the facilities needed for the work undertaken. In gen- eral, however, it pays to be absolutely above-board. Noth- ing goes farther to destroy confidence in an institution than a suspicion that something is under cover. Illustrative Balance Sheet It would be possible, but confusing, to show here a form of balance sheet that should include all items likely to oc- cur for any type of institution; but since such a form would include for each type of institution many items that would occur in no other case (as, for example, for clubs and hotels, for educational institutions, etc.), such a sheet would be very cumbersome and would look not at all like the sheet for any particular institution. The illustration given on page 28 is for a hospital, and is chosen because hospitals cover more lines of activity than most other types of institution. One can easily see what items for any other institution would be substituted for certain items shown here. Suggestions for such substitutions follow the bal- ance sheet. Since, even for one type of institution, details are likely to cumber any statement, items of a similar sort are grouped in the form here shown, and provision is made for a supporting schedule, or appendix, for each group needing further elucidation. The discussion of the items appearing on a hospital bal- ance sheet is intended to indicate the general principles of classification, not only for this type of institution but for all ; and it is therefore of general application. The hospital is chosen simply as the best means of illustrating the princi- THE BALANCE SHEET 19 pies, and all general discussion of these principles will be found in this chapter. Classification of Capital and Expense Accounts The capital items for hospital property are divided, un- der the plan explained in detail in the following pages, into fourteen accounts. These various accounts — summarized on pages 24-26 — are determined by the same sort of classi- fication as that used for current expenses, and every de- partment which has any equipment or property of sufficient value to be really recognizable as belonging to that depart- ment exclusively has accounts both for that property and for current expenses. The division between departments, both for capital and expense items (the order followed here is the logical order for expense accounts rather than for capital accounts, but simplicity will be attained by follow- ing it for capital accounts also), is based on the following principles : (a) Administration The administrative department is charged, both for equipment and for expenses, with the cost of those things which serve the general administrative purposes of the in- stitution as a whole — including those things which serve all departments. (b) Apparatus and Instruments The charges to the capital account for apparatus and instruments cover everything of the nature of permanent medical and surgical equipment (supplies rapidly consumed are charged to the expense account for this department) ; but only things used directly in the professional care of patients should be charged in this group. As indicated in the table, when the pathological laboratory and the home 20 COST ACCOUNTING FOR INSTITUTIONS nursing department have little equipment, the costs of equipment for them may well be included with the cost of permanent apparatus and instruments; but expenditure for running expenses should be shown separately for each. (c) Dispensary The dispensary, or out-patient department, serves an entirely different type of need from that of the hospital as a whole, and consequently its costs, whether capital or cur- rent, should be separately reported. (d) Emergency Department The emergency department may be similarly situated; but if there is not a separately maintained department, no accounts should be kept for the items naturally falling into this group, for if a distinction cannot be made with fair completeness between emergency work, dispensary work, and ordinary care of patients, the distinction should not be made at all. (e) X-Ray Department The X-Ray department is naturally entirely distinct from the other departments, at least so far as its equipment is concerned ; and it may be easily kept distinct for its cur- rent expenses, if only reasonable care is taken to distinguish its supplies, wages, and other items from those of other departments. (f) Training School The training school is one of the departments hardest to place in a uniform scheme of accounting; for it serves a double function and has connected with it two types of expenditure and at least one type of income. The most logical division of its functions considers anything afforded personally to nurses in training (either wages — when any THE BALANCE SHEET 21 are paid — or clothing, laundry, board, and equipment) as a cost of nursing, and therefore chargeable under the head of professional care of patients; but it considers expendi- ture for purposes of teaching (whether wages of teachers, equipment for class rooms, books, magazines, maintenance — including lighting and heating — of class rooms), though incurred directly as a means of obtaining nurses and giving them compensation, as an educational cost^to be separately reported, so that the purely educational features of the cost of maintaining nurses in training may be compared between different institutions and between different periods in the same institution. Both are costs of nursing, but the cost of the two phases of expense should be shown separately for statistical use. (g) Household Household expenditures are divided into several groups. The housekeeping department is responsible primarily for cleanliness and order, and its expenditures should be dis- tinguished from those for the kitchen, the laundry, and the steward's department, as well as from those for repairs of buildings, for heating, for lighting, etc. ; for in order to make comparisons we must have costs in rather detailed groups. The housekeeping department has charge of the equipment and care of dormitories, dining-rooms, reception rooms, halls, etc., and of the cleaning of the house in gen- eral.* * The order in which departments are here named is that used in the New York plan of hospital accounting, to which reference will be made hereafter. Since the author is urging uniformity, he has desired to accept with as little change as possible any plan of uniformity, already in use, that will produce the desired results. The New York plan is excellent as far as it goes. Though the order of accounts is not of much importance, it is of great importance that in any establishment the same order be always followed in all lists, records, etc.; for the waste of time in hunting for a desired figure when no specific place belongs to that figure is serious. A more logical order, and that recommended, is to list the household departments as follows: (i) steward's, (2) kitchen, (3) housekeeping, (4) laundry; and that order is followed in the rest of the text. 22 COST ACCOUNTING FOR INSTITUTIONS (h) Kitchen The kitchen department is concerned solely with the preparation of food, and nothing which is not a cost of cooking should be charged to that department, either for capital or for current expenses. (i) Laundry The laundry department has so distinct a function that there is no danger of confusion between it and others if only one remembers that a charge is made under good ac- counting not on the basis of the article with which the charge is connected, but on the basis of the purpose which it serves; for example, pails used for scrubbing about the halls are chargeable to Housekeeping Equipment, pails used in the preparation of food are chargeable to Kitchen Equip- ment, pails used in the laundry are chargeable to Laundry Equipment, and pails used in the store-room for handling foods are chargeable to Steward's Equipment; and simi- larly so-called laundry soap used for general cleaning pur- poses is chargeable to housekeeping-department expense, soap used for washing dishes is chargeable to kitchen- department expense, and soap used for laundering is charge- able to laundry-department expense. (j) Steward's Department Just as the kitchen is employed solely in the preparation of food, so the steward's department is concerned solely with purchase and delivery of food. (The store-room de- livers to the kitchen, the kitchen delivers to the household department, and the household department delivers to the consumer.) Steward's Department Equipment is shown as a capital item on the first half of the balance sheet, but supplies of food are carried among the current items as general material on hand. THE BALANCE SHEET 23 (k) Machinery and Tools The account for machinery and tools should record vir- tually all removable equipment not an essential portion of the buildings or of the equipment used for professional or household purposes; this should be kept separate from the building and improvements because a different rate of depreciation as well as a different rate of insurance is likely to be chargeable. (1) Buildings and Improvements Buildings and improvements should be kept distinct from sites and grounds, for taxes may be at a different rate, and very different factors of appreciation and depre- ciation are likely to affect values; this account should in- clude the cost to the institution (or the presumable value if donated) of its real property in excess of the native value of the grounds, but should not be written up or in- creased in value merely because the assessed or market value has appreciated. Since the balance sheet for an insti- tution is less an indication of solvency than of what the institution can show for the value entrusted to it, cost rather than market value is the figure of real significance. (m) Sites and Grounds Sites and grounds, similarly, should be shown at cost; if anyone wishes to know how far it is true that the insti- tution has property of enhanced value, he may at any time learn the value of the sites and grounds irrespective of any debit to the account representing them on the books; but an effort to make the books show such a value would mean either the confusion of constant changes or else a mislead- ing figure. 24 COST ACCOUNTING FOR INSTITUTIONS Varying Purposes of Asset Statements It should be noted that three distinct purposes of stating assets are likely to be at one time or another in the mind of the accountant, and the purpose must determine the form of the statement. Ordinarily the assets are those of a "going concern," and the record of property should show the cost of that property to the institution — for only ac- countability for the funds used need be considered on the books. Occasionally, however, the institution needs to bor- row money, with the property as security; since here the important thing is not the cost, but the probable readabil- ity of the particular property, the statement should put the valuation at a reasonable sale price. Finally, absolute sale of the property as a whole may be contemplated ; here the value of the property in use is the criterion. Truth lies in the proper relation of any fact to other facts, and usually cannot lie in a bald statement of any fact by itself. For this reason three statements of assets for an institution at any time may all be true, though the figures vary widely. For ordinary purposes, however, the true statement is that of cost, and this is what is recommended on books and bal- ance sheets. Summarized List of Capital Accounts Capital Accounts for Institution Property (i) Administrative Equipment Includes office equipment, such as desks, calculat- ing machines, typewriters, telephone switch- boards (if owned), etc. (2) Apparatus and Instruments For medical and surgical uses only. Since the Pathological Laboratory and the Home Nurs- ing Department are likely to have compara- tively inexpensive equipment of this type, the THE BALANCE SHEET as amount for therri may well be included here. If their equipments are expensive, they should have separate accounts. (3) Dispensary Equipment (4) Emergency Equipment This should be kept separate only if the work is done in distinct quarters with distinct ap- paratus. Otherwise these items are included in Apparatus and Instruments. (5) X-Ray Equipment (6) Ambulance Equipment (7) Training School Equipment (8) Steward's Equipment Storage refrigerators, scales, trucks, etc. (9) Kitchen Equipment This should include cost of ranges, steam tables, boilers (for cooking), ice-chipping machines, potato parers, kitchen utensils, etc. (10) Household Equipment This should include equipment used for dormi- tory and table purposes and for general pur- poses of cleanliness — such as linen, beds, bed- ding, crockery, dormitory and dining-room fur- niture, vacuum cleaners, etc. It is likely to be worth while to subdivide and show dormitory, dining-room, and general equipment separately. (11) Laundry Equipment (12) Machinery and Tools This should include machinery and tools for gen- eral purposes, as boilers, engines, motors, ven- tilating fans, and mechanics' tools. (13) Buildings and Improvements This is kept less as an indication of valuation than as an indication of the cost to the institution of 26 COST ACCOUNTING FOR INSTITUTIONS its property in excess of the native value of the ground. Hence it should be debited for the cost of the "improvements," commonly so- called, including plumbing and steam-fitting. (14) Sites and Grounds This should register the cost of the land alone. Arrangement of Balance Sheet for Comparative Purposes The balance sheet should make provision for an easy comparison between the present situation and that of a year ago. If the figures for the last year are placed at the left of such a sheet, with a column for increase and one for de- crease immediately following, and then the present figures are placed at the right of the titles of accounts or groups of accounts, the reader will see as the most conspicuous figure on the sheet the present situation, but will find at hand an easy correlation of the present figures with the old. Arrangement of Balance Sheet as to Assets The assets should be divided into several groups. The institutional property should comprise the first group, and should be shown in more or less detail, at least in enough detail to indicate the different types of property owned, such as sites and grounds, buildings, furniture and fixtures, machinery and tools, etc. The second group should include investments, which, in the case of many institutions, would comprise the endowment. The sum of these two groups — that is, properties and investments — would constitute the capital assets (unless there were certain cash funds destined, perhaps, because of restrictions, for capital use). The next main group of assets would be the so-called current assets, comprising any accounts receivable, supplies on hand, cur- rent cash, and accrued or prepaid items. THE BALANCE SHEET 27 Arrangement of Balance Sheet as to Liabilities A similar division should be made for the liabilities. The first capital liability for a corporation having shares would be capital stock. For an endowed institution it would be proprietorship, or book value of property above debts and special funds. Then would follow special funds, bonds and mortgages payable, etc. The current liabilities would be of the ordinary type, such as bills payable, ac- counts payable, and accrued items. These things are shown, without figures, on the sample sheet following (pages 28 and 29). Schedule of Furniture and Fixtures The supporting schedules for details should follow. The first, schedule I, is a list of equipment under the head of furniture and fixtures, as shown (the form varying with the circumstances) on page 30. These figures should be obtained chiefly by inventory, though some items, like calculating machines and refriger- ators, would be valued by an allowance for depreciation subtracted from their original cost or from their last book value. The general treatment of depreciation is discussed on page 104, and on pages 170 to 174. Schedule of Investments It is usually desirable for an institution to report an- nually all property owned by it for investment purposes. This form is intended to give information regarding not only the principal (the book value) of such property, but its market value, the gross income which it produces, any allowances or expenses connected with its ownership, and its final net income. The bookkeeper should clearly under- stand that any charges for taxes, insurance, depreciation, etc., on property held as investment, should be entered not 28 COST ACCOUNTING FOR INSTITUTIONS form a BALANCE Last Year In- crease De- crease This Year Capital Assets Hospital Properties, etc. Sites and Grounds (O)* Buildings (B) Furn. & Fixt. (ATSKRFH) (See Schedule I, p. — ) Machinery & Tools (LQ) Apparatus & Instruments (IDEXP) Ambulances, Horses (M) Miscellaneous Total Investments (Schedule II, p. — ) Bonds Stocks Mortgages Receivable Other Investments Total Cash in Capital Fundsf Total capital assets Current Assets Bills Receivable Accts. Receivable (Treas.) Accts. Receivable (Supt.) General material on hand (U) Cash — current (Treas.) Cash — current (Supt.) Interest (net accrued) Insurance prepaid Other prepaid items Miscellaneous Total current assets Grand Total Deficit * The initials after the names of the capital asset items are the symbols of the various accounts representing the property. For example, Furniture and Fixtures should include the equipment of the following divisions: Administration, Training School, Steward's, Kitchen, Housekeeping. The symbols are explained on page 35. t Cash belonging to capital funds, awaiting immediate investment. THE BALANCE SHEET 29 SHEET Last Year In- crease De- crease This Year Capital Liabilities Capital Account (Proprietorship of property not assigned to special funds) Special Funds (See Schedule III, page -) Bonds Outstanding Mortgages Payable Total capital liabilities Current Liabilities Bills Payable Accounts Payable Advances by patients Interest (net accrued) Other accrued items Miscellaneous Total current liabilities Grand Total Surplus 3° COST ACCOUNTING FOR INSTITUTIONS Schedule I Furniture and Fixtures Group Total Administrative Office Furniture (desks, tables, etc.) Office Devices (typewriters, calculating ma- chines, etc.) Telephone Apparatus Training School Furniture Library Charts, models, etc. Stores Refrigerators Trucks, scales, measures, etc. Kitchen Ranges, boilers, steam tables, etc. Machines (ice-chipping, potato-paring, etc.) Utensils Housekeeping Dormitory Equipment (tables, chairs, beds, bedding, linen, crockery, etc.) Table Equipment (tables, chairs, linen, crockery, etc.) General Equipment (furniture for general use, appliances for cleaning, vacuum cleaners, etc.) Grand Total as operating expenses of the institution, but as charges against the income of the particular property held. For this reason it is desirable to maintain in the general ledger (or in a subordinate investment ledger) a separate account for the income and for the expenses of each piece of invested property. Then complete record is at hand and statistics may be compiled. As is indicated in connection with the THE BALANCE SHEET 31 bonds appearing on the form shown, any bonds at a premium must be amortized whenever interest payments are received, in order that their book value may be reduced to par at maturity. Any bonds at a discount, unless it is be- lieved that they will not produce par at maturity, should be similarly accumulated, and a sum should be added to their book value sufficient to bring them to par at maturity. Schedule II Investments Property Book Market Gross Allow- Net Value Value Income ances Income Stocks Park Bank $9,000 $13,500 $710 $710 A. B. R. R. 1,000* 1,100 15 15* Bonds H. & P. Ry. 12,543 13,250 600 $55' 545 etc. etc. etc. etc. etc. Mortgages etc. etc. etc. etc. etc. Real Estate House, 16 Bee St. 15,000 1,500 500 2 1,000 Totals $62,200 $64,550 $4,815 $1,300 $3,515 Less short-term holdings 1,000 1,100 15 15 Full-term holdings $61,200 $63,450 $4,800 $1,300 $3,5oo Average percentage of net income 3,5oo 61,200 : 5-72%- ' Held for less than a year. Schedule of Special Funds The schedule of special funds is intended to give a sum- mary statement of the condition of each fund in such a way 1 Amortization of premium on bonds. 2 Taxes, insurance, depreciation, etc. 32 COST ACCOUNTING FOR INSTITUTIONS 8 to to 8 oo o o o_ O O M oo" as- «% ■a *s o o o o o o o o o o *• 9 O to 00 O 3 H fa M3~ O «5> oo" it) a~ C a) _; 3 as O o 8 o o 00 1 *u o o o d o o o o o o o o ■a w ^ m o o o o o o o o e lO to CO^ in to o_ °~ to £ HfHfi io o" to -? €© 4 ©£ 6* rC ■* .