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Author: 
 
 Mcintosh, Robert James 
 
 Title: 
 
 Reference book of 
 accounts for... 
 
 Place: 
 
 Toledo 
 
 Date: 
 
 [1914] 
 
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 370.8 
 M1892 
 
 iBi/jyiHi 
 
 Mcintosh, Robert James, 1871- 
 
 Eef erence book of accounts for manufacturing and mer- 
 cantile companies, by Robert J. Mcintosh ... Toledo, 0., 
 R. J. Mcintosh and company ["^1914] 2d ed* 
 
 299, [li p. incl. forms (part fold.) 23i~. . $3.50. 
 
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 Reference book of accounts for, 
 
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REFERENCE BOOK OF ACCOUNTS 
 
 FOR 
 
 i 
 
 i 
 
 MANUFACTURING 
 
 AND 
 
 MERCANTILE COMPANIES 
 
 BY 
 
 ROBERT J. McINTOSH 
 
 CERTIFIED PUBUC ACCOUNTANT 
 Fellow of the American Association of Public Accountants 
 
 Published by 
 
 ROBERT J. McINTOSH AND COMPANY 
 
 Accountants and Systematizers 
 
 Toledo, Ohio 
 
' 
 
 
 COPYRIGHT 1914 
 
 BY 
 
 ROBERT J. McINTOSH 
 
 : 
 
 H 
 1 
 
 
 
 CONTENTS 
 
 PART 1 
 
 Order of Arrangement of Accounts 
 
 PART 2 
 Accounts for Manufacturing Companies 
 
 PART 3 
 Accounts for Mercantile Companies 
 
 PART 4 
 Principles of Cost Accounting 
 
 PART 5 
 Opening Elntries 
 
 PART 6 
 
 Financial Statements 
 
 PART 7 
 Accountmg Forms 
 
 293791 
 
WPIPiliilMI 
 
 tl 
 
 V 
 
 INTRODUCTION. 
 
 This book is prepared as a work of reference to aid the 
 bookkeeper in handling the accounts specially for Manu- 
 facturing and Mercantile Companies, according to modem 
 practice, and to present accounting principles applicable to 
 business in general. 
 
 It is also prepared as a reference book to be used in 
 conjunction with a course in advanced accounting pre- 
 pared by the author. 
 
 Special attention is given to the preparation of finan- 
 cial statements, opening and closing entries and to the 
 details of accounting for individuals, partnerships and cor- 
 porations. 
 
 It having been the aim to furnish this information in a 
 condensed and practical manner, certain subjects have 
 necessarily been only briefly presented. 
 
 ROBERT J. McINTOSH. 
 
 Toledo, Ohio, June 29, 1914. 
 
■■■■ 
 
 MiP 
 
 PART 1 
 
 ORDER OF ARRANGEMENT 
 OF ACCOUNTS 
 
Ml 
 
 ORDER OF ARRANGEMENT OF ACCOUNTS. 
 
 In every business conducted for profit a knowledge of 
 two things above all others is essential, viz : the net worth 
 of the business and the net profits or losses from operation. 
 
 1. The net worth of a business is the amount which 
 the assets exceed the liabilities, detailed in the form of a 
 statement termed a "Balance Sheet". 
 
 2. The net profit or loss from the operation of a busi- 
 ness is the amount which the revenues exceed the expenses 
 or vice versa, the details of which are shown in the form 
 of a statement termed a "Profit and Loss Statement". 
 
 3. Balance Sheet. 
 
 A balance sheet is generally understood to be a state- 
 ment of account balances or book values of assets and 
 liabilities of a ledger. Book values are not always true 
 values, therefore a balance sheet is not always a true state- 
 ment of assets and liabilities, although it may be mathe- 
 matically correct. 
 
 4. The term "balance sheet" is not synonymous with 
 the term "trial balance", the latter being a list of the bal- 
 ances of all open accounts of a ledger kept by double entry. 
 The object of a trial balance is to prove that all debit 
 entries made in posting mediums have been posted to the 
 debit side of the ledger in the right amount, and that all 
 
] 
 
 S-7 
 
 ARRANGEMENT OF ACCOUNTS 
 
 credit entries have been posted to the credit side of the 
 ledger in right amount; to prove the footings in both the 
 ledger and books of original entry; and to furnish in con- 
 cise form, the data from which the balance sheet and profit 
 and loss statement may be prepared. The books are under- 
 stood to be in balance when the sum of the debits equals 
 the sum of the credits, but a trial balance may be obtained 
 and still errors may exist in posting to the wrong account 
 as well as errors in the books of original entry. 
 
 5. Arrangement of Accounts of the Balance Sheet. 
 
 The accounts of the balance sheet are properiy ar- 
 ranged and classified according to one of the two follow- 
 ing forms : (see 353, 354.) 
 
 6. First Form of Arrangement. 
 
 7. Assets. 
 
 Generally speaking, these are the things owned by a 
 corporation, partnership or individual which may be con- 
 verted into money or value. 
 
 (a) Current or Quick Assets in the order of their 
 availability. 
 
 These are assets which are readily realized upon, such 
 as cash, notes and accounts receivable, raw and finished 
 material, securities, etc. 
 
 (b) Deferred Charges to Operation, or prepaid 
 items, in the order of their importance. 
 
 These consist of expense inventories or balances car- 
 ried as assets at closing periods to be absorbed in subse- 
 quent periods of operation, such as insurance premiums 
 and interest paid in advance, advertising, stationery, print- 
 
 10 
 
 i 
 
 i 
 ( 
 
 
 f 
 
 BALANCE SHEET 
 
 7-8 
 
 ing and office supplies, etc. Although this class of assets 
 is of value only to the going concern, they should be taken 
 into account on the balance sheet in order to show the 
 results from operations in the period in which they belong. 
 
 (c) Fixed or Permanent Assets in the order of their 
 importance. 
 
 These consist of assets of a permanent nature, con- 
 stituting the equipment for conducting the business, such 
 as real estate, buildings, machinery, fixtures, etc. 
 
 (d) Intangible or Nominal Assets in the order of 
 . their importance. 
 
 These are assets which are uncertain of realization or 
 proportion of realization, such as patents, copyrights, good 
 will, etc. They are virtually assets in name only and have 
 a value only as related to the going concern. 
 
 8. Liabilities. 
 
 These consist of the debts or obHgations of a corpora- 
 tion, partnership or individual. 
 
 (a) Current or Floating Liabilities in the order in 
 which they would be paid in case of liquidation. 
 
 These are liabilities constituting the general indebted- 
 ness resulting from the ordinary operation of a business, 
 such as notes payable, accounts payable and pay rolls, 
 together with accrued items payable consisting of unpaid 
 expense items which have accumulated to a certain date, 
 such as accrued interest, taxes, commissions, etc. 
 
 (b) Fixed Liabilities in the order of their amounts. 
 These are obligations of long time nature, such as 
 
 mortgages, mortgage bonds, etc. 
 
 II 
 
 i 
 
9-13 
 
 ARRANGEMENT OF ACCOUNTS 
 
 PROFIT AND LOSS STATEMENT 
 
 14-15 
 
 9. Net Worth. 
 
 This is the excess of all assets over all liabilities. (A 
 corporation's own stock is not to be included among the 
 liabihties). It is represented by the sum of the paid-up 
 or issued capital stock and the surplus, or less the impair- 
 ment at closing periods, in a corporation ; by the partners' 
 or proprietor's individual investment or capital accounts 
 and the undivided profits or less the profit and loss deficit, 
 if the business is conducted as a partnership or by an indi- 
 vidual respectively. 
 
 10. Second Form of Arrangement. 
 
 11. Assets. 
 
 (a) Fixed or Permanent Assets in the order of their 
 importance. 
 
 (b) Intangible Assets in order of their amounts. 
 
 (c) Deferred Charges to Operation in order of their 
 importance. 
 
 (d) Current or Quick Assets in the reverse order of 
 their availability. 
 
 12. Liabilities and Net Worth. 
 
 (a) Capital Stock. 
 
 (b) Fixed Liabilities in the order of their amounts. 
 
 (c) Current or Floating Liabilities in the order in 
 which they would be paid in case of liquidation. 
 
 (d) Surplus or Deficit. 
 
 13. Although either form afore shown is considered 
 correct by professional accountants, the first order of 
 arrangement will be followed in the charts of accounts 
 herein presented as it is the form which is generally 
 
 
 preferred by credit men and bankers, owing to the fact 
 that it sets forth, first, the net available assets or work- 
 ing capital of a business, which constitute the basis for 
 extending credit and granting loans. 
 
 14. Profit and Loss Statement (see 344, 347, 356, 
 
 358). 
 
 A profit and loss statement for a manufacturing or 
 
 mercantile business, briefly, is an analytical statement 
 
 showing in logical order the results from the operations 
 
 of the business covering a given period. 
 
 15. The distinction between the terms Profit and Loss 
 Statement and Statement of Income and Expenditure on the 
 one hand, and Statement of Receipts and Disbursements on 
 the other should be noted as follows: The former are 
 applied to statements showing the results from operation, 
 including all profits or income and all expenses applicable 
 to a given period, whether actually paid or accrued, while 
 a "Statement of Receipts and Disbursements" is under- 
 stood to mean a statement of cash actually received and 
 actually disbursed. 
 
 The elements constituting the profit and loss state- 
 ment should be arranged in the following order: 
 
 (a) Gross Sales. 
 
 (b) Deduct Sales Returned. 
 
 (c) Net Sales. 
 
 (d) Deduct Cost of Sales. (See 260, 344, 356.) 
 
 (e) Gross Profit or Gross Revenues from Sales. 
 This is the excess of the net sales over the net cost of 
 
 sales. 
 
 (f) Deduct Commercial Expenses. 
 
 Expenses, generally speaking, may be divided into 
 
 12 
 
 13 
 
15 
 
 ARRANGEMENT OF ACCOUNTS 
 
 > 
 
 two main groups, viz : Manufacturing and Commercial. 
 
 Manufacturing Expenses include only those expenses 
 relating to the factory end of the business, and constitute a 
 part of the cost of production. (See 136). 
 
 Commercial Expenses include those expenses relating 
 to the administrative and selling end of a business and 
 may be classified according to these two divisions. (See 
 196 and 222). 
 
 (g) Net Profits from Operation. 
 
 This consists of the excess of the gross profits over the 
 administrative and selling expenses. 
 
 (h) Add Other Revenues and Deduct Other Ex- 
 penses. 
 
 Other Revenues include such items as cash discounts 
 earned, interest earned on items receivable, and revenues 
 from outside investments. Other Expenses include such 
 items as cash discounts allowed others, interest on bonded 
 and floating indebtedness. 
 
 (i) Net Profits from all Sources. 
 
 These consist of the net profits from operation 
 increased by other revenues and decreased by other 
 expenses. 
 
 The foregoing remarks regarding the order of arrange- 
 ment of the accounts of the Balance Sheet and Profit and 
 Loss Statement are summed up in concise form in the 
 diagram shown on the following page: 
 
 it« 
 
 
 BH 
 
BALANCE 
 SHEET 
 
 THE 
 i6. BUSINESS 
 EXHIBIT 
 
 PROFIT 
 
 AND LOSS 
 
 STATEMENT 
 
 1 
 
 ASSETS 
 
 LIABILITIES 
 
 AND 
 NET WORTH 
 
 REVENUES 
 
 DIRECT 
 COSTS 
 
 GROSS PROFITS 
 FROM SALES 
 
 INDIRECT 
 COSTS OR 
 EXPENSES 
 
 ''Current 
 or Quick 
 
 Deferred 
 Charges to 
 Operation 
 
 Fixed 
 
 or 
 Permanent 
 
 I Cash, Notes and Accounts Receivable, Merchandise Inven- 
 (tories, Securities and other changeable or floating assets. 
 
 rStationery, Printing and Office Supplies, Interest and Insur- 
 
 < ance paid in advance. 
 
 TGrounds, Buildings, Machinery, Tools, Patterns and Drawings, 
 
 < Office Furniture and Fixtures, and other fixed or permanent 
 [assets. 
 
 Intangible \ Patents, Copyrights, Good Will, etc. 
 
 Current or 
 Floating 
 
 { Notes and x\ccounts Payable, Accrued Items, and other change- 
 I able or floating liabilities. 
 
 Fixed \ Mortgages and Bonds Payable relating to the fixed assets. 
 
 Net Worth 
 
 I Net Sales 
 
 rif a corporation — Capital Stock, Undivided Profits or Surplus. 
 •I If not incorporated — Investment or Capital Accounts of part- 
 Lners or individuals together with Undivided Profits. 
 
 \ Gross Sales less Returned Sales. 
 
 Manufacturing 
 Business 
 
 Direct f Direct Material. 
 
 Charges ( Direct Labor. 
 
 (^Manufacturing Expenses — as Salaries of Superin- 
 Indirect J tendents and Foremen, and other indirect labor, 
 
 Charges ] Maintenance, Depreciation and other expenses 
 ^ incidental to the production of the product. 
 
 Mercantile J Purchase price of Merchandise together with Incoming Trans- 
 Business jportation Charges. 
 
 r The excess of the net sales over the net cost of 
 I goods sold. 
 
 'Salaries of Executitve Officers, Office Employees, Office Ex- 
 pense, and other expenses incidental to the management of 
 the business. 
 
 Administrative^ 
 
 Selling 
 
 rSalaries and Expenses of Salesmen, Commissions, Advertising 
 < and other expenses incidental to the selling end of the busi- 
 Iness. 
 
 NET PROFITS FROM f The excess of the gross profits over the sum of the administrative and selling 
 OPERATION i expenses. 
 
 f Discounts Earned, Interest Earned and other miscellaneous revenues from 
 OTHER REVENUES | outside investments. 
 
 OTHER EXPENSES ( Discounts Allowed, Interest on Items Payable. 
 
 NET PROFITS FROM f The sum of the net profits from operation, increased by other revenues and 
 ALL SOURCES ( decreased by other expenses. 
 
 15 
 
 * • 
 
 • •• 
 
 • • 
 
CHART OF ACCOUNTS 
 
 17-18 
 
 17. Chart of Accounts. 
 
 The first step in the installation of an accounting sys- 
 tem is an analysis of the requirements of the business from 
 an accounting viewpoint, and the preparation of a working 
 plan. This working plan will be termed a "Chart of 
 Accounts", examples of which are found in 26 and 248. 
 
 These Charts of Accounts are presented to illustrate 
 and to furnish suggestions as to the general order of 
 arrangement in which the accounts should appear in the 
 Balance Sheet and Profit and Loss Statement, and also 
 to furnish a list from which accounts applicable to a 
 specific business may be selected. It is not expected that 
 all of the accounts Hsted will be used in any one business, 
 neither is it intended that the charts include all accounts 
 which may be required in every business. Large con- 
 cerns require a finer analysis of operating results than 
 small ones, and when fifty accounts may be considered 
 proper for the former, one-half of that number may be 
 adequate for the latter. Also in many mercantile busi- 
 nesses it may not be desirable to group the Administra- 
 tive and Selling Expenses separately but to show them all 
 under the one general heading, "Commercial Expenses," 
 which, in closing, should be treated in a similar manner 
 as described for Administrative or Selling Expenses. 
 
 18. Numbering Accounts. 
 
 In these charts each account is given a permanent 
 number in order to facilitate the performance of the daily 
 work in summarizing costs, expenses and other results, 
 and to give each account a certain fixed position as 
 related to other accounts. 
 
 17 
 
19-21 
 
 ARRANGEMENT OF ACCOUNTS 
 
 ig. Classification of General Ledger Accounts. 
 
 Some systematic order of arrangement of ledger ac- 
 counts should be adopted; therefore, in order to facilitate 
 the preparation of Balance Sheets and Profit and Loss 
 Statements, the accounts of the General Ledger will be 
 classified in the order that they should appear on these 
 statements. The asset accounts should be shown first, in 
 their logical order, followed by the liabilities, revenues 
 and expenses; each group of accounts being designated 
 by an index tab, as "Assets," "Liabilities," "Profit and 
 Loss Revenues," "Profit and Loss Costs," "Expenses," 
 "Sundry Debtors and Creditors." 
 
 20. General or Private Ledger. 
 
 This is a ledger usually containing all accounts relat- 
 ing to the business except individual accounts with cus- 
 tomers and purchase creditors, with which controlling 
 accounts only are carried in the general ledger. The gen- 
 eral ledger accounts, together with the accounts receiv- 
 able and accounts payable, when few in number, may all 
 be carried in the same book or binder, each class of 
 accounts being separated by an index tab marked "Gen- 
 eral Ledger," "Accounts Receivable" and "Accounts 
 Payable" respectively, the general ledger accounts being 
 shown first, followed by the accounts receivable second, 
 and the accounts payable, third. 
 
 21. Factory Ledger. 
 
 When a cost system is in operation, all accounts relat- 
 ing to the operation of the factory may be advantageously 
 carried in a factory ledger, in which event a controlling 
 
 i8 
 
 CONTROLLING ACCOUNTS 
 
 22-23 
 
 account with the factory ledger should be carried in the 
 general ledger, and accordingly a controlling account 
 with the general ledger carried in the factory ledger. For 
 further details see 302. 
 
 22. Expense Analysis Record. 
 
 Instead of carrying detailed expense accounts in the 
 ledger, an account with each general subdivision of ex- 
 penses may be carried, for example, with Manufacturing, 
 Administrative and Selling Expenses supported by an 
 expense analysis record showing the detailed expense 
 accounts. This book should be ruled with fourteen col- 
 umns with headings showing name of account, name of 
 each month, and total, thus showing the comparative 
 monthly expenses and total for the year. 
 
 The method of handling expense accounts depends, 
 of course, upon conditions in each case. 
 
 ■r 
 
 23. Controlling Accounts. 
 
 A controlling account is a summary account, repre- 
 senting or controlling a certain class or group of indi- 
 vidual accounts. For example, the "accounts receivable 
 controlling account" represents and controls the indi- 
 vidual accounts with customers, and the "accounts pay- 
 able controlling account" controls the individual accounts 
 with purchase creditors, and should always agree in 
 amount with the aggregate of the balances of the indi- 
 vidual accounts of the respective ledgers, illustrated as 
 follows : 
 
 19 
 
II 
 
 I 
 
 24-25 ARRANGEMENT OF ACCOUNTS 
 
 24. Accounts Receivable Controlling Account. 
 
 Debit Credit Balance 
 
 Balance at the beginning of a given ,000000 
 
 month $30,000.00 30,000.00 
 
 Debit from the customers' charge sum- 
 mary or sales book, the total charges 
 for the month 20,000.00 
 
 Debit from the cash book the total re- 
 funds to customers with whom ac- 
 counts are carried 300.00 
 
 Credit from the cash book the total 
 collections from customers for the 
 month 17.000.00 
 
 Credit from the journal or credit mem- 
 orandum summary the total allow- 
 ances to customers for the month.. ^SO.oo ^ 
 
 Results at close of the month $50,300.00 17,250.00 33.050.00 
 
 The monthly totals are obtained by providing in the 
 various posting mediums, such as cash book, journal, etc., 
 special columns into which are entered all items which are 
 to be individually posted to the various customers' 
 accounts; the totals only of these special columns to be 
 posted to the controlHng account at the close of the 
 month. (See 360, 409, Accounting Forms). It therefore 
 follows that if all individual postings have been correctly 
 made, that the aggregate of the customers' accounts 
 should agree with the controlling account. 
 
 25. The advantages of controlling accounts, briefly 
 
 stated, are as follows: 
 
 First: A trial balance of the general ledger may be 
 taken and a financial statement prepared before finishing 
 the posting of other ledgers, or waiting to prove them. 
 
 Second: They enable the head bookkeeper to know 
 what the totals of other ledgers should be before postings 
 are completed, and whether the balances submitted to 
 him by ledger keepers are correct or not. 
 
 20 
 
 CONTROLLING ACCOUNTS 
 
 25 
 
 Third: They greatly facilitate getting the trial bal- 
 ance by localizing errors. For example, if the general 
 ledger and accounts payable each are in balance and the 
 accounts receivable are out of balance, it is necessary to 
 look for the error among the accounts receivable items 
 only, thus saving the time in going over those accounts 
 which are known to be in balance. 
 
 21 
 
PART 2 
 
 ACCOUNTS 
 FOR MANUFACTURING COMPANIES 
 
\ 
 
 1 
 
 i 
 
 I 
 
 It ' 
 
 26. CHART OF ACCOUNTS 
 
 FOR MANUFACTURING COMPANIES 
 
 (See 17) 
 
 ASSETS* 
 Acct. No. Rcf. No. 
 
 Current Assets 7 
 
 I — Imprest Cash Fund 2^ 
 
 2 — 'Cashier's Change 28 
 
 3 — Cash on hand Undeposited 29 
 
 4 — Cash in Banks 30 
 
 5— 
 
 Q— 
 
 7 — Stocks and Bonds of Other Companies 32 
 
 9— Mortgages Receivable 33 
 
 10 — 
 
 1 1 — Notes Receivable 34 
 
 12 — Notes Receivable Discounted 35 
 
 13 — Reserve for Doubtful Notes 36 
 
 14 — Accrued Interest on Items Receivable 37 
 
 IS— 
 
 16 — 
 
 17 — Accounts Receivable — Customers 38 
 
 18 — Reserve for Doubtful Accounts — Customers 39 
 
 19 — Accounts Receivable — Sundry Debtors 40 
 
 20 — Reserve for Doubtful Accounts — Sundry Debtors 41 
 
 21 — 
 
 23 — Consignments to Others 42 
 
 24 — 
 
 25 — Inventories of Merchandise — Branches 43 
 
 26 — Inventory of Manufacturing Material or Stores 44 
 
 27 — Inventory of Semi-Finished Product or Stores 45 
 
 28 — Inventory of Finished Product or Stores 46 
 
 29 — Inventory of Work in Process 47 
 
 30 — Reserve for Depreciation of Manufacturing Material 
 
 and Work in Process 48 
 
 31 — Undistributed Manufacturing Overhead 49 
 
 •Note. Reserve accounts are here listed among the Assets, owing 
 to the fact that they are shown on the balance sheet as a deduction Xrom 
 the accounts to which they relate. 
 
 25 
 
CHART OF ACCOUNTS 
 
 26 
 
 I 
 
 I- 
 
 hi 
 
 li 
 
 25 MANUFACTURING COMPANIES 
 
 Rcf . No. 
 Acct. No. CO 
 
 32— Treasury Stock, Preferred ^^ 
 
 33_Treasury Stock, Common ^^ 
 
 ^'^'"tltS"cco°r°nTtf °"e Vequirements of the business ^ 
 Fixed Assets * ' " ' ' 63 
 
 tures 66 
 
 40 — Power Plant • • •. ii'"'' pianV 60-61 
 
 tbl^Reserve for Depreciation-Power Plant 
 
 Tools ... 68 
 
 S3— Factory Fixtures • • •••••• ^u:.;^" " ■"' 60-61 
 
 54-Reserve for Depreciation-Factory Fixtures 
 
 si-Perishable Tools -[^ /. 
 
 ^^ 
 
 56— 
 
 57— •••: ;•• 71 
 
 Si^Stable Equipment o^oKI^ Fmimment 60-61 
 
 59-^Reserve for Depreciation-Stable Equipment ^^ 
 
 t=^:^^^^^^^^ '^^^^ '""t 
 
 ^=^:^-fo;Depr^ciaiion-Patterns:::::::: •; 74 
 
 ^Zg:::^^; DepVeciaiion-D^ings: : : 74 
 
 ^Fa'cto^y Office Furniture and Fixtures .^^^. . 7. 
 
 67— Reserve for Depreciation— Factory umce ^^^^ 
 
 and Fixtures 
 
 ^ :::::::::::::::::;'••••■••'•■••■••■•••••• 
 
 tive Department •_;. 77 
 
 Fixtures V W' '/./.-'o'c .. 7^ 
 
 Fixtures ;;; 
 
 77- ; ::;::: 
 
 7&- 
 
 79— ;:::: > 
 
 80— ; 79 
 
 giu^Sinking Fund 80 
 
 82_Other Investments 
 
 83- :::: 
 
 84- 7 
 
 Intangible Assets 81 
 
 85_Patents 
 
 26 
 
 Acct No. ^«'- ^^ 
 
 86— Good Will |2 
 
 87 — Organization Expense o3 
 
 88— 
 
 89— 
 
 LIABILITIES. 
 
 Current Liabilities ^ 
 
 loi — Notes Payable — Loans °4 
 
 102— Notes Payable— Purchase Creditors ©5 
 
 103— Accounts Payable— Purchase Creditors 86 
 
 104— Accounts Payable— 'Sundry Creditors 87 
 
 los— 
 
 106 — 
 
 108— Accrued Pay Rolls o5 
 
 109 — Accrued Commissions ^9 
 
 no Other Accrued Items Payable (Itemize according to 
 
 the requirements of the business) 90 
 
 Fixed Liabilities ° 
 
 J 17 — Mortgages Payable 9^ 
 
 1 18 — Bonds Payable 93 
 
 1 19 — 
 
 CAPITAL OR NET WORTH 9 
 
 120— Capital Stock, Preferred— Authorized 95 
 
 121— Capital Stock, Preferred— Unissued. (This account is 
 listed here to be shown as a deduction from 
 
 Authorized Preferred Capital Stock) 97 
 
 122— Capital Stock, Common— Authorized. • 96 
 
 123 — Capital Stock, Common)— Unissued. (This account is 
 listed here to be shown as a deduction from 
 
 Authorized Common Capital Stock) 98 
 
 124 — Subscribed Capital Stock 99 
 
 125 — Subscriptions to Capital Stock • • 100 - 
 
 (This account to be shown on balance sheet as a deduction from 
 subscribed Capital Stock, the difference being the amount advanced 
 by subscribers for stock sold on the instalment plan.) 
 
 (If not incorporated, each partner's Capital or Invest- 
 ment Account is to be shown here in place of the 
 
 Capital Stock Accounts) 101-103 
 
 126— Cumulative Dividends— Preferred Stock los 
 
 127 — Dividends — ^Common Stock 106 
 
 128 — Reserve for Sinking Fund 108 
 
 1 2^—— *** 
 
 130 — Reserve for Working Capital (When stock is donated 
 
 to company) 109 
 
 131 — Surplus ^ ^^^ 
 
 i32^Profit and Loss ^^^ 
 
 PROFIT AND LOSS REVENUES. 
 
 141— Sales— Finished Product (To be subdivided according 
 
 to requirements)" 112 
 
 27 
 
ii 
 
 26 MANUFACTURING COMPANIES 
 
 Ref.No. 
 Acct.No. 
 
 142— Sales of Semi-Finished Product "4 
 
 143— Sales of Manufacturing Material JJ^ 
 
 144 — Sales of Scrap 
 
 145— 
 
 146— 
 
 147— 
 
 14&— ::; 
 
 149— Sales of Miscellaneous • ^ J^ 
 
 150— Cash Sales •••••• ; ng 
 
 i5i_Revenues of Branches ^^ 
 
 152— Rents Earned • 
 
 i53_Cash Discounts Earned ^^^ 
 
 154— Interest Earned 
 
 155— * 
 
 156— ;;; 
 
 i57_Miscellaneous Earnings ■» 
 
 PROFIT AND LOSS COSTS. 
 171— Manufacturing Material Purchases 124 
 
 l73-Manukctur?ng Expenses (dve^^^ or Burden) 126 
 
 i74H-Cost of Product Manufactured '^7 
 
 i75_Consigned Merchandise 
 
 i7'6— Cost of Sales ^ 
 
 177— Administrative Expenses ^^^ 
 
 178— Selling Expenses • • • ^ 
 
 179— Cash Discounts Allowed Others J^;f 
 
 180— Interest on Items Payable ^'J 
 
 181— Extinguishment of Patents. • • ^^ 
 
 182— Extinguishment of Organization Expenses i35 
 
 MANUFACTURING EXPENSES 136 
 
 Executive and Preparatory. , , _. j^j 
 
 201— Salaries of Superintendents and Foremen i37 
 
 202— Salaries of Designers and Draftsmen 130 
 
 203— Salaries of Factory Accounting Employees I39 
 
 204— Salaries of Storekeepers ^ 
 
 205— Salaries of Patternmakers • • • • * "^^ 
 
 206 * 
 
 • ••••••••*** ••• 
 
 207 — 
 
 208 
 
 Indirect Labor. ^ ^ , _ _ , . . 142 
 209h-Wages of Tool Makers "^ 
 
 2i(>— Wages of Inspectors ; 'wmi" ' ■ ' 11 taa 
 
 fi?IIWaies of Carpenters, Painters and Millwrights 44 
 
 212— Wages of Truckers. ^g 
 
 213— Wages of Sweepers and Cleaners J4" 
 
 214— Miscellaneous Indirect Labor ^4/ 
 
 215— 
 
 216- ^ 
 
 217^ ' 
 
 28 
 
 i 
 
 CHART OF ACCOUNTS ^6 
 
 Acct. No. 
 
 Heat, Light and Power. « 
 
 218— Heat, Light and Power, Labor J4o 
 
 219— Heat, Light and Power, Fuel J49 
 
 220— Heat, Light and Power, Electric Current JSo 
 
 221 — Heat, Light and Power, Gas *5i 
 
 222— Heat, Light and Power, Supplies ^52 
 
 223 — 
 
 224— • • .• ::; 
 
 225— Heat, Light and Power, Proportion i53 
 
 Maintenance \\^ 
 
 226— Repairs to Grounds •.;:.•• •;,•. tta 
 
 227^-Repairs to Buildings and Building Fixtures 150 
 
 228— Repairs to Power Plant JSZ 
 
 229 Repairs to Machinery and Machine Tools 150 
 
 230— Repairs to Factory Fixtures •':'''•••■'. \^ 
 
 231— Repairs and Replacements Perishable Tools 100 
 
 232— Repairs to Patterns ; ' ;-•' 1 IaI 
 
 233— Repairs to Factory Office Furniture and Fixtures 162 
 
 234— 
 
 235— 
 
 Stable Expenses. , 
 
 236— Wages of Drivers J"^ 
 
 237_Stable Supplies and Expenses J04 
 
 238— Feed and Bedding J?5 
 
 230— Repairs to Stable Equipment ..••••• 'r^u""\"' ]^ 
 
 2^Depreciation— Stable Equipment (Reserve Charge)... 167 
 
 241— Insurance— Fire and Liability J0° 
 
 242— Stable Expense— Proportion J09 
 
 243 — Wages of Chauffeurs ^'O 
 
 Automobiles— Factory . 
 
 244— Automobile Supplies and Expense ^7^ 
 
 245— Repairs to Automobiles, Factory...... ^^V*--; Hz 
 
 246— Depreciation— Automobiles, Factory (Reserve Charge) I73 
 
 247— Insurance— Fire and Liability, Automobiles I74 
 
 248— Automobile Expense— Factory Proportion I75 
 
 General. ^ 
 
 249— Rent— Factory Proportion J/o 
 
 250— Taxes on Plant and Stock J/7 
 
 251— Insurance, Fire— Plant and Stock i70 
 
 252— Insurance, Liability— General Factory I79 
 
 253— Factory Supplies Used J°^ 
 
 254— Oil, Waste and Packing ^^\ 
 
 255-Water ]°l 
 
 256— Experimental Work ^°^ 
 
 257— Lost Time •• • ]J* 
 
 258— Material Spoiled or Scrapped i^S 
 
 259_Replacement of Defective Material loo 
 
 260— Repairs to Factory Stock... v; J- V MTJ laa 
 
 261— Incoming Transportation Charges— Undistributed i»» 
 
 262— Telephone and Telegraph ;.•'•• u ^1? 
 
 263— Stationery, Printing and Office Supplies— Factory 190 
 
 264— Drafting Supplies ^^^ 
 
 29 
 
II ( 
 
 ^ 
 
 ''•f 
 
 11.1 1 
 
 26 
 
 MANUFACTURING COMPANIES 
 
 Acct. No. 
 
 265 — Miscellaneous Manufacturing Expense 
 266— 
 
 Ref. No. 
 
 192 
 
 193 
 194 
 
 267— 
 
 268— 
 
 269 — Depreciation Expense (Reserve Charge) (This account 
 
 may be subdivided according to plant accounts) . . . 
 
 270 — Administrative Expenses — Manufacturing Proportion.. 
 
 a — Salaries of Executive Officers. 
 
 b — Salaries of Main Office Employees. 
 
 c — Postage. 
 
 d — Legal Expense. 
 
 e — Telephone and Telegraph. 
 
 f — Stationery and Printing. 
 
 g — Charities and Donations. 
 271 — Interest on Plant Equipment I95 
 
 ADMINISTRATIVE EXPENSES 
 
 280 — Salaries of Executive Officers 
 
 281 — Expenses of Executive Officers 
 
 282 — Directors' Fees and Expenses 
 
 283 — Salaries of Main Office Employees.... 
 
 284 — ^Salaries — Miscellaneous 
 
 285 — Stationery, Printing and Office Supplie; 
 286— Postage — General 
 
 287 — Telephone and Telegraph 
 
 288 — Water and Ice 
 
 289 — Rent — Office Proportion 
 
 290 — Heat and Light (Proportion) 
 
 291 — Repairs to Main Office Furniture and Fixtures 
 
 293 — Depreciation — Main Office, Furniture and Fixtures 
 (Reserve Charge) 
 
 293 — Repairs and Expense — Main Office Automobiles 
 
 294: — Depreciation — Main Office Automobiles (Reserve 
 Charge) 
 
 295 — Charities and Donations (Proportion) 
 
 296 — Traveling Expenses (other than selling) 
 
 297 — Indemnity Bonds — Executive Officers and Office Em- 
 ployees 
 
 298 — Insurance — Main Office Furniture and Fixtures 
 
 299 — Taxes — State and Federal 
 
 300 — Legal Expense 
 
 301 — Doubtful Accounts (Reserve Charged 
 
 302 — Cash Overs and Shorts 
 
 303— 
 
 304— 
 
 305— 
 
 306— 
 
 196 
 
 197 
 198 
 199 
 200 
 201 
 202 
 203 
 204 
 205 
 206 
 207 
 208 
 
 209 
 210 
 
 211 
 212 
 213 
 
 214 
 
 215 
 216 
 217 
 218 
 219 
 
 307— 
 
 30S-. 
 
 309 — Incidentals 
 
 310 — Administrative Expenses — ^^Proportion charged to other 
 departments 
 
 30 
 
 220 
 221 
 
 Acct. No. 
 
 CHART OF ACCOUNTS 
 
 SELLING EXPENSES 
 
 26 
 
 Rcf. No. 
 
 222 
 
 320 — Salaries of Traveling Salesmen 
 
 321 — Commissions, Traveling Salesmen 
 
 322 — Traveling Expenses, Traveling Salesmen 
 
 323— Indemnity Bonds, Traveling Salesmen 
 
 324 — Entertainment 
 
 325— Salaries of Clerks (Selling) 
 
 326 — Advertising — Periodicals 
 
 327 — Advertising — Literature 
 
 328 — Advertising — Miscellaneous 
 
 329 — Advertising — Expositions 
 
 330 — Replacement of Merchandise^— Gratis 
 
 33i_Rcnt— (Selling Department Proportion) 
 
 332_Heat and Light (Proportion) • 
 
 333__Salaries of Office Employees (Sellmg Department) ... . 
 
 334— -Stationery, Printing and Office Supplies (Sellmg De- 
 partment) 
 
 335— Postage— Selling Department) 
 
 336— Telephone and Telegraph (Proportion) 
 
 337— Commercial Agency Subscriptions . • . 
 
 338_Depreciation— Selling Department (Reserve Charge).. 
 
 339_Transportation Charges (Outgoing Shipments) •••••• 
 
 340— Stable and Automobile Expense (Proportion on Out- 
 going Shipments) 
 
 341 — Shipping Labor 
 
 342 — Shipping Supplies and Expense 
 
 223 
 224 
 225 
 226 
 227 
 
 22& 
 229 
 230 
 231 
 232 
 
 233 
 234 
 235 
 236 
 
 237 
 238 
 
 239 
 240 
 
 241 
 242 
 
 243 
 244 
 
 245 
 
 .343^-. 
 
 344—. 
 345—. 
 346—. 
 347- 
 
 348— 
 
 349 — Incidentals ; • • 
 
 350— Administrative Expenses— Selling Proportion 
 
 246 
 
 247 
 
 31 
 
1 
 
 * 
 
 ! I 
 
 CURRENT ASSETS 
 MANUFACTURING COMPANIES 
 
 27. Imprest Cash Fund. 
 
 This is a small fund out of which to pay all petty 
 items which are impracticable to pay by check. It should 
 be started by depositing in the bank all cash on hand, and 
 then drawing a check payable to the order of "Imprest 
 Cash" for whatever amount is considered sufficient for 
 petty expenses covering a short period. This check 
 should be cashed and the money placed in a drawer sepa- 
 rate from the incoming cash as the imprest fund should 
 never be mixed with other cash. When this fund is once 
 established no entries should be made to it except when 
 the regular fund is to be either increased or diminished. 
 As disbursements are made from it, receipts should be 
 taken and carried as cash items until the fund requires 
 replenishing, or until the end of the month, when a 
 voucher or summary (see 378) should be prepared cover- 
 ing the exact amount of the disbursements, for which a 
 check should then be drawn payable to "Imprest Cash" 
 and cashed to replace the amount expended, leaving the 
 fund intact. This check should be entered in the same 
 manner as other checks and charged to the various ac- 
 counts as shown by the distribution on the voucher. The 
 
 32 
 
 
 CURRENT ASSETS 
 
 28-29 
 
 voucher together with the receipted bills should then be 
 filed and a new one started for future disbursements. 
 
 This method not only facilitates a thorough audit of 
 petty cash disbursements, but provides for depositing all 
 incoming cash in the bank, and virtually, for checking 
 all disbursements out of the bank. In balancing the fund 
 the amount of cash on hand together with the cash items 
 or receipts in the drawer should agree with the original 
 fixed amount. 
 
 Debit: with the amount of the checks drawn to create 
 or to increase the fund, crediting the bank. 
 
 Credit: with the amount of any decrease in the fund. 
 
 Balance of this account is a current asset and should 
 represent the amount of cash set aside for petty disburse- 
 ments. 
 
 28. Cashier's Change Fund. 
 
 Debit: at time of opening books with the amount of 
 change on hand; with the amount of any increase in the 
 fund. 
 
 Credit: with the amount of any decrease in the fund. 
 
 Balance of this account is a current asset and should 
 represent the amount of cash in cash registers or in the 
 hands of cashiers for making change. 
 
 29. Cash on Hand — Undeposited. 
 
 As mentioned in 27, Imprest Cash Fund, all incoming 
 cash should be deposited in the bank daily, in which 
 event the deposits, as shown by the bank pass book, 
 should agree with the net cash received as shown by the 
 cash records after taking into account any undeposited 
 
 33 
 
 Ij 
 
 S*=Wi^^fSP^ 
 
 9^ 
 
15 1 
 
 ! 
 
 m 
 
 ^!^l 
 
 1.1 
 
 30 
 
 MANUFACTURING COMPANIES 
 
 items. Duplicate deposit slips should be filed according 
 to date, thus facilitating the tracing of each item directly 
 into the bank, if desired. 
 
 Debit: at the time of opening books with the amount 
 of cash on hand undeposited; at the close of the month, 
 with the total of the cash received for the month as 
 shown by the cash received records. 
 
 Credit: at the close of the month with the total cash 
 deposited in banks. 
 
 Balance of this account is a current asset and should 
 represent the undeposited cash on hand. 
 
 30. Cash in Banks. 
 
 Although it is customary with some bookkeepers to 
 carry no cash or bank accounts in the ledger, owing to 
 the fact that the general or private ledger should contain 
 all of the main accounts constituting the trial balance, 
 from which the Balance Sheet and Profit and Loss State- 
 ment are prepared, these accounts should be carried in the 
 general ledger to which totals only are to be posted at 
 the close of each month. When funds are deposited in 
 more than one bank, a separate account should be carried 
 with each. 
 
 Debit: at time of opening books with the amount of 
 cash in bank; at the close of the month with the total 
 amount of cash deposited during the month. 
 
 Credit: at the close of the month with the total 
 amount of checks issued during the month. 
 
 Balance of this account is a current asset, and should 
 represent the balance of cash in bank, providing all de- 
 
 34 
 
 CURRENT ASSETS 
 
 31 
 
 posits have been credited and that all checks issued have 
 been presented and paid by the bank. 
 
 31. Reconciliation of Bank Account. 
 
 In a business of any volume it seldom occurs that all 
 checks issued have been cashed, in which event the bal- 
 ance shown by the bank's statement fails to agree with 
 the balance shown on the check register. 
 
 This difference should be reconciled by taking into 
 account all outstanding checks and deposits which may 
 not have been entered by the bank. 
 
 It is understood, of course, that all bank checks 
 should be numbered consecutively in advance of issuing, 
 the numbering to be continuous throughout the year at 
 least. When the checks are returned from the bank at 
 the close of each month, they should first be checked with 
 the bank's adding machine slips accompanying the checks, 
 before sorting. They should then be sorted according to 
 number and checked with the items in the check register, 
 placing a red ink check mark after each item returned. 
 The unchecked items should then be listed as shown on 
 the following page, and the reconciliation preserved for 
 future reference. 
 
 35 
 
( 
 
 32 MANUFACTURING COMPANIES 
 
 Reconciliation of account with 
 
 for the month of 191 
 
 Balance as shown by bank's statement 
 
 Bank 
 
 \ 
 
 ■I 
 
 I 
 
 191 
 
 - f 
 
 i*'; 
 
 Add deposit of not credited by 
 
 bank until the following month 
 
 $13,238.96 
 
 672.20 
 
 13,911.16 
 
 Deduct outstanding checks as follows 
 
 Check No. 
 
 Amount 
 
 2030 
 
 $100.00 
 
 2141 
 
 40.00 
 
 2248 
 
 30.70 
 
 2260 
 
 1.65 
 
 2372 
 
 3.98 
 
 2390 
 
 643.70 
 
 2392 
 
 98.73 
 
 2393 
 
 100.00 
 
 2394 
 
 200.00 
 
 2395 
 
 300.00 
 
 Total checks outstanding 
 
 1,518.76 
 
 Balance as shown by check register 191 $12,392.40 
 
 32. Stocks and Bonds of Other Companies. 
 This account should include all stocks and bonds pur- 
 chased for investment of any funds not required in the 
 
 3^ 
 
 CURRENT ASSETS 
 
 33 
 
 operation of the business. It does not include, however, 
 bonds purchased for the Sinking Fund. 
 
 A separate ledger account should be kept with each 
 kind of stocks and bonds, giving the following partic- 
 ulars: date purchased, name, certificate or bond number, 
 quantity of bonds or shares of stock, price paid, par value ; 
 if bonds, interest rate and dates of payment, and maturity. 
 If desired, a subsidiary ledger may be kept showing the 
 above details, controlled by an account in the general 
 ledger. 
 
 Debit: at the time of opening books with the market 
 value of stocks and bonds on hand; with cost of all stocks 
 and bonds purchased; with adjustments due to revalua- 
 tions, crediting Stocks and Bonds Adjustment account, 
 which at closing periods should be transferred to Profit 
 and Loss account and shown on the Profit and Loss State- 
 ment under "Other Revenues** or "Other Expenses or 
 Losses" as the case may be. 
 
 Credit: with cost of stocks and bonds sold; with 
 adjustments due to revaluation, charging Stocks and 
 Bonds Adjustment account. 
 
 Balance of this account is a current asset, and 
 should represent the valuation at which stocks and bonds 
 of other companies are carried. 
 
 33. Mortgages Receivable. 
 
 Each mortgage should be shown separately on the 
 ledger with sufficient space allowed to provide for the 
 postings of payments and renewals relating to it. In 
 addition to this account, an auxiliary record may be kept 
 containing the following headings: Number, Date given, 
 
 37 
 
I 
 
 i 
 
 
 ^'w 
 
 MANUFACTURING COMPANIES 
 
 Payee, Indorser, Amount, Time, Interest rate and due 
 date, Date paid. 
 
 Debit: at the time of opening books with the face 
 value of mortgages on hand; with all mortgages received; 
 with all mortgages renewed. 
 
 Credit: with payments received; with mortgages 
 sold; with mortgages renewed. 
 
 Balance of this account is a current asset and should 
 represent the face value of mortgages receivable on hand. 
 
 34. Notes Receivable. 
 
 This account is often called "Bills Receivable", but 
 as here used, refers to promissory notes received, and is 
 therefore termed "Notes" instead of "Bills Receivable". 
 Each note should be shown separately on the ledger with 
 sufficient space allowed for the postings of payments and 
 renewals relating to it. 
 
 In addition to this account an auxiliary record com- 
 monlv called "Notes Receivable Book" may be kept, 
 containing the following headings: Number, Date given, 
 Payee, Indorser, Amount, Time, Interest rate and Pay- 
 ment date, Date paid. 
 
 Debit: at the time of opening books with the face 
 value of promissory notes and acceptances on hand; with 
 all notes and acceptances received; with all notes re- 
 
 riewed. 
 
 Credit: with payments received on notes receivable 
 items; with all notes sold; with all notes renewed. 
 
 Balance of this account is a current asset and should 
 represent the face value of notes receivable on hand and 
 notes receivable discounted at banks on which we remain 
 
 38 
 
 CURRENT ASSETS 
 
 35-36 
 
 l. 
 
 guarantor, which should remain in this account and be 
 offset by the credit account, Notes Receivable Discounted. 
 
 35. Notes Receivable Discounted. 
 
 This account is a contingent liability, the company 
 being liable in case the maker fails to pay at maturity the 
 notes discounted. It should be shown on the balance 
 sheet as a deduction from notes receivable, or as both a 
 contingent asset and liability, one offsetting the other. 
 
 Debit: when notes previously discounted become 
 due and are paid, crediting the account. Notes Receivable. 
 
 Credit: at the time notes receivable are discounted 
 with their face value, charging the bank or party dis- 
 counting. 
 
 Balance of this account is a contingent liability and 
 represents notes discounted for which the company is 
 contingently liable. 
 
 36. Reserve for Doubtful Notes. 
 
 Debit: with all notes considered uncollectible. 
 
 Credit: at the time of opening books for an amount 
 estimated to be sufficient to provide for all losses on 
 notes considered doubtful of collection; at the close of 
 each month, if profit and loss statements are prepared 
 monthly, otherwise at closing periods, with an amount 
 estimated to be sufficient to provide for losses on notes 
 taken during the period which may prove to be uncollect- 
 ible, charging the account. Doubtful Accounts (Reserve 
 
 Charge). 
 
 Balance of this account represents the allowance for 
 losses on notes receivable and should be shown on the 
 
 39 
 
 ;i 
 
m 
 
 37 
 
 MANUFACTURING COMPANIES 
 
 11 
 
 balance sheet as a deduction from them, the difference 
 representing the net valuation at which they are carried. 
 
 37. Accrued Interest — Items Receivable. 
 
 This item may be kept according to one of the three 
 following methods: 
 
 (i) Debit; at the time of opening books with inter- 
 est accrued on notes receivable and other interest bear- 
 ing items; at the close of each month with the amount 
 of interest accrued on these items during the month, 
 crediting the account, Interest Earned. 
 
 Credit: with all payments of interest on items receiv- 
 able. 
 
 Balance of this account is a current asset, and should 
 represent interest accrued on notes and interest bearing 
 items receivable. 
 
 (2) Debit: at the time of opening the books with 
 interest accrued on items receivable; at closing periods 
 with interest accrued on items receivable at that time, 
 crediting the account. Interest Earned. 
 
 Credit: at closing periods with the amount of accrued 
 interest shown at the beginning of the period being closed, 
 charging the account, Interest Earned. 
 
 Note. — In this case all interest received should be 
 credited to the revenue account, Interest Earned. 
 
 Balance of this account, after making the above en- 
 tries, is a current asset, and should represent the accrued 
 interest on items receivable unpaid. 
 
 (3) The above account may be dispensed with and 
 the accrued interest at closing periods shown as a debit 
 balance in the revenue account. Interest Earned, in which 
 
 40 
 
 CURRENT ASSETS 
 
 38 
 
 n 
 
 ir 
 
 event all cash received from this source should be credited 
 to the revenue account. (See 122). 
 
 38. Accounts Receivable — Customers (Controlling 
 Account). 
 
 This is a controlling account of the individual bal- 
 ances of customers' accounts as illustrated in 24. If the 
 individual accounts are of such a number as to require 
 more than one binder or section, a separate controlling 
 account may be carried for each section. The accounts 
 receivable ledgers should be verified monthly by listing 
 the individual balances contained therein, the aggregate 
 of which should agree with the balance of the controlling 
 account. 
 
 Debit: at the time of opening books with the net 
 total of the individual accounts carried in the accounts 
 receivable ledger; at the close of each month with the 
 total charges to customers as shown by the monthly 
 footings of the debit columns headed "Accounts Re- 
 ceivable" in posting mediums. 
 
 Note. — The monthly totals of the charge summary 
 are to be transferred to the journal, and from there posted 
 to the ledger. 
 
 Credit: at the close of each month with the total 
 credits to customers for money, notes or allowances, in- 
 cluding cash discounts allowed as shown by the monthly 
 footings of all credit columns headed "Accounts Re- 
 ceivable" in posting mediums. 
 
 Balance of this account is a current asset and should 
 represent the net total of the customers* accounts. 
 
 41 
 
 !'/ 
 
39-40 
 
 MANUFACTURING COMPANIES 
 
 CURRENT ASSETS 
 
 41 
 
 ill 
 
 ' ) 
 
 3g. Reserve for Doubtful Accounts — Customers. 
 
