=x mnmmmmmmmmmmiimmmmmmm THE ARTHUR YOUNG ACCOUNTING COLLECTION Graduate School of Business Administration Library of the University of CaUfomia Los Angeles Cova^ 'XI ' v^ SOUTHERN BRANCH, UNIVERSITY OF CALIFORNIA, LIBRARY, UOS ANGELES, CAU^, ^^raduate Sohool of Businega Administration University of California Los Angeles 24, California GARCKE AND FELLS: FACTORY ACCOUNTS IN PRINCIPLE AND PRACTICE A Handbook for Accountants and Manufacturers APPENDICES ON THE NOMENCLATURE OF MACHINE DETAILS AND THE RATING OF factories; AND TABLE FOR THE AMORTIZATION OF LEASES INCLUDING ALSO A GLOSSARY OF 7'ERMS AND A LARGE NUMBER OF SPECIMEN RULINGS Seventb BMtion IReviBco anJ> biougbt up to 5atc WITLI FOREWORD J. M. FELLS, C.B.E. FELLOW OF THE SOCIETY OF INCORPORATED ACCOUNTANTS AND AUDITORS; FELLOW OF THE INSTITUTE OF COST AND WORKS ACCOUNTANTS ; FELLOW OF THE ROYAL ECONOMIC SOCIETY, ETC. FORMERLY GENERAL MANAGER OF THE SALT UNION, LIMITED ■ 47645 NEW YORK D. VAN NOSTRAND COMPANY EIGHT WARREN STREET 1922 PRINTED IN GREAT BRITAIN AT THE DARIEN PRESS, EDINBURGH rj Bus. Admin. I library w M3Q ^^ PREFACE TO THE SEVENTH EDITION. ^;: As stated in the Preface to the first edition, this work is the first attempt to place before English readers a systematised statement of the principles relating to Factory Accounts, and of the methods by which those principles can be put into practice, and made to serve important purposes in the economy of manufacture. Our aim has N^ been to show not only that as great a degree of accuracy ^ can be attained in factory book-keeping as in commercial j^ accounts, but that the books of a manufacturing business ^ can scarcely be said to be complete and reliable unless ^ supplemented by, and to a large extent based upon, the " accounts special to a factory, and we mentioned that in ; attempting to supply a want which was known to exist, :^ we but indicated the direction for useful work. This path has been pursued by others as well as our- selves, and their helpful criticisms, commentaries, and our own continuous study of the subject, have enabled us to place before our readers a book which is of practical service under present-day conditions. The demand for a further edition of this work is co- incident with marked industrial unrest and development of dissatisfaction on the part of both employers and iv PREFACE TO THE SEVENTH EDITION. employed with the existing relations between Capital and Labour. We have considered whether, in view of probable economic changes in the established methods of remunera- tion of labour, any substantial variations are needed in the structure of this work, as apart from the revisions and additions of a technical character resulting from lengthened and wider experience. Its main purpose, however, is of a technical character, and while hitherto it has seemed appropriate to make some references to economic and social questions in relation to the remuneration of labour and allocation of profits, we are of opinion that those questions have now become of such importance, and they are so interwoven with social and political conditions and considerations, that they do not admit of being dealt with except at greater length than would be practicable, and in a more controversial spirit than would be desirable, in a technical work. The concluding chapter of previous editions on " Methods of Remunerating Labour " has therefore been omitted in the present edition, but such portions of it as bear on the recording and analysis of payments under differing methods have been incorporated in other chapters. We would, however, again record our opinion that the regrettable difference of view as to these matters between employers and employees prevents the attainment of the highest degree of efficiency in production, and is to the prejudice of all interests. As Professor Fawcett said more than a generation ago in relation to this matter, PREFACE TO THE SEVENTH EDITION. V all experience shows that there can be no hope of intro- ducing more harmonious relations between them unless both are made to feel that they have an important and direct interest in the success of the work in which they are jointly engaged. Whatever the next stage in the evolution of industrial organisations may be, there can be little doubt that the tendency must be more and more to greater detail and accuracy in the preparation of accounts which form the basis of apportionment, as between partners or as between rival and contending interests. Our view is that the principles enunciated in this book have a scientific basis, rendering them applicable to any condition of industrial organisation ; that to demonstrate their economic results is peculiarly the province of the accountant ; and to the attainment of that end a clear and complete system of Factory Accounts is essential. In the " Foreword " to this edition we have thought it advisable to refer to the connection of cost accounting with industrial economics, and have indicated the direc- tions in which the next advances toward scientific costing should tend, if the economic facts of life are to be made manifest in the most serviceable, clear, and complete manner. Mr. Garcke desires to record his obligation to his friend and colleague, Mr. Fells, who has undertaken the work and responsibility of revising and extending the preceding edition of this book, and of writing the " Foreword." " The counting-house of an accomplished merchant is a school of method wherein the great science may be learned of ranging particulars under generals, of bringing the different parts of a transaction together, and of showing at one view a long series of dealing and exchange." Dr. Johnson, in Preface to Roll's '■'■Dictionary of Cofiunerce." CONTENTS. FOREWORD. Scientific Methods in Business Administration and Manage- ment. — Dr. Alfred Marshall. — Cost Accounts. — Development of Science of Accounting. — Systems of "Costing." — Army Cost Accounting. — Terminology — Economics and Accountancy. — Cost of Production. — Cost and Expenditure. — Railway and Canal Commis- sion Court. — Cost and Terms of Art. — Ascertainment of Cost. — Elements of Cost. — Units in Economics. — Units for Administrative Industrial Purposes. — Differ- ences in Relative Cost. — Analyses on Qualitative and Quantitative Bases. — Coefficients in Cost Statements. — Co-operation of Industrial Technicians and Account- ants. — Cost Accounting and Scientific Accuracy . CHAPTER I. INTRODUCTORY. The Development of the Modern Factory System. — Family, Guild, and Domestic Systems. — The Advantage of Combination and Specialisation of Labour. — Legis- lation. — The History of the Factory System. — Extension of Routine and Registration. — The Need for Factory viii CONTENTS PAGES Books of Account. — Fundamental Principles of Book- keeping Applicable, but Special Methods Required. — Requirements of a Manufacturing Business. — The Need of Analysis of Expenditure— of Ascertaining Profit or Loss on Individual Transactions — on Branches of Business. — Ultimate Determining Factors in Price. — Federal Trade Commission. — Merchants and Manu- facturers, — Changes in Trade Organisation. — Stock Ascertainable without Survey. — Its Comparison with Cash. — Advantages of Systematic Factory Accounting. — Advantages of Detailed Records of Cost. — Cost in Relation to Indirect Charges and Depreciation. — The Utility of Systematised Factory Books — and Accurate Accounts — their Moral Effect on Employees. — Inade- quacy of Ordinary Commercial Books. — Assimilation of Factory Books with them. — Consistency of Special- isation with Concentration in Accounts. — Merging of Departmental Books in General Ledger. — The Utility of Adequate Office Organisation — its Economy. — Mechanical Aids. — The Specialisation of Labour. — Costings and Estimates. — The Scope of this Work — its Relation to Treatises on General Book-keeping. — Application to Loose Leaf, Card, Slip, or other Systems. — Specimen Rulings. — Exterior of Books. — Principles Applicable to Liquid, Mixing, and other Trades. — Diagrams showing Assimilation of Accounts. — The Differentiation of Records. — The Requisites of a Wages System. — The Purchase and Consumption of Material. — The Production of Commodities. — Definition of Prime Cost. — Direct Cost Lessened by Use of Machinery. — Cost Books. — Charges for Machinery. — Progress in Cost Accounting Since First Edition. — The Sale of Commodities. — Distinction between Stores and Stock. — Depreciation. — Surveys and Stocktaking. — Subsidiary Books. — A Symbolic Nomenclature. — The Rating of Machinery . . . . . • ^3-31 CONTENTS. IX CHAPTER II. LABOUR. PAGES Initial Step in the Organisation of a Factory. — Time Recorders. — The Utihty of a Proper Wages System — it Minimises Error— Prevents Fraud. — "Dummy Men." — Piecework. — Sick andother Funds. — Factory Acts. — Receipts from Employees. — Systematic Allocation of Wages.— Registration of Time. — Time Office. — Auto- matic Time Recorders. — Automatic Time Clocks. — Workmen's Checks. — Time Recorder Described. — Mess Room. — Time Book. — Functions of Timekeeper and Gatekeeper. — Building and Contracting Industries. —Absentee Book. — OvertimeBook. — Analysis of Time. — Time Boards or Records. — Automatic Time Registers for Job Cards. — Time Allocation Book. — Verification of Time. — Year of Thirteen Months.— Out-Works' Time Records. — Check on Excessive Overtime Work. — Returns and Analysis of Overtime. — SoUdarity of Labour. — Premiums for Punctuality. — Fines for Un- punctuality. — Voluntary Fines. — Application of Fines. — Piecework. — Standard Piece Rates — their Modifica- tions. — Forms to be Used. — Settlement of Balances. — PubUcation of Piecework Rates.— Non-Continuous Working. — Log Book. — An Analysis Book— its Advan- tages. — Advice of Men Engaged, Dismissed, or Fined. — A Wages Rate Book. — Records of Service of Em- ployees. — Supplemental Wages Advice. — The Wages Book— its Compilation and Analysis. — Stoppages and Deductions. — Income Tax Returns. — The Truck Acts. — Stoppage Agreement Form. — "Subbing." — Wages Books for Disabled Men.— Summary of Wages.— Com- pensation Acts. — Receipt for Wages. — Amounts not Claimed. — Payments to Deputies. — Out-Workers' X CONTENTS. PAGES Travelling and other Expenses. — The Method of Payment. — The Allocation of Wages. — Agreement with Wages Book. — Wages Journal. — Allocations of Fines and other Deductions. — Adhesion to Factory Rules. — Character Book. — Address Book. — Registers and Certificates under Factory Acts. — Appropriation of Fines. — Rent as Wages. — Rent Roll. — Rent Receivable Book 32-73 Diagram I, — The Assimilation of Wages and Commercial Books. CHAPTER III. STORES. The Purchase of Material for Plant Maintenance — Manu- facturing, or Retailing. — Initiatory Stage. — Stores Re- quisition Book. — The Advantage of Orders for Stores Emanating from one Centre. — Stores Requisition Form. — The Sanction to Purchase. — Contract Registers. — Small Purchases. — Orders to Vendors — their Condi- tions. — Sale of Goods Act. — Manifolding Orders. — Registration of Invoices — their Examination. — Invoice Register. — Stores Received Book. — Stores Ledgers — Accounts in. — Endorsement of Invoices — their Alloca- tion. — Stores at Out-Stations. — Agreement of Com- mercial and Factory Books as to Material Purchased and Periodical Survey. — The Consumption of Material. — Initiatory Stage. — Instruction to Manufacture. — Planning and Progress Departments. — Production Re- turns. — Manufacture of Parts. — Estimates to Precede Expenditure. — Limitation of Issue of Material. — In- struction to Foreman. — Stores and Sub-Stores. — Stores CONTENTS. XI PAGES Warrants. — Stores Issued Book. — The Registration and Analysis of Stores Warrants. — Stock Numbers. — Working Numbers. — Cost Ledger. — Summarised Issues. — Stores Journal. — Material Returned to Vendors. — Stores Rejected Book. — Credit Notes — their Registration. — Surplus Material. — Advantage of Re- turning it to Store. — Stores Rejected Note — and Book. — Shop Sweepings. — Old Material. — Complaint, Mistakes, Waste Account. — Stores Debit Note. — Temporary Notes. — Shop Returns Book. — Transfers between Store and Warehouse. — Cost of Processes and Qualities. — Bye-Products ...... 74-99 Diagram II. — Assimilation of Stores and Commercial Books. CHAPTER IV. PRIME COST AND THE COST LEDGER. The Distinction between Stock and Stores — Utility of the Distinction. — Process Transfers. — Uniformity in Regis- tration of Cost. — Authority to Manufacture. — Cost of Parts and Processes. — The Advantage of Correct and Complete Analysis of Cost. — "The Economy of Machinery and Manufactures." — The Manufacture of Matches — their Cost. — The Utility of a Symbolic Nomenclature. — Standard Parts. — Channels of Ex- penditure. — Fixed Capital. — The Localisation of Maintenance Expenses — Standing Orders — the Wages of Supervision — of Distribution — of Registration. — Jobbing or Repairing Work. — Operation Costs. — Factory General Charges — their Registration. — Cost Xll CONTENTS. PAGES Ledger — how Compiled — its Agreement with the Commercial Books. — Stock Debit Note. — Stock Received Book. — Stock Ledger. — Goods in Course of Manufacture. — Work in Progress. — Actual and Estimated Costs ...... 1 00-113 CHAPTER V. INDIRECT OR INCIDENTAL EXPENSES AND THEIR ALLOCATION. The Methods of Apportioning Shop Expenses. — Changes since 1887. — The Utility of the Cost Ledger extended to Machinery Use and Plant, and other Accounts. — Balances on Stock Orders. — Cost in Relation to Stand- ing Charges. — Depreciation and Profit. — Systems of Prime Cost. — ^Method of Charging Indirect Expenses in Proportion to Wages Paid — and to Wages and Materials.— Oncost. — Skilled and Unskilled Labour. — Need of Allocating Machinery Costs. — A Machine Flour Rate. — How Machinery Charges are Arrived at. — Depreciation in Relation to Cost. — Oncost. — Drawing Office Establishment Expenses. — Cost Ledger. — Ex- panding Business may Increase Cost. — Interest and Profit in Relation to Cost. — Comparisons between Actual and Estimated Costs. — Comparative Cost Register. — Graphs and Curves. — Departmental Cost Ledgers. — Departmental Transfers. — Cost, plus Per- centage Contracts. — Actual and Apparent Costs. — Self-Balancing Principle ..... 114-125 DlAGR.\MS III. AND IV. — ThE ASSIMILATION OF CoST AND Commercial Books. CONTENTS. xiii CHAPTER VI. FIXED CAPITAL AND DEPRECIATION. PAGES Mill's Definition of Fixed Capital. — Deterioration. — Depre- ciation of Buildings and Plant — Varying Views. — Marshall's "Principles of Economics." — Depreciation in Relation to Maintenance. — Factors in Determination of Depreciation Rate.— Obsolescence. — Supersession. — Methods of Dealing with Depreciation. — Adherence to Depreciation Rate for Period of Time. — Double Account System. — The Rough-and-Ready Method. — Comparative Depreciation Tables. — Average Annual Charge. — Repairs and Renewals Fund. — Depreciation in Relation to Capital — to Current Expenditure — to Railway and Water Companies — to Reserve Funds — to Obsolescence — to the Life of the Object — to the Cost of Maintenance. — Varying Methods in Vogue. — The Ascertainment and Allocation of Cost of Deterioration — Direct Method. — Method of Periodical Valuation — its Advantages — its Disadvantages — its Results when Fallacious — its Bearing on Capital and Revenue Accounts. — Skilled and Unskilled Labour. — Loss on Capital and Loss on Revenue Accounts. — Mr. Justice Buckley and the Case of the Neuchatel Asphalte Co. — The Natal Land and Colonisation Co. — General Commercial and Investment Trust. — McNamara & Co., Ltd. — Barrow Hfematite Steel Co., Ltd. — The Cory Case. — British Bank of South America and Trinidad Lake Asphalte Co.'s Cases. — Deductions from these Decisions. — Rating Cases. — Cambridge Gas Co. — English and United States Practice — a Practical View of the Matter. — Increase in Value of Fixed Assets. — The Revenue Account in Relation to Market Value of Fixed Assets in a Xiv CONTENTS. Going Concern. — The Establishment of Sinking and Reserve Funds. — Losses on Capital Account. — The Need of Insurance. — The Income Tax Acts in Relation to Fixed Capital. — Depreciation Charge on Business 126-145 CHAPTER VII. MACHINERY USE. Verification and Extension of Principles Outlined in 1887. — The Greater Use of Machinery. — Increasing Need of Ascertaining its Cost of Use. — The Life of an Object the best Basis for Depreciation Rate — the Difficulties of this Method — the Advantages. — Leases — an Amortisation Table — a Hypothetical Ledger Account. — The Annuity System — Sinking Fund and " Straight Line " Methods — Insurance. — Dilapidations. — Classi- fication of Assets. —Fixed and Loose Plant — Tool Kits — Loose Tools Register — Patterns — Tools — the Appro- priation of their Cost. — The Numbering of Distinctive Objects. — The Expenditure on Plant — its Registration. — Machinery — Bases of Charges. — Plant Ledger. — Plant Debit Note. — The Ratio between the Life and Cost of a Machine. — Moving Parts. — Plant Journal. — The Appropriation of Residual Values. — Grouping Machinery. — Plant Debit Summary. — Unit of Product and other Methods. — Relative Advantage in Use of Different Kinds of Machinery. — Idle Capacity. — Idle Hour Rate — Productive Hour Rate. — Normal Machine Rate. — The Cost of Fuel— its Apportion- ment. — The Apportionment of Standing Charges in Relation to Profit and Loss — to Cost of Production. — The Valuation of Patents and Goodwill. — Wasting Assets 146-164 CONTENTS. XV CHAPTER VIII. STOCK. PAGES Realisation or Distribution of Manufactured Commodities — Involves Four Classes of Transactions being brought into Account by Corresponding but Independent Pro- cesses of Book-keeping. — The Agreement of the Commercial and Factory Books. — Transfer from Fac- tory to Warehouse. — Stock Debit Note. — The Stock Received Book. — Transfer from Warehouse to Factory — the Rejected Stock. — Transfer Notes — Transfer Books— their Agreement. — Transfer Analysis Book. — The Sale of Commodities. — Orders from Customers, how Dealt with. — Orders Received Book.— Advice to Warehouseman. — Forwarding Note. — Stock Requisi- tion. — Stock Issued Book. — Warehouseman's Daily Return of Stock Issued. — Sales Analysis Book. — Stock Returned by Customers — its Registration — and Analy- sis. — Stock Returned Debit Note. — Stock Returned by Customers Book. — The Concentration of Books. — The Pricing of Loaned Articles — its Relation to the Profit and Loss Account.— The Agreement of the Commercial and Factory Books exemplified. — Whole- sale and Retail Transactions — their Distinction — their Combination — their Registration. — The Manufacture of Complete or Subsidiary Parts — the Localisation of their Cost ........ 165-182 Diagram V. — The Assimilation of Stock and Commercial Books. XVI CONTENTS. CHAPTER IX. SURVEYS. PAGES The Utility of Stores and Stock Ledgers in relation to Stocktaking and the General Accounts. — The Balance-Sheet independent of a Stocktaking. — Fac- tory Accounts in relation to Book-keeping by Single Entry. — Surveys in relation to Commercial Ledgers. — The Utility of Verifying the Details of Inventories — the Comparative Advantages of Partial and General Surveys. — The Need of a Standard of Efficiency in Stocktakings. — Summarising Survey Results. — The Agreement of the Inventories with the Factory and Commercial Ledgers. — Inherent Conditions of Stock. — Allowance for Margin of Error or Waste. — Surveys in relation to Stores, Stock, and Plant. — Agency or Consignment Goods. — Mechanical Divisions and Aids in Surveys. — Location of Stores. — The Essentials of a Stores and Stock System — Stores or Stock Register. — The Efficiency of Control over Commodities. — Weighing Vehicles. — Gate Passes. — Departmental Transfers. — Excessive Supplies in Stores or Stock. — The Valuation of Commodities in Relation to Cost of Production and Market Prices. — Survey Prices in relation to Establishment Expenses and Standing Charges. — The Realisation of Profit. — Loading Per- centage for Stores Expenses. — The Valuation of Raw Material and Exceptional Commodities. — Base Metals. — Departmental or Branch Prices. — Abnormal Times. — Interest and Cost. — Valuation in Relation to Obsoles- cence. — Valuation of Old Material. — Reduction in the Valuation of Stocks ...... 183-201 CONTENTS. xvii CHAPTER X. SUBSIDIARY BOOKS. PAGES Summary of Chapter. — The Registration of Plant or Machi- nery acquired on the Purchase Hire System. — Purchase Hire and Income Tax. — The Accounts of Government, Railway, and similar Factories and Workshops. — Registration of Costs by Means of Cards and Symbols — its Disadvantages. — Advantages Claimed for Card System. — Cartage Accounts. — Horses and Vehicles. — Motor Vehicles. — Units of Cost. — Freight Books. — The Railways Bill, 1921.^ — -The Railway and Canal Traffic Act, 1888. — Rates and Charges Confirmation Acts, 1891-92 — and other Railway Acts. — The Trans- port Act, 1918. — Consignment Note.— Accuracy in Declaration. — Railway Sidings.— Railway Rebates or Allowances. — Wagon and Van Books. — Demurrage. — Lighter and Barge Books. — Craft Register. — Towage Book. — Stock Diagrams. — Packing Cases. — Method of Registering Cost of Empties. — Coal Accounts. — Weigh- ing Machine Book. — Machinery Examination Register. — Surprise Visits Book. — Gas, Water, and Electricity Meter Books. — Brigade and Fire Hose Books. — Casualty Book. — Patterns Accounts. — Log Book. — Weather Charts. — Visitors' Book. — Stores Delivery Diary. — Staff Register. — Stationery. — Catalogues Issued— and Advertisement Registers. — Notices Book. — Licences. — Boiler Inspection. — Accounts relating to Sick, Provident, Superannuation, and similar Funds. — Books and Forms required under Factory Acts. — Scope and Conditions of Factory and Workshop Acts. — Public Health Acts.— Trades Board Acts. — Local Bye-Laws. — Electricity Regulations . . . 202-223 b XVIU CONTENTS. APPENDICES. PAGES A. — Nomenclature of Machine Details (Paper by Mr. Oberlin Smith) 225-232 B. — The Rating of Factories Containing Machinery 233-243 C. — Table for Determining Amortization of Leases, Etc 244-250 GLOSSARY OF TERMS INDEX . . . . 