« «© m> «. t O u « 5*. a^ M, S> to H c T3 a k CO <-> 1 a -3 1 .3 s ■6 1 B ft 1 8 6 1 ■a O 'ft'S o 3 in CD 6 "2 > 3 'ft s d> o o o 0) c3 o o o 04 Q g « «* «* 0) o o ■o o 1 ^ H, m o o 1=1 8 to to a «*> ««■ «* ^ >* H fa o o o o o o O o II o o o o o o o o o o o_ o «5 to lO m U o. Tl C a V-. C aj X 3 aj a. •a g t-i a) V-l S t-i 3 Ml 3 •d x) *a CJ CJ u -u •c *n H ■c Si en Si a a fa \=> P THE BALANCE SHEET 33 that all persons interested in the fund, as donors or trustees, may learn exactly what has been done with it for the year in question. As in the balance sheet, the comparison with the preceding year is preferably placed at the left of the statement, and the items pertaining to the immediate year at the right. Since many even of the capital funds will have an occasional unexpended balance, that balance should be reported in a column by itself, and preferably the amount of the fund invested (of which, therefore, the in- come has been received) should also show separately. This gives for each fund three possible figures for the year in question, namely : the amount from which income was re- ceived, the unexpended balance, and the total of the fund. The statement should also show the totals for each group of funds — for instance, the total of the funds restricted to the purchase of hospital property, of the funds restricted to investment, of the unrestricted funds, etc. The total of all the groups will then give the total capital funds. To these are appended the current funds specified, classified on the basis of any restrictions that may be placed upon them. The figure in the last column is susceptible of proof in three ways : it should equal the last-year total plus the in- crease minus the decrease; it should equal the amount this year in use plus the uninvested balance; it should equal the total of the individual funds of the preceding column. Designation of Accounts by Symbols It is usually found very convenient, if not absolutely necessary, to have symbols representing the various ac- counts, for then memoranda indicating accounts to be debited or credited may be easily made on various forms and documents. The choice of symbols should be carefully made, or errors will arise from carelessness or confusion. Letters, having mnemonic significance, are preferable to 34 COST ACCOUNTING FOR INSTITUTIONS figures. Those recommended for the property accounts of a hospital are shown below. Throughout this book much emphasis is laid upon the symbols used — not because the symbol itself is of consequence, but because classification of accounts is of utmost importance, and here the symbolism is the expression of the classification. A knowledge of the symbol of an account under this plan instantly and auto- matically shows its place in the general accounting scheme. Symbols for Property Accounts A single capital letter may be used to indicate a prop- erty account, and the letter will always suggest the account to one who has once realized the connection between the symbol and the name of the account. In a few cases the correspondence is not so obvious as might be desired, but in these cases the natural symbol is required for use in another connection where it is likely to be in much more frequent demand, and hence the advantage of the mnemonic aid in that connection will be greater than here. Or, if deemed simpler, to show the relation of the property sym- bol to the department symbol, a symbol may be prefixed to the departmental symbol. Since it is usually unnecessary to distinguish between property, plant, and equipment, we may take E (equipment) as the general symbol of a capital account. If the institution is one which maintains a large number of departments, symbols for the capital accounts may well be related in all cases to the corresponding sym- bols for expense accounts, for example, by the prefix E; for not enough single letters are available. Symbols by both methods are shown below. In the right column are given those related more closely to the expense symbols. (Their significance will be seen only after the expense sym- bols have been observed— as explained on page 66. ) THE BALANCE SHEET 35 Where departments are few, the single letter should be used. Short symbol A Administrative Equipment Buildings and Improvements Dispensary Equipment Emergency Equipment Dining Equipment (F suggests feeding, as D is al- ready in use) Household Equipment (general, for dining and dormitory are separately shown) Apparatus and Instruments (I suggests instru- ments, as A is already in use) Kitchen Equipment Laundry Equipment Ambulance Equipment (M suggests awbulance, as A is already in use) Home Nursing Equipment Sites and Grounds (0 suggests outside, as S and G are needed elsewhere) Pathological Laboratory Equipment Machinery and Tools (Q suggests equipment, as M and T are needed elsewhere) Dormitory Equipment (R suggests rooms, as D is already in use) Steward's Equipment Training' School Equipment Inventories of Material (U suggests a basket, for stores) X X-Ray Equipment B D E F H K L M N O P Q R S T U Combination symbol EA EB EPD EPE EDHT EDHZ EPM EDK EDL EDM EPH EO EDP EHQ EDHD EDS EDT EU EPX Basis of Treatment of Accounts Herein In order to avoid confusion, as already suggested, the treatment of accounts in any paragraph in this book is based in large part on the sort of institution with which 36 COST ACCOUNTING FOR INSTITUTIONS the paragraph is primarily concerned; since, however, the chief type of institution chosen for illustration is the hos- pital, in the paragraphs on hospital accounts are discussed all accounts having general application to all institutions, as well as those peculiar to hospitals. Such are accounts for the steward's department, the kitchen department, the housekeeping department. Other accounts of occasional use in hospitals, but of more frequent use elsewhere, are treated in other paragraphs which chance to be devoted pri- marily to the accounts of other institutions (for example, baths, in the paragraphs devoted to accounts for clubs). Similarly, educational institutions may need accounts pri- marily designed for clubs (as the accounts for tennis-court equipment and maintenance). For other institutions than hospitals, therefore, many accounts similar to those already discussed for hospitals, or even identical, are likely to be required; and a few accounts desirable for hospitals, but not mentioned above, may also be worth while. Only in the index is attempt made to bring together, for all, or any, types of institutions, all references to the recom- mended accounts. The arrangement Of the text is that which is believed to bring out most clearly the principles. An attempt to discuss in a connected passage all accounts for each type of institution would mean an enormous amount of repetition. The hospital is taken here as the standard type, and variations from it are discussed by themselves. Capital Accounts for Educational Institutions Universities, colleges, and schools will require accounts not even suggested in the discussion of hospital accounts. Such are accounts representing different types of instruc- tion and facilities for study both for students and for in- structors. Below is a list of capital accounts recommended THE BALANCE SHEET 37 (the list is not necessarily complete, but indicates the kind of differentiation to be made). The symbol recommended for each is shown. The significance of the general symbols is as follows : E Property, plant, and equipment (an initial E, then, always indicates a capital account, and the term equipment is used indifferently for property, plant, and equipment) P Professional research S Students' instruction The symbols for subdivision are in the main obvious, but a few which must be somewhat arbitrary (because the letters naturally to be applied are already in use elsewhere) are as follows : B Books (for libraries) G Ground (for students on the ground or in residence) The following is the list of capital accounts : ESG Equipment for oral instruction to students in residence ESE Equipment for instruction through university extension ESC Equipment for instruction by correspondence ESL Equipment of laboratories devoted to the use of students (including libraries and collections in connection there- with, but not those for general use) EPL Equipment of laboratories for research work by the mem- bers of the teaching staff (or by special investigators) ESB Libraries for the general student body (not in connection with laboratories, and not especially for research by members of the teaching staff or by special inves- tigators) 38 COST ACCOUNTING FOR INSTITUTIONS It may be worth while to subdivide this account as follows: ESBB Books (not including periodicals or musical scores) ESBU Pamphlets ESBP Periodicals, bound and unbound, other than newspapers ESBN Newspapers, bound and unbound ESBG Maps and charts ESBM Musical scores, rolls, and records ESBA Photographs, lantern slides, prints, etc. ESBQ General equipment, for storage, adminis- trative, and delivery purposes The amount entered to the library accounts should be in all cases, except equipment, the cost of what is added. Replacement and rebinding of books lost or worn is not a capital charge, but a running expense, whereas additions, so long as they are avail- able for use, are what the library has to show for its funds. Depreciation and appreciation are be- yond anyone's power to estimate in any important library, and may be disregarded. Libraries for which no capital accounts have been kept in the past may be roughly represented on the books on the basis of a fair average estimated cost per volume — not for the purpose of valuing the present library (for such a figure might be an absurdity), but in order that there may be a point of departure, so to speak, for watching its future progress. Gifts should be appraised, and the value should be en- tered to the capital account and credited to an account for Library Gifts. EPB Libraries for the use of the teaching staff or of special investigators engaged in research ESM Museums and other permanent exhibitions (not in con- nection with laboratories) THE BALANCE SHEET 39 ESO Equipment of observatories used by students EPO Equipment of observatories for research by members of the teaching staff or by special investigators. It might be worth while to subdivide this account as follows: EPOA Astronomical apparatus EPOP Photographic apparatus EPOB Books, maps, charts, etc. EPOQ General equipment EHH Equipment in public halls (pianos, organs, scenery, etc.). The first H of the symbol indicates general "house property." So far as universities, colleges, and schools afford to their residents facilities similar to those afforded by clubs, hotels, etc., to the accounts above named will be added certain departmental accounts indicated below. Equipment Accounts for Hotels and Clubs Hotels and clubs would have to a certain extent the same accounts as hospitals and educational institutions. For example, EDS, steward's equipment, and EDK, kitchen equipment, would be the same. A library, however, would be designated EDB (since D indicates a department of ac- tivity, and only one type will be maintained), rather than ESB or EPB, and an exhibition EDM. In addition, the accounts indicated below are likely to be necessary. The departmental symbols shown for this group of ac- counts are usually suggestive of the initial letters of the de- partments. The following, however, are more or less arbi- trary; but they are in each case made necessary by some other use of the symbol which would naturally be used in this connection, and each suggests a word connected with the department function. 40 COST ACCOUNTING FOR INSTITUTIONS A Boats (suggesting aquatics) F Carting (suggesting freight) I . Gymnasium (suggesting, by its shape, straightness and setting-up exercises) J Driving (suggesting Jehu) O Bowling (by its shape suggesting a ball) Q Cards (suggesting queen) R Billiards (suggesting rubber and cushions) V Golf (suggesting, by its shape, an inverted tee) W Baths (suggesting water) Y Bar (suggesting the shape of a wine glass) The following, then, is a list, with symbols, of equip- ment accounts recommended for hotels and clubs : EDA Equipment for the department of boats (This should in- clude the cost of boat-houses, boats, canoes, launches, ' etc.) EDC Equipment for the department of cigars EDE Equipment for entertainments (properties, etc.) EDF Equipment for the department of transportation (in- cluding cost of draught horses, wagons, harnesses, etc., for cartage and delivery) EDG Equipment for the department of garage (including cost of automobiles and all equipment connected with their use) EDI Equipment of gymnasium EDJ Equipment of stable (including the cost of horses, horse- drawn vehicles, harnesses, blankets, etc., for driving or livery purposes, but not including the cost of such equipment for cartage or delivery) EDN Equipment for the department of news-stands EDO Equipment of bowling alleys EDQ Equipment of card rooms EDR Equipment of billiard rooms EDT Equipment for the department of tennis (This should include the cost of alterations of land which serve the purpose of tennis alone and do not add to the value of THE BALANCE SHEET 41 the land for general use. The cost of special equip- ment, such as nets — center, side and back — should be entered here. No institution is likely to need this symbol for both a tennis department and for a training school for nurses. Hospitals maintaining courts for doctors and nurses would hardly find a separate ac- count worth while. Sanatoria, if they had a training school for nurses, might use symbol EDX for tennis.) EDV Equipment for the department of golf (the cost of tees, putting greens, artificial hazards, shelters, etc., and all equipment or improvements on the land which serve golf purposes and would not increase the value of the land for general use. Grading and the cultivation of fair greens may be deemed an addition to the general value of real estate.) EDW Equipment for the department of baths (This includes the cost of all the equipment for swimming pools, Turkish baths, vapor baths, electric or violet-ray baths, and other therapeutic baths. This account should be kept in hospitals maintaining such a department.) EDY Equipment for the bar In many institutions, having but few departments, these symbols could be shortened to a single letter. In every case above, the E is retained to show that the account is for capital items, and the D is retained to show that it rep- resents capital for a department — as distinguished from property or capital independent of departmental use. For example, EA is administrative equipment, but EDA is aquatic equipment; EO is sites and grounds, but EDO is bowling equipment. The titles of accounts given above are often long and awkward in order to suggest the signifi- cance (as a mnemonic aid) of the symbol. In use, their shortening is obvious. 42 COST ACCOUNTING FOR INSTITUTIONS Balance Sheet for Institutions Generally The balance sheet for educational or other institutions would not be essentially different in form from that shown on page 28. The grouping of property accounts would be somewhat different, however. The costs of equipment for purposes of instruction, for example, would preferably form one group. Similarly, for clubs and hotels, the costs of equipment for outdoor or athletic purposes would form a group by itself. CHAPTER III THE STATEMENT OF FINANCIAL TRANSACTIONS FOR THE YEAR The statement which is of most importance in giving a summary view of the transactions of any business organi- zation for any particular period is the statement of income. For institutions which are not primarily profit-making, how- ever, the common type of income statement is not likely to be quite satisfactory. A complete statement of transactions should combine capital and revenue items, but should do this without confusing them. Several related schedules may well supersede the single statement of income. It is obvious that institutions having several sources of income and compelled to meet several kinds of expense should show how far any of the kinds of income are adequate to take care of the expense connected with them. Earnings and Endowments In a hospital, for example, the first fact we wish to know is how far the earnings from the service of patients are adequate to pay running expenses. If we show all items connected with the care of patients in a schedule by them- selves, which we may call the "schedule of earnings," the resulting surplus or deficit gives us the desired figure. We ' next wish to know how far the income from the endowment of the institution is adequate to make up any deficit in its direct earnings, or how far it will add to the surplus of: earnings. So the surplus or deficit of earnings, 43 44 COST ACCOUNTING FOR INSTITUTIONS from the first schedule, should be carried down to the sec- ond schedule — which we may call the "schedule of endow- ment income." Any surplus or deficit remaining after in- come from endowment has been considered is the net re- sult of the internal affairs of the hospital. Subscriptions For most hospitals, two other sources of income remain — annual subscriptions from charitable organizations and individuals, and legacies. It happens that subscriptions are likely to maintain a fairly steady level, and may with some degree of certainty be counted upon by the administrative officers to meet running expenses. Legacies, on the other hand, are extremely variable, and may run very high in seasons of abnormal death rate among the well-to-do, and may run very low even in extremely prosperous seasons if these seasons happen to be seasons of good health. For this reason it seems desirable to make a distinction be- tween these two kinds of income, and to provide separate schedules for them. If we bring down the surplus or deficit from our second schedule, or "endowment income," into a third schedule, which we may call "normal current income," we have a final surplus or deficit resulting from what may be considered the normal transactions of the period under review. Legacies and Other Funds This figure, in turn, should be carried into the fourth schedule, which should cover legacies. Here we enter a field which may be either capital or revenue. This sched- ule will show the final result for the year as affected not only by normal income and expense, but by the two transi- tory and unreliable elements, current and capital legacies. If any legacies have been received subject to the restriction STATEMENT OF FINANCIAL TRANSACTIONS 45 that they shall be used for capital purposes only, it is hardly feasible to consider them as of the same class with unre- stricted legacies, and theoretically they should not go into a schedule which includes current items; but since most persons who are interested to watch contributions to an in- stitution of this sort are not familiar with accounts, and are therefore likely to expect to see even capital legacies placed with the income for the year, it is desirable to place them in this part of the statement — though they should be desig- nated separately. This fourth schedule, since it is not strictly for either income or capital, but combines all kinds of ultimate receipts, should distinguish by separate columns those for current use from those for capital use. Detailed Schedules To these schedules may be appended details for pur- poses of comparison — one institution with another or one year with another; but anyone who has attempted to make comparisons for himself either within an institution or be- tween institutions will recognize the importance of the sum- mary statements, even though details be not shown. Detailed Examination of Schedules Let us now examine these statements in detail. The forms given, on pages 51-54, are for a hospital. Provision is made there for virtually all contingencies. Never could all of them arise at the same time in any institution, but the titles are shown for the sake of completeness. Virtually the same sort of items would appear for any other type of institution, though the titles might be changed in certain cases — as with "State appropriation" substituted for "Sub- scriptions from normal sources." 46 COST ACCOUNTING FOR INSTITUTIONS Schedule A — Earnings In schedule A are shown only those items of earning and of expense which result from the conduct of the insti- tution's prime function — the care of patients. (For a school or college this would be the education of students, and for a club or hotel the entertainment of guests.) Distinction should be made clearly between earnings and income, for the latter term is commonly used to designate not only earnings from the chief business of the enterprise, but also interest and dividends on bonds and stocks held and mis- cellaneous income from chance profits. Any gain arising from sources not directly related to the year under consider- ation should appear on neither the earnings account nor the income account, but on the fourth schedule. Deprecia- tion must be counted as an expense of conducting business, and is therefore chargeable against earnings on this first schedule. In view of the fact that very different policies with regard to the amount of depreciation chargeable in any year prevail in different establishments, however, it is desirable to show depreciation as a separate item; for it would be unfortunate for any institution to have its super- intendent judged by the total charge for expenses, when that charge included very liberal provisions for deprecia- tion, in comparison with the superintendent of another in- stitution in which the provision for depreciation is very scant. For these reasons, on the revenue account deprecia- tion is shown in the accompanying form as a deduction from an initial surplus or deficit, and is therefore excluded from the first figure of expenses. Obviously if the revenue from the main activity of the institution is in excess of all the expenses, the words "Total deficit" on the form which follows will be canceled, and "Net surplus" will stand as the title; and if the initial surplus is less than the amount of the depreciation, the final designation of the amount of schedule A will be "Net deficit." STATEMENT OF FINANCIAL TRANSACTIONS 47 Schedule B — Endowment Income The purpose of schedule B is to show not merely the figures for income, but also the rate of return. In view of the fact that some investments may have been made in the progress of the year, and therefore have borne interest for less than a year, one cannot draw exact conclusions with regard to the average rate of return unless one knows how much investment has borne interest for a short period. Schedule B accordingly shows as its first item the invest- ment previously reported and unchanged, and gives in parentheses the average rate. The next item is the interest charged by the corporation, and therefore earned by the corporation, on property used in the departments and shown on the statement of detailed operating costs under the vari- ous departments. The income from new and changed in- vestments, which, of course, is for less than a year, is sep- arately shown. From the total of this income from invest- ments and property must be subtracted any deficit of earn- ings as shown by schedule A, if any has occurred; or to these will be added any surplus of earnings. The cancella- tion of the unnecessary words on the schedule makes the final figure clear. Schedule C — Normal Current Income Schedule C is likely to be most useful if it covers not only all items of gain from earnings and from investments, but also all sums received from outside in the way of gifts or legacies applied to current uses and normal in amount. Since the purpose of schedule C is to show the ultimate re- sult of the year's work so far as the balance of income and expense is concerned, and since many institutions receive frequent legacies not only available for current expenditure but even intended by the donors to apply to that use, the result of the year's operations is not fairly shown unless the amount of such gifts and legacies actually utilized for cur- 48 COST ACCOUNTING FOR INSTITUTIONS rent purposes is shown on the final schedule of normal cur- rent income and expenditure. The final figure of schedule C indicates whether the institution is running behind on all its normal current income, from whatever source, or is ac- cumulating a fund available either for expansion or for in- creased investment. Institutions, unlike most commercial and manufacturing enterprises, are likely to have funds which may be treated as either capital or current ; for they are not primarily engaged in making and distributing profit ; and hence they have not the same need of distributing evenly throughout the years any unlabeled items of income and capital. Since expenses need not necessarily be met out of earnings, and since some contributions may be either income or capital, a certain overlapping of what in ordi- nary business would be deemed either pure income or pure capital is bound to occur. This overlapping should be indi- cated so that, one in reading the accounts, or at least in read- ing the final published statement, may see both what is the gross increase in the capital of the enterprise, and how much of those receipts which under certain conditions might have been added to capital have been actually absorbed for current use. The balance sheet, as previously indicated, shows annually the condition of all capital funds; but it cannot show how much property possibly available to add to capital has been absorbed for other purposes. Schedule C should show the actual absorption of legacies for current uses. Corporation expenses should be reported here. Schedule D — Special Items : (a) Available Funds Schedule D is meant to be a statement of the financial transactions for the year, both capital and income. It be- gins with the balance brought down from schedule C. If schedule C has not produced either a mere cancellation of receipts and expenditures on one hand or a deficit on the STATEMENT OF FINANCIAL TRANSACTIONS 49 other, the surplus of normal current income is, of course, available to increase capital, and therefore it may be held either for current use in the subsequent year or as a fund laid aside and destined for capital investment. The sched- ule shown below indicates how much surplus of normal cur- rent income is destined for each of these two possible uses. The second and third columns of the schedule are intended to separate the current from the capital items; and there- fore these amounts, resulting from a division of the surplus of normal current income just indicated, are not only shown, with their total, in the first column, but are extended into the appropriate other columns. As above indicated, legacies and other special contributions may be restricted to investment for capital endowment, they may be available for the purchase of property, or they may be available for current expenses. The sum of these constitutes the amount which it is possible to add to capital ; but if any part of this sum is applied to current expenses, the balance only will be extended into the capital column of the schedule, and the sum deflected to current expense will appear in the current column and will correspond with the sum so named on schedule C. Occasionally an institution disposes of some of its prop- erty at a profit. This gain is clearly not a gain of income in the ordinary sense, because it does not arise from circum- stances of the current year. It should be considered a cap- ital addition, although, of course, unless there were a re- striction on the original property, it may be applied to cur- rent uses if need arises. Similarly, gains may arise from change of investment. These, when added to the possible capital additions already indicated, show all possible addi- tions to capital for the year. It is likely to happen, how- ever, that some capital items have depreciated, and that, although sums are available for capital increase, it is wise 50 COST ACCOUNTING FOR INSTITUTIONS to devote them to making good capital losses. Wherever this has occurred, it is obvious that the increase in property or investment shown by the balance sheet will not be so great as the increase in possible additions to capital shown on schedule D. To explain any such discrepancy, it is de- sirable that those sums necessary to make good losses shall be shown directly on schedule D, and thus indicate the de- duction from items of possible addition to capital. It is true likewise, of course, that capital property may have increased because the institution has borrowed to make purchases. If that has occurred, the increase in outstanding debt should appear on schedule D as a means of showing the total amount of funds to be accounted for. Then any changes on the balance sheet will be explained by reference to sched- ule D — unless those balance-sheet changes have arisen from a mere shift of one kind of assets for another, or from a shift of one kind of liability for another. Schedule D' — Special Items: (b) Disposition of Funds The second half of schedule D is intended to show how the institution has accounted for the funds which the first half of schedule D shows it responsible for. If the normal current income (schedule C) has shown a deficit, obviously a part of the funds available for current use and shown on the upper half of schedule D will be absorbed in making good this deficit. Any additions to institution property and to institution investment will also absorb certain portions of the increase of funds available for capital use; and if any shrinkages of either property or investment are to be made up from capital funds these will also show. It will be no- ticed that those sums necessary to make good losses are shown on both halves of schedule D ; since it is desirable to show the details regarding the use made of capital funds available, they must appear on one side of the schedule, and STATEMENT OF FINANCIAL TRANSACTIONS 51 FORM B Statement of Financial Transactions for the Year Schedule A — Earnings Expenses, excluding depreciation (see Schedule IV, page — ) .... $245,000 Revenue from hospital sources (see Schedule V, page — ) 100,000 Initial [surplus] deficit $145,000 Depreciation (see Schedule IV, page — ) 5,000 Total [Net] [surplus] deficit of earnings (see Schedule VI, page — ) $150,000 Schedule B — Endowment Income Income from investments previously reported, and unchanged (5-12%)* $85,000 Interest charged to institution departments on their equipment (3%)t 10,000 Income from new or changed investments (parts of year only) . . . 