 In all financial statements, provision should not only 
 be made for accounts which are known to be doubtful of 
 collection, but also for losses on other accounts, which 
 at the time of calculating profits cannot be positively 
 determined. This reserve for bad accounts may be 
 created by a monthly charge of a certain percent of the 
 sales, based on past experience of losses on bad accounts. 
 
 Debit: with all customers' accounts considered un- 
 collectible, crediting the customers' accounts charged off. 
 
 Credit: at the time of opening books for an amount 
 estimated to be sufficient to provide for all losses on ac- 
 counts considered doubtful of collection; at the close of 
 each month, if profit and loss statements are prepared 
 monthly, otherwise at closing periods, with the percent 
 of the sales for the period estimated to be sufficient to 
 provide for losses on the accounts charged during the 
 period, charging Doubtful Accounts (Reserve Charge). 
 
 Balance of this account represents the allowance for 
 losses on accounts receivable, and should be shown on 
 the balance sheet as a deduction from them, the differ- 
 ence representing the net valuation at which they are 
 carried. 
 
 40. Accounts Receivable— Sundry Debtors. 
 
 This includes accounts with officers and employees 
 of the company, individual accounts with whom are to be 
 carried in a separate section of the general ledger, desig- 
 nated by an index tab marked "Sundry Debtors and 
 Creditors". Briefly, all personal accounts except those 
 with customers and purchase creditors, are to be carried 
 
 42 
 
 in this division. In cases where accounts with traveling 
 salesmen are very numerous they should be kept in a 
 separate ledger by themselves, a controlling account for 
 which should be carried in the general ledger. Each in- 
 dividual account should be handled as follows: 
 
 Open the respective accounts with the debit or credit 
 balance as the case may be. 
 
 Debit: with all payments of cash, and with any other 
 indebtedness incurred. 
 
 Credit: with salaries and commissions earned by 
 them and with expenses upon rendering itemized ac- 
 counts of same. 
 
 Balance of each individual account, when a debit, is 
 a current asset and should represent the amount due from 
 the debtor. On the balance sheet the aggregate debit 
 balances of these accounts should be shown as "Sundry 
 Debtors". 
 
 41. Reserve for Doubtful Accounts — Sundry Debt- 
 ors (see 40). 
 
 Debit: with all "Sundry Debtor" accounts considered 
 uncollectible. 
 
 Credit: at the time of opening books with an amount 
 estimated to be sufficient to provide for all losses on ac- 
 counts of this nature considered doubtful of collection; 
 at the close of each month with an amount estimated to 
 be sufficient to provide for losses on accounts charged 
 during the month charging the account. Doubtful Ac- 
 counts (Reserve Charge). 
 
 Balance of this account represents the allowance for 
 losses on Sundrv Debtors and should be shown on the 
 
 43 
 
i 
 
 42 
 
 MANUFACTURING COMPANIES 
 
 CURRENT ASSETS 
 
 43-44 
 
 i ih 
 
 I 
 
 balance sheet as a deduction from them, the difference 
 representing the net value at which they are carried. 
 
 42. Consignments to Others. 
 
 The details in regard to handling this account de- 
 pend upon such a variety of conditions in different lines 
 of business that no specific instructions applicable to all 
 cases will be given here. The function of this account, 
 as generally understood, is to show the cost of merchan- 
 dise in the hands of others to be sold on our account and 
 risk, which in a general way, may be handled as follows : 
 
 Debit: at the time of opening books with the cost 
 value of merchandise in the hands of others to be sold 
 on our account and risk; with the cost of subsequent 
 consignments, crediting the proper merchandise stock 
 account, if a cost system is maintained, or consigned 
 merchandise account if a cost system is not maintained. 
 
 Credit: with expenses advanced by the consignee to 
 be allowed by us; with the cost of consignments re- 
 turned; and at the time sales are reported, with the cost 
 of the items sold, previously charged to this account, 
 charging the account Cost of Sales when a cost system 
 is maintained or the account. Consigned Merchandise 
 when one is not maintained. At this time the customer 
 should be charged for the amount of the sale and the 
 proper sales account credited. 
 
 Balance of this account is a current asset and should 
 represent the valuation of merchandise in the hands of 
 others to be sold on our account and risk. 
 
 When merchandise is consigned to several different 
 parties, an account should be kept with each consignee, 
 
 44 
 
 these individual accounts being carried in a subsidiary 
 ledger controlled by an account in the general ledger. 
 
 ^ i: 
 
 43. Inventories of Merchandise — ^Branches. 
 
 All inventories at branches are to be handled in a 
 similar manner as other inventories herein described. 
 (See 44 to 47). 
 
 44. Inventory of Manufacturing Material or Stores. 
 
 This account is here understood to include all ma- 
 terial purchased for manufacturing purposes whether in 
 a raw or semi-finished state, thus including finished or 
 unfinished parts when purchased from others to be as- 
 sembled into the marketable product. 
 
 This item may be treated according to one of the 
 three following methods: 
 
 (i) When a cost system is maintained. 
 
 Debit: at the time of opening books with the cost of 
 manufacturing material on hand; at the close of each 
 month with the cost of manufacturing material pur- 
 chased; with material returned to the store room, previ- 
 ously charged to the account. Work in Process; with 
 the cost of material returned by customers which had 
 been previously charged to them, crediting the account, 
 Cost of Sales. 
 
 Note. — When freight and cartage charges on pur- 
 chases of manufacturing material are included in the costs 
 entered on stock records, or in other words, when these 
 charges follow the invoice, they should also be charged 
 to this account. 
 
 Credit: at the close of each month with the cost of 
 all material withdrawn from Stores as shown by the 
 
 45 
 
 i' 
 
I ■ 
 
 MANUFACTURING COMPANIES 
 
 CURRENT ASSETS 
 
 45-46 
 
 li 
 
 I'V ' 
 
 Stores Distribution Summary, charging the proper ac- 
 counts, such as Work in Process, Plant accounts, Ex- 
 pense accounts, Cost of Sales, etc. as the case may be; 
 with the cost of discarded material, (See 48, 185) ; with 
 the cost of manufacturing material returned to purchase 
 creditors. 
 
 j^^^ote. — Any transportation charges included in the 
 cost of merchandise returned to purchase creditors should 
 be charged to the account, Incoming Transportation 
 Charges, Undistributed. 
 
 Balance of this account is a current asset and should 
 represent the cost of manufacturing material or stores 
 on hand, and should agree with the aggregate of the in- 
 dividual stock cards. 
 
 (2) When a cost system is not maintained. 
 This account is carried for the purpose of showing 
 the value of the manufacturing material on hand at the 
 beginning and close of each period, and no entries except 
 at these times are to be made to it, except in cases where 
 the inventory at the beginning of the period requires 
 adjusting by reason of errors having been discovered 
 subsequently during the period, in which event, the con- 
 tra entries should be made to Surplus account. 
 
 Debit: at the time of opening the books with the 
 cost of manufacturing material on hand; at closing 
 periods with the inventory at that time, crediting the 
 account, Manufacturing Material Purchases, to which all 
 purchases of manufacturing material should be charged, 
 
 in this case. 
 
 Credit: at closing periods with the cost of manu- 
 facturing material on hand at the beginning of the period 
 
 46 
 
 being closed, charging the account, Manufacturing Ma- 
 terial Purchases. 
 
 Balance of this account at closing periods, after mak- 
 ing the above entries, is a current asset and should rep- 
 resent the cost of manufacturing material on hand. 
 
 (3) When a cost system is not maintained. 
 
 The above ledger accounts may be dispensed with 
 and the inventory at closing periods shown as a debit 
 balance in the account, Manufacturing Material Pur- 
 chases. 
 
 45. Inventory of Semi-Finished Product or Stores. 
 
 This account at closing periods should represent the 
 cost value of all completed parts on hand on which labor 
 has been performed, which, when assembled, will lose 
 their indentity and become a part of the finished product, 
 and should be treated in a similar manner as described 
 in 44, Inventory of Manufacturing Material or Stores, 
 except that no purchases should be charged to it; and 
 when a cost svstem is not maintained, it should be treated 
 as work in process and included in the account. Inventory 
 of Work in Process. 
 
 The cost value should include the three elements of 
 direct material, direct labor and manufacturing overhead 
 or burden as referred to in 278. 
 
 46. Inventory of Finished Product or Stores. 
 This account at closing periods should represent the 
 
 cost value of the manufactured product on hand which 
 has been completed and is ready for shipment, and should 
 be treated in a similar manner as described in 44, In- 
 
 47 
 
47 
 
 MANUFACTURING COMPANIES 
 
 I 
 
 \\i 
 
 II 
 
 'i 
 1 
 
 1 . 
 
 ventory of Manufacturing Material or Stores, except that 
 no purchases should be charged to it; and when a cost 
 system is not maintained, the inventory entries at closing 
 periods in the second method should be made to the ac- 
 count, Cost of Sales, in which the inventory at closing 
 periods in the third method should be brought down as 
 a debit balance. 
 
 47. Inventory of Work in Process. 
 
 This item may be treated according to one of the 
 three following methods : 
 
 (i) When a cost system is maintained. 
 
 Debit: at the time of opening books with the cost 
 value of work in process on hand; at the close of each 
 month with the cost of material received from store 
 rooms for manufacturing purposes, ascertained from the 
 stores distribution summary, crediting the proper stores 
 accounts; with the cost of direct labor ascertained from 
 the distribution of the pay roll, crediting the account. 
 Accrued Wages; with the total of the manufacturing 
 overhead expense actually distributed to cost sheets dur- 
 ing the month, crediting the account, Undistributed Man- 
 ufacturing Overhead. 
 
 Credit: at the close of each month with the cost of 
 material returned and transferred to store rooms, as 
 shown by the summary of material transferred to store 
 rooms, charging the proper stores accounts; with the 
 cost of shipments from work in process, charging the 
 Cost of Sales. 
 
 Balance of this account is a current asset and should 
 represent the cost of work in process on hand at the close 
 
 48 
 
 CURRENT ASSETS 
 
 47 
 
 of the month after making the above entries. This con- 
 trolling account should agree with the aggregate of the 
 balances shown on the individual cost sheets. 
 
 (2) When a cost system is not maintained. 
 
 This account is carried for the purpose of showing 
 the value of the work in process of manufacture on hand 
 at the beginning and close of each period, and no entries, 
 except at these times, are to be made to it except in 
 cases when the inventory at the beginning of the period 
 requires adjusting by reason of errors having been dis- 
 covered subsequently during the period, in which event, 
 the contra entries should be made to Surplus account. 
 
 The items constituting this inventory should be 
 priced at manufacturing cost as defined in 251 and 278. 
 
 Debit: at the time of opening books with the cost of 
 work in process on hand; at closing periods with the 
 cost of merchandise in process on hand at that time, 
 crediting the account, Cost of Product Manufactured. 
 
 Credit: at closing periods with the cost of work in 
 process on hand at the beginning of the period, charging 
 the account, Cost of Product Manufactured. 
 
 Balance of this account at closing periods, after mak- 
 ing the above entries, is a current asset and should rep- 
 resent the cost of work in process of manufacture on 
 hand. 
 
 (3) When a cost system is not maintained. 
 
 The above ledger accounts may be dispensed with 
 and the inventory at closing periods shown as a debit 
 balance in the account, Cost of Product Manufactured. 
 
 49 
 
Illl. 
 
 !'il 
 
 ilili 
 
 ■ t 
 
 III 
 
 >i<i il 
 
 48-49 
 
 MANUFACTURING COMPANIES 
 
 ! I 
 
 I ' 
 
 48. Reserve for Depreciation of Manufacturing Ma- 
 terial and Work in Process. 
 
 Debit: with the amount of material scrapped, credit- 
 ing the account, Work in Process or the proper stores 
 account as the case may be; at closing periods with the 
 amount of any decrease in the reserve for depreciation. 
 
 Credit: at the time of opening books with the amount 
 of reserve calculated for depreciation on these items ; and 
 at closing periods with the amount of any increase of this 
 reserve, charging the account, Obsolete or Spoiled Ma- 
 terial. 
 
 Balance of this account represents the allowance for 
 depreciation to be deducted on the balance sheet from 
 the inventories affected, extending the net value at which 
 the inventories are to be carried from the standpoint of 
 
 a going concern. 
 
 Note — When a reserve for depreciation of finished 
 product is carried, it should be treated as described in 
 
 254. 
 
 49. Undistributed Manufacturing Overhead. 
 
 Debit: at the close of each month with the total man- 
 ufacturing expenses for the month, crediting the account, 
 Manufacturing Expenses. 
 
 Credit: at tfee close of each month with the total 
 overhead expenses actually distributed to individual cost 
 sheets, charging the account, Inventory of Work in Pro- 
 cess. 
 
 Balance of this account should represent the undis- 
 tributed manufacturing overhead, this amount being the 
 difference between the actual manufacturing expenses 
 and the amount actually distributed to cost sheets. 
 
 SO 
 
 
 CURRENT ASSETS 
 
 50-51 
 
 50. Treasury Stock — Preferred. 
 
 51. Treasury Stock — Common. 
 
 These accounts should not be treated or regarded as 
 being the same as the accounts of Capital Stock Unis- 
 sued. The term "Treasury Stock" as here intended, rep- 
 resents the company's own stock which has been previ- 
 ously issued and subsequently acquired by purchase or 
 otherwise and held in the treasury; while the account. 
 Capital Stock Unissued, represents exactly what the term 
 implies, that is, original authorized stock which has never 
 been issued. Many bookkeepers erroneously take these 
 accounts to mean the same. In most states it is unlawful 
 for a corporation to buy its own stock, however, a com- 
 pany may acquire it in various ways. For example, to 
 satisfy a claim against a stockholder who may be indebted 
 to the company, or it purchases its own stock at de- 
 linquent sales provided there are no other bidders; also 
 stock is sometimes donated to the company for the pur- 
 pose of raising working capital. 
 
 Debit: with the par value of stock acquired, credit-, 
 ing the account Reserve for Working Capital with the 
 difference between the amount paid and the par value. 
 
 Credit: with the par value of Treasury Stock sold, 
 charging cash for the amount of cash received, and Work- 
 ing Capital for the difference between the cash received 
 and the par value, if sold below par. 
 
 Balance of this account, although an asset of ques- 
 tionable value in certain cases, represents the par value 
 of the company's own stock on hand previously issued, 
 and subsequently acquired. 
 
 51 
 
 !l 
 
II 
 
 I 
 
 I' \ 
 
 i 
 
 iii' 
 
 DEFERRED CHARGES TO OPERATION 
 MANUFACTURING COMPANIES 
 
 52. In nearly every business there are certain 
 expense accounts, which at closing periods stand charged 
 with a greater amount than is actually apphcable to the 
 
 period. 
 
 For example, a certain company closed its books on 
 December 31, IQIS- A charge was made on the books for 
 the cost of a fire insurance premium amountmg to $720.00 
 for a three year policy, dated June 30, IQIS- To charge 
 the entire $720.00 to the month's expenses m which it 
 was entered would show misleading results when com- 
 paring one month's expenses with another. As a matter 
 of fact the $720.00 should be distributed over the entire 
 time the insurance is in force, charging each month with 
 its proportion, or in this case $20.00, which would leave 
 $600.00 as prepaid on December 31, I9i3- This is com- 
 monly called a prepaid expense item or a deferred charge 
 to operation. Other such items may be interest on items 
 payable, stationery, printing and office supplies, adver- 
 tising, commercial agency subscriptions, telephone and 
 telegraph, etc., also stable supplies, shipping supplies and 
 general factory supplies when not carried under a gen- 
 eral stores system. 
 
 52 
 
 DEFERRED CHARGES TO OPERATION 
 
 53-55 
 
 These prepaid expenses or deferred charges to oper- 
 ation may be properly carried on the books according to 
 one of the three following methods : 
 
 53. Prepaid Expenses — First Method. 
 
 Under this method, for every expense account hav- 
 ing a prepaid balance, a separate prepaid account should 
 be carried and charged with its inventory at the time of 
 opening the books and with all subsequent purchases. It 
 should be credited at the close of each month with the 
 amount applicable to the month, charging the relative 
 expense account. Under this method, each expense ac- 
 count at the close of the month stands charged with the 
 expenses applicable to the month and the prepaid account 
 shows the amount of the prepaid expense to be carried 
 as an asset. The details of the entries are illustrated in 
 the two following accounts. 
 
 54. Prepaid Insurance. 
 
 Debit: at time of opening books with the amount 
 of unexpired insurance premiums ; with all insurance bills 
 subsequently entered. 
 
 Credit: with all refunds, cancellations, etc.; at the 
 close of each month with one-twelfth of the annual in- 
 surance cost, charging the proper insurance accounts in 
 the expense groups. 
 
 Balance of this account is an asset classified as a 
 Deferred Charge to Operation, and should represent un- 
 expired insurance premiums paid in advance. 
 
 55. Prepaid Stationery and Office Supplies. 
 Debit: at time of opening books, with the cost value 
 
 53 
 
 n 
 
 ' 
 
 w 
 
56 
 
 MANUFACTURING COMPANIES 
 
 I 
 
 li 
 
 
 i!t»i 
 
 \ 
 
 of stationery and office supplies on hand; with the cost 
 of these items purchased. 
 
 Credit: with all items returned; at the close of each 
 month, with the cost of these items used, charging the 
 proper expense account. When no records are kept of 
 the actual amount of these items used during the month, 
 the amount may be estimated, the credit in the last month 
 of the fiscal period to be for such an amount that the 
 balance left in the account will agree with the physical 
 
 inventory at that time. 
 
 Balance of this account is an asset classified as a 
 Deferred Charge to Operation, and should represent the 
 amount of stationery and office supplies on hand. 
 
 56. Prepaid Expenses— Second Method. 
 
 Under this method one prepaid account is carried 
 containing the prepaid amounts of all expense accounts. 
 
 These should not be entered in one combined total 
 but the prepaid balance relating to each expense account 
 should be shown separately in the one account, and should 
 remain in this account unchanged until the close of the 
 period. 
 
 It further differs from the first by charging all pur- 
 chases directly to the proper expense account at the time 
 the purchases are entered, illustrated as follows: 
 
 Debit: at the time of opening the books with the 
 prepaid amounts relating to those expense accounts hav- 
 ing prepaid balances; at closing periods, with prepaid 
 amounts relating to those expense accounts having pre- 
 paid balances at that time, crediting the expense accounts 
 to which they relate. 
 
 54 
 
 DEFERRED CHARGES TO OPERATION 
 
 57 
 
 Credit: at closing periods, with the prepaid balances 
 shown at the beginning of the period being closed, charg- 
 ing the respective expense accounts to which they relate. 
 
 Balance of this account, after making the above en- 
 tries, is an asset classified as a Deferred Charge to Oper- 
 ation and should represent the prepaid expenses at the 
 time of closing the books. 
 
 57. Prepaid Expenses — ^Third Method. 
 
 Under this method the prepaid account described in 
 the first two methods may be dispensed with and all pur- 
 chases charged directly to the proper expense accounts, 
 in which event the prepaid amounts at closing periods 
 should be shown as debit balances in the respective ex- 
 pense accounts to which they relate. This method is 
 shorter and possibly more simple, and for this reason in 
 certain cases is to be recommended. 
 
 55 
 
i 
 
 V'l 
 
 1 
 
 FIXED ASSETS AND RESERVES 
 
 59 
 
 FIXED ASSETS AND RESERVES 
 MANUFACTURING COMPANIES 
 
 58. Plant Accounts. 
 
 Plant is a general term applied to the fixed or per- 
 manent assets of a manufacturing business, including such 
 items as Real Estate, Power Plant, Machinery, Tools, 
 Patterns, Stable Equipment, Automobiles, Office Furn- 
 iture and Fixtures, etc. A separate account should be 
 opened for each item according to the requirements in 
 
 each case. 
 
 To illustrate in a general way the manner in which 
 these accounts should be handled, the machinery account 
 is described in detail as follows: 
 
 59. Machinery and Machine Tools. 
 
 The items to be charged to this account depend upon 
 the classification of plant accounts, but in no event should 
 small or perishable tools be charged to it. It should em- 
 brace the general machinery of a plant such as lathes, 
 power presses, drill presses, grinders, etc., together with 
 machine tools, line shafting, hangers, belting and pulleys. 
 If no account is carried with power plant, it should then 
 include engines, dynamos, motors, etc. This account may 
 be subdivided, keeping separate accounts with such oC 
 the above items as may be desirable. 
 
 56 
 
 Debit: at the time of opening books with the cost or 
 replacement value of machinery on hand, including cost 
 of transportation and installation; with the cost of all 
 new machinery acquired and all additions and better- 
 ments. 
 
 Repairs to machinery are not to be charged to this 
 account, but to the maintenance account, Repairs to 
 Machinery. 
 
 Credit: with the cost of machinery replaced or dis- 
 carded, charging cash or its equivalent for the amount 
 received for the machinery and the account. Reserve for 
 Depreciation of Machinery, for the difference between 
 the cost and the amount received. 
 
 Balance of this account is a fixed asset and should 
 represent the cost or replacement value of machinery on 
 hand. 
 
 To illustrate the method of treating this account, for 
 example, if a certain machine, costing $1,000.00, is dis- 
 carded and sold as scrap for $50.00 and replaced by a 
 new one costing $1,500.00, the entries should be as fol- 
 lows : 
 
 Debit: Cash 
 
 Reserve for Depreciation — Ma- 
 chinery 
 
 Credit: Machinery account (for 
 machinery discarded and sold as 
 scrap, receiving cash, $50.00) 1,000.00 
 
 Debit: Machinery account 1,500.00 
 
 Credit: Purchase Creditor (for cost 
 of new machine) 
 
 $50.00 
 
 950.00 
 
 1,500.00 
 
 57 
 
Ill I 
 
 59 
 
 MANUFACTURING COMPANIES 
 
 (;:: 
 
 I 
 i 
 
 W' 
 
 V' 
 
 In regard to betterments, if a machine in, good order 
 could be made to increase its output, say, 50% by re- 
 modeling, the entire cost of the improvement should be 
 charged to the asset account, Machinery. This account 
 should then be credited with the cost of the parts dis- 
 carded, charging the account, Reserve for Depreciation 
 of Machinery. 
 
 For new construction or betterments of the plant, 
 when the work is performed by the company's own em- 
 ployees, a production cost sheet or account should be 
 carried for each job, to which all material and labor should 
 be charged. When the job is completed it should then 
 be closed into the proper regular plant account. 
 
 In addition to the general ledger account of ma- 
 chinery, auxiliary or perpetual inventory records should 
 be kept, properly classified, furnishing the following de- 
 tails: number, name of machine, from whom purchased, 
 date purchased, cost, installation cost, betterments, de- 
 preciation, net value, discarded or disposed of, repairs, 
 remarks. The aggregate of the net replacement values 
 shown on the auxiliary records should agree with the 
 controlling account carried in the general ledger. When 
 plant accounts are kept in this manner, the yearly taking 
 of physical inventories of the plant items is unnecessary. 
 This record also furnishes important data for insurance 
 purposes and statistics on depreciation, and faciHtates the 
 verification of plant accounts. When this record is not 
 kept, entries are apt to be made to the machinery account 
 with less care than if they are analyzed on a perpetual 
 inventory record, and the asset account becomes charged 
 with items which belong to maintenance or vice versa. 
 
 58 
 
 FIXED ASSETS AND RESERVES 
 
 60 
 
 Following each plant account in both the ledger and 
 the balance sheet should be shown its corresponding Re- 
 serve for Depreciation account. In the balance sheet the 
 reserve account should be shown as a deduction from 
 the cost or replacement value of the plant account to 
 which it relates, for example, Machinery account would 
 be shown as follows: 
 
 Machinery (Cost Value) $30,000.00 
 
 Less Reserve for Depreciation 9,000.00 
 
 Extended on balance sheet 
 
 $21,000.00 
 
 60. Reserve for Depreciation. 
 
 A general discussion of the subject of depreciation, 
 which would fill a volume in itself, must necessarily be 
 omitted here, but commenting briefly on the subject, 
 balance sheets and profit and loss statements which do 
 not provide for the depreciation of wasting fixed assets 
 due to wear and tear and obsolescence, fail to show the 
 true financial condition of a business and accurate results 
 from operation. 
 
 If no yearly provision is made for depreciation, when 
 replacements are finally made, it becomes necessary to 
 charge the entire cost against the operations of the year 
 in which the expenditure for the replacement was made, 
 while as a matter of fact the cost of the replacement 
 should have been distributed over the years which re- 
 ceived the services of the thing replaced, and when 
 monthly profit and loss statements are prepared, each 
 month's operating expenses should include a charge for 
 one-twelfth of the annual reserve charge. This expense 
 
 59 
 
il 
 
 li > 
 
 I 
 
 I '13 
 
 6i 
 
 MANUFACTURING COMPANIES 
 
 in a manufacturing business constitutes a part of the cost 
 of production, and in a trading business a part of the 
 cost of conducting the business. 
 
 6i. Rates of Depreciation. 
 
 Owing to the nature and various conditions under 
 which different plants are operated no fixed rates of de- 
 preciation can be given applicable to all cases, but the 
 following annual rates, based on the life of the thing 
 depreciated, are recommended by industrial engineers in 
 many instances. 
 
 Frame buildings 2 to 5%, brick and concrete build- 
 ings I to 3%, dynamos 5%, engines 4 to 6%, boilers 4 
 to 8%, machinery 7,^ to 15%, hangers, shafting and belt- 
 ing ID to 20%, factory fixtures 7}^ to 12%, horses 15 to 
 25%, wagons 8 to 10%, automobiles 15 to 25%, patterns 
 20 to 33 1/3% (See 74), office furniture and fixtures 
 10 to 15%. The valuation of perishable tools should be 
 adjusted by physical inventories at fiscal closing periods. 
 
 Debit: with the cost of the thing replaced or dis- 
 carded, crediting the proper plant account for the full cost, 
 if no value is received for the item; when fixed assets 
 are sold or exchanged, debit this account with the dif- 
 ference between the cost and the amount received or 
 allowed, crediting the proper plant account. 
 
 Credit: at the time of opening books with the amount 
 of the reserve allowed for depreciation; at the close of 
 each month with one-twelfth of the annual depreciation 
 charge, if monthly profit and loss statements are pre- 
 pared, otherwise at closing periods with the full amount, 
 charging the proper depreciation expense account. For 
 
 60 
 
 FIXED ASSETS AND RESERVES 
 
 61 
 
 example, if the machinery of a plant amounted to 
 $120,000.00, and the annual depreciation was 10% or 
 $12,000.00, the monthly charge would be $1,000.00 as 
 follows : 
 Dr. Depreciation — Machinery 
 
 (Reserve Charge) $1,000.00 
 
 Cr. Reserve for Deprecia- 
 tion — Machinery $1,000.00 
 Balance of this account represents the allowance on 
 account of depreciation to be deducted on the balance 
 sheet from the plant account to which it relates, extend- 
 ing the present net value at which the item is carried 
 from the standpoint of a going concern. 
 
 It is the practice of some bookkeepers to post the 
 amount of the depreciation to the credit side of the plant 
 account, calculating depreciation on the balance of the 
 account each year, instead of carrying the plant account 
 at its cost or replacement value, on which to calculate 
 the reserve charge, and a separate or contra account for 
 the reserve, more fully explained as follows: 
 
 For illustration, if the machinery of a plant originally 
 cost $50,000.00, this cost with additions for betterments 
 and deductions for items discarded, should be carried at 
 its replacement value. The accumulating reserve for de- 
 preciation should be carried in a separate account, follow- 
 ing in the ledger the asset account to which it relates. 
 This method shows at all times in one account the cost 
 or replacement value of the plant item and in another 
 account, the total reserve for depreciation relating to it. 
 The advantages of this method are of great value in in- 
 surance, taxation, appraisal and other matters. 
 
 61 
 
62 
 
 MANUFACTURING COMPANIES 
 
 I 
 
 |: ^ 
 
 111 
 
 u 
 
 '. I 
 
 ill 
 
 A card record may be kept showing each plant item 
 and particulars for calculating the depreciation reserve 
 charge, but when this is not maintained, for convenience 
 in making these charges a schedule similar to the follow- 
 ing may be prepared at the beginning of each fiscal year 
 and filed for reference. 
 
 Account 
 Depreciated 
 
 Replacement Monthly Dcpr. Charge 
 
 Rate % Value at Annual Manufac- Adminis- 
 
 beginningof Charge turing trative 
 fiscal year Expenses Expenses 
 
 Buildings 
 Power Plant 
 Machinery & 
 
 Machine Tools 
 Factory Fixtures 
 Stable Equipment 
 Automobiles — 
 
 Factory 
 Patterns 
 Office Furniture & 
 
 Fixtures 
 
 3 $100,000.00 
 
 5 20,000.00 
 
 10 30,000.00 
 
 10 5,000.00 
 
 15 2,000.00 
 
 20 8,000.00 
 
 20 8,000.00 
 
 10 2,000.00 
 
 3,000.00 
 1,000.00 
 
 3,000.00 
 500.00 
 300.00 
 
 1,600.00 
 1,600.00 
 
 200.00 
 
 250.00 
 83.33 
 
 250.00 
 41.66 
 25.00 
 
 133.33 
 133.33 
 
 16.66 
 
 62. Secret Reserve. 
 
 A secret reserve is created by undervaluing current 
 or fixed assets. In other words, it is secretly reducing 
 the statement of the net worth of a business. Such a 
 manipulation is sometimes made during prosperous times 
 by reducing the real value of inventories, and at times of 
 more unfavorable conditions of operation, restoring them 
 to their correct value in order to show uniform earnings 
 during both favorable and unfavorable conditions. 
 
 When secret reserves are created by directors for the 
 purpose of reducing earnings and thereby influence cer- 
 tain stockholders to dispose of their stock, it is unques- 
 tionably wrong, and opinions differ among accountants 
 as to the propriety of carrying a secret reserve under 
 
 62 
 
 FIXED ASSETS AND RESERVES 
 
 63 
 
 any circumstances. It is better to make such a provision 
 by creating a "Reserve for Contingencies'* to be plainly 
 set up on the books and balance sheet as such. 
 
 63. Grounds. 
 
 This account should include the valuation of the 
 land on which the plant is located, and should be carried 
 in an account by itself, excluding buildings; owing to the 
 fact that buildings depreciate in value while, in many 
 cases, land appreciates in value. Land owned or acquired, 
 which is not in any way connected with the operation of 
 the business, should be carried in a separate account 
 under the heading of *'Other Investments." 
 
 Debit: at the time of opening books with the cost of 
 land owned; with land subsequently purchased, including 
 all expenses incidental to acquiring title thereto, such 
 as legal expenses, recording fees, etc.; with the cost of 
 all permanent improvements such as walks, fences, 
 sewers, underground piping, wells, grading, planting of 
 trees, etc.; with the increased valuation as adjusted from 
 time to time, generally crediting Surplus account for such 
 increases. 
 
 Repairs relating to these items are not to be charged 
 to this account, but to the account, Repairs to Grounds. 
 
 Credit: with the book value of land sold; with the 
 decreased valuation if any, as subsequently adjusted, 
 charging Surplus account. 
 
 Should the proceeds from the sale of land be greater 
 or less than the valuation at which it was carried, the dif- 
 ference should generally be transferred to Surplus ac- 
 count. 
 
 63 
 
 •I 
 
r 
 
 64-68 
 
 MANUFACTURING COMPANIES 
 
 !' 
 
 ! 
 
 !! 
 
 l! 
 
 I' 
 
 Balance of this account is a fixed asset and should 
 represent the valuation of the ground on which the plant 
 is located. 
 
 64. Buildings and Building Fixtures. 
 
 This account should include the cost of buildings 
 constituting a part of the plant, with appurtenances 
 thereto, embracing such items as electric wiring, gas and 
 electric fixtures, plumbing, heating apparatus, etc. Build- 
 ings owned or acquired which are not in any way con- 
 nected with the operation of the business, should be car- 
 ried in a separate account under the heading of "Other 
 Investments." 
 
 This account should be treated in a similar manner 
 as described in 59. 
 
 65. Reser\'e for Depreciation — Buildings. 
 
 This and other Reserve for Depreciation on plant 
 accounts should be treated in a similar manner as 
 described in 60 and 61. 
 
 66. Power Plant. 
 
 This account should include the cost of all boilers, 
 engines, dynamos, motors, etc. and appurtenances thereto, 
 and should be treated in a similar manner as described 
 in 59. 
 
 67. Reserve for Depreciation— Power Plant (See 
 
 65). 
 
 t 
 
 68. Factory Fixtures. 
 
 This account should include the cost of such items 
 
 64 
 
 FIXED ASSETS AND RESERVES 69-70 
 
 as chairs, benches, desks, cupboards, lockers, shop trucks, 
 partitions, tool racks, etc., and be treated in a similar 
 manner as described in 59. 
 
 69. Reserve for Depreciation — Factory Fixtures 
 (See 65). 
 
 70. Perishable Tools. 
 
 This account should include the cost of files, twist 
 drills, wrenches, pliers, hammers, tongs, flasks, crucibles 
 and similar items of a short life. 
 
 Owing to the fact that these items are easily lost, 
 broken and destroyed, this account should be handled in 
 a different manner than that described for other regular 
 fixed asset accounts. Instead of carrying them at the 
 purchase price with a reserve for depreciation, this ac- 
 count should be adjusted by a physical inventory at least 
 once each year, and may be carried on the books accord- 
 ing to one of the three following methods, the one to be 
 used depending upon the conditions in each case. 
 
 (i) Debit: at the time of opening the books with 
 the valuation of perishable tools on hand in use; with 
 the cost of tools purchased. 
 
 Credit: with all items returned; at the close of each 
 month with the estimated cost of tools replaced during 
 the month, charging the account. Repairs and Replace- 
 ments—Perishable Tools, the credit in the final month 
 of the fiscal period to be for such an amount that the 
 balance left in the account will agree with the physical 
 inventory at that time. 
 
 65 
 
 I 
 
iii 
 
 71 
 
 MANUFACTURING COMPANIES 
 
 1. 
 
 I 'I 
 
 ii 
 
 ! 
 
 Balance of this account at closing periods, after mak- 
 ing the above entries, is a fixed asset and should represent 
 the valuation of perishable tools on hand. 
 
 (2) Debit: at the time of opening the books with 
 the valuation of perishable tools on hand in use ; at closing 
 periods with their valuation at that time, crediting the 
 account. Repairs and Replacements— Perishable Tools. 
 
 When no cost system is maintained, all purchases in 
 this case should be charged to the expense account, Re- 
 pairs and Replacements— Perishable Tools ; when a cost 
 system is maintained, purchases should be charged to 
 stores account which should be credited for tools as 
 issued and charged to the above expense account. 
 
 Credit: at closing periods with the valuation of per- 
 ishable tools on hand at the beginning of the period being 
 closed, charging the account, Repairs and Replacements 
 — Perishable Tools. 
 
 Balance of this account at closing periods, after mak- 
 ing the above entries, is a fixed asset and should represent 
 the valuation of perishable tools on hand. 
 
 (3) Under this method the asset account. Perish- 
 able Tools, described under the ^rst two methods, may 
 be dispensed with and all purchases charged directly to 
 the expense account. Repairs and Replacements— Perish- 
 able Tools, and the inventory at closing periods shown as 
 a debit balance in that account, but shown on the balance 
 sheet in the asset account, Perishable Tools. 
 
 71. Stable Equipment. 
 
 This account should include the cost of horses, har- 
 
 66 
 
 FIXED ASSETS AND RESERVES 
 
 72-75 
 
 nesses and wagons, and be treated in a similar manner 
 as described in 59. 
 
 7a. Automobiles — Factory. 
 
 This account should include the cost of autos and 
 auto trucks used in conjunction with manufacturing de- 
 partments, and be treated in a similar manner as described 
 in 59- 
 
 73. Patterns and Drawings. 
 
 For each of these items a separate ledger account 
 should be carried, and be treated in a similar manner as 
 described in 59. They should represent the cost of such 
 Patterns and Drawings as are necessary to the manu- 
 facture of the regular product. When patterns or draw- 
 ings are made for some special job, they should be charged 
 to the cost of the job, in which event, generally they 
 should not be carried as an asset. 
 
 74. Reserve for Depreciation — Patterns and Draw- 
 ings (Separate account for each). 
 
 Liberal reserves should be provided for the deprecia- 
 tion of patterns and drawings in order to avoid carrying 
 them at enchanced values. Futhermore, at the close of 
 each year it is an excellent plan to inspect them and 
 charge obsolete patterns and drawings to their respec- 
 tive Reserve for Depreciation accounts. 
 
 75. Factory Office Furniture and Fixtures. 
 
 This account should include the cost of all office 
 furniture and fixtures used in the manufacturing end of 
 the business, such as desks, chairs, tables, typewriters, 
 
 67 
 
76-79 
 
 MANUFACTURING COMPANIES 
 
 
 I ■ 
 
 
 III 
 
 i 
 
 adding machines, etc., and should be treated in a similar 
 manner as described in 59. 
 
 76. AutomobUes — Administrative Department. 
 
 This account should include the cost of all auto- 
 mobiles which are used in conjunction with the adminis- 
 trative end of the business, and should be treated in a 
 similar manner as described in 59. 
 
 77. Main Office Furniture and Fixtures. 
 
 This account should be treated in a similar manner 
 as described in 59, and should include the cost of all of- 
 fice furniture and fixtures used in the administrative end 
 of the business, such as desks, chairs, filing cabinets, rugs, 
 movable partitions, typewriters, adding machines, etc. 
 Articles requiring frequent replacement such as inkwells, 
 rulers, waste baskets, etc. should be charged to Station- 
 ery, Printing and Office Supplies account. 
 
 78. Branch Office Furniture and Fixtures. 
 
 This account should include the cost of all office furn- 
 iture and fixtures at branch offices, and be treated in a 
 similar manner as described in 59. 
 
 79. Sinking Fund. 
 
 This account, as here used, represents cash or its 
 equivalent set aside periodically out of the cash assets of 
 the business and invested for the purpose of creating a 
 special fund, out of which to liquidate bonded or other 
 indebtedness at maturity— illustrated as follows: 
 
 68 
 
 FIXED ASSETS AND RESERVES 
 
 79 
 
 First — By ascertaining what sum of money invested 
 each year would, with accumulated interest, liquidate the 
 debt at maturity. 
 
 Second — By dividing the amount of the indebtedness 
 by the number of years to maturity, placing equal amounts 
 each year in the sinking fund. 
 
 Debit: with the amount of cash set aside periodically 
 out of the cash assets of the business for the purpose of 
 creating the sinking fund above described, crediting cash; 
 with income from sinking fund investments, if the first 
 method is used, crediting the account. Interest Earned 
 on Sinking Fund Investments. 
 
 Note — In regard to income on sinking fund invest- 
 ments when the first method is used; although the 
 account, Reserve for Sinking Fund, should eventually be 
 credited with interest earned on the investments, the 
 author suggests showing such earnings among the profit 
 and loss revenues, as above stated, as "Interest Earned 
 on Sinking Fund Investments." Although income from 
 this source is not available for the payment of dividends, 
 it should be included in the total income and be trans- 
 ferred to the account, Reserve for Sinking Fund, together 
 with the amount of cash periodically set aside out of the 
 cash assets of the business, and consequently showing 
 their sum as a deduction from the total net revenues, not 
 as an expense, however, as periodical sinking fund appro- 
 priations are not expenses but the "setting aside" out of 
 earnings, amounts which will eventually revert to surplus. 
 
 If the second method is used, cash received on 
 account of the interest earned on the sinking fund invest- 
 ments should be charged to cash and credited to the 
 
 69 
 
 i 
 
 fi 
 
So 
 
 MANUFACTURING COMPANIES 
 
 Mil 
 
 
 Iv 
 
 account, Interest Earned on Sinking Fund Investments, 
 to be treated in the same manner as interest earned from 
 any other source. 
 
 Credit: with payments made from the sinking fund in 
 the extinguishment of the obligations for which the fund 
 was created. 
 
 Balance of this account, although a cash asset, is 
 unavailable as working capital. It therefore virtually 
 becomes a fixed asset and represents cash set aside and 
 invested for the purpose of retiring certain obligations at 
 maturity. See io8 for the distinction between "Sinking 
 Fund" and "Reserve for Sinking Fund." 
 
 80. Other Investments. 
 
 When property, in the nature of fixed assets, is ac- 
 quired, which at the time is in no way related to the busi- 
 ness, such items may be classified as "Other Investments." 
 For example, a manufacturing company may acquire real 
 estate foreign to the business in settlement of a debt, or 
 purchase land and hold it for a future manufacturing site. 
 A separate ledger account should be kept with each 
 investment item of this character. 
 
 Debit: at time of opening books with the appraised 
 value of other investments owned ; with all properties sub- 
 sequently acquired. 
 
 Credit: with the book value of all properties dis- 
 posed of. 
 
 Balance of this account should be classified as a 
 fixed asset, and should represent the present value of other 
 investments owned. 
 
 70 
 
 INTANGIBLE ASSETS 
 MANUFACTURING COMPANIES 
 
 81, Patents. 
 
 Debit: at the time of opening books with the ap- 
 praised valuation of patents owned; with the cost of 
 acquiring other patents including all expenses incidental 
 thereto, such as the services of patent attorneys, 
 engineers, draftsmen, etc. ; with adjustments in valuation, 
 crediting Surplus account. 
 
 Credit: at the close of each month with one-twelfth 
 of such an annual amount as will charge off the account 
 at the expiration of patents, if profit and loss statements 
 are prepared monthly ; otherwise, at closing periods, with 
 the proper proportion, charging the account, Extinguish- 
 ment of Patents; with adjustments in valuations, charg- 
 ing Surplus account. (The original life of a patent is 
 seventeen years). 
 
 Balance of this account is an intangible asset and 
 should represent the valuation at which patents are car- 
 ried, this value depending upon the conditions under 
 which they were acquired. It may represent only the 
 actual cost of securing the patents, or it may represent 
 the worth of the patents to the business from the view- 
 point of a going concern. 
 
 71 
 
 '^1 
 
82-83 
 
 MANUFACTURING COMPANIES 
 
 ; • 
 
 *i 
 
 
 82. Goodwill. 
 
 Good will may be briefly defined as representing the 
 value of a business name, a reputation, a locality or 
 patronage. Although good will is commonly carried on 
 the books as representing the difference between the real 
 net worth of a company and its issued capital stock, in 
 other words, as representing the watered stock or over- 
 capitalization; it is also carried as justly representing the 
 value to the going concern of trade marks or the reputa- 
 tion of the goods or product manufactured, but any over- 
 capitalization represented by such items should never be 
 buried in an account denominated "Plant*' or in any of 
 the various plant accounts. 
 
 Debit: at the time of opening books with the amount 
 at which good will is to be carried on the books from the 
 viewpoint of a going concern; with adjustments, crediting 
 Surplus. 
 
 Credit: with amounts written off, charging Surplus. 
 (The extinguishment of good will affects actual profits in 
 no way and therefore is a charge against surplus). 
 
 Balance of this account is an intangible asset. 
 
 83* Organization Expense. 
 
 Debit: with all expenses incidental to the organiza- 
 tion of the company, including expenses of incorporating, 
 such as attorney's and state fees, stock certificate books, 
 seal, etc., together with the cost of selling stock during 
 the organization period to provide working capital. 
 
 Credit: at the close of each month with one-twelfth 
 of such an annual amount as will charge this account off 
 over a term of years, to be decided upon by the manage- 
 
 72 
 
 INTANGIBLE ASSETS 
 
 83 
 
 ment, if profit and loss statements are prepared monthly; 
 otherwise, at closing periods, with the proper proportion, 
 charging the account. Extinguishment of Organization 
 Expense. 
 
 Balance of this account is an intangible asset and 
 represents the portion of organization expenses to be 
 charged to future periods. 
 
 When this account is a comparatively small amount, 
 say $500.00, it may be treated as a prepaid expense, and 
 shown on the balance sheet under the caption, Deferred 
 Charges to Operation. 
 
 73 
 
CURRENT LIABIUTIES 
 
 85-86 
 
 1 
 
 CURRENT LIABILITIES 
 MANUFACTURING COMPANIES 
 
 84. Notes Payable — Loans. 
 
 In a large business, notes given for money borrowed 
 from banks and other sources for the general operation 
 of the business, should be carried in a separate account 
 from notes given to purchase creditors for purchases of 
 merchandise, etc. Each note should be shown separately 
 on the ledger with sufficient space allowed for the posting 
 of payments and renewals relating to it. 
 
 In addition to keeping this account, an auxiliary rec- 
 ord, commonly called "Notes Payable Book,*' should be 
 kept, ruled with columns headed as follows: Number, 
 Date given, In whose favor, Amount, Time, Interest rate, 
 
 Payment date, Date paid. 
 
 Debit: with payments made to reduce the principal 
 of notes payable; with all renewals. (Interest paid on 
 notes payable should not be charged to this account). 
 
 Credit: at the time of opening books with the face of 
 notes payable outstanding; with all notes subsequently 
 given ; with all renewals. 
 
 Balance of this account is a current liability and 
 should represent the amount owing on the principal of 
 notes payable. 
 
 74 
 
 85. Notes Payable— Purchase Creditors. 
 
 This account should include notes given to purchase 
 creditors for merchandise and other purchases, and should 
 be treated in a similar manner as described in 84. 
 
 86. Accounts Payable— Purchase Creditors (Con- 
 trolling Account). 
 
 This is a controlling account of the individual bal- 
 ances of the purchase creditors^ ledger or of the unpaid 
 vouchers carried in the voucher file, depending upon the 
 method used in handling these accounts. (See 24). 
 
 The accounts payable ledger or unpaid voucher file 
 should be verified monthly by listing the individual bal- 
 ances contained therein, the aggregate of which should 
 agree with the balance of the controlling account. 
 
 Debit: at the close of each month with the total 
 amount of payments made by money, note, returned 
 merchandise or otherwise, including discounts allowed by 
 purchase creditors, as shown by the monthly footings of 
 all debit columns headed "Accounts Payable," in posting 
 mediums. 
 
 Credit: at the time of opening books with the net 
 total of the individual accounts of the accounts payable 
 ledger or unpaid vouchers; at the close of each month 
 with the total credits to purchase creditors for merchan- 
 dise and other purchases as shown by the monthly foot- 
 ings of all credit columns headed "Accounts Payable" in 
 posting mediums. 
 
 Balance of this account is a current liability and 
 should represent the net total of the purchase creditors' 
 accounts. 
 
 75 
 
87-89 
 
 MANUFACTURING COMPANIES 
 
 CURRENT LIABILITIES 
 
 90 
 
 t 
 
 
 
 » 
 
 87. Accounts Payable— Sundry Creditors. 
 
 This account should be treated in a similar manner 
 
 as described in 40. 
 
 Balance of each individual account, when a credit, is 
 a current liability and should represent the amount due 
 the creditor. .On the balance sheet the aggregate credit 
 balances of these accounts should be shown as "Sundry 
 Creditors." 
 
 88. Accrued Pay Rolls. 
 
 Debit: with all payments for wages and salaries. 
 
 In cases where employees receive their compensation 
 by instalments other than regular pay periods, an account 
 should be opened with each employee and charged with 
 all cash payments, the account to be carried among the 
 "Sundry Debtors." At the close of each pay period or at 
 least at the close of each month, their personal accounts 
 should receive credit for the amount of their compensa- 
 tion, charging Accrued Pay Rolls account. 
 
 Credit : at the time of opening books with the amount 
 of the unpaid pay roll; at the close of each pay period, or 
 at the close of each month, if profit and loss statements 
 are prepared monthly, with the total amount of all pay 
 rolls, charging the proper expense accounts or other 
 accounts affected for which services are rendered. 
 
 Balance of this account is a current liability and 
 should represent accrued wages unpaid. 
 
 89. Accrued Commissions. 
 
 Debit: at the close of each month with the total 
 amount of commission actually due or earned by an agent, 
 
 76 
 
 crediting the personal account of the agent to whom the 
 commission is payable. 
 
 Credit: with adjustments and allowances; at the 
 close of each month with the total prospective commis- 
 sions on orders taken during the month, but which are 
 not due and payable until certain conditions are fulfilled, 
 such as the shipment of the goods or the payment of the 
 account, at this time charging Commission account under 
 the Selling Expense group. 
 
 Balance of this account is a liability and represents 
 commissions accrued but not due. 
 
 If the accounts with agents are numerous a subsidiary 
 ledger may be kept containing the desired details, con- 
 trolled by an account in the general ledger. 
 
 90. Accnied Items Payable. 
 
 What is stated in regard to prepaid expenses is also 
 generally applicable to accrued items payable, the prin- 
 cipal difference between the two classes of accounts being 
 that the former are assets, while the latter are liabilities. 
 (See 52). 
 
 An illustration of accrued items payable is furnished 
 in the item of interest, when a company borrowed, four 
 months prior to the closing of its fiscal year, $10,000.00 at 
 6%, both principal and interest being payable in six 
 months. In this case, on account of the interest not being 
 due, the books show no interest having been actually 
 paid ; however, the period being closed should be charged 
 for four months accrued interest amounting to $200.00, 
 and shown on the balance sheet among the liabilities, 
 classified as Accrued Items Payable. Other such items 
 
 77 
 
Iv 
 
 M 
 
 91 
 
 MANUFACTURING COMPANIES 
 
 CURRENT LIABILITIES 
 
 91 
 
 h fl™ 
 
 
 might be taxes, commissions, electric current and gas. 
 This class of accounts may be treated according to one of 
 the three methods described as follows : 
 
 91. Accrued Interest — Items Payable. 
 
 (i) Debit: with all payments of interest on items 
 payable, crediting cash or its equivalent. 
 