253-261 263-290 TABLE OF SPECIMEN RULINGS. Time Book, No. i „ No. 2 No. 3 Overtime Book Time Record Sheet Time Allocation Book . Out- Works Time Record Sheet Overtime Return Overtime Comparison Book . Piecework Return Specimen No. PAGE I 36 2 40 3 40 4 40 5 41 6 44 7 45 8 46 9 46 10 48 CONTENTS. XIX Piecework Analysis Book Wages Advice Wages Rate Book . Wages Book Summary of Wages Unclaimed Wages Book Pay \\^ages Note . Wages Remittance Form Cash Sheet . Money Tray . Abstract of Wages . Stores Requisition Stores Requisition Book Invoice Register Book Stores Received Book Stores Ledger Invoice Endorsement Instruction to Foreman of Works Stores Warrant Stores Issued Book Stores Rejected Book Stores Debit Note . Shop Returns Book Cost Ledger . Stock Debit Note . Stock Received Book Stock Ledger Amortisation Table Plant Ledger Plant Debit Note . Plant Debit Summary Transfer Note . • Transfer Book Orders Received Book Stock Requisition and Advice to Warehouse: Specimen No. PAGE II 52 12 56 13 59 14 60 15 60 16 ^5 17 66 18 66 19 67 20 68 21 69 22 76 23 76 24 Si 25 Si 26 83 27 84 28 87 29 8S 30 89 31 92 32 93 33 94 34 109 35 no 36 hi 37 1 12 38 149 39 154 40 156 41 157 42 170 43 170 44 172 n 45 172 XX CONTENTS. Stock Issued Book Stock Requisition Stock Returned Debit Note . Stock Returned by Customers Book Stock Survey Sheet Cartage Advice .... Railway Rate Book Wagon and Van Statement Form . Wagon Journey Repairs Book Time Sheet for Lighter, Barge, or Boat Craft Register .... Fuel Summary Form Specimen No. PAGE 46 174 47 176 48 176 49 177 50 18S 51 209 52 212 53 212 54 215 55 215 56 216 57 219 FACTORY ACCOUNTS THEIR PRINCIPLES AND PRACTICE. FOREWORD. Dr. Alfred Marshall in "Industry and Trade" — a study of industrial technique and business organisation, and of their influence on the conditions of various classes and nations — says that movements towards the general application of scientific methods in business management and administration were pioneered by studies of Cost Accounts, and in this connection makes a generous refer- ence to the first appearance of Factory Accounts in 1887. He mentions that the use of scientific analysis as an engine of business first attracted attention as the result of dissatisfaction with the customary methods of making up " Cost Accounts," that is, accounts which claim to show the total charges to be attributed to each particular class of product, as contrasted with cost accounting, by which the path of each element of material or labour is traced so as to show how much is embodied in the product, how much consumed in the process, and how much is lost. He points out that the science of accounting has received a very high development during the last few generations, but that Accountants " even now often merely apply a few broad rules which represent broad results fairly B 2 FOREWORD. well, while making no pretence of being adapted closely to the special circumstances of each individual case." Gradually, however, increasing attention has been paid to the actual extent to which each process of production is operated ; how much use is made during the production of each class of plant ; what it costs ; what is its wear and tear ; what is its consumption of power ; and what is its liability to depreciation. Similarly the charges to be set against any particular product on account of storage accommodation, and expenses of internal movement, are specially examined, for it is obvious that some goods ought to be charged at a low rate relatively to their prime costs, while to others a high rate should be applied, and that an hour's work of a machine for which there is but little appropriate work must be charged more highly than that of a machine which is seldom idle. In 1887, when "Factory Accounts" first appeared, " Cost Accounting " was a neglected and non-recognised branch of Accountancy. To-day it is no longer necessary to urge the importance of the systematic and continuous ascertainment of the costs of production, and this advance in appreciation of " Cost Accounting " has arisen, in the main, from the prominence given to more or less empirical systems of "Costing" brought into operation during the war, not only in connection with the control by the State of a large number of industrial organisations in order to obtain requisites for the carrying on of war, munitions, food-stuffs, and other commodities, but also in connection with Governmental controls in relation to the maximum prices chargeable in the various branches of trade and for wholesale and retail transactions. The methods of " Costing " adopted were in many respects suitable for the immediate purpose, but they were FOREWORD. 3 not intended to make manifest from the systematic and scientific examination of every element of expenditure the various lessons to be learnt in the sphere of industrial economics, and they yielded only estimates of cost. The same objections apply to recent suggestions that in factories where there is a great deal of repetition work, such expense as there may be in a Cost Accounting system might be avoided by the adoption of methods of Costing based on some figures specially compiled for comparison with standard efficiency costs founded on estimates. In the Army a system of Cost Accounting is now being adopted which is not merely a series of Costings, but which constitutes a complete analysis of the whole of the expenditure incurred. The Select Committee on National Expenditure has reported most favourably on the method adopted, and has recommended that this system should be applied to the other spending departments of the State, The War Office was the first department of the Govern- ment to adopt a system of Cost Accounting, but before doing so referred the matter to a Committee who in their report, on which the Army Council decided to make the departure, stated inter alia : — " Among the advantages arising from the use of accounts of a Costing type may be mentioned those arising from the regular and systematic bringing before the individuals who are ultimately responsible for expenditure, the various objects on which expenditure has been incurred, and the channels through which the expenditure has been made. The details of the account, although expressed only in money in the final account, reveal the commodities used and the services performed, which are eventually summed up in these terms. By the agency of Cost Accounts it is thus possible to consider the constituent elements of cost, and by these means to ascertain the differences which arise from varying conditions, and to consider methods by which, without 4 FOREWORD. impairing efficiency, either in service or in production, economies may be effected. Cost Accounts also reveal the differences which arise from varying conditions as regards supply of commodities or remuneration of labour in different districts. " A knowledge of all these varying factors is essential to good — that is, to efficient and economical — administration or manage- ment. Without such data, administration and management are either more or less haphazard, or are carried out on empirical lines. It is only through the study of comparative costs that progress in a commercial sense can be obtained. " The systematic compilation of Cost Accounts has the further advantage of bringing about natural uniformity in the methods of accounting with such variations only as may be necessary, owing to the special circumstances of any locality or any special class of service or of product. " Through Costing being undertaken as a distinct function in the accounting system, it is possible to obtain records of a detailed but general character, obviating the need of a large number of accounts being kept individually and for the information of some particular branch of administration without consideration of the relation of that particular branch to the whole undertaking. Cost accounting will thus lead to the prevention of the duplicating of account-keeping, and to the elimination of such accounts that are kept as do not of themselves serve any useful or informative purpose." Most branches of Science and Art possess a terminology in which words employed as "terms of art" have distinct and definite meanings, but the progress of Accountancy has been retarded by its chief terms and phrases having multiple and ambiguous meanings. In the interpretation of terms of a technical or semi- technical character used in accounting, reference to a dictionary is of comparatively little use, for until those engaged in various pursuits have moulded the meaning of the terms or phrases they use, the compilers of FOREWORD. 5 dictionaries are only able to give vague and general connotations to those terms. The need in Accountancy for definition of terms so as to obtain a uniform and scientific phraseology is accentuated by the differing sense in which words used by accountants are employed by economists. Amongst the subject-matters common to Economics and Accountancy are Capital, with its subdivisions of con- sumption, auxiliary, circulating, fixed and specialised. Income in money and net. Interest, profits, earnings of management, value, prime cost, supplementary and total cost, or cost of production. Distribution, exchange, wages, time and task earnings. In economics, from the lax use of the term " Cost of Production," many misunderstandings have arisen and many barren controversies have taken place. It is said that Mill and other economists have used the term in two senses, sometimes to signify the difficulty of production and sometimes the total money outlay that has been incurred. Dr. Marshall amplifies its general definition in Economics by pointing out that as regards a particular business it always means money cost, and commonly includes a reasonable rate of profit, together with insurance against risk ; whilst remuneration of the work of the owner of the business does not appear as a separate item in the accounts, but goes with interest on capital under the head of " Profits." If there were co-ordination of the terms used in Economics and Accountancy, it should be possible to state the economic facts of industry in a manner so clear and succinct as to prevent the barren and often bitter con- troversy between the different interests in an industry as to what the facts really are. Lack of precision in Accountancy terms has led to the 6 FOREWORD. two words "Cost" and "Expenditure" being often used indiscriminately and as synonyms, and in some recent cases in the Railways and Canal Commission Court, little (if any) distinction has been drawn between them. In a case before that Court in 191 6, which turned mainly on the use of the word " Cost " in an Act of Parliament, and the distinction to be drawn between that word and " Expenditure," it was pointed out in a minority judgment that these words were not convertible terms. The member of the Court who expressed this view stated that Ex- penditure was a debit factor which referred to outlay only, and was absolute, whilst Cost was a resultant and comprehensive factor, and was relative. This minority judgment formed the basis of an application to the Court of Appeal to review the case and reverse the judgment of the majority in the Court below. But the higher Court, however, did not allow the application, the then Master of the Rolls, referring to a previous practice of the Railway and Canal Commission Court under an Act of 1894, expressly repudiating the view that the "cost of working " a railway was a " term of art." It was thought that the majority judgment still left open the question whether, in ascertaining an increase in cost consequent upon increased rates of pay and shorter working hours, the result of altered modes and methods of working should not be taken into account. This view did not, however, commend itself to the members of the Railway and Canal Commission Court, one member of the tribunal stating : — " The proper method of arriving at the increased cost is to ascertain the cost of working the railway in 191 3 quite regardless of the way in which it was worked in 191 1, then to apply the 191 1 scale of wages to the 191 3 working, and the difference will give the increase which FOREWORD. 7 the company can claim. This involves no comparison of either wages paid or the miles run or quantum of work done in some week in 191 1 with wages and miles and work done in a week in 191 3." By its nature this mode is a comparatively simple and primitive one, ignoring altogether as it does the difference between Cost and Expenditure, and is thus open to very grave objection from a commercial and from an accounting point of view. That "Cost" is a relative term is gradually winning recognition in accountancy circles, although it is sometimes applied somewhat loosely to an expenditure on construc- tional or other work to which no unit of cost can be applied, as, for instance, to the capital expenditure on communal undertakings which are not operated mainly for revenue purposes, but for purposes which are intended to promote the health and happiness of the community. In usage the word "Cost" is often amplified into such terms as "cost of working," "cost of production," or is limited in meaning by the addition of qualifying words in such cases as " prime cost," " full cost," " actual cost," " direct cost," " true cost," " supplementary cost " ; but none of these, or the other expressions used in Cost Accounts or in " Costings," are recognised " terms of art," and they have no strictly and generally accepted defined meaning. The word " Cost " is often used as a generic phrase covering the aggregate of many cost ascertainments in the successive stages in manufacture or distribution through which the commodity has passed. In practice, the m.ethods of Cost Accounting must depend very largely not only on the technique of the particular trade and industry concerned, but also on the stage of production, distribution, or use at which the business interest of those, on whose behalf the ascertain- 8 FOREWORD. ment is sought, ceases. The classification of the con- stituent elements of Cost is also dependent upon the determination of what information it is desired to obtain, and the particular purpose or purposes which it is hoped to subserve by the ascertainment of Cost at particular situations. The ascertainment of Cost at various stages and under varying conditions renders it desirable to refer in any save an elementary ascertainment of Cost under primal conditions, to the costs of production, instead of, as has hitherto been the case, to cost of production. This more accurate phrase emphasises the fact that ultimate cost may be the product of an intermediate series of costs. Under present-day economic conditions, to ensure the continuance of production not only now but in the future, regard has to be paid to all elements which enter into or have to be considered with regard to the costs of a commodity. Such costs range themselves under eight generic factors. Generic. Illustrative. 1. Fixed Capital - - Acquired good-will, freeholds, and kindred objects. Formation ex- penditure. Replacement. 2. Circulating - - - Charges in connection with interest on stock manufactured or in process, stores, and working capital. 3. Rights - - - Royalties on patents, processes, charges in relation to permits, leases, wayleaves, and easements. 4. Power- - - - Wages and other payments in respect of manual power performed by skilled and non-skilled workers, and for machine labour utilised or FOREWORD. Generic. Power {continued) 5. Materials 6. Auxiliary Services State and Local Govern- ment Services 8. Contingency Services Illustrative. directed by them. The cost of producing or purchasing fuel and other forms of energy such as coal, steam, electricity heat, water, gas, and oil. Remuneration paid to mental workers in salaries, fees, and emoluments in connection with research, directive and administrative activities." Expenditure in producing, or the pur- chase price paid for, raw materials, or in the manufacture of parts. Payments or provisions in connection with insurance, publicity, market- ing, transportation and other aids to production and distribution. Taxes, rates, tolls, and charges in connection with police or other protection. Maintenance of roads, sanitation, or payments for other purposes for which State or muni- cipal authorities levy charges. Risks not usually covered by in- surance, including bad debts, dis- turbances due to war, panics, and strikes. Supersession of processes or patents as the result of com- petition or invention. Provision for the expansion, development, and improvement of a particular business to ensure the maintenance of its position relatively to other undertakings of a like character, or that it may be adopted to altered trade conditions. 10 FOREWORD. Whilst in economic science the unit in which cost of production is stated is nearly always that of a whole process, for administrative industrial purposes this unit has to be detailed into component parts which, in different kinds of undertakings, vary with the purposes for which the information is required, whether the ascertainment is for ordinary commercial and competitive purposes, or for technical purposes with a view to improving the product, increasing the output, or reducing the expenditure on production. The need of care in the selection of the units of cost may, as a matter applicable in principle to other industries, be instanced in connection with the ascertainment of cost in railway working. Until recently in the majority of cases, and even at present in public inquiries, the unit adopted lias been the train mile or the engine mile. The former recorded the number of miles travelled by a train, whilst the engine mile not only recorded the mileage run by the engine, but often included an allowance for a number of miles not actually run. In many cases the time during which engines were "standing" was calculated in mileage as if they had been running on a basis of 5 or 6 miles an hour. Administrative economy in the working of a railway naturally consists in running as small a number of miles as is possible, consistently with doing the required work. Economies effected by the better loading of passenger coaches, wagons, or vans, or by the use of more powerful engines, or by running trains to which an increased number of vehicles were attached, were not only not reflected in costs ascertained on the basis of train miles run, but the result shown on such basis would lead to absolutely erroneous conclusions. Thus if the train mile were taken as the unit of cost. FOREWORD. 1 1 the anomaly arises that the more economically and efficiently the railway was worked, the greater would seem to be the cost ; that is to say, the saving in the number of miles run shows an increase of cost in the miles actually run. The adoption of a unit of cost based upon the number of tons carried one mile known as the ton-mile — that is quantity multiplied by distance hauled — obviates the anomaly referred to, so far as goods traffic is concerned. In railway working, however, as in many other industries, the use of a single unit of cost does not enable the most effective and economical working to be carried out, and does not afford sufficiency of information, and many other units have to be employed. Difference in the relative cost in making or producing the same or similar products under different conditions of time, place, material, parts, quantities or qualities, or by use of machinery of differing character and capacity, can only be ascertained by cost records being analysed on a qualitative as well as a quantitative basis. Systems of Cost Accounting which permit of the ascer- tainment of cost in the terms of the required coefficients, can only result from close co-operation between the technicians of industry and trade, and the accountant. The results enable the accountant to supply the scientific economist and the practical man of business with those " economics of actuality " which enable the economist to survey the business world and surmise the economic tendencies of the times, and enable the practical man of business to apply the ascertained facts of his trade to the development of such modifications and improvements in material or method as may seem to be both desirable and possible. When costs are ascertained through the co-operation of industrial technicians and accountants they can best be 12 FOREWORD. expressed for other than purely financial purposes in algebraic formulae, through which it is possible to translate general principles into terms of quantitative and qualitative analysis. Cost Accounting, as Mr. Miles Taylor * has well pointed out, is the audit of activities, recording, analysing, com- paring, interpreting, and demonstrating, dependable factors and tendencies, or, as put by Mr. Dick f in algebraic formulae, Cost is expressed as a function of certain inde- pendent or interdependent variables, and from this function the consequences of changes in the variables can be predicted. The methods of Cost Accounting to be employed to achieve these results have not found expression to any large extent as yet in practice, but more general recogni- tion is now being given by economists, industrialists, and accountants to tlie desirability, in large undertakings, of Cost Accounting being carried out with more scientific accuracy than is as yet the case, * " Business Organisation and Management." Pitman. t "The Economics of Works Costs." John R. Dick, B.Sc, M.I.C.E. CHAPTER I. INTRODUCTORY. With the rapid and continuous development of the modern Factory System there has arisen a need for regulations which would not have had application when The modern , . . . , , . , Factory production was carried on under a comparatively simple industrial organisation. By the aid of machinery the specialisation of labour is now carried to an extent which usually involves the passing of an article through as many hands or machines as there are processes in its production, and renders a further extension of routine and registration necessary. Under manual labour a simple form of accountancy sufficed to ascertain the cost of working up material. Guided by observation, and doubtless by some rudimentary account keeping, Walter de Henley, about the year 1240, with the object of increasing production, intro- duced into agriculture, the oldest of all the industries, the principle of leaving one field out of three fallow, and led the way to the recognition of the principle of rotation of crops as now practised in agriculture. Intricate accounting was not required in connection with the production of articles under a system of domestic or cottage industry, or under the early type of the Factory system dating from the time of Henry VH., when master manufacturers, weary of municipal and guild restrictions, organised little communities in country places solely for industrial purposes, and so arranged as to afford greater scope for the combination and division of labour.* Although the * "The Industrial History of England," Gibbins. London: Methuen. 14 INTRODUCTORY. divisions overlap, and examples of each systenn still survive, the predominant system in England up to the Norman Conquest was the Family system, followed by that of the Guild from about 1066 to 1450, the Domestic system from 1450 to 1750, and thereafter the Factory system. The industrial conditions of society have, however, been changed by the introduction of steam, of electric power, and by the continuously increasing extent to which it is found econom- ical to expend large sums in the installation of machinery. Under these conditions employers find it economical to adopt methods of supervision and of registration which, prima facie^ make production more costly. The advant- ages of the saving of labour by the use of machinery, and of the combination of labour — of each workman confining himself to one process, and that always the one for which he is best fitted — are so great that the expenses of the necessary organisation are insignificant in comparison. Experience has shown that wherever the magnitude of the operations renders it practicable, every further extension of this principle of specialisation results, in spite of the increased expense of administration, in economic advantage. The legislation with regard to factories and workshops, regulating the employment of children and women and their hours of labour, as well as providing for their health, educa- tion, and safety, the legal restrictions with regard to adult employees, the necessity of providing compensation for accidents arising out of, or in connection with, their em- ployment, and regulations with regard to contributions to health and unemployment insurance, afford but some of the many indications of the complexity of the methods of organised production which now obtain. Although these changes in our industrial arrangements have already been fraught with many far-reaching consequences, both material and moral, they have been of comparatively recent growth. DEFINITION OF FACTORY ACCOUNTS. 