5,000 Total $100,000 [Surplus] Required to make good deficit of earnings (Schedule A). 150,000 [Total surplus] Net deficit of endowment income $50,000 Schedule C — Normal Current Income Subscriptions from normal sources (see Schedule VII, page — ) . . $80,000 Legacies and special donations used for current expenses 00,000 Total $80,000 [Surplus] Required to make good deficit of endowment income (Schedule B) 50,000 Balance $30,000 Corporation expenses 5,000 Net [Total] surplus [deficit] in normal current income .... $25,000 * This does not include income from any funds of which the income is not available foi current use. t The reason for charging interest to departments is given on page io3. 52 COST ACCOUNTING FOR INSTITUTIONS 3 a C o O M ■< W n « *> o E & o o o o o o g o o o o" o~ o" <* o o o O o o O o o o o o IO IO t-H 69- w OOP o o S o o o n « a! ft 2 o 2 o o o o o" ■*• o io o ■* o «9- S3 3 £ a H 3 ■a to o H Z W Id H '73 3 -d w •o "d i> CD •3 ■d « a S.2 a 3 •- .Q a o -c B •d 8 "C ni a ■K '3 8 * fl o •d £ a 3,3 2 ft « E o s & "- 1 3 E ft S 8 ."S !-■ a 3 d o ° n ■is "" rrj *d *d o Oj 0) r/i * QJ T3 "S ft CD 3 J3 3 u. u m 3 1 o p- o o t-H Vh 4-> o o ■d 4-( CI) > "rt < < ■•s fe •d o w -d o m ft w 3 w §J ■2 1 ,__, CO O cu 3 *+3 S> en > .S .£ O O QJ QJ '3 ft e ft ^2 c E3 S -S ft M +» o 53 u — ' — ' 2 *d *d o o 9 9 M be ss cd cd QJ 0} ^•2 3 •S 3 I IU — ! -^ o 3 3 B a) H ■a "O § Q - w » « o h z; o H cfl 55 «: as W s w H H S 1 =o £ c3 u -a 8 -a. o o o o o o o o o 8" O o o o in o o o o n 8 o o o o o in u-i \n \r> «* t& 0_ <3 1/5 o O •3 fc. 2 0. •s S W, ft" d o » » U S ■a £ "5 .Q 3 c3 5 oj ■s I ++ «2 e«9 t^ w p Jj a G o o „ o o 3 ■3 SCI o o 13 ■d as 3 iS .13 o ■d ■a a! >© •* •a +3 o 69. 8 M a Q o XI a ■o ^a- M u Q 6» 69. o o o o O 0) M H ,!T> "J S -1 c * Q o o pi 3 O o * o o o Ov a Q s o o h o 4J o M o .3 H J J 69. o o o 3 O H o P >o t-s o * H ■q- **• * In o 60. 69. o (V) 1^ M- r>i O o Vr, »o O M- Oi Q in »n O N *o o o* M- Oo <* rr, *o QO V-> Oo en 60. M N 60. M N 69? S»o g "> m "i>o "> D 0> O. «-> H O Ov «1 N N N ftj ft) -> M « K) >-> ^ N O fc> O § •a i "3 1 8 1 1 1 s 5 a a a a a a B cS <# CO CO O to S CO O Co ft. ■ft. FORMS FOR THE DETERMINATION OF COSTS m o O H oo Q oo ■<* 69. +3 2 «> N H Otj oo' >-i 11 69. Q o oo to. o H oo 69 t5 1 69 u Q o 69 R. 69 +J £ O Oo 69 a ■g 69. S Q 4J O H o oo 69 (J Q "8 5 o H Q o v> ® ? CN-J Cfl 69 O O oo rj. 69. +> £ i-i o 69 Q *d m i-< w-i 6? H2 COST ACCOUNTING FOR INSTITUTIONS the general ledger to the laundry department as a whole. The credit of $1.49 is obviously a credit to general supplies which have been transferred from the laundry department to some other. (The detail is shown, of course, in the journal.) Of course the cross footing of the eleven sub- division totals should equal the vertical footing of the gen- eral total. This total is posted hence to the general ledger. It is unnecessary to enter in the first column the total of items from each book, for the sum of the footings of all the other columns will give the total figure ; but the method shown is a check on error. The total of each subdivision is extended, it will be observed, into the total column for that subdivision; and the total debit of all subdivisions, as already noted, is en- tered in the first of the pair of columns headed "Total," whence it is posted to the general ledger (here page 53). It will be noticed, however, that under the "debit" column in each pair of columns for the subdivisions, but not under the column marked "total" in each pair, a double red line is ruled at the end of each month. This double red line indicates that addition will not proceed farther in that column ; but since there are no double rulings in the "total" column of the subdivisions, the total may be made con- tinuous until the closing of the books at the end of the half year or year. Under the debit column in the total group (which is the first pair of columns) the double ruling is provided; for this figure is not continuous; but since it is shown in the general ledger and will appear upon the monthly trial balance, the cumulative figure for the depart- ment as a whole may be found at any time. Expense-Ledger Results The ultimate result of this arrangement is that details are posted from the voucher register, from the cash book, FORMS FOR THE DETERMINATION OF COSTS 113 and from the journal, to the subdivision accounts in the expense ledger; that these subdivision accounts are kept both monthly and cumulatively until the end of the half year or year ; that the total for the department, which must agree with the total of the subdivisions of the department for any month, is carried monthly to the general ledger, whence it is taken in total and carried to the trial balance : so that we have a statement of condition at the end of each month; that, if we wish to compare individual months, we have the total for each month, both for the subdivisions and for the department as a whole, in the expense ledger; and if we wish the total of any subdivision for any number of months, we get it from the footing (naturally taken each month for test purposes) of the total column of that subdivision. In the end, therefore, we have the total of each subdivision and of the department as a whole for each month, for any number of months, and for the half year or year as a whole. List of Forms for Details of Cost Determination The following forms are presented and discussed in the present chapter : Form 1 Registry Book 2 Daily Patient Ward Report (from nurse in charge) 3 Ward Record (kept by nurse in charge, and checked monthly with Patient Summary) 4 Monthly Patient Summary, all wards (from Daily Patient Ward Reports — Form 2 ) 4a Annual Patient Summary (from Monthly Patient Summaries — Form 4) 5 Monthly Discharge and Death Record (from Daily Patient Ward Reports — Form 2 — and Registry Book — Form 1) 114 COST ACCOUNTING FOR INSTITUTIONS Form 5a Annual Discharge and Death Record (from Monthly Discharge and Death Record — Form 5) 6 Monthly Patient Report (for trustees, from Monthly Patient Summary — Form 4 — and Monthly Dis- charge and Death Record — Form 5) 6a Annual Patient Report (for trustees, from Annual Patient Summary — Form 4a — and Annual Dis- charge and Death Record — Form 5a) 7 Time Sheet yx Time Sheet Appendix (for employees whose time is divided) 8 House Tables Requisition ( from Time Sheet — Form 7 — made out in office and sent to housekeeper or dietitian) 9 Ward Diet Requisition (made out by nurses and sent to dietitian) 10 Summary Patient Diet Requisition (made out by dietitian from Ward Diet Requisitions — Form 9 — and sent to housekeeper) 11 Requisition on the Steward's Department (based on House Tables Requisition — Form 8 — and Sum- mary Patient Diet Requisition — 'Form 10 — and made out by the housekeeper) I2w Weekly Dietary Summary (from House Tables Requisitions — Form 8 — and Summary Patient Diet Requisitions — Form 10) 12 Monthly Dietary Summary (similar to I2w, but adding the last three days and combining the weeks) 13 Calculation of Special Food Costs (from Requisi- tions on Steward's Department — Form 11 — and purchase records of prices of food) 14W Weekly Summary of Special Food Costs (from FORMS FOR THE DETERMINATION OF COSTS 115 Form Calculations of Special Food Costs — Form 13 — and Weekly Dietary Summary — Form i2w) 14 Monthly Summary of Special Food Costs (similar to 14W, but adding the last three days and com- bining the weeks) 15 Calculation of Occasional Common Food Costs (from Requisitions on Steward's Department — Form 11 — and purchase records of prices of food) l6w Weekly Summary of Occasional Common Food Costs (from Calculations of Occasional Common Food Costs — Form 15 — and Weekly Dietary Summary — Form I2w) 16 Monthly Summary of Occasional Common Food Costs (similar to i6w, but adding the last three days and combining the weeks) 17 Calculation of Regular Common Food Costs (from inventories, purchase records, and Monthly Dietary Summary — Form 12) 18 Summary of Average Food Costs (from Summary of Special Food Costs — Form 14 — Summary of Occasional Common Food Costs — Form 16 — and Calculation of Regular Common Food Costs — - Form 17 — and Monthly Dietary Summary — Form 12) 19 House Tables Record (from Time Sheet — Form 7) 20 Distribution of Food Costs (from Summary of Average Food Costs — Form 18 — Monthly Patient Summary — Form 4 — and House Tables Record — Form 19) 21 Engineer's Daily Time Card 22 Engineer's Monthly Summary 23 Space-Cost Basis 24 Space-Cost Distribution 25 Monthly Record of Ice Il6 COST ACCOUNTING FOR INSTITUTIONS Form i — Registry Book On the Registry Book attempt is made to give all the information, other than medical, which it is desirable to keep for any one of four purposes : first, identification of the patient; second, financial responsibility; third, general statistical information, including that which will enable one to determine the costs of service ; fourth, physical condition of the patient at discharge. Each patient on entrance is given a number, as shown in the first column. This number is not repeated, even though the patient returns later ; but the fact of return may be shown by an additional memorandum, after the name of the patient, showing the number given to the patient on his first arrival and any subsequent number given him on returns prior to this. The column headed "Notify" con- tains the name of the person who is to be informed in case of emergency. The next column indicates the person financially responsible for the payment of charges, or, if the name is in parenthesis, recommending credit. The next five columns contain records requiring no comment, but they should be filled accurately, so that statistics regarding the social and economic standing of patients may be available. The record of ward, or room, is of importance not merely as a guide in finding the patient, but as an indication of the department of the institution chargeable with the costs of board, etc. In the column for the date of entry the small number at the right and above the date indicates the time of entry (that is, the last meal served before entry). If the same plan is followed after the date of discharge, the difference in dates indicates the total number of days' board, with any fractions of days, chargeable to the patient. This is important for statistical purposes even if it is not used in determining charges to the patient; for example, if the number in the column headed "Total days" is 21 1 , it indi- FORMS FOR THE DETERMINATION OF COSTS 117 M a o "2 m ■3 -d § S > CO O ■a < <*> 8 5 d a V _ &0 Si IH 13 'H .2 » > +J T +3 a) t K| C O O K O O m % 3 >2 J3 B an c n8 COST ACCOUNTING FOR INSTITUTIONS cates sixty-four rrieals served — twenty-one days and one meal over. Form 2 — Daily Patient Ward Report Form 2 is a daily report for a ward, and contains all information necessary for the calculations of daily costs and for the completion of the registry record. Since it is to be made out daily, the number admitted, the number FORM 2 Day, January 2, 1912 Daily Med. A Ward Patient Report Number of patients, morning Number admitted 28 1 Number under treatment Number discharged Number died 29 1 Number remaining, evening 28 Special diet days * House diet days * Fever diet days * i 2 25 1 Total diet days * 27 2 DISCHARGES Registry numbers of individual patients Cured Improved Not Improved Died 147 •In days and thirds of days (meals). FORMS FOR THE DETERMINATION OF COSTS 119 discharged, and the number died, should be always the number since the report of the preceding day. The second part of this report shows the number of patients in each of the main classes of diet. This figure is used in the dis- tribution of food costs. The last part of the report gives the condition of patients leaving. It gives not the number of patients, but the registry number of each patient, dis- charged as cured, improved, not improved, died. This re- port should be sent by the head nurse in each ward to the office at a specified hour daily, and should cover preferably figures until midnight of the preceding day. Form 3 — Ward Record This form is virtually a duplicate of form 2, but it contains the record for all the days of the month on the same sheet, and it should be kept in the ward. At the end of each month, the nurse in charge of each ward should send to the office the final figure for the month on a daily patient report blank (form 2) with the word "daily" changed to "monthly." The office will then have means of comparing its own figures for the summary of all wards with the total of the summaries kept by the head nurses, and, therefore, will see that the monthly ward record kept by the nurse of each ward is kept accurately. Only thus is it possible to know that no discrepancies creep in between the nurses' daily reports and the office monthly report. The only difference between form 3 and form 2, except for the larger content, is the provision for avoidance of duplication in the total number of patients in the last column. The number of patients at the beginning, of course, should be not the sum of the number of patients for each day, but only the number of patients on the morning of the first day. The number under treatment should be not the sum of the numbers under treatment for all days, but may 120 COST ACCOUNTING FOR INSTITUTIONS a s I o u w < a I o o <^ o "5 >o «\ a °0 ID M u 8 "8 "O & in V a 3 P22 60 a M s •a 1 3 ia * * ill a W "d +j W-> N o, « >o (M M H oo s « Ml X5 •» U-, ~o 00 >o O CM 03 Q & n « i, CD 3 > a ° a) m K t^ id >. a 13 •n "o a DD >. a 1 3 O 21 ^ a ff«S !fl jp a CL) a 'U c 3 IS ,£3 jj b O 3 a a rt a 3 a Q JB >■ 8 £ . w 124 C0ST ACCOUNTING FOR INSTITUTIONS parison of the two calculations will serve as a check on error. The last item on the first part of this summary, total number of meals, is new, and is obtained by multiplying the total diet days by three. It gives the total number of meals served during the month, and is required in order to make possible the proper distribution of food costs for articles which are common not only to all diets but also to all meals — such as flour, butter, sugar, milk, etc. Another new item on this summary is the "largest number under treatment any day." This shows how largely in any day the institution was run at full capacity. Since, however, this figure might misrepresent the facts by putting undue em- phasis upon a large number, a supplementary statement, "duration of that number," should show whether it was mere chance or is more or less frequent. Similarly, the "smallest number under treatment any day" indicates the minimum use of the plant, and the supplementary statement, "duration of that number," indicates whether the condition is normal or extreme. On this summary is also added the distribution of diet days between wards and private rooms. The figures are taken from the daily ward reports, of course; for the office knows for each report whether the ward or room named falls within one or the other category. These figures are important in determining our costs for patients in wards as compared with those for patients in private rooms. Form 4a — Annual Patient Summary This is identical in purpose, and to a great extent identical in form, with form 4. It gives a summary for« the year, and substitutes monthly for daily figures and an annual for a monthly total or average. FORMS FOR THE DETERMINATION OF COSTS 125 PS w ■* a OS o 1 # ■1- ■» <■ UK d & S < 1 C3 1—1 W V 3 O 2 ■s in "3 'a w , OT3 •a s SB .a"S 1-. t-« ll 3 3 22: 8 6 1"S 8 1- 2 +J S W w <3 "3 'a ■d U .3 ±> G u >? to rt v ., ■555 tu 2 > o.,S "C 9 S5 AP< H B Efl T) « U H a in & O VI >> at Q CD +3 H 3 Specia House Fever a « :>. .a S Tj 1- >> > < a !>> 3 CD ■a >, 3 c £>§ b ai cd h cd *" E. S 3 ai 3 rt . & k*^ •2 o a o 5 3 3 3 w +J +J -M w ^ 0; ^ i-J CO o o ° B I* 126 COST ACCOUNTING FOR INSTITUTIONS Form 5 — Monthly Discharge and Death Record Since the monthly discharge and death record should be kept with great accuracy, not only for statistical purposes but because of the fact that it deals with persons and not with things, it may well appear on a separate statement rather than as a part of the Monthly Patient Summary.* It is desirable, moreover, to know, in addition to the in- dividual discharge and the condition at discharge, the num- ber of days for which the individual was in residence at the hospital; for if the hospital is one of last resort its proportion of deaths will be high, and the fact that it is of last resort will be somewhat indicated by the fact that the average time of residence within the hospital is short. For each class of patients discharged (cured, improved, not improved, died), therefore, there should be a record of the individual registry numbers of the patients, and the number of days of residence; to these figures should be appended the totals, so that the check on error or omission will be complete. To this general statement should be added three statistical items — the longest stay for any patient discharged during the month (which may be easily learned by running through the days shown under each group) ; the condition of that patient at discharge; and the average stay of all patients discharged during the month (which is found by dividing the total days by the total number of patients). The average stay for each group can be shown easily if desired; but in the forms used here it is shown on the an- nual record only, and is deemed hardly valuable for the monthly record unless peculiar circumstances have arisen. * In some institutions a discharge number is given every patient and recorded on a form consisting of two columns only — the first giving the entry number and the second the discharge number. Entry is made only when a patient leaves or dies. The difference between the last entry number on the Registry Book and the last discharge number on the Discharge Book is the number of patients in the hospital. This is a good check on error, but serves no other purpose. FORMS FOR THE DETERMINATION OF COSTS 127 a I to O B o s « o to r3 w «s "5 to ■8.S Pi N fo CO 1*3 0< C C3 r? ° p> "1 •■sl N. N -m p '•3 s O SI '•3 s O P) 53 a a W '0 !* to r? ° 00 ^2 pi (2° «"3 A ° CVJ CS] 0) Pj N -a- pT pi pi & Q odd 1- '■§3 1-1 cu a A< .a N <*■ a o u w a s 2; H rt w ■d to O, H CM H CJ CM M- CO < a, > cij <> O Q & 8 g a CdhH Q xs Q < CD o S 3 O CM £ > Ov N O, 1/3 *o CM ^ Q J5"S Q Oo >0 oo D o S5 < h- 1 B 3 2 cm c! to E? H CM ■B-O +3 3 03 Q ■SI- CM" CM can rt 10 > s 3 t— i February March etc. etc. +3 ■S o 8 u a ftQ i I BO I FORMS FOR THE DETERMINATION OF COSTS 129 Form 5a — Annual Discharge and Death Record Form 5 a is similar to form 5, but substitutes months for days, and gives the average stay by groups (cured, improved, not improved, died). (See opposite page.) Form 6 — Monthly Patient Report The superintendent of the hospital should make to the trustees or governing board a monthly report containing a summary of those items concerning which the board will desire information; but this report should be brief and therefore should not contain quite so much information as the superintendent will require for his own guidance. This form is intended to suggest the desirable information. All the figures recorded here are obtainable from reports and records already discussed. (See page 130.) Form 6a — Annual Patient Report This is practically identical with form 6; it differs only in substituting annual for monthly figures. (See page 131.) Form 7 — Time Sheet [Illustrated on page 132.] In attempting to divide the cost of board, room, laundry, etc., for employees among the various departments which they serve, it is necessary to have complete information with regard to their assignments. This form is intended to suggest how such information may be kept in connection with the ordinary calculation of payroll, and without much labor beyond that required for the simplest form of payroll. The first column (beyond the name) shows the type of table board served to each employee, and indicates there- fore which of the various rates of board is to be used in charging the department served by the employee. The second column indicates the specific board account charge- able for this employee's board — that is, which departmental board account is so chargeable. All the other columns but 130 COST ACCOUNTING FOR INSTITUTIONS a a I O B z o H Bl o ft. w a >< J o o N>0 O in v-,0 In'* •ll O to u->0 1-2 2^ O H N.N. 0\ Is.** •a Efig E " -ri *± to *d "" .