 Credit: at the time of openmg books with the amount 
 of accrued interest on items payable; at the close of each 
 month with the interest applicable to the month, charging 
 the account, Interest on Items Payable. 
 
 Balance of this account at the close of each month is 
 a current liability and should represent interest accrued on 
 items payable. 
 
 (2) Debit: at closing periods with the accrued in- 
 terest on items payable shown at the beginning of the 
 period being closed, crediting the account. Interest on 
 Items Payable. 
 
 The actual payments of interest in this case should 
 be charged to the expense account. Interest on Items 
 Payable, and not to the Accrued account, as done in the 
 first method. 
 
 Credit: at the time of opening the books with the 
 accrued interest on items payable; at closing periods 
 with accrued interest on items payable, at that time 
 charging the account. Interest on Items Payable. 
 
 Balance of this account at the close of each month is 
 a current liability and should represent interest accrued on 
 items payable. 
 
 (3) Under this method the accrued accounts 
 described in the first two methods may be dispensed with, 
 
 78 
 
 in which event all payments of interest should be charged 
 to the expense account. Interest on Items Payable, and 
 the accrued amount at closing periods shown as a credit 
 balance in that account. 
 
 79 
 
h ! 
 
 I" - 
 
 .i i 
 
 I 'I 
 
 FIXED LIABILITIES 
 MANUFACTURING COMPANIES 
 
 92. Mortgages Payable. 
 
 Each mortgage should be shown separately on the 
 ledger with sufficient space allowed for the posting of 
 payments and renewals relating to it. In addition to this 
 account an auxiliary record may be kept containing the 
 following headings: Number, Date given, In whose 
 favor, Amount, Time, Interest rate. Payment date. Date 
 paid. 
 
 Debit: with payments made to reduce the principal 
 of mortgages payable ; with all renewals. 
 
 Credit: at time of opening books with the unpaid 
 balances on the principal of mortgages payable; with all 
 mortgages subsequently assumed; with all renewals. 
 
 Balance of this account is a fixed liability and 
 should represent the total amount owing on the principal 
 of mortgages payable. 
 
 93. Bonds Payable. 
 
 Debit: with par value of bonds retired. 
 
 Credit: at time of opening books with the par value 
 of bonds outstanding; with the par value of bonds subse- 
 quently issued. 
 
 80 
 
 FIXED LIABILITIES 
 
 93 
 
 Balance of this account is a fixed liability and 
 should represent the par value of bonds outstanding. 
 
 In regard to unissued bonds, it is considered sufficient 
 to show, as memorandum only, on the ledger the amount 
 of the authorization. 
 
 In addition to this account a bond register should be 
 kept showing the Date, Number, To whom sold, Amount, 
 Maturity, Interest rate, Payment dates. Date retired. 
 The cancelled coupons should be pasted in books specially 
 prepared for that purpose. 
 
 81 
 
 J4 
 
i 
 
 m 
 
 CAPITAL OR NET WORTH 
 MANUFACTURING COMPANIES 
 
 94. Capital Stock. 
 
 The capital stock of a corporation is the aggregate 
 par value of its issued shares, while capital, in general, is 
 the valuation of the property in a business or undertaking 
 employed in conducting the business. 
 
 A corporation is an artificial body created by law, 
 consisting of several natural persons, and having the 
 power of perpetual succession. 
 
 Although the account, Capital Stock, may be properly 
 kept when it shows only the issued capital stock, the 
 author recommends carrying accounts with both the 
 entire authorized stock and the unissued stock, their dif- 
 ference representing the amount of issued stock. When 
 both accounts are kept, the latter should follow the 
 former in the ledger. 
 
 When the stockholders of a corporation are numer- 
 ous and the stock is frequently transferred, a stock ledger 
 should be kept, showing the number of shares issued, 
 transferred and amount owned by each stockholder. 
 Accompanying this should also be a stock journal, into 
 which issued and transferred stock should be entered 
 from the stock certificate stubs, and from there posted to 
 the stock ledger. Accordingly, the aggregate of the bal- 
 
 82 
 
 CAPITAL OR NET WORTH 
 
 95-98 
 
 ances in the stock ledger should agree with the amount 
 of issued capital stock shown by the general ledger. If 
 both common and preferred stock are issued a separate 
 stock ledger and journal should be kept for each, or com- 
 bined in one book properly subdivided. 
 
 When stock is transferred, each cancelled certificate 
 should be marked "Cancelled" and pasted in the certifi- 
 cate book to the stub to which it was originally attached. 
 
 95. Capital Stock, Preferred — Authorized. 
 
 96. Capital Stock, Common — ^Authorized. 
 
 When a corporation issues both preferred and com- 
 mon stock, a separate account should be kept with each, 
 and treated as follows: 
 
 Debit: with the par value of the reduction of the 
 capital stock when authorized by the state in which the 
 company is incorporated. 
 
 Credit: with the total par value of the authorizeS 
 capital stock. 
 
 Balance of these accounts should represent the par 
 value of the authorized stock respectively. 
 
 97. Capital Stock, Preferred — Unissued. 
 
 98. Capital Stock, Common — Unissued. 
 Debit: with the par value of the unissued stock. 
 Credit: with the par value of stock when fully paid 
 
 up, at which time certificates of stock should be issued; 
 with the par value of the reduction of the authorized 
 stock. . . 
 
 Balance of these accounts should represent the par 
 value of the unissued capital stock respectively. 
 
 83 
 
>piii 
 
 il " 
 
 
 M 
 
 1 
 
 99-100 MANUFACTURING COMPANIES 
 
 99. Subscribed Capital Stock. (This account is to 
 be used only when stock is sold on the instalment plan). 
 
 Debit: with the par value of stock subscribed, upon 
 being paid in full, crediting the account, Unissued Capi- 
 tal Stock or Treasury Stock, as the case may be. (See 50 
 and ^i). 
 
 Stock sold on the instalment plan should not be 
 issued until fully paid. 
 
 Credit: with the par value of stock sold on the in- 
 stalment plan, charging the account. Subscriptions to 
 Capital Stock. 
 
 Balance of this account should represent the par 
 value of the subscribed stock which is being paid by in- 
 stalments. 
 
 100. Subscriptions to Capital Stock. (This account 
 is to be used onlv when stock is sold on the instalment 
 plan). 
 
 Debit: with the amount of Capital Stock subscribed, 
 payments for which are to be made by instalments, credit- 
 ing the account. Subscribed Capital Stock. 
 
 Credit: with all payments made to apply on stock 
 sold on the instalment plan. 
 
 Balance of this account represents the amount un- 
 paid on stock sold on the instalment plan. 
 
 In addition to this account a subsidiary Subscription 
 Ledger should be kept, showing the charges, credits and 
 balance due from each subscriber who purchases stock in 
 this manner. 
 
 84 
 
 r, I •■ ' t i 
 
 CAPITAL OR NET WORTH 
 
 I0I-I02 
 
 loi. Proprietor's Capital or Investment Account. 
 
 Debit: with all withdrawals of investments previ- 
 ously credited to this account; with all losses not appli- 
 cable to the operations of the current year's business; at 
 closing periods with the debit balance, if any, transferred 
 from the proprietor's personal drawing account; with the 
 net loss, if any, transferred from the Profit and Loss 
 account, unless the proprietor prefers to carry yearly 
 profits or losses in the Profit and Loss account. 
 
 Credit: at time of opening books with the net invest- 
 ment; with all additional investments; at closing periods 
 with the credit balance, if any, transferred from the pro- 
 prietor's personal drawing account; with the net profits 
 transferred from the Profit and Loss account unless the 
 proprietor prefers to carry yearly profits or losses in the 
 Profit and Loss account. 
 
 Balance of this account at closing periods, when the 
 balance in the Profit and Loss account is transferred to it, 
 should represent the net worth of the business. 
 
 • 
 
 102. Proprietor's Private or Drawing Account. 
 
 Debit: with all merchandise and withdrawals of 
 money for personal use. 
 
 Credit: with the monthly or yearly salary which the 
 business is to allow the proprietor for his services, charg- 
 ing the proper expense account. 
 
 Balance of this account at closing periods is usually 
 closed into the proprietor's capital account, however, it 
 may be carried as an asset or liability to the business, if 
 desired. 
 
 8s 
 
il 
 
 I HinR 
 
 m 
 
 I 
 
 •«/: 
 
 tv 
 
 103-105 
 
 MANUFACTURING COMPANIES 
 
 103. Partners' Capital or Investment Accounts. 
 
 A partnership is the relationship resulting from an 
 agreement between two or more persons to place their 
 money, properties, labor and skill or some or all of them 
 in an undertaking, and divide the resulting profits and 
 losses according to certain agreed upon proportions. 
 
 When the business is conducted as a partnership, 
 each partner's capital account should be handled in a 
 similar manner as described in loi, Proprietor's Capital 
 Account, each partner being credited with his share of 
 the investment and profits, and charged with his with- 
 drawals and proportion of losses, if any. 
 
 104. Partners' Private Accounts. 
 
 These accounts are to be handled individually in a 
 similar manner as described under Proprietor's Private or 
 Drawing account, 102. 
 
 105. Cumulative Dividends— Preferred Stock. 
 Dividends, whether on preferred or common stock, 
 
 are legally payable only out of surplus, and in case of divi- 
 dends being paid out of capital, or in other words, when 
 there is no surplus against which to charge them, the 
 directors become individually liable. 
 
 Debit: with the amount of dividends paid. 
 
 Credit: at closing periods with the amount of the 
 accrued dividends on the issued Cumulative Preferred 
 Stock, charging Surplus account. (This should be done, 
 however, only when authorized by the board of directors). 
 
 86 
 
 ii ' 
 
 CAPITAL OR NET WORTH 
 
 106-107 
 
 Balance of this account is a liability and should rep- 
 resent unpaid dividends which have accrued on the issued 
 Cumulative Preferred Stock. 
 
 106. Dividends — Common Stock. 
 
 When a corporation issues both preferred and com- 
 mon stock, any dividends paid on them should be shown 
 in separate respective accounts. 
 
 Debit: with the amount of dividends paid. 
 
 Credit: at the time a dividend is declared with the 
 total dividend authorized by the board of directors, 
 charging Surplus account. 
 
 Balance of this account is a liability and should rep- 
 resent dividends declared, but unpaid. 
 
 Each dividend should be numbered consecutively and 
 indicated in the particulars column of the ledger. When 
 the stockholders are numerous, a check may be drawn for 
 the total amount of the dividend, charging the proper 
 dividend account, and depositing it in a special bank 
 account against which dividend checks may be drawn in 
 paying the dividends to the stockholders, thus eliminating 
 individual dividend checks from the general books. When 
 treated in this manner, a dividend record should be kept 
 showing in numerical order the checks issued and to 
 whom paid. 
 
 107. Stock Dividend. 
 
 This account represents dividends paid in the com- 
 pany's own stock. 
 
 Debit: at time of issuing stock in payment of divi- 
 dends, crediting the account. Capital Stock Unissued. 
 
 87 
 
 t 
 
 
 
}, i 
 
 io8 
 
 MANUFACTURING COMPANIES 
 
 I' > 
 
 p:J 
 
 Credit: with the amount of stock dividends declared 
 by the board of directors, charging Surplus account. 
 
 1 08. Reserve for Sinking Fund. 
 
 Debit: with the amount of obligations retired, for 
 which the reserve was created, crediting Surplus account. 
 
 Credit: with an amount equal to the cash periodically 
 placed in the sinking fund, charging Profit and Loss 
 accoimt; with an additional amount corresponding to the 
 income received from Sinking Fund Investments, if the 
 first method in 79 is used. 
 
 Balance of this account is a capital liability and rep- 
 resents a portion of the earnings withheld from surplus, 
 and carried on the books as an offset to the account, Sink- 
 ing Fund. It is virtually a part of surplus and will be 
 closed into it upon the liquidation of the indebtedness for 
 which the sinking fund was created. 
 
 A Reserve for Sinking Fund may be created and car- 
 ried as a subdivision of the surplus account without actu- 
 ally setting aside the cash in a Sinking Fund, in which 
 event, the object of this account would be merely to guard 
 against all of the earnings being paid out in dividends. 
 
 The distinction between Sinking Fund, Reserve for 
 Sinking Fund, and Reserve for Depreciation accounts, 
 briefly, is as follows : 
 
 Sinking Fund, as here used, is understood to be an 
 asset representing actual cash invested to meet a future 
 obligation or contingency. 
 
 Reserve for Sinking Fund, as here used, is an off- 
 setting account to the Sinking Fund, and represents a 
 portion of the earnings withheld from surplus. It is 
 
 88 
 
 CAPITAL OR NET WORTH 
 
 109 
 
 virtually a part of surplus and will eventually be closed 
 into it. 
 
 Reserve for Depreciation, when relating to a plant 
 account, represents the amount allowed for the deprecia- 
 tion of the fixed asset to which it relates. Unhke the 
 account. Reserve for Sinking Fund, it is not a part of the 
 Surplus account and is not to be closed into it, unless at a 
 future time the Reserve for Depreciation is found to be 
 more than adequate for the purpose for which it was 
 created, in which event, an adjusting entry may be made, 
 charging the account. Reserve for Depreciation, and 
 crediting Surplus account; however, this reserve will gen- 
 erally be extinguished by charges for renewals and 
 replacements of the thing depreciated. 
 
 109. Reserve for Working Capital. (When stock is 
 donated to the company). 
 
 Working Capital is generally understood to mean the 
 excess of the current assets over the current liabilities of 
 a business. 
 
 The term, "Reserve for Working Capital," is here 
 applied, as relating to the issued capital stock of a cor- 
 poration, donated to the company and carried as Treasury 
 Stock, to be resold for the purpose of providing additional 
 working capital. (For illustrating entries, see 324, 325, 
 326, 330). 
 
 Debit: with the discount on the sale of stock, donated 
 as working capital, when sold at less than par. 
 
 Credit : with the par value of stock donated ; with the 
 premiums on the sale of such stock, when sold at more 
 
 89 
 
no 
 
 MANUFACTURING COMPANIES 
 
 CAPITAL OR NET WORTH 
 
 III 
 
 l> 
 
 * I! 
 
 ' 1 
 
 ''■' i1 
 
 I 
 
 ] 
 
 than par; with the discount on such stock purchased at 
 less than par. 
 
 Balance of this account in this case is virtually a part 
 of Surplus, and although not available for the payment of 
 dividends, may represent the par value of stock donated 
 to be resold for the purpose of raising working capital, 
 or it may represent the proceeds of the sale of such stock 
 or both. 
 
 no. Surplus. 
 
 Debit: with any adjustments made during the cur- 
 rent fiscal period constituting charges which should have 
 been made against profits of prior periods; with the 
 amount of dividends declared by the board of directors, 
 crediting the proper dividend account. 
 
 Credit: at the time of opening books with the amount 
 of undivided profits; with any adjustments made during 
 the current fiscal period constituting credits which should 
 have been made to profits of prior periods ; with the bal- 
 ance transferred from the Profit and Loss account at 
 closing periods, provided, that account shows a gain. 
 (Debit Surplus account, if it shows a loss). 
 
 Balance of this account at closing periods, if a 
 credit, should represent the undivided profits; if the bal- 
 ance is a debit, it is said to represent an impairment or 
 deficit. 
 
 As shown by the illustrations of balance sheets, this 
 account, together with its subdivisions, added to the 
 issued capital stock, represents the net worth of the busi- 
 ness, which is the excess of the assets over the liabilities. 
 
 90 
 
 If the balance of this account is a debit instead of a 
 credit, it should be shown on the balance sheet in the posi- 
 tion of the surplus, but denominated "Impairment,*' and 
 deducted from the amount of the issued capital stock, 
 extending the difference as the net worth ; while if a credit 
 or surplus, it should be added to the capital stock, the 
 total being extended as the net worth. 
 
 III. Profit and Loss. 
 
 This account is also called "Loss and Gain," but the 
 term "Profit and L-oss" is used here for the reason that, 
 in financial statements, profits or revenues are more logi- 
 cally shown before expenses and losses. 
 
 This account is kept for the purpose of assembling 
 at closing periods the revenues and expenses from all 
 sources, the difference between the totals of which con- 
 stitutes the net results for the period. 
 
 Make no entries to this account except at closing periods. 
 Any adjustments of consequence affecting the opera- 
 tions of prior periods should not be made to this account 
 or through any of the operating accounts closing into it, 
 but to the surplus account or individual capital accounts, 
 depending upon whether the business is conducted by a 
 corporation, individual or partnership. Minor adjust- 
 ments belonging to prior periods may be made to the 
 current operating accounts, but never directly to the 
 Profit and Loss account. In other words, operating 
 results should be shown in the period in which they 
 belong, and no entries should be made to the current 
 Profit and Loss account except as coming from the 
 accounts regularly transferred into it at closing periods. 
 
 91 
 
 1 4 
 

 MANUFACTURING COMPANIES 
 
 I'ilp 
 
 Debit: at closing periods (i) with the total of the 
 administrative expense group of accounts; (2) with the 
 total of the selling expense group; (if the commercial 
 expenses are not divided into the two groups, "Adminis- 
 trative" and "Selling," debit with the total commercial 
 expenses) ; (3) with all other expense accounts individu- 
 ally, such as Cash Discounts Allowed Others, Interest on 
 Items Payable, Extinguishment of Patents, etc., crediting 
 the respective expense accounts. 
 
 Note — In a manufacturing business the manufactur- 
 ing expenses should not be closed directly into the Profit 
 and Loss account, but into the account, Work in Process, 
 if a cost system is maintained ; and into the account. Cost 
 of Product Manufactured, if one is not maintained. 
 
 Credit: at closing periods (i) with the Gross Profit 
 from sales, charging Sales account; (2) with the balances 
 of all other revenue accounts individually, charging the 
 respective revenue accounts. 
 
 Balance of this account at closing periods, after 
 transferring amounts to Sinking Fund Reserve account, 
 if any, should be transferred to Surplus account, if a cor- 
 poration. If the business is conducted by an individual 
 or partnership, the balance is generally transferred 
 directly to the respective capital accounts of the owners; 
 however, it may be transferred to an Undivided Profits 
 account if it is desired that such an account be carried. 
 
 92 
 
 PROFIT AND LOSS REVENUES 
 MANUFACTURING COMPANIES 
 
 112. Sales — Finished Product. 
 
 This account should be subdivided to meet the 
 requirements in each case. For example, where several 
 models of machiner}'^ are manufactured, a separate sales 
 account may be kept for each. 
 
 Debit: at the close of each month with the total of 
 merchandise returned by customers at selling price, and 
 with allowances as shown by the Credit Memorandum 
 Summary, crediting Accounts Receivable Controlling 
 account; at closing periods with the balance transferred 
 from the account. Cost of Sales. 
 
 Credit: at the close of each month with the total sales 
 for the month shown by the Sales Summary, charging 
 Accounts Receivable Controlling account and Cash Sales 
 account, for their respective amounts. 
 
 Balance of this account, after making the above 
 entries at closing periods, should represent the gross profit 
 on sales to be transferred to the Profit and Loss account. 
 
 Note — Instead of closing the cost of sales into the 
 Sales account, a "Trading Account," as below described, 
 may be carried, closing into it the net sales and cost of 
 sales; or when no cost system is maintained, the "Trad- 
 ing Account" may take the place of the Cost of Sales 
 
 93 
 
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 ttHBI 
 
 V. 
 
 
 1 
 
 "3 
 
 MANUFACTURING COMPANIES 
 
 account (see 129-260). The balance of the "Trading 
 Account," showing the gross profit on sales, is closed into 
 the Profit and Loss account, but the Sales account by 
 closing the cost of sales into it, as described in 112 and 
 258, shows the gross profit on sales to be transferred to 
 Profit and Loss, thus making the Trading Account un- 
 necessary. 
 
 1 13. Trading Account. 
 
 This account, when used, is a subdivision of the Profit 
 and Loss account and is carried at closing periods for the 
 purpose of showing the details of arriving at the gross 
 profit on sales, when no perpetual inventory is kept. 
 When a trading account is not kept, the functions of this 
 account are taken care of in the two accounts, Sales and 
 Cost of Sales. (See 112 and 129). 
 
 (a) Trading account for a manufacturing business. 
 Debit: at closing periods with the inventory of 
 
 finished product at the beginning of the period ; with the 
 cost of product manufactured during the period. 
 
 Credit: at closing periods with the net sales for the 
 period; with the inventory of finished product at the close 
 of the period. 
 
 Balance of this account should represent the gross 
 profit on sales and be transferred to Profit and Loss 
 account. 
 
 (b) Trading account for a mercantile business. 
 Debit: at closing periods with the inventory of 
 
 merchandise at the beginning of the period ; with the cost 
 of merchandise purchased, including transportation 
 charges inward. 
 
 94 
 
 PROFIT AND LOSS REVENUES 
 
 II4-II6 
 
 Credit: at closing periods with the net sales for the 
 period; with the inventory of merchandise at the close 
 of the period. 
 
 Balance of this account should represent the gross 
 profit on sales and be transferred to Profit and Loss 
 account. 
 
 114. Sales — Semi-Finished Product. 
 
 This account should include the sale of parts and 
 repairs on which manufacturing operations have been per- 
 formed, and may be subdivided according to the require- 
 ments in each case. 
 
 It should be treated in a similar manner as described 
 in 112. 
 
 115. Sales — Manufacturing Material. 
 
 This account should include the sale of material on 
 which no manufacturing operations have been performed, 
 and should be treated in a similar manner as described in 
 112. 
 
 116. Sales of Scrap. 
 
 This account, as the term implies, represents the sale 
 of scrap material. 
 
 Credit: at the close of each month with the total sales 
 of scrap as shown by the Sales Summary, charging 
 Accounts Receivable Controlling account and Cash Sales 
 account for their respective amounts. 
 
 Balance of this account at closing periods may be 
 transferred to Profit and Loss account or to the credit of 
 the manufacturing account affected. (See 185). 
 
 95 
 
II7-II8 
 
 MANUFACTURING COMPANIES 
 
 r '• 
 
 
 117. Sales — Miscellaneous. 
 
 Credit: with sales of miscellaneous items, such as 
 barrels, boxes, etc., shown by the Sales Summary. 
 
 Balance of this account at closing periods should be 
 transferred to the Profit and Loss account. 
 
 118. Cash Sales. 
 
 This account is not to be understood as being a 
 revenue account, but is kept in the manner about to be 
 described, with the object of providing a thorough check 
 on cash sales. 
 
 In a business where the cash sales are few in num- 
 ber, they should be treated in a similar manner as charge 
 sales by making an invoice for each cash sale, which 
 should be marked "Cash Sale," summarized and dis- 
 tributed with the charge sales, only instead of posting 
 each cash sale to the ledger, these invoices are entered 
 in a column headed "Cash Sales," and the charge invoices 
 in a column headed "Charge Customers," the former to 
 be posted only in total at the end of the month to the 
 debit of the account. Cash Sales in the general ledger, 
 which, if all cash sales have been accounted for, should 
 balance with the total cash credits posted from the cash 
 received records. 
 
 In a retail business where the cash sales are numer- 
 ous, they should be summarized and distributed according 
 to departments and the total cash sales for the day entered 
 in one amount in the cash book. 
 
 Debit: at the close of each month with the total of the 
 column headed, "Cash Sales," of the Sales Summary; with 
 cash refunds of cash sales, crediting Cash. 
 
 96 
 
 m 
 
 PROFIT AND LOSS REVENUES II9-I2O 
 
 Credit: at the close of each month with the total of 
 the column headed "Cash Sales" of the Cash Received 
 Records; with the total cash sales returned as shown by 
 the Credit Memorandum Summary. 
 
 119. Revenues — Branches. 
 
 The details of keeping the accounts with branch 
 houses depend upon the conditions in each specific case, 
 but it is suggested that, generally, a controlling account 
 with each branch be carried in the general ledger, and a 
 subsidiary or branch ledger be kept containing certain 
 accounts with each branch, such as Cash, Notes and 
 Accounts Receivable with Reserves, Fixed Assets and 
 Reserves, Notes and Accounts Payable, Revenues, Ex- 
 penses, Profit and Loss and Net Investment. If the 
 branches are few in number, these accounts may be car- 
 ried in a section of the general ledger, set off by an index 
 tab marked "Branch Ledger." The various branches 
 should prepare daily reports in dupHcate, the original to 
 be sent to the main office, to be summarized and totals 
 posted at the close of each month ; the duplicate to remain 
 at the branch office for posting details. 
 
 120. Rents Earned. 
 
 This account, as here used, is intended to include 
 only rents earned on properties owned which are foreign 
 to the business. 
 
 When a portion of the property owned by the com- 
 pany for conducting its business is rented to others, the 
 revenue from that source constitutes a credit to the 
 expense group to which such rents would be chargeable 
 
 97 
 
III 
 
 ll ) 
 
 I2I-I22 
 
 MANUFACTURING COMPANIES 
 
 when rented from others. When a portion of the prop- 
 erty rented from others, is sublet, the revenue from that 
 source constitutes a credit to the proper rental expense 
 
 account. 
 
 Debit: with expenses incurred on property rented to 
 
 others. 
 
 Credit: at the close of each month with the amount 
 applicable to the month, charging Accounts Receivable. 
 
 Balance of this account at closing periods should be 
 transferred to Profit and Loss account. 
 
 121. Cash Discounts Earned. 
 
 Credit: with discounts earned by reason of paying 
 bills within a certain specified time. (This account should 
 not be credited with trade discount). 
 
 Balance of this account at closing periods should be 
 tranferred to Profit and Loss account. 
 
 122. Interest Earned. 
 
 This account should include interest earned on items 
 receivable, such as notes or open accounts drawing inter- 
 est. It may be subdivided to meet the requirements in 
 each case, as Interest Earned on Notes Receivable, Inter- 
 est Earned on Bonds or Other Investments, and kept 
 according to one of the three following methods : 
 
 (i) Credit: at the close of each month with the 
 interest applicable to the month whether paid or not, 
 charging the account. Accrued Interest— Items Receiv- 
 able, When not paid in advance. (When this interest is 
 paid in advance, the above charge should be made to the 
 account of that title). 
 
 98 
 
 PROFIT AND LOSS RENTCNUES 
 
 122 
 
 Note — In this case the interest, when actually paid, 
 should be credited to the accrued or prepaid account as 
 the case may be. 
 
 Balance of this account at closing periods should be 
 transferred to Profit and Loss account. 
 
 (2) Debit: at closing periods with the amount of 
 accrued interest on items receivable at the beginning of 
 the period being closed, crediting the account, Accrued 
 Interest — Items Receivable, if not paid in advance; with 
 the amount of interest paid in advance at the close of the 
 period, if any, crediting the account. Interest Paid in 
 Advance on Items Receivable. 
 
 Credit : with interest received ; at closing periods with 
 the amount of accrued interest at that time, charging the 
 account, Accrued Interest — Items Receivable, if not paid 
 in advance; with the amount of interest paid in advance 
 at the beginning of the period being closed, if any, credit- 
 ing the account, Interest Paid in Advance on Items 
 Receivable. 
 
 Balance of this account at closing periods, after mak- 
 ing the above entries, should be transferred to Profit and 
 Loss account. 
 
 (3) Debit: at the time of opening books with the 
 amount of accrued interest on items receivable unpaid; 
 at closing periods with the net amount of this account 
 after adding the accrued interest unpaid at that time to 
 the credit side, and the prepaid amount to the debit side 
 of the account, crediting the Profit and Loss account. 
 
 Credit: at the time of opening books with the amount 
 of interest paid in advance on items receivable ; with inter- 
 est received. 
 
 99 
 
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 123 
 
 MANUFACTURING COMPANIES 
 
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 Balance. At closing periods, after making the above 
 entries, the accrued amount unpaid is a current asset and 
 should be brought down as a debit; the prepaid amount 
 is a current liability and should be brought down as a 
 credit. 
 
 123. Miscellaneous Earnings. 
 
 This account should include miscellaneous revenues 
 not provided for in other revenue accounts. 
 
 Credit: at the close of each month with miscellaneous 
 
 earnings. 
 
 Balance of this account at closing periods should be 
 
 transferred to Profit and Loss account. 
 
 PROFIT AND LOSS COSTS 
 MANUFACTURING COMPANIES 
 
 124. Manufacturing Material Purchases. 
 
 This account may be kept according to one of the 
 two following methods when a cost system, and accord- 
 ingly a general stores system is not maintained, and as 
 here used is understood to include all material purchased 
 for manufacturing purposes, whether in a raw or semi- 
 finished state. 
 
 (i) Debit: with all manufacturing material pur- 
 chased, including freight and cartage inward on same (see 
 188 — Incoming Transportation Charges Undistributed) ; 
 at closing periods with the inventory of purchased 
 material at the beginning of the period being closed, 
 crediting the account. Inventory — Manufacturing Ma- 
 terial 
 
 Credit: with the cost of manufacturing material 
 returned to those from whom purchased; with the inven- 
 tory at the close of the period, charging the account, 
 Inventory — Manufacturing Material. 
 
 Balance of this account, after making the above 
 entries, should represent the cost of material used in 
 manufacturing, and should be transferred to the account, 
 Cost of Product Manufactured. 
 
 100 
 
 lOI 
 
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 125 
 
 MANUFACTURING COMPANIES 
 
 PROFIT AND LOSS COSTS 
 
 126 
 
 (2) Debit: at the time of opening the books with 
 the amount of Manufacturing Material- on hand; with all 
 purchases including Incoming Transportation Charges on 
 same. 
 
 Credit: with the cost of Manufacturing Material 
 returned; at closing periods with the balance of the 
 account less the inventory at that time, charging the 
 account. Cost of Product Manufactured. 
 
 Balance of this account, after making the above 
 entries, is a current asset and should represent the amount 
 of Manufacturing Material on hand. 
 
 Note — When a cost system is maintained, purchases 
 of manufacturing material should be charged to General 
 Stores account, to be issued on requisition as required, 
 and charged to the account. Work in Process, the proper 
 Stores account being credited as explained in 44. 
 
 125. Direct Labor. 
 
 (a) When a cost system is not maintained. 
 
 This account should include only such charges for 
 labor as would be charged directly to job or process num- 
 bers, if a cost system were maintained. All other labor 
 charges, such as salaries of superintendents, foremen, 
 engineers, firemen, watchmen, truckers, cleaners, etc., 
 constitute indirect labor and should be charged to the 
 proper accounts in the manufacturing expense group. 
 
 Debit: at the close of each month with the total 
 amount of direct labor, crediting Accrued Wages account. 
 
 Balance of this account should represent the cost of 
 labor charged directly to manufacturing operations, and 
 
 102 
 
 at closing periods should be closed into the account, Cost 
 of Product Manufactured. 
 
 (b) When a cost system is maintained. 
 
 This account may be omitted when a cost system 
 is maintained, for the reason that all direct labor at the 
 close of each month or pay period is charged from the 
 distribution of the pay roll to the account, Work in 
 Process, as explained in 47. 
 
 126. Manufacturing Expenses (Overhead or bur- 
 den). 
 
 This is a general term embracing all expenses in- 
 cidental to manufacturing operations, such as indirect 
 labor, heat light and power, maintenance of plant, rent, 
 taxes, insurance, depreciation and such other expense 
 accounts as are related to the production of the product. 
 
 This account is kept for the purpose of assembling 
 all accounts in the manufacturing expense group, either 
 monthly or at closing periods, the balance of which is 
 to be transferred to the account. Undistributed Manu- 
 facturing Overhead or Cost of Product Manufactured, 
 depending upon whether or not a cost system is main- 
 tained. 
 
 (a) When a cost system is maintained. 
 
 Debit: at closing periods with the sum of the bal- 
 ances of the accounts of the manufacturing expense 
 group, crediting the individual expense accounts. 
 
 Credit: at the close of each month with an amount 
 equal to the sum of the month's charges to the accounts 
 of the manufacturing expense group, charging the ac- 
 count, Undistributed Manufacturing Overhead. 
 
 103 
 
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 127 
 
 MANUFACTURING COMPANIES 
 
 Balance of this account prior to closing periods 
 should agree with the sum of the balances of the accounts 
 of the manufacturing expense group. At closing periods, 
 after the above debit entry is posted, this account should 
 balance. 
 
 (b) When a cost system is not maintained. 
 
 Debit: at closing periods with the sum of the bal- 
 ances of the accounts in the manufacturing expense 
 group, crediting the individual expense accounts. 
 
 Balance of this account at closing periods represents 
 the overhead or burden and should be closed into the ac- 
 count, Cost of Product Manufactured. 
 
 127. Cost of Product Manufactured (When a cost 
 system is not maintained). 
 
 This account may be kept according to one of the 
 two following methods: 
 
 (i) Debit: at closing periods with the cost of direct 
 labor, crediting the account, Direct Labor; with the cost 
 of manufacturing material used, crediting the account, 
 Manufacturing Material Purchases; with the total manu- 
 facturing overhead expenses, crediting the account. Man- 
 ufacturing Expenses; with the inventory of work in pro- 
 cess at the beginning of the period, crediting the account, 
 Inventory of Work in Process. 
 
 Credit: at closing periods with the inventory of 
 work in process at that time, charging the account. In- 
 ventory of Work in Process. 
 
 Balance of this account at closing periods should 
 represent the cost of goods manufactured during the 
 period, and be transferred to the account. Cost of Sales. 
 
 104 
 
 PROFIT AND LOSS COSTS 
 
 128-129 
 
 (2) Debit: at the time of opening the books with 
 the cost of manufactured product on hand; at closing 
 periods with the cost of direct labor, crediting the ac- 
 count. Direct Labor; with the cost of manufacturing 
 material used, crediting the account, Manufacturing Ma- 
 terial Purchases ; with the total of the overhead expenses, 
 crediting the account, Manufacturing Expenses. 
 
 Credit: at closing periods with the balance of the 
 account less the inventory at that time, charging the 
 account, Cost of Sales. 
 
 Balance of this account, after making the above en- 
 tries, is a current asset and should represent the cost of 
 work in process on hand. 
 
 128. Consigned Merchandise. 
 
 This account is to be kept when no cost system is 
 maintained. 
 
 Debit: with the cost of consignments returned, 
 crediting Consignments to Others; with the cost of pro- 
 duct sold at the time sales are reported, crediting the 
 account, Consignments to Others. 
 
 Credit: with the cost of merchandise consigned to 
 others to be sold on our account and risk, charging the 
 account Consignments to Others. 
 
 Balance of this account at closing periods is to be 
 transferred to the account. Cost of Sales. 
 
 129. Cost of Sales. 
 
 (a) W^hen a cost system is maintained. 
 
 Debit: at the close of each month with the total cost 
 
 105 • 
 
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 129 
 
 MANUFACTURING COMPANIES 
 
 of sales for the month, crediting the proper inventory 
 
 account. 
 
 Credit: at the close of each month with the total 
 cost of merchandise returned by customers during the 
 month, as shown by the Credit Memorandum Summary, 
 charging the accounts, Reserve for Depreciation of Man- 
 ufacturing Material, Replacements of Merchandise 
 Gratis, or the proper inventory account, for their respec- 
 tive proportions. 
 
 Balance of this account should represent the net cost 
 of sales and at closing periods should be transferred to 
 
 Sales account. 
 
 (b) When a cost system is not maintained. 
 
 This account may be kept according to one of the 
 two following methods : 
 
 (i) Debit: at closing periods with the balance 
 transferred from the account, Cost of Product Manu- 
 factured; with the inventory of finished product at the 
 beginning of the period, crediting the account, Inventory 
 of Finished Product; with the balance transferred from 
 the account. Consigned Merchandise, if a debit balance. 
 
 Credit: at closing periods with the inventory of Fin- 
 ished Product at that time, charging that account; with 
 the balance transferred from the account. Consigned 
 Merchandise, if a credit balance. 
 
 Balance of this account at closing periods should 
 represent the cost of merchandise sold during the period 
 and should be transferred to Sales account. 
 
 (2) Debit: at the time of opening books with the 
 cost of finished product on hand; at closing periods with 
 the balance transferred from the account. Cost of Product 
 
 106 
 
 PROFIT AND LOSS COSTS 
 
 130 
 
 Manufactured; with the balance transferred from the 
 account, Consigned Merchandise, if a debit balance. 
 
 Credit: at closing periods with the balance trans- 
 ferred from the account, Consigned Merchandise, if a 
 credit balance; with the balance of this account (Cost of 
 Sales) less the inventory of finished product at that time, 
 charging Sales account. 
 
 Balance of this account, after making the above 
 entries, is a current asset and should represent the 
 amount of finished product on hand. 
 
 130. Administrative Expenses. 
 
 This is a general term embracing all expenses ap- 
 plicable to the administrative end of the business, such 
 as salaries of executive officers, office employees, main 
 office expenses, office rent, stationery, printing and office 
 supplies, directors' fees, postage, telephone and telegraph, 
 corporation taxes, legal expenses, depreciation of office 
 equipment, etc. 
 
 This account is kept for the purpose of assembling all 
 accounts in the Administrative Expense group, either 
 monthly or at closing periods, depending upon the re- 
 quirements in each case. 
 
 Debit: at closing periods with the sum of the bal- 
 ances of all expense accounts classified as administrative 
 expenses, crediting the individual expense accounts. 
 
 Credit: at the close of each month or at closing 
 periods, depending upon whether or not monthly Profit 
 and Loss Statements are prepared, with the proportion of 
 expenses applicable to other departments. 
 
 107 
 

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 131-133 
 
 MANUFACTURING COMPANIES 
 
 Balance of this account at closing periods should be 
 transferred to Profit and Loss account. 
 
 131. Selling Expenses. 
 
 This is a general term embracing all expenses appli- 
 cable to the selling end of the business, such as salaries 
 of traveling salesmen, commissions, traveling expenses, 
 advertising, etc., and should be treated in a similar man- 
 ner as described in 130. 
 
 132. Cash Discounts Allowed Others. 
 
 This account should include cash discounts taken by 
 customers on sales, but should not include trade dis- 
 counts. 
 
 Debit: at close of each month with the total dis- 
 counts allowed customers on bills paid by them within 
 a specified time. 
 
 Balance at closing periods to be transferred to Profit 
 and Loss account. 
 
 133. Interest on Items Payable. 
 
 This account may be treated according to one of the 
 three following methods: 
 
 (i) Debit: at close of each month with the amount 
 of interest accrued for the month on interest bearing 
 items payable, crediting the account. Accrued Interest- 
 Items Payable, if not paid in advance, or the account, 
 Prepaid Interest— Items Payable, if paid in advance. 
 
 Note— In this case the interest, when actually paid, 
 should be charged to the accrued or prepaid account as 
 the case may be. 
 
 108 
 
 PROFIT AND LOSS COSTS 
 
 133 
 
 Balance of this account at closing periods should 
 represent the actual interest cost for the period and 
 should be transferred to Profit and Loss account. 
 
 (2) Debit: with all interest paid in cash or other- 
 wise ; at closing periods with the amount of accrued inter- 
 est on items payable, at that time crediting the account, 
 Accrued Interest — Items Payable, if not paid in ad- 
 vance; with the amount of the prepaid interest at the 
 beginning of the period being closed, crediting the ac- 
 count. Prepaid Interest, if paid in advance. 
 
 Credit: at closing periods with the amount of 
 accrued interest on items payable at the beginning of 
 the period, charging the account, Accrued Interest — 
 Items Payable, if not paid in advance; with the amount 
 of the prepaid interest at that time, charging the account, 
 Prepaid Interest, if paid in advance. 
 
 Balance of this account at closing periods, after mak- 
 ing the above entries should represent the actual inter- 
 est cost for the period and should be transferred to Profit 
 and Loss account. 
 
 (3) Debit: at the time of opening the books with 
 the amount of interest paid in advance on items payable; 
 with interest paid during the period. 
 
 Credit: at the time of opening the books with the 
 amount of accrued interest unpaid on items payable; at 
 closing periods with the net amount of this account, after 
 adding the amount of the accrued interest unpaid at that 
 time to the debit side, and the amount of the prepaid 
 interest to the credit side of the account, charging Profit 
 and Loss. 
 
 109 
 
 
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 134-135 
 
 MANUFACTURING COMPANIES 
 
 Balance. At closing periods, after making the above 
 entries, the accrued amount unpaid is a current liability 
 and should be brought down as a credit; the prepaid 
 amount is a deferred charge to operation and should be 
 brought down as a debit. 
 
 134. Extinguishment of Patents. 
 
 Debit: at the close of each month, if profit and loss 
 statements are prepared monthly, otherwise at closing 
 periods, with such a proportionate amount as will charge 
 off the account of patents at their expiration, crediting 
 the account. Patents. 
 
 Balance of this account at closing periods should 
 represent the amount charged off of Patents account, 
 and should be transferred to Profit and Loss account. 
 
 135. Extinguishment of Organization Expense. 
 The account. Organization Expense, should be 
 
 charged off over a certain period of time, and treated in 
 a similar manner as described in 134, Extinguishment of 
 Patents. (See 83). 
 
 110 
 
 MANUFACTURING EXPENSES 
 
 136. The accounts in this group, which are in- 
 tended to include only those expenses relating to the 
 operation of the factory, collectively constitute what is 
 termed "Manufacturing Overhead or Burden." 
 
 These individual accounts at closing periods are to 
 be closed into the account, Manufacturing Expenses. 
 Other entries relating to them are described under each 
 account heading as follows: 
 
 137. Salaries of Superintendents and Foremen. 
 Debit: at the close of each month or pay period with 
 
 the salaries of superintendents and foremen whose time 
 is exclusively devoted to supervision, also with the 
 proper portion of the time of sub-foremen devoting only 
 a part of their time to supervision, crediting the account, 
 Accrued Pay Rolls, as referred to in 88. 
 
 138. Salaries of Designers and Draftsmen. 
 Debit: at the close of each month or pay period with 
 
 salaries of designers and draftsmen, crediting the account, 
 Accrued Pay Rolls. 
 
 Credit: with the cost of all drawings which are to 
 be carried as assets, charging the account, Drawings, as 
 
 III 
 
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 MANUFACTURING COMPANIES 
 
 MANUFACTURING EXPENSES 
 
 142-144 
 
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 referred to in 73; with the cost of all drawings to be 
 charged to customers. 
 
 Note— Draftsmen's daily time records should show 
 the time spent on each order or drawing number, so that 
 the cost of any particular drawing may be readily de- 
 termined if desired. 
 
 139. Salaries of Factory Accounting Employees. 
 Debit: at the close of each month or pay period with 
 
 the salaries of time clerks, paymasters, cost clerks and 
 purchasing department employees, crediting the account, 
 Accrued Pay Rolls. 
 
 140. Salaries of Storekeepers. 
 
 Debit: at the close of each month or pay period with 
 the salaries of storekeepers and their assistants, credit- 
 ing the account, Accrued Pay Rolls. 
 
 141. Wages of Pattern Makers. 
 
 (a) When a cost system is not maintamed. 
 
 Debit: at the close of each month or pay period with 
 the wages of pattern makers, crediting the account. Ac- 
 crued Pay Rolls. 
 
 Credit: with the cost of all patterns which are 
 carried as assets, charging the account. Patterns; with 
 the cost of all patterns to be charged to customers. 
 
 Note— Pattern makers' daily time records should 
 show the time spent on each order or pattern number, 
 so that the cost of any particular pattern may be readily 
 ascertanied if desired. 
 
 112 
 
 (b) When a cost system is maintained, pattern 
 makers* time is usually charged to production, construc- 
 tion or repair orders. 
 
 142. Wages — ^Tool Makers. 
 
 (a) When a cost system is not maintained. 
 Debit: at the close of each month or pay period with 
 
 the wages of tool makers, crediting the account, Accrued 
 
 Pay Rolls. 
 
 Credit: with the cost of all tools which are to be 
 carried as assets, charging the proper tool account; with 
 the cost of tools to be charged to customers. 
 
 Note — Tool makers' daily time records should show 
 the time spent on each order or tool number, so that the 
 cost of any particular tool may be readily ascertained 
 if desired. 
 
 (b) W^hen a cost system is maintained, tool makers' 
 time is usually charged to production, construction or 
 repair orders. 
 
 143. Wages — Inspectors. 
 
 Debit: at the close of each month or pay period with 
 the wages of inspectors and testers, crediting the account. 
 Accrued Pay Rolls. 
 
 144. Wages — Carpenters, Painters and Millwrights. 
 Debit: at the close of each month or pay period with 
 
 wages of carpenters, painters and millwrights, whose time 
 is not chargeable to production, construction or repair 
 orders, crediting the account. Accrued Pay Rolls. 
 
 113 
 
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 145-148 
 
 MANUFACTURING COMPANIES 
 
 1 45. Wages— Truckers. 
 
 Debit: at the close of each month or pay period with 
 the wages of men when employed in the transportation 
 of material throughout the plant, crediting the account, 
 Accrued Pay Rolls. 
 
 146. Wages — Sweepers and Cleaners. 
 
 Debit: at the close of each month or pay period with 
 the wages of persons when employed in the general 
 sweeping and cleaning of the plant, crediting the account, 
 Accrued Pay Rolls. 
 
 147. Miscellaneous Indirect Labor. 
 
 Debit: with all indirect labor not properly chargeable 
 to any other labor account, crediting the account. Accrued 
 Pay Rolls. For example, sweepers, cleaners, handlers 
 and truckers are chargeable to this account when no 
 regular account for any one of them is provided in the 
 chart of accounts. 
 
 148. Heat, Light and Power— Labor. 
 
 Debit: at the close of each month or pay period with 
 the wages of engineers, firemen, oilers, etc., crediting the 
 account. Accrued Pay Rolls. 
 
 Note—When a portion of the heat, light and power 
 expense is to be charged to other than manufacturing 
 departments, the balance in this account at closing periods 
 should be transferred to the account, Heat, Light and 
 Power — Proportion. 
 
 114 
 
 MANUFACTURING EXPENSES 
 
 149 
 
 149. Heat, Light and Power — Fuel. 
 
 This account may be treated according to one of 
 the three following methods: 
 
 (i) Debit: at the close of each month with the cost 
 of fuel used during the month, crediting the account, 
 Prepaid Fuel, or the proper stores account if purchases 
 are charged to stores. 
 
 Balance of this account at closing periods should 
 represent the cost of fuel used and should be closed into 
 the account. Manufacturing Expenses. 
 
 Note — In other accounts referring to this account 
 as to the general manner of treatment, the balance in 
 each case should be closed to the group in which the 
 account is classified. 
 
 (2) Debit: with all purchases of fuel, crediting 
 Vouchers or Accounts Payable as the case may be; at 
 closing periods with the inventory of fuel at the begin- 
 ning of the period being closed, crediting the account, 
 Prepaid Expenses. 
 
 Credit: with all returns and allowances; at closing 
 periods with the inventory of fuel at that time, charging 
 the account. Prepaid Expenses. (See 52). 
 
 Balance of this account at closing periods should 
 represent the cost of fuel used and should be closed into 
 the account, Manufacturing Expenses. 
 
 (3) Debit: at the time of opening the books with 
 the cost of fuel on hand; with all subsequent purchases, 
 crediting Vouchers or Accounts Payable as the case may 
 be. 
 
 Credit: with all returns and allowances; at closing 
 periods with the net amount of this account, after add- 
 
 115 
 
I50I53 
 
 MANUFACTURING COMPANIES 
 
 I' ' 
 
 » * 
 
 •« 1. 
 
 I 
 
 I 
 
 ing the inventory at that time to the credit side of the 
 account, charging the account, Manufacturing Expenses. 
 
 (See note above). 
 
 Balance of this account at closing periods, after mak- 
 ing the above entries, is a deferred charge to operation 
 and should represent the amount of fuel on hand. (See 
 note in 148). 
 
 150. Heat, Light and Power— Electric Current. 
 This account should show the cost of electric current 
 
 purchased from other power plants, and be treated in 
 a similar manner as described in 177. (See note in 148). 
 
 151. Heat, Light and Power— Gas. 
 
 This account should show the cost of gas purchased 
 and be treated in a similar manner as described in 177. 
 (See note in 148). 
 
 152. Heat, Light and Power Supplies. 
 
 This account should show the cost of miscellaneous 
 heat, light and power supplies used and be treated in a 
 similar manner as described in 149. (See note in 148). 
 
 153. Heat, Light and Power— Proportion. 
 
 This account is to be kept only when a portion of 
 the heat, light and power expense is to be charged to 
 other than manufacturing departments. 
 
 Debit: at closing periods in one amount with the 
 total of the balances shown by the individual accounts 
 relating to heat, hght and power costs, crediting these 
 individual accounts. 
 
 116 
 
 MANUFACTURING EXPENSES 
 
 154 
 
 Credit: at the close of each month, when monthly 
 profit and loss statements are prepared, '.otherwise at 
 fiscal closing periods, with the proportion to be charged 
 to other than manufacturing departments. 
 
 Balance of this account, after making the above 
 entries, should represent the total heat, light and power 
 expense applicable to manufacturing departments. 
 