1 5 " In the course of little more than a century the indus- trial framework of the whole civilised world has been radically reconstructed, and more changes have System: its occurrcd in consequence, even more obvious history. -^ and tangible changes — changes conspicuous upon the very face and features of the country itself — than for certainly the whole of the previous thirteen hundred years. But it is only quite recently that any endeavour has been made to trace the continuity of the various im- pulses, historical and economical, that have been concerned in the evolution of this particular method of production." * Under these circumstances, it is perhaps not surprising that systems of regulating the intricate affairs pertaining to a factory have until recently been determined entirely by empirical methods. Although the term Factory Accounts may be familiar, and its meaning sufficiently evident to persons acquainted Misconcep- ^'^^ manufacturing business, or experienced in factor* *° ^"y operations requiring records to be kept of books. materials, plant, wages, the use of machinery, and stock, yet it is not infrequently assumed, even by accountants, that the ordinary commercial method of book- keeping by double entry, without the special subsidiary books which every trade demands, suffices for every kind General of busincss. The fundamental principles appli- oj'book'-* cable to accounts necessarily hold good through- paftlcufa*"** o'Jt all the branches of book-keeping ; but trades. many businesses involve, in addition to the mercantile transactions familiar to every one acquainted with the routine of an office or counting-house, multifarious and often extensive operations, of which the employment of labour and payment of wages, the purchase of raw * "Introduction to a History of the Factory System," by R. Whately Cooke Taylor. London : Bentley. l6 INTRODUCTORY. materials and their conversion into manufactured commodi- ties by the use of machinery, and the organisation and supervisory work in connection therewith, are but some of the outward manifestations ; and for their proper registra- tion special methods of book-keeping have to be devised. Require- ^" ^^^ ^^^^ °^ manufacturing firms the opera- mlnulaJtur- tions referred to call for careful analyses of ing business, expenditure, sometimes necessitating the storage of large quantities of various kinds of raw material, and the warehousing of goods to a considerable extent, as well as the manufacture, purchase, or erection, and gradual wearing out of valuable plant and tools. All this implies accurate adjustments of accounts. When large sums are paid in wages, it is essential, if the business is to be eco- nomically conducted, that the time during which the work- people are employed and the work upon which they are engaged should be accurately and sufficiently recorded. It is equally important that the material should be syste- matically charged to the work on which it is used, and the machinery cost ascertained. As regards the last-mentioned item of cost, it has been well pointed out by Professor Davis- son * that labour cost without machinery is a different thing from labour cost with machinery, and that in machinery industry the expense of working the machine, as well as re- placement charge, must be included in the real labour cost of production. It is only by means of systematic records Profit or th^t leakage, waste, and fraud can be prevented, l?dSa?'trani- ^"""^ ^^^^ employers can know the cost of any actions. article of their manufacture, and be able to determine accurately and scientifically, not merely approxi- mately and by haphazard, the actual profit they make or loss they sustain, not only on the aggregate transactions during a given period, but also upon each individual * " The Bargain Theory of Wages." REQUIREMENTS OF A MANUFACTURING BUSINESS. 17 transaction.* In a business, the operations of which vary widely in character, this special knowledge as to the pecuniary result of a particular piece of work is of paramount importance, for it is not only conceivable, but very probable, that the presence or absence of this infor- mation may determine the policy to be pursued in accepting Profitable ^^ rejecting large contracts, for whilst in general proFitrbic selling or contracting price is limited or deter- branches. mined by competition, it is obvious that the ultimate determining factor is the direct cost below which, in the absence of some equivalent advantage in other directions, a manufacturer or contractor will not knowingly supply for any length of time. A Federal Trade Commission was recently appointed in the United States. In their report (which led up to the issue by the Commission of a bulletin entitled " Fundamentals of a Cost System for Manu- facturers," so that business men might realise that an accurate determination of costs is fundamentally related to business efficiency), the Commissioners express the view that "the purpose of conducting a business is to make money, and the only way to make money is to sell something for more than it costs. The first essential, then, is to know the cost. . . . Ignorance causes them (the manufacturers) to make unprofitable prices, which the * " In brief, Cost Accounts are the key to economy in manufacture, and are indispensable to the intelligent and economical management of a factory." ("Cost Accounts." W. Strachan. Stevens c5c Haynes.) " A true costing system meant an accurate knowledge of productive and operative outlays, and while that was a truism, yet the fact remained that in many undertakings true costs were unknown. It was generally possible to show what was the actual cost of labour and material used on a particular piece of work, but that was only part of the cost. Then had to be added a proportion of machine and shop charges and general administration expenses, as well as interest on capital, so that the departmental manager . . . woukl be able properly to measure his cost with that of an outside manufacturer." Sir William Plcndcr. Accountant, February 7, 1914. C l8 INTRODUCTORY. manufacturer who does not know his cost is forced to meet." The merchant or middleman has endeavoured to buy from the manufacturer at the lowest price he could get him to accept, and has endeavoured to sell to the retailer or user at the highest price which competition with other manufacturers permitted. In the future, owing to changes in circumstances, the selling price of com- modities will probably stand in more close and direct relation to cost of production than hitherto, and cost accounts will provide the bases for estimates or tenders. In the computation of this cost, allowance for the deprecia- tion of wasting assets, must necessarily enter. The lack of knowledge of cost often meant that manu- facturers unwittingly have been selling below it, but have considered their price remunerative, because on the whole their business was profitable. The tendency in large organ- isations to combine the productive and distributive func- tions emphasises the need for " larger knowledge of cost in the productive department, larger knowledge of prices in the distributive department, larger knowledge even of foreign cost of production."* As Professor Sir VV. J. Ashley has forcibly pointed out, whatever the price above or below cost at which it may be wise at any particular moment to sell, it is most desirable that the manufacturer should know what his goods do in fact cost him.f There is always a danger, when only the general result of a business is known, of departments or processes which are relatively unremunerative being unduly fostered, and of those which yield more than the average profit not receiving adequate attention. Employers should not, as is too frequently the case, be entirely dependent upon the periodical profit and * H. John Falk, " On Changes in Trade Organisation." Ecoiioiiitijottrtial. + Professor W. J. Ashley, "The Enlargement of Economics." Economic Journal, June 1908. STOCK KNOWABLE WITHOUT SURVEY. 19 loss accounts for their knowledge as to the financial result of their transactions, but should at any time, and at any stage of manufacture, be able to ascertain, /;'£' /cz;//^', rapidly and reliably, the actual, and not merely the estimated, cost of production of any given article of their manufacture. They should also be able to determine, without the delay and labour of a survey or inv-entory, the quantity of stock and of raw material on hand, or of any particular item or part thereof It would be discreditable to any cashier if stock should his principal could not ascertain by a glance without**'**'' at the books the amount of cash in hand, but survey. found it nccessary to have the money counted ; and there can be no reason why the same punctilious book- keeping should not be adopted in the case of goods. It is not too much to say that for a manufacturing or trading concern to be well organised, the storekeeper or ware- houseman should be able to state, by referring to his Stores or Stock Ledgers, the actual quantities of any kind of material, or stock, on hand with the same facility and precision as the accountant can ascertain from the books the balance at the bankers, or the amount of securities in the safe. By means of detailed records of cost accu- rately compiled, and carefully considered and criticised, purchases of stores and expenditure of wages may be regulated, production facilitated and increased, economies introduced, and the business thereby placed on an improved competitive and profit-earning basis. The advantages of systematic factory accounting are now receiving recognition in all industrial countries. Professor Laurence R. Dicksee, M.Com., F.C.A., has pointed out that there appears to be a " widespread belief that Cost Accounts were invented in the United States and introduced into this country by Sir S. H. Lever, K.C.B., when he came over to place himself at the disposal 20 INTRODUCTORY. of the Ministry of Munitions. The impression is as rehable as are most popular impressions, and it would not be worth combating, but for the fact that one never quite knows what may be the consequences hereafter of wrong ideas concerning the history of any important movement." As stated in the Preface (dated February 1887) to the first edition, the authors of this book believe that this was " the first attempt to place before English readers a systematised statement of the principles regulating Factory Accounts." Papers on various aspects of the matter had been read before various societies from time to time. One branch of the subject had been ably dealt with in a paper on "The Balance Sheets of Manufacturing Firms: Their Principles and Theories Viewed Analytically," read by its author, the late Mr. F. R. Goddard, Public Accountant of Newcastle, before a meeting of the Cleveland Institute of Engineers on January 16, 1872. This paper, through the courtesy of Mr. F. R. Miller, Chartered Accountant, of Manchester, the authors had an opportunity of perusing for the first time in 1916. Mr. A. Lowes Dickinson, C.P.A., F.C.A., in an address at the annual meeting of the American Association of Public Accountants, held at Atlantic City, New Jersey, in 1908, summarised the principal objects to be attained by a modern cost system as — (i) To ascertain the cost of the same product at different periods in the same mill, or at the same periods in different mills, and so to remedy inequalities in cost by reducing all to the results shown by the best. (2) By an accurate ascertainment of the cost of output to maintain running book inventories which will show at any time, without a physical inspection, how much of each class of materials, supplies, etc., is on hand, and so reducing ASSIMILATION OF ACCOUNTS. 21 stocks and capital invested to the lowest state consistent with efficiency, and at the same time avoiding the delay, expense, and interruption to business consequent upon the old method of taking a complete physical inventory at a specific date in each year. (3) The preparation of statistical information as to costs of parts, quantity, and variety of output, relative efficiency of different classes of labour, and relative costs of labour and material, between different mills and periods. (4) The preparation of periodical statements of profit and loss in a condensed form, readily giving directors all material information as to the results of the business. Mr. Dickinson considers the last as the least important of the objects aimed at, and that the cost of a system designed merely to produce periodical statements of profit and loss, v.'ithout providing for the other and far more important objects enumerated under the first three head- ings, may be considered as money thrown away. Professor Sir S. J. Chapman, M.A., M.Com., formerly Dean of the Faculty of Commerce at the Victoria Univer- sity of Manchester, has pointed out that developments in Cost Accounting have rendered possible measurements which were not possible before, and that without these the scientific management of productive enterprises is not possible.* These are only a few of the questions which present themselves in a cursory consideration of the and dcprc- nature of Factory Accounts. The subject of Cost admits of very varied treatment. In its consideration it has to be borne in mind that in the absence of an agreed definition, unless certain distinctive * Lecture delivered before the Manchester Chartered Accountants' Students' Society, October 26, 1914. 22 INTRODUCTORY. words are prefixed, different impressions may be conveyed to different minds. When the incidental charges and depreciation are of a more or less fixed character, it may be sufficient to know the cost of an article in wages and materials only; but if the use and wear and tear of plant and incidental expenses form a more direct element in the cost of production, and manufacturing cost has to be ascertained, it is highly desirable to apportion such items over the product or over the various operations or departments. The allocation of these charges thus presents many interest- incidental irig' problems, whilst the numerous methods of charges. « ^yj-jj-j^g off" and of determining the proper incidence of items such as deterioration of plant, tools, buildings, or similar assets, deserve the serious attention of owners of property, and tax to no mean degree the abilities of accountants, and their power of obtaining an absolutely accurate statement of affairs. In the widest sense Cost is all that part of the selling price which is not profit. For the above-mentioned purposes, among others, systematised factory books are essential. The advantage of such books, clearly representing the actual state of affairs, is particularly evident when a business is for Sale of busi- disposal ; or is being converted from a private ncss, etc. ^j.^^ jj-j^^ ^ joint stock Company, or when the whole or some part of the factory has been destroyed by fire, and it is necessary to prepare a claim on insurance companies. The figures in the commercial books then require to be substantiated in detail. There is little doubt Moral cKcct ^^^o that under a well-organised system of count*s***upon' Factory Accounts, each employee should feel employees, ^j-j^^ j-^g jg contributing to the attainment of accurate records of costs ; and that it is necessary that his account of the time he spends, and the material he uses, should be adequate and precise. This begets general ORDINARY COMMERCIAL BOOK-KEEPING. 23 confidence in the manner in which the accounts are kept, and on occasion of strikes or reduction of wages, or negotiations for fixing wages by means of a sHding scale based on selhng prices — a principle adopted in many industries, notably the coal and iron trades, in the last quarter of the nineteenth century, but which has now fallen somewhat out of favour — employees have less hesitation in accepting the results shown by the books as correct and as based on fair principles. It will be seen, even from this superficial summary, that it is not feasible to record accurately, and with requisite Ordinary detail, in the ordinary commercial books, all boSkTIn^-'*^ the numerous entries necessary for the proper adequate. registration of the operations of a large manu- facturing establishment. It is, moreover, essential that factory books should have columns for time spent in labour, for the hours machinery is in use, and for the weight or measurement of materials and the number of articles, in addition to cash columns for values ; and these, which are an indispensable condition in factory books, would not serve any useful or practical purpose in com- mercial books, but would on the contrary mar their utility. The insufficiency of the commercial books alone to represent the transactions is conspicuously evident in the case of railway, gas,* and water companies, and large industrial undertakings. The factory books record the home trade and manufacture of the business, the commercial books its external transactions. Factory books must not be considered, as is often the case, to be merely memoranda books, which are not * The statutory form of accounts for Gas Companies is prescribed by Section 35 and Schedule B of the Gas Works Clauses Act of 1871, whilst that for Railways is prescribed by the Railway Returns and Accounts Act of 1911. 24 INTRODUCTORY. necessarily required to balance.* The\' should so assimilate to the books of the counting-house that the obvious Assimilation advantage is not sacrificed of having a balance- of all books, gheet made up from the General Ledger which embraces, or verifies, or is in part verified by the balances of the ledgers and books kept in the stores and warehouses. No matter how far the subdivision of departments of an establishment be carried, or to whatever extent the principle of localising the book-keeping be applied, the concentration of the accounts — the merging of Spcc'alisa- , i i i i i • r • r tion consis- the departmental books and the verification oi tent with , - . • i /-^ i conccntra- the manufacturing accounts in the General Ledger — should be kept constantly in view. There is not any special theoretical or practical difficulty in establishing a separate set of books for each and any of the departments, if it be not attempted to make the proper working of all dependent upon the proper working of each, or if no regard be had to the necessity of attaining the highest degree of efficiency and despatch with the minimum expense. On the other hand, to devise upon sound principles, and to carry out efficiently and economically, a sj'stem of accounts which necessitates the departmental book-keeping in a large establishment being subsidiary to one centre, is a science as well as an art. That a system is clerical not ccouomical which is inefficient is but a truism, and although we appreciate the im- portance and the necessity of minimising clerical labour, there is no occasion to lay particular stress upon this con- sideration, as the tendency is to dispense with services * " The Cost Accounling Books should never be considered as something separate and apart from the regular set of books of a concern ; hey should not be considered as inferior nor superior to the commercial and financial books, but they should in all cases be an integral part of the established system." — Professor H. C. M. Vedder in The Business IVorld on " Cost Accounting." VIGILANCE OVER EXPENDITURE. 25 which an adequate recognition of the value of sound book-keeping would probably show to be indispensable. Book-keepers and clerks being only indirectly engaged in the production of wealth, are often regarded as " unpro- ductive " workers — using the expression not invidiously, but in a sense in which some economists employ it. The routine of the office is often limited by the number of clerks from time to time engaged, instead of the system of accounts and routine best adapted for the business being determined on, and a staff employed proportionate to the work to be done. The wisdom of initiating b)- the dismissal of one or more clerks the retrenchment which in times of depression may be called for, is not always apparent. The maintenance of a perfect organisation may enable economies to be practised, in comparison with which the whole cost of the office staff is insignificant.* It is well, therefore, to weigh carefully the pro and con before relaxing vigilance over expenditure and the salutary checks upon wastefulness and extravagance in Division of manufacture which a good s}-stem of accounts work. affords. One of the disadvantages of in- sufficient records being kept is that book-keepers and clerks haveoften to spend much time in obtaining from foremen and workmen, after the event, information which should reach the counting-house in a regular and systematic manner. This is contrary to the principle that true economy is to be found in ihe specialisation of labour, and in clerks devoting themselves to clerical, and foremen and workmen * " The frequently expressed fear of increased clerical expense is largely imaginary. Good costing is not an expensive luxury. Any reasonable expense is found in practice to be fully compensated by many savings and economies and real gain in efficiency. Cases exist of a sound system being worked by fewer clerks than were required to handle a mass of worthless makeshifts."' — "Cost Records, or Factory Accounting.'' John Mann, jun., M. A.C.A., " Encyclopaedia of Accounting." 26 INTRODUCTORY. to more directly productive work. The expense of clerical work involved in Cost Accounting may often be much reduced by the use of mechanical aids such as Time Recorders and Calculagraphs. In many large organisations the term " Costing " is applied to the work performed by technical estimating departments, in which estimates but not records of costs are kept, and the monthly results are from time to time compared with the financial accounts, and as far as possible a reconciliation obtained between them, and the results of the estimates taken to be correct if, for purposes of control, the percentage of difference is negligible. The task we have set ourselves is to explain the nature The scope of ^^ factory books and the method of keeping this work. them, and to show the operation whereby the subdivision and localisation of the accounts may be made consistent with the system of book-keeping by Ordinary double-entry obtaining in the counting-house. bookT"ot** ^Ve do not propose to enter upon a detailed explained. explanation of the Ledger, Journal, and Cash Book, and of the subsidiary books which constitute the system of commercial accounts whether kept on the Loose Leaf, Card, Slip, or other systems, and whether mechanical devices such as Hollerith machines are or are not adopted.