<« ■K'S §b a-Si-g&t.fc.SO'Siz: o H 1 a|ia^s^| iF|*£g£g FORMS FOR THE DETERMINATION OF COSTS 131 w H PS o ft. a Pi H H H «: Oh SS <3 3 S ■< CIS o ■s M C 5 5 3 2 S 3 a ■^ ° ** ,17+3 "-S a h g> H £? a «* 3 § n >? a b , ft ft-d B O s ° 5 3. S >i >*4-i T3 O ■ if a O V c > Is. 5 » g v S ts w c 3 a o 3-2 3-9 «>+» u.SOtSZ S 6 § S Sfl gp-2 ■B 5-3,3 2 mS^ 132 COST ACCOUNTING FOR INSTITUTIONS o a s O W H 65 O H a w a w s o o o a-< o o 3 nJ o -S y> o 2 P tv «-> O ^ o W ,»o , co to to Z £ is< TtJ T^J T^J ^ ^ +> S " * t3 v> o o MOO H N H . «i p ^ i*) H t^ N 6 HO 8 5 -3 «-* 1 8 * oj^cj Q e M FORMS FOR THE DETERMINATION OF COSTS 133 one are of the usual type for a time sheet. The exception, which is headed "wages account," indicates the account chargeable for the wages alone — that is, which depart- mental wages account is chargeable. These columns are disposed on the sheet in this fashion because the charge to a wage account will be determined by the amount shown on the time sheet, and therefore the two columns should be in close proximity ; but the board account is more closely associated with the name of the individual than with the amount of the wages, and hence is given first. The group- total time is then shown in close proximity to both the board account and the wages account, for no intervening items occur. (See page 132.) In case the board and wages of any individual are di- vided between two departments, or two subdivisions of a department, the amount should not appear upon this sheet, but should be entered on a separate sheet, form 7x. The totals of form 7x, however, should be transferred to this sheet, so that this sheet may be complete for departments and subdivisions of departments, even though it is not com- plete for all individuals. To put the subdivisions for in- dividuals on such a sheet as this would unnecessarily either cumber this sheet or split wages for individuals between several departments. Under this plan of a special divided time sheet, all the items for any department, and for any person whose work is not divided, are in one place, namely, the time sheet; and all items for the wages of any indi- vidual whose time is divided are in one place, namely, the time sheet appendix. Form 7X — Time Sheet Appendix The purpose of this form has been indicated in the dis- cussion of form 7. In the main, the detailed working out is suggested by the form itself; but one should observe 134 COST ACCOUNTING FOR INSTITUTIONS that if any board account (and, of course, the corresponding wages account) occurs more than once, the times and amounts indicated should be added together to produce a total for transfer to form 7; for the purpose of yx. is to gather, on the basis of board accounts and wages accounts, the items which are on the upper half of yx. scattered in con- nection with the time of various individuals. In other words, since the unit of this sheet is the employee, and the employees cannot here be classified upon the basis of the de- partments which they serve, the data referring to each de- partment must be picked out and combined in the summary shown in the lower half of the form. On this summary, it will be observed, the first two board accounts to be debited (ASb and ATb) have only one item each; the next (DKb) is charged in part from the record of P. Jones and in part from the record of S. Brown; the next comes in part from Jones's record and in part from Brown's; the next is a part of Jones's only ; and the last is a part of Smith's only. The wages items are similarly determined. Because of the possibility of carelessness in summarizing the details of the upper half of the sheet, the totals to be transferred to form 7 should be proved by comparison with those for the first half of the sheet. Since total time shown on the sum- mary should agree with the total time shown in detail for the individuals, a comparison is readily made ; the total amount of wages shown on the summary should agree both with the sum of all the individual items of wages shown on the first half of the statement and with the sum of the totals shown on the first half of the statement. Thus there is a check on time and a double check on amounts. On all forms emphasis should be laid upon the impor- tance of checking all additions by comparing group totals with individual totals, and, where opportunity is afforded, of comparing cross additions with vertical additions. FORMS FOR THE DETERMINATION OF COSTS 135 a a R a a x co w s o fa 13 c 3 S < ^ § ° ° § <* "> OOOOOOOO OOOOOOOO O O v^ 1 , <,r J tv ^ pr l 00 O O "5t- *1 000000 000000 O O 00 00 Xr} rrj "o^lCl Ci h H 00 CD +J bo a *Vr> ^S "O "O "O H N 01 01 N ►-< lb 0\ P CD CJ CD ■*■ N N N CO H N N O" Q fa" ** 1*4 w ■a Q .9 3 b CO "3 0, *» h 01 Number Each Spe- cial Dish ■<* <•> Special diet A Special dishes Omelet Chops 4J (U 0) 1 s •a & fa 138 COST ACCOUNTING FOR INSTITUTIONS Form 10 — Summary Patient Diet Requisition The information contained in form 9 from the various wards should be summarized on a similar form for the table manager. The original of form 9 should then be sent to the serving department for guidance in the distribution of food prepared. ( See preceding page. ) Form 11 — Requisition on the Steward's Department If one is to determine accurately food costs, one must know not only how much food of each type goes into each dietary, but also at what cost. Someone must know what is to be withdrawn from stores for each type of dietary; and to preserve these figures in the form of a well-arranged requisition on the steward's department requires no addi- tional labor. Those foods used in one type of dietary only are extended into the appropriate columns for that dietary : the amount for which requisition is made should be ex- tended in the column marked "issued," the amount returned (if any) after the meal has been prepared should be ex- tended in the column marked "returned," and the amount consumed should appear as "net." Amounts called for in excess of the amounts actually used must always be re- turned to the store-room and entered upon this requisition sheet. Otherwise there is great danger of loss, or mis- placement, or failure to account for supplies used. If any articles of diet are common to two or more types of dietary, indication of that fact should be made on the requisition; but it is not necessary to divide the total into the amounts required in each dietary, for since such items are to be distributed among the types of dietary monthly on a cal- culated basis, they may be kept together and charged to the common dietary until the monthly figures have been obtained. Such common participation in any foods is in- FORMS FOR THE DETERMINATION OF COSTS 139 dicated on the form by lines extending from the figures through the columns for the dietaries concerned. As in- dicated on the blank, Dietary A, in this particular classifica- tion, comprises special diet and the highest class of table board for employees, such as that for the superintendent, the resident physicians, and head nurses. Dietary B com- prises the general house diet served in wards, and the diet for nurses, orderlies, and other employees above the servant class. Dietary C comprises the diet served to employees of the servant class. Dietary D comprises fever diet only. These subdivisions vary, of course, both in number and content, between institutions. In many institutions food is ordered from the steward's department daily. This simplifies ordering, but it leaves open greater likelihood that food ordered for one dietary shall be used in another without credit. The form shown here allows credits by entries in the columns headed "re- turned," with corresponding debits in the columns headed "issued," for the dietaries taking the unused foods. The form which follows is not intended to displace the common form of requisition for open-stock foods. Spices, flour, sugar, cereals, tea, coffee, etc., are not usually ordered from the steward's department for single meals or days, of course, but in convenient quantities for use in the kitchen as occasion arises ; and they are for use usually in all classes of dietary. They may well be ordered on separate requisi- tion slips, known as open-stock requisitions (possibly desig- nated form 11O) ; they would not, however, enter into the cost calculations, except for checking purposes, for the cost of such open-stock foods is to be learned from inventories checked by the open-stock requisitions. This form 11O should have printed upon it the name of all such common open-stock foods; but since returns are not common, only one column for amounts is necessary. 140 COST ACCOUNTING FOR INSTITUTIONS 4 CO Q H S5 a s < w Q w H W Ed W H O S5 O a a & cU -^ CD 3 o & cfl b cd +-» 3 2 (A 1-1 3 a) «j a (4 U M 3 o o >> s 1 & Q v- ^ fti/S fti/9 f^fco o^,^ o*£lM ^JxM p< IH M CO ■* to vo r* 1 s "is o FORMS FOR THE DETERMINATION OF COSTS 143 < 3 S a w < H W >< J n H Z o o T3-J OH 0, Q # .§ "■+3 M 5o "5 O CO w =1 fr ** c\T 00 « "3 !0 0, <*> -*— w t-t * s 0< M °0 5 < ■3 6-1 M~ -J— 4) O "3 * § C3 H N 3 3 "3 2 & +3 +J +» WWW pqQwPQQwPQQw rN. Tt- w 00 to "3 V B "3 H a! "3 w & ■d CO § j>o OiPo ts. KM Vi K v-,Ov *o O, K xs Ov S h ■* •3Q ° ■s + "g + U < s E o o CM a o 144 C0ST ACCOUNTING FOR INSTITUTIONS figures. Here, for instance, on the monthly summary the grand total of meals served, 17,579, should be the sum not only of the figures above it in the column for grand total, but also the sum of the four group totals at the left on the same line, for each of these totals is the sum of a column of which the details go to make up the grand total. Since later we shall need to know the sum of certain combinations of groups (for form 16), they are shown here at the bottom of form 12. Proof of correctness is found by subtracting D from the grand total (since it is not in any combination) and multiplying the difference by three (since each group is used three times). Strong temptation occurs in most large institutions to say that two or three persons more or fewer make no differ- ence in food costs and therefore need not be regarded in the figuring. Whether that is true or not, it is a fact that a slight inaccuracy known and neglected leads to a growing tolerance of inaccuracy, and usually results in .inaccuracy that is, or should be, intolerable. An indefinite margin of inaccuracy usually results in worthless figures. For this reason, form i2w is carried out in detail for each meal rather than left with an approximate figure for each day. With a reasonable degree of accuracy, of course, the latter would serve for most purposes. Then form i2w and form 12 would be combined, with a line for each day. Form 13 — Calculation of Special Food Costs The calculations of food cost may now begin with those foods entering into one diet only. We already have, on the summary patient diet requisition (form 10), and on the requisition on the steward's department (form 11), all items not open-stock entering into each dietary. If the items actually consumed in each class of dietary, and in that alone, are entered on a new form at the cost known to FORMS FOR THE DETERMINATION OF COSTS 145 2 a! Q In R" id s w <0 n. +» C/J a, ft S O is h- 1 H ^^ <1 o £ 1 vs >o CO *? Q Q 1 T3 00 00 O O 1 , H *d e s O, . 6 O O "? "? 1 Is. Is. m ■8 O >o CM >o CM 1 $ ti^lrj CM 10 O 2> c T3 PL, CM N »1 H O •0 0) JS a s a M M ! Meats Chicken Beef Beef Vegetables, frt Celery i i XI a) -^ 0) M if "18 .£20 1 ■a ■8 H 146 COST ACCOUNTING FOR INSTITUTIONS the office, the sum of all such items will give the charge to each dietary for the special foods consumed. These items are figured for each meal. As a matter of fact, how- ever, for most meals they are likely to be either few or entirely absent, for most food is either common to all dietaries or to several. If the custom is to fill out form 11 (requisition on the steward's department) only daily, this form 13 will be a daily sheet, of course, and no attempt will be made to calculate on it for individual meals. Forms 14W and 14 — Summaries of Special Food Costs- Weekly and Monthly To these forms are carried from form 13 the total costs of special food for the various dietaries for each meal, and from form i2w and form 12 the number of persons served. A total of these items, for each dietary, for the month, gives the total cost of special food and the total number of meals served for each dietary. A division of the former by the latter gives the average cost of food, for each type of dietary, for the foods peculiar to that dietary. These figures multiplied by three give the average daily cost. Form 14W, like form I2w, is for the week, and form 14 combines the weeks and adds the extra days to make the month. The averages at the bottom of form 14W may be of service to enable the manager to watch his costs ; but they are not used in the final books, for the monthly averages supplant them, as shown on form 14. If the requisitions on the steward's department (form 11) are made out for a day at a time, form 1 3 becomes a calculation of daily food cost, and form 14W and form 14 may be combined; for, with only thirty-one items for any month, one sheet may cover it. FORMS FOR THE DETERMINATION OF COSTS 147 form 14W Month of January, 1912 Week 1-7 Weekly Summary of Special Food Costs Dietary A B C D Day Meal Cost (Form 13) Cost (Form 13) Cost (Form 13) Cost (Form 13) 1 Breakfast Dinner Supper 2 Breakfast Dinner Supper 3 Breakfast Dinner Supper 4 Breakfast Dinner Supper 5 Breakfast Dinner Supper 6 Breakfast Dinner Supper 7 Breakfast Dinner Supper 8.00 7-50 1.08 ■36 Total Meals served (Form I2w) Average, meal Average, day 148 COST ACCOUNTING FOR INSTITUTIONS form 14 Month of January, 191 2 Monthly Summary of Special Food Costs Dietary A B C D Day Meal Cost Cost Cost Cost (Form 13) (Form 13) (Form 13) (Form 13) 29 Breakfast Dinner Supper 30 Breakfast Dinner Supper 31 Breakfast Dinner Supper 1- 7 8-14 15-21 22-28 Total 166.56 379 -50 24.50 27.60 Meals served (Form 12) 2,823 11,385 2,451 020 Average, meal ■059 ■033 .01 ■03 Average, day .177 ■099 ■03 .09 Form 15 — Calculation of Occasional Common Food Costs The cost of foods common to two or more dietaries may be figured for each meal in a fashion similar to that used in finding the special food costs. On this form 15 should be entered, however, only items which, though com- mon to several dietaries, are not common to all meals — such, for instance, as vegetables and fruits. The cost of foods common to all meals, of course, may be taken for longer periods and so simplify the labor of calculation. On this form, therefore, should be entered for any meal all FORMS FOR THE DETERMINATION OF COSTS 149 I Q 0-3 w H "* -«fr Tf "* M W M H " S H o q E C Bo c P o o o Ofe c 4) U ffi d, O M d aaaa"^ +ea3CfiKicfiOP5 Srtff » u V, o 5 u FORMS FOR THE DETERMINATION OF COSTS 157 If we multiply the number of patients in wards and the number in private rooms, as shown by form 4, by the cost for each type of dietary served, and divide for wards and for private rooms by the total number of patients in each, we shall get the average cost of patient food for wards and the average cost of patient food for private rooms. This is worked out on page 156. Form 19 — House Tables Record This form is designed to supplement form 7, when the number of employees is large, and thus provide the means of final distribution of board costs among employees serv- ing the various departments. As shown in the form, all employees whose board is chargeable to the same account are considered for the purpose of this schedule as constitut- ing a group, and since the classification follows almost ex- actly the natural classification of the time sheet and the payroll, the first figures are at hand. The employees' time is further grouped so that we may have a final figure for those who have dietary A, for those who have dietary B, and for those who have dietary C. Each department em- ploying any of those whose time is included in group A is of course to be charged with their board at the group A cost — which has already been shown on form 18. Each department employing any of those whose time is included in group B is to be charged at the group B rate. The same thing is true of group C. The totals are taken, for test purposes, in order to see whether they agree, as they should, with the figures on form 12. The application of the rate to the time here shown is made on form 20. When groups of employees and of dietary are few, form 7, as shown, will in its group totals provide all necessary information; but when complications exist, or when the importance of proving figures is great, a summary like 158 COST ACCOUNTING FOR INSTITUTIONS a a 4 g o o _ en E < § H 2 O a a a ."■§ •B.a ig 8 g 8 h *•* ■S — -* -d m a a r > CBC" ■S.S.9 inoo'^h QPQQW »d S3 e S? E° bo . . flUO a a> ^ O •a a Sg si CO E.9 '32 oin C S.2 *o bo ■ -S 03 a w O 3+3 O Kg o ca •2 •« 3 £ o d a o 3 .0 ■< co •h NO »1 O t^ *vj "S rr)\^ cv, cl,phQQQWWWWKW m CO S •0 g J C S £ 3 .a C (U .S 0) is +3 *d 3 .3 J O M .3 B _3 a c •a »d .w ■a 3 _ _ .3 O c E .3 ■d c M O .S *c ? " 3 0) I 60 O J2 M-< M-l W Ifl iw W u_4 5j II jj D 0) « S e I OUOOUPiKl o (D S3 it V it a .g a 5 JS o H 164 COST ACCOUNTING FOR INSTITUTIONS Form 23 — Space-Cost Basis This form furnishes the basis for the distribution of space costs — that is, the cost of light, heat, cleaning, insur- ance on buildings, taxes on buildings and land, etc. It usu- ally iriay be made up from the architect's plans, but an exact calculation of space is seldom necessary. In the illus- tration; given, rough rectangular dimensions were taken, and thpn allowances were made (as shown by the column with the heading "out") for jogs, light wells, etc., cut out from the rectangular space. The figures of net floor space are kept as a means of finding average cleaning costs, etc. The benefit >of the basement, halls, stairways, etc:, is sup- posed to be ishared proportionately by all departments, and hence is undistributed. Entire neglect of it in the distribu- tion raises each department's proportional share properly. The amounts in the column headed "undistributed" are therefore subtracted from the net floor space, as indicated on the form. When this undistributed amount has been subtracted from the net floor space, the remainder is the figure on which all items of distribution for floor area must be apportioned to the various departments. This figure multiplied by the height gives for each floor the cubic space which is to be used in distribution; and the net cubic space is found by multiplying the net floor space by the height, for statistical uses in determining the average cost per cubic foot for heating, etc. This form, it will be ob- served, divides the buildings in floors, on the assumption that all rooms on the same floor are chargeable at the same rate for their space cost. Under some conditions this would be varied, for different rooms on the same floor might be chargeable at different rates, and rooms on different floors might be chargeable at the same rate. The aim of this form is to find the bases, whatever they are, for use in form 24. When once calculated, they are permanent. FORMS FOR THE DETERMINATION OF COSTS 165 n o O ■ w u < o Cubic Space t Appor- tion 00 OiO •* r^ 00 *>o n w On so lOO; N to CO Tj wo"^ OS cT rC tO « (*5 « M >o Net Cubic Space ■* 00 SO •* O CM no in CH CH OO IO H » SO CO •* hT NO~ CO to CO ocf ■* CO 10 ^t- CO 'C +J Net Floor Space 10 10 lO IO ■* ■* 00 CO CO "*■ M M O •* ■*■ tsl CO CO -? CO CO 1^ * in 10 ■u Tf * OS =1 NO SO «. hH Gross Floor Space 10 10 O O O t)- -+ 00 OO 00 CO »1 HH O n n * O ■tF O IO ocf i 00 3 J- co'C T .5 w Q S a •3 a> > +5 ■3 c3 m Ward Administr a o s d .2 fc a 2 las 3-3.2 s .-B t> S s ff .0 ^ c o ^ fe h .a * +- +j i 166 COST ACCOUNTING FOR INSTITUTIONS Form 24 — Space Cost Distribution This form makes the calculation, for each department in the institution, based on the figures shown in form 23. If several rooms form a group serving the same purpose, it is unnecessary to distribute costs to each room. For this reason columns are provided for "separate floor space" and "combined floor space"; by the use of the combined floor space, one distribution serves the total for any group of rooms of which the space cost is chargeable to the same account. The space of a room treated by itself is extended in the same column as the combined space for groups. The floor space is multiplied by the height, as in the preceding form, and the result gives the combined cubic space. These figures compared with the first-found spaces, as shown on form 23, give the percentage of floor space and of cubic space chargeable to each room or group of rooms. The last column gives the symbol of the account to which charges are to be made for these rooming or housing costs. Where a group of rooms is used in common by two or more groups of persons, as here the lavatory, the bath-room, the linen closet, the clothing room, and the solarium, the division of cost may be on the basis of beds. Here, for instance, a person occupying a large and expensive private room is chargeable for no larger share of cost of maintaining the clothing room or solarium than one occupying a bed in the lowest-cost ward. This principle is again illustrated in the case of the dining-room, which is used in common by the employees of the housekeeping department, the kitchen department, and the laundry department. Its cost is conse- quently divided among those three departments on the basis of the number of persons boarded for each. Since several accounts have more than one item here, as RHP, RHW, and DKh, a list is made, and filed with this form 24, for the total percentage chargeable to each ac- FORMS FOR THE DETERMINATION OF COSTS 167 3.O. RHP & RHW * DKh RHW RHP RHP & RHW * DKh RHW RHP ASr AOh RHP PMh PSrz DLh DKr DHr DHr, DKr, DLrf DKh DKr Share Cubic Space cO-^r^co sN IOOO IOSO 00 O O M O O •«*■<> fON ^ NOON w •O 5 -*l-<4- 3 O M O O O 0) > l-l O 10C100 OSO\ OSSO Os OsO O COM COI^CO OSOO t<^H H H lOH OmOOOOOO HH Share Floor Space Os^-h-W O O r^so w 100 O Tt* u" O O M O O h*.^0 W 00 HH *d-co M O w O O O w so O 01 Ostnrt-w tJ-m ^> co r^oo r^ 10 t^ oi t^ CONflM H h Nh 0«OO0000 O 8 O M Com- bined Cubic N OO^N / OOM00C1 00 COSO ^O 01 N w Osfl M 0* 01 00 OMO00 ^IO 01 OMflO 10 0\0\0\Nff MOW M u"> 1-^00^ COSO^ H^ MO) CO00 M 00 M O •-< 00" m~oo~ t^ tCw ii^vo so" *^ M , ^*-o\T?oTi-rord^or M M l-l l-l 01 00 10 rmSpH 01 o) 01 oi ir CO CO CO CO w )tf)iOiO« Oh 01 CO II X 0\D\Q w 00 n co CO II <* 00 X t^b- 00 01 01 CO hH 00 t^oo OS 01 01 01 is >« 000000 00 ■<*■ 000000 00 «*■ SO SO SO Os O ^mioioio in co ... 