 154. Repair or Maintenance Accounts. 
 
 The maintenance cost of each fixed asset account 
 should be kept in a separate relative account; for ex- 
 ample, all repairs to Machinery and Machine Tools 
 should be charged to the account. Repairs to Machinery 
 and Machine Tools. All current repairs should be 
 charged to the proper repair account, but replacements 
 of importance may be charged to the fixed asset account, 
 when the article replaced is credited to the fixed asset 
 account and charged to the proper reserve account. For 
 illustration, a new machine purchased to replace one 
 previously charged to the fixed asset account, Machinery, 
 should be charged to the account. Machinery, which ac- 
 count should be credited with the cost of the article 
 replaced, charging the relative reserve account. In other 
 words, the fixed asset account should be charged with 
 the cost of the article purchased and credited with the 
 cost value of the article replaced. It is often difficult to 
 distinguish between a repair and a replacement, but to 
 be conservative all parts of machinery replaced should 
 be generally charged as repairs to operating expense, 
 using the fixed asset account and reserve only when ex- 
 traordinary replacements are made. 
 
 117 
 
 II 
 
 i 
 
;i) . 
 
 I. 
 
 I 
 
 155-156 
 
 MANUFACTURING COMPANIES 
 
 MANUFACTURING EXPENSES 
 
 157-160 
 
 In addition to providing for the depreciation of wast- 
 ing fixed assets due to wear and tear and obsolescence by 
 a reserve charge against manufacturing operations, as 
 a general rule all plant repair and maintenance expenses 
 are also charged to operating expenses during the period 
 in which such expenditures actually take place ; however, 
 in order to show a more uniform monthly maintenance 
 cost, separate reserve accounts for repairs and mainte- 
 nance may be carried, into which to close the repair ac- 
 counts; or the general reserve charge may be at such 
 a rate as to cover both maintenance cost and deprecia- 
 tion, according to the general understanding of the term. 
 Although, to be conservative, the author suggests 
 the adoption of the first method in most cases, the one 
 to be selected should depend entirely upon the general 
 policy of the business and the conditions in each specific 
 case. But even in cases where current repairs are 
 charged against the reserve accounts, it is suggested that 
 individual repair accounts be kept corresponding to each 
 plant account, to be closed into the reserve accounts to 
 which they relate, in order to facilitate the establishment 
 of an average yearly rate for creating the reserve for 
 repairs and maintenance. 
 
 155. Repairs to Grounds. 
 
 Debit: with the cost of repairs, as referred to in 
 154, to walks, roadways, wells, fences, underground pip- 
 ing, etc. 
 
 156. Repairs to Buildings and Building Fixtures. 
 Debit: with the cost of repairs, as referred to in 154, 
 
 118 
 
 to all buildings and appurtenances thereto, embracing 
 such items as electric wiring, gas and electric fixtures, 
 plumbing, heating apparatus, etc. 
 
 157. Repairs to Power Plant. 
 
 Debit: with the cost of repairs, as referred to in 
 154, to boilers, engines, dynamos, motors, and other 
 items classified as a part of the power plant. 
 
 158. Repairs to Machinery and Machine Tools. 
 Debit: with the cost of repairs, as referred to in 
 
 154, to the general machinery of the plant, such as lathes, 
 power presses, drill presses, grinders, etc., together with 
 machine tools, line shafting, hangers, belting, chain hoists, 
 pulleys, etc. If no account is carried with Power Plant, 
 its repairs should be charged to this account. 
 
 159. Repairs to Factory Fixtures. 
 
 Debit: with the cost of repairs, as referred to in 154, 
 to benches, cupboards, chairs, desks, lockers, partitions, 
 tool racks, shop trucks, and such other items classified as 
 factory fixtures located in the factory. 
 
 160. Repairs and Replacements— Perishable Tools. 
 This account should include the cost of repairs and 
 
 replacements of wrenches, pliers, hammers, gongs, flasks, 
 crucibles, files, twist drills, and such other similar items 
 of short life classified as Perishable Tools, and should be 
 handled according to one of the three following methods : 
 (i) Debit: at the close of each month with the 
 estimated cost of tools used, crediting the account, Per- 
 ishable Tools; with the cost of repairs. (See 70). 
 
 119 
 
"II 
 
 If 
 
 i6i 
 
 MANUFACTURING COMPANIES 
 
 Balance of this account at closing periods should 
 represent the cost of repairs and replacements of per- 
 ishable tools and be closed into the account, Manufac- 
 turing Expenses. 
 
 (2) Debit: with all purchases of tools if no cost 
 system is maintained; with tools delivered from stores, 
 if one is maintained; with the cost of repairs; at closing 
 periods with the valuation of tools on hand in use at the 
 beginning of the period being closed, crediting the ac- 
 count, Perishable Tools. 
 
 Credit: with all returns and allowances; at closing 
 periods with the inventory of tools at that time, charging 
 the account, Perishable Tools. (See 70). 
 
 Balance of this account at closing periods should 
 represent the cost of repairs and replacements of perish- 
 able tools and be closed into the account. Manufacturing 
 Expenses. 
 
 (3) Debit: at the time of opening the books with 
 the valuation of perishable tools on hand in use; with 
 all subsequent purchases. 
 
 Credit: with all returns and allowances; at closing 
 periods with the net amount of this account after add- 
 ing the inventory at that time to the credit side of the 
 account, charging the account. Manufacturing Expenses. 
 
 Balance of this account at closing periods, after mak- 
 ing the above entries, is a fixed asset and should represent 
 the valuation of perishable tools on hand. 
 
 161. Repairs to Patterns. 
 Debit: with the cost of all repairs and ch 
 patterns. 
 
 anges to 
 
 120 
 
 MANUFACTURING EXPENSES 
 
 162-166 
 
 162. Repairs to Factory Office Furniture and Fix- 
 tures. 
 
 Debit: with the cost of repairs, as referred to in 
 
 154, to office furniture and fixtures located in the factory 
 office, such as desks, chairs, typewriters, adding machines, 
 etc. 
 
 163. Wages — Drivers. 
 
 Debit: at the close of each month or pay period with 
 the wages of drivers, crediting the account, Accrued Pay 
 Rolls. 
 
 Note — When a portion of this expense is to be 
 charged to other departments, the balance of this account 
 at closing periods should be transferred to the account, 
 Stable Expenses — Proportion. 
 
 i'64. Stable Supplies and Expense. 
 
 This account should show the cost of whips, blankets, 
 small stable tools, shoeing, veterinary services, etc., and 
 be treated in a similar manner as described in 149. (See 
 note in 163). 
 
 165. Feed and Bedding. 
 
 This account should show the cost of horse feed and 
 bedding and be treated in a similar manner as described 
 in 149. (See note in 163). 
 
 166. Repairs to Stable Equipment. 
 
 Debit: with the cost of repairs, as referred to in 154, 
 to harnesses and wagons. (See note in 163). 
 
 121 
 
 I 
 
 \\ 
 ( 
 
 ! 
 
III! 
 
 '§ 
 
 t'\ 
 
 ■I 
 
 'i 
 
 
 
 I 
 
 167-168 MANUFACTURING COMPANIES 
 
 167. Depreciation— Stable Equipment (Reserve 
 
 Charge). 
 
 Debit: at the close of each month with one-twelfth 
 
 of the annual reserve charge for depreciation on stable 
 equipment, when monthly profit and loss statements are 
 prepared; otherwise, at closing periods, for the proper 
 amount, crediting the proper Reserve for Depreciation 
 account. (See 60 and 61 also note in 163). 
 
 168. Insurance, Fire and LiabUity-Stoble Equip- 
 ment. , 
 This account should be treated according to one of 
 
 the three following methods: 
 
 (i) Debit: at the close of each month with one- 
 twelfth of the annual cost of liability insurance on horses, 
 harnesses and wagons, and with fire insurance on the 
 stable and equipment, crediting the account. Prepaid 
 
 Insurance. . v u 
 
 Balance of this account at closing periods should 
 
 represent the cost of this insurance applicable to the 
 
 period. 
 
 (2) Debit: with all invoices received for insurance, 
 as above mentioned, crediting Vouchers or Accounts 
 Payable as the case may be; at closing periods with the 
 amount of prepaid insurance applicable to this account 
 at the beginning of the period being closed, crediting the 
 account, Prepaid Expenses. 
 
 Credit: with cancellations and refunds; at closing 
 periods with the amount of prepaid insurance applicable 
 to this account at that time charging the account, Pre- 
 paid Expenses. (See 52). 
 
 122 
 
 MANUFACTURING EXPENSES 
 
 169-I7I 
 
 Balance of this account at closing periods should 
 represent the cost of this insurance applicable to the 
 
 period. 
 
 (3) Debit: at the time of opening the books with 
 the amount of unexpired insurance premiums applicable 
 to this account; with all insurance bills subsequently 
 
 entered. 
 
 Credit: with all refunds and cancellations; at closing 
 periods with the net amount of this account after add- 
 ing the amount of the prepaid insurance at that time, 
 to the credit side of the account, charging the account. 
 Manufacturing Expenses. 
 
 Balance of this account at closing periods, after mak- 
 ing the above entries, is a deferred charge to operation 
 and should represent the unexpired insurance premiums 
 applicable to this account. (See note in 163). 
 
 169. Stable Expense — Proportion. 
 
 This account is to be kept only when a portion of 
 the stable expenses are to be charged to other than man- 
 ufacturing departments and should be treated in a similar 
 manner as described in 153. 
 
 1 70. Wages — Chauffeurs. 
 
 Debit: at close of each month or pay period with 
 wages of chauffeurs, crediting the account. Accrued Pay 
 Rolls. (See note in 163). 
 
 171. Automobile Supplies and Expense. 
 
 This account should show the cost of oil, grease, gas- 
 oline, auto tools, etc., and be treated in a similar manner 
 as described in 149. (See note in 163). 
 
 123 
 
'^m 
 
 172-176 
 
 MANUFACTURING COMPANIES 
 
 MANUFACTURING EXPENSES 
 
 177 
 
 H 
 
 1 
 
 '. t 
 
 172. Repairs to Automobiles. 
 
 Debit: with the cost of repairs, as referred to in 
 154, to autos and auto trucks. (See note in 163). 
 
 173. Depreciation — ^Automobiles (Reserve Charge). 
 Debit: at the close of each month with one-twelfth 
 
 of the annual reserve charge for depreciation on auto- 
 mobiles, when monthly profit and loss statements are 
 prepared, otherwise at closing periods, for the proper 
 amount; crediting the proper Reserve for Depreciation 
 account. (See 60 and 61, also note in 163). 
 
 174. Insurance, Fire and Liability— Automobiles. 
 This account should show the cost of both fire and 
 
 liabilitv insurance on autos and auto trucks, and fire 
 insurance on garage, and be treated in a similar manner 
 as described in 168. (See note in 163). 
 
 175. Automobile Expense— Factory Proportion. 
 
 This account is to be kept only when a portion of 
 the automobile expense is to be charged to other than 
 manufacturing departments, and should be treated in a 
 similar manner as described in 153. 
 
 176. Rent— Factory Proportion. 
 
 In the chart of accounts for a manufacturing business 
 a rental proportion account is found under each of the 
 three groups, Manufacturing, Administrative and Selling 
 Expenses, and for a mercantile business, under the two 
 groups, Administrative and Selling Expenses. When 
 the factory and main office occupy the same building, 
 
 124 
 
 the proportion of rent chargeable to each should be ac- 
 cording to floor space or valuation of floor space. 
 
 Debit: with the portion of the rent applicable to the 
 manufacturing departments, crediting Vouchers or Ac- 
 counts Payable as the case may be. 
 
 Credit: with revenues, if any, from sub-renting a por- 
 tion of the factory. 
 
 177. Taxes on Plant and Stock. 
 
 This account may be treated according to one of the 
 three following methods: 
 
 (i) Debit: at the close of each month with the local 
 taxes applicable to the month, crediting the account, Ac- 
 crued Taxes. 
 
 Balance of this account at closing periods should 
 represent the cost of taxes applicable to the period, and 
 should be closed into the account. Manufacturing Ex- 
 penses. 
 
 (2) Debit: with the amount of tax notices or bills 
 when received, crediting Vouchers or Accounts Payable, 
 as the case may be; at closing periods with the amount 
 of accrued local taxes at that time, crediting the account, 
 Accrued Items Payable. 
 
 Credit : at closing periods with the amount of accrued 
 taxes at the beginning of the period being closed, charg- 
 ing the account, Accrued Items Payable. (See 90). 
 
 Balance of this account at closing periods should 
 represent the cost of taxes applicable to the period, and 
 should be closed into the account Manufacturing Ex- 
 penses. 
 
 125 
 
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 u 
 
 iFTTni 
 
 
 i; 
 
 'll 
 
 i 
 
 i 
 
 178-179 MANUFACTURING COMPANIES 
 
 Note— The amount of taxes accruing during the 
 current period should be estimated, if the levy is un- 
 known, until the correct amount is finally determined, 
 when the proper adjustment should be made. 
 
 (3) Debit: with the amount of tax notices or bills 
 when received, crediting Vouchers or Accounts Payable 
 as the case may be. 
 
 Credit: at the time of opening the books with the 
 amount of accrued taxes unpaid ; at closing periods with 
 the net amount of this account after adding the amount 
 of the accrued taxes unpaid at that time to the debit side 
 of the account, charging the account, Manufacturing Ex- 
 penses. 
 
 Balance of this account at closing periods, after mak- 
 ing the above entries, is a current liability and should be 
 brought down as a credit balance. 
 
 178. Insurance, Fire— Plant and Stock. 
 
 This account should show the cost of fire insurance 
 on plant and merchandise stocks, and be treated in a 
 similar manner as described in 168. 
 
 179. Insurance, Liability— General Factory. 
 
 This account should be treated in a similar manner 
 as described in 168 and show the cost of all liability in- 
 surance applicable to the manufacturing end of the busi- 
 ness, which includes elevator, steam boiler and general 
 liability insurance relating to all manufacturing depart- 
 ments. (This should not include insurance on Stable or 
 Automobile equipment). 
 
 126 
 
 MANUFACTURING EXPENSES 
 
 180-185 
 
 180. Factory Supplies Used. 
 
 This account should show the cost of miscellaneous 
 factory supplies used, and be treated in a similar manner 
 as described in 149. 
 
 181. Oil, Waste and Packing. 
 
 This account should show the cost of oil, waste and 
 packing used, and be treated in a similar manner as 
 described in 149. 
 
 182. Water. 
 
 This account should show the cost of water used in 
 manufacturing departments and be treated in a similar 
 manner as described in 177. 
 
 183. Experimental Work. 
 
 This account should show the cost of all experimental 
 work. When the cost of any given experimental job is 
 desired, an order should be issued to which all material 
 and labor relating to it should be charged. 
 
 184. Lost Time. 
 
 Debit: with the cost of all lost time of employees in 
 the productive departments, due to various causes such 
 as lack of material, insufficient machinery or tools, de- 
 lays caused by repairs to the power plant, etc. 
 
 185. Material Spoiled or Scrapped. 
 
 Debit: with the cost of material spoiled or scrapped 
 during the operations of manufacture, or by reason of 
 surplus stock or obsolescence, when the reserve account, 
 
 127 
 
.» I 
 
 ■* 
 
 i86-i88 
 
 MANUFACTURING COMPANIES 
 
 MANUFACTURING EXPENSES 
 
 189-193 
 
 reference 48 is not carried; with the periodical reserve 
 charge when a reserve account is carried. 
 
 Credit: with the sale of scrap. (See 116). 
 
 186. Replacement of Defective Material. 
 
 Debit: with the cost of all gratis replacements for 
 customers on account of defective material and workman- 
 ship. 
 
 187. Repairs to Factory Stock. 
 
 Debit: with the cost of repairing or refinishing 
 factory stock. 
 
 188. Incoming Transportation Charges — Undis- 
 tributed. 
 
 In cases where it is practicable to distribute freight 
 and cartage charges to the items purchased, such charges 
 should follow the invoice. For example, if a car load of 
 lumber is purchased for manufacturing purposes, the 
 transportation charges as well as the lumber itself should 
 be charged to the manufacturing material account or its 
 equivalent. 
 
 In like manner the transportation charges paid on 
 coal, for fuel, are frequently more than the cost of the 
 coal at the mines, and should follow the invoice as a 
 charge to the cost of fuel. 
 
 No detailed instructions can be given applicable to 
 all cases as the method which would fit one case might 
 be unsuited to another, but generally, the account may 
 be treated as follows: 
 
 Debit: with the payment of all freight and cartage 
 charges. 
 
 128 
 
 Credit: with such charges distributed with purchase 
 
 invoices. 
 
 Balance of this account at closing periods, if a manu- 
 facturing business, is to be transferred to the account. 
 Manufacturing Expenses; if a mercantile business, to the 
 account, General Administrative Expenses. 
 
 189. Telephone and Telegraph. 
 
 This account should show the cost of all telephone 
 and telegraph messages, together with telephone rental 
 chargeable directly to the factory, and be treated in a 
 similar manner as described in 168. 
 
 190. Stationery, Printing and Office Supplies- 
 Factory. 
 
 This account should show the cost of stationery and 
 office suppHes used in the factory, and be treated in a 
 similar manner as described in 149. 
 
 191. Drafting Supplies. 
 
 This account should show the cost of all drafting 
 supplies used, and be treated in a similar manner as 
 described in 149. 
 
 192. Miscellaneous Manufacturing Expenses. 
 Debit: with the cost of all manufacturing expenses 
 
 not chargeable to any other expense account of the 
 Manufacturing Expense group. 
 
 193. Depreciation — Reserve Charge. 
 
 This is an expense account receiving the charges off- 
 setting the credit entries to the Reserve for Depreciation 
 
 129 
 
 I''" 
 
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 ! I 
 
 I* 
 
 .4 
 
 I 
 
 Siii' 
 
 \.Jl,ill 
 
 194 
 
 MANUFACTURING COMPANIES 
 
 accounts referred to in 60, the distinction between the 
 two accounts being, that this is an expense account to 
 be closed as other expense accounts at closing periods, 
 while the account "Reserve for Depreciation" is to be left 
 to accumulate and to be shown on the balance sheet as 
 a deduction from the asset account to which it relates. 
 In each group of expense accounts will be found depre- 
 ciation accounts to which depreciation charges should be 
 made, affecting the asset accounts relating to the re- 
 spective groups; that is, depreciation on fixed assets of 
 manufacturing departments should be charged to the 
 depreciation account in the manufacturing group of 
 accounts; depreciation on administrative and selling 
 items should be charged to their depreciation accounts in 
 the administrative and selling expense group^ respec- 
 tively. 
 
 Debit: at the close of each month, when profit and 
 loss statements are prepared monthly, otherwise at clos- 
 ing periods, with the reserve charge for depreciation on 
 items other than stable and auto equipment, relating to 
 the manufacturing departments of a business, crediting 
 the various Reserve for Depreciation accounts. 
 
 W 
 
 194. Administrative Expenses — Manufacturing Pro- 
 portion. 
 
 Where a business is conducted mainly from one gen- 
 eral office, a portion of certain administrative expenses 
 is properly chargeable to the cost of production, such 
 items being salaries of executive officers and main office 
 employees, postage, legal expense, telephone and tele- 
 graph, stationery and printing, charities and donations, 
 
 130 
 
 MANUFACTURING EXPENSES 
 
 195 
 
 etc. This charge may consist of an arbitrary amount to 
 be made at the close of each month, crediting the account, 
 Administrative Expenses — Proportion Charged to Other 
 Departments. 
 
 195. Rent and Interest on Plant Equipment. 
 
 Opinions of accountants differ in regard to including 
 in manufacturing costs a charge for interest on invest- 
 ment, also a rental charge in cases where the company 
 owns the real estate on which the business is conducted. 
 
 A detailed discussion of this subject will not be 
 taken up here as it, in itself, would fill a volume and is 
 therefore left to special works on manufacturing costs. 
 However, briefly, on the one hand it must be admitted 
 that more accurate departmental costs are obtained by 
 including in the overhead a charge for interest and rent, 
 in proportion to the valuation of the investment in each 
 department. On the other hand bankers frequently ob- 
 ject to the borrower's statement which includes such 
 charges in inventory valuations, therefore the matter 
 must be decided according to the conditions and policy 
 in each specific case. 
 
 '3* 
 
ADMINISTRATIVE EXPENSES 
 
 200-203 
 
 a 
 
 '■(1 
 
 ADMINISTRATIVE EXPENSES 
 MANUFACTURING COMPANIES 
 
 196. This group of accounts is intended to include 
 only those expenses relating to the administrative end of 
 the business. The balances of the individual accounts at 
 closing periods are to be closed in one amount into the 
 account, Administrative Expenses, found in the group 
 of accounts headed, "Profit and Loss Costs." Other 
 entries to these accounts are described under each ac- 
 count heading as follows : 
 
 197. Salaries of Executive Officers. 
 
 Debit : at the close of each month or pay period with 
 the salaries of the President, Treasurer, Secretary and 
 others classified as executive officers, crediting the ac- 
 count, Accrued Pay Rolls. 
 
 198. Expenses — ^Executive Officers. 
 
 Debit: with all expenses incurred by executive of- 
 ficers, not properly chargeable to other expense accounts, 
 crediting Vouchers or Accounts Payable or the individual 
 accounts of executive officers, as the case may be. 
 
 199. Directors' Fees and Expenses. 
 
 Debit: with compensation to directors for services 
 
 rendered, also with all expense incurred by them, credit- 
 ing Vouchers or Accounts Payable as the case may be. 
 
 200. Salaries of Main Office Employees. 
 
 Debit: at the close of each month or pay period with 
 the salaries of bookkeepers, stenographers, filing clerks 
 and others whose services are devoted to the administra- 
 tive end of the business, crediting the account, Accrued 
 Pay Rolls. 
 
 201. Salaries — Miscellaneous. 
 
 Debit: with all salaries of employees connected with 
 the administrative end of the business which are not 
 properly chargeable to any other account, crediting the 
 account, Accrued Pay Rolls. 
 
 202. Stationery, Printing and Office Supplies. 
 
 This account should show the cost of all stationery 
 in the form of accounting books, invoices, statements and 
 other stationery used in the accounting department, also 
 with all office supplies such as pencils, erasers, ink, ink- 
 wells, etc., and be treated in a similar manner as described 
 in 149. 
 
 203. Postage — General. 
 
 This account should show the cost of all postage, 
 including stamps and stamped envelopes used in the ad- 
 ministrative department of the business, and be treated 
 in a similar manner as described in 149. It will be 
 noticed that there is also an account with postage in the 
 manufacturing and selling expense groups to which 
 
 132 
 
 133 
 
'n: 
 111 
 
 i'.' 
 
 204-207 
 
 MANUFACTURING COMPANIES 
 
 M 
 
 [i 
 
 
 postage, applicable to those departments, 
 charged as purchased, when possible. 
 
 should be 
 
 204. Telephone and Telegraph. 
 
 This account should show the cost of telephone and 
 telegraph expense applicable to the administrative de- 
 partment of the business, and be treated in a similar man- 
 ner as described in 149. 
 
 205. Water and Ice. 
 
 Debit: with the cost of all water and ice, crediting 
 Vouchers or Accounts Payable as the case may be. 
 
 206. Rent— Office (Proportion). 
 
 Debit: with the portion of rent applicable to the 
 administrative department of the business, crediting 
 Vouchers or Accounts Payable as the case may be. (See 
 
 176). 
 
 Credit: with the revenues from subrenting any por- 
 tion of the administrative department. 
 
 207. Heat and Light (Proportion). 
 
 Debit: at the close of each month, if profit and loss 
 statements are prepared monthly, otherwise at closing 
 periods, with the portion of heat and light expense appli- 
 cable to the administrative department of the business, 
 crediting the account. Heat, Light and Power— Propor- 
 tion in the manufacturing expense group. In some cases 
 an arbitrary charge is made, based on the number of 
 cubic feet in each department, while in others an actual 
 distribution of light may be made from meter readings, 
 in which event this account may be charged direct, credit- 
 
 134 
 
 ADMINISTRATIVE EXPENSES 
 
 208-211 
 
 ing the account, Vouchers or Accounts Payable as the 
 case may be. 
 
 208. Repairs to Main Office Furniture and Fixtures. 
 Debit: with the cost of all repairs, as referred to in 
 
 154, to items classified as main office furniture and fix- 
 tures, such as desks, chairs, typewriters, adding machines, 
 duplicating devices, etc. 
 
 209. Depreciation— Main Office Furniture and Fix- 
 
 tures (Reserve Charge). 
 
 Debit: at the close of each month, when profit and 
 loss statements are prepared monthly, otherwise at 
 closing periods, with the reserve charge for depreciation 
 on items, other than automobiles, included in the admin- 
 istrative department of the business, crediting the proper 
 Reserve for Depreciation accounts. 
 
 2X0. Repairs and Expense — Main Office Automo- 
 biles. 
 
 Debit: with the cost of all repairs and other ex- 
 penses, exclusive of depreciation, relating to automobiles 
 used in the administrative department. 
 
 211. Depreciation— Main Office Automobiles (Re- 
 serve Charge). 
 
 Debit: at the close of each month, when profit and 
 loss statements are prepared monthly, otherwise at clos- 
 ing periods, with the reserve charge on automobiles used 
 in the administrative department of the business, credit- 
 ing the account. Reserve for Depreciation — ^Automobiles. 
 
 135 
 
 I 
 
■f i 
 
 f 
 
 <iS 
 
 212-216 
 
 MANUFACTURING COMPANIES 
 
 212. Charities and Donations — (Proportion). 
 
 This account, as the title impHes, should show the 
 amount of expenditures for charities and donations, ap- 
 plicable to the administrative department. 
 
 213. Traveling Expenses (Other than Selling). 
 Debit: with all traveling expenses relating to the 
 
 administrative department of the business, crediting the 
 account of the individual to whom expense money was 
 advanced, when handled as described in 40. (See note 
 in 225). 
 
 214. Indemnity Bonds — Executive Officers and Of- 
 fice Employees. 
 
 This account should show the cost of indemnity 
 bonds of all employees whose services are rendered to 
 the administrative department, and be treated in a similar 
 manner as described in 168. 
 
 215. Insurance — Main Office Furniture and Fix- 
 tures. 
 
 This account should show the cost of insurance on 
 main office furniture and fixtures, and be treated in a 
 similar manner as described in 168. 
 
 2x6. Taxes — State and Federal. 
 
 The above title embraces such taxes as the corpora- 
 tion state tax and the income tax. The former, at cer- 
 tain times of the year, may be a prepaid amount while 
 at other times, an accrued unpaid amount, depending 
 upon the time of the year in which the tax is paid as it 
 varies in different states. The latter is an accrued unpaid 
 
 136 
 
 ADMINISTRATIVE EXPENSES 
 
 217-218 
 
 amount, which can only be estimated until the close of 
 the period, when it may be accurately determined and 
 adjusted. 
 
 This account should show the cost of such taxes as 
 above mentioned, chargeable against the administrative 
 department of the business, and be treated in a similar 
 manner as described in 168 when prepaid, and 177 when 
 accrued unpaid. 
 
 217. Legal Expense. 
 
 Debit: with the cost of all legal services and ex- 
 penses, except those which are incurred at the time of 
 organizing a company and those relating to patents, 
 which may be properly charged to the accounts. Organ- 
 ization Expense and Patents, respectively. 
 
 218. Doubtful Accounts (Reserve Charge). 
 
 This is an expense account receiving the charges off- 
 setting the credit entries to the account, Reserve for 
 Doubtful Accounts, referred to in 39. The distinction 
 between the two accounts, is that this is an expense ac- 
 count to be closed as other expense accounts at closing 
 periods, while the account, Reserve for Doubtful Ac- 
 counts is left to accumulate and be shown on the balance 
 sheet as a deduction from the account to which it relates. 
 
 Debit: at the close of each month, when profit and 
 loss statements are prepared monthly, otherwise at clos- 
 ing periods, with a certain percent of the sales, based on 
 the previous years* experience of losses from uncollect- 
 ible accounts, crediting the account. Reserve for Doubt- 
 ful Accounts. 
 
 137 
 
 ■ 
 
1 
 ir '1 
 
 !l 
 
 219-221 
 
 MANUFACTURING COMPANIES 
 
 irji 
 
 
 'I--, I 
 
 1:1 
 
 M 
 
 I 
 
 \\\ 
 
 M 
 
 i- 1 : 
 
 Ml' 
 
 I' I 
 
 1 
 
 219. Cash Over and Short. 
 
 Debit: with all cash shortages which cannot be ac- 
 counted for in the daily balancing of cash. 
 
 Credit: with all cash overs. 
 
 Note — If, at closing periods, this account shows a 
 credit balance, it should be transferred to the account, 
 Profit and Loss, and shown on the profit and loss state- 
 ment under the caption "Other Revenues." 
 
 220. Incidental Administrative Expenses. 
 
 Debit: with the cost of miscellaneous expense items 
 which are not properly chargeable to other accounts of 
 the administrative expense group. 
 
 221. Administrative Expense, Proportion Charged 
 to Other Departments. 
 
 Credit: with such proportion of the administrative 
 expense accounts, as is chargeable to other departments. 
 
 Balance of this account at closing periods should be 
 closed into the account, Administrative Expenses, shown 
 in the group of accounts under Profit and Loss Costs. 
 
 138 
 
 SELLING EXPENSES 
 MANUFACTURING COMPANIES 
 
 222. This group of accounts is intended to include 
 only those expenses relating to the selling department 
 of the business. The balances of the individual accounts 
 at closing periods are to be closed in one amount into 
 the account, Selling Expenses, found in the group of 
 accounts headed "Profit and Loss Costs." Other entries 
 to these accounts are described under each account head- 
 ing as follows: 
 
 223. Salaries of Traveling Salesmen. 
 
 Debit: this account at the close of each month or pay 
 period with the salaries of traveling salesmen, crediting 
 the account, Accrued Pay Rolls. 
 
 Note — In cases where traveling salesmen receive 
 their salaries at various intervals instead of receiving 
 each month's salary at regular pay periods, a personal 
 account should be kept among the sundry debtors with 
 each salesman, to which should be charged all payments 
 on account of salary. At the close of each month the 
 personal account should be credited with the salary for 
 the month, charging the account, Accrued Pay Rolls. 
 
 139 
 
r ' 
 
 }. ti 
 
 224-228 
 
 MANUFACTtTRING COMPANIES 
 
 SELLING EXPENSES 
 
 229-232 
 
 224. Commissions — Traveling Salesmen. 
 
 Debit: at the close of each month with prospective 
 commissions which may be allowed salesmen and agents, 
 on sales for the month, crediting the account, Accrued 
 Commissions, as described in 89. 
 
 225. Traveling Expenses— Traveling Salesmen. 
 Debit: with the expenses of traveling salesmen as 
 
 expense reports are rendered, crediting the salesman's 
 personal account to which all cash advanced for expenses 
 should be charged. 
 
 Note — ^A personal account should be kept with each 
 traveling salesman, to which should be charged all cash 
 advanced for traveling expenses and remain so charged 
 until an itemized statement of his expenses is rendered 
 by him, at which time the account, Traveling Expenses 
 — Salesmen, should be charged and the salesman's per- 
 sonal account credited, the balance of the account rep- 
 resenting cash advanced, to be accounted for. 
 
 226. Indenmity Bonds — Salesmen. 
 
 This account should show the cost of salesmen's in- 
 demnity bonds, and be treated in a similar manner as 
 described in 168. 
 
 or 
 
 227. Entertainment. 
 Debit: with expenses of entertaining customers, 
 
 the company's own traveling salesmen. 
 
 228. Salaries of Clerks (Selling). 
 
 When a manufacturing concern maintains a retail 
 
 140 
 
 selling department on a limited scale, this account 
 
 should be carried. 
 
 Debit: at the close of each month or pay period with 
 salaries of clerks, crediting the account. Accrued Pay 
 Rolls. ^ 
 
 229. Advertising — Periodicals. 
 
 This account should show the cost of advertising in 
 magazines, newspapers, programs, etc., and be treated in 
 a similar manner as described in 168. 
 
 230. Advertising — Literature. 
 
 This account should show the cost of catalogs and 
 circulars used, and be treated in a similar manner as 
 described in 149. 
 
 231. Advertising — Miscellaneous. 
 
 When advertising expense is subdivided into accounts 
 with Periodicals, Literature, etc., this account should 
 include all advertising expense that is not chargeable to 
 other advertising accounts. When the advertising of a 
 business is of small cost and therefore a subdivision of the 
 accounts is considered unnecessary, advertising of every 
 description may be included in this account, and should 
 be treated in a similar manner as described in 149. 
 
 232. Advertising — Expositions. 
 
 This account should show the cost of exhibition 
 expenses at shows, fairs, etc., and be treated in a similar 
 manner as described in 168. 
 
 141 
 
 ill 
 
)• ' 
 
 Ik 
 
 233-237 
 
 MANUFACTURING COMPANIES 
 
 233. Replacement of Merchandise — Gratis. 
 
 Debit: with the cost of repairs and replacement of 
 all merchandise, gratuitously for customers, when the 
 chief object of such replacement is the promotion of sales. 
 (This account should not be charged with merchandise 
 replaced on account of its being defective). (See 186). 
 
 234. Rent — Selling Department (Proportion). 
 Debit: with the portion of rent applicable to the 
 
 selling department of the business, crediting Vouchers or 
 Accounts Payable as the case may be. (See 176.) 
 
 Credit: with the revenues from subrenting any por- 
 tion of the selling department. 
 
 235. Heat and Light — Proportion. 
 
 This account should show the cost of heat and light 
 expense applicable to the selling department of the busi- 
 ness, and be treated in a similar manner as described in 
 207. ^ 
 
 236. Salaries— Office Employees (Selling Depart- 
 ment). 
 
 Debit: at the close of each month or pay period with 
 the salaries of office employees whose attention is given 
 to the selling branch of the business, crediting the 
 account, Accrued Pay Rolls. 
 
 237. Stationery, Printing and Office Supplies — 
 Selling Department. 
 
 This account should show the cost of stationery, 
 printing and office supplies used in the selling department, 
 and be treated in a similar manner as described in 149. 
 
 142 
 
 SELLING EXPENSES 
 
 238-241 
 
 Note — If no accurate record is kept of these items, 
 used by the seUing department, they may be included in 
 the account. Stationery, Printing and Office Supplies in 
 the administrative expense group, and an entry made for 
 an arbitrary amount charging the account, Administrative 
 Expenses— Selling Proportion, in the selling expense 
 group; and crediting the account. Administrative Ex- 
 penses, Proportion to other departments. 
 
 238. Postage — Selling Department. 
 
 This account should show the cost of all postage 
 stamps and stamped envelopes used in the selling depart- 
 ment, and be treated in a similar manner as described in 
 149. (Also see Note in 237). 
 
 239. Telephone and Telegraph (Proportion). 
 This account should show the cost of the proportion 
 
 of telephone and telegraph expenses applicable to the sell- 
 ing department, and be treated in a similar manner as 
 described in 168. (Also see Note in 237). 
 
 240. Commercial Agency Subscriptions. 
 
 This account should show the cost of the services of 
 commercial agencies such as furnished by Bradstreet 
 and Dun, and should be treated in a similar manner as 
 described in 168. 
 
 241. Depreciation Selling Department (Reserve 
 
 Charge). 
 
 Debit: at the close of each month, when profit and 
 loss statements are prepared monthly, otherwise at clos- 
 ing periods, with the reserve charge for depreciation on 
 
 143 
 
,4 
 
 242-245 
 
 MANUFACTURING COMPANIES 
 
 office and store furniture and fixtures in the selling de- 
 partment, together with depreciation on travelingmen's 
 equipment, such as trunks, sample cases, etc., crediting 
 the proper reserve for depreciation accounts. 
 
 Note — In regard to travelingmen's equipment, a 
 physical inventory is preferable in most cases to a reserve 
 charge, to be treated in a similar manner as described in 
 160. 
 
 242. Transportation Charges — Outgoing Shipments. 
 Debit: with freight and cartage charges on all out- 
 going shipments. 
 
 243. Stable and Automobile Expense (Proportion 
 en Outgoing Shipments). 
 
 Debit: with the proportion of stable and auto ex- 
 pense applicable to outgoing shipments, crediting the 
 accounts. Stable Expense — Proportion and Automobiles 
 Factory — Proportion, respectively. This charge may be 
 an estimated amount based on the comparative amount 
 of trucking in the manufacturing and selling departments. 
 
 244. Shipping Labor. 
 
 Debit: at the close of each month or pay period with 
 wages of employees in the shipping department, crediting 
 the account. Accrued Pay Rolls. 
 
 245. Shipping Supplies and Expense. 
 
 This account should show the cost of all shipping 
 crates, lumber, wrapping paper, twine, etc., used in the 
 shipping department, and be treated in a similar manner 
 as described in 149. 
 
 144 
 
 SELLING EXPENSES 
 
 246-247 
 
 Note — In certain lines of manufacturing the cost of 
 the package containing the manufactured product is prop- 
 erly chargeable to the cost of production, for example, 
 pails and containers used in connection with the manufac- 
 ture of paint, while the crates or boxes in which the indi- 
 vidual packages are shipped may be considered to consti- 
 tute shipping supplies. The method of charging such 
 items depends upon the conditions in each specific case. 
 
 246. Incidental Selling Expenses. 
 
 Debit: with the cost of miscellaneous expense items 
 which are not properly chargeable to other accounts of 
 the selling expense group. 
 
 247. Administrative Expenses — Selling Proportion. 
 
 This account should be treated in a similar manner 
 as described in 194, and should include such a portion of 
 the administrative expenses as may be applicable to the 
 selling department. 
 
 145 
 
Ill: 
 
 ifiil 
 
 i.'t 
 
 I 
 
 I 
 
 
 PART 3 
 
 ACCOUNTS 
 FOR MERCANTILE COMPANIES 
 
r 
 
 - 1 
 
 il 
 
 248. CHART OF ACCOUNTS 
 
 FOR MERCANTILE COMPANIES 
 
 (See 17 and 249) 
 
 ♦ASSETS. 
 
 Acct. No. Ref- No. 
 
 Current Assets • 7 
 
 I — Imprest Cash Fund ^7 
 
 2 — Cashier's Change 28 
 
 3 — Cash on Hand Undeposited 29 
 
 4 — Cash in Banks 30 
 
 5— 
 
 6-^ • 
 
 &— Stocks and Bonds of Other Companies 32 
 
 ^— 
 
 10 — Mortgages Receivable 33 
 
 II — 
 
 12 — Notes Receivable 34 
 
 13 — Notes Receivable Discounted 35 
 
 14 — Reserve for Doubtful Notes 3^ 
 
 15 — Accrued Interest — Items Receivable 37 
 
 16—. 
 
 17 — Accounts Receivable — C. O. D 250 
 
 18 — ^Accounts Receivable — Customers 38 
 
 19 — Reserve for Doubtful Accounts — Customers 39 
 
 20 — Accounts Receivable — Sundry Debtors 40 
 
 21 — Reserve for Doubtful Accounts — Sundry Debtors 41 
 
 22 — 
 
 23 — 
 
 24 — Consignments to Others 42 
 
 25 — 
 
 26 — Inventory of Merchandise — Branches 43 
 
 27 — Inventory of Merchandise—Warehouse 252 
 
 28 — Inventory of Merchandise — Departments 253 
 
 29 — Reserve for Depreciation of Merchandise Stocks 254 
 
 30 — 
 
 *Note. Reserve accounts are here listed among the assets owing 
 to the fact that they are shown on the balance sheet as a deduction from 
 the accounts to which they relate. 
 
 149 
 
■ A 
 
 ■ I 
 
 
 248 MERCANTILE COMPANIES 
 
 Acct. No. R«f- No. 
 
 31— 
 
 32 — 
 
 33 — Treasury Stock— Preferred SO 
 
 34 — .Treasury Stock — Common 5^ 
 
 Deferred Charges to Operation / V * V ' •• ; ^^ 
 
 (Itemize according to the requirements of the busmess.; 
 
 Fixed Assets J 
 
 45 — Grounds 03 
 
 46— Buildings and Building Fixtures : ' ';,• v, ;: * " ^ 
 
 47__Reserve for Depreciation — Buildings and Buildmg 
 
 Fixtures "5 
 
 48 — Store Furniture and Fixtures \'^" ^^^ 
 
 49— Reserve for Depreciation— Store Furniture and Fix- 
 tures °^oi 
 
 50 — Alterations and Improvements 250 
 
 51 — 
 
 52— Office Furniture and Fixtures \"^" ^^ 
 
 =;^— Reserve for Depreciation— Office Furniture and Fix- 
 
 tures 60-61 
 
 54— Stable Equipment • • • • : 7i 
 
 55— .Reserve for Depreciation— Stable Equipment 00-61 
 
 56 — Automobiles • • a^^k 
 
 57 Reserve for Depreciation — ^Automobiles So 
 
 S8— Branch Office— Furniture and Fixtures • 78 
 
 50— Reserve for Depreciationf— Branch Office Furniture and 
 
 Fixtures ^-^^ 
 
 60— 
 
 61— 
 
 62— 
 
 63— ;: 
 
 64— Sinking Fund gj 
 
 65 — Other Investments °o 
 
 Intangible Assets ^ 
 
 70 — Patents %\ 
 
 71— Good Will ll 
 
 72 — Organization Expense *** 
 
 73— 
 
 LIABILITIES. 
 
 o 
 
 Current Liabilities ° 
 
 gi — Notes Payable — ^Loans °4 
 
 82 Notes Payable — Purchase Creditors 85 
 
 83— Accounts Payable— Purchase Creditors |o 
 
 84— Accounts Payable— Sundry Creditors »7 
 
 85— ; ; 
 
 86 QQ 
 
 87— Accrued Pay Rolls ^ 
 
 88— Accrued Commissions • °9 
 
 89— Other Accrued Items Payable / V * V *. < ^ 
 
 (Itemize according to the requirements of the business.) 
 
 Fixed Liabilities ^ 
 
 loi — Mortgages Payable ^ 
 
 102 — Bonds Payable 93 
 
 CHART OF ACCOUNTS 248 
 
 Ref. No. 
 Acct. No. 
 
 103 — 
 
 CAPITAL OR NET WORTH 9 
 
 no-Capital Stock, Preferred-Authorized 95 
 
 iii--Capital Stock, Preferred— Unissued I'JIJ- U:*^: ^^ 
 
 (This account is listed here, to be shown as a deduction 
 from Authorized Preferred Capital Stock.) 
 
 112— Capital Stock, Common— Authorized 9o 
 
 in— Capital Stock, Common— Unissued • • • • • • • • • ^ 
 
 ^ (This account is listed here, to be shown as a deduction 
 from Authorized Common Capital Stock.) 
 
 114— Subscribed Capital Stock ;••• 99 
 
 115— Subscriptions to Capital Stock .•••••••• till:* '^'I 
 
 (This account to be shown on the balance sheet as a 
 ^ deduc?k>n from Subscribed Capital Stock, the differ- 
 ence being the amount advanced by subscribers for 
 stock sold on the instalment plan.) . , . . 
 (If not incorporated, each Partner's Capital or Invest- 
 ment account is to be shown here in place of the 
 Capital Stock Accounts.) , ^ , __- 
 
 1 16— Cumulative Dividends— Preferred Stock 105 
 
 117— Dividends— Common Stock « 
 
 118— Reserve for Sinking Fund 
 
 l^Reserve for Working* Capital ' (When "stock is donated 
 
 to company) ' " ^^^ 
 
 1211 — ^Surplus jjj 
 
 122 — Profit and Loss 
 
 PROFIT AND LOSS REVENUES 257 
 
 ni— Sales (By departments) ^^ 
 
 132— 
 
 133— 
 
 134— ;;;!;';!''**!^*ii !'**•■'• 
 
 136— Sales Miscellaneous "| 
 
 137— Cash Sales j„ 
 
 1 3g__Revenues— Branches ^^ 
 
 139 — Rents Earned • 
 
 140— Cash Discounts Earned * 
 
 141— Interest Earned 
 
 142— 
 
 145- •• ••• iii 
 
 144— Miscellaneous Earnings * •» 
 
 PROFIT AND LOSS COSTS aS7 
 
 161— Merchandise Purchases (By departments) 259 
 
 162— Consigned Merchandise • ^^ 
 
 i63^Cost of Sales (By departments) 200 
 
 164— Administrative Expenses -J 
 
 165— Selling Expenses .... . . . • • • ^ 
 
 166— Cash Discounts Allowed Others J3^ 
 
 167— Interest on Items Payable ^^^ 
 
 il 
 
]>l'l 
 
 w 
 
 I * 
 
 \jii 
 
 m 
 
 248 
 
 MERCANTILE COMPANIES 
 
 Acct. No. Rcf. No. 
 
 168 — Extinguishment of Patents 134 
 
 169 — Extinguishment of Organization Expense 135 
 
 GENERAL ADMINISTRATIVE EXPENSES 196 
 
 181 — Salaries of Executive Officers 197 
 
 182 — Expenses — Executive Officers 198 
 
 183 — Directors' Fees and Expenses 199 
 
 184 — Salaries of Main Office Employees 200 
 
 185 — Salaries — Miscellaneous 201 
 
 186 — Stationery, Printing and Office Supplies — General 202 
 
 187 — Postage — General 203 
 
 188 — Telephone and Telegraph (Proportion) 204 
 
 189 — ^Water and Ice 205 
 
 190 — Rent 206 
 
 191 — Heat and Light (Proportion) 261 
 
 192 — Repairs to Main Office Furniture and Fixtures 208 
 
 193 — Depreciation — Main Office Furniture and Fixtures (Re- 
 serve Charge) 209 
 
 194 — Repairs and Expenses) — Main Office Automobiles 210 
 
 195 — Depreciation — Main Office Automobiles (Reserve 
 
 Charge) 211 
 
 196 — ^Charities and Donations 212 
 
 197 — Traveling Expenses (Other than selling) 213 
 
 198 — Indemnity Bonds — Executive Officers and Office 
 
 Employees 214 
 
 199 — Insurance — Main Office Furniture and Fixtures 215 
 
 2oo^Taxes — State and Federal 216 
 
 201 — Legal Expense 217 
 
 202 — Doubtful Accounts (Reserve Charge) 218 
 
 203 — Cash Overs and Shorts 219 
 
 204 — Stable and Auto Expense (Proportion on Incoming 
 
 Merchandise) 262 
 
 20s — Incoming Transportation Charges! — Undistributed 188 
 
 206 — ', 
 
 207 — . 
 208 — . 
 209 — . 
 
 21 
 
 21 1 — Incidentals 220 
 
 212 — Administrative Expense (Proportion charge to other 
 
 departments) 221 
 
 SELLING EXPENSES 222 
 
 221 — Salaries of Traveling Salesmen 223 
 
 222 — Commissions — Traveling Salesmen 224 
 
 223 — Traveling Expenses — Traveling Salesmen 225 
 
 224 — Indemnity Bonds — Traveling Salesmen 226 
 
 225 — Entertainment 227 
 
 2^ — ^Salaries of Office Employees (Selling Department) . . 236 
 227 — Stationery, Printing and Office Supplies (Selling De- 
 partment) 237 
 
 228 — Postage (Selling Department) 238 
 
 229 — Telephone and Telegraph (Proportion) 239 
 
 CHART OF ACCOUNTS 
 
 Acct. No. 
 
 248 
 
 Ref. No. 
 
 230 — Commercial Agency Subscriptions 240 
 
 231 — Salaries of Clerks (Selling) 263 
 
 232 — Salaries — Miscellaneous 264 
 
 233 — Advertising, Periodicals 229 
 
 234 — Advertising, Literature 230 
 
 235 — Advertising, Miscellaneous 231 
 
 236 — Rent (Proportion) 234 
 
 237 — Heat and Light (Proportion) 265 
 
 238 — Elevator Wages and Expense 266 
 
 239 — Insurance — Liability 267 
 
 240 — Insurance — Fire on Merchandise Stocks, Buildings and 
 
 Building Fixtures 268 
 
 241 — Taxes — Merchandise Stocks, Buildings and Building 
 
 Fixtures 269 
 
 242 — Repairs to Buildings and Building Fixtures 270 
 
 243 — Repairs to Store Furniture and Fixtures 270 
 
 244 — Depreciation (Reserve Charge) 241' 
 
 245 — Extinguishment of Alterations and Improvements 271 
 
 246 — Departmental Supplies 272 
 
 247 — Water and Ice 205 
 
 248 — ^Transportation Charges (Outgoing Shipments) 242 
 
 249 — Shipping Labor 244 
 
 250 — Shipping Supplies and Expense 245 
 
 251 — Merchandise Scrapped 273 
 
 252 — Incidentals ,. 246 
 
 253 — Administrative Expenses (Selling Proportion) 247 
 
 Stable Expenses. 
 
 254 — Wages — Drivers 163 
 
 255 — Stable Supplies and Expense 164 
 
 256 — Feed and Bedding 165 
 
 257 — Repairs to Stable Equipment 166 
 
 2587— Depreciation — Stable Equipment (Reserve Charge) 167 
 
 259 — Insurance — Fire and Liability 168 
 
 260 — Stable Expense — Proportion 274 
 
 Automobile Expenses. 
 
 261 — Wages — Chauffeurs 170 
 
 262 — Automobile Supplies and Expense 171 
 
 263 — Repairs to Automobiles 172 
 
 264 — Depreciation — Automobiles (Reserve Charge) 173 
 
 265 — Insurance — Fire and Liability 174 
 
 266— Automobile Expense — Proportion 275 
 
 
 153 
 
 1' ' 
 
CURRENT ASSETS 
 
 251-252 
 
 11 "i 
 
 '^\ 
 
 kl 
 
 i 
 
 w 
 
 nil 
 
 CURRENT ASSETS 
 MERCANTILE COMPANIES 
 
 249. Comparison of Accounts for Manufacturing and 
 Mercantile Companies. 
 
 Comparing the chart of accounts for manufacturing 
 companies with that for mercantile companies, it will be 
 seen that the principal difference between them is that 
 the former requires plant accounts, production accounts 
 and manufacturing expense accounts, not found in the 
 chart of accounts for the latter. With these exceptions 
 the accounts of the two different classes of business are 
 generally similar to each other, therefore the instructions 
 previously written relating to the accounts for manufac- 
 turing companies, references 26 to 247 inclusive, are gen- 
 erally applicable to mercantile companies with the follow- 
 ing exceptions : 
 
 250. Accounts Receivable — C. O. D. 
 
 Debit: at the time of opening books with the total of 
 uncollected C. O. D. items; at the close of each month 
 with the total C. O. D. sales, ascertained from the sales 
 
 summary. 
 