* The numerous excellent treatises extant on general book- keeping render this needless, and we shall assume on the part of our readers that acquaintance with the elements of the subject which is essential to a proper understanding of factory and other accounts. For this reason chiefly we do not think it necessary to follow the precedent of writers * An interesting description of Book-keeping on the Slip and Card System is given in the lecture by E. E. Price, F.C.A., delivered to the Newcastle Chartered Accountants' Students' Society in 1906. The Hollerith machines are described in a series of articles on " Accountancy and Machinery," which appeared in The Accountant in January and February 1915. GENERAL APPLICABILITY OF BOOKS. 2J on commercial book-keeping by tracing the entries of an imaginary firm through a series of model books. We do Specimen ^lot hesitate, however, to give specimen rulings rulings. Q^ ^^ books and forms suggested in these pages for adoption, and for facility of reference these specimens are numbered consecutively, as indeed should be the case in actual practice. In this connection Exterior of . in- books and it may be well to point out that some regard distinguish" ,ii,ti i • riii able fea- should be had to the exterior of the books, an advantage being derivable from the books of each department or of each class being distinguishable by their bindings. Similarly papers of different colours should be used for the various forms suggested, while General ap- .... i i i- • i i piicabiiity their rulings and headings may with advantage be printed in copyable ink. As in the majority of businesses the articles dealt in are reckoned in weight, we think it well to show the specimen rulings with weight columns. As it is not possible to show the specimen rulings of books applicable to every trade, we show only those of one class. Slight alterations in headings make these rulings applicable to trades using other measures, for the principles on which they are based are equally applic- able to the liquid and mixing trades, such as those of brewers, distillers, manufacturing chemists, and Diagrams. i i • i • others, as well as to paper and other industries in which there is a continuous production of one kind of commodity, or to other enterprises where there are a number of processes or varying classes of products.* The principles * "A clear perception of the similarities and dissimilarities is one of the great essentials to the practice of factory accounting. The fundamental prin- ciple is always the same, namely, the practice of making a record sufficiently full to constitute a clear accounting for the factory expenditure, and the object of the accounts is always the same, namely, to eliminate waste from the operations." — "Factory Accounting as Applied to Machine Shops." John Whitmore. /ournal of Accou7itancy. New York. 28 INTRODUCTORY. enunciated are applicable to the ascertainment of all manufacturing costs, whether production is on a "unit" or multiple of a unit basis, on a "job" or separate cost for each product basis, or on a " standard " or " test " cost basis in which cost is ascertained with precision in a particular case, and the result taken as a basis for average costs. The relation of the various books to each other will be found further elucidated by the diagrams at the conclusions of Chapters II., III., IV., and VIII., showing the manner in which the books and forms assimilate to each other and converge into the Com- mercial Ledger. Whilst not presuming to suggest that the forms and books of which specimen rulings are given apply uni- versally and are incapable of modification either by subdivision or concentration, we believe that the prin- ciples underlying them are of general application,* and that the rulings will serve as useful examples, the cardinal principle to be observed being that the form of the records should be conducive to the easy alloca- tion of expenditure to the object on behalf of which it was incurred. In the next chapter we deal with the subject of Labour, defining the requisites of a proper wages system ; and explaining, in as much detail as seems needful, the purpose Outline oT o^ ^^6 books and the nature of the routine contents. u^hich in our opinion should be adopted by manufacturers. It will then be necessary to explain the forms it is desirable to observe in connection with the purchase and consumption of materials for the purpose of manufacture, or the maintenance of buildings and the * This belief has been proved lo be well founded by the number of books that have been issued in recent years, applying these principles in the formu- lation in detail of cost systems applicable to special industries. OUTLINE OF CONTENTS. 29 upkeep and renewing of machinery and plant. The question of Stores and the manner of deaUng with the invoices for goods purchased will next demand our attention. In this connection we shall have occasion to explain the uses of the Stores Ledger and its rela- tion to the subsidiary stores books and to the Com- mercial Ledger. Having considered the book-keeping and routine relating to the expenditure of labour and material for the purpose of the direct production of commodities, or for the working, maintenance, and renewal of machinery and plant whereby direct labour is saved or supplemented, we shall be in a position to consider the important books in which this expenditure is concentrated, analysed, and properly apportioned to the resultant objects. The books by means of which this is accomplished are the Cost Books. Their object is to enable a manufacturer to ascertain the cost to him of any given operation, and thus afford him some of the principal data for the conduct of DeFinition of ^^^ business. There are many systems of Prime prime cost. Cost in voguc, but the writers who in dealing with book-keeping generally have touched upon the sub- ject, are not agreed upon the definition of the term Prime Cost. In some instances the confusion of ideas and language has been carried so far as to render it necessary to speak of net and gross prime cost. Throughout these pages we take Prime Cost to mean, as shown in the Glossary, and as in fact the words imply, only the original or direct cost of an article in labour and material, including in labour, charges for the use of machinery when machine labour takes the place of manual labour. The cost of maintaining and working this machinery is one of the facts ascertained through the Cost Books. This cost, supplemented by a provision for the necessary replacement, has to be distributed over the purposes for 30 INTRODUCTORY. which it is incurred through the Plant Books recording the working of the machinery. Cost of production we define, as we have defined it since 1887, as the total expenditure incurred in the production of a commodity. The term " Factory Cost " is often used as synonymous with it* In earlier editions of this work we called the books referred to the Prime Cost Books or Prime Cost Ledgers, but we made provision for the inclusion therein of machinery and other charges. In the previous edition the rearrangement of chapters consequent upon our more exhaustive consideration of the subject of charges for machinery, aided thereto as we have been by the efforts of those who have followed us in this field of inquiry, made it desirable to allude to those books as Cost Books or Cost Ledgers, and thereby avoid the misconception which an adherence to the original titles might involve. The sale or distribution of manufactured commodities and the resultant "Marketing Costs" will next be dealt Distinction with, and at this point we think it well to sfj^s^and draw a clear distinction between materials for stock. manufacture and articles in the manufactured state. Until materials are converted into manufactured articles we speak of them as stores, but when so converted they are termed stock ; and the book-keeping we recom- mend is based on this view. The accounts in the Cost Ledgers are debited with wages and materials spent in manufacture, with charges for use of machinery, and with the general expenses due to them, and are credited with the stock produced. The importance of this distinction * In a lecture delivered at the London School of Economics in 1918, Mr. A. E. Goodwin, Secretary of the Federation of Master Printers, stated that the printers were indebted to Mr. A. A. Austin Leigh for the definition of Cost as "The sum of all the expenses, direct or indirect, measured in the production of a given article." Luorporated Acioiiftianfs Journal, December 191S. OUTLINE OF CONTENTS. 3 1 between stores and stock will be evident when the subject is dealt with in detail. The eighth chapter treats of the Stock Books, which though in some respects analogous in their functions to the Stores Books, are as distinct from them as is consistent with the principle of a system by which all the books of the establishment are required to merge into the Commercial Ledger, or to verify, or be verified by them. This practically completes the outline of what constitutes the absolutely essential books in a system of Factory Accounts, but there are many other matters which have too important a bearing upon the subject of this work to admit of being passed over without reference. Such are the questions of surveys or inventories, and the numerous subsidiary books that, for the better understanding of the accounts, are required in the management of factories, and for the consideration of the economic effect of various methods of remunerating labour. These matters are dealt with in subsequent chapters. On the question of surveys or stocktaking, we do not presume, in view of the varying requirements of different trades, to do more than to offer some more or less obvious suggestions which have a general application. The Appendices contain a reprint of a paper on the advantages derivable from the use of symbolic nomen- clature for parts of machines, some notes on the law of rating of factories containing machinery, table for deter- mining the amounts to be provided for the amortisation of leases, and a glossary of some of the terms used in this book. CHAPTER II. LABOUR. The initial step in the organisation of a factory must perforce be the adoption of a system by which each person employed at a rate of pay on a time scale shall systcm^the rcceivc payment for the exact time employed. thc'orga^ni- Such a systcm should necessarily be one in factory!* * which the workpeople have confidence, and in which they themselves co-operate. In the present chapter we describe the methods of recording the hours worked by each employee either auto- matically by means of mechanical " Time wa*geYsys- Rccorders," or, in the case of small factories miTe^cTror. o^ workshops, which are still more numerous chapt^rr^ *** than the larger undertakings, by means of written time records. We show also how either of these records, through the instrumentality of the leading hand in the shop and of the time clerk, may be compared, checked, and if need arise, be corrected. By these means the possibility of an error either by over or under payment is reduced to a minimum, whilst fraud necessitates for its successful perpetration the connivance of the employee, the timekeeper, the leading hand of the shop in which such employee works, the time clerk, and of the clerk in the counting-house who makes up the Wages Book, and also of the cashier who pays the wages. Such collusion is very improbable, although not impossible. "DUMMY MEN." 33 Further, we show that, by means of a weekly return, it is impossible for anyone connected with either the counting- house or the factory to enter in the books wages for "dummy men." This phrase is used to designate such a system of fraud as can only exist in a large undertaking where it is possible for the foreman, the time- Creation of , i i • , . i dummy men keeper, Or the pay clerk, either smgly or m prevented ^ . \ -^ ' , ■' . conspiracy, to show a larger number of men employed than is actually the case. By the use of the same return, fraud through the unauthorised alteration of the rates of pay of the work- wcckiy re- people is prevented, and the authorised rate alteration recorded for future reference. The regulation rate. ^^^ recording of piecework prices, and the payment of piecework balances to those employees who have been paid during the continuance of piecework at time rates, is described ; as are also the modes of controlling time made outside the factory and of preventing undue recourse to overtime. It is then shown how deductions may, if required, be made from the wages of the employee, fines imposed for non-observance of rules, or other causes, for rent, or in Sick and rcspect of saviugs bank, sick, superannuation, other funds. ^^ other funds ; or of the amounts of adverse balances on piecework, of the deductions authorised by the Factory Acts, and of those obligatory under the National Health Insurance and Unemployment Acts, with regard to sickness and unemployment. Attention is called to the fact that the Wages Book may be correctly and concisely compiled from these various returns, and that it, in its turn, may, if thought well, be summarised for the use of the principal into a more condensed form. The possibility with very little trouble of obtaining receipts from employees is dealt with, provision against the D 34 LABOUR. misappropriation of unclaimed wages suggested, and con- sideration given to the mode of payment. The work of Receipts ^he time clerk in reference to the systematic Dutut^o*" allocation of the wages for the Cost Books, time clerk, ^j-j^-j q|- ^|^g timekeeper or other employee in reference to the records required by the Factory Acts, is explained. The necessity of compiling a list of addresses and of obtaining information as to the character of em- ployees, as well as some miscellaneous matters, are incidentally dealt with. At the entrance to a factory, or to a section or sections of a factory, there is almost invariably found a small building, where the time of the entry and exit Time oHice ^ , . • , , • , and time of cvcry employee is registered by means either recorders. . . , , , of automatic time recorders or clocks, or manually by a gate or timekeeper. As a general rule, the clocks make an automatic record of the time of one em- ployee on a card or sheet, or make a record of the times of several employees on the same sheet. Before describing the working of these recorders and the routine in connection with the registration of the record slips, it will be convenient to describe the older method of time registration which still survives in many of the smaller factories, and in building and kindred industries. In these cases the time is ob- tained by each employee, on entering the factory, being required to pass the time office and mentioning the number which has been allotted to him at the commencement of his engagement, receiving from the timekeeper a metal check, tally, or other ticket, bearing his number, and taken from a board, on which the checks have previously been consecutively arranged. In some cases, in order to save time the employee is allowed to take his own check from the board. REGISTRATION OF TIME. 35 On leaving the factory the employee deposits this check in a box placed outside the time office. The checks are sorted by the timekeeper, and can, in any case of doubt or dispute, be compared with the entries made by him in a book which is hereafter described. The checks having been again placed on the board, the process referred to is repeated each time the workpeople enter or leave the premises. In some cases separate check boards are used for, and a different series of numbers are allotted to, each department, and different sizes or shapes of checks are used for each shift. Should a mess-room have been provided for the use of the employees there will not be any obstacle to the carry- ing out of the system if the mess-room is out- Mess-room. . , , ,11 , , , , . . side the timekeepers lodge, but should it be situated inside the works, the checks can be issued from that point after meal hours. After admitting the workpeople, the timekeeper proceeds to register their time. He sees by the presence or absence of checks on the board which employees are, or Method of ... , , , , , keeping time are not, in the factory. In a book so ruled as to show each employee's name and number, and each day of the week divided into four parts (for the time made before breakfast, where such time is worked, after breakfast, after dinner, and overtime, or such other divisions as may be most suitable for the business), the timekeeper enters the employees present. This is in most cases done by a vertical stroke, absence being denoted by a horizontal one. In some cases the four divisions of time above referred to are shown in the form of a square, thus D ; or in cases where three divisions only are required, by means of a triangle, thus A. In the square, the top stroke is supposed to represent the time before breakfast, the down stroke, right hand, that after breakfast, the base the time after dinner, 36 LABOUR. •a 9 H >< •a c o B •a 3 •a u 9 H 1 -^ ^ --- •a B ■a -- 1 1 -^ S 2 6 5^ and the up-stroke, left hand, any overtime that may be made. In the triangle the down stroke, left hand, is presumed to represent the first division of time, the base the second, and the up stroke, right hand, the third. In printing the book the various lines of the square or angle may be faintly printed, and when entries are made, inked over completely or partially, as required. Absence during any or all of these divisions is of course made apparent by the omission of the stroke or strokes. Specimens Nos. I, 2, and 3 show a Time Book so ruled. In large establishments auto- matic time recorders, whereby the employee makes his own record, are now generally used. The re- corder generally takes the form of clock-work mechanism placed at the entrance to the factory, or to the various departments or floors, fitted with a slot into which the employee drops a card bearing his number, and pulling a lever causes a record to be taken of the time at which he enters or leaves the works. The card is generally printed to last a week, and the machine so designed that the slot REGISTRATION OF TIME. 37 rises automatically day by day, thus corresponding with the spacing on the card. The cards are not retained by the employees, but on entry are taken by them from numbered places or pocket slips on the one side of the clock, and are afterwards deposited in corresponding places on the other side. When leaving the factory the process is reversed. In the case of time clocks which record the time of several employees on one sheet, the employee on arrival or departure turns a ke}' bearing his number in the clock once, as if winding it, thus ringing a bell which indicates that the time and date have been printed in the register the clock contains. The record slips are summarised in a Time Book, in the same way as the records obtained by checks, and it is desirable that they should be retained for purposes of reference over the ensuing pay day, in case of dispute. In cases where there are a number of shops, some a con- siderable distance from the main entrance, the clocks are placed at the entrance of the shops, thereby ensuring that the time recorded is that at which the employee commences work ; but when men are working overtime or at odd times, the record is usually taken, as a measure of pre- caution, on the time clocks at the main entrance. An arrangement whereby in some recorders the arrivals at regulation times are registered in one colour and late arrivals in another, has in practice much to recommend it. These time records, apart from their utility in building up the pay-sheet, can also be utilised for costing purposes, and are specially serviceable in connection with jobbing costs. The "Rochester," " Dey," " Bundy," and the "Empire," or " Gledhill Brook," are among the time recorders at present most largely used. If the employees are working in two or three shifts a separate Time Book may be used for each shift ; or one 47645 38 LABOUR. book may be so ruled as to take all three returns. It may be desirable at irregular intervals to change the Double or timekeepers from one shift to another to lessen treble shift, chances of collusion. The time of the work- people who are admitted into the works, or allowed to leave, at intervals between any of these divisions, may be shown by a red ink note of the number of minutes or hours' difference between the time at which they should have presented and did present themselves for admittance and departure, or, if the square and the triangle are adopted, by recognised shortenings of the strokes. The time at which employees are admitted into the works if late in arriving, will follow prescribed rules. No employee should be allowed to leave work at an irregular time unless provided with a permit or " pass out " note signed by his foreman, setting out the cause of such permission. In some, and particularly in the larger, establishments, the functions of gatekeeper and timekeeper are quite dis- tinct. The gatekeeper attends to the opening and closing of the gates, to the various callers thereat, and often records the times of the entry and exit of members of the staff and of visitors. So far as regards the time records, his duty consists in opening the gates at the prescribed times, seeing that each employee admitted receives or takes off the time board, or puts into the time box, as the case may be, one check only, closing the time box at the regulation hour, and forwarding it to the timekeeper. It will be seen that the general principle of recording the time is the same whether checks are given to the employees or taken by them from the time board or clock as they enter the works, and are deposited by them on leaving, or are deposited by them on entering and taken up on leaving the works. In the building and the contracting industries in con- nection with the clearing of sites, and the erection of REGISTRATION OF TIME. 39 buildings, a simple method of timekeeping is sometimes adopted in which the employee, who is given a number, simply repeats that number to the timekeeper when entering or leaving the premises, and the presence of the workmen is recorded by means of different coloured lines representing the various turns of duty which are drawn in the square representing the employee's number. The Time Book is ruled across with spaces for the ten primal units, with a side ruling for tens and multiples of ten. By these means a compact and diagrammatic record is obtained which when well kept seems to well serve the compara- tively elementary time recording which such class of work necessitates. If it be deemed desirable to have a record of the em- ployees who periodically absent themselves, it may be kept Absentee "^ ^" Absentee Book ruled to show the names Book. Qf those away on any particular day, and to bring out prominently the names of those who are most frequently absent. The same principle may be applied in recording, by means of a Time Lost Book, the names of those who are unpunctual. At each four-weekly or other period these absentee and time lost records should be summarised under names, trades, and times, and the fore- man should record the steps taken in individual cases. It may also be desirable to keep a similar record as to overtime (Specimen No. 4), and so prevent resort to it becoming chronic in the case of individuals, trades, or departments. Having thus booked the time, entry by entry and day by day, the timekeeper at the conclusion of the week or fortnight, as the case may be, proceeds to cast across and enter in the column provided the total time made by the employee during such period, and then forwards the book to the office. 