00 0-so co 10 10 10 r^so co -^ •* ^*" *d- *j- *3- ^ CO»-<»H COMt-tl-l^-IWl-lhH a Lav. and Bath-room Linen closet Clothing Solarium Diet Kitchen Ward Room Private Rooms (4) Lav. and Bath-room Linen closet Clothing Solarium Diet Kitchen Ward Room Private Rooms (4) Matron Office Reception Room Private Room No. 1 Private Room No. 2 Private Room No. 3 Operating Room Nurses' Floor Laundry Servants' Room No. 1 Servants' Room No. 2 Dining Room Kitchen Cook's Room JOO^ w 01 « 01 CO M a '3 1 E +3 1 68 COST ACCOUNTING FOR INSTITUTIONS count. When arranged in the order in which accounts are kept in the ledger, this list may be conveniently used for making the entries. Form 25 — Monthly Record of Ice Very commonly it is unnecessary to provide any special treatment for ice ; but if it chances that there is a large con- sumption of ice in certain wards of a hospital and at the same time in the steward's department, accurate distribu- tion of the cost requires that notes shall be made of these facts. If ice is charged immediately to one account, HO, and is then distributed to the wards for medical purposes, form 25 Month of January, 1912 Monthly Record of Ice Medical Purposes Days Total* 1 2 3 4 5 6 etc., etc. Ward 1 2 3 15 20 Total 35 90 25 Steward's Dept. Household Grand total * 150 Medical and surgical supplies (PMo) lbs. at = Steward's department (DSo) lbs. at = * This should agree with the charge to HO. The amount chargeable to the household Is not carried below here, for as all ice is charged to HO, credit should be given HO for the amount chargeable to PMo and DSo, and the balance of HO will then be a general bouse charge. FORMS FOR THE DETERMINATION OF COSTS 169 to the steward's department, to the kitchen department, and to the housekeeping department for ice water, etc., a rec- ord should be made of the amount taken by each depart- ment each day. This form provides for a monthly distri- bution of ice costs. Ice not absorbed by medical and food uses should be considered a general house charge, like wa- ter, gas, etc. CHAPTER VII CLOSING PROCESSES Charges for Ice On the information given by the Monthly Report of Ice (form 25), PMo and DSo are to be debited and HO is to be credited. If there is no general consumption of ice, as in drinking fountains for visitors and for employees, HO should have no balance. (See closing entry No. 1, page 187.) Depreciation Charges The purpose of depreciation accounts is to prevent un- fair distribution of costs between periods — months, or years, or superintendent's regimes. Only when depreciation is considered can comparisons be made either within an insti- tution or between institutions. The basis of the allowance for depreciation should be always the use of the property. Supposed market price has nothing to do with the cost of the institution's activities. If, for example, land has risen in value, that increase in value cannot offset depreciation in the value of buildings that must be sooner or later re- placed unless the institution is to move or sell part of its land. Even if the land is to be sold, the change in the value of buildings and land should be reported separately; for the depreciation of the buildings has arisen from the exhaustion of capital in conducting the work of the institu- tion, but the change in land value has arisen from causes outside its control. Since, moreover, the new value of the land is not of any use to the institution until the land is 170 CLOSING PROCESSES 171 sold, the original cost valuation should remain until the sale has been actually made. If maintenance has presumably kept the value of any equipment intact, as in most institutions it generally can for most departments, no depreciation need be charged in those departments; but unless extensive repairs or better- ments are made frequently in buildings, the building ac- count should be steadily written down. The same thing is true of the boiler-room equipment. Care should be taken to see that the book valuation of surgical apparatus, etc., is not continued too high, thus necessitating a heavy charge in the period when replacements become necessary. The cost of all extensive replacements should be spread over as many periods as the life of the apparatus replaced. This does not mean, however, that each particular bit of replace- ment must be treated by itself, but only that for any de- partment as a whole the sum of repairs and replacements and depreciation should be a practically steady charge month after month and year after year — except so far as an increase or decrease in the activity of the department, and hence the use of property to be maintained, may result * < in an actual increase or decrease in the cost of maintenance. When, therefore, in any period the expense of repairs and renewals or replacements in any department as a whole is less than a fair average for a long period of years, deprecia- tion, and therefore current expenses, should be charged for the difference ; and when new equipment more than restores the equipment of the department, the excess may be charged to the capital account of the department.* Since in institutions the cost accounting is less for the purpose of guidance in making prices than it is in factories working under fierce competition, elaborate formulae for apportioning depreciation are not necessary; and even with * Since most institutions live from hand to mouth, it is not usually feasible to accumulate a fund for replacements. 172 COST ACCOUNTING FOR INSTITUTIONS such a formula, unless one could be sure that it were ap- plied similarly in all institutions, comparison of figures would be misleading. It is wise, therefore, to consider the normal annual depreciation of any equipment to be its cost divided by the estimated number of years of life. If repairs and replacements keep up the estimated future life of the whole equipment of a department at the original figure, no depreciation need be charged; if they do not, the periodic charge to depreciation should be enough to amount, at the time of expected replacement, to the cost of such replace- ment. If, for example, one-fifth of the equipment is re- placed every year in a department having equipment of an average life of five years, maintenance has kept the property intact and no depreciation need be charged. The following depreciation accounts may need to be debited, and the corresponding capital accounts credited: AOx, ATx, PMx, PDx, PEx, PXx, DMx, DTx, DSx, DKx, DHxd, DHxt, DHxz, DLx, HXB, HXQ. (See closing entry No. 2.) Temporary Depreciation Accounts When the expenditures for maintenance are fairly even year by year, but are unevenly divided among the months, and it is desired to get monthly figures, the device of an account called Temporary Depreciation may save a good deal of labor. This should be credited, as a temporary lia- bility, for the depreciation in each department; and then, when purchases make good such depreciation, Temporary Depreciation should be debited. When the accounts are closed at the end of the year, if in any department the prop- erty has been allowed to run down during the year as a whole, so that Temporary Depreciation has a credit bal- ance (a liability), this account should be closed into the proper capital account — showing an actual reduction in CLOSING PROCESSES 173 property on the balance sheet and on the statement of finan- cial transactions for the year. This Temporary Deprecia- tion can be kept very easily by the use of the subordinate ledger already described — with Temporary Depreciation as a general-ledger account, and the various department tem- porary depreciation accounts as subordinate-ledger ac- counts. The natural symbol would be TX, with lower-case- letter additions, to designate subdivisions, corresponding with the capital-letter symbols of equipment accounts — thus TXa, for temporary depreciation of administrative equip- ment, TXi, for apparatus, etc. Under such a plan, for regular estimated monthly wear and tear, whether any repairs and replacements have been made or not, the bookkeeper should debit the depreciation account of the department (as PMx) and credit Temporary Depreciation (as TXi). When repairs and replacements are made, on the other hand, he should debit Temporary Depreciation (as TXi) and credit cash. Then when the annual closing is made, Temporary Depreciation (as TXi) will show a debit balance if the expenditures for the year more than offset the estimated depreciation for the year, and such debit balance should be charged to the equipment account (as I), increasing the figure on the balance sheet. If the debits do not equal the credits, the credit balance should be transferred to the equipment account (as I), thus reducing the book asset. Obviously, on any subdivision in this account, so much of the original debit (made before the closing entries) as does not exceed the credit shows actual maintenance. So much of such debit should then be charged to the main- tenance account for the department (as PMa, DHmd, DMm), and should be credited to the depreciation account for the department (as PMx, DHxd, DMx) ; for to this amount the cost is now known to be for maintenance and 174 COST ACCOUNTING FOR INSTITUTIONS not for depreciation as first recorded. All accounts relating to these matters now stand as they should, thus : capital ac- counts debited for increases and credited for depreciation; maintenance accounts debited for actual expenditures for repairs and replacements, but not for improvements; de- preciation accounts debited for theoretical depreciation but credited for actual maintenance; and temporary deprecia- tion closed without balance. (See page 234.) In no case should the temporary account go over into a new year. The only special caution necessary in this method is that the estimate of wear and tear be sane. If too low, the prop- erty will be actually depreciated in spite of a valuation con- tinued on the books at the old figure, or will be written up on the books when actually stable or depreciated. If too high, on the other hand, costs will be overstated. The method should be based on adequate experience, or should be checked frequently by careful appraisals of the property. Interest Charges Interest should be charged to the various departments for the use of equipment and supplies. The amount of such interest should be credited to the corporation in a special account, ICIH, Corporation Hospital Interest. The rate, however, should preferably approach a pure interest rate, or 3 per cent, for the corporation takes no risk in lending to its own departments — it gets the service. Departments carrying large supplies (the steward's, for example) should be charged interest not only on equipment, but on average supplies carried. The following should be debited : AOi, PMi, PDi, PEi, PXi, DMi, DTi, DSi, DKi, DHid, DHit, DHiz, DLi, HIB, HIQ. (See closing entry No. 3.) The permanent equipment for the Pathological Laboratory and for the Home Nursing Department is likely to be so small CLOSING PROCESSES 175 that interest need hardly be separately reported for them: the amount of interest could be included in PMi. Interest on sites and grounds is not taken into consideration; for the cost of land is largely independent of working condi- tions. If interest on land were included in cost figures, hospitals in the crowded sections of large cities (where they need to do their work) would be at a great disadvantage as compared with hospitals on land that is inexpensive. The aim of our cost accounting is largely to provide a means of judging efficiency; but artificial influences on the price of land actually used for hospital purposes do not at all affect hospital efficiency. Service, not profit, is the aim of hos- pital management. Rent Charges Usually rent paid for the use of land and buildings should be charged directly to the departments using the property benefited — as ambulance department charged for stable or garage rental. This would not affect the distribu- tion of THS or THC, for only so far as these departments use space owned by the hospital should they bear a share of these accounts. The total housing charge to the depart- ments would be the sum of these two items — one a direct rent charge and the other a charge from the distribution of transfer space-cost accounts. So far, on the other hand, as property hired adjoins property owned, mere chance is likely to determine which department is assigned to the refited quarters and which to owned quarters ; then the rent may well be charged to a separate account HR, may be transferred thence to THS and THC, and may then be distributed on the usual basis. Charges for Engineer's Services From the Engineer's Monthly Summary (form 22) is learned how the engineer's time is divided between different I 176 COST ACCOUNTING FOR INSTITUTIONS kinds of work. These various kinds of work are to be charged not only for his wages, but also, if he lives on the premises, for his board, his lodging, etc. It is impossible to get an absolutely accurate figure for each step of the closing process, for to a certain small extent the charges move in a circle — e. g., the board costs depend in part on housing costs (of rooms used for cooking, etc.), and hous- ing costs depend in part on the compensation of the engi- neer, and a part of his compensation is often board. So we cannot- learn exact final board until we have learned the engineer's board, and we cannot learn his board until we learn final board. This difficulty occurs only in starting the process, however, and if we use a fairly reasonable arbitrary figure for a few initial matters of this sort, we shall get a result that errs by only a negligible percentage on a very small item. The error is corrected before final costs are reached, as will be seen later. This is necessary, moreover, only for the first month. After that, the figure of the preceding month would naturally be taken as suffi- ciently correct, unless a change is known to have occurred. Let us begin with the attempt to find housing cost. Boiler-room service is one element in it. In trying to get boiler-room cost, therefore, we assume a reasonable arbi- trary cost of board, rooms, and laundry for our boiler-room force. The amount for board, rooms, and laundry, plus the wages, gives the total of HS; but this amount should not be entered yet on the books as a debit to HS, for some of the items are not yet accurately known. A part of this total is now debited to the accounts shown on the Engi- neer's Monthly Summary for their share of his time and in the ratio there shown — but, of course, HS, which repre- sents the cost of engineer's time devoted to the engine, need not be debited now, for it will absorb in the end any undis- CLOSING PROCESSES 177 tributed balance. HS will be credited at the time that the other accounts are debited, of course. (See closing entry No. 4.) HS has now a credit balance, but it will be debited later for HSs and for the actual charges to HSb, HSr, and HS1. (See closing entries No. 10, No. 11, No. 12, No. 15). When these debits have been made, later, HS will have a debit balance; and this balance will be the actual cost of power service. Charges for Power If electric power is used, it should be separately metered for each department using it. If power is taken from the boiler, the power used for each department should be deter- mined as exactly as possible by competent engineers, and the distribution made accordingly; but since here the cost for each department is a share not merely of the fuel, but of all the costs of the boiler-room, the debit to TP should be not only HF, but also the balance of HS, as already fig- ured — that is, HSs plus estimated HSb plus estimated HSr plus estimated HS1, minus the amount debited to other de- partments from form 22. If the water consumption is large — e. g., because no condenser is used — HW should be in part charged to TP. (See closing entry No. 5.) Then TP should be credited and the various power-consuming de- partments should be debited for their consumption. The balance of TP will then usually represent the cost of ele- vator service and heating. No two institutions may have quite the same conditions with regard to power, but figures for the following accounts must usually be provided for by some process similar to that described above : PMp (for sterilization), DKmf (for steam tables, etc.), DLmf (for laundry steam), HP. (See closing entry No. 6.) If other departments use directly fuel -originally charged to HF, they should be debited (e. g., DKmf and DLmf) 178 COST ACCOUNTING FOR INSTITUTIONS and HF credited, for the weight, at purchase prices, each month. Charges Based on Floor Space The following are to be closed periodically into THS, which is to absorb the amount to be distributed later on the basis of floor space occupancy : HW,* HO, HL, HR, HMQ, HXQ, HIQ, HZ. To this account should also be charged the amount of DHs, DHb, DHr, DH1, DHmz, DHiz, DHxz, DHf— and DH should be credited.! (See closing entry No. 7.) Entries will not be made to DHs, DHb, etc., at this time, for some are not yet accurately de- termined, and these accounts need not be closed into DH until the end. Since three charges named (DHb, DHr, DH1) cannot be exactly determined until after THS itself has been found ( for they are all dependent on the distribu- tion of THS), in the first month of the use of this system they must be taken arbitrarily at a fair estimate for this cal- culation. In subsequent months, the figure of the preceding month had best be taken arbitrarily unless known charges suggest increase or decrease. The amount of error result- ing from this estimate is small in any department, and is corrected before final costs are reached. The debits to these accounts (DHb, DHr, DH1), therefore, should not be made until the amounts have been exactly determined; then any balance should be carried to the adjustment ac- counts, as explained later. THS is to be distributed on the percentage shown on the Space Cost Distribution sheet (form 24) to the fol- lowing accounts: ASr, AOh, ATr, ATh, PSrp, PSrw, PSrz, PMr, PMh, PDr, PDh, PEr, PEh, PHr, PHh, PXr, PXh, DMr, DMh, DPr, DPh, DTr, DTh, DSr, DSh, DKr, * See note on p. 179. t AH these processes are worked out with actual figures in Appendix D, and this particular process is shown on page 223. Both general and subordinate ledger follow — but in skeleton form. CLOSING PROCESSES 179 DKh, DHr, DLr, DLh, HSr, RHP, RHW. Few institu- tions engage in all the activities represented by these ac- counts, but the books should show them for those which do. ( See closing entry No. 8. ) Charges Based on Cubic-Space Occupancy The following are to be closed periodically into THC, which is to be distributed on the basis of cubic-space occu- pancy: HT, HE, HG, HP, HMB, HXB, HMP, HN, HIB.* (See closing entry No. 9.) This distribution is made on the percentages shown on the Space Cost Distribution sheet (form 24), to the same accounts as was THS — unless for some reason a space in- volved in one space cost is not involved in the other. If any space is only partly lighted and partly heated, it may count for less in the distribution ; but the total cubic cost is made up of so many elements that an immunity in one par- ticular is likely to be offset by extra costs in others, and the average is likely to be fair. Straight subdivision by space is recommended for the sake of uniformity ; but when buildings of various grades are used by the same institution, such as stables, power plants, etc., either separate schedules should be used for each grade of building or all should be brought to a common unit of cost by multiplying or divid- ing dimensions. (Since the debit accounts are the same as for THS, entry No. 8, the closing entry is not given. The two entries may well be combined into one. ) * The line drawn between those things to be distributed on floor space and those on cubic space is necessarily more or less arbitrary. To be exact, one might say that part of the water (for bathing and cooking) should be distributed on a per capita basis, part (for scrubbing) on floor space, and part (for heating) on cubic space. Of course this would be an absurd refinement. The method adopted here is to distribute on cubic space only those house charges which are affected directly by the height of rooms, and to distribute all other house charges on floor space. Water consumption known to be chargeable to the laundry, if expensive, should be charged to DLmz before the debit balance of HW is distributed. 180 COST ACCOUNTING FOR INSTITUTIONS Household Charges The amount of DHmd, DHxd, and DHid should be credited to DH, and the various accounts for rooms (sym- bol r) should be debited, on the basis of the number of beds. If differences in quality of equipment prevail, al- lowance should be made. (See closing entry No. 10.) Similarly, the amount of DHmt, DHxt, and DHit should be credited to DH and the various accounts for board (sym- bol b) should be debited, on the basis of the number of persons boarded. ( See closing entry No. 1 1 . ) The distri- bution of these maintenance expenditures should be made to each department even though no expenditure occurs within the month for the rooms used by the particular department ; for it is easier to maintain a constant ratio than to vary individual departments month by month, and it produces the same result in the end if the ratio is correct; for any proportion of the total expenditure for all departments, for each month, charged to any department each month, is the same in the end as that proportion of the total monthly expenditures for the same number of months. Whether in any month the dormitory replacements happen to be for any particular department does not matter — if only each department bears its proportion of total dormitory replace- ments of all the departments for all the months. Laundry Charges For DL1 and DLb an arbitrary figure should be tem- porarily assumed (but after the first year the last year's figures should be taken, unless there is reason to assume an increase or a decrease), and then the sum of these items and all the other DL accounts should be distributed as debits to the various accounts representing laundry charges CLOSING PROCESSES igi to the departments.* (No entry should be made to DL1 and DLb until the exact amounts have been determined by the appropriate entries.) When these debits are made to departments for laundry work, DL (not DL1 and DLb) should be credited. The distribution of debits to the vari- ous 1 accounts (AS1, ATI, PSlp, PSlw, PSlz, PM1, PD1, PE1, PHI, PX1, DM1, DPI, DTI, DS1, DK1, DH1, DL1, HS1, RLP, RLW) will be determined by laundry statistics, showing the amount of work done for the various depart- ments. (See closing entry No. 12.) As was indicated in connection with the other accounts, any reasonable error in the estimate for DL1 and DLb will produce little effect on any one department, because it is so widely distributed, and it is corrected before the final cost figures are reached. Food Charges To TB should then be debited the total of all costs for the period in the Steward's Department and in the * No very satisfactory method of distributing laundry costs has been found. It is always possible to find the cost per hundred pieces, and distribute on that basis; but that burdens some departments unduly and leads to unfair compari- sons between institutions that change linen in different proportions from others. An institution changing tablecloths frequently, but napkins infrequently, will show a higher laundry cost per hundred than one reversing this practice, even though the actual laundry cost is the same. The most satisfactory method is to make a time study of laundry operations (under the actual conditions prevailing in the institution) and learn how many articles of each sort are equivalent to one of a standard or unit sort. In one laundry studied by the writer and Mr. John E. Hyde, an advanced student in business administration, hand towels were taken as the unit and other articles were rated as equal in cost to a certain number of units. The table follows: Hand towels i Pillow slips 1 34 Napkins l'A Sheets 6 Towels (av. length) 1% Table cloths 12 These figures, it will be noticed, are independent of absolute cost. Whether any or all of these things cost more or less than they should is another question. These figures make it possible to know what proportion of laundry cost should be borne by each department, for when all laundry work sent by departments is converted into units, the proportion to be borne by each is obvious. The figures above should not be taken offhand as applicable to other institu- tions, for they were derived from a somewhat inadequate number of time-studies in a laundry that gives special attention to careful folding (square corners, even folds, etc.) of table linen. Each laundry should be the scene of study for its own conditions. Washing, extracting, tumbling, sorting, ironing, folding — all ahould be observed. 