 Credit: at the close of each month with the C. O. D. 
 
 cash collections and items returned. 
 
 154 
 
 Balance of this account is a current asset and should 
 represent the net total of outstanding C. O. D. items. 
 
 Note — ^This is a controlling account of the individual 
 items carried on the C. O. D. Register. There are various 
 methods of recording these transactions, the general prin- 
 ciple of which is as follows : The amount of each C. O. D. 
 sale is entered in numerical order, on what is termed a 
 C. O. D. Register; as collections are made, or as items 
 are returned, the proper credit is given, with the result 
 that the balance in the register should equal the controll- 
 ing account in the general ledger. 
 
 251. Pricing Inventories. 
 
 In order to show uniform and accurate results from 
 operation and to facilitate the verification of merchandise 
 stocks, inventories should be priced at cost. The term 
 cost, as applied to inventories of mercantile companies, 
 should include the purchase invoice price together with 
 the cost of transportation charges and handling. In case 
 the actual value at the time of taking inventories is less 
 than cost, the difference should be taken care of in the 
 account. Reserve for Depreciation of Merchandise, and 
 shown on the balance sheet as a deduction from the cost 
 value, extending the net value at which the merchandise 
 is to be carried, further illustrated in 254, Reserve for 
 Depreciation — Merchandise. 
 
 For pricing inventories of Manufacturing Companies 
 see 278. 
 
 252. Inventory of Merchandise — ^Warehouse. 
 
 This account is used only when a perpetual inventory 
 record is kept. 
 
 155 
 
 « 
 
253 
 
 MERCANTILE COMPANIES 
 
 CURRENT ASSETS 
 
 253 
 
 ri 
 
 Debit: at. the time of opening books with the cost of 
 merchandise on hand in the warehouse; at the close of 
 each month with the cost of merchandise purchased, and 
 delivered to warehouse, crediting Vouchers or Accounts 
 Payable as the case may be ; with the cost of merchandise 
 transferred to the warehouse from departments, crediting 
 the account, Inventory of Merchandise — Departments. 
 
 Note — When freight and cartage charges on mer- 
 chandise purchases follow the invoice as described in 188, 
 and are included in the amounts entered on the stock rec- 
 ords, they should be charged to this account. 
 
 Credit: at the close of each month with the cost of all 
 merchandise withdrawn from the warehouse and deliv- 
 ered to departments, charging the account, Inventory of 
 Merchandise — Departments; with the cost of discarded 
 merchandise, charging the account, Merchandise Scrapped 
 or the reserve account if one is kept; with the cost of 
 merchandise returned to purchase creditors, charging 
 Vouchers or Accounts Payable, as the case may be. 
 
 Balance of this account is a current asset and should 
 represent the cost of merchandise in the warehouse, which 
 should agree with the aggregate of the Stock Records, 
 when kept. 
 
 253. Inventory of Merchandise — Departments. 
 
 This account should be subdivided according to 
 departments, keeping a separate account for each, and be 
 handled according to one of the three following methods : 
 
 (i) When a perpetual inventory is kept. 
 
 Debit: at the time of opening books with the cost 
 value of merchandise on hand in departments; at the 
 
 156 
 
 close of each month with the cost of merchandise received 
 from the warehouse, crediting the account, Inventory of 
 Merchandise — Warehouse, or with merchandise purchases 
 when delivered directly to departments as purchased, 
 crediting Vouchers or Accounts Payable, as the case may 
 be; with the cost of merchandise returned by customers, 
 crediting the account, Cost of Sales. (See Note in 252). 
 
 Credit: at the close of each month with the cost of 
 merchandise sold, charging the account, Cost of Sales; 
 with the cost of merchandise returned to warehouse stock, 
 charging the account, Inventory of Merchandise — Ware- 
 house : with the cost of merchandise returned to purchase 
 creditors when purchases are charged directly to depart- 
 ments, charging Vouchers or Accounts Payable; with the 
 cost of merchandise scrapped, charging the account Mer- 
 chandise Scrapped, or the reserve account if one is kept. 
 
 Balance of this account is a current asset and should 
 represent the cost value of stock on hand in departments, 
 which should agree with Stock Records, when kept. 
 
 (2) When a perpetual inventory is not kept. 
 
 This account is carried for the purpose of showing 
 the value of merchandise on hand at the beginning of 
 each period, and no entries, except at the beginning and 
 close of periods, are to be made to it except in cases 
 where the inventory at the beginning of the period re- 
 quires adjusting by reason of errors having been dis- 
 covered subsequently during the period, in which event 
 the contra entries should be made to Surplus account. 
 
 Debit: at the time of opening books with the cost of 
 merchandise on hand in departments and warehouse, the 
 inventorv of warehouse stock to be classified according to 
 
 157 
 
■ 'J 
 
 41 
 
 '■1 
 
 H 
 
 I 
 
 
 l' 
 
 254 
 
 MERCANTILE COMPANIES 
 
 departments; with the cost of merchandise on hand at 
 closing periods, crediting the account, Merchandise Pur- 
 chases, by departments, to which purchases should be 
 charged. 
 
 Credit: at closing periods with the cost of merchan- 
 dise on hand at the beginning of the period, charging the 
 account. Merchandise Purchases, by departments. 
 
 Balance of this account at closing periods, after mak- 
 ing the above entries, is a current asset and should repre- 
 sent the cost of merchandise on hand. 
 
 (3) When a perpetual inventory is not kept. 
 
 The above ledger accounts may be dispensed with 
 and the inventory at closing periods shown as a debit 
 balance in the account. Merchandise Purchases to which 
 account all purchases are charged. 
 
 254. Reserve for Depreciation of Merchandise 
 Stocks (by Departments). ^ 
 
 Debit: with the amount of merchandise scrapped, 
 crediting the proper merchandise inventory account; at 
 closing periods with the amount of any decrease in the 
 account. Reserve for Depreciation of Merchandise Stocks. 
 
 Credit: at the time of opening books with an amount 
 estimated to be sufficient for the depreciation of merchan- 
 dise stocks on account of their becoming antiquated, and 
 at closing periods with the amount of any increase of 
 this reserve, charging the account Obsolete and Scrapped 
 
 Merchandise. 
 
 Balance of this account represents the allowance on 
 account of depreciation to be deducted on the balance 
 
 158 
 
 CURRENT ASSETS 
 
 254 
 
 sheet from the cost value of the Inventory of Merchan- 
 dise, extending the net value at which it is to be carried 
 from the standpoint of a going concern. 
 
 159 
 
,ni 
 
 FIXED ASSETS 
 
 256 
 
 
 \ 
 
 FIXED ASSETS 
 MERCANTILE COMPANIES 
 
 (See 248). 
 
 255. Store Furniture and Fixtures. 
 
 This account should be treated in a similar manner 
 as described in 59 and should show the cost of all furni- 
 ture and fixtures used in the selling departments, such as 
 partitions, shelving, show cases, desks, counters, chairs, 
 cash registers, cash carrier systems, trucks and special 
 departmental equipment, none of which is included as 
 general office furniture and fixtures. 
 
 of twenty years, one-tenth of the cost, or $600.00 should 
 be charged off annually. 
 
 Debit: with the cost of improvements or alterations 
 of a lasting value, crediting Vouchers or Accounts Pay- 
 able, as the case may be. 
 
 Credit: at the close of each month, if profit and loss 
 statements are prepared monthly, otherwise at closing 
 periods, with such a proportionate amount as will charge 
 off the account over a certain period of years, based on 
 the life of the lease or improvements as above described, 
 charging the account. Extinguishment of Alterations and 
 Improvements. 
 
 Balance of this account is a fixed asset, and should 
 represent the value of the improvements to a going con- 
 cern. 
 
 256. Alterations and Improvements. 
 
 This account should show the cost of alterations and 
 improvements on leased premises made at the expense of 
 the tenant. The cost of these improvements should be 
 charged off over a period of years in such annual amounts 
 that will eliminate the account when the value of the im- 
 provements is terminated, or when the lease expires, if 
 the improvements are of a more lasting value. For illus- 
 tration, if the Hfe of a lease is six years and improvements 
 of value for a period of ten years were made at a cost of 
 $6,000.00, one-sixth of this amount, or $1,000.00, should 
 be charged off annually ; but if the lease was for a period 
 
 160 
 
 161 
 
 III 
 
PROFIT AND LOSS COSTS 
 
 259 
 
 >. 
 
 V il 
 
 'fi 
 
 m. 
 
 PROFIT AND LOSS REVENUES AND COSTS 
 MERCANTILE COMPANIES 
 
 257. The Profit and Loss Revenues and Costs of 
 mercantile and manufacturing enterprises being generally 
 similar to each other, the instructions previously written 
 regarding these accounts under manufacturing companies, 
 112 to 135, are generally applicable to mercantile com- 
 panies with the following exceptions: 
 
 258. Sales (By Departments). 
 
 This account may be subdivided as much as desired 
 to meet the requirements of the business in each case ; for 
 example, in a department store a separate sales account 
 should be carried for each department. 
 
 Debit: at the close of each month with the total of 
 merchandise returned by customers at selling price, and 
 with allowances as shown by the Credit Memorandum 
 Summary, crediting Cash Sales account, Accounts Receiv- 
 able and C. O. D. controlling accounts for their respective 
 amounts; at closing periods with the Cost of Sales. 
 
 Credit: at the close of each month with the total sales 
 for the month as shown by the Sales Summary, charging 
 Cash Sales account, Accounts Receivable and C. O. D. 
 controlling accounts for their respective amounts. 
 
 162 
 
 Balance of this account after making the above en- 
 tries at closing periods, should represent the gross profit 
 on sales, to be transferred to the Profit and Loss account. 
 
 259. Merchandise Purchases (By Departments). 
 
 When a perpetual inventory is not maintained, all 
 merchandise purchases should be charged to this account. 
 When a perpetual inventory is kept all purchases of mer- 
 chandise should be charged to the stock account to which 
 they are delivered as described in 252 and 253. 
 
 This account may be kept according to one of the 
 two following methods : 
 
 (i) Debit: with the cost of all merchandise pur- 
 chases including incoming transportation charges on 
 same (see 188) ; at closing periods with the inventory at 
 the beginning of the period being closed, crediting the 
 account. Inventory of Merchandise — Departments; with 
 the balance transferred from the account. Consigned Mer- 
 chandise, if a debit balance. 
 
 Credit: with the cost of merchandise returned to pur- 
 chase creditors; with the inventory at the close of the 
 period, charging the account, Inventory of Merchandise 
 — Departments; with the balance transferred from the 
 account, Consigned Merchandise, if a credit balance. 
 
 Balance of this account at closing periods should 
 represent the cost of merchandise sold and should be 
 transferred to the proper Sales account. 
 
 (2) Debit: at the time of opening the books with 
 the cost of merchandise on hand; with all merchandise 
 purchased including incoming transportation charges 
 (see 188) ; at closing periods with the balance transferred 
 
 163 
 
PROFIT AND LOSS COSTS 
 
 260 
 
 r . 
 
 m 
 
 I 
 
 t. t •! - lit 
 
 
 ii 
 
 260 
 
 MERCANTILE COMPANIES 
 
 from the account, Consigned Merchandise, if a debit 
 
 balance. 
 
 Credit: with the cost of merchandise returned to pur- 
 chase creditors ; at closing periods with the balance trans- 
 ferred from the account, Consigned Merchandise, if a 
 credit balance ; also with the amount of the balance of this 
 account less the inventory at that time, charging the 
 proper Sales account. 
 
 Balance of this account, after making the above en- 
 tries, is a current asset and should represent the amount 
 of merchandise on hand. 
 
 260. Cost of Sales (By Departments). 
 
 When the sales in a mercantile business are not "cost 
 priced," the cost of sales at closing periods is shown in 
 the account. Merchandise Purchases (see 259). There- 
 fore this account is kept when a perpetual inventory is 
 maintained and when sales are "cost priced." As to sub- 
 divisions it should correspond to the Sales accounts, a 
 separate Cost of Sales account being kept for each depart- 
 ment. 
 
 The "cost pricing" of sales and maintaining perpetual 
 inventories as to money values, not only constitutes a 
 check on merchandise stocks, but furnishes necessary 
 information in the preparation of monthly profit and loss 
 statements. 
 
 In certain departments of a business, the cost pricing 
 of individual sales is a comparatively easy matter, while 
 in others it is impracticable. For example, in a cloak or 
 suit department, the cost of the sales may be readily 
 ascertained by entering on each sales ticket the cost of the 
 
 164 
 
 sale, and summarizing same: but in the notion depart- 
 ment, for example, this method would entail an immense 
 amount of work considering the results, therefore in such 
 a department the total sales may be satisfactorily priced 
 on a percentage, based on the cost of sales of previous 
 periods ascertained from physical inventories. That is, 
 if by physical inventories, the cost of the sales of a certain 
 department for a given period are found to be 60% of the 
 sales, this percentage may be used in pricing the total 
 monthly sales of the department subject to adjustment 
 by a physical inventory at closing periods. 
 
 Debit: at the close of each month with the total cost 
 of sales for the month, crediting the proper Merchandise 
 Inventorv account. 
 
 Credit: at the close of each month with the total cost 
 of merchandise returned by customers during the month, 
 as shown by the Sales Returned or Credit Memorandum 
 Summary, charging the account. Reserve for Deprecia- 
 tion of Merchandise Stocks for defective merchandise 
 and the proper Merchandise Inventory accounts for their 
 respective proportions. 
 
 Balance of this account should represent the net cost 
 of sales and at closing periods should be transferred to 
 the proper sales account. 
 
 165 
 
 ■'t 
 
EXPENSES 
 
 264-267 
 
 1. 1 
 
 I 
 
 I 
 
 Ml 
 I' 
 
 EXPENSES 
 MERCANTILE COMPANIES 
 
 (See 242). 
 
 261. Heat and Light (Proportion) — Administrative 
 Expense Group. 
 
 Debit: at the close of each month, if profit and loss 
 statements are prepared monthly, otherwise, at closing 
 periods, with the proportion of the heat and light expense 
 appHcable to the general office, crediting the account, 
 Heat and Light (Proportion) in the Selling Expense 
 group. ^ 
 
 262. Stable and Auto Expense (Proportion on In- 
 coming Merchandise). 
 
 Debit: at the close of each month, if profit and loss 
 statements are prepared monthly, otherwise at closing 
 periods, with the proportion of stable and automobile 
 expense applicable to incoming merchandise, crediting 
 the accounts, Stable Expense, Proportion and Automobile 
 Expense, Proportion, respectively, in the Selling Expense 
 group. 
 
 263. Salaries — Clerks (Selling). 
 
 Debit: with salaries of clerks devoting their time 
 
 166 
 
 exclusively to selling, crediting the account, Accrued Pay 
 Rolls. 
 
 264. Salaries — Miscellaneous (Selling Depart- 
 ments). 
 
 Debit: at the close of each month or pay period 
 with the salaries of employees connected with the selling 
 department of the business which are not properly charge- 
 able to any other salary account, crediting the account. 
 Accrued Pay Rolls. 
 
 265. Heat and Light (Proportion)— Selling Expense 
 
 Group. 
 
 Debit: with the cost of heat and light, crediting 
 Vouchers or Accounts Payable as the case may be. 
 
 Credit: at the close of each month, if profit and loss 
 statements are prepared monthly, otherwise at closing 
 periods, with the proportion of the heat and light expense 
 applicable to the general office, charging the account. 
 Heat and Light (Proportion) in the Administrative 
 Expense group. 
 
 266. Elevator Wages and Expense. 
 
 Debit: at the close of each month or pay period with 
 wages of elevator operators, crediting the account, 
 Accrued Pay Rolls; with all other expenses incidental to 
 the operation of elevators, such as water, repairs, etc., 
 crediting Vouchers or Accounts Payable, as the case 
 may be. 
 
 267. Insurance — Liability. 
 
 This account should show the cost of all liability 
 
 167 
 
 ,' 
 
r <■ 
 
 
 i 
 
 It 
 
 [fi 
 
 268-270 
 
 MERCANTILE COMPANIES 
 
 insurance, such as elevator, steam boiler and general lia- 
 bility, except that relating to stable and automobile 
 equipment, and should be treated in a similar manner as 
 described in 168. 
 
 268. Insurance — Fire, on Merchandise Stocks, Build- 
 ings and Building Fixtures. 
 
 This account should be treated in a similar manner 
 as described in 168, and should show the cost of fire insur- 
 ance on merchandise stocks, buildings and building fix- 
 tures, usually, to be distributed to the various depart- 
 ments in proportion to the valuation of departmental 
 stocks and equipment. 
 
 269. Taxes — Merchandise Stocks, Buildings and 
 Building Fixtures. 
 
 This account should be treated in a similar manner 
 as described in 177, and should shov^ the cost of local 
 taxes on merchandise stocks, buildings and building fix- 
 tures, to be distributed to the various departments in 
 proportion to the valuation of departmental stocks and 
 equipment. 
 
 270. Repairs to Buildings and Building Fixtures. 
 Repairs to Store Furniture and Fixtures. 
 
 Debit: these accounts respectively in a similar man- 
 ner as described in 154, v^ith the cost of repairs on items 
 relating to each, the departmental distribution of which 
 in some instances to be actual, while in others according 
 to space occupied. 
 
 168 
 
 EXPENSES 
 
 271-275 
 
 \ 
 
 271. Extinguishment of Alterations and Improve* 
 ments. 
 
 Debit: at the close of each month, if profit and loss 
 statements are prepared monthly, otherwise at closing 
 periods, with such a proportionate amount as will charge 
 off the account, Alterations and Improvements, over a 
 certain period of years as referred to in 256. 
 
 272. Departmental Supplies. 
 
 This account should be treated in a similar manner 
 as described in 149, and should show the cost of depart- 
 mental supplies used, such as clerks' sales books, wrap- 
 ping paper, twine, etc. 
 
 Note — When practicable, these supplies should be 
 issued on requisitions, which should be summarized and 
 distributed according to departments, otherwise the de- 
 Dartmental distribution may be made according to sales. 
 
 273. Merchandise Scrapped. 
 
 Debit: with the cost of all merchandise scrapped on 
 account of its being damaged, shop-worn, antiquated, etc., 
 when the reserve account, reference 254, is not carried; 
 with the periodical reserve charge, when a reserve account 
 is carried. 
 
 Credit: with the sale of scrap. 
 
 274. Stable Expense — Proportion (Selling Depart- 
 ments). 
 
 275. Automobile Expense — Proportion (Selling De- 
 partments). 
 
 These accounts are to be kept only when a portion 
 
 169 
 
1.' '' 
 
 F ^ 
 
 275 
 
 MERCANTILE COMPANIES 
 
 of these expenses are to be charged to other than selling 
 departments. 
 
 Debit: each account at closing periods in one amount 
 with the total of the balances shown by the individual 
 stable and automobile expense accounts, respectively, 
 crediting the individual accounts. 
 
 Credit: at the close of each month, when profit and 
 loss statements are prepared monthly, otherwise at clos- 
 ing periods, with the proportion to be charged to other 
 than selling departments. The amount of this entry in 
 most cases must be estimated. 
 
 Balance of this account, after making the above en- 
 tries, should represent the stable expenses and automobile 
 expenses, respectively, applicable to selling departments. 
 
 ill 
 
 PART 4 
 
 (I 
 
 I " f 
 
 li 
 
 PRINCIPLES 
 
 OF 
 
 COST ACCOUNTING 
 
 170 
 
> 
 
 !5 I 
 
 M 
 
 Hi? 
 
 u 
 
 hi 
 
 S; 
 
 PRINCIPLES OF COST ACCOUNTING 
 
 Owing to the fact that there is such a variety of con- 
 ditions to be met in different lines of manufacturing, no 
 ifixed rules or set of forms can be prepared specifically 
 applicable to all cases, and as the main object of this 
 reference book is to deal with the general accounts of a 
 business, the subject of cost accounting will be treated 
 only briefly as to the principles involved in arriving at 
 manufacturing costs and bringing the cost figures under 
 the control of the general books from which financial and 
 operating statements are prepared. 
 
 276, Importance of a Cost System. 
 
 The importance and, in fact, necessity of an adequate 
 cost system in order to determine accurate costs of goods 
 manufactured, will not be generally discussed here, but 
 it has been found by actual experience that the manufac- 
 turer who depends upon estimated and test costs of 
 material and labor with an estimated percentage added to 
 cover "Overhead,'* for information upon which to establish 
 selling prices, seldom finds that the actual results come up 
 to his expectations, and it is he who cannot understand 
 why his business does not show greater net pro/fits. Such 
 methods fail to show true cost for the reason that a test 
 job at one period under certain favorable conditions of 
 
 173 
 
! ■ 
 
 m 
 
 276 
 
 PRINCIPLES OF COST ACCOUNTING 
 
 \r, 
 
 production may be greatly increased at a different period 
 under less favorable conditions of manufacture when 
 increased costs of material and expenses together with 
 other items such as the element of waste, have been lost 
 sight of. 
 
 A cost system to be relied upon, should constitute a 
 part of the general books of account by being controlled 
 by the general ledger. The effective cost system is 
 founded on the principles of double entry bookkeeping, 
 operating on debits and credits, the various processes and 
 stages of manufacture thus balancing with certain contra 
 accounts. When a cost system is not operated in this 
 manner and controlled by the general books, it is no 
 more nor less than a memorandum system, to be com- 
 pared with the single entry method of bookkeeping, 
 which has been generally discarded long ago on account 
 of its inadequacy. The efficient cost system not only 
 serves to show detailed costs of production, but also pro- 
 vides for a perpetual inventory, thus making possible in 
 most cases the preparation of monthly statements show- 
 ing the financial condition of a business and its results 
 from operation. Although there may be some certain 
 lines of business in which a detailed cost system is im- 
 practicable, in the majority of them it may be installed 
 and maintained to advantage. 
 
 Briefly then a cost system, properly installed on 
 scientific principles, furnishes the information which 
 enables the management of a business to eliminate waste, 
 reduce costs and expenses, and most important, to know 
 actual costs and thus be able to meet competition intelli- 
 
 174 
 
 ELEMENTS OF COST 277-278 
 
 gently; to push the paying lines and eliminate the losing 
 ones. 
 
 277. Distinction Between Accounts for a Manu- 
 facturing and Mercantile Business. 
 
 The accounts referred to in this book relate mainly 
 to two general classes of business, viz.: Mercantile and 
 Manufacturing. 
 
 A Mercantile or Trading business is one which buys 
 and sells merchandise manufactured by others. 
 
 A Manufacturing business is one which buys raw or 
 semi-finished material and by the addition of labor and 
 other expenses, converts it into a marketable product. 
 
 In the first, the cost is represented by the purchase 
 price together with incoming transportation charges. In 
 the second, the production cost consists of material, labor 
 and manufacturing expenses. In the first, arriving at the 
 cost is simple, while in the second it is often very difficult. 
 
 The expenses of a mercantile business may be divided 
 into two general groups, viz. : Administrative and Selling, 
 while to the manufacturing business is added another 
 group termed "Manufacturing Expenses." It may be 
 seen by referring to 26 and 248 that the principal differ- 
 ence in the accounts of a mercantile and a manufacturing 
 business is, that the latter requires plant accounts, pro- 
 duction accounts and manufacturing expense accounts 
 not found in the list of accounts for the former. 
 
 278. Elements of Manufacturing Costs. 
 Manufacturing costs, composed of the three principal 
 
 17s 
 
M 
 
 Kl 
 
 1;);; 
 
 1 1 
 
 i 
 
 279-280 PRINCIPLES OF COST ACCOUNTING 
 
 elements of Material, Labor and Expense, are classified 
 into three principal divisions, viz. : 
 
 (i) Direct Material. 
 
 (2) Direct Labor. 
 
 (3) Manufacturing Expense also termed "Over- 
 head'' or "Burden," including indirect material, indirect 
 labor and expense. 
 
 The first two divisions constitute "Prime Cost" or 
 "Direct Charges to Manufacturing" and the third con- 
 stitutes "Indirect Charges to Manufacturing." 
 
 279. (i) Direct Material. 
 
 This includes all material used which is chargeable 
 directly to a specific job number or process. All other 
 material, termed indirect material, used in manufacturing 
 operations, such as oil, waste, packing, fuel, supplies, etc., 
 which is not chargeable to any job number or process, 
 is classified as manufacturing expense or overhead, 
 although the general term, material, embraces both direct 
 and indirect material. A general description of the 
 method of handling material records is as follows: 
 
 280. Perpetual Inventory. 
 
 When a cost system is maintained, all purchases of 
 material should be charged to a stores account. 
 
 This embraces the keeping of stock records with 
 each vsize and kind of material items showing quantities 
 received, dates, unit cost, quantities issued or used and 
 balance on hand. This information may be kept on 
 cards or in loose leaf record books; and when possible, 
 should be kept in the office of the factory accounting depart- 
 
 176 
 
 MATERIAL RECEIVED AND ISSUED 
 
 281-282 
 
 ment, by employees who are in no way identified with the 
 stock room, in order to obtain an efficient check on the 
 stock in store rooms. When more than one stock room 
 exists, a separate set of records and controlling account 
 should be kept with each. 
 
 In order that the records may be accurately main- 
 tained, certain of the stock items should be verified regu- 
 larly at stated intervals, and all differences between the 
 records and quantities actually on hand investigated and 
 the proper adjusting entries prepared. 
 
 The method leading up to recording the entries on 
 the stock records varies with different lines of business, 
 but it is illustrated in general as follows: 
 
 281. Material Received. 
 
 All incoming material is recorded by the receiving 
 department on receiving slips, two copies of which are 
 passed to the purchasing department, one copy to be 
 attached to the purchase invoice, the other to be priced 
 and forwarded to the stock record clerk, who enters 
 on the stock records the date, quantity received, and 
 unit cost. 
 
 Material transferred to the store room from work 
 in process is recorded on transfer slips after being priced 
 by the cost department. These are summarized and 
 charged in total at the close of the month to the control- 
 ling account. Stores and credited to the account, Work 
 in Process. 
 
 282. Material Issued. 
 
 All material used in the different departments either 
 
 ^77 
 
 'H 
 
 m 
 
"> 
 
 II' 
 
 ii, 
 
 « 
 
 m 
 
 283-285 PRINCIPLES OF COST ACCOUNTING 
 
 for production or expenses should be drawn from the 
 store room on a stores order or requisition, the form to 
 show date, department, job number or account, article, 
 quantity, cost, by whom received and by whom ordered. 
 The store keeper receiving these requisitions, delivers 
 them daily to the cost department to be entered on the 
 the stock records, from which they are priced, and in 
 turn extended and filed for summarizing to be eventually 
 charged to the proper job or account number. They are 
 also summarized as to departments, charging at the close 
 of the month the accounts. Work in Process, Operating 
 Expenses and crediting Stores. 
 
 283. Material Transferred from One Department to 
 
 Another. 
 
 As work in the factory is completed or transferred 
 from one department to another, transfer slips are issued, 
 summarized and posted to the cost sheets or departments 
 to which they refer. 
 
 284. (2) Direct Labor. 
 
 This includes all labor which is chargeable directly 
 to a specific job number or process. All other labor 
 termed "indirect labor" such as salaries of superintend- 
 ents and foremen, engineers, watchmen, store keepers, 
 sweepers, truckers, etc., constitutes a part of the manu- 
 facturing expense or overhead. 
 
 285. Time Tickets. 
 
 The distribution of labor as to job numbers and ex- 
 pense accounts originates with the time tickets. These 
 
 178 
 
 METHODS OF PAYING WAGES 
 
 286-289 
 
 should show date, employee's name and number, depart- 
 ment, job number or account number, operation, hours, 
 rate, number of pieces, rate per piece, amount. They are 
 made out by the workmen or timekeeper as the case may 
 be, and collected daily and delivered to the pay roll de- 
 partment to be compared with the clock cards, priced 
 and turned over to the cost department to be filed and 
 summarized at the proper time, and charged to the proper 
 job or account number. They are also summarized accord- 
 ing to departments, charging at the close of the month the 
 accounts. Work in Process, Operating Expenses, and 
 crediting Accrued Wages. 
 
 286. Methods of Pajang Wages. 
 
 There are various methods of paying wages, some of 
 which are as follows: 
 
 287. (a) Day Rate Plan. 
 
 This consists of paying employees at a certain rate 
 per hour or day. 
 
 288. (b) Piece Work Plan. 
 
 This consists of paying employees for the exact 
 amount of work performed at a certain price per piece. 
 
 289. (c) Differential Rate Plan. 
 
 This consists of paying employees an increased or 
 decreased rate per piece according to the increased or 
 decreased number of pieces produced over or under a 
 certain standard. For illustration, suppose that it is 
 found in a certain factory that the average number of a 
 certain part produced by all workmen per day is ten, 
 
 179 
 

 hi 
 
 h ' 
 
 I' 
 
 h 
 
 m. 
 
 290-292 PRINCIPLES OF COST ACCOUNTING 
 
 for which 25^ per piece is paid. In order to increase the 
 production, workmen are allowed 28^ per piece for all 
 over ten produced per day, and on the other hand 22^ 
 per piece for all pieces under ten produced per day. 
 
 290. (d) Premium Rate Plan. 
 
 This consists of allowing workmen a certain extra 
 amount or premium on time saved in performing a cer- 
 tain piece of work based on a certain standard. For 
 example, if the average time of all workmen to perform 
 a certain piece of work is ten hours at the rate of 25^ 
 per hour, and if a workman performs the work in eight 
 hours, he is paid the eight hours at 25^ per hour or $2.00 
 and for the two hours saved he is paid one-half of the 
 saving or 25«f as a premium in addition to the remaining 
 two hours at the regular rate, so that for the day he would 
 receive ten hours at the regular rate of 25^ or $2.50 plus 
 the premium of 25^ or a total of $2.75. 
 
 291. (e) Bonus Rate Plan. 
 
 This plan is similar to the premium rate plan, only 
 the rate per hour is increased instead of the rate per 
 piece according to the saving of time based on a certain 
 standard. For illustration, if a rate of 25^ per hour is 
 paid for producing 12 pieces per hour, 29^ per hour is 
 paid if 15 pieces per hour are produced. 
 
 292. (f) Profit Sharing Plan. 
 
 This consists of a distribution to employees of a cer- 
 tain percentage of the net profits for a given period. 
 This plan is not as satisfactory as the others, however, 
 
 180 
 
 MANUFACTURING EXPENSES 
 
 293-296 
 
 as the inefficient workman shares in the profits similar 
 to the efficient, and then certain conditions may arise over 
 which workmen have no control, thus causing a loss, in 
 which event they would be deprived of an extra com- 
 pensation for their increased efforts. 
 
 293. Manufacturing Expenses, "Overhead" or 
 •'Burden." 
 
 This term includes all expenses incidental to the 
 operation of the plant such as indirect labor, heat, light 
 and power, maintenance of plant, stable expense, rent, 
 taxes, insurance, depreciation, etc. (For detailed accounts 
 see 26). Administrative and SelHng Expenses are not to 
 be included in Manufacturing overhead. 
 
 294. Distribution of Manufacturing Expenses to 
 Departments. 
 
 The manufacturing expenses should first be distrib- 
 uted to the various departments. They may be classified 
 into two general divisions, viz: 
 
 (a) Direct Expenses. 
 
 (b) Indirect Expenses. 
 
 295. Direct Expenses are those which may be iden- 
 tified with certain departments and are thus chargeable 
 directly to them. 
 
 296. Indirect Expenses are those which are charge- 
 able as general operating expenses to the entire plant to 
 be prorated over the various departments according to 
 some given element, for example, labor. 
 
 181 
 
 ■ 1 
 
296 
 
 PRINCIPLES OF COST ACCOUNTING 
 
 DISTRIBUTION OF EXPENSES 
 
 297-298 
 
 u 
 
 B 
 
 i 
 
 ^1. 
 
 hi 
 
 h 
 
 k 
 
 If 
 
 I 
 
 ^m 
 
 No fixed rule for the classification of expenses can be 
 given applicable to all cases, but the following accounts 
 are given as illustrations of how they may be treated 
 under certain conditions. 
 
 Referring to the manufacturing expense group of 
 accounts (See 26), Salaries of Foremen may belong to 
 the first class, being chargeable directly to certain depart- 
 ments from the pay roll distribution summary, while the 
 accounts, Salaries of Superintendents, Factory Account- 
 ing Employees and Storekeepers, belong to the second 
 class, as they constitute general operating expenses of 
 the entire plant. The indirect labor accounts may be 
 both direct and indirect. The heat and light accounts 
 in most cases may be distributed directly to departments 
 in proportion to floor space ; power according to machines, 
 or in manv cases, an accurate distribution of electric cur- 
 rent and gas may be obtained by means of departmental 
 meter readings. Of the maintenance accounts, portions 
 are chargeable directly to departments from the material 
 and labor distribution summaries, while other portions 
 are chargeable only as general indirect expenses. Rent 
 may be distributed directly to departments according to 
 floor space; Taxes and Fire Insurance according to val- 
 uation of stocks and equipment; LiabiHty Insurance ac- 
 cording to pay rolls; Factory SuppHes, direct from the 
 material distribution summary; Experimental Work and 
 Lost Time, direct from the labor distribution summary; 
 Stable and Auto Expenses, Incoming Transportation 
 Charges Undistributed and the Proportion of Administra- 
 tive Expenses belong to the second class. Water, Tele- 
 phone and Telegraph may be both direct and indirect. 
 
 182 
 
 Depreciation and Interest on Investments may be com- 
 puted on the equipment of each department and charged 
 direct, and these charges applicable to the remainder of 
 the plant may be treated as indirect expenses. 
 
 297. Distribution of Manufacturing Expenses to 
 
 Cost Sheets. 
 
 The sum of the two above mentioned classes of 
 expenses for each department constitutes the amount of 
 overhead of the department to be distributed to its own 
 product according to one of several different methods, 
 four of which, for illustration, are briefly described as 
 
 follows : 
 
 (a) Direct Labor Cost Method. 
 
 (b) Direct Labor Hours Method. 
 
 (c) Direct Labor and Material Method. 
 
 (d) Machine Hour Method. 
 
 298. (a) Direct Labor Cost Method of Distrib- 
 uting Overhead Expense. 
 
 Under this method the expenses are distributed to 
 the various jobs by adding to the material and labor cost, 
 a certain percent of the labor for overhead, this percent 
 being found by dividing the total manufacturing expense 
 of a certain department by the total manufacturing labor 
 of the department, the quotient, carried to four decimal 
 places, being the percent of expense to direct labor for 
 the department. For example, if the direct labor in a 
 certain department for a given period is $10,000.00 and 
 the manufacturing expense $5,000.00, the percent of 
 expense to labor would be 50% applied as follows: 
 
 183 
 
 \\\ 
 
 ' 'I 
 
t i 
 
 jl 
 
 299 
 
 PRINCIPLES OF COST ACCOUNTING 
 
 DISTRIBUTION OF EXPENSES 
 
 300-302 
 
 
 hi 
 
 1:' 
 
 Cost Sheet Results. 
 Direct Material Cost ^. 
 Direct Labor Cost 
 
 $100.00 
 60.00 
 
 Total Material and Labor 
 Overhead Expense 50% of Labpr 
 
 160.00 
 ^\ go.oo 
 
 Total Factory Cost \*^'^:% 
 
 ^v $100.00 
 
 This method is fairly accurate when the expenses of 
 each department are kept separate, but when the ex- 
 penses of the entire factory are distributed according to 
 the labor of the entire factory, the results are not accurate 
 owing to the fact that the expenses of different depart- 
 ments are so at variance. 
 
 This method is not as accurate as the direct labor 
 hours method owing to the fact that a skilled mechanic 
 receiving 35^ per hour may require no more actual over- 
 head per hour than an apprentice receiving 10^ per hour. 
 However, it must be admitted that the product of skilled 
 labor is entitled to a greater margin of profit than that 
 of unskilled labor, thus justifying this method of distribu- 
 tion in certain cases. 
 
 299. (b) Direct Labor Hours Method of Distribu- 
 ting Overhead Expense. 
 
 Under this method the total number of hours of 
 direct labor is divided into the total manufacturing ex- 
 penses, giving the overhead cost per hour. This method 
 gives more accurate results than the direct labor cost 
 method owing to the fact that the expense is distributed 
 
 184 
 
 equally over high labor or low labor costs, being based 
 on the number of hours w^orked. 
 
 300. (c) Direct Labor and Material Method of 
 Distributing Overhead Expense. 
 
 This method is similar to the direct labor cost 
 method, except that the total of direct labor and material 
 cost instead of the direct labor cost alone, is divided into 
 the total overhead expense, giving the percent of over- 
 head expense to be added to material and labor cost. 
 This method is practicable only when the material con- 
 stitutes the greater portion of the direct cost of the prod- 
 uct. 
 
 301. (d) Machine Hour Method of Distributing 
 Overhead Expense. 
 
 Under this method the number of machine hours is 
 used as a basis of costs, each job being charged with the 
 number of hours each machine is used on the job. The 
 direct hourly rate to be charged for operating the differ- 
 ent machines is determined by distributing directly to 
 the different machines, the greater portion of the expenses 
 of the department in which the machine is located. Those 
 expenses which are not distributed directly in the hourly 
 rate charge are prorated in a manner similar to some one 
 of the above described methods. 
 
 302. Factory Ledger. 
 
 A factory ledger, controlled by the general ledger, 
 should be kept containing accounts with the various store 
 rooms, labor, work in process, overhead expenses and 
 
 185 
 
 1 !' 
 
 I A 
 
t 
 
 ii 
 
 ,t- : 
 
 303-304 PRINCIPLES OF COST ACCOUNTING 
 
 general ledger. A controlling account only with over- 
 head expenses may be carried in the factory ledger, ob- 
 taining the amount of individual accounts and the depart- 
 mental distribution from expense analysis sheets; or a 
 separate ledger sheet may be given to each expense 
 account, the sheet to be ruled with columns for each de- 
 partment, thus showing the total amount of each expense 
 account with the departmental distribution; totals only 
 being posted from the distribution summaries at the close 
 of each month. This method provides a valuable com- 
 parative analysis record. 
 
 Some prefer to carry each manufacturing expense 
 account independent of departmental distribution in the 
 general ledger, obtaining the distribution for monthly 
 operating statements from expense analysis sheets. The 
 method to be adopted depends upon conditions in each 
 
 case. 
 
 When the details of the manufacturing accounts are 
 kept in the factory ledger, it becomes necessary to keep 
 in the general or private ledger, only a controlling account 
 with the factory ledger. 
 
 303. Methods of Cost Finding. 
 
 There are two general methods of cost finding, viz: 
 
 (a) Production Order Method. 
 
 (b) Process Method. 
 
 304. (a) The Production Order Method provides 
 for charging direct material and labor to a given order, 
 article or product, to which total is added a pro rata 
 
 186 
 
 PRODUCTION ORDER 
 
 305-306 
 
 share of overhead expenses, based on some certain ele- 
 ment of direct cost to make total cost. 
 
 305. Manufacturing or Production Order. 
 
 This is a written order issued by the factory super- 
 intendent to the various departments concerned when a 
 job is to be started, giving the necessary specifications 
 relating to it. It should be in a form to show order num- 
 ber, date issued, date wanted, date completed, quantity, 
 and description of product. 
 
 For example, an order is issued to assemble fifty 
 complete machines of a certain model. This order is 
 registered in the order register, receiving a number by 
 which it is identified until the job is completed. If parts 
 are required to be manufactured for stock or to complete 
 the order, separate manufacturing orders, identitfied by 
 separate order numbers, are issued for each part required. 
 
 The form and details as to issuing these orders 
 depend upon the specific conditions in each case, but the 
 following procedure is given as an illustration, applicable 
 under certain conditions. One copy is sent to each manu- 
 facturing department affected, one copy to the store 
 room, one copy to the cost department, ruled to act as 
 a cost sheet; and two copies remain in the superintend- 
 ent's office, one to be filed numerically constituting an 
 order register and the other to be placed on a "unfilled 
 order file," where it remains until completed, when it is 
 transferred to a "completed order file." 
 
 306. Construction and Maintenance Orders. 
 
 For construction and maintenance of plant items, 
 
 187 
 
307 
 
 PRINCIPLES OF COST ACCOUNTING 
 
 PROCESS METHOD 
 
 308-309 
 
 ft 
 
 It' 
 
 ID 
 
 it 
 
 orders are issued by the superintendent in a similar man- 
 ner as described in 305, the cost sheets being carried in 
 the indirect cost ledger until completed, when they are 
 transferred to the proper expense or fixed asset account. 
 For petty repairs of, say $10.00 or less, usually no order 
 is considered necessary, in which event workmen's time 
 tickets should indicate the expense account to be charged 
 
 as: 
 
 Repairs to Buildings and Building Fixtures. 
 
 Power Plant. 
 
 Machinery. 
 
 Factory Fixtures, etc. 
 
 ti 
 
 (( 
 
 << 
 
 i( 
 
 (t 
 
 307. Cost Ledger. 
 
 The detailed costs are assembled on cost sheets 
 showing separately the cost of material, labor and over- 
 head expense for each job, the form to contain columns 
 headed accordingly. These cost sheets collectively con- 
 stitute the Cost Ledger. As before stated, a cost sheet 
 is kept corresponding to each job number to which are 
 posted all direct charges for material and labor relating 
 to it, the material originating with the requisitions, and 
 the labor, with the time tickets. At the close of each 
 month the manufacturing overhead should be entered on 
 the cost sheets according to one of the methods referred 
 to in 297. On jobs completed during the month on 
 which costs are desired before the close of the month, the 
 rate of manufacturing overhead is based on the known 
 rate at the beginning of the month. 
 
 When a job is completed, its cost sheet should be 
 removed and filed in a transfer binder, thus keeping only 
 
 188 
 
 unfinished jobs in the current cost ledger. At the close 
 of the month after posting the totals of material, labor, 
 overhead and transfer slips to the controlling accounts of 
 Stores and Work in Process, and the detailed totals to the 
 cost sheets of each department, the aggregate of the 
 cost sheets of each department should then agree with 
 the respective departmental controlling accounts of Work 
 in Process; and the aggregate of all cost sheets for the 
 entire factory should agree with the one ledger control- 
 ling account. Work in Process. 
 
 308. (b) The Process Method. 
 In certain lines of manufacturing the production 
 order method, described in 304 to 307 inclusive, is not 
 practicable, and costs are found by the method, termed 
 the "Process Method.*' Examples are flour mills, sugar 
 and salt refineries, button and pin factories, nail mills, 
 yarn mills, etc. Under this method all material, labor 
 and overhead expenses are distributed to the various 
 departments in a similar manner as described in the pro- 
 duction order method. The unit cost of production by 
 departments is then found by dividing the total produc- 
 tion cost of a department for a given period by the num- 
 ber of units of production ; the unit may be tons, pounds, 
 gross, dozen or each. Under this method instead of is- 
 suing special production orders for each lot, standing 
 shop orders, covering operations or processes, may be 
 issued, to which all material, labor and expenses are dis- 
 tributed. 
 
 309. By-Products. 
 
 The question often arises as to the proper method 
 
 189 
 
I 
 
 ;i!i 
 
 
 310 
 
 PRINCIPLES OF COST ACCOUNTING 
 
 ESTABLISHING SELLING PRICES 
 
 310 
 
 i 
 
 of handling the account with salvage which is either sold 
 in its natural state or manufactured into other products 
 called "By-Products." Packing and refining companies 
 are good examples, and often these by-products constitute 
 the greater portion of the business. If no other labor 
 or material is necessary to convert them into marketable 
 products, they are sold as such, the revenues from which 
 constituting a reduction in the cost of the main products. 
 If labor and material are added to make the products 
 marketable, manufacturing departments should be main- 
 tained for that purpose, and be charged with the market 
 value of the scrap, and these departments then handled 
 as other manufacturing departments. 
 
 310. Establishing Selling Prices. 
 
 Costs as related to manufacturing, as previously 
 Stated, consist of material, labor and overhead as factory 
 costs, to which are added administrative and selling ex- 
 penses, making the total cost to produce and sell, illus- 
 trated as follows: 
 
 Material Cost $100.00 
 
 Add Direct Labor 60.00 
 
 " Overhead (50% of labor) ' 30.00 
 
 Total Factory Cost 
 
 Add Administrative and Selling Ex- 
 penses (25% of Factory Cost) 
 
 190.00 
 
 47.50 
 
 Total Cost to Produce and Sell $237.50 
 
 The costs as related to a mercantile business consist 
 of the purchase price of goods, together with incoming 
 
 IQO 
 
 transportation charges constituting direct costs, to which 
 are added administrative and selling expenses, making the 
 total cost, to purchase and sell, illustrated as follows: 
 Cost of Merchandise Purchased $100.00 
 
 Add Administrative and Selling Ex- 
 penses (33 1/3% oi Cost) 33-33 
 
 Total $13333 
 
 When the percentages of profits are calculated on 
 the cost price, the desired percentage of profit in the above 
 cases would be figured on the respective costs and added 
 to them, producing the selHng prices, but it is customary 
 with many manufacturers and the majority of merchants 
 to figure the percentage of expenses and profits on sales 
 instead of costs. 
 
 The question then arises — what percentage must be 
 added to production or purchase cost, covering adminis- 
 trative and selling expenses, to make a certain percent 
 net profit on the sales: in answer to which the following 
 form of solution is suggested: 
 Let a=Selling Price, 100%. 
 
 b=a, less the total percentages on sales. 
 
 c=iExpenses. , 
 
 d=Profit on Sales. 
 
 g_y^tQ be added to cost to make a certain % 
 
 of sales. 
 Then: 
 
 c+d 
 
 it 
 
 (S 
 
 tt 
 
 tt 
 
 -=e 
 
 191 
 

 ^^^^^^^H 
 
 
 > 1 ' 
 
 ::y t 
 « i 
 
 mkid'' 
 
 M 
 
 310 PRINCIPLES OF COST ACCOUNTING 
 
 Example i. What percent must be added to factory 
 or purchase cost to make 10% net on sales, when the 
 administrative and selling expenses are 25% of sales? 
 
 Solution : 
 
 c+d 25% + io% 35% 
 
 =e. = =54% 
 
 b loofo— (25% + io%) 65% 
 
 Application : 
 
 Cost of article $2.00 
 
 Add 54% 1.08 
 
 Selling Price 
 
 Proof : 
 
 Cost $2.00 
 
 Add 25 fo of sales ($3.08) for 
 
 expenses -77 
 
 Add 10% of sales ($3.08) for 
 
 profit -3^ 
 
 $3.08 
 
 $3.08 
 
 Or: 
 
 Selling Price 
 Expenses 
 Profit desired 
 
 100% 
 
 25% of sales. 
 10% of sales. 
 
 ioo%— 35%=65% of sales. 
 $2.oo-7-.65=$3.o8, selling price. 
 
 192 
 
 ESTABLISHING SELLING PRICES 
 
 310 
 
 Example 2. What per cent must be added to the 
 material and labor cost of a certain article to make 10% 
 net profit on the sales, when the Factory Overhead is 
 22% of the Material and Labor cost and the Commercial 
 Expenses are 15% of sales f 
 Solution: 
 
 c+d 22% + 15% + iofo 47% 
 
 =e,-^ -= =^2 2/3% 
 
 h ioo%— (157^ + 10%) 75% 
 
 193 
 
11 
 
 
 
 PART 5 
 
 OPENING ENTRIES 
 
 'ii 
 
 II 
 
 f 
 
I 
 
 hr 
 
 tW!" 
 
 '■r. 
 
 
 
 OPENING ENTRIES. 
 
 311. Opening Entry for business operated by indi- 
 vidual with cash investment. 
 
 C. J. Wilson engages in the retail coal business with 
 a cash investment of $10,000.00. 
 Entry. 
 
 C. J. Wilson has this day of 
 
 19 commenced business located at 
 
 as a retail coal dealer with a cash investment of $10,000.00. 
 
 Cash $10,000.00. 
 
 To C. J. Wilson (Capital Account) $10,000.00. 
 
 For amount of investment on this date. 
 
 312. Opening Entry for partnership with cash in- 
 vestment. 
 
 J. W. Henderson and R. F. Fox form a partnership 
 for the purpose of conducting a general merchandise busi- 
 ness, each investing $5,000.00. 
 Entry. 
 
 A partnership has this day of 
 
 ig been formed between J. W. Henderson and R. F. Fox for the 
 
 purpose of conducting a general merchandise business, located at 
 
 each investing $5,000.00 in 
 
 cash. The business is to be operated under the firm name of Hender- 
 son & Fox, the profits or losses to be shared equally. 
 
 Cash $10,000.00. 
 
 To: J. W. Henderson (Capital Account) $5,000.00 
 
 R. F. Fox (Capital Account) 5,000.00 
 
 For amount of investment on this date. 
 