40 LABOUR. TIME BOOK.— Specimen No. 2. So. Name. Trade. Wed. Thurs. Fri. Sat. Sun. Mon. Tues. Total Hours. A A A A A A z TIME BOOK.— Specimen No. 3 No. Name. Trade. Wed. Thurs. Fri. Sat. Sun. Mon. Tues. Total Hours. D u c n n n D OVERTIME BOOK.— Specimen No. 4. Date. Employe's No. Time. Hours worked. Allowance. Total Time. Remarks as to work. From To i J Double. i A " time sheet," " working sheet," or " operation card," or some otherwise designated form of record being supplied to or provided for each employee, or a group TIME RECORD SHEETS. 41 of employees, there is recorded on it, in consonance with the instructions received from the foreman, a record of how the day's time is spent, giving in two Use of cm- . 111 , r L pioycc's time or three words, or m symbols, the nature 01 the record work, the number of the order (if for plant or buildings, called the working order number ; if for manufacturing any commodities, the manufacturing or stock order number), and the time spent thereon. In TIME RECORD SHEET.— Specimen No. 5. Name No. . Day. Nature of Work. Order No. Time. 1 Ordinary. Over. Piece Work. Day Work. Piece Work. Day Work. some cases the employees arc supplied with sheets or cards, in book or portfolio form, but perforated for each day's use. These time records, if used for more than one day's work, are perhaps most convenient if written on a form which can be easily gummed at one end to a board. On these forms or time slips it is well to have two divisions ruled — the one for a record of ordinary time, the other for overtime. The forms used for different shops or different classes of workmen may be distinguished by initial letters or signs ; or, as previously suggested, by the use of paper or cards of different colours or tints. In some cases when a card is used it is found convenient 42 LABOUR. to have it perforated so that each piece of work done is entered between the perforations, and the card split up and used in the same way as the time sh'ps hereafter referred to. It is sometimes practicable to issue, or for employees to take, one of these cards for each operation from a rack near the foreman's desk in the shop, and by means of a Time Register to record automatically the time at which a certain order was commenced and finished, the employee placing the card in another rack when the completion of the order has been automatically recorded. Some of these Registers, such as the Calculagraph, automatically record the time spent on the work, as well as the time it was started and finished. The Calculagraph can be used in many ways and for many purposes. It is desirable, however, in cases in which it is used to arrange that the operator who thus keeps his own time, shall, when the piece of work on which he is engaged is completed, record his time in the presence of the foreman who would pass the work as being properl)' done. In works, the branches or departments of which are widely separated, the distribution of cost records or vouchers is much facilitated by the use of the Pick-up Mechanical Messenger, or two or more Calculagraphs can be used, located at points within easy distance of which the work is carried on. The records should be initialled by the shop foreman or leading hand, and afterwards copied by the time clerk into a Time Allocation Book. In a business in which the work is highly specialised, and in which the employee is engaged on one piece or form of work only, cords, when and on that for some considerable time, it is Prime Cost possible, and may be found advantageous, to use these time slips as the direct sources of entry in the Cost Books * instead of the wages being analysed * See Chapter IV. TIME RECORD SHEETS. 43 in the manner described later. It is essential that in either case the total entries made in the Cost Books on account of wages should agree with the total wages expended. The Time Allocation Book previously referred to is Time Aiioca- ^^^^ ^P ^Y ^he time clerk and forwarded, tion Book, at the end of each payment period, to the office. The two records of time made, viz., the Time Book (as prepared by the timekeeper) and the Time Allocation Book (as entered from the employee's own records, VcriFication ^ , . , ...,,,, , , ,. , ,n of time which are mitialled by the leadmg hand), are, return. -^ is /> > when sent to the office, compared, and in cases where differences arise, explanations obtained by the Wages Book clerk from the employee or the timekeeper. Should the explanation then given not be satisfactory, or should it not be received in time, it is incumbent on the clerk making up the Wages Book to see that the employee, pending the settlement of the question, is paid only for the lesser number of hours. In cases in which, owing to a breakdown, or inability of a leading hand or foreman im- mediately to start an employee on another order on com- pletion of that on which he has been engaged, and there is a discrepancy between the time of the employee in the Time Book and in the Time Allocation Book, the time not profitably employed should be charged to a Waste account. In some cases the employee is provided, where time is lost through causes beyond his control, with a Lost Time Ticket, which is charged up to a Waste or a Lost Time account. A suggested form for a Time x-^llocation Book, which may be ruled so as to take the records for a week, fortnight, or month, is shown (Specimen No. 6). Considerable economy in clerical work arises from considering the year to consist of 13 periods of 4 weeks each, so as to avoid the number of 44 LABOUR. I O o o H o t< > <« "S u a J3 H a S ai u ^ d o ^ -a c a S K o ^ d o '% a. 3 u u O a It ■o^s.utuiJiJOjvv ° 1 K O o 3 S < 3 o H d d •3}E>I 6 6 d aujiqjdAQ suiviaAQ Xeq d •alEH 3mi^9AQ Acq d •S}E^ 9UII)JJAO •a 2 H d RETURN OF OVERTIME. 47 ignore or be ignorant of the fact that the higher rate generally paid for overtime adds very considerably to the cost of the work and sometimes to the amount charged for it. The economic aspects of overtime in relation to fixed capital are dealt with in a subsequent chapter. For our Return of present purpose it suffices to say that if the overtime. employer desires to keep a check upon, and to reduce to a minimum, the overtime that is worked, he should require the foreman or leading hand to send to the office at the end of each period of payment a return of overtime made (Specimen No. 8), in addition to giving an " overtime slip," or authority to work overtime to an employee, to be handed to the timekeeper. This return is initialled by the foreman or leading hand to show that the overtime has been sanctioned, and the clerk making up the Wages Book, to whom the return is handed, sees that no overtime other than that shown therein is allowed to pass through that book. Instructions can be given either to the time clerk or to the Wages Book clerk, or to both, to prepare a state- ment showing the amount spent on overtime in excess of the amount that would have been paid had the same work been done at ordinary rates. Where the resort to over- time is on account of general pressure of work, and not on account of the pressing nature of a specific order, the allowance for overtime would seem more correctly charge- able to a general expenses account than to a particular order. This return can simply show the amount paid in excess in each trade or to each individual, or it can be in a more complete form, as shown in Specimen Ruling No. 9. It is desirable that the extra cost of working overtime should be noted in the cost records against the various orders on which it is incurred. 48 LABOUR. PIECE-WORK RET URN. -Specimen No. io. Week ending 19 Workman's Name No. Rate Started on .1 19 . at_ Foreman. Order No. Reg. No. Quantity. Description of Work. Rate. I s. d. Date. His. Date. Hrs. Date. Hrs. Date. Hrs. Oveitime Allowancei. Wednesd.iy Thursday Friday Saturday Monday Tuesday 1 Last Piece-rate Last percentage on Day-work_ Total time_ Balance at Percentage on Day-work Signature of Woikman No. received as above Signature of Piece-work Clerk Balance entered in Wages Book_ Foreman. 19 Exd. Time Clerk, PIECEWORK RETURN. 49 In factories where, owing to the soHdarity of labour, a large number of men and women are unable to commence, or fully carry out, their work unless a smaller number of men or women of a particular trade are present, it is some- times found advisable to ensure the greater punctuality on the part of the smaller number by instituting a system of fines for late and of premiums for early attendance. Thus the man who was punctual would get his premium and wages for the time made, whilst the unpunctual man would be fined, besides losing pay for the time he was absent. In some cases a system of voluntary fines is resorted to, em- ployees purchasing from the gatekeeper tickets recording the rule which has been broken, and the amount paid in connection therewith. The amount so contributed is often used at regular intervals for festive or charitable purposes. Care should be taken in connection with any system of fines instituted that the provisions of the Truck Acts are respected. The number of times each employee is un- punctual is reported to the office by the timekeeper, and can of course be checked from the Time Books and record slips, if thought necessary. The amount of premium or fine in each case would then be passed through the Wages Book. The economic position in industry under pre-war, and still more so under post-war, conditions has led to increased advocacy of the application in some industries of methods of wages payments based on results. Considerable opposi- tion was manifested toward the adoption of some of the earlier devised piecework systems, but the strength of the objection to the principle has been lessened by the modifications made in them, whereby the advantages of increased production have been more equitably shared between employers and employees. In many factories — boot and shoe, tailoring, coopering, cotton weaving, for E $0 LABOUR. example — the majority of the employees are generally paid on piece wages and not on time rates. The employee is remunerated not on the basis of payment for time at a rate per hour, day, or week, but by a piece- work wage or specified price for the production of a standard article, or the execution of a specific process, both under normal conditions, with such modifications of the standard, either by extras or deductions, as may correspond with specified variations of the standard product, with adjustments in the rates in case of defective materials or tools supplied by the employer. In factories where employees engaged at time rates are employed on piecework, they should, when starting on it, be supplied with a Piecework Return Form Method of -XT N u- u ■ -c J ^1 recording (Specimen No. lo), on which is specified the piecework nature of the work, the extent of the job, and the rate at which it is undertaken. The pieceworker on the completion of the work hands this sheet to a viewer, having entered upon it the number of hours spent on that particular job, for which he has been paid in ordinary course. The viewer records the result of his inspection in a viewing book, which has a carbon slip. This viewing report will contain much technical data of great value in the administration and management of the shops. The Return, having been modified or verified by the viewer of the work, is passed on to the time clerk, who checks the time entries made thereon from his Time Allocation Book, gives it monetary form, and enters in his Allocation Book the difference between the value of the output at piece rate and the amount already paid at time rate. Any balances favourable to the employee may be placed to his or her credit at the next piecework settlement, whilst adverse balances may THE ANALYSIS OF PIECEWORK COSTS. 5 1 be deducted from the time pay, or from the next favourable balance. In practice the latter course is preferable, as it prevents any question being raised by representatives of the trade union as to deduction from time pay reducing wages below the ordinary standard rate. The provisions of the Factory Acts and of administra- tive orders authorised by the Home Secretary as to the publication of particulars of piecework rates, or as to check weighing, in certain trades have, of course, to be borne in mind. In some cases it will probably be found impracticable, owing to the nature or pressure of other work, to keep an employee continuously on the work which he has taken at a piece rate. Under these circumstances the foreman or leading hand should at once notify the time clerk, in writ- ing, that he has taken the employee off piecework and put him on time work. It may be found desirable for the foreman or leading hand to keep a Log Book, in which such interruptions to pieceworking are noted. In a large establishment this function might be discharged by the piecework viewer. In any event it will be found very desirable to have a record of interruption to pieceworking, to which reference may, if necessary, be made at the time of settlement. The time clerk, after duly examining and vouching the piecework returns, forwards the same to the office, where they can be rechecked in a general or detailed manner, if thought desirable. Considerable advantage accrues from a Piecework Analysis or Register Book being compiled from these sheets. As indicated in Specimen No. ii, such a book would show the various rates at which work was undertaken, as also the percentage in which any kind of piecework is favour- 52 LABOUR. rj S as ist Price. and Price, reduction of... each. Piecework Percentage on Day Work. Amount of Balance. Time made. •paidnooo a 3 O a JO -CM •ON -Al j ."5 iz; G } able or unfavourable to either the employer or the employee ; and it would serve as a Piecework i i • r Analysis record or check in nx- Book. mg piecework rates. From this source also comparisons between the percentage of piece- work rates and day-work prices ruling in the various shops or departments can be obtained. Having been checked, these piecework balances may be entered in the Wages Book (Specimen No. 14). The pro- cedure applicable in the case of a pieceworker is also applicable when more than one employee is concerned either as an assistant or as a member of a piece- work gang. At the conclusion of the contract the remaining balance will be apportioned be- tween the workers on the agreed basis, and their individual results credited to them in the wages sheets. Before passing from the subject of piecework it will be desirable to refer briefly to kindred methods of remuneration. In the United States of America the opposition of the International Association of Machinists is by no means relaxed, and its official Return of n\en en- gaged or left. PIECEWORK. 53 representative some time since declared that the Associa- tion will never be a willing party to the propagation of piecework. At present, in the States, more than in the United Kingdom, the original defects of the piece- work system are being modified by the intensified or differential piece-rate system, and the premium plan of labour remuneration. The incentive to quicken produc- tion being diminished by the "dropping" of rates when piecework balances have been in the opinion of the employer too largely in favour of the employee, some employers have adopted the differential rate system, which " consists in offering for the same job a high price per piece if the work is done in the shortest possible time and in a perfect condition, and lower prices per piece for slow and imperfect work." * In these cases it is not usual to fix the rate primarily on tbe records which show the shortest time in which the same or similar work has been done, but on the basis of a calculation by a rate fixer as to the time that the work under ordinary and average conditions would occupy with provision for higher rate for shorter time, subject to there being no deterioration in quality. It is claimed for this system that it maximises output, by leaving to labour the extra reward of skill and application. It has stood the test of time in various works, among others those of the Midvale Steel Company of Philadelphia, where it was introduced by Mr. Fred W. Taylor, with whose name the system is often associated. A modification of this method was introduced by Mr. Gantt at the works of the Bethlehem Steel Co. Its distinctive characteristic is that if the worker does not reach the standard time, he is paid only 75 per cent, of normal wages for the excessive time, provided the bonus earned permits of the imposition of this penalty. The * Engineering Magazine. 54 LABOUR. Gantt and Taylor methods are not now very extensively used. A system known as the Three Rate System of Com- pensation was initiated by Mr, Gillreth. The earnings were divided into three parts. The first was the day rate which the worker received whatever his efficiency. The second was the rate paid to a worker performing his work in exact accordance with the instruction card. The third was a rate paid when the work is done both in accordance with the instruction card and within the stipulated time. The premium plan, which has been successfully adopted in many works, was the result of much care and thought given by Mr. (now Sir) J. A. Halsey to the problem of reconciling the divergence of interest between employer and employed in quickening production. The basis of this plan, often described as the time share method, is the continuance of payment by time, modified by the expecta- tion of a certain minimum product within that time, with a bonus or premium for lessened time, which is, of course, equivalent to increase of product. The direct labour gain to the employer consists of the difference between the premium and the wages cost saved. The division of the gain as between employer and employee presents, of course, some difficulty. In some cases a certain proportionate part of the gain is allotted to the employee. Sir J. A. Halsey himself adopts the principle of being liberal with the time rather than the premium rate. In some cases special grants are made to foremen, proportional to the number of men earning a bonus in the respective shops. In the Emerson Efficiency System as applied in the shops of the Santa Fe Railway, the characteristic features are the revision as part of the daily shop practice of any scheduled prices which appear to be too high or too low, and this without lessening the earning power of the worker. Another characteristic is the establishment of a general PIECEWORK. 55 monthly efficiency record covering the shop as a whole, and the employment instead of " speeders " and " task- setters" of instructors, who having determined as nearly as possible the standard time that a particular piece of work should take, show the employee how it should be worked out practically. The premium plan is in the main identical with the system adopted in many factories and works in the United King- dom under the name " gain-sharing," which has been defined as* "an arrangement under which a fixed or minimum wage is supplemented by a premium proportionate to the efficiency of the workman, so far as this exceeds a specified standard." Thus under the Progressive Rate method, intro- duced by Mr. Rowan, of Glasgow, the Halsey plan has been modified by the fraction of the gain receivable by the employee being varied so as to make the rate of earnings on the work (time wages plus premium) exceed the time wages rate by the same proportion as that which the saving in time effected bears to the standard time.f A further variation is to be found in the Reference Rate method, in which a total wages payment calculated upon a time allowance is fixed for a given quantity of work, and if the employee completes this in such time that his day- rate wages come to less than the Reference Rate, a share of the saving is allotted to h\m.l It will be found advantageous, and sometimes in large establishments indispensable, for a return or returns to * " Profit-sharing and the Labour Question." By T. M. Bushell. London : Methuen. t An interesting account of the variations of both systems, as adopted in the Imperial Dockyards and other establishments in Germany, is given in an article by Mr. F. D. Schloss on "Gain Sharing in Germany," in the Econotnicjotirnal. X Interesting comparisons between the Time Share, the Progressive Rate, and Reference Rate methods are given by Mr. H. Culpin, A.S.A.A., in his lecture on Wages Systems. 56 LABOUR. be sent by the foreman at regular intervals, either to the clerk responsible for the Wages Book or to the principal, enumerating the names, trades, and rates of pay of employees who have been engaged since the date of the last return, and giving similar information concerning those who have resigned or been discharged. This return should also record any increases in the rates of pay, any transfers from one department to another, also the names of employees who are to be fined for neglect of duty or for any other cause, of those who are to receive premiums for some special reason, or who are on leave, or absent through illness or injury, but to whom wages or allowances are to be paid, and of those who are entitled to " black money " (or " dirty money " as it is often called), or other extras, with the respective amounts. These returns should be duly entered in a Wages Rate Wages Rate ^^ok (Specimen No. 13). At any period the Book. j-^^g Qf p^y entered in the Wages Book for all or any of the employees can be checked from this book. WAGES ADVICE.- Specimen No. 12. REfURN OF Men Engaged, Rfsigned, Discharged, Promotk.d, Trans- FERKED OR FiNED, AND OF ALLOWANCES AND PREMIUMS, Works, for the Week ending 19 Engaged. No. Name. Occupation. Rate. Name and Address of last Employer. {Specimen continued. THE WAGES BOOK. 57 WAGES ADVICE.— Specimen No. 12— (continued). Left. No. Name. Occupation. Remarks. Promoted or Transferred. No. Name. Occupation. 1 From 1 To Rate. Remarks. From To Fined. No. Name, Occupation. Amount. Fined for {Specimen continued. 58 LABOUR. WAGES ADVICE.— Specimen No. \2.