182 COST ACCOUNTING FOR INSTITUTIONS Kitchen Department. The amount properly belonging to any month may be more or less than the amount already entered on the books at this stage, however. More food may have been purchased, for instance, than has been con- sumed. If, then, the inventory of food is larger in any month than in the preceding month, the debit to TB for food supplies should be less than the total of all DSm ac- counts by the amount of such increase of inventory; and if the inventory is less, the amount chargeable to TB on ac- count of food supplies should be greater than DSm by that shrinkage. Assumed charges for DSb and DKb (by the methods and for the reasons previously explained in other connections) should be added to these costs for DK ac- counts and DS accounts, and then the total for DS and for DK should be charged to TB; and DS and DK should be credited for the amounts found for each; but DSb and DKb will not be debited until the exact amount is deter- mined by the distribution. (See closing entry No. 13.) It will be noted that at the end of the first month the food accounts will have been debited for the stores pur- chased (in DSm accounts), and will have been credited (in DS) for the food consumed, as just indicated. Then DS will have a debit balance at the end of the month equiv- alent to the inventory of supplies on hand. (Any excess debit balance, above this inventory, or deficient debit bal- ance, below it, arises from a distribution of costs before actual costs have been determined, and will be disposed of as indicated later.) This inventory figure may well be carried to an inventory account (appearing in the balance sheet as materials on hand), thus closing DS by an entry debiting Inventories of Material (U), and crediting DS. Each month Inventories of Material should be debited for additions and credited for shrinkages, and DS should be correspondingly credited or debited. Since DS is a pure CLOSING PROCESSES 183 expense account, it should show the cost of what is con- sumed. It is unnecessary to allow for exact record of in- ventory, on the ledger, for each class of food supply. Since the group account, DS, allows for the total, the expense ledger may omit detailed inventories. It is well, however, to provide in the expense ledger a column for changes in the inventory, for then the balance of the expense ledger will agree with the balance of the general-ledger account for the department — which will be a true controlling ac- count. This expense-ledger account, which we may call "inventory changes" (DSv), will then be a true nominal account. It will be debited for any shrinkages in supplies on hand, and will be credited for any increases; and a shrinkage means a consumption of more than was debited through purchases, and an increase means a consumption of less. The entry to DS in the general ledger is made through the special inventory-changes account in the ex- pense ledger — from which ledger, of course, all other en- tries reach the general-ledger accounts. The actual amount of inventory will be kept in Inventories of Materials — a general-ledger account representing property — and this will be debited (as the departmental inventory-changes account is credited) for any increases in inventory, and will be credited for any decreases (as the departmental inventory- changes account is debited). (See closing entry No. 14.) If at any time it is desired to show on the books the exact consumption (and not merely the purchases) of each kind of food represented by an account, this can be done by clos- ing the inventory-changes account into the accounts for the various foods. This will not affect the general-ledger ac- count, for it will merely shift balances among subdivisional accounts. This same device may be used for other departments purchasing supplies in advance of requirements (like DKmf, 184 COST ACCOUNTING FOR INSTITUTIONS PSm, DHmd, DHmt, DHmz). The account for inventories of material may be kept with little labor if the form rec- ommended for the expense ledger is used for the various details (total for each department), and in the general ledger is the controlling account, Inventories of Ma- terials (U). It should be remembered, however, that the debit balances of this account at any time represent prop- erty, but the debit balances of the inventory-changes ac- counts, showing shrinkages, represent expense. TB should next be credited for its total, and the corre- sponding debits should be distributed to the various board accounts in the ratios (percentages) shown on the Distri- bution of Food Costs (form 20), as follows: ASb, ATb, PSbp, PSbw, PSbz, PMb, PDb, PEb, PHb, PXb, DMb, DPb, DTb, DSb, DKb, DHb, DLb, HSb, RBP, RBW. (See closing entry No. 15.) Charges for Professional Services The cost of services of persons engaged exclusively in the professional care of patients in private rooms and of patients in wards should now be transferred to RSP and RSW; for example, if patients in private rooms engage their own physicians, PSd should be charged to RSW, by a credit to PS for the total of the account and a debit to the RSW. Similarly, if the special nurses and special or- derlies are engaged exclusively in private-room service, PS should be credited for the total of PSnp and PSop, and RSP should be debited. So also the amount of PSbp, PSrp, and PSlp should be debited to RSP, and PS should be cred- ited; and PSbw, PSrw, PSlw should be debited to RSW, and PS should be credited. Then the time of each class of persons engaged in serving both private rooms and wards should be divided as accurately as possible between the two classes of service, and on the basis of that division the re- CLOSING PROCESSES 185 maining charges for professional salaries should be divided ; and RSP and RSW should be debited, and, of course, PS should be credited. Finally, on the same basis of division (say 30 per cent for RSP and 70 per cent for RSW), the totals of PSbz, PSrz and PSlz should be debited to RSP and RSW, and PS should be credited. Next PQ and PM should be closed into RSP and RSW in the proportion of the number of patient-days of each class of service. Of course these entries will be combined into one. (See clos- ing entry No. 16.) Closing Subsidiary Expense Accounts The next step is to close certain detailed expense ac- counts of the subordinate ledger into the general ledger. For example, PS has been credited for the amount trans- ferred to RSP and RSW, but it has been debited nothing; and the various subordinate accounts under PS have been debited for salaries, wages, board, etc., but have been cred- ited for nothing. The subordinate accounts for PS in the expense ledger should now be posted, or transferred, to the general-ledger account PS. This process should be ap- plied to all subordinate expense accounts — and their corre- sponding group accounts in the general ledger — except those for the ultimate groups of cost, which are to absorb a part of the administrative expense. The accounts to be closed at this point are the following: PS, PQ, PM, DS, DK, DH, DL, HS, HZ. Certain general-ledger accounts — PS for instance — will be closed by this process. The rec- ord of the amount of PS is already transferred to RSP and RSW, and therefore is not lost. The only complication will occur in a few accounts from which transfers were made before the exact cost was known, as with HS. There slight discrepancies will appear, for these accounts will have small balances to be adjusted. These balances should be 186 COST ACCOUNTING FOR INSTITUTIONS closed out into the appropriate resident accounts, for, as the institution is conducted primarily for residents, the bal- ances are chargeable or creditable to the ultimate resident accounts. The following accounts, for example, may have small balances : DS, DK, DH, DL, HS. Obvious entries will close them. (See closing entries Nos. 17, 18, 19.) The expense-ledger items for AS, AO, AT, should now be closed into their group accounts in the general ledger. Administrative Charges All departmental costs have now been closed to the various departments, and various department accounts have been closed into ultimate accounts, and only administrative costs remain undistributed. These may now be distributed as a percentage on the costs previously found.* If total de- partmental costs, exclusive of administration, are $33,000, and the administrative cost is $3,300, obviously 10 per cent should be added to the cost for each ultimate account. A trial balance taken at this stage would show for expense ac- counts only the following with any balances : AS, AO, AT, AL, AZ, PD, PE, PH, PX, DM, DP, DT, RHW, RHP, RBW, RBP, RLW, RLP, RSW, RSP. If the sum of the first five is divided by the sum of all the others, the quotient will give a percentage of administration cost. This percentage applied to the amount for each resident account or department account will give the proper charge for ad- ministration to that division. Since, however, it is absurd to figure administration separately as an element of cost for patients' service, patients' food, patients' laundry, etc., this percentage can well be applied at once to the sum of RHW, RBW, RLW, RSW for ward patients, and to the sum of RHP, RBP, RLP, RSP for private-room patients. The * Sometimes other bases should be used, for certain departments may require special attention, or their work may involve special bookkeeping costs, etc. CLOSING PROCESSES I8 7 amount should be debited to RAW and RAP respectively. The debits to the other activities designated above (PD, PE, PH, PX, DM, DP, DT) should be made through their subordinate-ledger accounts (symbol z — miscellaneous) in each case. Of course the entries debiting these various ac- counts will credit the administrative accounts named above. This will close out the administrative accounts. (See clos- ing entry No. 20.) Final Expense-Ledger Closing The expense-ledger accounts for the remaining groups should now be closed into the general-ledger accounts for the corresponding groups. Closing Entries No. 1 E [continued] DHiz PMo X DLi DSo M HIB To HO T S HIQ To ICIH No. 2 K AOx R No ATx F PSo PMx H PMs PDx L DSs PEx B DSmvf PXx Q DHs DMx HE DTx No • 3 HMB DSx AOi HL DKx PMi HMQ DHxd PDi HMP DHxt PEi B DHxz PXi ToHS DLx DMi HXB DTi No HXQ DSi TP To A DKi To HP I DHid HS D continued] DHit [continued] HW [continued] 1 88 COST ACCOUNTING FOR INSTITUTIONS No. ( PMp DKmf DLmf HP ToTP No. ; THS ToDH HW HO HL HR(?) HMQ HXQ HIQ HZ No. 8 ASr AOh ATr ATh PSrp PSrw PSrz PMr PMh PDr PDh PEr PEh PHr PHh PXr PXh DMr DMh DPr DPh DTr DTh DSr [continued] DSh DKr DKh DHr DLr DLh HSr RHP RHW To THS No. THC ToHT HE HG HP HMB HXB HMP HN HIB No. 10 ASr ATr PSrp PSrw PSrz PMr PDr PEr PHr PXr DMr DPr DTr DSr DKr DHr DLr HSr RHP RHW ToDH [continued] No. ii ASb ATb PSbp PSbw PSbz PMb PDb PEb PHb PXb DMb DPb DTb DSb DKb DHb DLb HSb RBP RBW ToDH No. AS1 ATI PSlp PSlw PSlz PM1 PD1 PE1 PHI PX1 DM1 DPI DTI DS1 DK1 DH1 DL1 HS1 RLP RLW ToDL 12 CLOSING PROCESSES No. 13 TB ToDK DS U No. 14 ToDSv (or reversed) ASb ATb PSbp PSbw PSbz PMb PDb PEb PHb PXb DMb DPb DTb DSb DKb No. 15 [continued]. DHb DLb HSb RBP RBW ToTB [continued] No. 16 RSP RSW To PS PQ PM No. 17 RHP RHW ToDH HS (or reversed for either DH or HS) No. 18 RBP RBW [continued] 189 To DS [continued] DK (or reversed for either DS or DK) No. 19 RLP RLW ToDL (or reversed) No. 20 RAP RAW PDz PEz PHz PXz DMz DPz DTz To AS AO AT AL AZ The actual working out of these entries, with figures, is given in Appendix D. The general ledger and the subordi- nate ledger are both shown there in skeleton form. Schedule 4 — Final Summary of Institution Expenses The balances of expense now remaining on the ledger are for ultimate accounts only, ready for use in the sum- mary schedule of expenses, as follows: Dispensary Emergency Ward Home Nursing X-Ray Service 190 COST ACCOUNTING FOR INSTITUTIONS Ambulance Service Pathological Laboratory , Training School Private-Room Patient Housing Ward Patient Housing Private-Room Patient Board Ward Patient Board Private-Room Patient Laundry Ward Patient Laundry Private-Room Patient Professional Service Ward Patient Professional Service Private-Room Patient Administrative Cost Ward Patient Administrative Cost These are grouped for reporting purposes — for general comparison with other institutions — as shown on pages 192- 193. For some of the details shown on this schedule refer- ence must be made to calculations off the books, as on form 18; other details are in the subordinate ledger; and others are in the general ledger. Of course uniformity could be produced by getting all desired figures into the general ledger; but this would unduly complicate the bookkeeping. The complete schedule of expenses, showing all principal and subordinate accounts, should be published in full if comparative study is to be worth much; this schedule IV is meant for summary use only. Purpose of Summary Schedule of Expenses For many purposes this schedule is the most important of all. It attempts to give the final figures for enabling us to make a comparison between the institution for which the figures are shown and any other institution with which a comparison is desirable. As will be seen from the form itself, three main types or groups of expenses are shown. These are administrative expenses, the cost of professional CLOSING PROCESSES 191 care of patients, and the living expenses. These groups are shown because they represent the ultimate purpose of all expenses within such an institution as a hospital. The prime function is, of course, to provide professional care of patients, and this group therefore is the all-important group; but since professional care cannot be rendered with- out providing housing and board for patients, the living ex- penses form the next most important cost ; and since neither of these things can be provided except through an adminis- trative force, the cost of administration forms a separate group. The total for each of these groups is taken from general-ledger accounts, but each is subdivided into its main elements, so that comparison may be made between institutions for those subdivisions as well as for the group cost in total. The figures for the subdivisions are taken from the subordinate ledger or from cost forms. Certain special items relating to professional care of patients vary not so much with the number or kind of patients as with other circumstances. These are shown on a separate statement indicating the cost per unit of service. Arrangement of Summary Schedule of Expenses The first column shows the type of expense or service; the second shows the symbols of the accounts from which the information is obtained ; the third shows the amount of debit to those accounts; the fourth shows the total of the group or the subdivision of a group. The living expenses are divided into two groups, so as to show separately the board cost and the other costs. For the upper half of the schedule columns are provided for ward patients and for private-room patients separately. These give the cost per patient-day, not only for principal details, but for the group total. The line at the foot of this part of the statement gives the total for each column ; and hence the pairs of col- 192 COST ACCOUNTING FOR INSTITUTIONS H O, « -t> ft) g > 3 .S w S? tn M l-H a Q > ft W K W f> V fl a S? cfl 5 ■H * S n i/j s £ > S3 a) '■+3 J" Ph a 1 In Ph Oo Oo <0 OO N 83.1 <5" irj V^Or^M-O BIN NS <5 en S +3 C3 Ph 1-1 IS art " OH Oo N OO 01 t*} *0 **s N 5" 00 1 Sic* 1 PL, 00 ft— d\d NO N » ^ t»> Ojts. Hts. d ft N c "S.2 n O*o i»> <§* hi &i S3 w>t3 O 00 .Q G O v>o 1'S'c oi 00 *n g *0 aoa O 0000000 O O 0000000 O O 0000000 d O, O w^OOo O WiM. h ts. "> <*5 SPhHOhIUX Q Q Q p, p, p, p, & 13 -w ,q M 3 O ■a .Q u 13 4) items J ulance ol. Lab. ling School ensary rgency War e Nursing iy Service "3 -4-3 O 13 C S "So ■O. J3 u ■at*! ♦, T3 13 a .-"So 5 b a o I " »'§ .at** S & ft 8"8 ^ ^ ^ 5 "3 w 1 1 1 s s-a SB d A -a "3 S" Jj « jS ar ^ fa ."ti «£ 2 & §■ 1 s || I O u n n „. £ " a a -" SQ s > o * « S 5 ^ Sj "« «> ^ *u .5 2 w _ „ bo " o 6 § .5 8 » o .8 5 S o « S ~ a a rt V a a S 8 •° h -^ a 194 COST ACCOUNTING FOR INSTITUTIONS umns, since in each pair one shows details and the other shows totals, should agree. The lower half of the form, showing items for which the patient-day is not a signifi- cant unit, names the unit of service for each special type of cost, gives the number of services performed during the period, and finally the cost per unit. From the figures on this form, therefore, comparisons may be made between institutions in their details, in their group totals, and in their final totals. It is obvious, also, that, if it is desired to compare figures for groups unlike those shown here, a different combination of details from this schedule into such required groups is likely to serve the purpose. If, on the other hand, details here are not de- tailed enough, recourse may be had to the detailed costs as reported in full on the schedule recommended in Chapter IV. If, for instance, the cost raw of all food consumed (patient or other) were desired for comparison between two institutions, the debit to general-ledger account DS would be taken; but if the cost of food cooked were desired, the total of DS and DK should be taken; but if the total cost of food served to patients were desired, the figure would be as shown in this schedule IV, designated "food supplies." The cost for each patient or employee per capita day may be readily obtained, of course, for any group or subdivision. The schedule is on pages 192-193. Closing Entries for General Ledger Accounts The balances of the expense accounts remaining (ten resident accounts and seven departmental or professional accounts) will now be closed into the final Earnings Ac- count — of which the purpose is indicated on the State- ment of Financial Transactions for the Year (pages 43, 46, and 52). The various accounts for income from hospital sources will also be closed into this account. CLOSING PROCESSES 195 To the Endowment Income Account, in turn, should be credited income from investments and from interest charged the hospital ; and into this account should be closed the balance of . the Earnings Account, found as indicated above. To the Normal Current Income Account should be closed the balance of the Endowment Income Account, and to it should be credited any contributions received from outside sources and any legacies assigned to current use. Corporation expenses should be debited to this account. The balance of this account will be transferred to Surplus and Deficit Account. The accounts for other kinds of income and expendi- ture, as suggested by schedule D of the Statement of Finan- cial Transactions (pages 52-53), will be closed, as circum- stances may warrant, into Special Funds, Capital Account, Surplus, etc. ; but every item to appear on either the Bal- ance Sheet or the Statement of Financial Transactions should be carried to an account such that the item may be identified and reported when, occasion arises. Usually a separate ledger account should be maintained for each group of items shown on any of the schedules here indi- cated — as the four groups of subscriptions shown on sched- ule VII (page 60), and the three groups of legacies shown on schedule VIII (page 61). Closing Entries for Institutions Other Than Hospitals The closing entries for institutions other than hospitals are not usually different in nature or in treatment, for they require the same method of distributing expense burden, administrative costs, and the like, and their transactions should be publicly reported in the same sort of way. A final summary of expenses for an educational institution, for ex- ample, could be provided in a form similar to that of sched- 196 COST ACCOUNTING FOR INSTITUTIONS ule IV (page 192), substituting salaries and other compen- sation of various classes of instructors for compensation of physicians and nurses, adding costs for libraries, museums, etc., and appending laboratory expenses, etc., in place of the cost of special hospital activities. Such a statement might well be combined with schedule VI (illustrated on page 57), so as to show ultimate costs in direct relation with earned receipts. APPENDIX A /. Alphabetical Index of Symbols of Hospital Accounts This index is intended quite as much as a guide to the accounts (a summary view) as to the symbols. A Administrative Equipment AC General Carting (see page 71) AL Administrative Legal AO Administrative Office f freight h housing i interest m supplies P postage X depreciation z miscellaneous AS Administrative Service b board 1 laundry r rooms s salaries AT Telephone b board h housing 1 laundry r rooms s salaries X depreciation z miscellaneous 197 198 COST ACCOUNTING FOR INSTITUTIONS AZ Administrative Miscellaneous B Buildings and Improvements CA Corporation Annual Report CH Corporation Housing CI Corporation Interest CL Corporation Legal Expenses CM Corporation Supplies CP Corporation Postage CS Corporation Salaries cz Corporation Miscellaneous D Dispensary Equipment DD Serving Department (see page 89) b board f freight h housing i interest 1 laundry m supplies r rooms s salaries ' X depreciation DH Household Department b board (when not subdivided) bd board of chambermaids bt board of waitresses bz board of other household employees f freight id interest on dormitory equipment it interest on table equipment iz interest on miscellaneous housekeeping equipment 1 laundry (when not subdivided) Id laundry for chambermaids It laundry for waitresses lz laundry for other household employees md dormitory supplies mt table supplies mz general supplies APPENDIX A 199 r rooms (when not subdivided) rd rooms for chambermaids rt rooms for waitresses rz rooms for other household employees s salaries (when not subdivided) sd salaries of chambermaids st salaries of waitresses sz salaries of other household employees xd depreciation on dormitory equipment xt depreciation on table equipment xz depreciation on miscellaneous housekeeping equip- ment DK Kitchen Department b board f freight h housing i interest 1 laundry mf fuel mz supplies r rooms sb salaries of bakers sz salaries of other employees x depreciation DL Laundry Department b board f freight h housing i interest 1 laundry mf fuel mz supplies o outside work r rooms s salaries x depreciation 200 COST ACCOUNTING FOR INSTITUTIONS DM Department of Ambulance b board f freight h housing i interest 1 laundry m supplies r rooms s salaries X depreciation z miscellaneous DP Department of Pathological Laboratory b board f freight h housing 1 laundry m supplies r rooms s salaries z miscellaneous DS Steward's Department b board f freight h housing i interest 1 laundry- mb bread and pastry mcb breakfast cereals mcf flour mdc cream mdf butter and other fats mdm milk mdp condensed milk mds cheese mef eggs, fresh mep , egg preparations mes eggs, storage DT APPENDIX A 20I mfc fruits, canned mfd fruits, dried mff fruits, fresh mfj fruit juices mfp fruits, preserved mg groceries and canned goods not elsewhere specified mh sugars, etc. mi ice cream purchased outside mmc meats, canned mmd meats, dried, smoked, cured mmf meats, fresh mn nuts mpc poultry, canned mpf poultry, fresh msc fish, canned msd fish, dried, smoked, pickled msf fish, fresh mt tea and coffee mvc vegetables, canned mvf vegetables, fresh o ice r rooms s salaries V inventory changes X depreciation z supplies not food Department of Training School b board £ freight h housing i interest 1 laundry m supplies r rooms s salaries X depreciation z miscellaneous 202 COST ACCOUNTING FOR INSTITUTIONS E All symbols beginning with E indicate capital accounts for the departments having as their general symbols the letters following the E. The departments will be found under the corresponding symbols; but lone E, as well as EPE, may stand for Emergency Ward Equipment; for under one method shown here all capital accounts are represented by single-letter symbols. (See also page 35.) F Dining Equipment H Household Equipment, General HE Electric Lighting HF Fuel, Oil, Waste HG Gas HIB Interest on Buildings and Improvements (including plumbing and steam-fitting) HIQ Interest on Machinery and Tools HL Care of Grounds HMB Maintenance of Buildings HMP Maintenance of Steam-Fitting and Plumbing HMQ Maintenance of Machinery and Tools HN Insurance HO Ice HP Power HR Rent HS Services of Engineer and Firemen b board 1 laundry r rooms s salaries HT Taxes HW ' Water HXB Depreciation of Buildings, etc. HXQ Depreciation of Machinery and Tools HZ Miscellaneous f freight z other APPENDIX A 203 I All symbols beginning with I indicate income accounts, usually for departments having as their general sym- bols the letters following the I. The departments will be found under the corresponding symbols. But lone I may stand for the capital account for Appa- ratus and Instruments. (See also below.) ICD Income from Stocks ICGC Income from Churches ICGG Income from Subscriptions, Governmental ICGO Income from Subscriptions, Charitable Organizations ICGP Income from Subscriptions, Private ICIH Income from Interest Charged the Hospital ICIO Income from Outside Interest ICR Income from Real Estate K Kitchen Equipment L Laundry Equipment M Ambulance Equipment N Home Nursing Equipment O Sites and Grounds P Pathological Laboratory Equipment PD Professional Care of Patients, Dispensary b board f freight h housing i interest 1 laundry m supplies r rooms s salaries x