 313. Opening Entry for partnership with cash and 
 other property investments. 
 
 A. C. Arnold and J. W. Shaw enter into a partner- 
 
 197 
 
 II 
 
 II,' 
 
PARTNERSHIP 
 
 3IS 
 
 f|* 
 
 l^i 
 
 
 II 
 
 flil 
 
 ■| 
 
 314 
 
 OPENING ENTRIES 
 
 Ship for the purpose of conducting a retail jewelry busi- 
 ness A. C. Arnold invests Notes Receivable $1,50000 
 with accrued interest $75-00, Accounts Receivable 
 $4,682.00, Merchandise $24,643.00, Prepaid Insurance 
 $350.00. Store Furniture and Fixtures $1,800.00 with ha- 
 bUities to be assumed by the firm as follows: No^s 
 Payable $6,000.00, Accounts Payable $2,050.00 J. W. 
 
 • . ocv. "R^cooooo The profits or losses to 
 Shaw invests cash $25,000.00. ^'^^ f 
 
 be shared equally. 
 
 Entry. dav of 
 
 A partnership has W'^.......------- J , ^ gj^ for the 
 
 profits or losses to be shared equally. The entries 
 Respective net investments are as follows. 
 
 Notes Receivable (Itemize, showing date 
 maker, time, interest and amount) $ i,5O0.O0 
 
 Accrued Interest-Notes Re^^^^^^^^^ ^^-oo 
 
 ^^Slidife^^^^^^ -^3.00 
 
 I[ork^"Srand Fixtures (per Inven- ^^^^ 
 
 ^""to- Notes Payable (Itemize, showing date, payee, 
 time, interest and amount) 
 Accounts Payable (Itemize) 
 
 A. C. A^'nojd . p Arnold as per above assets and 
 For net investment of A. C Arnoia <*» v^ 
 
 liabilities. 
 
 $ 6,000.00 
 
 2,050.00 
 
 25,000.00 
 
 Cash (see Cash Book) 
 
 To J. W. Shaw 
 For cash investment of J. W. Shaw. 
 
 $25,000.00 
 
 25,000.00 
 
 314. Note-It is suggested that opening entries 
 containing both cash and other transactions, as the above 
 for example, be made complete in the Journal. The cash 
 transactions will also, necessarily be entered in the cash 
 book, but posted from only one of the original entries. 
 
 198 
 
 315. Changing books from rfngle to double entry. 
 
 E. C. Day and J. B. Davis, partners, after conducting 
 a retail clothing business for one year and keeping their 
 books by single entry decide to change their books to 
 double entry. The only ledger accounts kept were with 
 cash, customers, purchase creditors and proprietors. 
 Day's original investment was $15,000.00 and Davis' 
 $10,000.00, their profits or losses to be shared in propor- 
 tion to their respective investments, i. e. 3/5 and 2/5. 
 
 From various sources of information the following 
 Statement of Assets and Liabilities is prepared: 
 
 ASSETS 
 
 Cash 
 
 Notes Receivable . 
 
 Accrued Interest— Notes Receivable 
 Accounts Receivable 
 Merchandise (per Inventory) 
 Prepaid Insurance 
 Real Estate 
 Furniture and Fixtures 
 
 Total Assets 
 LIABILITIES 
 
 Notes Payable 
 
 Accounts Payable 
 
 Accrued Interest— Notes Payable 
 
 Total Liabilities 
 
 Net Worth at close of period 
 
 Represented by: 
 
 £. C. Day's Capital Account 
 
 Balance at beginning of period $15,000.00 
 Add 3-5 Net Profit 2,892.00 
 
 Balance at close of period 
 J. B. Davis' Capital Account 
 
 Balance at beginning of period 
 Add 2-5 Net Profit 
 
 Balance at close of period 
 
 $ 1,890.00 
 
 1,300.00 
 
 60.00 
 
 4,070.00 
 
 17,000.00 
 
 150.00 
 
 11,67500 
 2,000.00 
 
 5,000.00 
 
 3,250.00 
 
 75.00 
 
 10,000.00 
 1,928.00 
 
 199 
 
 $38,14500 
 
 8,32500 
 29,820.00 
 
 17,892.00 
 
 11,928.00 
 
 $29,820.00 
 
 il 
 
 [ 
 
316-318 
 
 OPENING ENTRIES 
 
 316. Note— The net profit in single entry, when no 
 revenue and expense accounts are kept, is found by tak- 
 ing the difference between the net worth at the begin- 
 ning and close of the period. 
 
 $ 1,300.00 
 
 60.00 
 
 17,000.00 
 
 150.00 
 
 11,67500 
 
 2,000.00 
 
 $ 5,000.00 
 
 75.00 
 
 2,892.00 
 
 1,928.00 
 
 317. Entry to be made on single entry books. 
 
 Notes Receivable (Itemize) 
 Accrued Interest— Notes Receivable 
 Merchandise (per Inventory) 
 Prepaid Insurance 
 Real Estate 
 Furniture and Fixtures 
 To: Notes Payable 
 
 Accrued Interest— Notes Payable 
 E. C. Day— Capital Account— for Net Gain 
 J. B. Davis— Capital Account— for Net Gain 
 To open accounts with the assets and liabilities not previously 
 carried on the books, in changing the books from single to double 
 entry and to credit each partner's capital account with his share ot the 
 net profits for the year ending ^9 
 
 Note—It is readily understood that the debits and 
 credits in the above entry are not equal in amount, as 
 the entry is made on the single entry books to place them 
 on a double entry basis. 
 
 318. Entry to be made on Single Entry books trans- 
 ferring accounts to Double Entry books. 
 
 Notes Payable $ 5,000.00 
 
 Accounts Payable 3,250.00 
 
 Accrued Interest— Notes Payable 0^^*°^ 
 
 E. C. Day— Capital Account 17,892.00 
 
 T. B. Davis— Capital Account 11,928.00 
 
 To: Cash $1,890.00 
 
 Notes Receivable 1,300.00 
 
 Accrued Interest— Notes Receivable 00.00 
 
 Accounts Receivable 4,070.00 
 
 Merchandise (per Inventory) 17,000.00 
 
 Prepaid Insurance 150.00 
 
 Real Estate 11,675.00 
 
 Furniture and Fixtures 2,000.00 
 
 The above entries made to close the accounts carried on the single 
 
 entry books, which have been transferred to a new set of books to be 
 
 kept by double entry. 
 
 200 
 
 CORPORATION STOCK PAID IN FULL 319-32O 
 
 319. Entry to be made on new books to be kept by 
 Double Entry. 
 
 E. C. Day and J. B. Davis, partners conducting a retail clothing 
 
 business located at under the firm name of 
 
 bay & Davis have on this day of 19 opened a 
 
 new set of books and changed their system of bookkeeping from 
 single to double entry. The partners agree to share the profits or 
 losses m proportion to their respective interests on this date as shown 
 by the following statement of assets and liabilities, taken from the 
 books formerly kept by single entry after making the entry changing 
 them from single to double entry. 
 
 Cash 
 
 Notes Receivable (Itemize) 
 
 Accrued Interest — Notes Receivable 
 
 Accounts Receivable (Itemize) 
 
 Merchandise (per Inventory) 
 
 Prepaid Insurance 
 
 Real Estate 
 
 Furniture and Fixtures 
 
 To: Notes Payable 5,000.00 
 
 Accounts Payable 3,250.00 
 
 Accrued Interest — Notes Payable 7Soo 
 
 E. C. Day — Capital Account 17,^2x30 
 
 J. B. Davis — Capital Account 11,928.00 
 
 To place on ledger No. ..• (new ledger) the accounts trans- 
 ferred from ledger No (old ledger). 
 
 $ 1,890.00 
 
 1,300.00 
 
 60.00 
 
 4,070.00 
 
 17,000.00 
 
 150.00 
 
 11,67500 
 
 2,000.00 
 
 320. Opening Entry for Corporation where entire 
 authorized capital stock is issued and fully paid in cash. 
 
 A corporation is formed under the name of The Gen- 
 eral Packing Company with a cash paid up capital of 
 $200,000.00. 
 Entry. 
 
 Cash $200,000.00 
 
 To Capital Stock $200,000.00 
 
 The above entry made to open the books of The General Packing 
 
 Company located at organized on the 
 
 day of 19 under the laws 
 
 of the state of Ohio with an authorized capital stock of $200,000.00 
 divided into 2,000 shares with a par value of $100.00 each, all of said 
 stock having been subscribed and fully paid as follows: 
 
 Note — Optional as to showing names and amounts 
 for each individual stockholder. 
 
 201 
 
\l 
 
 I, 
 
 ll.-'. ' 
 
 321-323 
 
 OPENING ENTRIES 
 
 321. Entries for opening books of corporation is- 
 suing preferred and common stock and for other entries 
 covering the foUowing transactions: stock sold for cash 
 at par ; stock issued in payment for plant purchased ; stock 
 donated by incorporators to be sold to provide working 
 capital ; donated stock sold at both discount and premium ; 
 bonds issued and sold at a discount with common stock 
 bonus; stock issued in payment of promotion expenses; 
 stock sold at premium; stock taken back in settlement 
 of debt of stockholder; stock sold on the instalment 
 plan; authorized stock increased and decreased and for 
 closing books of company selling plant to corporation. 
 322. The N. W. Auto Accessories Company of 
 
 Toledo, Ohio was incorporated under the 
 
 laws of the state of Ohio with an authorized capital stock 
 of $500,000.00 divided into 2,000 shares of preferred and 
 3,000 shares of common stock with a par value of $100.00 
 
 each. 
 
 Entry to place authorized stock on books. 
 
 Capital Stock, Preferred— Unissued $200,000.00 
 
 Capital Stock, Common— Unissued . 300,000.00 
 
 ^To: Capital Stock, Preferred-Authorized ^^'^'^ 
 
 Capital Stock, Common— Authorized ^ '^^ 
 
 The above entry made to open the books of account of The N. W. 
 AuJ^'IctZrL Company located ^tTo.edo.^Oh.o.^or^gan^^^^^^^ 
 
 of* the* State of ^Oh?o' with an authorized capital stock of $500,000.00 
 divided into 2,000 shares of preferred and 3.000 shares of common 
 stock with a par value of $100.00 each. 
 
 323. Fifty shares of the preferred stock were sold 
 for cash at par. 
 Entry. 
 
 ^^ To 'coital Stock, Preferred— Unissued $5,000.00. 
 For fifty shares of Preferred Stock sold for cash. 
 
 202 
 
 STOCK ISSUED IN PURCHASE OF PLANT 
 
 324 
 
 324. Subsequent to incorporation J. H. Smith and" 
 F. H. Fox, two of the incorporators who are equal part- 
 ners in the firm of Smith & Fox Manufacturing Com- 
 pany, manufacturing along a simliar line, proposed by the 
 new company, made a proposition to sell to the company 
 for the sum of $350,000.00 payable $100,000.00 in preferred 
 stock and $250,000.00 in common stock, all right title 
 and interest in the net assets of Smith & Fox Manufac- 
 turing Company exclusive of cash. These net assets 
 exclusive of cash $2,100.00 were carried on the books 
 of the co-partnership at a valuation of $300,000.00, as 
 shown on the following statement. 
 
 203 
 
 I! . 
 
bn' 
 
 If- 
 
 V 
 
 ,1! 
 
 '.J 
 
 m 
 
 1 1 
 
 324 OPENING ENTRIES 
 
 SMITH & FOX MANUFACTURING COMPANY 
 
 BALANCE SHEET 
 
 As of 19. . . . 
 
 ASSETS 
 Current Assets 
 
 Cash 
 
 Imprest Fund 
 In £ank 
 
 $ 100.00 
 2,000.00 
 
 Accounts Receivable— Customers 60,708.38 
 Less Reserve for Bad Accounts 5,000.00 
 
 2,100.00 
 
 55,708.38 
 
 Inventories 
 
 Raw Material 
 Work in Process 
 Finished Product 
 
 Deferred Charges to Operation 
 
 Prepaid Insurance 
 
 35,438.90 
 40,360.72 
 34,792.80 
 
 110,592.42 
 
 560.00 
 Heat7 Light and Power Supplies 430.00 
 
 990.00 
 
 Fixed Assets 
 
 Grounds 
 
 Buildings 100,000.00 
 
 Less Reserve for 
 
 Depreciation 5,000.00 
 
 Machinery 70,380.00 
 
 Less Reserve for 
 Depreciation 18,076.00 
 
 Perishable Tools 
 
 Patterns 10,000.00 
 
 Less Reserve for 
 
 Depreciation 4,000.00 
 
 5,000.00 
 
 95,000.00 
 
 52,304.00 
 8,846.50 
 
 STOCK ISSUED IN PURCHASE OF PLANT 
 
 324 
 
 Office Furniture and 
 Fixtures 
 
 Less Reserve for 
 Depreciation 
 
 Total Assets 
 
 LIABILITIES 
 Current Liabilities 
 Notes Payable 
 Accounts Payable — P 
 Creditors 
 
 Net Worth 
 
 Represented by: 
 
 J. H. Smith— Capital 
 
 F. H. Fox— Capital A 
 
 1,500.00 
 300.00 
 
 1,200.00 
 
 
 urchase 
 
 Account 
 ccount 
 
 
 $ 30,000.00 
 5,641.30 
 
 168,350.50 
 
 $337,741.30 
 
 151,050.00 
 151,050.00 
 
 35,641.30 
 
 
 302,100.00 
 
 $337,741.30 
 
 6,000.00 
 
 It )' 
 
 204 
 
 205 
 
'i'l 
 
 I'm ;r 
 
 325 
 
 OPENING ENTRIES 
 
 $ 60,708.38 
 
 35,438.90 
 
 40,360.72 
 
 34,792.80 
 
 560.00 
 
 430.00 
 
 5,000.00 
 
 100,000.00 
 
 70,380.00 
 
 8,846.50 
 
 10,000.00 
 
 1,500.00 
 
 50,000.00 
 
 $ 30,000.00 
 5,64130 
 5,000.00 
 5,000.00 
 18,076.00 
 4,000.00 
 
 300.00 
 175,000.00 
 175,000.00 
 
 Entry 
 
 Accounts Receivable — Customers 
 Raw Material — Inventory 
 Work in Process 
 Finished Product " 
 Prepaid Insurance 
 Heat, Light and Power Supplies 
 Grounds 
 Buildings 
 Machinery- 
 Perishable Tools 
 Patterns 
 Office Furniture and Fixtures 
 
 Good Will 
 
 To: Notes Payable ^ ^ , n a-^ 
 Accounts Payable— Purchase Creditors 
 Reserve for Bad Accounts 
 Reserve for Depreciation of Buildings 
 Reserve for Depreciation of Machinery 
 Reserve for Depreciation of Patterns 
 Reserve for Depreciation of Office 
 
 Furniture and Fixtures 
 J. H. Smith 
 
 F H Fox " " 
 
 Tn transfer to The N. W. Auto Accessories Company by the above 
 menLVeTvtdo?s^heir right title -d interest i. all the assets ex 
 elusive of cash) includmg Good WiU full^^ set^^^^^^^^^^^ 
 
 lut^ion of 'the Board* of 'Directors recorded in minute book page 
 
 J. H. Smith ^'7?'^-^ 
 
 F H Fox 175,000.00 
 
 To Capital Stock— Preferred, Unissued $100,000.00 
 
 «' " Common, Unissued 250,000.00 
 
 For 1,000 shares of preferred stock and 2,500 shares of common 
 stock issued equally to the vendors in payment of the net assets pur- 
 chased per the above mentioned bill of sale. 
 
 325. For the purpose of providing working capital, 
 the proposal of Smith & Fox having been accepted and 
 the stock issued by the company, the vendors donate to 
 the treasury of the company $40,000.00 of the common 
 stock received by them. 
 Entry 
 
 Treasury Stock, Common $40,000.00 
 
 To Reserve for Working Capital ^ ^^^ ^t w ^'?^ 
 
 For 400 shares of preferred capital stock of The N. AV. Auto 
 Accessories Company donated by Messrs. Smith & Fox for the pur- 
 pose of providing working capital. 
 
 206 
 
 TREASURY STOCK 
 
 326-329 
 
 326. One hundred shares of the stock so donated 
 are sold from the treasury at a discount of 25%. 
 Entry 
 
 Cash $7,500.00 
 
 Reserve for Working Capital 2,500.00 
 
 To Treasury Stock, Common 10,000.00 
 
 For 100 shares of treasury stock sold at a discount of 25%. 
 
 327, For the purpose of making needed additions 
 to the plant the company authorized an issue of first 
 mortgage bonds which were sold at 90, the purchasers 
 receiving with each bond a bonus of 15% in common 
 stock. 
 
 Entry 
 
 $90,000.00 
 10,000.00 
 15,000.00 
 
 Cash 
 
 Discount on Bonds 
 
 Reserve for Working Capital 
 
 To: Bonds Payable 100,000.00 
 
 Treasury Stock, Common 15,000.00 
 
 For the issue and sale of $100,000.00 first mortgage bonds at 90, 
 dated January 2, 1914, payable in ten years, with interest at 5% pay- 
 able annually, and also the issue of 150 shares of common stock held 
 in the treasury as a bonus on the sale of the bonds. 
 
 328. Fifty shares of common stock were issued to 
 J. B. King, the promotor for services in organizing the 
 company and selling stock. 
 
 Entry 
 
 Organization Expense $5,000.00 
 
 To Capital Stock, Common — Unissued 5,000.00 
 
 For 50 shares of stock issued to J. B. King for services in organiz- 
 ing company and selling stock. 
 
 329. One hundred fifty shares of the common sroGk 
 are sold for cash at a premium of 10%. 
 
 Entry 
 
 Cash $16,500.00 
 
 To: Capital Stock, Common — Unissued 15,000.00 
 
 Premium on Capital Stock 1,500.00 
 
 For 150 shares Common Stock sold at a premium of 10%. 
 
 207 
 
'I 
 
 330333 OPENING ENTRIES 
 
 330. One hundred fifty shares of treasury stock are 
 sold for cash at a premium of 10^0. 
 
 Entry 
 
 P jj $16,500.00 
 
 ^' To: Treasury Stock, Common '?'?CS'S 
 
 Reserve for Workmg Capital . rr.ir 
 
 For ISO shares of treasury stock sold at a premium of io7o. 
 
 331. A certain stockholder, who became indebted to 
 the company for $8,000.00 giving his note for that amount 
 and depositing $10,000.00 common stock with the com- 
 pany as collateral to his indebtedness, being unable to 
 meet his obligation when it became due. forfeits his 
 entire $10,000.00 in stock, in settlement of the claim. 
 
 Entry 
 
 Treasury Stock Common $10,000.00 
 
 To: Notes Receivable 200000 
 
 Treasury Stock Discount . ^.ooo.w 
 
 For 100 shares of common stock transferred to company m s^tl^ 
 
 given 1/.'!'. T. .T." . T, : : ; : ; : : : : : : se^r^d ' bV ' ii;;' abovf stock. 
 
 332. Two hundred shares of common stock are sold 
 on the instalment plan, payable within one year in equal 
 quarterly payments. 
 Entry 
 
 Subscriptions to Capital Stock, Common $20,000.00 
 
 To Subscribed Capital Stock, Common T 'T'2^ 
 
 For 200 shares of common stock sold on the instalment plan to be 
 paid within one year in equal quarterly instalments, subscribed as 
 follows: (Give name and number of shares each;. 
 
 Note— If desired, a separate account may be opened 
 with each instalment. 
 
 333. Instalment No. i for 25% of the shares of 
 common stock is paid in cash. 
 
 208 
 
 I 
 
 STOCK SOLD ON INSTALMENTS 
 
 334-336 
 
 Entry 
 
 Cash $5,000.00 
 
 To Subscriptions to Capital Stock, Common $5,000.00 
 
 For instalment No. i of 25% paid on stock sold on the instalment 
 plan as follows: (Give names and amounts paid). 
 
 334. The 200 shares of common stock sold on the 
 instalment plan having been paid in full and entries made 
 for each instalment at time of payment, stock certificates 
 are now issued. 
 
 Entry 
 
 Subscribed Capital Stock, Common $20,000.00 
 
 To Capital Stock, Common— Unissued $20,000.00 
 
 For the issue of 200 shares of common stock sold on the instal- 
 ment plan and fully paid. 
 
 Note — Stock sold on the instalment plan should not 
 be issued until fully paid. 
 
 335. The Common Capital Stock is increased 1,000 
 shares. 
 
 Entry 
 
 Capital Stock, Common— Unissued $100,000.00 
 
 To Capital Stock, Common— Authorized $100,000.00 
 
 To increase the common capital stock 1,000 shares, in accordance 
 with resolution of the Board of Directors recorded in minute book 
 
 page and certificate authorizing the increase of capital stock 
 
 issued by the state of Ohio. 
 
 336. The Common Capital Stock is decreased 500 
 shares. 
 
 Entry 
 
 Capital Stock, Common— Authorized $50,000.00 
 
 To Capital Stock, Common— Unissued $50,000.00 
 
 To decrease the common capital stock 500 shares in accordance 
 with resolution of the Board of Directors recorded in minute book 
 
 page and certificate authorizing the decrease of capital stock 
 
 issued by the state of Ohio. 
 
 209 
 
337 
 
 OPENING ENTRIES 
 
 *' 
 
 
 III 
 
 Fi* 
 
 I' I 
 
 ¥ 
 
 337. Smith & Fox Manufacturing Company make 
 the necessary dissolution entries on their books. 
 
 Entries 
 
 J. H. Smith— Capital Account $1,050.00 
 
 F. H. Fox " " 1,050.00 
 
 To: Imprest Cash $ loooo 
 
 Bank 2,000.00 
 
 For equal withdrawal of cash on hand at time of selling business. 
 
 Good Will $50,000.00 
 
 To: J. H. Smith— Capital Account $25,000.00 
 
 F. H. Fox " " 25,000.00 
 
 Representing the excess valuation placed on the net assets trans- 
 ferred to The N. W. Auto Accessories Company. 
 
 u 
 
 « 
 
 M 
 
 (« 
 
 .00 
 .00 
 .30 
 .00 
 .00 
 ,00 
 .00 
 
 The N. W. Auto Accessories Company $350,000 
 
 Notes Payable 30,000. 
 
 Accounts Payable 5i64i- 
 
 Reserve for Bad Accounts 5,ooo. 
 
 " " Depreciation — Buildings 5»ooo, 
 
 *• — Machinery 18,076 
 
 — Patterns 4>ooo 
 
 — Office Furniture 
 
 and Fixtures 300.00 
 
 To: Accounts Receivable-^Customers 
 Raw Material 
 Work in Process 
 Finished Product 
 Prepaid Insurance 
 Heat, Light and Power Supplies 
 Grounds 
 Buildings 
 Machinery 
 Perishable Tools 
 Patterns 
 
 Office Furniture and Fixtures 
 Good Will 
 To transfer the assets and liabilities to The N. W. 
 sories Company as per contract and bill of sale dated.. . 
 
 $60,708.38 
 
 35438.90 
 
 40,360.72 
 
 34,792.80 
 
 560.00 
 
 430.00 
 
 5,000.00 
 
 100,000.00 
 
 70,380.00 
 
 8,846.50 
 
 10,000.00 
 
 1,500.00 
 
 50,000.00 
 
 Auto Acces- 
 
 $100,000.00 
 
 Preferred Stock— The N. W. Auto Acces- 
 sories Company 
 Common Stock— The N. W. Auto Acces- 
 sories Company 250,000.00 
 To The N. W. Auto Accessories Company $350,000.00 
 For 1,000 shares of preferred stock and 2,500 shares of common 
 stock of The N. W Auto Accessories Company received in payment 
 for the above net assets transferred to it as per contract. 
 
 210 
 
 DISSOLUTION OF PARTNERSHIP 
 
 337 
 
 $175,000.00 
 175,000.00 
 
 $100,000.00 
 
 J. H. Smith — Capital Account 
 F. H. Fox 
 
 To: Preferred Stock — The N. W. Auto 
 Accessories Co. 
 Common Stock — The N. W. Auto 
 Accessories Co. 250,000.00 
 
 To close the stock accounts and the partners' capital accounts 
 upon the dissolution of the firm of Smith & Fox Manufacturing Com- 
 pany the above stock of The N. W. Auto Accessories Company having 
 been issued to J. H. Smith and F. H. Fox equally. 
 
 211 
 
A' 
 
 I i 
 
 I 
 
 PART 6 
 
 FINANCIAL STATEMENTS 
 
 ••I 
 
 I 
 
E> i 
 
 W 
 
 I 
 
 I 1 
 
 .( ' 
 
 i.k' 
 
 
 FINANCIAL STATEMENTS 
 
 338. The following forms and references 339 to 359 
 inclusive furnish illustrations of financial statements and 
 the details as to their preparation, showing the classifica- 
 tion of accounts and their order of arrangement. 
 
 The balance sheet may show the assets listed first 
 and the liabilities below as illustrated in 342 and 345; or 
 the assets on the left and the liabilities on the right, as in 
 
 353 and 354. 
 
 As to the order of arrangement of the accounts of the 
 balance sheet, the author suggests the following, as shown 
 in detail in 342-345-353- (Also see 5 to 9). 
 
 Assets. 
 
 I — Current Assets. 
 
 2 — Deferred Charges to Operation. 
 
 3 — Fixed Assets. 
 
 4 — Intangible Assets. 
 
 Liabilities. 
 
 I — Current Liabilities. 
 
 2 — Fixed Liabilities. 
 
 3— Net Worth. 
 
 The following order of arrangement shown in detail 
 in 354 is found to be quite generally used by large cor- 
 porations publishing their statements. 
 
 215 
 
 u. 
 
338 
 
 FINANCIAL STATEMENTS 
 
 Assets. 
 
 I — Fixed Assets. 
 2 — ^Intangible Assets. 
 2 — Deferred Charges to Operation. 
 4 — Current Assets. 
 Liabilities, 
 
 I — Capital Stock. 
 2- — Fixed Liabilities. 
 3 — Current Liabilities. 
 4 — Surplus. 
 
 Statements for Partnership Conducting a Retail 
 
 Business. 
 
 Nos. 339 to 344 inclusive are given to show the 
 details of the preparation of balance sheets and profit and 
 loss statements for a partnership conducting a retail busi- 
 ness v^hen no cost system is maintained, as follows: 
 
 No. 339 shows the working details. 
 
 Nos. 340-341 give detailed working sheet instructions 
 together with entries for closing the books, resulting in 
 the following exhibits and schedule. 
 
 No. 342 — Exhibit A — Balance Sheet. 
 
 No. 343 — Schedule i, supporting Exhibit A— Adjust- 
 ing entries of partners' accounts affecting prior periods. 
 
 ]S^o. 344 — Exhibit B — Profit and Loss Statement, 
 showing operating results and percentages. 
 
 Statements for Department Store. 
 
 Nos. 345 to 348 inclusive show exhibits and sched- 
 ules setting forth the financial condition and results from 
 
 216 
 
 GENERAL COMMENTS 
 
 338 
 
 Operation, of a corporation conducting a department store 
 where a cost system is maintained, as follows: 
 
 No. 345 — Exhibit A — Balance Sheet. 
 
 No. 346 — Schedule i, supporting Exhibit A — Mer- 
 chandise Inventories. 
 
 No. 347 — Exhibit B — Profit and Loss Statement 
 showing operating results and percentages. 
 
 No. 348 — Schedule i, supporting Exhibit B — Distri- 
 bution of Departmental Expenses. 
 
 Statements for Manufacturing Business. 
 
 Nos. 349 to 359 inclusive are given to show the de- 
 tails of the preparation of a balance sheet and profit and 
 loss statement for a corporation conducting a manufac- 
 turing business; first, when a cost system is not main- 
 tained; second, when one is maintained, as follows: 
 
 No. 349 illustrates entries to be made monthly or at 
 closing periods, depending upon whether or not profit 
 and loss statements are prepaid monthly, for reserves and 
 extinguishment of intangible assets. 
 
 No. 350 — Working Sheet. 
 
 Nos. 351 and 352 — Working Sheet instructions and 
 entries for closing books. 
 
 ^o. 353 — Exhibit A — Balance Sheet, illustrating 
 order of arrangement described in 7, 8, 9. 
 
 No. 354 — Exhibit A — Balance Sheet, illustrating 
 order of arrangement described in 11 and 12. 
 
 No- 355 — Schedule i, supporting Exhibit A — Ad- 
 justing entries afifecting prior periods. 
 
 No. 356 — Exhibit B — Profit and Loss Statement 
 showing operating results when no cost system is main- 
 tained and when sales are not subdivided. 
 
 
 
 I -I 
 
 217 
 
338 
 
 FINANCIAL STATEMENTS 
 
 No. 357— Schedule i, supporting Exhibit B— Ex- 
 penses, when no cost system is maintained. 
 
 No, 3c;8 — Exhibit B — Profit and Loss Statement 
 showing operating results and percentages, when a cost 
 
 system is maintained. 
 
 No. 359— Schedule i, supporting Exhibit B— Distri- 
 bution of direct and indirect charges to manufacturing 
 together with departmental overhead expenses, when a 
 cost system is maintained. 
 
 
 2l8 
 
 ■ 
 
WILSON AND CRANE 
 
 339* 
 
 WORKING SHEET 
 
 Showing details in preparing restflts to be transferred to Balance Sheet and Profit and Loss Exhibits. 
 
 Acct. 
 
 No. ASSETS 
 
 I — ^^Cash — Imprest Ftind 
 
 2 — Cash—Cashier's Change 
 
 3 — ^^Cash — In Bank 
 
 4 — Accounts Receivable — C. O. D.'s 
 
 5 — Accounts Receivable — Customers 
 
 6 — Reserve for Doubtful Accounts 
 
 7-^Inventory — Dry Goods 
 
 8 — Inventory — Boots and Shoes 
 . ^—Inventory — ^Clothing 
 lo— Deferred Charges to Operation 
 II — Furniture and Fixtures 
 i2^Reserve for Depreciation— Furniture and Fixtures 
 13— Good Will 
 
 LIABILITIES 
 20 — Notes Payable 
 21 — ^Accounts Payable 
 22r— Accrued Interest 
 23 — ^J. H. Wilson — Capital Account 
 
 24 — S. F. Crane — Capital Account 
 
 25 — ^Profit and Loss 
 
 PROFIT AND LOSS REVENUES 
 30 — Sales— Dry Goods 
 31 — Sales — Boots and Shoes 
 32— Sales — Clothing 
 33 — Cash Discounts Earned 
 34— Miscellaneous Earnings 
 
 PROFIT AND LOSS COSTS 
 40— Purchases — Dry Goods 
 41 — Purchases — Boots and Shoes 
 42 — Purchases — Clothing 
 43 — Administrative and Selling Expenses 
 44 — Cash Discounts Allowed 
 45 — Interest 
 
 Balance — Profit and Loss Account 
 
 EXPENSES 
 
 50 — Salaries^Management 
 
 51 — Salaries — Office and General 
 
 52 — Office Supplies and Expense 
 
 53 — Doubtful Accounts (Reserve Charge) 
 
 54 — Salaries — Sales Help 
 
 55 — Advertising 
 
 56— Rent 
 
 57 — Heat and Light 
 
 58 — Insurance 
 
 59 — Taxes 
 
 60— Depreciation- Furnt. & Fixt. (Reserve Charge) 
 
 61 — Delivery Expense 
 
 62 — Incidentals 
 
 $ 
 
 Trial Balance 
 Before Closing 
 
 A 
 Dr. 
 
 25.00 
 
 100.00 
 
 4,052.00 
 
 985.00 
 
 14,340.23 
 
 10,000.00 
 10,000.00 
 
 751.10 
 810.40 
 691.04 
 
 45,627.14 
 47,410.90 
 45,527.10 
 
 257.16 
 510.00 
 
 4,000.00 
 1,800.00 
 
 950.25 
 
 1,377.83 
 
 11,214.10 
 
 7,160.04 
 
 3,600.00 
 
 900.00 
 1,850.00 
 
 450.00 
 1,000.00 
 1,875.10 
 
 161.40 
 
 Totals 
 
 $217,425.79 
 
 B 
 Cr. 
 
 1,265.10 
 
 Accounts Affected by 
 
 Inyentories, Deferred 
 
 Charges & Accrued Items 
 
 C 
 Dr. 
 
 
 2,000.00 
 
 12,000.00 
 8,975.20 
 
 25,108.10 
 
 25,108.10 
 
 45,976.10 
 
 47,521.07 
 
 46,538.90 
 
 2,792.12 
 
 141. 10 
 
 15,210.00(2) 
 
 14,625.10(2) 
 
 15,723.40(2) 
 
 700.00(2) 
 
 D 
 Cr. 
 
 
 210.00(3) 
 
 210.00(4) 
 
 15,210.00(4) 
 14,625.10(4) 
 15,723.40(4) 
 
 
 217,425.79 II 46,468.50 
 
 100.00(4) 
 
 600.00(4) 
 
 46,468.50 
 
 Assets 
 
 Liabilities 
 
 E 
 Dr. 
 
 25.00(6) 
 
 100.00(6) 
 
 4,052.00(6) 
 
 985.00(6) 
 
 14,340.23(6) 
 
 15,210.00(6) 
 14,625.10(6) 
 15,72340(6) 
 700.00(6) 
 10,000.00(6) 
 
 10,000.00(6) 
 
 F 
 Cr. 
 
 1,265.10(6) 
 
 Expenses Revenues 
 
 G 
 Dr. 
 
 2,000.00 ( 6 ) 
 
 12,000.00(6) 
 8,975.20( 6 ) 
 
 2I0.00( 6 ) 
 
 25,io8.io( 6 ) 
 ►5,547.11(10) 
 25,io8.io( 6) 
 -^5,547.12(10) 
 
 H 
 Cr. 
 
 f 
 
 
 ,4^0,417.14 (9) 
 
 32,785.80 (9) 
 
 >29,8o3.70 (9) 
 
 <I30,4I7.I4 
 ■< 32,785.80 
 
 ■< 29.803.70 
 
 (7) 
 
 (7) 
 
 ^ ,, (7) 
 >-35,638.72(8) 
 
 257.16 (7) 
 
 720.00 (7) 
 
 '11,094.23 
 
 85,760.73 
 
 140,716.75 
 
 85,760.73 
 
 4,000.00 (7) 
 1,800.00 (7 
 850.25 (7 
 
 1,377.83 (7 
 11,214.10 (7 
 
 7,160.04 (7 
 3,600.00 (7 
 
 900.00 (7 
 1,250.00 (7 
 
 450.00 (7 
 1,000.00 (7 
 1,875.10 (7 
 
 16140 (7 
 
 45.225.00(7) 
 
 46,710.67(7) 
 
 45,847.86(7) 
 
 2,792.12(7) 
 
 141.10(7) 
 
 'Close to 
 Sales 
 
 Xlose 
 
 to 
 T. & L. 
 
 Close 
 to 
 &L. 
 
 V- 
 
 140,716.75 
 
 ^ -fo5>638.72 
 
 I 
 
 219 
 
WILSON AND CRANE 
 
 340. INSTRUCTIONS FOR PREPARING BALANCE SHEET 
 AND PROFIT AND LOSS STATEMENT. 
 
 I — In columns A and B are entered the items constituting the trial 
 balance of the general ledger, before closing, charges for Reserve 
 for Bad Accounts, and Depreciation on Plant accounts having 
 been previously made. The inventories, deferred charges and 
 accrued items at the close of the period are as follows: 
 
 Inventories 
 
 Dry Goods 
 Boots and Shoes 
 Clothing 
 
 Deferred Charges 
 
 Office Supplies and Expense 
 Unexpired Insurance 
 Accrued Items Payable 
 Interest 
 
 $15,210.00 
 14,625.10 
 15,723.40 
 
 100.00 
 600.00 
 
 210.00 
 
 2— Enter in column C, all inventories and deferred charges to opera- 
 tion. See items marked (2). 
 
 3— Enter in column D, all accrued items payable. See items marked 
 (3). 
 
 4— Enter in columns C and D, the contra entries to the operating 
 accounts affected by inventories, deferred charges and accrued 
 Items, mentioned in Nos. 2 and 3. See items marked (4). 
 
 5— Foot columns C and D, which should equal each other. 
 
 6— Carry all assets and liabilities from columns A, B, C, and D, into 
 columns E, and F, respectively. See items marked (6). 
 
 7— Carry all operating accounts from columns A, B, C and D into 
 columns G and H. See items marked (7). 
 
 8 — Close the sum of the individual expense accounts No. 50 to No. 
 62 inclusive into account No. 43. 
 
 9— Close accounts Nos. 40, 41, 42 into accounts Nos. 30, 31 and 32 
 
 respectively. 
 10— Foot accounts Nos. 30 to 45 inclusive, omitting accounts No 40 
 to No. 42 inclusive. The difference between the debit and credit 
 footmgs thus obtained should represent the net profit or loss 
 which should be closed to accounts No. 23 and No. 24. 
 II — Foot columns E and F, which should equal each other. 
 12— After thus proving the work the Balance Sheet and Profit and 
 Loss Exhibits may be prepared. (See 342-344.) 
 
 341. ENTRIES FOR CLOSING BOOKS. 
 
 I— Dr. Account No. 43, Administrative and Sell- 
 ing Expenses $35,638.72 
 Lr. the mdividual accounts No. 50 to No. 
 62 inclusive 
 2--Dr. Account No. 30 Sales— Dry Goods 30,417.14 
 Cr. Account No. 40, Purchases — Dry 
 
 Goods 
 
 30,417.14 
 
 221 
 
I ' 
 
 9— Dr. 
 
 3 — Dr. Account No. 31 Sales — Boots and 
 
 Shoes 32,785.80 
 
 Cr. Account No. 41 Purchases — Boots 
 
 and Shoes 32,78580 
 
 4— Dr. Account No. 32 Sales— Clothing 29,803.70 
 
 Cr. Account No. 42 Purchases — Clothing 29,803.70 
 
 5 — Dr. Account No. 30 Sales — Dry Goods 14,807.86 
 
 Cr. Account No. 25 Profit and Loss 14,807.86 
 
 6 — Dr. Account No. 31 Sales— Boots and Shoes 13,924.87 
 
 Cr. Account No. 25 Profit and Loss 13,924.87 
 
 7 — Dr. Account No. 32 Sales — Clothing 16,044.16 
 
 Cr. Account No. 25 Profit and Loss 16,044.16 
 
 8 — Dr. Account No. 33 Cash Discounts Earned 2,792.12 
 
 Cr. Account No. 25 Profit and Loss 2,792.12 
 
 Account No. 34 Miscellaneous Earnings 141. 10 
 
 Cr. Account No. 25 Profit and Loss 141. 10 
 
 10 — Dr. Account No. 25 Profit and Loss 35,638.72 
 
 Cr. Account No. 43 Administrative and 
 
 Selling Expenses 35,638.72 
 
 II — Dr. Account No. 25 Profit and Loss 257.16 
 
 Cr. Account No. 44 Cash Discounts 
 
 Allowed 257.16 
 
 12 — Dr. Account No. 25 Profit and Loss 720.00 
 
 Cr. Account No. 45 Interest 720.00 
 
 13 — Dr. Account No. 25 Profit and Loss 11,094.23 
 
 Cr. Account No. 23 J. H. Wilson capital 
 
 account 5,547.11 
 
 Cr. Account No. 24 S. F. Crane capital 
 account 
 14 — After posting the above entries the Profit 
 should show as follows: 
 
 5.547.12 
 and Loss account 
 
 PROFIT AND LOSS ACCOUNT. 
 
 Dr. 
 
 Administrative and Sell- 
 ing Expenses $35,638.72 
 
 Cash Discount Allowed 257.16 
 
 Interest 720.00 
 
 Balance transferred to 
 Partners' Capital Ac- 
 counts 11,094.23 
 
 Gross Profits 
 Dry Goods 
 Boots and Shoes 
 Clothing 
 Cash Discount Earned 
 Miscellaneous Earnings 
 
 Cr. 
 
 $14,807.86 
 
 13,924.87 
 
 16,044.16 
 
 2,792.12 
 
 141. 10 
 
 $47,710.11 
 
 $47,710.11 
 
 15 
 
 Rule accounts No. 23 to No. 62 inclusive, bringing down bal- 
 ances. The balances of those accounts affected by inventories, 
 deferred charges or accrued items, should be brought down as, 
 "Inventory Balance," "Deferred Charges Balance" or "Accrued 
 Balance" respectively, as the case may be. 
 16 — Prove the general ledger by taking a trial balance before posting 
 transactions of the new period. 
 
 Note — Closing entry No. i may be omitted and in entry No. 10 instead 
 of crediting account No. 43, credit the individual accounts No. 50 
 to No. 62 inclusive. 
 
 222 
 
 34a- 
 
 WILSON AND CRANE 
 
 EXHIBIT A. 
 BALANCE SHEET 
 
 As of December 31, 1913. 
 
 4,177.00 
 
 13,07513 i4»o6o.i3 
 
 45,558.50 63,795.63 
 
 700.00 
 
 10,000.00 
 2,000.00 
 
 ASSETS. 
 Current Assets 
 
 Cash 
 
 Imprest Fund $ 25.00 
 
 Cashier's Change 100.00 
 
 In Bank 4,052.00 
 
 Accounts Receivable 
 
 C. O. D.'s 985.00 
 
 Customers 14,340.23 
 
 Less Reserve for 
 
 Doubtful Accounts 1,265.10 
 
 Inventories 
 
 Dry Goods 15,210.00 
 
 Boots and Shoes 14,625.10 
 
 Clothing 15,723.40 
 
 Deferred Charges to Operation 
 
 Office Supplies and Expense 100.00 
 
 Unexpired Insurance 600.00 
 
 Fixed Assets 
 
 Furniture and Fixtures 
 
 Less Reserve for Depreciation 
 Intangible Assets 
 
 Good Will 
 
 Total Assets 
 
 LIABILITIES. 
 Current Liabilities 
 Notes Payable 
 Accounts Payable 
 Accrued Interest 
 
 Total Liabilities 
 Net Worth 
 
 Represented by: 
 J. W. Wilson's Capital 
 
 Balance December 31, 1912, as 
 
 adjusted (see Schedule i) $25,108.10 
 
 Add K Net Profits for year 
 ended December 31, 1913 
 (see Exhibit B) 5,547.11 
 
 Balance December 31, 1913 30,655.21 
 
 S. F. Crane's Capital 
 
 Balance December 31, 1912, as 
 
 adjusted (see Schedule i) 25,108.10 
 
 Add H Net Profits for year 
 ended December 31, 1913 
 (see Exhibit B) 5,547.12 
 
 Balance December 31, 1913 30,655.22 
 
 8,000.00 
 
 10,000.00 
 
 82,495.63 
 
 12,000.00 
 
 8,975.20 
 
 210.00 
 
 21,185.20 
 $61,310.43 
 
 $61,310.43 
 
 223 
 
 I 
 
\1 
 
 WILSON AND CRANE 
 
 SCHEDULE I— EXHIBIT A. 
 
 343. ADJUSTMENT OF PARTNERS' CAPITAL ACCOUNTS. 
 
 For entries belonging to prior periods made during the year ended 
 December 31, 1913. 
 
 J .W. WUson's Capital Account 
 
 Balance December 31, 191 1, per books $26,15310 
 
 Deduct H oi net adjustments as below shown 1,045.00 
 
 Balance December 31, 1912, as adjusted (see 
 Exhibit A) 
 
 S. F. Crane's Capital Account 
 
 Balance December 31, 191 1, per books $26,15310 
 
 Deduct -A of net adjustments as below shown 1,045.00 
 
 Balance December 31, 1912, as adjusted (see 
 Exhibit A) 
 
 ADJUSTMENTS 
 
 $25,108.10 
 
 $25,108.10 
 
 Charges belonging to prior periods: 
 
 Bad accounts charged off in 1913, applicable to prior 
 
 periods $ 2,000.00 
 
 Taxes for the year 1912 entered in 1913 250.&v> 
 
 Item of interest charged to Notes Payable in 191 1, 
 
 which should have been charged to Interest Account 160.00 
 
 Total Charges 
 Credits belonging to prior periods: 
 
 Unexpired Insurance premiums at December 31, 1912 
 
 2,410.00 
 
 320.00 
 
 Net Debit adjustments to be charged in equal amounts 
 
 to Partners' Capital Accounts as above $ 2,090.00 
 
 When the sales are not subdivided, the "Cost of Sales" and "Gross 
 Profits" would be shown on the Profit and Loss Statement as follows: 
 
 Sales $137,783.53 
 
 Cost of Sales 
 
 Inventory at beginning of period $ 38,758.80 
 
 Add: Purchases 99>8o6.34 
 
 138,565.14 
 Deduct Inventory at close of period 45,558.50 
 
 93,006.64 
 Gross Profit on Sales $ 44,776.89 
 
 The remaining items would be shown as illustrated on Exhibit B. 
 
 224 
 
INTENTIONAL SECOND EXPOSURE 
 
 WILSON AND CRANE 
 SCHEDULE I— EXHIBIT A. 
 
 343. ADJUSTMENT OF PARTNERS' CAPITAL ACCOUNTS. 
 
 For entries belonging to prior periods made during the year ended 
 
 December 31, 1913. 
 
 J .W. Wilson's Capital Account 
 
 Balance December 31, 1911, per books $26,153.10 
 
 Deduct H oi net adjustments as below shown 1,045.00 
 
 Balance December 31, 1912, as adjusted (see 
 Exhibit A) 
 
 S. F. Crane's Capital Account 
 
 Balance December 31, 1911, per books $26,153.10 
 
 Deduct 'A of net adjustments as below shown 1,045.00 
 
 $25,108.10 
 
 Balance December 31, 1912, as adjusted (see 
 Exhibit A) 
 
 $25,108.10 
 
 ADJUSTMENTS 
 
 Charges belonging to prior periods: 
 
 Bad accounts charged off in 1913, applicable to prior 
 
 periods $ 2,000.00 
 
 Taxes for the year 1912 entered in 1913 250.00 
 
 Item of interest charged to Notes Payable in 191 1, 
 
 which should have been charged to Interest Account 160.00 
 
 Total Charges 2,410.00 
 
 Credits belonging to prior periods: 
 
 Unexpired Insurance premiums at December 31, 1912 320.00 
 
 I III I ■ 
 
 Net Debit adjustments to be charged in equal amounts 
 
 to Partners' Capital Accounts as above $ 2,090.00 
 
 When the sales are not subdivided, the "Cost of Sales" and "Gross 
 Profits" would be shown on the Profit and Loss Statement as follows: 
 
 Sales $137,783.53 
 
 Cost of Sales 
 
 Inventory at beginning of period $ 38,758.80 
 
 Add: Purchases 99,806.34 
 
 ^ ^ 138,565.14 
 
 Deduct Inventory at close of period 45,558.50 
 
 93,006.64 
 Gross Profit on Sales $ 44,776.89 
 
 The remaining items would be shown as illustrated on Exhibit B. 
 
 224 
 
344- 
 
 WILSON AND CRANE 
 
 EXHIBIT B 
 
 PROFIT AND LOSS STATEMENT. 
 For the year ended December 31, 1913 
 
 Revenues from Sales 
 Dry Goods 
 Boots and Shoes 
 Clothing 
 
 Touts 
 
 $ 45.225.00 
 46,710.67 
 45,847.86 
 
 $137,783.53 
 
 Sales 
 
 (See 
 
 below) 
 
 30,417.14 
 32,785.80 
 29,803.70 
 
 93,006.64 
 
 % of 
 Sales 
 
 67 
 
 70 
 65 
 
 68 
 
 Gross 
 Profits 
 
 14,807.86 
 13,924.87 
 16,044.16 
 
 
 44.776.89 
 
 % of 
 Sales 
 
 33 
 30 
 
 35 
 
 Net 
 Profits 
 
 32 
 
 
 deduct: 
 
 Ldministrative and Selling Expenses 
 
 Salaries — Management 
 
 Salaries — Office and General 
 
 Office Supplies and Expense 
 
 Doubtfiil Accounts — Reservp Charge 
 
 Salaries — Sales Help 
 
 Advertising 
 
 Rent 
 
 Heat and Light 
 
 Insurance 
 
 Taxes 
 
 Depreciation — Furniture and Fi-<tures 
 
 Delivery Expense 
 
 Incidentals 
 
 Total Administrative and Selling Ex- 
 penses (26% of sales) 
 Net Profits from Operations (6.6% of sales) 
 Add: 
 
 Other Revenues: 
 
 Cash Discounts Earned 
 Miscellaneous Earnings 
 
 
 4,000.00 
 
 1,800.00 
 
 850.25 
 
 1,377.83 
 
 11,214.10 
 
 7,160.04 
 
 3,600.00 
 
 900.00 
 
 1,250.00 
 
 450,00 
 
 1,000.00 
 
 1,875.10 
 
 161.40 
 
 35,638.72 
 
 9,138.17 
 
 Less Other Expenses: 
 
 Cash Discounts Allowed 
 Interest — Notes Payable 
 
 Net Additions (1.4% of sales) 
 
 2,792,12 
 141.10 
 
 2.933.22 
 
 2^7.16 
 720.00 
 
 977.16 
 
 Net Profits from all sources transferred to Partners' 
 Capital Accounts as shown on Exhibit A (8% of sales) 
 
 1,056.06 
 
 $11,09423 
 
 COST OF SALES 
 
 Dry Goods 
 Boots and Shoes 
 Clothing 
 
 Inventory 
 Jan. 1, 1913 
 
 $ 12.597.80 
 13.750.10 
 12,410.90 
 
 $ 38,758.80 
 
 Purchases 
 
 33,029.34 
 33,660.80 
 33,116.20 
 
 99.866.34 
 
 Totals 
 
 45,627.14 
 47,410.90 
 45,527.10 
 
 138,565.14 
 
 Inventory 
 Dec. 31, 1913 
 
 15,210.00 
 14,625.10 
 15,723.40 
 
 45,558.50 
 
 Cost of 
 Sales 
 
 30,417.14 
 32,785.80 
 29,803.70 
 
 93,006.64 
 
 225 
 
»#■* 
 
 tv 
 
 'I 
 
 ,; 
 
 1:1 
 
 THE HENDERSON & McCREERY COMPANY 
 
 EXHIBIT A 
 
 345. BALANCE SHEET 
 
 ^ As of December 31, 191 3. 
 