—{co/iti>iim{). Allowances and Primiums. No. Name. Occupation. Amount. Premium allowed for Remarks. Entered on Pay-sheet by_ Signature Unless a special book recording the length of the employee's service and of his or her varying rates of pay and other details is kept, the Wages Rate Book may be made to serve such purpose. If a large number of employees follow the same trade, or if there is a recognised scale of rises on a period of employ- ment or other basis, it may be well to supplement advances in the Wages Advice (Specimen No. 12) by a return, sent into the counting-house on the first day of each month, showing the names and numbers of those to whom it is proposed during the month to grant increased pay. This form is almost identical with the Wages Rate Book (Specimen No. 13), with the exception that before the columns showing the successive advances there should be inserted two columns, the first showing the rate of pay in force, and the second the proposed rate. The " remarks " column should be used for stating the reasons for the advance. The sole utility of this form is that through its use the principal has only to settle the question of proposed increases once a month instead of once a week ; and is thereby enabled more conveniently THE WAGES BOOK. 59 Remarks and Date of leaving Serric e. V u B H > < 8 a > Pi u a > < 5 a > V as Q o u a n > < a Q u a ? •a -t ,5 c c 2 Z d to make inquiries as to the char- acter and capacity of any employee who is recommended for an in- crease of pay. In order to have a further check on the engagement of additional employees, it is often arranged that the names of any men who have been taken on and whose engage- ment increases the number of hands in a particular trade, shall be entered in the Wages Book in a distinctively coloured ink, until the employer has seen, sanctioned, and initialled the entry on the Wages Advice recording the en- gagement. It will be seen from the fore- going that the compilation of the Wages Book is not Compilation ,.^^ . ^, , of Wages a dimcult matter, and that, if ordinary care and attention are given to it, a clerical mistake should not occur ; whilst the number of persons through whose hands the returns pass, each acting as a check on the others, should prevent pecu- lation and fraud. The Wages Records being kept in detail mini- mises the number of questions which may arise in connection with the return which the em- ployer has now to make of those 6o LABOUR. •SijJEiua-g 1 oi lEJox 1 1 1 •SQOl} onpaQ -1 Stoppages. [These coluiniis may be used for the stoppages on account of Savings Bank, Superannuation Fund, Medical Attendance, Fuel, Healtli, Unemploynicm .i^c. ■ssou-ei-Eg m^a jfjoMajst^ •sanij 1 •FloX 1 1 •s9owe -MOJIY JO sainiiu9jj •S3DUB[«g }!paj3 3[JOAi30aiJ u > o < swiX 1 1 ■^nnomy •apEiv3inix| 1 •a;^H •noi; -•Bdnboo •OtU-BfJ d o ^ Remarks, including average rate of pay, &c. o'rt 31 s Savings Bank Superannua- tion Fund and other Deductions. 1 •saouBicg HJOAV-330IJ •sanij 1 1 5 ,o H saonEAiojiv puE siuninisjj •saDOBi^g ■Om\fMAQ •jnnomy poN •sapcjx THE WAGES BOOK. 6 1 employees who are liable to Income Tax, and their earnings. The specimen ruling of a Wages Book (No. 14) is, we venture to think, applicable in detail to most, and in general principle to all trades. This specimen ruling shows columns for the entry of any stoppages or deductions for rent of houses, cottages, looms, frames, troughs, or machinery, where these belong to the employer and are hired to the employee, as also for fuel supplies, sick and provident societies, superannuation fund, deductions under the National Insurance Acts for Health and Unemployment contributions or other purposes. It must be remembered that under the "Truck Acts" no non-statutory stoppage or deduction can be made, unless there is a written agreement or request, signed by the employee, authorising such deduction or stoppage. All employees, therefore, who require such or other deductions to be made should be requested to sign a Stoppage Agreement Form, or Book, should the latter be the more convenient. An exceedingly useful " Memorandum upon the Truck Acts," issued by the Home Office, and obtainable from His Majesty's printers, sets out the various purposes for which deductions are allowable, provided they are reasonable. The whole of the recommendations of the Report of the Departmental Committee on these Acts have not yet found legislative sanction, but they show the trend of probable legislation. The Truck Acts, of course, do not prevent the practice of "subbing," whereby an employer sometimes permits an employee on occasions of misfortune or special expense to receive an advance of wages to a limited extent, such advance being v»ithout interest and repaid by deduction from the pay-bill each week until extinguished. In 62 LABOUR. pursuance of Board of Trade orders under Section ii6 of the Factory and Workshop Act of 1901, particulars of work and wages have to be given to employees in certain trades. If it is necessary to have a permanent record of the character of an employee, as evidenced by the fines imposed or the premiums granted, such information can be inserted in the Rate Book by means of additional columns, or special books arranged with reference to trades, as well as to individuals, might be used for this purpose. Whether a separate banking account for wages be kept or not, necessitating the employer each week signing a cheque _ J for the exact amount of the previous week's Summary or '■ wages. wages, so that the account may be kept in balance, he may find it desirable to have a summary of the Wages Book prepared (Specimen No. 15), showing the number of men and women employed in the various trades, the aggregate of their wages, their average rates of pay, etc. The Wages Book and Summaries of Wages should be filed for ready reference, so that, /nfer alia, if required for any purpose under the Employers' Liability or Work- men's Compensation Acts, or in connection with any insurance fund created by the employer, or any policy of insurance taken out by him, as a provision against claims under those Acts, the total amount paid during a certain period to any employee may be ascertained with precision and detail. War and post-war conditions have necessi- tated the keeping of the Wages Records in considerable detail, e.g., in connection with the employment of disabled men, many insurance companies have entered into an undertaking with the Government to include the disabled in compensation policies on the same terms as able-bodied men, and require employers to keep a special Wages Book THE WAGES BOOK. 63 containing the names of all disabled sailors, soldiers, and airmen employed by them, showing the wages of each separately. Before passing from this branch of our subject it may be well to mention that the signatures of the pay clerk and another responsible person in whose presence the wages are paid are often considered sufficient evidence of Hccci ts for payment. Pay Bills, if used, often contain wages. places at foot for the signatures of foreman, the calculators and checkers of the amounts, of the cashier, and for a declaration by the pay clerk that the wages shown thereon have been paid by him at the place and on the date shown. This is sometimes supplemented by a further certificate in general form by the Manager, and in the cases of Limited Companies by the Secretary also. In some large undertakings it is not unusual to ask the Auditor to arrange occasional surprise visits to the pay tables whilst pays are in progress. Even in large establish- ments what is in reality a receipt for the wages paid may be obtained from each emplo}'ee by a process which entails but little trouble. The time or pay clerk (as may be considered the more expedient) writes out on a slip of paper, ruled and printed for the purpose, the date, the employee's number, and the amount receivable. These forms can be distributed by the various foremen to their subordinates prior to the pay. Each employee presenting himself at the pay table hands in this " Pay-slip " to the pay clerk. These receipts can be compared with the Wages Book. If instead of a Wages Book pay sheets, rolls, or bills are used, the receipts can be obtained on the original documents by distributing them in the different shops, but this would involve considerable labour as compared with the procedure first described. It is considered by 64 LABOUR. some that each receipt for wages above £2 should bear a receipt stamp. Practice in this respect varies considerably. In some cases receipts for amounts over £2 are not taken at all, in other cases receipts from all receiving more than that sum are taken on one sheet, and one receipt stamp used for the whole. As previously pointed out, in some undertakings advan- tage arises from, and clerical labour is saved by, the wages being tabulated in four-weekly, instead of monthly periods, and the same principle is applied to other branches of expenditure. In such cases, as the thirteen four-weekly periods would not coincide with the calendar year, some adjustment would be necessary as regards broken periods at the beginning and end of the year. In all cases where men do not present themselves at Unclaimed the pay table in ordinary course the pay clerk Wages Book, ghould make an entry in a book specially pro- vided for that purpose, called Unclaimed or Unpaid Wages Book, showing the man's name, the date, and the amount of his pay (Specimen No. 16). The pay clerk should hand over wages unpaid to the cashier as soon as possible after the close of the pay, and the cashier should pay the amounts he has received on account of unpaid wages into the bank at regular periods. A signature should be obtained in this book for the money of each employee who obtains his or her wages in any way other than at the pay table on the ordinary pay day. By means of this book the principal can also see at once what wages have not been claimed, and can give instructions as to the disposal of such amounts as have been so long outstanding as to render their being claimed improbable. In many cases employees are advised of any amounts due to them which they have not claimed. THE METHOD OF PAYING WAGES. 65 Where any considerable number of employees are unable, owing to their hours of work, to be at the pay table at the appointed time, there may be two or more Payment of ^^ • , , , i i wages to pays at suitable hours, or the employees so absent may empower one of their fellow- workers to receive wages on their behalf (Specimen No. 17). UNCLAIMED WAGES BOOK. —Specimen No. 16. No. Name. Trade. Amount. For Week Ending. Date Paid. Received by Instructions as to Disposal. Payment of wages to employees outside factory. In cases in which employees are engaged permanently or temporarily outside the factory, a receipt for the wages remitted them may with equal ease be obtained by means of a form ruled and printed in copyable ink (Specimen No. 18). . The amount of expenses to be entered in the 7th column of Specimen No. 18 against the name of the employee are obtained from the Out-workers' Travelling and other expenses sheets, which are forwarded to the office by the official in charge of the out-works operations, by whom they should be certified. Each item of expense, such as railway fares, lodging money, or allowance for daily maintenance, "walking time," etc., should be separ- ately shown. As regards the method of paying wages, we may point out that in large establishments, prior to drawing the F 66 LABOUR. PAY WAGES NOTE Specimen No. 17. 19 To Vie Cashier. Please pay the bearer, * * ♦ *, my wages, amounting to £ , for the week ending 19 . Name ___^ Occupation No The Person receiving the amount above named is respousible for delivering the money to the person to whom it is due. WAGES REMITTANCE FORM. -Specimen No. 18. -19 Dear Sir, We enclose you herewith amount- ing to £ in payment of wages and expenses during the. .ending. 19 as per details below. Please obtain the receipts on this form and return to Nos. of Notes- Postal Orders No. Time. Wages. Overtime. Expenses. Deduction on account of Superannua- tion Fund, Sec, as per advice. Total amount received. 1 Received in payment as j per amount opposite my name. THE METHOD OF PAYING WAGES. ey amount from the bank, it is almost obligatory that the totals of each page of the Wages Book should be analysed so that such proportions of silver and copper Method of 1 1 • 1 .,1 , . paying may be obtamed as will prevent the necessity for further change. This is done by means of a cash sheet (Specimen No. 19), which also serves as a check upon the addition of each page in the Wages Book, and by assigning to each page of that book the exact proportion of cash required to pay all the wages entered on that page, is further useful in localising mistakes in the process of counting out the money to be paid to each CASH SHEET.— Specimen No. 19. No. of Page. Notes. Sovereigns. Half- sovereigns. Silver. Copper. employee, for if the sovereigns and half sovereigns, or as at present Treasury Notes for 20s. and los., are piled or placed in heaps of ten or twenty, and on the Wages Sheet a mark in ink or in pencil is placed where the respective heap should end, any mistake soon becomes apparent, and can be rectified by going over the counts to the last stopping place. The process of distributing wages is often by means of small tin boxes bearing the numbers by which the workpeople are known for time-taking and recording purposes, allocated under the systems described on page 34. In some cases the amount is placed in envelopes on which in printed spaces the employee's name, number, 68 LABOUR. and the make-up and amount of his wages are entered. In some cases envelopes either wholly or partially trans- parent are used, so that the contents of the envelope may be seen and counted, but some doubts have been expressed as to whether this method can usefully be employed where a large number of employees are engaged. MONEY TRAY.— Specimen No. 20. 2 4 5 6 7 8 9 10 II 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 SI 61 52 53 54 55 56 57 58 59 60 62 63 64 6S 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 If tin boxes are used they are placed in trays constructed Money ^^ ^o^*^ ^oo each, and arranged in ten squares trays. (Specimen No. 20). The employees are called to the pay table by their numbers and in consecutive order, the duties of pay clerk being discharged by the cashier, or some oflficial who has not been engaged in the process of counting the money, or in the compilation or checking of the Wages Book, The pay THE METHOD OF PAYING WAGES. 69 g p. s- 1 ri en- z « [d a ^S ^^ 1 9 "o a ,2 c .8 1 1 Zi u •H clerk hands to each employee his or her particular tin or enve- lope against the presentation of the receipt form (explained on page Ct,). If, owing to the large number of hands, the pay would otherwise take up much time, it may be found expedient to have two or more pay tables and pay clerks, or there may be variation, one set of workpeople being paid first one week, second another week, or payment may be made from shop to shop, and so forth ; but on the whole it is advisable that the process of paying wages should be completed in as few minutes as possible. It may be desirable that the pay clerks should be changed from section to section in irregular rotation, and that each section should be paid in or near its own shop or department. As a general rule payment takes place after hours, that is in the employees' time. In some cases in which large numbers of men are employed, officials known as identification officers attend the pay, which is made by a representative of the finance branch,theidcntificationofficials 70 LABOUR. giving certificates to the paying officer that he has identified each person to whom payment has been made. In cases in which owing to the absence of the employee payment could not be made, the paying officer leaves with the identifica- tion officer a left over wages note to be handed to the employee when available, who would thereafter be able to draw his wages. Insurances against misappropriation by cashiers and pay clerks can be effected with any of the well-known Guarantee Societies. From the Time Allocation Book (Specimen No. 6) the time clerk should make an abstract weekly, fortnightly, „ four-weekly, or monthly as required, showing stract for the vanous working or stock orders on which purpose of ° cost. time has been spent. This summary or abstract should show against the various orders the cost of labour during that period in the respective departments or trades (Specimen No. 21). The totals so compiled should agree with that in the Wages Book for the same period. This abstract of wages will form the basis of the debit to the Cost Ledger (see Chapter IV.) for labour expended upon the various operations carried on. It is evident that the totals so entered on the Abstract of Wages Sheet may easily be traced back to the Time Allocation Book, and that any more detailed information that may be required can be promptly obtained. In some cases it is desirable to post these Wages Abstracts in a Wages Journal under the respective Stock, Plant, or other orders (to be hereafter described), with cross divisions for various trades, and post the totals of these entries to the respective orders in the Cost Ledger, every quarter or half year, whichever may be considered the more serviceable. In such cases reference for details can, when desired, be made back from the Cost Ledger DUTIES OF TIMEKEEPER. 71 to the Wages Journal and to the Wages Abstracts, with the records on which the latter is based. The diagram opposite page 72 will serve to books and show the relation of the various forms and books referred to in this chapter. It remains to be observed, as the posting of the rules in conspicuous places in the works is not of itself sufficient Adhesion ^° prove knowledge, that when a person who ru/csb"^^ has been engaged presents himself at a factory employees, (q^ work, the timekeeper should obtain his signature to a book or form testifying that the rules of the factory have been duly read and noted. If any system of fines is adopted, the attention of the employee should be called thereto when engaged, and if agreed to by him a record of such consent should be made. In some cases a book containing the rules and regulations of the factory, a short description of the time system in use, the method of dealing with material, and the series of numbers or symbols used for Standing Orders, is supplied to skilled workmen on their joining the business. The timekeeper should also obtain the name and address of the last employer, and fill in and forward to the counting-house a character form for transmission to him. This form, which would ask for information as to the proposed employee's character and capacity, his rate of pay, and possibly other details of a Character personal nature, when returned filled in should, book. after consideration, be filed in a Character Book or on the Card Index or other system, so as to be easily available. The address of every employee should be taken when engaged, and should be entered in Address fc> fc> ' book. an Address Book. It is very desirable that periodically the whole of the employees should be asked for their addresses, and these when obtained compared with the existing entries. In cases in which workpeople may ^2 LABOUR. be required on urgent or pressing work it is especially desirable to know their correct addresses, and it may therefore be necessary to impose a fine for not notifying change of address. This information is also required in connection with the return which an employer has to make to the Assessor of Taxes of the names of all persons employed by him, and who are paid during the year an amount in excess of the sum for the time being fixed as the limit for total exemption from Income Tax. The timekeeper should furthermore keep Registers, in accordance with the Factory Acts, of the children, young persons, and women employed in the factory, women and as Well as a rccord of the cleansing and white- washing, etc., of the shops as required by those Acts. He should also inform some responsible person when any children are engaged, and should see that the necessary certificates as to education are produced, and that the certifying surgeon after making the examination required by the Act duly attests the Register. We have not dealt with the appropriation of fines im- posed, or the deductions on account of superannuation, sick, unemployment, or other funds, or with the occu- Houses be- . , , - , i i • , t longing to pation by employees ot houses belongmg to the firms occu- ~ . . . , , pied by firm, as these more correctly appertam to the books of the system of commercial accounts, with which it is not our province here to deal. In the last case, should an arrangement be made by which the work- people, in consideration of not paying rent for the houses they occupy, receive less wages than they otherwise would, then the interest on the capital invested in the buildings forms an element in the cost of production, and should be debited to the Cost Ledger as a percentage upon the wages paid or in common with the indirect expenses to be referred to later. In practice, however, it is found k'lTH Wages. r rv /•- . . H^. Diagram I. THE Relation of the Books and Forms used in connection with [The numbers, where shown^ correspond to the spcdmen rulings.) m c RENTS RECEIVABLE. 73 that it is preferable to pay full wages, to collect the amount of the rent from the workpeople who occupy the houses, such amount being dealt with as revenue, and to enter the particulars of and amounts received from individual tenancies, with records of any premises "void" or unlet, weekly or quarterly on a Rent Roll, or in a Rents Receiv- able Book, ruled to show for each quarter the weekly or other receipts from each tenant, with columns for arrears brought and carried forward. These records are of special utility where the system of compounding for rates is adopted. CHAPTER III. STORES. One of the first points to be considered in a review of the accounts of a manufacturing or trading concern is the Purchase of question of the purchase of the materials or materials, commodities which are essential to the carry- ing on of the business, whether the articles obtained are to be used as plant or for its maintenance, or are for the purpose of manufacturing, or are simply to be retailed. We aim, therefore, in this chapter, to show the wants to be provided for in order to insure economy in the purchase and consumption of material, and to suggest those forms by which an employer may assure himself that the raw materials of his trade are being bought in the cheapest market, and economically and properly used. The initiative in the purchase of materials must neces- sarily be taken by those more directly engaged with the Initiatory details of manufacture, such as the foreman or stage. overlooker. The storekeeper, having found either that he has not a supply of the required or similar material, or that his stock is low and needs replenishing, enters a record of his requirements in a Stores Requisition Book, which can be periodically submitted to the principal, whose province it is to determine when, and in what quantity, it is desirable to purchase material. If there are numerous branches the Requisition Book would be entered up in the counting-house, daily or weekly STORES REQUISITIONS. 75 as the exigencies of the business require, from the forms sent in by the heads of the several departments. These stores re- requisitions may be as shown in Specimen No. quisition. 