depreciation z miscellaneous PE Professional Care of Patients, Emergency Ward b board f freight h housing i interest 1 laundry 204 C0ST ACCOUNTING FOR INSTITUTIONS PH PM PQ PS m supplies r rooms s salaries ' X depreciation z miscellaneous Professional Care of Patients, Home Nursing b board f freight h housing 1 laundry m supplies r rooms s salaries z miscellaneous Professional Care of Patients, Medical and Surgical Facilities , a apparatus and instruments, repairs and renewals. b board of pharmacists f freight h housing i interest 1 laundry of pharmacy and pharmacist and operating rooms m medicines, bandages, and other supplies ice P sterilization r rooms of pharmacists s salaries of pharmacists w stimulants X depreciation Professional Care of Patients, Equipment of Nurses a apparatus and instruments b books u uniforms Professional Care of Patients, Service bp board of those serving patients in private rooms bw board of those serving ward patients APPENDIX A 205 bz board of those serving both classes of patients d salaries of physicians lp laundry of those serving patients in private rooms lw laundry of those serving ward patients lz laundry of those serving both classes of patients ng salaries of graduate nurses np salaries of special nurses ns salaries of superintending nurses nt salaries of nurses in training salaries of orderlies op salaries of special orderlies rp rooms of those serving patients in private rooms rw rooms of those serving ward patients rz rooms of those serving both classes of patients w salaries of ward employees PX Professional Care of Patients, X-Ray Service b board f freight h housing i interest 1 laundry m supplies r rooms s salaries x depreciation z miscellaneous Q Machinery and Tools R Dormitory Equipment RAP Residents, Administration for, in Private Rooms (Patients only) RAW Residents, Administration for, in Wards (Patients only) RBP Residents, Board of, in Private Rooms (Patients only) RBW Residents, Board of, in Wards (Patients only) RHP Residents, Housing of, in Private Rooms (Patients only) RHW Residents, Housing of, in Wards (Patients only) 206 COST ACCOUNTING FOR INSTITUTIONS RLP Residents, Laundry of, in Private Rooms (Patients only) RLW Residents, Laundry of, in "Wards (Patients only) RSP Residents, Professional Service of, in Private Rooms RSW Residents, Professional Service of, in Wards S Steward's Equipment T Training School Equipment TB Transfer Board Account THC Transfer House Cubic-Space Account THS Transfer House Floor-Space Account TP Transfer Power TX Temporary Depreciation (Lower-case additions indicate the particular prop- erty depreciated. See page 172.) U Material and Stores Inventory X X-Ray Equipment 77. Alphabetical Index of Additional Symbols for Institu- tions Other Than Hospitals This index does not repeat the symbols given for hos- pitals, in the preceding list, and common to institutions other than hospitals. It is intended quite as much as a guide to the classification of accounts (a summary view) as to symbols. No attempt is made in this list to include all symbols likely to occur as mere subdivisions of general accounts when such subdivision is obvious or has been already suffi- ciently indicated by the preceding list or in the text. Sym- bols for detailed subdivisions similar in every respect to those already discussed (for example, b for board, r for rooms, h for housing, i for interest, x for depreciation, etc.) apply to subdivisions for most of the group accounts here indicated and therefore do not need repetition. The only symbols for detailed accounts here indicated are those APPENDIX A 207 for accounts more or less peculiar to the departments, or phases of activity, found in certain institutions and not al- ready sufficiently indicated by somewhat parallel cases in other types of institutions. DA Boats DAsi salaries of instructors in rowing and paddling DAsz salaries of other employees DB Library DBg binding and rebinding costs DBmb bindery supplies DBmz general supplies DBsa salaries of administrative officers DBsb salaries of bindery employees DBsc salaries of cataloguers and classifiers DBse salaries of runners and errand boys DBsl salaries of loan clerks DBso salaries of accession-department clerks DBsp salaries of shelf -department clerks DBsr salaries of reference clerks DBss salaries of secretarial assistants DBsz salaries of miscellaneous employees DC Cigar Stand DD Dining-Room Service This assumes a separate department independ- ent of the housekeeping department. On page 89 is shown the treatment of dining- room service as a subdivision of the house- keeping department. It might then be worth while to divide account f with the others. DE Entertainments DF Cartage Department (Subdivided somewhat as the stable account is subdivided) DG Garage DGmg gasoline DGmo oil 208 COST ACCOUNTING FOR INSTITUTIONS DGmt maintenance of tires DGmv maintenance of automobiles, not including tires DGmz general supplies DGsc salaries of chauffeurs (drivers who are also mechanics) DGsd salaries of drivers DGsm salaries of mechanics DGso salaries of attendants DI Gymnasium DIsa salaries of attendants and rubbers DIsi salaries of instructors DIsz salaries of general employees DJ Stable DJmf feed DJmh maintenance of harnesses DJmr maintenance of robes, etc. DJmv maintenance of vehicles DJmz general supplies, including medicines, etc. DJsd salaries of drivers DJse salaries of messengers, etc. DJso salaries of hostlers DM Exhibitions DN News-stand DO Bowling Alley DQ Card Rooms DR Billiard Rooms DT Tennis Courts DV Golf Links DW Baths DWsa salaries of attendants DWsi salaries of swimming instructors, etc. DWsz salaries of other employees DX Tennis Courts (a substitute symbol for DT, when DT is training school) DY Bar E All symbols beginning with E indicate capital accounts for departments having as their general APPENDIX A 209 symbols the letters following the E. The depart- ments will be found under the corresponding symbols. (See also pages 37—41). HH Public Halls HIO Interest on the Value of Sites and Grounds I All symbols beginning with I indicate income ac- counts for departments having as their general symbols the letters following the I. The depart- ments will be found under the corresponding symbols. OA Advertising OH Hospitality OP Publications (not advertising) PB Libraries for Research Work (For subdivisions, see under DB) PL Laboratories for Research PO Observatories for Research POmp photographic supplies POmz general supplies POp postage POsc salaries of computers POso salaries of observers POsp salaries of photographers POss salaries of secretaries and recording clerks POsz salaries of general employees SB Libraries for Students (Subdivided similarly to DB — libraries for institu- tions not educational) SC Instruction by Correspondence (See subdivisions under SG) SCp postage SE Instruction for Extension Students (See subdivisions under SG) SG Instruction Orally for Students in Residence SGm supplies (chalk, stationery, etc., for classes) and maintenance of equipment SGsa salaries of assistant masters or assistant professors 210 COST ACCOUNTING FOR INSTITUTIONS SGsd salaries of assistants, demonstrators, etc. SGsi salaries of teachers or instructors SGsm salaries of masters or professors SGsp salaries of special teachers or lecturers SGss secretarial service for teachers SL Laboratories for Students' Use SM Museums and Other Permanent Exhibitions SO Observatories for Students APPENDIX B Alphabetical Index of Common Items of Hospital Expense, with the Symbols of Accounts Chargeable Alcohol PMm Ambulance supplies DMm Annual reports (printing and mailing) CA Apollinaris DSmg Apparatus, replacements only- PMa Barge, cost of running HZz Bedding, replacements of DHmd Books, blank for hospital AOm blank, for treasurer's office CM reference (not text books) for nurses PQb text (not reference books) for nurses, not paid for by nurses DTm Bread, from outside DSmb Brooms DHmz Butter DSmdf Canned goods, not specified elsewhere DSmg Carbonated water DSmg Car fares AOz Care of flower beds HL Care of grounds HL Care of fruit trees DSmff Care of vegetable garden DSmvf Cartage (See page 71, and also, below, Freight) Cheese DSmds Coal, boiler-room HF kitchen use only DKmf laundry DLmf Cream- DSmdc Crockery, replacements of, for bed-rooms DHmd for table DHmt 211 212 COST ACCOUNTING FOR INSTITUTIONS Depreciation of buildings HXB equipment, dormitory DHxd equipment, table DHxt equipment, general household DHxz equipment, departmental dept. symbol +x Diplomas DTm Dispensary supplies PDm Egg preparations DSmep Eggs, culinary DSmes fresh DSmef Electric lighting HE Emergency ward supplies PEm Entertainment of nurses in training DTm Express (See Freight) Fertilizer (vegetable garden) DSmvf Fish, canned DSmsc fresh DSmsf smoked, dried, and pickled DSmsd Flower beds, care of HL Freight on building- machinery and ground- maintenance supplies HZf dispensary supplies PDf emergency ward supplies , PEf furniture replacements DHf home nursing supplies PHf housekeeping supplies DHf kitchen supplies DKf laundry supplies DLf medical and surgical supplies and alcoholics PMf office supplies AOf pathological laboratory supplies DPf steward's supplies DSf training school supplies DTf X-Ray supplies PXf miscellaneous AOf APPENDIX B Fruits, canned DSmfc dried DSmfd fresh DSmff Fuel (See Coal) Furniture and fixtures, office (replacements) AOz house (bed-room replacements) DHmd (dining-room, table replacements) DHmt (general replacements) DHmz Gas HG Ginger ale DSmg Gloves, surgeons' rubber PMm Graduation expenses DTm Grounds, care of HL Home nursing supplies PHm House and property miscellaneous expenses HZz Housekeeping, bed-room supplies DHmd dining-room, table supplies DHmt general supplies (not laundry, food, kitchen, or boiler) DHmz Ice HO Ice-cream DSmi Instruments, surgical — for nurses PQa for physicians PMa Insurance, hospital buildings (one year's proportion) HN departmental equipment, charged to dep'ts 213 Interest (on mortgages and loans payable) Kitchen utensils — replacements and maintenance Laundry bills (outside) Laundry supplies Lawn-mowing Legal expenses, corporation, in connection with investments, donations and legacies hospital, in connection with col- lection of bills, damage suits, etc. CI DKm DLo DLm HL CL AL 214 COST ACCOUNTING FOR INSTITUTIONS Linen, replacements of, bed-room DHmd table DHmt Machinery, replacements and repairs HMQ Magazines, (not for nurses) AOz (for nurses) PQb Meat, canned DSmmc dried DSmmd fresh DSmmf Medical supplies PMm Messenger service, not telephone or telegraph AOz telephone and telegraph ATz Milk DSmdm Miscellaneous administrative expense AZ Miscellaneous corporation expense (all expenses not provided for) CZ Miscellaneous house and property expense HZ Newspapers and periodicals (not for nurses) AOz (for nurses) PQb Office supplies (not stationery) AOz Oil, kerosene HF machine HF olive DSmdf Pastry, from outside DSmb Pathological laboratory supplies DPm Periodicals (not for nurses) AOz (for nurses) PQb Plumbing, repairs and replacements HMP Postage, annual report CA corporation (except annual report) CP hospital (not on annual reports or notices of meetings) AOp Poultry, canned DSmpc fresh DSmpf Printing, annual report CA corporation (not annual report) CM hospital (not annual reports or notices of meetings) AOm APPENDIX B 215 Property and house miscellaneous expenses HZz Renewals, house furniture and fixtures, dormitory DHmd table (dining-room) DHmt general DHmz office furniture and fixtures AOz machinery and tools HMQ surgical apparatus and instruments PMa Repairs of buildings (not including additions or permanent improvements or plumbing) HMB housekeeping property (See Renewals) machinery and tools HMQ plumbing and steam-fitting HMP Reports, annual (printing and mailing) CA Seeds, lawn HL vegetable garden DSmvf Snow-shoveling HL Soap, dish-washing DKm laundry DLm medicinal PMm scrubbing DHmz toilet DHmd Starch, corn DSmcb laundry DLm Stationery, corporation CM hospital AOm Steam-fitting, repairs and replacements HMP Stimulants (not flavoring spirits, carbonated waters, ginger ale) PMw Surgical instruments, replacements only PMa Taxes on property used for hospital purposes HT (other taxes charged to the : income of the specific property) Telephone rental ATz Tools, repairs and replacements HMQ 216 COST ACCOUNTING FOR INSTITUTIONS Uniforms, for nurses PQu Vegetables, canned DSmvc fresh DSmvf Waste (cotton, for boiler-room use) HF Water HW Wax, laundry DLm Wood, boiler-room and fireplace HF kitchen use only DKmf X-Ray supplies PXm APPENDIX C Comparison of Accounts of the New York Plan of Accounting for Hospitals and the Plan Advocated Herein Number of Account, Symbol of Account, New York Plan Plan Herein i ASs 2 AOf , AOz 3 AOm, AOp, CA 4 ATs, ATz 5 AL 6 AZ 7a PSd b PSns c PSng, PSnt d PSnp e PSo f PSop g PSw 8a PQu b PQb c PQa 9a PMa b PMm + alcohol c PMw — alcohol 10a PDs b PDm na PEs b PEm 12a PHs b PHm 13a PXs b PXm 217 2l8 COST ACCOUNTING FOR INSTITUTIONS 14a DMs b DMm 15a DPs b DPm 1 6a DTs DTm 17a DHs b DHmd, DHmt, DHmz 1 8a DKs b DKmz, DKmf 19a DLs b DLmz, DLmf 20a DSs b: bread DSmb c: milk and cream DSmdm, DSmdc, DSmi DSmds, d: groceries DSmg, DSmfc, DSmfd, DSmfj, DSmfp, DSmvc, DSmcf, DSmcb, DSmdp, DSmh, DSmn, DSmt e: butter and eggs DSmdf, DSmef, DSmep DSmes, f : fruit and vegetables DSmff, DSmvf g: meat, poultry, and fish DSmmf, DSmpf, DSmsf, DSmsc, DSmsd, DSmmc, DSmpc, DSmmd 21 HE 22 HF 23 HG 24 HO 25 HMB, HL ' 26 HMQ, HSs 27 HMP APPENDIX C 219 28 HR, or distributed to depart- ments (not of importance for comparisons) 29 HN* 30 HZ 31 CS 32 CM, CP 33 CL 34 CI 35 HT 36 CZ In primary accounts, it will be noticed, the two plans are not essentially different. The really important differ- ences lie in the disposition of those primary accounts — that is, the distribution of them so that ultimately costs of vari- ous elements of service may be put on a unit basis. * This is true only if all insurance is carried to HN, under the plan herein, before it is distributed in part to the departments having insured equipment. If one desires to know the total cost of all insurance, that should be done. That complicates the bookkeeping, however, and puts the emphasis on the expenditure rather than on the service — which sometimes leads to false economy. APPENDIX D The Bookkeeping Entries for Imaginary Transactions in a Hospital In order to illustrate more concretely the actual book- keeping processes, all the entries for a hospital making use of the accounts recommended here (except for a few de- partments which it is assumed not to employ — as an emer- gency department and a department of home nursing — and one or two which conditions do not require — because a few employees, boiler-room help, for instance, do not live on the premises) are shown in the following pages. All revenue and expense accounts are designated by symbols only. The figures used are approximate figures for a cer- tain hospital for a year, but they are used here as if for a month. It is assumed that the voucher-register system with many special columns, and a special-column cash book, also with many columns, are used. The amounts shown for the first entry of expenses are supposed to be totals of spe- cial columns in one or the other of these books. Only one posting will be required each month for each account ap- pearing on either of these books. All other entries are supposed to be taken from the journal, and are no more frequent than monthly — unless errors are discovered or ad- justments are needed for new conditions arising. If the closing entries were made only annually, however, and these figures were actually figures for a year, the method would be the same as that shown here. Following these are shown the general ledger and the 220 APPENDIX D 221 subordinate expense ledger. The accounts are designated by symbol only. From these can be seen how complete is the record and how little labor is made by the bookkeeping requirements of the many subordinate accounts. The trial balance is shown as it appears when all other accounts have been closed into the ultimate accounts. ash 287,750 To IRBP 64,000 IRBW 50,000 IPSN 22,000 IPD 9,000 IDM 250 IZ 2,500 Subscriptions, etc.* 140,000 We assume that the capital assets are already on the books (shown in accounts having a single capital letter for a symbol), with a credit to the Capital Account (Proprie- torship) amounting to $1,557,500. The following is a single entry, as if in a journal, to express in summary form the debits to various expense ac- counts, from the cash book and the voucher register; and the credit to cash (either direct or from the payment of vouchers payable). * The details of this item should be given in the ledger and in the report, of course, and should be given not on schedule V but on schedules B, C, and D. They are here combined merely to give a working cash item on the books, so that the bookkeeping details to follow shall not proceed with a credit item to cash. 222 COST ACCOUNTING FOR INSTITUTIONS ASs 16,000 Brought up 141,170 AOf * 100 DKmf 500 AOm 3.5oo DLs 5,000 AOp 300 DLm 1,200 AOz 40 DLmf 600 ATs 2,300 DLo 50 ATz 50 DSs 1,200 AL 700 DSmb 500 AZ 30 DSmdm 12,000 PSns 5,800 DSmdf 10,000 PSng 6,000 DSmef 5,000 PSnp 18,000 DSmff 3,000 PSnt 2,300 DSmfc 100 PSo 5,000 DSmfd 450 PSw 2,500 DSmvf 4,5oo PQu 2,500 DSmvc 200 PQb 200 DSmmf 12,000 PQa 100 DSmpf 9,000 PMa 6,000 DSmsf 6,000 PMm 11,000 DSmg 10,000 PMw 2,000 DSz 700 PMf 100 DSf 45o PDs 4,000 HE 900 PDm 5,000 HG 700 PDf 50 HF 10,000 PDz 25 HW 500 PXs 800 HO. 3,000 PXm 500 HMB 10,000 DMs 1,500 HL 2,500 DMm 5,000 HMQ 1,500 DPs 6,000 HMP 2,500 DPm 1,000 HSs 2,290 DTs 2,000 HN 6,000 DTm 50 HZf 50 DTz 25 HZz 100 DHs 16,000 CS 2,500 DHmd 4,000 CM 800 DHmt 2,000 CP 300 DHmz 1,000 CA 1,500 DHf 200 CL 500 DKs 6,000 CZ 1,500 DKmz 1,500 To Cash 270,760 APPENDIX D 2.2 "• The following entries are numbered to correspond with the discussion of closing entries on pages 170-187: No. 1 PMo DSo to HO No. 2 AOx HXB DHxt DHxz PMx DKx DLx DMx HXQ DHxd DSx DTx PXx To A B F H I K L M Q R S T X No. 3 AOi HIB DHit DHiz PMi •This amount as shown by the DHb, DHr, DHL 500 2,300 45 30,000 90 1,200 450 300 600 150 1,200 39° 90 60 150 Closing Entries 2,800 [Cont.] DKi 300 [Cont.] DLi 600 DMi 150 HIQ 1,200 DHid 390 DSi 90 DTi 60 PXi ISO To ICIH 34,725 No. 4 HL 25 DSmvf 50 HE 15 ToHS 90 No. 5 TP 12,400 ToHF 10,000 HS 2,200 HW 200 No. 6 DLmf I.OOO DKmf 300 PMp 4,000 HP 7,100 ToTP 12,400 No. 7 THS 50,675 ToHW 300 HO 200 HL 2,525 HMQ 1,500 HXQ 1,200 HIQ 1,200 HZ 150 DH* 43,600 45 30,000 90 1,200 450 300 600 150 1,200 390 90 60 150 45 30,000 90 1,200 450 was determined by taking the total DHs, DHmz, DHiz, DHxz, DHf, subordinate ledger at this point, and adding an estimated figure for ?24 COST ACCOUNTING FOR INSTITUTIONS No. 8 DLh 900 [Cont.] ASr 1,200 DSh 800 AOh 2,110 RHP 15,000 PSrp 4,000 RHW 21,315 PSrw 6,000 To THC 87,215 PMh 3,000 This entry may be combined PXh 200 with No. 8, for the debit accounts DMh 300 are the same. DPh 500 DTh 4 2 5 No. 10 DHr 3,800 ASr 50 DKr i>350 PSrp 300 DKh 400 PSrw 400 DLr 375 DHr 230 DLh 415 DKr 100 DSh 35° DLr 100 RHP 10,270 RHP 1,600 RHW 15,980 RHW 2,000 ToTHS 50,675 ToDH No. .11 4,780 No. 9 ASb 25 THC 87,215 PSbp 80 To HE 915 PSbw 100 HG 700 DHb 75 HP 7,100 DKb 5° HMB 10,000 DLb 50 HXB 30,000 RBP 800 HIB 30,000 RBW 1,000 HMP 2,500 ToDH 1 2,180 HN 6,000 No. 12 No. 9a AS1 100 ASr 2,500 PSlp 500 AOh 4,200 PSlw 600 PSrp 9,000 DH1 400 PSrw 12,000 DL1 200 PMh 6,000 DK1 200 PXh 500 RLP 6,000 DMh 400 RLW 9,900 DPh 1,400 ToDL 17,900 DTh 900 DHr 8,000 No. 13 DKr 2,700 TB 94,500 DKh 800 ToDS 76,980 DLr 800 [Cont.] DK 17,520 APPENDIX D 225 U No. 14 ToDSv 2,000 6,700 6,000 9,000 12,000 3,000 6,000 280 23,510 28,010 S7.98o 65,900 No. 15 ASb PSbp PSbw DHb DKb DLb DSb RBP RBW ToTB No. 16 RSP RSW To PS PQ PM (At this point the following groups of accounts in the expense ledger— PS, PQ, PM, DH, DK, DL, DS, HS, HZ— should be closed into the corresponding group accounts in the general ledger.) 2,000 94,500 87,580 2,800 33,5oo| 17 No. RHP RHW ToDH 235 270 505 No. 18 RBP RBW ToDS No. 1 8a DK To RBP RBW 19 No. DL ToRLP RLW No. 20 PDz DTz PXz DMz DPz RAW RAP To AS AO AT Al AZ 60 20 1,384 459 153 153 306 24,450 13,090 80 26,575 10,340 2,350 700 30 The general ledger, in skeleton form, showing the ulti- mate expense and income accounts, but not showing the final closing into Earnings, Endowment Income, Normal Current Income, etc., is shown below. As a convenient means of showing many accounts at once, each account, representing a ledger page, is here given a square or block. This should not confuse anyone familiar with the appear- ance of a ledger. 226 COST ACCOUNTING FOR INSTITUTIONS GENERAL LEDGER A B F H I 1,500 45 1,000,000 30,000 3,000 90 40,000 1,200 15,000 450 K L M 10,000 30c 20,000 600 5,000 150 400,000 40,000 1,200 R s T U X 13,000 39c 3,000 90 2,000 60 2,000 5,000 150 Capital Account Subscriptions, etc. Cash 1,557,500 140,000 287.750 268,760 IRBP IRBW IPSN IPD IDM IZ 64,000 50,000 22,000 9,000 250 2,500 ICIH AS AO AT AL AZ 34.725 26,575 26,57 5 10,340 10,340 s ,350 2,350 700 700 30 30 PS PQ PM PD PX DM 87,580 87,580 2,800 2,800 33,500 33,500 I 0,459 2,453 7,653 DP DT DS DK DH DL 9206 3.979 79,060 2.000 76,980 80 17,500 17,5 20 20 51,065 43,6o< 4.78i 2,18 50 > 17,890 17,900 ) 10 HE HG HF HW HO 900 915 15 700 700 10,000 10,000 500 200 300 3,000 2,800 200 HP HMB HXQ HXB HL 7,100 7,100 10,000 10,00c 1,200 1,200 30,000 30,000 2,500 2,525 25 HMO HMP HS HN HZ HIB 1,500 1,500 2 500 2,500 !,290 90 2,200 6,000 6,000 150 150 3C ,000 30,000 HIQ THS THC TB TP 1,200 } ,200 50,675 50,675 87,215 87,215 94,500 94.500 12,400 12,400 APPENDIX D general ledger [Continued] 227 RHP RHW RBP RBW RLP 10,270 15,000 1,600 235 15.980 21,315 2,000 270 800 10 23,510 60 1,000 10 28,010 20 6,000 5 RLW RSP RSW RAP RAW cs 9.900 s 57,98o 65,900 13.090 24,450 2,500 CM CP CA CL cz 800 300 1,500 500 1,500 228 COST ACCOUNTING FOR INSTITUTIONS 1-1 g u o ■* N O < o *fr H O <■* oi w rl o < Q m W ►J w o O Z M ' ro B P. 55 < a o < B o o o o W H < o O O 2 r- , w (— < a o < Q CO < ei o o o o o O O «) O to io o o l^ fj « ja o , N CO < o < O v> o « o o w O o r*- i-i N *o « *f o o o o o o n o < < < o o o o o o H f*J o M M *3 ■a *c3 ■fe 2 o o o fO o o « N H en O H < < < APPENDIX D 229 IS 03 Ph O O O O O O O H 0, CO PM CO 000 o_ en ft 03 Em O q o_ 10 ft R 03 ft q CO o_ 00" a en ft fO O O bo c 03 ft O O O SO O O q to r tn ft CO w 00 10 •3' O 00 CO CO Cu 000 000 °_ °. ■* 000 000 OOri O O O O .a S. O O o_ O O O O O q rOv© s PL, O O M O O O &4 O O m o s s 0. H O O s Oh O O q *c3 O O a C4 230 COST ACCOUNTING FOR INSTITUTIONS IO a P to 3 e o U r*> r*3 X Hi O a n o H « a Q M ►J B o o Q 0. o o a o M P o CO 2 H Oh X w B < Q woo o 1/) o to o CO a p. O -a X Hi o o J3 a P o o J3 a o o 9! o o o o o o o o o © o o o M O m en a o o o_ w E X ft. o o IT) E a n o o s Hi P o o o_ o o q »o o o to o o q io o o Q CM o o o Oh o o to a Q o o H P o o q o o o o o 00 o o o o o ■a 1 O H ■a 1 •a 6 IO o w <> Q X 0. a Q APPENDIX D 231 to ! (a o Q a CO Q O O a CO Q O ** O O O IO 4 a CO Q \ > to p q to P to p to p 10 100 COCO to p O -* CO Q O O O O 232 COST ACCOUNTING FOR INSTITUTIONS M Q o ro o o o o o o a Q o o g a o o o o o ro O o o_ 81 P4 o o o o TfOO E as o o o o_ ci la o o 00 o o o_ o o o o IOrO •a S a a o o o ■4 O o IT) o o o^ 4 o o S Q o a o o M ■* o o o o i-. o o 4 a Q o fO o o o o moo rot* m o o o O O ro oq q w fOCO a o q ro w a t* o^ o o o W o_ ro io o t-o o_ 0} Q o o o CO p o o o -6 o o o so o o o O •3 o o m in P X f O i-h P o co o o o o\ « Pi ►J P o o o o o "3 o E-" 3 P o o ° 1 a n p» o o •o K P CO X « 3 P ro o o IOO •H O 13 W P o 1 P o o >q o o o o >o q o N E ►J a o o C4 1 o o o »o o o" P o o ro to ■J P o o q o m o Oi fO o o o to ■a S Eh 3 S o o. 00 o P APPENDIX D 233 Trial Balance Capital Account $1,557,500 A 1. 