 ASSETS 
 
 Current Assets 
 
 Cash 
 
 Imprest Fund $ 50.00 
 
 Cashier's Change 200.00 
 
 In Banks 12,254.34 12,504.34 
 
 Notes Receivable 
 
 Accounts Receivable — Custom- 
 ers 
 
 Less Reserve for Doubtful 
 Accounts 
 
 27,612.74 
 2,023.75 
 
 5,862.37 
 25,588.99 
 
 Inventories of Merchandise 
 (See Schedule i) 
 
 Deferred Charges to Operation 
 
 Unexpired Insurance 
 Interest on Items Payable 
 Advertising 
 
 732.90 
 
 75.00 
 
 3,452.45 
 
 62,187.80 
 
 106,143.50 
 
 4,260.35 
 
 Fixed Assets 
 
 Store Furniture and Fixtures 10,000.00 
 Less Reserve for Depreciation 2,000.00 
 
 8,000.00 
 
 Stable Equipment 
 
 3,673.90 
 
 
 
 Less Reserve for Deprecia 
 
 tion 73478 
 
 2,939.12 
 
 10,939.12 
 
 Total Assets 
 
 $121,342.97 
 
 LIABILITIES 
 
 
 
 
 Current Liabilities 
 
 
 
 
 Notes Payable 
 
 
 $ 5,000.00 
 
 
 Accounts Payable — Purchase 
 
 Creditors 
 
 4437.56 
 
 
 Accrued Items Payable 
 
 
 
 
 Pay Rolls 
 
 151.00 
 
 
 
 Taxes 
 
 136.60 
 
 287.60 
 
 
 Total Liabilities 
 
 
 
 9725-16 
 
 Net Worth 
 
 
 
 
 Represented by: 
 
 
 
 
 Capital Stock Authorized 
 
 100,000.00 
 
 
 
 Less Unissued Stock 
 
 30,000.00 
 
 70,000.00 
 
 
 Surplus — Balance December 31, 
 
 1 91 2 17,820.84 
 
 Add Net Profits for Year Ended 
 
 Dec. 31, 1913 23,796.97 
 
 41,617.81 111,617.81 
 
 Total Liabilities and Net Worth 
 
 226 
 
 $121,342.97 
 
 H « >, » ^7 
 
 SE3= 
 
 =S*E 
 
 THE HENDERSON & McCREERY COMPANY 
 
 SCHEDULE I— EXHIBIT A '^ 
 
 346. MERCHANDISE INVENTORIES 
 
 As of December 31, 1913 
 
 -•— »- 
 
 Department 
 
 A — Men's Furnishings 
 B — Gloves and Handkerchiefs 
 C — Hosiery and Underwear 
 D — 'Linen and White Goods 
 E — ^Jewelry and Art 
 F — Millinery 
 G — Cloaks 
 H — Shoes 
 I — Carpets 
 J — Hardware 
 K— Toys 
 -Music 
 
 Total as shown on Exhibit A 
 
 Amount 
 
 $ 3,566.74 
 3,264.25 
 
 2,856.81 
 1,921.71 
 
 1,^5.91 
 5,878.15 
 13,097.13 
 14,356.15 
 8,434-43 
 4.544.65 
 
 ^,49359 
 8(38.28 
 
 $62,187.80 
 
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34«. 
 
 Accounts 
 
 [Selling Expenses 
 
 Salaries — Sales People 
 
 Premiums and Commissions 
 
 Advertising — Periodicals 
 
 Advertising — Miscellaneous 
 
 Rent 
 
 Heat 
 
 Ligfht 
 
 Insurance 
 Taxes 
 
 Depreciation — Furniture and Fixtures 
 Elevator Wages* and Expense 
 Delivery Service 
 
 Departmental Supplies 
 
 Total Selling Expenses 
 
 General Administrative Expenses 
 
 Salaries — Executive Officers 
 
 Salaries — Office Employees 
 
 Salaries — Miscellaneous 
 
 Stationery and Office Supplies 
 
 Postage 
 
 Telephone and Telegraph 
 
 ClKirities and Donations 
 
 Legal Services 
 
 Doubtful Accounts (Reserve Charge) 
 
 Cash Shorts 
 
 Total General Admmstrative Ex- 
 penses distributed according 
 to Sales 
 Totals as shown on Exhibit B 
 
 THE HENDERSON St McCREERY COMPANY 
 
 SCHEDULE I— EXHIBIT B 
 
 EXPENSES 
 
 For the year ended December 31, 1913. 
 
 
 Basis of Distribution 
 
 From payrolls 
 
 According to space used 
 From advertising reports 
 According to floor space 
 
 Items 
 
 
 •i 
 
 According to stocks 
 
 According to valuation of fixtures 
 According to sales 
 
 M 
 
 «< 
 
 From requisitions 
 
 12.000.00 
 
 1.237.94 
 
 642.71 
 
 2.198.63 
 820.04 
 
 1,000.00 
 5,043.92 
 
 6,000.00 
 2.694.70 
 600.00 
 360.42 
 120.00 
 248.20 
 498.00 
 210.00 
 465.40 
 60.32 
 
 Total 
 
 $15,576.76 
 
 431-91 
 
 13,160.90 
 
 1. 2 1 0.00 
 
 13.880.65 
 
 3,018.67 
 1,000.00 
 
 6,043.92 
 650.39 
 
 54.973-20 
 
 11,257.04 
 
 $66,230.24 
 
 A 
 Men's 
 Furn. 
 
 1,200.00 
 
 30.00 
 
 636.92 
 
 60.75 
 
 Departments 
 
 B 
 
 Gloves 
 
 & Hdkfs. 
 
 1.087.25 
 
 171.79 
 57.27 
 
 350.55 
 32.65 
 
 3,627,1s 
 
 652.91 
 
 4,280.09 
 
 841.20 
 T0.20 
 71.28 
 
 32.43 
 
 578.23 
 
 156.73 
 52.24 
 
 320.33 
 17.43 
 
 C 
 . Hosiery 
 and Und. 
 
 2.080.07 
 
 596.62 
 
 2,676.69 
 229 
 
 743.80 
 
 20.41 
 
 1,035.82 
 
 105.51 
 
 277.61 
 
 138.64 
 46.22 
 
 350.54 
 56.71 
 
 D 
 Linens & 
 W. Goods 
 
 E 
 Jewelry 
 and Art 
 
 2,775.26 
 
 652.9 
 
 2 
 
 623.42 
 
 419.98 
 59.90 
 
 694.04 
 
 93.44 
 31.14 
 
 284.06 
 32.19 
 
 2,238.17 
 
 500.57 
 
 3.428.18 I 2,738.74 
 
 000.00 
 
 8.90 
 
 492.40 
 
 49.12 
 
 F 
 Millinery 
 
 925.44 
 
 93.44 
 31.14 
 
 24176 
 26.40 
 
 2,468.60. 
 
 478.79 
 
 1,042.20 
 101.40 
 
 2,162.28 
 122.45 
 
 G 
 
 •Cloaks 
 
 694.04 
 
 286.32 
 95.45 
 
 580.22 
 65.81 
 
 5.150.17 
 
 1 ,080.67 
 
 2,947.39 I 6.230.84 
 
 2,400.00 
 
 . 210.30 
 
 2,843.48 
 
 162.99 
 
 2.3 » 3.50 
 
 637.95 
 
 209.99 
 
 1.039-55 
 87.61 
 
 9.905.37 
 
 1.936.22 
 
 11.841.59 
 
 H 
 
 Shoes 
 
 2,010.00 
 
 50.70 
 
 77776 
 
 200.73 
 
 2,082.10 
 
 698.27 
 230.04 
 
 1,081.86 
 107.91 
 
 7-239.37 
 
 2,015.01 
 
 9.254-38 
 
 I 
 Carpets 
 
 3.463.20 
 
 3.438.92 
 218.16 
 
 Hardware 
 
 2,313.50 
 
 410.54 
 136.00 
 
 ^039.55 
 117.28 
 
 IM37.I5* 
 
 1.936.22 
 
 13.073.37 
 
 1,650.21 
 
 943.05 
 155.61 
 
 2,082.10 
 
 220.02 
 73-34 
 
 562.09 
 83.64 
 
 5,770.06 
 
 1 ,046.90 
 
 6,816.96 
 
 K 
 Toys 
 
 630.50 
 
 288.61 
 31.82 
 
 41642 
 
 72.34 
 24.11 
 
 108.79 
 17.10 
 
 1,589.69 
 
 202.62 
 
 1,792.31 
 
 L 
 Music 
 
 372.23 
 
 50.40 
 10.53 
 
 416.42 
 
 39.19 
 13.06 
 
 8462 
 5.66 
 
 992.11 
 
 157.59 
 
 1,149.70 
 
349* 
 
 ENTRIES FOR RESERVES 
 
 FOR BAD ACCOUNTS AND DEPRECIATION ON PLANT 
 
 ACCOUNTS. 
 
 When these entries are not made monthly for the amounts appli- 
 cable to each month, they should be made at the close of the year 
 covering the entire period, before taking the final trial balance from 
 which the Balance Sheet and Profit and Loss Statement are prepared. 
 
 Doubtful Accounts (Reserve Charge) $5,148.97 
 
 To Reserve for Doubtful Accounts 
 
 (To provide for losses on bad accounts 
 for the year ended December 31, 1913, 
 estimated on the basis of 1% of net sales. 
 (See 39 and 218.) 
 
 Depreciation on Plant (Reserve Charge) $7,990.88 
 
 To: Reserve for Depreciation — Buildings 
 (3% on $55,000.00.) 
 
 Reserve for Depreciation — Machinery and 
 Machine Tools 
 (7^% on $40,627.50.) 
 Reserve for Depreciation — Factory Fix- 
 tures 
 
 (10% on $10,438.20.) 
 Reserve for Depreciation — Patterns 
 (25% on $9,000.00.) 
 
 Depreciation on Office Furniture and Fixtures 
 
 (Reserve Charge) $ 150.00 
 
 To Reserve for Depreciation — Office Furni- 
 ture and Fixtures 
 (10% on $1,500.00.) 
 
 $5,148.97 
 
 $1,650.00 
 
 $3,047.06 
 
 $1,043.82 
 $2,250.00 
 
 Extinguishment of Patents 
 To Patents 
 
 (10% of the valuation of Patents.) 
 
 $2,500.00 
 
 $ 150.00 
 
 $2,500.00 
 
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THE BLANK MANUFACTURING COMPANY 
 
 351. INSTRUCTIONS FOR PREPARING BALANCE SHEET 
 
 AND PROFIT AND LOSS STATEMENT. 
 
 I— In columns A and B are entered the items constituting the trial 
 balance of the general ledger before closing, charges for Reserve 
 for Bad Accounts and Depreciation on Plant Accounts havmg 
 been previously made. The inventories, deferred charges and 
 accrued items at the close of the period are as follows: 
 
 $65,270.00 
 
 25,410.60 
 
 47,432.81 
 
 6,219.10 
 
 1,597.10 
 460.00 
 100.00 
 350.00 
 
 42500 
 
 500.00 
 
 Inventories 
 
 Manufacturing Material 
 
 Finished Product 
 
 Work in Process 
 
 Perishable Tools 
 Deferred Charges to Operation 
 
 Factory Supplies 
 
 Unexpired Insurance — Fire 
 
 Unexpired Insurance — Liability 
 
 Stationery and Printing 
 Accrued Items Receivable 
 
 Accrued Interest — Notes Receivable 
 Accrued Items Payable 
 
 Accrued Interest — Notes Payable 
 2 — Enter in column C, all Inventories and Deferred Charges to Op- 
 eration. See items marked (2). 
 3 — Enter in column D, all Accrued Items Payable. See items marked 
 
 (3). 
 4 — Enter in columns C and D, the contra entries to the Operatmg 
 
 Accounts affected by the Inventories, Deferred Charges and Ac- 
 crued items mentioned in Nos. 2 and 3. See items marked (4). 
 
 5 — Foot columns C and D which should equal each other. 
 
 6 — Carry all Assets and Liabilities from columns A, B, C and D into 
 columns E and F respectively. See items marked (6). 
 
 7 — 'Carry all Operating Accounts from columns A, B, C and D into 
 columns G and H. See items marked (7). 
 
 8 — Close the sum of the individual Accounts No. 80 to No. 93 inclu- 
 sive into Account No. 62. 
 
 9 — Close the sum of the individual Accounts No. loi to No. no in- 
 clusive into Account No. 65. 
 
 10 — Close the sum of the individual Accounts No. 120 to No. 126 in- 
 clusive into Account No. 66. 
 
 II — Foot Accounts No. 60 to No. 62 inclusive and close to Account 
 No. 63. 
 
 12 — Close Account No. 63 into Account No. 64. 
 
 13 — Close Account No. 64 into Account No. 50. 
 
 14 — Foot Accounts No. 50 to No. 69 inclusive, omitting Accounts No. 
 60 to No. 64 inclusive. The difference between the debit and 
 credit footings thus obtained should represent the net profit or 
 loss, which should be closed to Account No. 38. 
 
 15 — Foot columns E and F which should equal each other. 
 
 16 — After thus proving the work, the Balance Sheet and Profit and 
 Loss Exhibits may be prepared. 
 
 235 
 
 
 Ml 
 
 I 
 
Ill 
 
 
 :).,. 
 
 35a. 
 
 ENTRIES FOR CLOSING BOOKS 
 
 I — Dr. Account No. 62 Manufacturing Ex- 
 penses, Overhead $ 52,638.61 
 Cr. the Individual Accounts No. 80 to 
 No. 93 inclusive 
 
 2 Dr. Account No. 65 Administrative Expenses 28,220.88 
 
 Cr. the individual Accounts No. loi to 
 No. no inclusive 
 3— Dr. Account No. 66 Selling Expenses 58,883.94 
 
 Cr. the individual Accounts No. 120 to 
 No. 126 inclusive 
 4 — Dr. Account No. 63 Cost of Product Manu- 
 factured 344030.31 
 Cr. Account No. 60 Manufacturing Ma- 
 terial — Purchases 
 Account No. 61 Direct Labor 
 Account No. 62 Manufacturing Ex- 
 pense — Overhead 
 5_Dr. Account No. 64 Cost of Sales 351,724.80 
 Cr. Account No. 63 Cost of Product 
 Manufactured 
 6 — Dr. Account No. 50 Sales 348,655-80 
 
 Cr. Account No. 64 Cost of Sales 
 7_Dr. Account No. 50 Sales 166,240.90 
 
 Cr. Account No. 39 Profit and Loss 
 8— Dr. Account No. 51 Cash Discount Earned 3,724-30 
 
 Cr. Account No. 39 Profit and Loss 
 9 — Dr. Account No. 52 Interest Earned 425.00 
 
 Cr. Account No. 39 Profit and Loss 
 10 — Dr. Account No. 39 Profit and Loss 28,220.88 
 
 Cr. Account No. 65 Administrative Ex- 
 penses 
 II— Dr. Account No. 39 Profit and Loss 58,883.94 
 
 Cr. Account No. 66 Selling Expenses 
 12 — Dr. Account No. 39 Profit and Loss 5*632.10 
 
 Cr. Account No. 67 Cash Discount Al- 
 lowed 
 13— Dr. Account No. 39 Profit and Loss 3,000.00 
 
 Cr. Account No. 68 Interest— Notes 
 Payable 
 14— Dr. Account No. 39 Profit and Loss 2,500.00 
 
 Cr. Account No. 69 Extinguishment of 
 Patents 
 15 — Dr. Account No. 39 Profit and Loss 72,153.28 
 
 Cr. Account No. 38 Surplus , , ^^ 
 
 16 After making the above entries the Profit and Loss Account will 
 
 show as follows: 
 
 195,050.40 
 96,841.30 
 
 52,638.61 
 
 351,724.80 
 
 348,65580 
 
 166,240.90 
 
 3,724.30 
 
 425.00 
 
 28,220.88 
 58,883.94 
 
 5,632.10 
 
 3,000.00 
 
 2,500.00 
 72,153.28 
 
 1 
 
 
 PROFIT AND LOSS ACCOUNT 
 
 Dr. 
 Administrative Expense $28,220.88 
 
 Cr. 
 
 Selling Expense 
 
 58,883.94 
 
 Cash Discount Allowed 
 
 5,632.10 
 
 Interest — Notes Payable 
 
 3,000.00 
 
 Extinguishment of Pat- 
 
 
 ents 
 
 2,500.00 
 
 Surplus 
 
 72,153.28 
 
 $1 
 
 [70,390.20 
 
 Gross Profit — Sales $166^0.90 
 Cash Discounts Earned 3,724.30 
 Interest Earned 425xx> 
 
 $170,390.20 
 
 17 — Rule Accounts No. 38 to No. 126 inclusive, bringing down 
 balances. The balance of those accounts affected by inventories, 
 deferred charges to operation or accrued items, should be brought 
 down as "Inventory Balance," "Deferred Charges Balance," "Ac- 
 crued Balance," respectively, as the case may be. 
 
 18 — Prove the general ledger by taking a trial balance before posting 
 transactions of the new period. 
 
 Note. — Closing entries Nos. i, 2 and 3 may be omitted, and in entry 
 No. 4 instead of crediting account No. 62 credit the individual 
 manufacturing expense accounts No. 80 to No. 93 inclusive, and 
 in a similar manner in entries No. 10 and No. 11 instead of credit- 
 ing accounts No. 65 and No. 66 credit the individual accounts No. 
 loi to No. no inclusive and No. 120 to No. 126 inclusive, respec- 
 tively. 
 
 w 
 
 236 
 
 237 
 
'itr: 
 
 11 
 
 Hi 
 
 % 
 
353* 
 
 THE BLANK MANUFACTURING COMPANY 
 
 EXHIBIT A 
 
 BALANCE SHEET 
 
 As of December 31, I9i3- 
 
 ASSETS 
 
 Current Assets 
 
 Cash 
 
 Imprest Fund 
 In Banks 
 
 Notes Receivable 
 
 Accrued Interest on Notes Re- 
 ceivable 
 
 Accounts Receivable: 
 Customers 
 
 Less Reserve for Doubtful 
 Accounts 
 
 Sundry Debtors 
 
 Inventories: 
 
 Manufacturing Material 
 Finished Product 
 Work in Process 
 
 Deferred Charges to Operation 
 Insurance — Fire 
 Insurance-^Liability 
 Factory Supplies 
 Stationery and Office Supplies 
 
 Fixed Assets 
 Grounds 
 
 Buildings 55,ooo.oo 
 
 Less Reserve for Depreciatio n 5,000.00 
 
 Machinery and Machine Tools 40,627.50 
 Less Reserve for Depreciatio n 9,286.23 
 
 Factory Fixtures 10,438.20 
 
 Less Reserve for Depreciation 1,863.20 
 
 $ 100.00 
 
 
 15,525.00 
 
 15,625.00 
 5,500.00 
 
 
 42500 
 
 46,979-60 
 
 
 6,410.40 
 
 
 40,569-20 
 1,974.20 
 
 
 
 42,543-40 
 
 65,270.00 
 25,410.60 
 
 47,432.81 
 
 138,11341 
 
 
 460.00 
 
 100.00 
 
 
 1,597-10 
 350.00 
 
 Perishable Tools 
 
 Patterns . 9,ooo.oo 
 
 Less Reserve for Depreciatio n 2,500.00 
 
 Office Furniture and Fixtures 1,500.00 
 
 Less Reserve for Depreciatio n 450.00 
 
 Intangible Assets 
 
 Patents 
 
 Total Assets 
 
 202,206.81 
 
 2,507.10 
 
 6,000.00 
 50,000.00 
 31,341-27 
 
 8,575.00 
 6,219.10 
 
 6,500.00 
 
 1,050.00 
 
 109,685.37 
 
 22,500.00 
 $336,899.28 
 
 LIABILITIES 
 
 Current Liabilities 
 Notes Payable 
 Accounts Payable 
 
 Purchase Creditors 
 
 Accounts Receivable — Credit 
 
 Balances 
 Sundry Creditors 
 
 Accrued Wages 
 Accrued Interest — Items 
 Payable 
 
 $ 25,000.00 
 
 15,520.40 
 
 1,042.00 
 438.90 
 
 1,250.00 
 500.00 
 
 Fixed Liabilities 
 
 Mortgages Payable 
 
 Total Liabilities 
 Net Worth (Excess of Assets) 
 Represented by: 
 Capital Stock— Authorized 
 
 200,000.00 
 
 Less Capital Stock— Unissued 50,000.00 
 
 Surplus 
 
 Balance December 31, 1912, 
 as adjusted (see Sched- 
 ule i) 60,994.70 
 Add Net Profit for year 
 ended December 31, 1913 
 (See Exhibit B) 72,15328 
 
 ■ 
 
 133,147.98 
 Deduct Dividends paid dur- 
 ing year 15,000.00 
 
 Total Liabilities and Net Worth 
 
 17,001.30 
 
 1,750.00 
 
 43,751.30 
 25,000.00 
 
 68,751.30 
 
 150,000.00 
 
 118,147.98 
 
 268,147.98 
 
 $336,899.28 
 
 239 
 
 *!«^^ 
 
354* 
 
 THE BLANK MANUFACTURING COMPANY 
 
 EXHIBIT A 
 
 BALANCE SHEET 
 
 As of December 31, 1913. 
 
 ASSETS 
 
 Fixed Assets 
 Grounds 
 
 Buildings . 55,000.00 
 Less Reserve for Deprecia- 
 tion 5,000.00 
 
 Machinery and Machine Tools 40,627.50 
 Less Reserve for Depreciatio n 9,286.23 
 
 Factory Fixtures 10,438.20 
 
 Less Reserve for Depreciatio n 1,863.20 
 
 Perishable Tools 
 
 Patterns . 9,000.00 
 
 Less Reserve for Depreciatio n 2,500.00 
 
 Office Furniture and Fixtures 1,500.00 
 
 Less Reserve for Depreciation 450.00 
 
 $ 6,000.00 
 
 50,000.00 
 31,341-27 
 
 8,575-00 
 6,219.10 
 
 6,500.00 
 
 1,050.00 
 
 Intangible Assets 
 Patents 
 
 
 
 Deferred Charges to Operation 
 
 Insurance — Fire 
 Insurance — Liability 
 Factory Supplies 
 Stationery and Office Supplies 
 
 
 460.00 
 
 100.00 
 
 1,597.10 
 
 350.00 
 
 Current Assets 
 
 Inventories 
 
 Manufacturing Material 
 Finished Product 
 Work in Process 
 
 65,270.00 
 25,410.60 
 47,432.81 
 
 
 Accounts Receivable 
 
 Customers 46,979.60 
 
 Less Reserve for Doubtful 
 
 Accounts 6,410.40 
 
 138,113.41 
 
 Sundry Debtors 
 
 40,569.20 
 1,974-20 
 
 Notes Receivable 
 
 Accrued Interest on Notes Receivable 
 
 Cash 
 
 Imprest Fund 100.00 
 
 In Banks 15,525.00 
 
 42,543.40 
 
 5,500.00 
 
 42500 
 
 15,625.00 
 
 109,685.37 
 22,500.00 
 
 2,507.10 
 
 202,206.81 
 $336,899-28 
 
 LIABILITIES 
 
 Capital Stock 
 Authorized 
 
 Less Unissued 
 
 $200,000.00 
 50,000.00 
 
 Fixed Liabilities 
 
 Mortgages Payable 
 Current Liabilities 
 
 Notes Payable 
 Accounts Payable 
 
 Purchase Creditors 
 Customers Ledger — 
 Credit Balances 
 Sundry Creditors 
 
 15,520.40 
 
 1,042.00 
 438.90 
 
 Accrued Wages 
 
 Accrued Interest on Items Payable 
 
 Surplus 
 
 Balance December 31, 1912, as adjusted 
 
 (see Schedule i) 
 Add Net Profits for year ended December 
 3i» 1913 (see Exhibit B) 
 
 Deduct Dividends paid during year 
 
 25,000.00 
 
 17,001.30 
 
 1,250.00 
 
 500.00 
 
 60,994.70 
 72,153.28 
 
 133,147.98 
 15,000.00 
 
 150,000.00 
 25,000.00 
 
 43,751.30 
 
 118,147.98 
 
 $336,899.28 
 
 240 
 
THE BLANK MANUFACTURING COMPANY 
 
 SCHEDULE I-EXHIBIT A 
 
 Balance December 31, 1912 
 
 as of December 31, ?if-f,%^^^o ?^ 
 footed $3,298.70 should be $5,29870 
 
 Accrued Interest on Notes Receivable 
 at December 31* 1912 
 
 Unexpired Insurance-December 31, 
 
 1912 
 
 $59,160.70 
 
 2,000.00 
 400.00 
 614.00 
 
 M 
 
 H 
 
 I 
 
 3,014.00 
 
 ^^"^Adjustments belonging to prior periods: 
 Invoices for purchases of ma- 
 terial received durmg 1912, 
 
 entered in 1913 ^ ^^^'^ 
 
 Taxes accrued December 31* 
 
 1912 ^ 
 
 1,180.00 
 
 Net Adjustments 
 
 Balance December 31. 19", as adjusted and as shown on 
 Exhibit A 
 
 1,83400 
 
 $60,99470 
 
 241 
 
if 
 
 'A. 
 
 i 
 
 pi 
 
 !fJ;-: 
 
 I' 
 
 
 356. 
 
 THE BLANK MANUFACTURING COMPANY 
 
 EXHIBIT B 
 PROFIT AND LOSS STATEMENT 
 
 For the year ended December 31, 1913- 
 
 Sales 
 
 Less Sales Returned 
 
 $520,938.90 
 6,042.20 
 
 Net Sales 
 Cost of Sales . 
 
 Inventory — Manufacturing Material, De- 
 cember 31, 1912 
 Add: Purchases 
 
 Deduct: Inventory December 31, 1913 
 
 Manufacturing Material Used 
 Add: Direct Labor 
 
 Total Direct Charges to Manufacturing 
 Add: Manufacturing Expenses (see Sched- 
 ule I) (54.4% of Direct Labor) 
 
 Total Charges to Manufacturing 
 Add: Inventory of Work in Process De- 
 cember 31, 1912 
 
 Deduct: Inventory of Work in Process 
 December 31, 1913 
 
 Cost of Product Manufactured 
 Add: Inventory of Finished Product De- 
 cember 31, 1912 
 
 Deduct: Inventory of Finished Product 
 December 31, 1913 
 
 514,896.70 
 
 61,460.00 
 198,860.40 
 
 260,320.40 
 65,270.00 
 
 195,050.40 
 96,841.30 
 
 291,891.70 
 52,638.61 
 
 344.530.31 
 54,627.30 
 
 399,157.61 
 47,432.81 
 
 351,724.80 
 22,341.60 
 
 374,066.40 
 25,410.60 
 
 Cost of Sales (67.7% of Sales) 
 Gross Profits on Sales (32.3% of Sales— 47.7% of cost) 
 Carried forward 
 
 348,655.80 
 
 166,240.90 
 
 i 
 
 Gross Profits on Sales brought forward 
 
 Deduct: ^ ^ , . 1 x 
 
 Administrative Expenses (see Schedule i) 
 
 (5.48% of sales— 8.1% of Cost) 
 Selling Expenses (see Schedule i) (11.4% 
 of Sales^i6.9% of Cost) 
 
 Total Administrative and Selling Ex- 
 penses (16.9% of Sales— 25% of 
 Cost) 
 
 Net Profits from Operations (i5-5% of Sales— 
 
 22.7% of Cost) 
 Deduct: 
 
 Other Expenses 
 
 Cash Discounts Allowed 5,632.10 
 
 Interest on Notes Payable 3,000.00 
 Extinguishment of Patents 2,500.00 
 
 166,240.90 
 
 28,220.88 
 58,883.94 
 
 87,104.82 
 
 79,136.08 
 
 Less Other Revenues 
 
 Cash Discounts Earned 
 Interest Earned 
 
 11,132.10 
 
 3,724-30 
 425.00 
 
 
 4,149.30 
 
 Total Net Deductions (1.36% of sales— 2% of Cost) 6,982.80 
 
 Net Profit from all sources transferred to Surplus 
 (14.1% of Sales— 48.1% of Capital Stock.) 
 
 $ 72,153.28 
 
 242 
 
 243 
 
 
'A 
 
 357. 
 
 THE BLANK MANUFACTURING COMPANY 
 SCHEDULE I-EXHIBIT B 
 
 EXPENSES 
 
 As of December 31, I9i3- 
 
 i 
 
 Manufacturing , _ 
 
 Salaries of Superintendents and Foremen 
 
 Miscellaneous Indirect Labor 
 
 Heat, Light and Power 
 
 Repairs to Buildings , ,, , . t, ,„ 
 
 Repairs to Machinery and Machme Tools 
 
 Repairs to Factory Fixtures 
 
 Repairs to Perishable Tools 
 
 Repairs to Patterns 
 
 Taxes on Plant and Stock 
 
 Insurance — Fire 
 
 Insurance — Liability 
 
 Factory Supplies 
 
 Experimental Work 
 
 Depreciation on Plant (Reserve Charge; 
 
 Total as shown on Exhibit B 
 
 Administrative 
 
 Salaries— Executive Officers 
 Salaries— Office Employees 
 Stationery and Office Supplies 
 Postage 
 
 Telephone and Telegraph 
 Depreciation on Office Furniture and fix- 
 tures (Reserve Charge) 
 Charities and Donations 
 Taxes— State and Federal 
 Incidentals 
 Doubtful Accounts (Reserve Charge) 
 
 Total as shown on Exhibit B 
 
 $17,531.10 
 6,841.30 
 4,710.40 
 1,564.60 
 
 1,941.31 
 131-40 
 
 2,419.94 
 
 1,931.06 
 
 1,843.10 
 
 871.60 
 
 440.00 
 
 2,524.92 
 1,897.00 
 7,990.88 
 
 $10,000.00 
 6,200.00 
 1,291.10 
 1,910.40 
 1,480.00 
 
 150.00 
 
 325.00 
 
 1,090.10 
 
 625.31 
 5,148.97 
 
 $52,638.61 
 
 Selling _ ^. ^ , 
 
 Salaries— Traveling Salesmen 
 
 Traveling Expenses 
 
 Advertising . 
 
 Stationery and Office Supplies (Proportion) 
 
 Postage (Proportion) 
 
 Shipping Labor and Expense 
 
 Miscellaneous Selling Expense 
 
 Total as shown on Exhibit B 
 
 $21,320.00 
 
 11,875.00 
 
 19,950.00 
 
 1,381.40 
 
 675.10 
 
 2,641.30 
 
 1,041.14 
 
 $28,220.88 
 
 $58,883.94 
 
 244 
 
 i 
 
Machinery Sales 
 Model No. I 
 No. 2 
 No. 
 No. 
 No. 
 No. 
 No. 
 No. 8 
 No. 9 
 No. 10 
 
 (I 
 <i 
 (t 
 <i 
 <i 
 i« 
 
 (4 
 (I 
 
 3 
 4 
 
 5 
 6 
 
 7 
 
 Totals 
 
 Sales 
 
 $102,979.34 
 42,908.06 
 85,816.12 
 77,234.50 
 
 51,489.67 
 64,362.09 
 
 38,617-25 
 15,446.90 
 
 25,744.84 
 10,297.93 
 
 $514,896.70 
 
 
 Deduct: 
 
 Other Expenses 
 
 Cash Discounts Allowed 
 Interest — Notes Payable 
 Extinguishment of Patents 
 
 Less Other Revenues 
 
 Cash Discounts Earned 
 Interest 
 
 35& 
 
 Factory 
 Costs 
 
 72,549.48 
 30,287.24 
 68,036.12 
 57,024.10 
 29,009.07. 
 34,201.99 
 25,995.23 
 8,005.60 
 17,092.74 
 
 6,45423 
 
 348,655-80 
 
 THE BLANK MANUFACTURING COMPANY 
 
 EXHIBIT B 
 
 PROFIT AND LOSS STATEMENT 
 
 For the year ended December 31, 1913. 
 
 Gross 
 Profits 
 
 30429.86 
 
 12,620.82 
 
 17,780.00 
 
 20,210.40 
 
 22,480.60 
 
 30,160.10 
 
 12,622.02 
 
 7»44i.30 
 
 8,652.10 
 
 3,843.70 
 
 % of 
 Sales 
 
 166,240.90 
 
 29.6 
 
 29-4 
 20.7 
 
 26.1 
 43-6 
 46.8 
 
 32.7 
 48.2 
 
 33-6 
 
 37-3 
 
 Administrative 
 Expenses 
 
 32-3 
 
 5,648-65 
 2,351.47 
 4,701-72 
 
 4,232ul8 
 
 2,821.65 
 
 3,527.04 
 2,116.21 
 
 846.50 
 
 1,410.83 
 
 56433 
 
 28,220.88 
 
 % of 
 Sales 
 
 5.48 
 
 Selling 
 Expenses 
 
 11,779.72 
 
 4,891.74 
 9,803.02 
 
 8,914.79 
 5,875.20 
 
 7»347.27 
 4,402.34 
 
 1,760.96 
 
 2,93493 
 
 1,173-97 
 
 58.883.94 
 
 % of 
 Sales 
 
 3,724.30 
 425.00 
 
 Total Net Deductions (1.36% of sales— 2% of costs) 
 Net Profit from all sources transferred to Surplus (See Exhibit A) (14.1% of sales— 48.1% of Capital Stock) 
 
 Total 
 Expenses 
 
 17,428.37 
 7,243.21 
 
 14.50474 
 13,147.27 
 
 8,696.85 
 
 10.874-31 
 
 6,518.55 
 
 2,60746 
 
 4.34576 
 1,738.30 
 
 1 1. 4 H 87,104.82 
 
 % of 
 Sales 
 
 5,632.10 
 
 3,000.00 
 
 » 2,500.00 
 
 11,132.10 
 
 4,149.30 
 
 16.9 
 
 Net 
 Profits 
 
 i3,pOM9 
 5.377.61 
 3.275.26 
 7/^313 
 13,783.75 
 19,285.79 
 6,103.47 
 4,833.84 
 4,306.34 
 2,105.40 
 
 79,136.08 
 
 % of 
 Sales 
 
 6^983.80 
 
 12.6 
 12.5 
 3.8- 
 9.1 
 
 26.7 
 29.9 
 15.8 
 
 31.3 
 16.6 
 204 
 
 15.5 
 
 
 M 
 
 $73,153-38 I 14.1 
 
 24s 
 
THE BLANK MANUFACTURING COMPANY 
 SCHEDULE I— EXHIBIT B 
 
 359 
 
 . STATEMENT OF DIRECT AND INDIRECT CHARGES TO MANUFACTURING 
 
 
 
 
 
 
 For the year ended December 31, 1913. 
 
 
 
 
 
 
 
 Accounts 
 
 Basis of Distribution 
 
 Totals 
 
 Departments || 
 
 A 
 
 B 
 
 c 
 
 D 
 
 E 
 
 F 
 
 General 
 
 Direct 
 
 
 
 
 
 
 
 
 
 
 Material Used 
 
 Stores Orders- 
 
 $195,050.40 
 
 21,607.20 
 
 18,210.40 
 
 27,632.10 
 
 14,729.82 
 
 30,438.60 
 
 82,432.28 
 
 — 
 
 Direct Labor 
 Indirect 
 
 Time Tickets 
 
 Totals 
 
 96,841.30 
 
 9.684.13 
 
 4,842.06 
 
 14,526.20 
 
 9,684.13 
 
 14,526.20 
 
 43.578.58 
 
 
 $291,891.70 
 
 31,291.33 
 
 23,052.46 
 
 42,158.30 
 
 24,413.95 
 
 44,964.80 
 
 126,010.86 
 
 - 
 
 1 
 
 
 
 
 
 
 1 
 
 Salaries of Superintendents & Foremen 
 
 Time Tickets 
 
 $ 17,531.10 
 
 1,54170 
 
 1,041.60 
 
 2,531.10 
 
 1,974.20 
 
 1,804.30 
 
 3,638.20 
 
 5,000.00 
 
 Miscellaneous Indirect Labor 
 
 it it 
 
 6,841.30 
 
 1,010.40 
 
 802.71 
 
 743.10 
 
 982.30 
 
 1,041.10 
 
 1,274.49 
 
 987.20 
 
 Heat, Light and Power 
 
 Meters and Schedule 
 
 4,710.40 
 
 501.60 
 
 432.10 
 
 621.40 
 
 381.10 
 
 987.10 
 
 889.20 
 
 897.90 
 
 Repairs to Buildings 
 
 Stores Orders and Time Tickets 
 
 1,564.60 
 
 210.40 
 
 198.10 
 
 2r4.6o 
 
 98.20 
 
 147.91 
 
 257.29 
 
 438.10 
 
 Repairs to Machinery & Machine Tools 
 
 << <4 ti U «« 
 
 1,941.31 
 
 347.20 
 
 398.00 
 
 147.10 
 
 150.92 
 
 429.32 
 
 468.77 
 
 — 
 
 Repairs to Factory Fixtures 
 
 «( *t «< t< It 
 
 13140 
 
 17.20 
 
 30.42 
 
 — 
 
 31.00 
 
 — 
 
 52.78 
 
 — 
 
 Repairs to Perishable Tools 
 
 M M M t< It 
 
 2,419.94 
 
 204.30 
 
 78.90 
 
 321.10 
 
 480.60 
 
 527.60 
 
 669.34 
 
 138.10 
 
 Repairs to Patterns 
 
 H «l «« <i It 
 
 1,931.06 
 
 — 
 
 160.56 
 
 943.20 
 
 — 
 
 827.30 
 
 
 — 
 
 Taxes on Plant and Stock 
 
 Special schedule of plant valuations and stocks 
 
 1,843.10 
 
 184.31 
 
 92.15 
 
 184.31 
 
 92.1 5 
 
 368.62 
 
 552.93 
 
 368.63 
 
 Insurance— Fire 
 
 •« «4 « « « »< <« 
 
 871.60 
 
 87.16 
 
 43.58 
 
 87.16 
 
 •43.58 
 
 174.32 
 
 261.48 
 
 174.32 
 
 Insurance — Liability 
 
 Departmental Pay Roll 
 
 440.00 
 
 44.00 
 
 22.00 
 
 66.00 
 
 44.00 
 
 66.00 
 
 198.00 
 
 
 Factory Supplies 
 
 Stores Orders 
 
 2,524.92 
 
 427.00 
 
 304.00 
 
 265.10 
 
 195.00 
 
 549.10 
 
 745.62 
 
 39-10 
 
 Experimental Work 
 
 Time Tickets 
 
 1,897.00 
 
 201.00 
 
 — 
 
 327.50 
 
 — ' 
 
 987.00 
 
 381.50 
 
 
 Depreciation on Plant 
 
 Schedule of valuations 
 
 Total General distributed to departments 
 according to Direct Labor 
 
 Totals 
 Percentage of Direct Labor 
 
 7,990.88 
 
 799.01 
 
 427.00 
 
 1,298.14 
 
 891.40 
 
 1,327.50 
 
 2,754.73 
 
 493.10 
 
 
 
 853.64 
 
 426.82 
 
 1,280.47 
 
 853.65 
 
 1,28047 
 
 3,84140 
 
 8,53645 
 
 $ 52,638.61 
 
 6,428.92 
 
 4.457-94 
 
 9,030.28 
 
 6,218.10 
 
 10,517.64 
 
 15,985.73 
 
 
 1 
 
 54.4 
 
 66.4 
 
 92.1 
 
 62.1 
 
 64.1 
 
 724 
 
 36.6 
 
 
 246 
 
WK^K^rvsm 
 
 '1 
 
 i 
 
 PART 7 
 
 II 
 
 l| 
 
 ACCOUNTING FORMS 
 
 li 
 
360. 
 
 ACCOUNTING FORMS. 
 
 The following pages illustrate and describe some of 
 the principal forms used for recording the transactions 
 entering into the general books. Those given are the 
 Cash Received, Check Register, Petty Cash Disburse- 
 ments, Journal, Accounts Payable Voucher, Purchase 
 Record, Distribution Summary, Combined Cash Journal 
 and Sales Summary. 
 
 In a business of such size that the services of only 
 one bookkeeper are required, these forms may all be 
 carried in one binder or holder, each form to be separated 
 by an index tab marked accordingly. Only a sufficient 
 number of sheets need be carried in the current binder to 
 provide for the transactions of the month. At the close 
 of the month these sheets should be transferred to a per- 
 manent key locking binder, thus making the records 
 secure. This method of carrying the current records in 
 one compact form facilitates the recording of the daily 
 transactions and makes the handling of several large 
 books unnecessary. When two or more bookkeepers or 
 cashiers are required, the sheets may be so divided as to 
 work to the best advantage in each case. 
 
 
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 250 
 
 361. CASH RECEIVED— FORM No. i. 
 
 This form is designed to record only cash received. 
 In many Hnes of business the items of daily cash received 
 are very numerous, and the ordinary cash book, which 
 provides for both receipts and disbursements in the one 
 book, v^ill often have one or more pages filled with 
 receipts while there are no disbursements on the opposite 
 pages, or vice versa. This form has an advantage over 
 such a record, in that all cash receipts are recorded by 
 themselves, resulting in a saving of fully 50% in space 
 
 used. 
 
 362. Column — Bank Deposits. In this column 
 should be entered the total amount of each deposit. No 
 postings are to be made from it, except at the close of the 
 month, when the total should be posted to the credit of the 
 account, Cash Received, but the amount of each deposit 
 should be transferred daily to the deposit column of the 
 check register. 
 
 363. Column — Net Cash Received. In this column 
 should be entered the net amount of each cash received 
 item. All cash received should be deposited in the bank 
 daily, in which event this column, after the day's deposits 
 have been made, should equal the column headed "Bank 
 Deposits." No posting except the total at the end of the 
 month is to be made from this column. 
 
 251 
 
364-368 ACCOUNTING FORMS 
 
 364. Column — ^Accounts Receivable. In this col- 
 umn should be entered the total amount of each remit- 
 tance credited to customers, therefore each amount in this 
 column must include not only the net cash received but 
 all deductions allowed. The items in this column should 
 be posted throughout the month to the individual ac- 
 counts in the customers' ledger, and at the close of the 
 month the total of the column should be posted to the 
 customers' controlling account in the general ledger. 
 (See 24). 
 
 365. Column — General Ledger Credit. In this col- 
 umn should be entered all amounts which are to be posted 
 to the general ledger, the items to be posted throughout 
 the month, or summarized as explained in 397, and their 
 totals only posted at the close of the month. 
 
 366. Column — Cash Sales. In this column should 
 be entered the cash received from cash sales. No post- 
 ings are to be made from this column until the end of the 
 month, when the total is to be posted to the Cash Sales 
 account in the general ledger, the total of which should 
 balance with the cash sales column of the sales sum- 
 mary. (See 407 and form No. 9). 
 
 367. Column — Cash Discount. In this column 
 should be entered all discounts allowed customers. No 
 posting except the total at the end of the month, is to 
 be made from this column. 
 
 368. Column — General Ledger Debit. This column 
 is given to provide for any cross entries or deductions 
 which might be made and not provided for in the cash 
 discount or other blank column at the right of it. The 
 amounts in this column are to be posted throughout the 
 
 252 
 
 CASH RECEIVED 
 
 369-370 
 
 month or in case there may be numerous expense ac- 
 counts, these may be summarized as explained in 397, 
 and their totals posted at the end of the month. 
 
 Columns — Day, From Whom, Particulars. These 
 are apparently self-explanatory. 
 
 369. Columns — Account Number and Check Mark. 
 In the account number column should be entered the 
 number of the account to which the item belongs and 
 when the item is posted or summarized, a check mark 
 should be made in the narrow column with the check, 
 mark heading. 
 
 370. Column — ^Blank Debit. This column is left 
 blank to be used for any account for which it may be 
 required. 
 
 253 
 
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 254 
 
 371. CHECK REGISTER— FORM No. 2. 
 
 This form is to be used for recording all checks 
 drawn on the bank and takes the place of the ordinary 
 check stub book and cash book relating to disburse- 
 ments. 
 
 As a consequence it will be found more convenient 
 to have checks put up in pads instead of book form, each 
 to be numbered consecutively. If a check is spoiled by 
 accident or otherwise, its number should be recorded in 
 the check number column and marked "Void." As all 
 postings are to be made directly from this form to the 
 ledger, it not only saves time in filling out check stubs 
 and transferring them to a cash book, but it also eliminates 
 the possibility of errors in so doing. 
 
 When more than one bank account is kept, separate 
 check register sheets should be kept for each bank, all 
 carried in one binder but separated by index tabs desig- 
 nating the name of each bank. This allows indefinite 
 expansion as to the number of banks and is much more 
 convenient for the bookkeeper than using several check 
 
 registers. 
 
 This form separates the petty cash payments from 
 the bank disbursements, showing the details of each 
 transaction and daily balance, and like the Cash Received, 
 form No. i, makes a saving of fully 50% in time and space 
 used. 
 
 255 
 
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 372-374 
 
 ACCOUNTING FORMS 
 
 Columns — Bank Account. These columns show at 
 all times the condition of the bank account, the total of 
 each deposit being entered in the deposit column from the 
 cash received record, and the amount of each check in 
 the check column with the check number in the column at 
 the left. No postings except the totals at the end of the 
 month less the balance brought forward at the beginning 
 of the month are to be made from these columns. 
 
 372. Column — Accounts Payable. In this column 
 should be entered the total amount to be charged to the 
 creditor, being the net amount paid, plus the discount, if 
 any, which discount should be entered in the cash dis- 
 count column. The sum of the amounts thus entered in 
 the discount column and the check column will then bal- 
 ance with the amount entered in the accounts payable 
 column. When ledger accounts are carried with pur- 
 chase creditors, the items in this column are to be posted 
 to the individual accounts of the creditors' ledger, other- 
 wise the payments are to be entered in the proper col- 
 umns of the purchase record, form No. 6, as described in 
 395. The total of this column at the close of the month 
 under either method, is to be posted to the controlling 
 account in the general ledger. 
 
 373. In the particulars column should be entered 
 the voucher number when no individual accounts are kept 
 with purchase creditors, or such other memorandum as 
 desired. 
 
 374. Column— General Ledger. The items in this 
 column are to be posted or summarized throughout the 
 month as described in 365 and 397. 
 
 256 
 
 CHECK REGISTER 
 
 375-377 
 
 375. Column — Expenses. In this column should be 
 entered the expenses paid directly by check when not dis- 
 tributed on the voucher record. (See 397 for details in 
 posting these items). 
 
 376. Column — Cash Discount Earned. In this col- 
 umn should be entered all cash discounts earned from 
 discounting purchase invoices, the total only, of which is 
 to be posted at the close of the month. 
 
 377. Column — General Ledger Credit. This column 
 in the check register answers a similar purpose as the 
 general ledger debit column of the cash received record, 
 providing for any cross entries. If the accounts in this 
 column are numerous, they may be summarized through- 
 out the month as explained in 397, the total only, of each 
 account being posted at the close of the month in one 
 amount, otherwise the individual items should be posted 
 throughout the month. 
 
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 RECAPITULATION OF ACCOUNTS 
 
 
 
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 Form No. 3— (Size of original, S% x ii54) 
 
 258 
 
 378. IMPREST CASH— FORM No. 3. 
 
 This form is designed to provide for a careful and 
 accurate accounting of all petty cash disbursements. 
 
 As mentioned in 363, all cash receipts should be 
 deposited daily in the bank, thus making necessary the 
 maintenance of a petty cash fund termed "Imprest Cash 
 Fund," out of which to pay miscellaneous small items 
 which are not practicable to pay by check. The method 
 of handling this class of disbursements is fully described 
 in 2y and therefore will not be repeated here. The ad- 
 vantages derived from this method are as follows: 
 
 1st. — A receipt is secured for every petty cash ex- 
 penditure, which facilitates a thorough audit of this class 
 of disbursements. 
 
 2nd. — The balancing of petty cash is simplified on 
 account of there always being a fixed amount against 
 which to balance. 
 
 3rd. — The balancing of the general cash is also 
 simplified as the total of the deposit column added to the 
 checks on hand undeposited, if any, should equal the total 
 of the cash received column. 
 
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 259 
 
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 379. 
 
 JOURNAL— FORM No. 4. 
 
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 This form is designed to take the place of the ordi- 
 nary journal and when used in conjunction with the other 
 forms herewith shown, the entries to be made on it will 
 be comparatively few in number; such as closing, adjust- 
 ing and other entries not provided for on the other forms. 
 
 The items entered in the various columns on this 
 form should be treated in a similar manner as described 
 under other forms containing like headings. All journal 
 entries should be supported by properly approved journal 
 vouchers. 
 