22. If made in duplicate the copy may, after the goods are ordered, be referred to the requisitionist, with any information as to the terms and conditions of the order which it is necessary for him to know. The Stores Requisition Book should contain columns for enter- ing in the date of requisition, a description of the goods, the department or purpose for which they are required, and the name of the firm to whom it is proposed to give the order. Columns showing the price at which the goods are to be supplied, the quantity in stock, the last purchasing price, and the name of last supplier, and the maximum and minimum stocks — as these may from time to time have to be altered according to circumstances — may also be pro- vided for the guidance of the principal. When the entries in the Requisition Book have been examined and allowed, an order for the articles would be issued. The advantage of all orders for the purchase of goods emanating from one centre, instead of each department being able to supply its own individual needs, is that it permits the principal of the business not only to control in a very large degree the character and amount of the consumption, but he, or the buyer or the purchasing department, as the case may be, can " feel the market," either by obtaining quotations or otherwise, and can thus contract far more favourably for the supply of the goods required than would otherwise be the case. Even if by this concentration a little delay in obtain- ing supplies is caused, it need not lead to inconvenience, as the requisitions can, in the majority of cases, very well be made in anticipation of the demand arising. Should the principal determine to contract for the supply of certain goods over a period of time, it is desirable that 76 STORES. the invitation-to-tender forms issued by him should be uniform, and should state clearly and concisely the conditions on which the goods will be purchased and paid for. This form should also state when and where the patterns or samples may be seen, the date on which tenders STORES REQUISITION.— Specimen No. 22. No. Department. 19 A supply of the undermentioned articles is required. Article. Purpose Date of last supply. Quantity last supplied. By whom supplied. Price of last supply. Present Stock and Remarks with Maximum and Minimum Stocks. STORES REQUISITION BOOK— Specimen No. 23. Date of requisi- tion. Goods re- quired. Wanted by Pur- pose. To be ordered from Order. Invoice. Remarks. Max. Stocks. Min. Stocks. No. Price. Amount. Date. 1 1 j will be received and opened, and the usual notification that the proposing purchaser does not bind himself to accept the lowest or any tender. The Prevention of Corruption Act has done much to safeguard the rights and interests of employers against malversation, and it is advisable that all STORES REQUISITION BOOK. ^J employees should be as well acquainted with its provisions as the employer. It is desirable that a Stores Contract Register be kept, that particulars of each contract should be entered therein, with the date of the various supplies, so that the position under the contract may be rapidly and easily ascertained. If the contract or order is to supply to pattern or sample, the storekeeper should keep a Pattern or Samples Register, showing dates on which duplicates (which usually bear some identifying seal or mark) were forwarded or handed to sup- pliers, and a record of the place of deposit of the originals. Specimen ruling No. 23 shows the headings of a Stores Requisition Book, which will probably suffice in most cases, but the other headings referred to would also be found useful. The date and amount of the invoice can, of course, only be inserted at the conclusion of the transaction and when the goods are delivered, but their entry gives a useful record, and is valuable as a check. It having been decided to order the material requisi- tioned, there should be made out from such requisitions the order to the vendors. These orders should Order form. . ,- , ... i • i i i specify the conditions on which the goods are ordered as to delivery, carriage and packing, the route by which they are to be sent, the place and time at which they will be received, the mode of testing quality, the terms and date of payment, including the cash discount, if any, which will be deducted, and instructions as to acknow- ledging receipt of order, sending advice notes, invoices, and statements of account. In some cases where material is ordered specially or entirely for one job the order to the suppliers contains the instruction that the goods supplied are to be marked with the working order. If there is any arrangement as to payment of penalty in case of delay in delivery, or defects in manufacture, the 78 STORES. clause or condition of the order should state that it is as by way of liquidated damages. In this connection it may be pointed out that it is desirable that those concerned with the ordering, accepting, or forwarding of material or finished products, should have some general acquaintance with the provisions of the Sale of Goods Act and with the law relating to carriers. In some cases, contracts are entered into for supplies extending over a period, and the conditions are either em- bodied in correspondence, or preferably in the clauses of a formal contract. These contracts should be summarised in the Stores Contracts Register previously referred to. It is desirable that orders for deliveries of portions of these contract supplies should be made on the ordinary order forms, any necessary alterations being made thereon. In other respects, this mode permits of the same procedure being observed with contracts as with orders. In the case of purchases of small value through Petty Cash, the cashier should advise the storekeeper monthly as to nature, quantities, and values of goods so purchased, the storekeeper should nominally pass an order for the goods, as if the cashier were an independent supplier, and the debits to the working orders would thus find their way into the books in the usual manner. In some cases orders to supply goods may be contained in a letter or a series of letters, or in some cases of emer- gency goods may be ordered orally. In these instances it is desirable for reference and other purposes, as well as for facilitating dealing with the invoices, that pro /on; /a orders should be sent to the suppliers, even if it is only possible to do so after the goods have been delivered. The order forms should, for reference, be numbered con- secutively by the ordering department, and subsidiary references, by initial letters, symbols, or numbers, might STORES REQUISITION BOOK 79 appear as numerators over the order number, or be inter- woven therein, so that, through the order number, the department or person requisitioning, with the number of the requisition, can be clearly traced, and a great deal of inter-reference thereby be saved. The use of the back of the order form for invoicing purposes will be referred to when dealing with the procedure as to invoices. It is sometimes considered that if the order forms have counterfoils, are press-copied or are manifolded by means of carbon sheets, and signed by a responsible person, the necessity for a Requisition Book is not very apparent. It will be found, however, in practice that while the work required to keep such a book is but slight, the facilities it affords for reference, and for noting the orders when executed, present many advantages. It is a question of the relative value of labour, and it is often more economical for a clerk to give regularly a portion of his time to certain work than for an employer to have occasionally to give a few minutes. If it is thought desirable to send copies of the orders issued to several departments, the necessary number of copies can be made in one operation by the use of carbon sheets. The practice of forwarding advice notes with the goods is sometimes objected to by the purchasers as convenient, but unsafe, as tending to lead the storekeeper to return the advice note to the office as correct, without having made the necessary count or examination, and as an alternative it is suggested that the storekeeper should be supplied with a duplicate cop\- of the order, but on which the quantit}' ordered and the price are left blank, so that the storekeeper is bound to make a count. If, however, the Factory and Cost Books are properly and regularly kept, such lapses on the part of the storekeeper would soon reveal them- selves and lead to correction. In some cases the orders 80 STORES. are in quintuplicate, the original being forwarded to the suppliers, a copy being sent to the costs branch, the store- keeper, the correspondence branch respectively, and one remaining with the buying department. To avoid confusion it is often considered that all goods received should pass through the Stores Account, even if ordered for some particular work only, and not be charged, as is sometimes the case, to the work as direct goods. Different systems obtain in different trades of dealing with the registration of invoices for goods supplied. Many Registration firms Stipulate for invoices in duplicate or tri- of invoices, plicate to be distributed among, and dealt with by, the departments concerned. In some instances the order forms sent by the purchasers are printed and ruled on the back, so that that portion of the order form can also be used by the suppliers for invoicing purposes. This is a matter of considerable convenience to the purchasers, and if the back is ruled and printed in copyable ink, the use of the form can be deprived of any disadvantages to the suppliers. In almost all cases it is stipulated that an advice note of the dispatch of the goods should be sent to the officer in charge at the place to which the goods are sent, and it is generally desirable that the supplier should be requested to send a duplicate to the ordering depart- ment. In such cases the officer in charge may be requested to send to the head office daily a Stores Received Form ruled to show the species of goods, from whom and whence they have been received, the purchase order number, mode of delivery, carriage charges, number and class of packages, the weight, measurement, number, remarks as to condition, location in store, and having a column for the initials of the clerk at the head office, who compares this Stores Received Form with the invoice, and makes on each the necessary numerical cross references to the other. REGISTRATION OF INVOICE. it Carbon copies of this return can also usefully be sent to the departmental chiefs who are concerned. Among the advantages of this method may be mentioned the retention of the original invoice at the head office, with the consequently lessened liability to loss, or delay, and, in cases where it is desirable, the easier restriction of in- formation as to price or other conditions of the order. A INVOICE REGISTER BOOK.— Specimen No. 24. From whom received. "0 i Folio in Requisi- tion Book. Amount of Invoice. Date sent to Store- keepeis Date returned by Storekeeper Date handed to Bought Day Book clerk. STORES RECEIVED BOOK.— Specimen No. 25. (0 ^8 ^1 ■a 0) n x> < a ^ No. Weight. < 73 hJ^ 6> Amount. system much in vogue is that of making one invoice per- form all functions. When this plan is adopted the vendor of the goods should be requested to send the invoice direct to the counting-house, notwithstanding that in pursuance of directions the goods are delivered at the works or else- where accompanied by a delivery note. Immediately on receipt of the invoice it should be examined with the view G §2 STORES. of ascertaining whether the general conditions of the order have been complied with, and the price charged is as stipu- lated. If the primary request to quote the order number is not complied with it is desirable, without further exami- nation, to return the invoice to the suppliers forthwith, so as to prevent a recurrence. Should the invoice be found correct, it should be numbered and sent to the storekeeper, foreman, or other person to whom the goods have been delivered, for him to certify as to the correctness or other- wise of their quantity and quality ; and it can also be signed by the works manager as to quality if an additional check is thought necessary. After comparison the counter- foil or copy of the order should be so marked or ticked as to show that the invoice has been received. It may be advisable, if the number of invoices is large, to enter them on receipt in a Register Book (Specimen No. 24). The procedure is for the storekeeper to enter the invoice in a stores He- Stores Received Book (Specimen No. 25), and ceived Book. ^^^y. ^^ j^- |.|-^g ^^y^^ q,^ which it has been entered in that Book. The entries in the Stores Received Book in turn are posted in the Stores Ledger to the Dr. sides of the stores accounts to which they belong. These two Leager. books bear to materials the same relation that the Dr. side of the Cash Book and the Cash Account in the Commercial Ledger bear to the cash. The accounts in the Stores Ledger var)' widely in different factories or works. In engineering, building, and many other trades, metals and timbers, under their various sub-divisions, are naturally the chief among a number of other important headings. In some cases, to save the multiplication of Ledger headings, stores are classified as Special or General, the accounts of those falling under the first category being kept individually, and STORES LEDGER. 83 a e S r1 f2 c 3 E ■33!Jd 1 3 •sqi 1 •SiO 1 •SJM3 1 •saox 1 •ON •noij -dU3S3Q ■o'loj •aj^a (2 Amount. •33UJ 1 j C 3 c sq-i •sJ«3 •suox •ON •aoij -duasaQ •sjsiiddns •oiioj •»'-a 1 1 those falling under the second being posted to a general Stores Account, or various sectional accounts. Tabular forms are also often used to lessen or avoid great detail in the Stores Ledger. The many uses of this book will be more fully explained as we proceed with our subject, and particularly in the chapter on Surveys. It will suffice at this stage to mention that it is the duty of the clerk keep- ing the Stores Ledgers to see that the store of certain commodities never falls below the minimum quantity named by the principal, or exceeds the maximum quantityauthorised by him. References to the various records in connection with the ^ ^.^. purchase of mate- Certihca- tion of rial, and the cer- invoices. ._ tificates as to the quality of the goods pur- chased and of the correct- ness of the quantity and price can be shown on the invoice itself by means of india-rubber stamps typed as shown below (Specimen No. 27), or by means of a 84 STORES. printed slip which can be gummed or pasted on the invoice. INVOICE ENDORSEMENT.— Specimen No. 27. Invoice Register No. Stores Requisition Book Fol. Stores Received Book Fol. Invoice Allocation Book Fol 2nd part of Report on condition Storekeeper Approved Works Manager Price and Amount checked Invoice Clerk Certified Accountant Passed for payment on by Cheque or Cash paid on by Supplies should be examined or tested as soon as possible after receipt. If there are deficiencies in supplies or defects in them they should be reported on a viewer's advice form without waiting for the com- pletion of the other endorsements, so that the matter may at once be taken up with the suppliers, who might otherwise be justified in refusing to accept re- sponsibility. Upon being returned to the counting-house the Invoice Alio- invoiccs are entered in an Invoice Allocation cation Book. ^j. gQugh^ Day-book, from which the items are posted in the aggregate in the Commercial Ledger to the debit of Stores, and in detail to the credit of the vendors of the goods. As these are counting-house books we do not show specimen rulings. STOCKTAKING. 85 It will be obvious that by these means the debit to the General Stores Account in the Commercial Ledger, on account of material purchased, will agree with the aggre- gate of the special accounts posted from the Stores Received Book to the Stores Ledger. Cases arise in which materials or tools are purchased, and for convenience are stored at the seller's works or elsewhere, or are waiting forwarding instructions at a carrier's wharf or railway shed. If the supplier's invoice is dealt with prior to the goods passing through the Stores, the goods represented by the invoice should be debited to a "Stores at Out-Stations Account" or " Stores in Transit Account," and not to the General Stores Account. In these accounts stores at the docks or in bonded warehouses may also be included. Some- times invoices for goods are dated forward so as to lengthen, for the benefit of the buyer, the period during which credit is given, or certain scales of discount are operative. In such cases it is necessary to see that the invoices are brought into the books on the actual and not the paper dates. Exceptionalh^ goods may have to be purchased free on cart or rail at seller's works, or at a forward- ing station or wharf. In such cases the cost of delivery should be added to the purchasing price of the goods, and the invoice and freight note treated as one docu- ment. The result of the periodical survey of the stores (or stocktaking) would under this system agree Result OS , . , , f^ T 1 • , stock- not only with the Stores Ledger in regard to the particular classes of materials, but should also agree collectively with the Stores Account in the Commercial Ledger. This is a matter of paramount impor- tance in securing accuracy in factory accounts, and in 86 STORES. removing one of the principal elements of uncertainty in a balance-sheet. So far we have only traced the records it is advisable to make in connection with the purchase and receipt of materials. We have now to consider the Consump- . . . tion of routme appertammcr to the withdrawal of materials. . , r r , r material from store for the manufacture of stock, for the running or upkeep of machinery and plant, or for any other purpose. The initiative in the expenditure of material for manu- facturing purposes should take the form of an instruction from the principal or manager of the business to the manager of the works to make for stock the required commodities, and authorising the withdrawal from store, by the methods to be described, of such material as may be thought necessary for that purpose. The instruction would probably take a form such as that shown (Specimen No. 28), and might be with two or more counterfoils, or, by means of carbonised sheets, with two or more duplicates according to the number of persons or departments that should be advised in order to meet the needs of particular organisations. In some cases the manufacture may in part be of a number of small and almost similar articles in large quantities, and the material used can only be worked up advantageously in the combination of parts or processes. In such a case, what may be described as generic Stock Orders are often issued by the management, one order covering a variety of similar articles. Standardised and interchangeable parts manufactured for stock as replace- ments are usually dealt with, as regards registration and routine, in the same way as Stock Orders for a complete article. Before any order to manufacture is given it is advisable, as tending to produce greater economy in cost of production. MANUFACTURING ESTIMATE. 87 that the designer, draughtsman, or other person best acquainted with its processes and details, on a properly Estimate to ^^^^'^ ^'"''^ headed form, should estimate the manSfac- probablc cost that will be incurred in wages and ture. materials and the time that different classes of machinery will be in use in the production of the articles in INSXRUCTION TO FOREMAN OF WORKS.— Specimen No. 28. Date Stock Order No. To Date Stock Order No. To Particulars of Order. Date Stock Order No. To Mr. Particulars of Order. Please make for Stock to the above number the undermen- tioned articles, and for that purpose employ labour, and withdraw mateiial from Store as per accompanying es- timate, No. Foreman Date of completion. question. This estimate should be a minimum rather than a maximum one. In all large establishments much ad- vantage is derived from the institution of a planning and progress department which initiates all production in- structions, and watches over and superintends the conduct of the productive operations. From this department emanates also from time to time, or at stated periods, a Progress Report, which often sets out as in a percentage form the percentage of work done on an order as at the 88 STORES. date of the previous report, the percentage carried out since, and the percentage remaining to be done. This department is also sometimes responsible for a Weekly Production Return, on which the expenditure under the headings of Labour, Machinery Use, Material, and Ex- penses is contrasted with the output or production for the week expressed in a percentage or unit form in the case of standardised products, whilst non-standardised products are set out in qualified detail or are grouped. The works STORES WARRANT.— Specimen No. 29. No. ♦ No. Entered in Stores Issued Book, fol. Requested from Store, ♦ Requested and received from Storekeeper, P. C. Ledger folios 19 — : 19 ."5 ). of :er to be rged. a 61 •3 ♦ c ♦ — o2 i • Sum i a c Weight. V £ s. d. 1- < 3 < '^6 -g 3 Oh 6 cwt. qrs. lbs. ♦ ■ ♦ ♦ « « ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ^^^ manager or foreman should be supplied with a complete specification of all material and parts included in the estimate. The storekeeper should also be furnished with the same particulars, and should not, without special authority, issue more material for the order than is estimated. There is always a tendency for more time and material to be spent in manufacture than are absolutely necessary, and the probability is that when once a surplus quantity of material has been withdrawn from store, instead of being returned undiminished, it is in great part, if not ISSUE OF STORES. 89 entirely, lost in wasteful processes or in other ways ; or the effective localisation of cost may be hindered by foremen exchanging material with each other without the ex- change being properly recorded. The foreman, having received instructions to proceed with the manufacture, should draw upon the storekeeper for material to the estimated extent by means of a requisition, sometimes called a Stores Issue Note, but which, to prevent confusion with the Stores Issued Book, and for technical distinction, may be called a Stores Warrant. This may either have a counterfoil as shown (Specimen No. 29), or be written in duplicate by means of stores carbon sheets ; or on a single sheet printed in Warrant. copyable ink, so that the form itself, as well as the entries written on it, may be copied by means of a press. In some factories, save in cases of emergency, the Store is open for distribution for certain periods at certain hours only. In other factories stores are issued on warrants ST ORE< 3 ISSUED BOOK.- -Specimen No. 30 6 t Sup- plied to < Working No. or Purpose to be charged. c . c 3 Weight. 