455 B 970,000 F 2,910 H 38,800 I I4.SS0 K 9,700 L 19,400 M 4,850 O 400,000 Q 38,800 R 12,610 S 2,910 T 1,940 U 2,000 X 4,850 PD 10,459 PX 2.453 DM 7.653 DP 9,206 DT 3.979 RHP 27,105 RHW 39,565 RBP 24,360 RBW 29,020 RLP 5,995 RLW 9,895 RSP 57.980 RSW 65,900 RAP 13,090 RAW 24,450 ICIH 34.725 IRBP 64,000 IRBW 50,000 IPSN 22,000 IPD 9,000 IDM 250 IZ 2,500 Subscriptions, etc. 140,000 CS 2,500 CM 800 CP 300 CA i.soo CL 500 CZ 1,500 Cash 287,750 270,760 $2,150,735 $2,150,735 234 COST ACCOUNTING FOR INSTITUTIONS It is interesting to see how schedule VI, for private- room patients and ward patients, works out in this case. Symbol of Account Earnings Expenses Loss Private-room patients IRBP IPSN 64,000 22,000 86,000 RHP 27,105 RBP 24,360 RLP 5,995 RSP 57,98o RAP IRBW 13,090 128,530 42,530 Ward patients 50,000 RHW 39,565 RBW 29,020 RLW 9,895 RSW 65,900 RAW 24,450 168,830 118,83a Temporary Depreciation Below is shown the working-out of the treatment of Temporary Depreciation, discussed on page 172, using medical and surgical facilities for illustration, and sup- posing normal wear and tear to require $100 a month. In case I, the expenditure is supposed to be $1,500 for the year, and in case II, $1,000. APPENDIX D 235 Case I Case II PMx ToTXi 1,200* 1,200 PMx To TXi 1,200* 1,200 TXi To Cash 1,500* 1,500 TXi To Cash 1,000* 1,000 PMa To PMx 1,200 1,200 PMa To PMx 1,000 1,000 I To TXi 300 300 TXi To I 200 200 Balances: I PMa i, 300 200 Cash 1,500 Balances PMx PMa 1 200 ,000 Cash 1,000 I 200 It is not usually worth while to keep account of de- preciation of plumbing and steam-fitting, for, if ordinary repairs are made and charged to maintenance (usually not varying much from year to year), equipment of that sort should last virtually as long as the building is used. If depreciation is actually suffered, on the other hand, it should be treated ultimately as a part of building deprecia- tion (HXB), and then, after repairs are actually made, the ultimate debit should be to HMP (in place of HMB). For temporary depreciation, therefore, the only difference of treatment from that just described would be the sub- stitution of HMP for HMB, for a part of the debit of the third entry, to cover the actual repairs. The depreciation, both HXB and TXb, would be regular. * The sum of numerous entries scattered through the year. APPENDIX E Report of the Committee on Uniform Accounting for Institutions* The membership of this committee was intended to in- clude representatives of various types of institutions and various aspects of institutional work. The committee has had a progressive rather than a constant life, for the mem- bership has been enlarged as various phases of the work were attempted and advice upon them became necessary. Besides the chairman, the following, in the order of ser- vice, have had a part in the work of the committee : Miss Olive Davis, director of halls of residence, Wellesley Col- lege; Dr. Frederic A. Washburn, superintendent of the Massachusetts General Hospital, Boston; Dr. Roland H. Harris, member of the board of trustees of the Battle Creek Sanitarium; Mr. John L. Taylor, assistant comp- troller of Harvard University, and treasurer of the Symmes (Arlington, Mass.) Hospital; Miss Florence Ruth Corbett, dietitian at Teachers College, Columbia Univer- sity, and consulting dietitian for institutions; Mr. Edgar A. Fisher, purchasing agent of Earlham College. This gives the committee, counting some members in more than one capacity when their work has had more than one aspect for the purposes of the committee, four repre- sentatives of hospitals, one representative of a sanitarium, four representatives of the food-and-shelter aspect of col- leges, three representatives of -the teaching aspect of col- leges, and two accountants. Mr. Melvil Dewey, of the * Presented at the Lake Placid Meeting of the Administration Section of th" American Home Economics Association, June, 1912; published in The Journal u* Home Economics: Home, Institution, School, December, 1912. 236 APPENDIX E 237 Lake Placid Club, has given the committee much help, par- ticularly in the consideration of problems of clubs and hostelries. A complete plan for uniform accounting would require a large volume for exposition and illustration. So many differences occur in institutions that doubtless fifty modifi- cations of any uniform plan would be required even for the institutions represented in this conference. Uniformity of detail is not really uniformity at all, for details must differ where conditions differ; otherwise one cannot know that conditions are different, and the accounts will misrepresent the facts. What we mean by uniformity is uniformity of method — so that the same situation will be disclosed by the same figures, and differences of situation will be disclosed by differences — and concomitant differences — of figures. For these reasons your committee has thought wise to recommend the adoption of certain principles that it believes essential to any sound accounting — whether for immediate costs, for studies of efficiency, or for purposes of compari- son either within an institution or between institutions. These principles may be stated concisely, as follows : 1. Capital accounts, so-called, should be kept for all permanent property and equipment — and that means a cap- ital account for each department of the institution. The purpose of these accounts is to show not what the prop- erty is worth to-day for sale purposes, but what it repre- sents in the way of cost, or investment, for the institution. These accounts indicate how much of the funds entrusted to the institution have been, and are now, locked up in per- manent form. It is assumed that either the property has been maintained at its original efficiency, or depreciation has been subtracted from the original cost and charged as operating cost, or expense. If in any institution the records of cost of permanent 238 COST ACCOUNTING FOR INSTITUTIONS equipment have not been preserved, a fair valuation of the property for use purposes (not for sale purposes unless early sale is contemplated) should be made. This valua- tion should have regard to three things — the cost of new equipment to do the same or substitute work, the probable life (or period of usefulness) of the old equipment, and the comparative efficiency of the new and the old. The important fact is to recognize the principle of valuation, for several things hinge upon it — as will appear in the dis- cussion of other accounts. The only objection to this plan is the fear that jealous citizens may agitate for taxation of tax-exempt institu- tions, or philanthropically minded persons may grow tight- fisted if they learn how much property institutions hold. The committee believes that even under such circumstances the figures should be kept on the books, but it may not be wisdom to publish them. On the other hand, a campaign of education may sometimes be profitably conducted by showing how big an investment is necessary to make pos- sible the conduct of a proper public service. Greater con- tributions may result. Directly related to these capital accounts are four, some- times five, operating or expense accounts, and these should be kept separate for each department. These give us the following : 2. A maintenance account should be kept for each de- partment. ' This should show all expenditures for repairs and replacements to keep the property in its original effi- ciency for service. The sum of these is an operating cost. If the property has been more than maintained, so that it has greater efficiency or longer life than before, the cost of the excess of service-value may be charged to the capital account of the department. If, on the other hand, repairs and replacements have APPENDIX E 239 not kept the property up to its old efficiency, this exhaus- tion of value is still one of the operating costs, or expenses, and must be counted. So far as cost, or expense, is con- cerned, it makes no difference whether one has replaced the wear and tear or not. The cost is the wear and tear itself. For convenience, we call the cost of restored wear and tear "maintenance," and actual (not restored) wear and tear we call "depreciation." A valuation, as already indicated for the capital account, assists in the annual answer to the question, Has the property been maintained ? This is to be determined for a department as a whole, and not for each item of property — table leg, or sheet, or instrument. If the property and equipment of the department as a whole are as efficient (looking into the future, i. e., at durability, as well as at the present) as they were at the beginning of the period for which the books were made up, the property has been maintained and no depreciation need be considered. The cost of that maintenance is the charge to maintenance account. If, for an absurd but simple example, a building were so constructed that one-tenth of the cost were in the roof, one-tenth in each of three floors, one-tenth in each of four walls, etc., and it were good for ten years only, and you replaced the roof one year (though the rest depre- ciated), and a floor another year (though the rest depre- ciated), and so on, there would be no actual depreciation. You might go on in this way for a thousand years, always with a building as good as it was at the end of the tenth year, with correct showing of values and of costs; for though each year nine-tenths were allowed to depreciate, the tenth-tenth would be entirely replaced and charged to maintenance ; and that would be as good, and indeed prac- tically far better, than replacing one-tenth of the walls and of the floors and of the roof each year. 3. A depreciation account should be kept for each de- 240 COST ACCOUNTING FOR INSTITUTIONS partment; for, as just indicated, when depreciation has oc- curred, it must be counted as a cost; otherwise a superin- tendent or manager who exhausts the equipment will be showing low costs. Depreciation must also be deducted from the capital value of the property. 4. An interest account is desirable for each depart- ment. Each department should be charged interest on its equipment. This sounds like paying the left pocket from the right — like playing with figures. Yet only so can we know whether equipment is profitable. Expensive equip- ment may be put in to save labor ; but no institution has a plethora of funds, and money spent for permanent equip- ment cannot be used for current accomplishment. If de- partments are not charged interest on their equipment, they are left with temptation to save a dollar in wages at the expense of two dollars in interest — for wages always show and the interest (in that case) will be hidden. Even if money. is plentiful, neglect to charge interest will represent conditions unfairly in a comparison with other institutions unless actually the same proportional investment has been made in the various departments. Obviously a valuation, as suggested for the capital ac- count, is necessary for the calculation of interest on equip- ment. The rate of interest must be determined by local conditions. For our purposes, the important things are merely two : first, the recognition of the principle of in- terest as a department cost; second, a statement, in the published report, of the amount of interest charged to each department and of the rate used. 5. Departments should be charged for insurance on their property for the same reason that they should be charged interest. The use of property involves the cost of insuring that property, and a department unwilling to bear the expense should not be granted the right to purchase. APPENDIX E 241 6. If taxes are paid, they should be charged to depart- ments in the ratio of the value of the property held. Obviously only when valuations of property are pre- served on the books can one apportion insurance and taxes to the various departments. So far we have been concerned only with direct costs — costs for which we know, or can easily tell, how much be- longs to each department. Besides those just considered are the obvious items of salaries, supplies, express, station- ery, printing, etc. Your committee recommends that at least four joint costs — or costs common to several departments — be dis- tributed among the departments concerned. These follow : 7. Food — including supplies, cooking, and serving — should be charged to departments separately. Food cost should be distributed among the departments and should be charged to each on such basis as in each particular case will show the actual cost to the institution of food con- sumed by employees "living in." Only when this is done can one tell whether "living in" is cheaper than "living out," and only then can one compare institutions operating under different conditions. When different types of dietary are served to different classes of guests, inmates, or students, the food costs should be kept separate for each. 8. The cost of dormitory or sleeping provision should be determined for each department. This should be charged to each department on the basis of space occupied and service rendered for sleeping accommodations for its employees. The chief items so to be distributed are rent, heat, light, laundry, and care of rooms. 9. The cost of laundry should be charged to each de- partment. This is meant to cover both laundry used by the 242 COST ACCOUNTING FOR INSTITUTIONS department itself, as operating-room laundry in a hospital, and laundry of employees of the department. 10. Department housing, or space cost, should be charged to each department. This includes rent, light, heat, cleaning, etc., for the quarters used by the department for the conduct of its business. ii. Your committee recommends that in some cases two items be subdivided within departments, as follows: (a) The subdivision of pay-roll in some departments. When several classes of employees, serving different func- tions and receiving various rates of wages or salaries, are employed in any department, their salaries should be sub- divided in such fashion as to make available statistical com- parisons or cost figures for the different classes of work. In a hospital, for example, wages of graduate nurses, of nurses in training, and of orderlies, though all in the group of cost of care of patients, should be separately reported. (b) Subdivision of supplies in certain departments. These should be divided into classes whenever such sub- division will give statistical information of value. Such information is the relative consumption of meat, of fish, of dairy products, of cereals, etc., under different condi- tions, and the cost of dietetic substitutes for any of these. The above recommendations are made by unanimous vote of the members of the committee present at this con- ference. Dr. Washburn,* who was unable to be here, has expressed personally to the chairman his approval of the principles involved; but he has not had opportunity to see them expressed in this form. Miss Davis* has been abroad for some time, and has not seen this formulation, but has expressed her approval of most, if not all, of the principles. Respectfully submitted, for the Committee, William Morse Cole, Chairman. * Since the meeting, both Dr. Washburn and Miss Davis have given the report their full endorsement. INDEX Additions to property, 105 Administration — distribution of costs of, 186 equipment for, 19 expenses of, 70-73 Advertising, 96 Alphabetical index — hospital ex- penses, 2 1 1-2 16 symbols for hospital accounts, 197-206 symbols for accounts of institu- tions not hospitals, 206-210 Ambulance service, 25, 76 Annual report, 86, 87 Apparatus — astronomical, 39 surgical, 19, 74 Asset statements, 24 Astronomical apparatus, 39 Automobiles, 40 B Bakers, 79 Balance sheet — arrangement of, 26-27 illustrative, 28-29 publication of, 17, 238 purpose of, 16 Bar, 41, 96 Baths, 41, 94 Bedding, 25, 80 Billiard rooms, 40, 95 Board — bookkeeping entries for, 181-184 employees', 129, 132-135, 156, 157, 160, 241 general, 71-86 passim Board — patients', 56, 85, 156, 160, 192 transfer account, 84, 181-184 Boats, 40, 95 Bookkeeping entries for— adminis- trative expenses, 186 board costs, 1 81-184 closing, 187-189, 194 depreciation, 170-175 engineer's services, 175-177 hospital complete, 220-235 household costs, 180 ice, 170 interest charges, 174 inventories, 182-184 laundry costs, 180 power, 177 professional services, 184 rent charges, 175 space-costs, 178-179 temporary depreciation, 172-174 Bookkeeping methods, 9, 101 Books, 38, 39, 74 Bowling alleys, 40, 95 Bread, 77 Breakfast foods, 78 Buildings, 23, 82, 179, 235 Burden, 7 Butter, 78 Calculation of food costs — occa- sional common, 148 regular common, 153 special, 144 Canoes, 40 243 244 INDEX Capital accounts — alphabetical in- dex of symbols of (with expense accounts), for hospitals, 197- 206 for other institutions, 206- 210 classified, 19-26, 36-41 general discussion of, 16, 237 Capital assets, statement of, 28 Capital gains, 49, 52 Capital liabilities, statement of, 29 Capital losses, 50, 52, 53 Card rooms, 40 95 Carriages, 40 Cartage, 71, 95 Cereals, table, 78 Charts, 38, 39 Cheese, 78 Cigar stand, 40, 96 Cleaning cost, distribution of, 100 Closing entries — general, 170-196 skeleton, 187-189, 223-225 Coffee, 79 Committee on uniform accounting, 236-242 Confectionery, 79 Contributions, 44, 47, 51, 52, 56, 61 Corporation expenses, 48, 51 Cost accounting— aims of, 1 methods of, 5-8 Cost units, 97 Cream, 78 Current assets, statement of, 28 Current liabilities, statement of, 29 D Death record, 126 Departmental income, 57 Depreciation — bookkeeping entries for, 170-175 general, 46, 51, -72-82 passim, 104, 170, 239 of buildings, 82, 179, 235 Depreciation — of machinery, 82, 178 of plumbing, 235 temporary, 172-174, 234 Dietary summaries, 141-144 Dining room service. 80, 89 Direct charges, 5 Discharge record, 126 Dispensary, 20, 75 Distribution of indirect costs — ad- ministrative, 186 engineer's time, 161-163, 175-177 food, 159-160, 181-184, 241 general, 7-12, 102 housekeeping, 180 laundry, 180 professional, 184 space, 166-168, 178-179, 241. 242 Divisional income, 58, 234 E Earnings — departmental, 57, 58 divisional, 58, 234 general, 43, 46, 51, 55-58 Economy of operations, 2, 5 Eggs, 78 Emergency ward, 20, 75 Employees' board, 129, 132-135, 156, 157, 160, 241 Endowment income, 43, 47, 51, 52 Engineer — compensation of, 83 distribution of time of, 161-163, 175-177 Entertainments, 94 Entry book, 116 Equipment — for nurses, 74 (see also under departments) Expense accounts — alphabetical in- dex of symbols of (with capital accounts), for hospitals, 197-206 for other institutions, 206- 210 classification of, 64-66 INDEX 245 Expense accounts — closing subsid- iary, 185, 187 for educational institutions, 90-93 for hospitals, 74-86 for other institutions, 94-96 Expense burden, 7 Expense ledger, 108-113, 228-232 Expenses — alphabetical index of, for hospitals, 21 1-2 16 classification of, 88 report of, 87 Expense summary, 189-194 Express, 71-84 passim, 103 Fair greens, 41 Fees earned, 56 Fish, 78 Flour, 77 Food — calculation of cost of, 144, 148, 153, 156 distribution of cost of, II, 99, 159-160, 181-184, 241 inventories of, 153, 182-184 per capita cost of, 155 requisitions for, 136-140 statistics of cost of, 13, 155 summaries of cost of, 146, 150 154-157 Forms for costs, list of, 113 Freight, see Express Fruit juices, 78 Fruits, 78 Fuel, 79, 81, 82, 177 Funds, 31, 171 Furniture, 27, 80 Gain — capital, 49, 52 (see also Earnings, and Income) Garage, 40, 95 Garden, vegetable, 3, 161 Gas, 82, 179 Golf, 41, 94 Greens, golf, 41 Groceries, 79 Grounds — care of, 82, 178 investment in, 23 Gymnasium, 40, 93 H Halls, public, 93 Harnesses, 40 Hazards, 41 Heating, distribution of, 100 Home nursing, 24, 75 Honey, 79 Horses, 40, 95 Hospitality, 96 Household department, 14, 21, 80, 180 House miscellaneous expenses, 84, 178 House tables record, 157 Housing, 5, 71-86 passim, 99, 176 Ice, 74, 79, 82, 168, 170, 178 Ice cream, 78 Improvements on land, 23 Income — defined, 46 endowment, 43 ledger for, 62 normal current, 47, 51 other, 59 statement of, 43-62 Index, alphabetical — hospital ex- penses, 2 1 1-2 16 symbols of hospital accounts, 197-206 symbols of other accounts, 206- 210 Indirect costs, 7-12, 102 (see also Distribution of indirect costs) 246 INDEX Instruction— correspondence, 37, 91 hospital training school, 20, 76 oral, 37, 90 university extension, 37, 91 Instruments, surgical, 19, 74 Insurance, 72-83 passim, 96, 179 240 Interest — bookkeeping entries for 174 earned, 59 on buildings, 84, 179 on equipment, 47, 51, 72-86 pas- sim, .84, 103, 178 240 on land, 96, 175 Inventories of food, 153, 182-184 Investments — charges against, 27 statement of, 26. 27 Joint costs, 7 K Kitchen department — distribution of costs of, 159, 181, 241 equipment for, 22 expenses of, 79 Legacies, 44, 47, 51, 52, 61 Legal expenses, 72, 86 Libraries, 37, 38, 91 Lighting, 82, 100, 179 Linen, 25, 80 Loss— capital, 50, 52, 53 (see also Expenses, and Deprecia- tion) M Machinery, 23, 82, 178 Maintenance — funds for, 171 general, 72-83 passim, 105, 238 of buildings, 82, 179, 235 of machinery, 82, 178 of plumbing, 83, 179 Maps, 38, 39 Meal requisitions, 136-140 Meats, 78 Medical supplies, 74 Milk, 78 Molasses, 79 Museums, 38, 92 Musical records, 38 Musical rolls, 38 Musical scores, 38 Laboratories, 37, 91 Land — interest on, 96, 175 valuation of, 23, 170 Lantern slides, 38 Launches, 40 Laundry costs — -charges for, 71-86 passim (see also Laundry de- partment) distribution of, 180, 241 statistics of, 181 note Laundry department, 22, 81, 177, 179 note Ledger — expense, 108-113 expense, skeleton, 228-232 general, skeleton, 226-227 N Nets, tennis, 41 Newspapers, 38, 74, 214 News stands, 40, 96 New York Plan of Hospital Ac- counting, 89, 217 Nurses — equipment for, 74 graduate resident, 73 in training, 73 superintending, 73 Nuts, 78 Observatories, 38, 39, 93 Occasional common food costs, 148- 153 INDEX 247 Office expenses, 71 Oils — culinary, 78 lubricating, 82 Open-stock inventories, 153, 182- 184 Open-stock reauisition, 139 Orderlies, 73 Organs, 39 Overhead costs, 7 Pamphlets, 38 Pastry, 77 Pathological laboratory, 24, 76 Patient report — annual, 124, 131 daily, 118 monthly, 121, 129 Pay roll, 129, 132-135 Per-capita costs, 8, 101, 155-157 Periodicals, 38, 74, 214 Photographic apparatus, 39 Photographs, 38 Physicians, 73 Pianos, 39 Plumbing — cost of, 26 depreciation of, 235 maintenance of, 83, 179 Postage, 72, 86, 91 Poultry, 78 Power — general, 82, 179 sterilizing, 74 transfer account, 85, 177 Preserves, 78 Prices, fixing, 1 Primary accounts, 7 Prints, 38 Products, 14 Professional services, 73, 85, 105, 184 Properties, theatrical, 40 Property, statement of, 26 Property accounts, symbols of, 34, 37-41 Publications, 96 Publicity expense, 96 Putting greens, 41 Registry book, 116 Regular common food costs, 153- 154 Renewals, see Maintenance Rent, 82, 175, 178 Repairs, see Maintenance Replacements, see Maintenance Requisitions, 136-140 Rooms, 71-86 passim Salaries, 70-86 passim Scenery, 39 Secondary accounts, 64, 65 Service costs, distribution of, 1 1 Sites, 23, 96, 170, 175 Space costs — basis for, 164—165 cubic, 84 definition of, 10 distribution of, 10, 166-168, 178- 179, 241, 242 floor, 84 Special food costs, 144-148 Special funds, schedules of, 31 Stable, 95 State appropriation, 45 Stationery, 71, 86 Statistics — compiled, 1 16-168 pas- sim in accounting, 13 Steam, 74, 79, 81, 82, 177 Steam-fitting, 26, 83, 235 Sterilization, 74, 177 Steward's department, 22, 77-79 Stimulants, 74 248 INDEX Store-room record, n Subdivision of accounts, 12, 242 Subscriptions, 44, 51, 60 Sugar, 79 Supplies, 72-82 passim Surgical instruments, 19, 74 Surgical supplies, 74 Swimming pools, 41 Symbols — alphabetical indexes of, Uniforms, 74 Transactions for the year, state- ment of, 48-55 Transfers, 106 U Uniformity of accounts — need of, 4, 15, 236 report of committee on, 236-242 197-206, 206-210 for capital accounts, 35, 37-41 for expense accounts, 70-86, 90-96 principle of choice of, 33, 66-69 Syrup, 79 Unit of cost, 97, 191 Valuation of property, 16, 23, 24. 170, 238 Vegetables, 3, 78, 161 Volume of business, 59 W Wagons, 40 Ward employees, 73 Ward record, 119 Taxes, 81, 179, 241 Tea, 79 Telephone and telegraph, 24, 72 Temporary depreciation, 172-174, Waste, 82 23 . Water, 82, 177, 178, 179 note Tennis, 40, 94 Work done ' I4 Time sheets, 129, 132-135 Tools, see Machinery • x Training school, 20, 76 X-Ray department, 20, 76