 261 
 
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 1 RCMlTTANcT^^^^:>-..^C COUNTS PAYABLE 
 1 STATEMtoiT ^\^^*<s^ VOUCHER 
 
 
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 • JlCllPT 7n ruLU roH -TMI ITEMS ABOVE 
 
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 ON THE VOUCHER copy APP^/tRS THt FOLLOW. NC OaTA wH-CH DOtS NOT SHOW ON THt 
 ABOVE .LLUSTRAT.or. .TBt.NO COVEREDBVTHt REM .TTA N C E STATt M L NX 
 DATE E.NTtf?LD.PAaE; DATE paid; BY WHOM CERTIFIED AND A PPROVEft. 
 
 Form No. 5— (Si2e of original, 8^ x 9) 
 
 262 
 
 . 
 
 380. 
 
 VOUCHER SYSTEM. 
 
 The voucher system comprises an "Accounts Payable 
 Voucher" to be used in conjunction with a "Voucher Rec- 
 ord," the two taking the place of a purchase creditors' 
 ledger. 
 
 The Accounts Payable Voucher, which should be 
 ruled to meet the requirements in each particular case, 
 should show the distribution charges of the invoices at- 
 tached to it, and the details of accounts with the purchase 
 creditors, while the Voucher Record constitutes a medium 
 of posting and distribution of the accounts, as well as a 
 record of the accounts with purchase, creditors. This 
 voucher may be made in duplicate, one copy constituting 
 the check and remittance statement, the other copy, to 
 which the invoices should be attached, being a copy of 
 the check and remittance letter, also showing the details 
 of the distribution. 
 
 381. Form No. 5 illustrates a labor-saving voucher, 
 the use of which is described as follows: As soon as 
 invoices from a purchase creditor are approved for entry, 
 they should be attached to a voucher, on which at that 
 time should be recorded on the check portion only, the 
 name of the creditor; on the remittance statement por- 
 tion, the date of each invoice and amount, and on the 
 voucher copy the distribution account numbers and 
 
 263 
 
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 11 
 
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 382-384 ACCOUNTING FORMS 
 
 amounts. All vouchers should then be filed temporarily 
 in alphabetical order until the close of the month or pay- 
 ment date, if paid before, when the vouchers should be 
 closed and entered on the voucher record. The entire 
 purchases for a month from any one creditor should be 
 covered by one voucher unless certain bills, to save the 
 discount, are paid during the month, in which event a 
 separate voucher should be made for each payment. 
 
 382. After being entered on the voucher record in 
 numerical order, they should be filed alphabetically in a 
 file marked "Unpaid Vouchers." Each voucher should 
 show the page of the voucher record and date of entry. 
 To provide for the payment of bills within the discount 
 time limit, a copy may be filed in a tickler file according 
 to the date of payment, and when vouchers are to be paid, 
 both original and duplicate should be passed to the proper 
 officers for signatures to the check, at which time invoices 
 should be stamped "Paid," thus guarding against the 
 duplicate payment of same. This method places all sup- 
 porting papers before officers who sign checks. 
 
 383. The original checks with remittance state- 
 ments are then ready to detach and mail, the dupHcates 
 with invoices attached to be permanently filed either 
 numerically or alphabetically. 
 
 384. The above described method of entering all of 
 one concern's invoices for a month in one amount on the 
 purchase record is recommended even in cases where 
 personal accounts are carried with purchase creditors, 
 thus requiring only one credit posting during the month 
 to each creditor's account. 
 
 264 
 
 VOUCHER SYSTEM 
 
 385-386 
 
 385. General. 
 
 It is to be recommended that the distribution of all 
 purchases, expenses, etc., be made on the purchase record 
 form, instead of distributing certain items on the check 
 register as is often done, and even provided for on form 
 
 No. 2. 
 
 386. In cases where all bills are paid in the same 
 month that they are received, or in cases where the 
 monthly showing of such items and the liability on 
 account of the unpaid bills is unimportant, the distribu- 
 tion may be made directly on the check register, but in 
 the majority of instances bills are not all paid during the 
 month in which they were received. Therefore in order 
 to show all purchases and expenses in the month in which 
 they were actually made, whether paid or not, also the 
 liability for all unpaid accounts at the close of the month, 
 all disbursements should be previously vouchered, entered 
 and distributed on the purchase or voucher record. This 
 method results in a uniformity of distribution on the one 
 form, and also provides for all disbursements being sup- 
 ported by properly approved vouchers. 
 
 265 
 
 
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 266 
 
 387. PURCHASE RECORD— FORM No. 6. 
 
 This form may be used either as a voucher record in 
 connection with the voucher system when individual 
 ledger accounts are not kept with purchase creditors, or 
 as a purchase record when ledger accounts are carried 
 with purchase creditors. When applied to the first 
 method, columns have been provided under the general 
 heading, "Voucher Record," showing the voucher or in- 
 voice number, date paid and check number. 
 
 388. In cases where purchase invoices are promptly 
 paid in full, that is, without making partial payments on 
 running accounts, the author suggests that they be 
 handled under the first method, as it is a great saving of 
 clerical work, and when used in conjunction with properly 
 prepared vouchers, constitutes a safeguard against the 
 duplicate payment of invoices; but when the accounts 
 with purchase creditors are very numerous of long stand- 
 ing and paid by instalments, the keeping of individual 
 accounts with purchase creditors is advisable. The 
 method to be used depends upon the condition in each 
 specific case. 
 
 389. Particulars as to the preparation and payment 
 of vouchers are fully described under the caption, 
 "Voucher System/' therefore the functions of this form 
 only will be described here. 
 
 267 
 
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 390-393 ACCOUNTING FORMS 
 
 390. Column— Accounts Payable. In this column 
 should be entered the total amount of the voucher, invoice 
 or group of invoices, depending upon the method used, 
 writhout deducting the cash discount, as provision is made 
 in the check register for the discount to be taken at the 
 time of payment. When individual accounts are carried 
 with purchase creditors, the items in this column are to be 
 posted throughout the month to the personal accounts 
 in the accounts payable ledger, and at the close of the 
 month the total of the column, to the controlling account 
 in the general ledger. When individual accounts are not 
 carried, only the total at the close of the month is to be 
 posted to the controlling account. 
 
 391. Column— Freight. See 188, Incoming Trans- 
 portation Charges Undistributed. 
 
 In this column should be entered the amount of the 
 freight relating to any particular purchase. The total of 
 the column at the close of the month is to be posted to 
 the credit of the account, "Transportation Charges Undis- 
 tributed" in the general ledger, the offset or debit to each 
 freight item to be distributed v^ith the invoice to the 
 proper account whether in the general ledger column or 
 in the column headed, "Items Distributed." All payments 
 of transportation charges should then be charged against 
 this account, the balance in the account representing 
 undisturbed transportation charges. 
 
 392. Column— General Ledger. The items in this 
 column are to be posted or summarized throughout the 
 month as described in 365 and 397. 
 
 393, Column — Items Distributed. In this column 
 should be entered the amounts to be distributed to the 
 
 268 
 
 PURCHASE RECORD 
 
 394-395 
 
 various accounts on the distribution summary, form No. 
 
 7, as described in 397. 
 
 394. Columns— Voucher Record. In the column. 
 Voucher or Invoice Number, should be entered the num- 
 ber of each voucher when the voucher system is used, 
 otherwise the number of each invoice or group of 
 
 invoices. 
 
 395. When the voucher system is used, the payment 
 of each voucher should be indicated by entering the date 
 of payment and check number on the same line as the 
 voucher number, in the columns headed, "Date Paid" and 
 "Check Number/' respectively. This need not be done, 
 however, on the same day that the vouchers were actually 
 paid, as it will be found more convenient to make these 
 entries on the voucher record at certain times throughout 
 the month, when several items may be entered at one 
 time from the check register. The total of the items, not 
 marked "Paid" should agree with the Accounts Payable 
 account in the general ledger, also with the "Unpaid 
 Vouchers" file, as referred to in 382. 
 
 269 
 
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 270 
 
 396. DISTRITUTION SUMMARY— FORM No. 7. 
 
 This form may be used in conjunction with all forms 
 here shown, but particularly with the Purchase Record, 
 form No. 6, and Combined Cash Journal, form No. 8. 
 
 397. All expenses should be entered in the expense 
 column of forms No. 2 and No. 8 and in the column 
 "Items to be Distributed" in form No. 6 and distributed 
 on the distribution summary. For illustration, say there 
 were ten entries to the account No. 127, Miscellaneous 
 Expense, fifteen to the account No. 130, Postage; the 
 account number should appear in the "Account Number" 
 column at the left, in each instance. In summarizing, one 
 column of the distribution summary would be headed No. 
 127, another No. 130 and all items of the account num- 
 ber 127 would be recapped in the column headed 127, and 
 all items of the account number 130, in column headed 
 130, and all other accounts treated in like manner. Sub- 
 headings may be made in columns when only a few items 
 for a certain account number are required, thus sum- 
 marizing two or more accounts in one column ; this to be 
 done and verified throughout the month to save an ac- 
 cumulation of work at the close of the month. At this 
 time the total of each expense account should be entered 
 in one amount in the expense column, of the form from 
 which the items were distributed, in order that only one 
 
 271 
 
 
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 398 
 
 ACCOUNTING FORMS 
 
 ledger posting of each account may be required for the 
 month, although it may be composed of numerous items. 
 At the close of the month this sheet should be placed in 
 the binder, following the sheets summarized, and for con- 
 venience in locating is printed on different colored paper. 
 The advantages of this method are as follows: 
 
 398. 1st — Allows indefinite expansion, being appli- 
 cable to almost any business. 
 
 2nd — Saves paper and time in distribution, by dis- 
 placing the ordinary, cumbersome voucher record, con- 
 taining numerous distribution columns and so inconven- 
 ient to handle. 
 
 3rd — Saves time in footing and forwarding numer- 
 ous columns in which only scattering entries are made. 
 
 4th — Reduces ledger postings, additions and space, 
 thus reducing the possibility of error. 
 
 272 
 
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 399. COMBINED CASH JOURNAL 
 
 FORM No. 8. 
 
 This record, which is especially adapted to the 
 smaller business houses, is designed to combine all the 
 features of the Cash Received, Check Register, Journal 
 and Purchase Record on one form. This form may be 
 used alone or in conjunction with any of the others pro- 
 viding for numerous entries of any one class. 
 
 400. Columns^Bank Debit and Credit. These col- 
 umns take the place of the ordinary check stub book and 
 cash book relating to bank disbursements, and show at all 
 times the condition of the bank account, the total of each 
 deposit being entered in the debit column and the amount 
 of each check in the credit column, with the check num- 
 ber in the column at the left. As a consequence it will be 
 found more convenient to have checks put up in pads 
 instead of book form, each to be numbered consecutively 
 and every number accounted for in the check number col- 
 umn If a check is spoiled by accident or otherwise its 
 number should be recorded and marked "Void." As the 
 postings are made directly from this form to the ledger, 
 time is not only saved in filling out check stubs and copy- 
 ing from them to the cash book, but the possibility of 
 errors in so doing is eliminated. No postings except the 
 totals at the end of the month less the balance brought 
 
 274 
 
 COMBINED CASH JOURNAL 
 
 401-403 
 
 forward at the beginning of the month, are to be made 
 from these columns. 
 
 401. Columns — Cash Debit and Credit. These col- 
 umns take the place of the ordinary cash book, the net 
 cash received being entered in the debit column and the 
 total of each deposit in the credit column. All cash re- 
 ceived should be deposited in the bank, in which event 
 these columns should balance when the day's deposits 
 have been made, thus facilitating the balancing of cash. 
 Petty cash disbursements should be handled under the 
 "Imprest System," as described in 27-378. 
 
 When this system is not used such disbursements 
 should be entered in the credit column. No postings ex- 
 cept the totals at the end of the month are to be made from 
 these columns. 
 
 402. Columns — Accounts Receivable Debit and 
 Credit. In the debit column should be entered the total 
 charges to customers, at the close of the month, from 
 the sales summary. (See 407.) In the credit column 
 should be entered the total amounts to be credited to 
 customers for remittances or otherwise, therefore each 
 amount in this column should include not only the net 
 cash received but all deductions allowed. 
 
 The items in these columns are to be posted through- 
 out the month to the individual accounts in the custom- 
 ers' ledger and at the close of the month the total of each 
 column, to the customers' controlling account in the gen- 
 eral ledger. (See 24). 
 
 403. Columns — Cash Discount Debit and Credit. 
 
 In the debit column should be entered all cash discounts 
 allowed customers, and in the credit column all cash dis- 
 
 275 
 
 I! 
 
 L: 
 
 I 
 
 P 
 
404-405 ACCOUNTING FORMS 
 
 counts taken from purchase creditors. The totals only 
 of these columns are to be posted at the close of the 
 month. 
 
 404. Column^Accounts Payable Debit and Credit. 
 
 In the debit column should be entered the total amount 
 to be charged to the creditor, being the net amount paid 
 plus the discount, if any ; and in the credit column, all credits 
 to purchase creditors. (The "Voucher Record" columns 
 shown on form No. 6 should be provided at the right of 
 the credit column when no individual accounts are carried 
 with purchase creditors, but to save space on the illustra- 
 tion these have been omitted). 
 
 405. Columns — General Ledger, Purchases, Ex- 
 penses and Cash Sales. For details as to the use of these 
 columns, see instructions accompanying forms i, 2 and 6, 
 -Cash Received, Check Register and Purchase Record, 
 respectively. 
 
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 406. SALES SUMMARY— FORM No. 9. 
 
 This form is to be used for summarizing the daily 
 sales and costs, when the sales are "cost priced" and when 
 several departments are maintained. The cost columns 
 on this form would be omitted when the costs are not 
 figured on sales. This form, as appHcable to a retail busi- 
 ness, is described as follows: 
 
 407. The daily sales tickets, showing both cost and 
 selling price, should be assembled according to depart- 
 ments and footed on an adding machine, the departmental 
 totals only to be entered on this summary, or when sales 
 items are few in number each sales ticket may be entered. 
 The total "Charge Sales" column should agree with the 
 charge binder from which postings are made to the indi- 
 vidual accounts of the customers' ledger, and the total 
 "Cash Sales" column should agree with the "Cash Sales" 
 column in the cash received record. At the close of the 
 month the totals of these various columns are to be 
 transferred to the journal from which they are posted to 
 their respective accounts in the general ledger. 
 
 408. In a manufacturing business it is usually cus- 
 tomarv to show each charge number and the distribution 
 on the summary. 
 
 278 
 
 SALES SUMMARY 
 
 409 
 
 409. Customers' Credit Memorandum Summary. 
 
 Goods returned or allowances to be made for which 
 credit memoranda are issued, or cash refunded, may be 
 summarized in red ink on this form; or a sheet headed 
 "Credit Memorandum Summary" may be provided for 
 that purpose, the corresponding totals to be posted at the 
 end of the month in a similar manner as described in 407. 
 
 ', t 
 
 279 
 
INDEX 
 
 u 
 
l\ 
 
 INDEX 
 
 A 
 
 Ref. No. 
 
 Accounting Forms 360-409 
 
 Accounts Payable Voucher 3oi 
 
 Cash Received 361-370 
 
 Check Register 3/1-377 
 
 Combined Cash Journal 399-40S 
 
 Credit Memorandum Summary 409 
 
 Distribution Summary 39^39^ 
 
 Imprest Cash Voucher 378 
 
 Journal 379 
 
 Purchase Record 387-395 
 
 Sales Summary ' 406-408 
 
 Accounts Payable 
 
 Controlling Account of 86 
 
 Ledger 86 
 
 Purchase Creditors o" 
 
 Sundry Creditors 87 
 
 Voucher form 381 
 
 Accounts Receivable 
 
 C. O. D.'s 250 
 
 Controlling Account of ,..-23,24,25,38 
 
 Customers 38 
 
 Ledger 38 
 
 Sundry Debtors 40 
 
 Reserve for ^^' it 
 
 Accrued Commissions 89 
 
 Accrued Items Payable 90 
 
 Accrued Interest, Items Payable 91 
 
 Accrued Interest, Items Receivable 37 
 
 Accrued Pay Rolls 88 
 
 Accrued Taxes 90 
 
 Adm.inistrative Expenses 26, 130, 190, 248 
 
 Manufacturing Proportion 26, 194 
 
 Proportion to Other Departments 221 
 
 Selling Proportion 247 
 
 Adjustments Affecting Prior Periods 1 1 1, 343. 355 
 
 Advertising 
 
 Expositions 232 
 
 Literature 230 
 
 Miscellaneous ; 231 
 
 Periodicals 229 
 
 283 
 
 >^ 
 
I 
 
 m^' 
 
 INDEX. 
 
 Rcf. No. 
 Alterations and Improvements 
 
 Account 256 
 
 Extinguishment of 271 
 
 Annual Report (See Financial Statements). 
 
 Analysis of 
 
 Expenses 22 
 
 Fixed Asset Accounts 59 
 
 Purchases 396, 39^ 
 
 Arrangement of Accounts 
 
 Balance Sheet 5. I3» 342, 345, 353, 354 
 
 Chart of Accounts i7> 26, 248 
 
 Ledger 19 
 
 Profit and Loss Statement 14, 15, 344» 347. 356, 358 
 
 Assets 
 
 On Balance Sheet 342, 345, 353, 354 
 
 Chart of 26, 248 
 
 Current 7. n. 26, 248 
 
 Fixed 7. n. 26, 248 
 
 Intangible 7, n. 26, 248 
 
 Nominal 7, u. 26, 248 
 
 Permanent 7» n, 26, 248 
 
 Quick 7, II, 26, 248 
 
 Authorized Capital Stock 95, 96 
 
 Automobiles 
 
 Account 7^* 76 
 
 Depreciation and Reserve 60, 61, 173, 193, 211 
 
 Insurance on I74 
 
 Proportion to departments 
 
 Administrative 243 
 
 Factory I75 
 
 Selling 275 
 
 Repairs to 172, 210 
 
 Supplies and Expense 171 
 
 Wages — Chauffeurs 170 
 
 B 
 
 Bad Accounts 
 
 Reserve for 39t 41 
 
 Reserve Charge 218 
 
 Balance Sheet 
 
 Arrangement of Accounts of 5, I3 
 
 Definition of 3 
 
 Illustrations of 342, 345, 353, 354 
 
 Instructions for Preparing 340, 351 
 
 Balance, Trial 4 
 
 Bank Account 30 
 
 Reconciliation of 3i 
 
 Betterments 59 
 
 Bills Payable 84, 85 
 
 Bills Receivable 34 
 
 Bills Receivable Discounted 35 
 
 284 
 
 INDEX. 
 
 Ref. No. 
 
 Bonds 
 
 Accounts 32, 93 
 
 Register 32, 93 
 
 Books (see Accounting Forms). 
 
 Branch Offices 
 
 Accounts with II9 
 
 Furniture and Fixtures 7° 
 
 Buildings and Building Fixtures 
 
 Account /L^'i" * 
 
 Depreciation and Reserve for 60, 61, I93 
 
 Repairs to ^56, 270 
 
 Burden (see Manufacturing Expenses). 
 
 By-Products 309 
 
 Cancelled Stock Certificates 94 
 
 Capital 26, 94, 248 
 
 Account of Partner I03 
 
 Account of Proprietor i^i 
 
 Working, Reserve for 1^9 
 
 Capital Stock 12, 94 
 
 Certificate Book 94 
 
 Common Authorized 90 
 
 Common Unissued 9° 
 
 Issued 94 
 
 Journal 94 
 
 Ledger 94 
 
 Preferred Authorized 95 
 
 Preferred Unissued 97 
 
 Subscribed 99 
 
 Subscriptions to i^o 
 
 Transferred 94 
 
 Cartage 44 
 
 Cash 
 
 In Banks 30 
 
 Discounts Allowed Others 132 
 
 Discounts Earned l^i 
 
 Imprest Fund ^7 
 
 On Hand 29 
 
 Over and Short 219 
 
 Petty ....27 
 
 Received Record, Form of 361-370 
 
 Sales "I 
 
 Cashier's Change Fund 28 
 
 Charities and Donations 212 
 
 Changing Books from Single to Double Entry 31 5 
 
 Chart of Accounts '7 
 
 Manufacturing Companies 26 
 
 Mercantile Companies 248 
 
 Check Register, Form of 371-377 
 
 Classification of Accounts W"l^ 
 
 Clerks, Salaries of •■228, 263 
 
 Closing Entries m, 3i7, 318, 341, 352 
 
 285 
 
h . 
 
 iill^ 
 
 h 
 
 U ! 
 
 K 
 
 INDEX. 
 
 Ref . No. 
 
 C. O. D. Accounts 250 
 
 Combined Cash Journal and Bank Account, Form of 399-405 
 
 Commercial Agency Subscriptions 240 
 
 Commercial Expenses 15 
 
 Commissions 
 
 Accrued 89 
 
 Traveling Salesmen's 224 
 
 Common Stock (see Capital Stock). 
 
 Comparison of Accounts Msmuf acturing and Mercantile Co's . 249 
 
 Consigned Merchandise 128 
 
 Consignments to Others 42 
 
 Construction and Maintensmce Orders 59, 306 
 
 Contingent Liabilities 35 
 
 Controlling Accounts 23, 24, 25, 38, 86 
 
 Corporation, Definition of (see Capital Stock) 94 
 
 Cost Accounting, Principles of 276-310 
 
 Cost Finding, Methods of 303 
 
 Process Method 308 
 
 Production Order Method 304 
 
 Cost Ledger 307 
 
 Cost of Doing Business, Percentage of 344, 347, 356, 358, 359 
 
 Cost of Product Manufactured 127 
 
 Cost of Sales 15, 129, 260, 344, 356 
 
 Cost System, Importance of 276 
 
 Costs Manufacturing, Elements of 278 
 
 Credit Memorandum Summary 409 
 
 Cumulative Dividends, Preferred Stock 105 
 
 Current Assets 7» 1 1» 26, 248 
 
 Current Liabilities 8, 12, 26, 248 
 
 Customers* Accounts 24, 38 
 
 Deferred Charges to Operation 7, 11, 26, 52, 248 
 
 Deficit 12, no 
 
 Defective Material, Replacements of 186 
 
 Departmental Supplies 272 
 
 Depreciation, Reserve Charge and Reserve for 60, 61, 193 
 
 Automobiles, Factory 60, 61, 173 
 
 Automobiles, Main Office 60, 61, 193 
 
 Buildings and Building Fixtures 60, 61, 193 
 
 Drawings 60, 61, 193 
 
 Entries 349 
 
 Factory Fixtures 60, 61, 193 
 
 Machinery and Machine Tools 60, 61, 193 
 
 Manufacturing Material and Work in Process 48 
 
 Merchandise Stocks .254 
 
 Office Furniture and Fixtures 
 
 Branch Office 60, 61, 193 
 
 Factory 60, 61, 193 
 
 Main Office 60, 61, 193, 209 
 
 Selling Department 60, 61, 193. 241 
 
 Patterns 60, 61, 74. I93 
 
 Perishable Tools 70 
 
 286 
 
 OB 
 
 fBti 
 
 INDEX. 
 
 Ref. No. 
 
 Power Plant 60, 61, i93 
 
 Rates of V;* "^^ 
 
 Stable Equipment 60, 61, 167 
 
 Store Furniture and Fixtures 60, 61, 241 
 
 Designers and Draftsmen, Salaries of 138 
 
 Direct Charges to Manufacturing 27S 
 
 Direct Expenses ^95 
 
 Direct Labor 125, 284 
 
 Direct Material 279 
 
 Directors' Fees and Expenses ^99 
 
 Dscounted Notes Receivable •■ 35 
 
 Discounts 
 
 Allowed ^^^ 
 
 Earned ^^i 
 
 On Bonds ^^Z 
 
 On Treasury Stock 32b 
 
 Distribution of Expenses 
 
 Department Store, Illustrated • • .34o 
 
 Manufacturing Overhead to Departments. .294, 295, 296, 359 
 
 Manufacturing Overhead to Cost Sheets 297 
 
 Methods of 
 
 Direct Labor 298 
 
 Direct Labor, Hours 299 
 
 Direct Labor and Material 30o 
 
 Machine Hour • • 30i 
 
 Distribution Summary, Form of 396-398 
 
 Dividends , 
 
 Common Stock ^^^ 
 
 Preferred Stock io5 
 
 Stock 107 
 
 Donated Stock 325 
 
 Doubtful Accounts 
 
 Reserve Charge 210 
 
 Reserve for 39, 4i 
 
 Drafting Supplies ^9^ 
 
 E 
 
 Earnings, Miscellaneous ^23 
 
 Electric Current ^5o 
 
 Elements of Manufacturing Cost ^7^ 
 
 Elevator Wages and Expenses 266 
 
 Entertainment 227 
 
 Entries, Miscellaneous 
 
 Adjustment of Partners' Capital Accounts 343 
 
 Adjustment of Surplus Account 355 
 
 Bonds Soldi at Discount 327 
 
 Bonds Sold with Common Stock given as bonus 327 
 
 Capital Stock Decreased 330 
 
 Capital Stock Increased • • • • 335 
 
 Changing Books from Single to Double Entry 3^5 
 
 Closing Ledger "i, 3^7, 3i8, 341, 352 
 
 Depreciation, Charge and Reserve for 349 
 
 Dissolution of Partnership 337 
 
 287 
 
i! 
 
 INDEX. 
 
 Ref . No. 
 
 Opening Books— Corporation (see 331 to 335). -320, 321, 322 
 
 Opening Books — Individual 3ii 
 
 Opening Books— Partnership 312, 313 
 
 Stock Donated by Incorporators 325 
 
 Stock Issued in Payment of Plant Purchased 324 
 
 Stock Issued in Payment of Promotion Expenses 328 
 
 Stock Issued for Cash 323 
 
 Stock Sold at Premium 329 
 
 Stock Sold on Instalment Plan 332-334 
 
 Stock Taken Back in Settlement of Debt of Stockholders. 331 
 
 Treasury Stock Sold at Discount 326 
 
 Treasury Stock Sold at Premium 330 
 
 Establishment of Selling Prices 310 
 
 Executive Officers 
 
 Expenses of ^9° 
 
 Salaries of ^97 
 
 Expenses 
 
 Accrued V ' * ^ 
 
 Administrative 26, 130, 190, 248 
 
 Commercial ^5 
 
 Direct 295 
 
 Indirect • • • -^^o 
 
 Manufacturing Overhead 126, 130, 293 
 
 Manufacturing Companies ^^* « 
 
 Mercantile Companies ....248 
 
 Organization °3. I35 
 
 Prepaid -7, 53, 50, 57- 
 
 Selling 26, 131, 222, 248 
 
 Expense Accounts, Chart of 
 
 Manufacturing Companies 26 
 
 Mercantile Companies 248 
 
 Expense Analysis Record 22 
 
 Expenses, Distribution of 
 
 Department Store, Illustrated ■•348 
 
 Manufacturing Overhead to Departments. . .294, 295, 296, 359 
 Manufacturing Overhead to Cost Sheets 297 
 
 Methods of 
 
 Direct Hours 299 
 
 Direct Labor 298 
 
 Direct Material 300 
 
 Machine Hour 30i 
 
 Experimental Work • • • ^^3 
 
 Extinguishment of Alterations and Improvements 271 
 
 Extinguishment of Organization Expense i3S 
 
 Extinguishment of Patents I34, 349 
 
 F 
 
 Factory Accounting Employees, Salary of I39 
 
 Factory Fixtures 
 
 Account <" V ' 
 
 Depreciation and Reserve 00, Oi, 193 
 
 Repairs to ^59 
 
 Factory Ledger 21, 302 
 
 288 
 
 I 
 
 INDEX. 
 
 Ref. No. 
 
 Factory Supplies Used ™ 
 
 Feed and Bedding • ^^ 
 
 Financial Statements, lUustrated Forms of ,,«,.« 
 
 Balance Sheet ^^ Iac 
 
 Corporation— Department Store V," ,cx 
 
 Corporation — Manufacturing 353- 354 
 
 Partnership — Retail ^^^ 
 
 Distribution of Expenses ^ 
 
 Department Store 34o 
 
 Manufacturing 359 
 
 Inventories, Schedule of 340 
 
 Profit and Loss Statement 
 
 Department Store 347 
 
 Manufacturing with cost system 35o 
 
 Manufacturing without cost system 35o 
 
 Retail 344 
 
 Working Sheet— Manufacturing 35o, 35i 
 
 Working Sheet— Mercantile 339, 34" 
 
 Finished Product ^ 
 
 Inventories j*^ 
 
 Fixe^ssew;:;::::::::::::::*:"^^-''*";--:-*---^^ 
 
 Fixed LiabiUties .....,.; V ^ 8 12 
 
 Floating Assets and Liabihties 7, ^i' ^' *^ 
 
 Freight ;:;i^ 
 
 Fuel ^^ 
 
 Fund 28 
 
 Cashier's Change 
 
 Imprest Cash 
 
 Sinking 
 
 Furniture and Fixtures 
 
 Branch Office g 
 
 Account *<^' * kV ^1t 
 
 Depreciation and Reserve 00, Oi, 241 
 
 Repairs to 
 
 Factory -- 
 
 Account ^* Vt' * xn^ 
 
 Depreciation and Reserve «>, 01, i93 
 
 Repairs to 
 
 Main Office y- 
 
 Account A^'kJ' 4on 
 
 Depreciation and Reserve '208 
 
 Repairs to 
 
 Store 2K^ 
 
 Account /U *At * o^T 
 
 Depreciation and Reserve '270 
 
 Repairs to 
 
 ^ 151 
 
 Gas • 20 
 
 General Ledger o^ 
 
 Good Will ...•• •• ?: 
 
 Gross Profits (see Financial Statement) ^5 
 
 289 
 
^:i 
 
 n ." 
 
 'N 
 
 I 
 
 i '. 
 I . 
 
 INDEX. 
 
 Ref. No. 
 
 Gross Sales (see Financial Statement) 15 
 
 Grounds 
 
 Account 63 
 
 Repairs and Upkeep 15s 
 
 H 
 Heat, Light and Power 
 
 Electric Current 150 
 
 Fuel 149 
 
 Gas 151 
 
 Labor 148 
 
 Proportion — Administrative Department 207, 261 
 
 Proportion — Manufacturing Department 153 
 
 Proportion — Selling Departments 235, 265 
 
 I 
 
 Imprest Cash 
 
 Fund 27, 378 
 
 Voucher form 378 
 
 Improvements and Alterations 
 
 Account 256 
 
 Extinguishment of 271 
 
 Incidental Expenses 
 
 Administrative 220 
 
 Selling 246 
 
 Income and Expense Statement 15 
 
 Income on Sinking Fund Investments 79 
 
 Incoming Transportation Charges — Undistributed 44, 188 
 
 Indemnity Bonds 
 
 Executive Officers and Office Employees 214 
 
 Salesmen 226 
 
 Indirect Charges to Manufacturing 278 
 
 Indirect . Manufacturing Expenses 296 
 
 Indirect Manufacturing Labor 26, 284 
 
 Indirect Manufacturing Labor — Miscellaneous 147 
 
 Indirect Manufacturing Material 279 
 
 Insurance 
 
 Automobiles 174 
 
 Fire, on Main Office Furniture and Fixtures 215 
 
 Fire, on Merchandise Stocks, Buildings, and Building 
 
 Fxtures 268 
 
 Fire, on Plant and Stock 178 
 
 Liability — Manufacturing 179 
 
 Liability — Mercantile 267 
 
 Prepaid 54 
 
 Stable Equipment 168 
 
 Intangible Assets 7, 11, 26, 248 
 
 Interest 
 
 Accrued Items Payable 91 
 
 Accrued Items Receivable 37 
 
 Earned 122 
 
 On Items Payable 133 
 
 On Investment 195 
 
 290 
 
 f 
 
 i 
 
 J 
 
 INDEX. 
 
 Ref. No. 
 Inventories 
 
 Department Store 253, 346 
 
 Finished Product 46 
 
 Perpetual 280 
 
 Manufacturing Material 44 
 
 Merchandise, Branches 43 
 
 Merchandise Warehouse 252 
 
 Pricing of 251 
 
 Schedule of ^ 346 
 
 Semi-finished Product 45 
 
 Work in Process 47 
 
 Investment Account 
 
 Proprietor loi 
 
 Partners 103 
 
 Sinking Fund 79 
 
 Items Payable, Accrued 90 
 
 Items Receivable, Prepaid 52 
 
 Journal 
 
 Form of 379 
 
 Vouchers 379 
 
 Stock 94 
 
 L 
 
 Labor 
 
 Direct 125, 284 
 
 Indirect 26, 284 
 
 Heat, Light and Power 148 
 
 Shipping 244 
 
 Land (see Grounds). 
 
 Ledgers 
 
 Accounts Payable 86 
 
 Accounts Receivable 38 
 
 Branch 119 
 
 Closing of Ill, 317, 318, 341, 352 
 
 Classification of Accounts of 19 
 
 Cost 307 
 
 Factory 21, 302 
 
 General 20 
 
 Private 20 
 
 Stock 94 
 
 Subsidiary 38, 86, 21, 94 
 
 Legal Expenses 217 
 
 Liabilities 
 
 On Balance Sheet 342, 345, 353, 354 
 
 Chart of 26, 248 
 
 Current 8, 12, 26, 248 
 
 Fixed 8, 12, 26, 248 
 
 Floating 8, 12, 26, 248 
 
 Loans, Notes Payable 84 
 
 Lost Time 184 
 
 291 
 
1 , 
 
 INDEX. 
 
 Rcf. No. 
 
 .2 
 
 Loss, Net • : V * ' * \ 
 
 Loss and Gain (see Profit and Loss). 
 
 M 
 
 Machinery and Machine Tools 
 
 Account • • k^' Vt ' in^ 
 
 Depreciation Charge and Reserve for .-W), oi, i93 
 
 Repairs and Replacements of A^ 
 
 Main Office Employees, Salaries of ^"" 
 
 Main Office Furniture and Fixtures ^^ 
 
 Depreciation 'charge 'and 'Reserve for 60, 61, 209 
 
 Repairs to 26 lU 
 
 Maintenance Accounts ^' ^^ 
 
 Manufactured Product, Cost of '' 
 
 Manufacturing Costs ^78 
 
 Elements of 
 
 Manufacturing Expenses ...126 
 
 Account '26 
 
 Chart of * j^g 
 
 Description of _ 
 
 Definition of ^^^ 
 
 Miscellaneous 
 
 Manufacturing Material ^79 
 
 Direct 279 
 
 Indirect ^ 
 
 Inventory 124 
 
 Purchases " ' ^^i 
 
 Received 282 
 
 Requisitions •_• •; • .0 
 
 Reserve for Depreciation of i'/.iis 
 
 Sales of jge 
 
 Spoiled or Scrapped • " * * * '^g^ 
 
 ManufacSind Mercantiie Accounts, 'Compa'rlson' of .'249; 277 
 
 Manufacturing Order . . . ... ••• — •••• '^.i 
 
 Manufacturing Overhead Undistributed 49 
 
 Material (see Manufacturing Material). 
 
 Merchandise J28 
 
 Consigned 
 
 Inventory .^ 
 
 Branches '. i's's*, ' 346 
 
 Departments ^^•^' ^^S 
 
 Schedule of ^^3 
 
 Warehouse ! ! .259 
 
 Purchases * * * ' 3^3 
 
 tales, cos't'of : : i ! ! ! '. ! ! ] ! ! 1 .' 1 ! ! i •' '. " ^" ^ ^5,' iVg/ifc,' "m'sse 
 
 Method?of D'isiributing '6'verhe'ad Expenses 
 
 To Departments 294, 295, 290, i^o, ^^y 
 
 To Cost Sheets 208 
 
 Direct Labor ^ 
 
 Direct Labor, Hours ^^ 
 
 292 
 
 INDEX. 
 
 Rcf. No. 
 
 Direct Labor and Material 300 
 
 Machine Hour 301 
 
 Miscellaneous Sales 117 
 
 Miscellaneous Earnings 123 
 
 Mortgages 
 
 Payable 92 
 
 Payable Registen' , 92 
 
 Receivable 33 
 
 Receivable Register 33 
 
 N 
 
 Net Loss 2 
 
 Net Profit (see Financial Statements) 2, 15 
 
 Net Sales (see Financial Statements) IS 
 
 Net Worth (see Financial Statements) i, 9, 26, 248 
 
 New Construction 59 
 
 Nominal Assets 7> 1 1. '^^ 248 
 
 Non-Productive Labor (see Indirect Labor). 
 Notes Payable 
 
 Loans 84 
 
 Purchase Creditors 85 
 
 Register 814 
 
 Notes Receivable 
 
 Account 34 
 
 Discounted 35 
 
 Register 34 
 
 Numbering Accounts 18, 2(i, 248 
 
 O 
 
 Office Employees, Salaries of 
 
 Administrative Department 200 
 
 Manufacturing Department i39 
 
 Selling Department 236 
 
 Officers Executive, Salaries of I97 
 
 Office Furniture and Fixtures (see Furniture and Fixtures). 
 
 Office Supplies and Expense (see Stationery and Printing). 
 
 Oil, Waste and Packing 181 
 
 Opening Entries 
 
 Changing Books from Single to Double Entry 319 
 
 Corporation 320-337 
 
 Individual Ownership 3" 
 
 Partnership 312, 313 
 
 Operating Expenses (see Manufacturing Expenses). 
 
 Orders 
 
 Construction 3©^ 
 
 Maintenance 306 
 
 Manufacturing 305 
 
 Material 282 
 
 Process 308 
 
 Production 30S 
 
 Stores 282 
 
 Organization Expenses 
 
 Account 83 
 
I 
 
 m 
 
 INDEX. 
 
 Ref . No. 
 
 Extinguishment of ^^ 
 
 Other Investments 
 
 Outgoing Shipments 
 
 Automobile Expense, proportion ^4J 
 
 Stable Expense, proportion 243 
 
 Transportation Charges on ^^ 
 
 Overhead (see Manufacturing Expenses) 
 
 P 
 
 Partners' Accounts 
 
 Capital or Investment J"^ 
 
 Private or Drawing ^ 
 
 Patents gj 
 
 Account ■ 
 
 Extinguishment of ^^ 
 
 Patterns and Drawings 
 
 Account • '^"Ar'^ATn^ 
 
 Depreciation of and Reserve for 60, 61, 74, I93 
 
 Repairs to ■''•'.■'• i^i 
 
 Pattern Makers, Salaries of ^^ 
 
 Pay Rolls, Accrued ; • • • • • • ' " '''o ' Icn 
 
 Percentages, Cost of Doing Busmess 344, 347, 35o, 35», 359 
 
 Perishable Tools 
 
 Account • (.f. 
 
 Depreciation of and Reserve for • /^ 
 
 Repairs and Replacements of :"r\"ofi^^^ 
 
 Permanent Assets 7, ",20, 240 
 
 Perpetual Inventory 
 
 Petty Cash -g 
 
 Plant Accounts ^ 
 
 Postage ...203 
 
 General 2^8 
 
 Selling Department -^ 
 
 Power Plant 55 
 
 Dep'Jeciation* of,' and Reserve for 60, 61, i93 
 
 Repairs to : ' ', " o" * i \ 
 
 Preferred Stock (see Capital Stock). 
 
 Prepaid Expenses 7, 53, bo, ^/ 
 
 Prepaid Insurance . . ...... ....•• • • • • t^ 
 
 Prepaid Stationery and Office Supplies ^55 
 
 Pricing Inventories ; 276U10 
 
 Principles of Cost Accounting ^20 
 
 Private Ledger io2,"io4 
 
 Private Accounts '•■"•■"■: -,08 
 
 Process Method of Cost Finding — • 3oo 
 
 Production Order Method of Cost Finding 304, 305 
 
 Productive Labor (see Direct Labor). 
 
 Profits (see Financial Statements). ^^ 
 
 S'"^ ^ ;.v.*.v.v.v.v.*.v.v.v.v.2, ' 15 
 
 Net 
 
 Profit and Loss ^^ 
 
 Accounts 
 
 294 
 
 INDEX. 
 
 Ref. No. 
 
 Costs 26, 248, 257 
 
 Revenues 26, 248, 257 
 
 Single Entry 316 
 
 Statement 
 
 Arrangement of Accounts 14, 15 
 
 Definition of 14 
 
 Illustrations of 344, 347, 356, 35B 
 
 Proprietor's Accounts 
 
 Capital or Investment loi 
 
 Private or Drawing 102 
 
 Purchases 
 
 Manufacturing Material 124 
 
 Merchandise 259 
 
 Purchase Creditors 86 
 
 Purchase Record 387-395 
 
 Q 
 
 Quick Assets 7, 11, 26, 248 
 
 R 
 
 Rates of Depreciation 61 
 
 Real Estate 63 
 
 Receipts and Disbursements, Statement of 15 
 
 Reconciliation of Bank Account 31 
 
 Rent and Interest Charges on Investment 195 
 
 Rent Earned 120 
 
 Rent Factory proportion 176 
 
 Rent Office proportion 206 
 
 Rent Selling Dept proportion 234 
 
 Register 
 
 Bond 32. 93 
 
 Check 37^-377 
 
 C. O. D 250 
 
 Dividend 106 
 
 Mortgages Payable 92 
 
 Mortgages Receivable 33 
 
 Notes Payable 84 
 
 Notes Receivable 34 
 
 Order 305 
 
 Purchase 387-395 
 
 Voucher 387-395 
 
 Repair Accounts 154 
 
 Repairs to 
 
 Automobiles — Factory Department 172 
 
 Automobiles — Administrative Department 210 
 
 Buildings and Building Fixtures 156, 270 
 
 Factory Fixtures 159 
 
 Factory Stock 187 
 
 Grounds 155 
 
 Machinery and Machine Tools 158 
 
 Office Furniture and Fixtures — Factory 162 
 
 Office Furniture and Fixtures — Main Office 208 
 
 Patterns 161 
 
 295 
 
«(> 
 
 r I 
 
 I 
 
 ,1 
 
 r 
 
 I 
 
 157 
 166 
 
 INDEX. 
 
 Rcf. No. 
 
 Perishable Tools ^^o 
 
 Power Plant 
 
 Stable Equipment 
 
 Store Furniture and Fixtures 270 
 
 Replacements, Defective Material 186 
 
 Replacements, Merchandise Gratis 233 
 
 Reports (see Financial Statements). 
 
 Requisition for Manufacturing Material 282 
 
 Reserves , ^ j 
 
 for Depreciation of Fixed Assets (see Depreciation and 
 
 Reserve). 
 
 for Doubtful Accounts Receivable, Customers 39 
 
 for Doubtful Accounts Receivable, Sundry Debtors 41 
 
 for Doubtful Notes 30 
 
 for Sinking Fund ^^S 
 
 for Working Capital 1^9 
 
 Secret 
 
 62 
 
 119 
 121 
 122 
 123 
 120 
 
 112 
 
 Returned Ssdes ^5, 112,258 
 
 Returned Purchases ^24, 259 
 
 Revenues from 
 
 Branches 
 
 Cash Discounts 
 
 Interest 
 
 Miscellaneous 
 
 Rents 
 
 Sales of 
 
 Finished Product 
 
 Manufacturing Material 1^5 
 
 Merchandise ^5° 
 
 5crap ^^" 
 
 Semi-finished Product ^M 
 
 s 
 
 ^^"^'^^trlfs --8, 263 
 
 Designers and Draftsmen 138 
 
 Executive Officers ^97 
 
 Miscellaneous 201, 204 
 
 Office Employees 
 
 Administrative Department 
 
 Manufacturing Department 
 
 Selling Department 
 
 Pattern Makers 
 
 Storekeepers 
 
 Superintendents and Foremen i37 
 
 Traveling Salesmen 223 
 
 Sales _-Q 
 
 Cash "^ 
 
 Cost of' ^5, 129,260,344 
 
 Finished Product ■ ^^ 
 
 Gross (see Financial Statements) i5 
 
 Manufacturing Material "5 
 
 Merchandise, by Departments 250 
 
 296 
 
 200 
 
 .139 
 .236 
 
 .141 
 .140 
 
 INDEX. 
 
 Rcf. No. 
 
 Miscellaneous 117 
 
 Net 15 
 
 Returned 15, 112, 258 
 
 Scrap 116 
 
 Semi-finished Product 114 
 
 Summary, form of 406-408 
 
 Secret Reserve 62 
 
 Selling Expenses 26, 131, 222, 248 
 
 Selling Prices, Establishment of 310 
 
 Semi-tinished Product 
 
 Inventory 45 
 
 Sales of 114 
 
 Shipping Labor 244 
 
 Shipping Supplies and Expense ^ 245 
 
 Single Entry, Changing to Double Entry 315 
 
 Sinking Fund 
 
 Account 79 
 
 Income from 79 
 
 Investments of 108 
 
 Reserve for 108 
 
 Spoiled Material 185 
 
 Stable 
 
 Depreciation and Reserve for 60, 61, 167, 193 
 
 Equipment 7^ 
 
 Expenses 26, 248 
 
 Expense proportion • 
 
 Administrative Department 262 
 
 Manufacturing Department 169 
 
 Selling Department 274 
 
 Feed and Bedding 165 
 
 Insurance 168 
 
 Repairs 166 
 
 Supplies and Expense 164 
 
 Wages, Drivers 163 
 
 Stable and Auto Expense, Proportion 
 
 Incoming Merchandise 262 
 
 Outgoing Shipments 243 
 
 Selling Department 274, 275 
 
 Statements 
 
 Assets and Liabilities 342, 345, 353, 354 
 
 Expense Distribution 348, 359 
 
 Financial 338-359 
 
 Income and Expense 15 
 
 Profit and Loss 14, I5, 344» 347» 356, 358 
 
 Receipts and Disbursements 15 
 
 Surplus 355 
 
 Stationery, Printing and Office Supplies 
 
 Administrative Department 202 
 
 Manufacturing Department 190 
 
 Selling Department 237 
 
 Stocks and Bonds of Other Companies 32 
 
 Stock 
 
 Capital (see Capital Stock). 
 
 297 
 
H 
 
 m 
 
 
 INDEX. 
 
 Rcf. No. 
 
 •Certificate Book ^^ 
 
 Dividend ^°7 
 
 Journal ^4 
 
 Ledger 94 
 
 Merchandise (see Inventories). 
 
 Records ^80 
 
 Store Furniture and Fixtures 
 
 Account V "J' '^^^ 
 
 Depreciation and! Reserve for 6o, oi, I93 
 
 Repairs to ^7© 
 
 Storekeepers, Salaries of ^4© 
 
 Stores Orders for Material ^82 
 
 Subscribed Capital Stock 99 
 
 Subscriptions to Capital Stock W'o^^^ 
 
 Subsidiary Ledgers 21, 38, 86, 94 
 
 Summary „ 
 
 Distribution Form 390-398 
 
 of Sales 406-408 
 
 Sundry Creditors °7 
 
 Sundry Debtors 40 
 
 Superintendents and Foremen, Salaries of i37 
 
 Supplies 
 
 Automobile ^^ 
 
 Departmental ^72 
 
 Drafting ]^ 
 
 Factory ™ 
 
 Heat, Light and Power ^52 
 
 Office 
 
 Administrative Department 202 
 
 Factory ^90 
 
 Selling Department 237 
 
 Shipping ^45 
 
 Stable ^"4 
 
 Surplus ....';; 12, no, 355 
 
 T 
 
 "^^"^ecrued ^o 
 
 Merchandise Stocks, Buildings and Buildmg Fixtures... 269 
 
 Plant and Stock ^77 
 
 State and Federal ^lO 
 
 Telephone and Telegraph 
 
 Administrative Department proportion 204 
 
 Manufacturing Department proportion 189 
 
 Selling Department proportion 239 
 
 Time Tickets rw.'-W ^^ 
 
 Tools, small (see Perishable Tools). 
 
 Trading Account • : ^^^ 
 
 Transferring Property of Partnership to Corporation 324 
 
 Transfer Slips ^^^ 
 
 Transportation Charges .. tQa 
 
 Incoming, Undistributed 44, 188 
 
 Outgoing Shipments ^42 
 
 298 
 
 INDEX. 
 
 Rcf. No. 
 
 Traveling Expenses 
 
 Other than Selling 213 
 
 Traveling Salesmen 225 
 
 Traveling Salesmen 
 
 Accounts with 40 
 
 Commissions of 224 
 
 Expenses of 225 
 
 Salaries of ^^3 
 
 Treasury Stock 
 
 Common 51 
 
 Preferred 50 
 
 Trial Balance 4, 339» 35o 
 
 U 
 
 Undistributed Manufacturing Overhead 49 
 
 Unissued Capital Stock 97, 98 
 
 V 
 
 Voucher Checks W'^^^ 
 
 Voucher Record, form of ^S^"^?? 
 
 Voucher System 380-386 
 
 Vouchers Payable 80 
 
 W 
 
 \^a&res 
 
 Carpenters, Painters and Millwrights I44 
 
 Chauffeurs ^70 
 
 Drivers ^^ 
 
 Elevator Operators 260 
 
 Inspectors ^43 
 
 Sweepers and Cleaners 140 
 
 Tool Makers 142 
 
 Truckers M5 
 
 Wages, Method of Paying 286 
 
 Bonus Rate Plan 291 
 
 Day Rate Plan 287 
 
 Differential Rate Plan 289 
 
 Piece Work Plan 288 
 
 Premium Rate Plan 290 
 
 Profit Sharing Plan 292 
 
 Water ^^2 
 
 Water and Ice ^5 
 
 Working Capital ^09 
 
 Working Sheet 
 
 Mercantile Companies 339 
 
 Manufacturing Companies 350 
 
 Work in Process, Inventory of 47 
 
 299 
 
) 
 
 m'' 
 
 m 
 
 w 
 
 *1l 
 
 TOI.KDO I.KSAX. MBWB 
 rBIMTBRB. TOI.BOO. O 
 
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 TITLE