4) CL, Amount. -a M << 6 cwt. qrs. lbs. signed by the workmen, the foreman countersigning them at the Store in the course of the day on which the material is issued. In some industries, and in the case of some individual factories, material is priced out, not at the price actually paid, but on the basis of an average_^cost over 90 STORES. different periods monthly, quarterly, or half-yearly as the case may be ; the balance of quantities at various costs being brought forward from time to time. The storekeeper should enter all materials issued by him in compliance with warrants in the Stores Issued Book Stores (Specimen No. 30), which in due course is Issued Book, posted in the Stores Ledger to the credit of the respective accounts. When the business is a large one, or where the repeat warrants for small quantities or small parts are numerous, a " sub-store " is often established in one or more of the shops, in which sub-store fixed quantities of supplies are to be held at each weekly or other period, the quantities used during such period being drawn by means of local or internal requisitions, which are transferred to one of the general requisitions at the end of the period, when the necessary parts or quantities would be issued from the main store to make up the fixed supply. Some little difficulty may be experienced both by the storekeeper and the clerk keeping the Cost Books referred to in a following chapter, unless some Numbering . /= , . , ,, Stores arrangement is made by which all warrants \V^arrants are numbered consecutively. When they all emanate from one centre they may be consecutively typed in the books when printed, but when they emanate from foremen of several departments or leading hands in various shops, it will be found advantageous for the storekeeper to be provided with a numbering machine, with which to type number all warrants as they reach him. The warrants from the different shops or depart- ments may be printed on differently tinted papers, and may bear the departmental consecutive number, the storekeeper's number being impressed over, alongside, or under it. ISSUE OF STORES. 9I All labour and material expended in manufacture of goods should be booked to the Number appearing on the stock Order Order given by the principal, for convenience '*°*' called the Stock Number, to distinguish it from the Working Number hereafter referred to. Working Numbers are those assigned for recording the recurring and general costs of the factory, the maintenance and upkeep of plant, machinery, and buildings, and any expenditure other than that incurred in manufacture for stock. The Stores Warrant when entered in the Stores Issued Book should be forwarded to the counting-house, where it finds its way into the Cost Book, and forms Cost Book. - , ^ . . . , . , one of the constituents ot the credit to the stores account in the Commercial Ledger. The Stores Warrants may be posted direct into the Cost Ledger, as will be shown in the next chapter, or it may in some cases be found desirable to post them in a Stores Journal under the re- spective Stock, Plant, or other orders, to be hereafter described, with the necessary information as to material, weight, number, rate, and cost fully entered therein, and to post the totals of these entries to the respective orders in the Cost Ledger every quarter or half year as may be considered the more serviceable. In such cases reference for details can, when desired, be made back from the Cost Ledger to the Stores Journal, and eventually to the Stores Warrant. In some cases where there are numerous issues of the same class of material for the same Stock or Working numbers, to reduce the amount of clerical work, the individual warrants are summarised at the end of each week or month, and the monetary calculation worked out for the period and not for the individual issues. 92 STORES. Before leaving the subject of the stores books, however, it is necessary to explain that materials returned to vendors stores Re- ^^^ entered in a Stores Rejected Book (Speci- iectcd Book, jy^g^j ]\Tq t j^^ which, in its purpose, is coexten- sive with the Stores Issued Book. The entries in this book are based upon the credit notes received from the vendors for the goods returned. The storekeeper should on returning any goods to the vendors enter the transaction in the Stores Rejected Book, but leaving the spaces for the number and date of credit note, and the rate and value of the returns blank, until he STORES REJECTED BOOK.— Specimen No. 31. i No. of Credit Note. a 3° Articles. Dimen- sions. 6 Weight. £ § V V Stores Ledger Folio. m M h-1 has received through the counting-house the credit note from the vendors. The office is advised of the rejection of goods either by an entry on the invoice or by means of a Stores Sent Away form. This Stores Sent Away form may require registration in the counting-house in the same way as an invoice, and the book records will be similar. If it be thought Registration . . of credit inadvisable to open a credit note register, the notes. , ^ . , . 1 . , . , T notes ma)' be registered in red ink in the In- voice Register Book and the words " credit note " might be added. The credit note may, by means of an india-rubber stamp, bear references corresponding to those impressed STORES CREDIT NOTES. 93 on the invoices. Specimen ruling No. 27 will equally apply in this case, save in the titles of the books referred to, which would be : — Credit Note Register No. Stores Rejected Book Fol. Goods Returned Outward Book Fol. It will probably be found that in many cases a reference to the Stores Requisition Book can be dispensed with on STORES DEBIT NOTE.— Specimen No. 32. No. * No. Sent into Store, J Dept. Entered in Shop Returns Book, fol.— 19 . ♦ Sent to and received by Storekeeper , 19 . Article. L V M 0. 3 1 {Article. d-S 20 1 1 Purpose. d Weight. Amount. w £ s. d. the credit note. If the rejections are at all numerous, owing to the nature of the business, or to the nature of the stores used in manufacture, it may perhaps be desirable not only for the storekeeper to keep a Stores Rejected Book, but to advise the office of defects in material by means of a Stores Rejected Note, and to send with it the original invoice duly cancelled. This note should specify the reason for rejection, either as regards non-compliance with terms of the order or quality of material. It is desirable that examination of stores should be made as promptly as 94 STORES. possible after receipt, but that right of rejection should be reserved with regard to those Stores defects in which can only be observed when they are worked up or worked upon. In addition to the process of receiving, examining, and, if need be, rejecting stores supplied by vendors, and of issuing material for manufacture, the storekeeper will receive from the foremen or over-lookers material which Return to ^as been drawn out in excess of the quantity lL*^p1us required, or the scrap material from some material. manufacturing operation. It is not unusual for material drawn out of store in excess of requirements to SHOP RETURNS BOOK.— Specimrn No. 33. Date. op e IP 13 'x. < Order No. or job for which Articles were with- drawn. u 6 Weigh t. Amount. 1 6 Si £ s. d. remain in the factory, and be used for the next similar stock order, but this procedure is open to serious objection, and the desirability of sending the material back to the stores Debit store with a Stores Debit Note (Specimen Note. j^Q_ ^2) cannot be too strongly urged. Not only does the direct return of material to store prevent waste or improper appropriation, but it conduces to the localisation of the cost of manufacture. If the surplus material is not so treated, the stock order, in respect of which it has been withdrawn, will appear at a higher cost than it should, while the work upon which such material is used without warrant will have the benefit without being charged. In SHOP RETURNS BOOK. 95 either case the records of cost of production are fallacious, and loss may thus be incurred. In some cases in which rigid adherence to this rule involves great inconvenience and expense, it is sometimes allowed to transfer material from one shop to another by means of a Shop Transfer Note, and at regular intervals to issue corresponding Stores Debit Notes and Stores Warrants. It has been suggested that these adjustments might be made and the number of entries reduced and clerical labour saved by the issue of temporary notes, and the issue of Stores Warrants post- poned until the facts were definitely ascertained, when Stores Warrants could be made out for the quantity actually used, which with the stores returned would equal or cancel the temporary note. In some cases this procedure might be practicable, but it is open to the objection that it would largely nullify the advantages of the Stores Ledger as indicating the actual quantity of the different kinds of goods in stock, and it would probably tend to delay in the compilation of the Cost accounts, as the debits to the Manufacturing Order could not be entered whilst any temporary notes were outstanding. This procedure would prevent stocks present being an accurate guide to the necessity or otherwise of ordering further supplies. The old material, or " Shop Sweepings," which cannot be credited to any particular Stock Order, should be re- turned to the stores with a Stores Debit Note crediting it to one or more of the series of numbers or standing orders allotted to maintenance of machinery. It is desirable to pass all saleable material through the stores in this manner whether it is sold forthwith, or remains till a quantity has accumulated, or prices have risen. In the case of the sale of all such material, it is usual to stipulate for payment when price is accepted, or before delivery. Material spoiled 96 STORES. in working, or defective products or " wasters," should also be returned to, or passed through, the stores by means of a Stores Debit Note, the working or other order number should be credited with the full cost of the material and the work done on it, and the difference between such cost and the value of the product should be debited to a Com- plaint, Mistakes, Spoilt Work, or Waste account, which should be so analysed that each shop or department, and each employee who has contributed to the result, may be reminded in due course of the cost of carelessness. In some trades, such as foundry and pottery, a certain percentage of defective products are a normal factor in production. In these instances the same procedure may be adopted, and will tend to prevent any increase in the percentage, and in some cases to reduce it, owing to detailed informa- tion leading to inquiries as to the cause or causes of the increase.* * There is great variation in the mode of dealing with waste as an ftem of cost in Cotton and similar mills. Some of these methods and the incidence of waste in cost are described in "Textile Manufacturing Costs," by Joel Harlen, The Journal of Accountancy, New York, and in a paper on Cotton Mill Accounts, read at the annual meeting in 1913 of the National Association of Cotton Manufacturers (Boston, Mass.) by Joel Hunter, C.P.A. An interesting lecture on Spoilage as "the Fourth Factor in Cost Account- ing," by Gordon Wilson, appeared in 1917 in The Journal 0/ Accoitntaiicy, New York. " The value in use of a bell with a flaw in it is very little ; it can be used only as old metal, and therefore its price is only that of the old metal in it. When it was being cast the same trouble and expense was incurred for it as for other bells which turned out sound. Its expenses of production were the same as those of sound bells ; but they have good value in use, and are therefore sold at a high price. The price of each particular bell is limited by its value in use. What the law of Normal Value states is that the price of cracked bells and sound bells together must, in the long run, cover the expense of making bells." Professor Alfred Marshall, "Economics of Industry." SHOP RETURNS BOOK 97 The Stores Debit Note having been posted by the store- keeper in a Shop Returns Book (Specimen No. 33), is Shop Re- forwarded to the counting-house, where it is turns Book, (^jg^j^ ^yjj-|-j ^g recording a factor in the cost, as will be explained in the following chapter. The entries in the Shop Returns Book are (as shown in the Diagram II.) posted to the Dr. side of the Stores Ledger. There is another source from which a storekeeper may receive goods, viz., from the warehouse of the firm. These Transfers cascs arc likely to be exceptional, and can be sfoJ^^and more fully and conveniently dealt with in the warehouse, subsequent chapter on Stock. At present it suffices to say that as between the warehouseman in charge of the manufactured commodities or stock, and the store- keeper in charge of the raw material of trade or stores, the departmental adjustments of accounts are made by means of a Transfer Book. The nature of this book will be explained later, and it is necessary to anticipate the subject at this stage to the extent only of stating that, so far as the storekeeper is concerned, the items in the Transfer Book are posted in the Stores Ledger to the Dr. side of the respective accounts in the same way as other receipts of material. Sometimes the storekeeper may have sent into store material which has been recovered from plant and build- ings, or parts of machinery which is no longer serviceable. In these cases the stores accounts will be debited in the usual manner, by means of a Plant Recovered Note. These transactions in relation to the machinery and capital account of the business will be dealt with in the chapters on Fixed Capital and Machinery Use (Chapters VI. and VII.). Diagram II. gives a complete view of the books and H 98 STORES. forms mentioned in this chapter, and their connection with each other, and we would refer to the remarks in the Introductory Chapter to the effect that the books are suggested more for the purpose of showing what the transactions are than as giving stereotyped forms applicable to every case without modification. It will be manifest that, provided the principles are not lost sight of, there is every scope for further division, or greater concentration, as may be required. The procedure referred to in this chapter, as well as other chapters in this book, is in principle, and with but slight modification in practice, applicable to ascertaining and recording the cost of continuous processes, per ton, per thousand feet, or other unit of weight or measurement. In some trades two or more qualities of the same article, or residual, or bye-products may be produced at the same time. In such cases all items of cost that are directly incurred in connection with a particular product should be so allocated, whilst items, like motive power, of which the direct incidence is not known, when their use cannot be localised, can be distributed over the various products on a percentage basis, the scale on which such percentage is based generally having the time taken by the various products as the main factor. It is desirable that, as far as can be done, bye-products should be treated as distinct branches of the business, so that the cost of, and the return from, the prime or original product shall be ascertained with the maximum accuracy obtainable. The methods adopted in the early stages of the Gas Industry, of deducting the revenue derived from residuals from the cost of the coal used for the manufacture of gas, and thus arriving at a net cost of coal for costing purposes, has been adopted by many industries which have residual products, and is still largely used. This method /^ I WITH Stores. (se, and Flatit, being continge?it I diagram. J {T» fn Diagram II. Showing the Relation of the Books and Forms used in connbctjon with Stores. \Tlii numbers, 7vhcre shown, torrtspond to the specimen rulings.) between Warehouse, Plant, and Store, and between Store, Warehouse, and Flant, being contingent and purely departmental adjustments, are not shown on this diagram. o BYE-PRODUCTS. 99 assumes that all bye-products are sold at cost, and throws all cost for a time upon the main product. In cases in which it may not, under present circumstances, be possible to discern the cost of joint products, the market or sale value of the bye-products, less a certain percentage, might be taken as the cost, as this would afford some information as to the cost at which the manufacturer, the least advan- tageously situated, could afford to sell the product. CHAPTER IV. PRIME COST AND THE COST LEDGER. In the two preceding chapters we have dealt with the routine appertaining to the payment of wages and to the Recapitu- receipt and issue of material. We now propose lation. ^Q indicate the manner in which these two so far independent factors may be united, with the view of obtaining a record of prime cost, and by the inclusion of other items of expenditure, as described in succeeding chapters, of ascertaining the cost of production. As we shall deal with the distribution of commodities in a following chapter, we do not here refer to the question of stock, except in so far as it has a bearing upon the question of stores and cost of production generally. It is well, how- ever, at the outset to explain that, so far as the manufacture of commodities is concerned, we regard it as axiomatic that all articles, whether produced in pursuance of an order received from outside or in anticipation of future demand, should be booked as if they were intended to constitute part of the standing stock in trade. This method of describing as stock all articles manu- factured necessarily involves a clear distinction being Distinction drawn between material used in manufacture, stock^and ^^^ *^^ manufactured article which is the pro- stores, (juct of the expenditure of labour, machinery and material, or in other words between stores and stock. The utility may not at once be apparent of passing through LOCALISATION OF COST. lOI the Stock Books, as distinguished from the Stores Books, commodities manufactured to supply a definite order, and which are not likel)' to form part either of the normal, or of the exceptional stock in hand of the business, but it will be evident that there is a distinct advantage in treating all orders to manufacture in the same way, whether they be of a special or of a standard nature. Confusion neces- sarily arises if part of an order for articles made in the factory is treated as if supplied from stock, and another part as if supplied from stores. We recommend therefore that all material and parts required for purposes of manu- facture should be withdrawn from store and charged to their proper stock orders. If the article has in reality been manufactured in execution of a customer's order, it should be withdrawn from the warehouse, and credited to the stock accounts, by the process described. The importance of uniformity in the treatment of the orders to manufacture is particularly exemplified when the cost of any article which has not previously been made, or made only to a very limited extent, is to be taken as the basis of calcula- tions for more extensive transactions. A simple illus- tration will make our meaning clear. If a customer orders a suite of furniture to be made, we maintain that, instead of the expense of executing that order being debited to one account, the several pieces making up the suite should be made to separate stock orders. In this way, while the cost of each individual piece would be known, the cost of the suite would be ascertainable by aggregating the costs of all the pieces, whereas, if the whole of the labour and material required for the production of the complete suite had been indiscriminately charged to one account, it would be difficult to determine the cost of any one piece, should it be required to be replaced or to be manufactured more I02 PRIME COST AND THE COST LEDGER. extensively. It is well to exclude all probable sources of error, and this is largely promoted by clearly recognising the distinction we have drawn between materials and manufactured goods. In cases in which processes are continuous in time, the product of one process can be charged out at its cost to the next process ; but in those cases in which the product from one process has to be kept or stored before it is used as the raw material of another process, it is desirable that an inventory of such product should be kept, preferably in the department in which it is produced. The general principles of Process Costing are applicable, and are applied, not only in chemical and similar industries, but in extensive ramifica- tions in the case of metalliferous mines from the getting of the ore to the shipment of matter or metals. It having been decided to manufacture certain commo- dities, the instruction referred to in the preceding chapter Initiatory (Specimen No. 28) will be issued. One part of manuiac- ^^^ form will convey to the manager or foreman *"''®- instructions to manufacture ; the other is for the use of the clerk keeping the Cost Ledger, and will be taken by him as an advice of what orders are in hand and as a guide to the folios to be reserved for such orders in his Ledger. The counterfoil, to which the forms may be attached upon the completion of the order, will be retained by the principal. It is important not only to know the cost of each indi- vidual article produced, but equally so to ascertain the cost of any particular part, or of any particular pro- scparatc cess of manufacture. Localisation of cost should process. ^^ carried as far as possible, so that the varying rates of realisable profit on parts may be known, and the pressure to minimise cost of production be applied in the right direction. The tendency to the specialisation of LOCALISATION OF COST. 103 labour has grown, and is growing, with the extension of the factory system and the use of machinery, and the economy thereby induced can only be rendered thoroughly effective by a complete analysis of cost. As a well-known writer on this subject has said, " One of the first advan- tages which suggests itself as likely to arise from a correct analysis of the expense of the several processes of any manufacture is the indication which it would furnish of the course in which improvement should be directed. If any method could be contrived of diminishing by one-fourth the time required for fixing on the heads of pins, the expense of making them would be reduced about thirteen per cent. ; whilst a reduction of one-half the time employed in spinning the coil of wire out of which the heads are cut, would scarcely make any sensible difference in the cost of manufacturing the whole article. It is therefore obvious that the attention would be much more advan- tageously directed to shortening the former than the latter process." * The fact that since this passage was written the process of manufacturing pins has been shortened and cheapened in the way referred to, serves to bring into clear relief the truth of the principles enunciated by the writer. A similar change has taken place in the production and in the cost of matches. In an article in Engineering \\. was pointed out that the introduction of machine methods had decreased the cost of manufacture to one-eighth the cost in 1844. In the machine process there are ten operations against four by hand, machines being used to cut the wood into splints, to place them in the dipping frame, to dip them in the sulphur and composition, and to remove them from the frame, and even to put them into boxes. All * "On the Economy of Machinery and Manufactures," by Charles Babbage. 4th edition. London : John Murray. I04 PRIME COST AND THE COST LEDGER. these operations are clone for 1,440,000 matches in less than eight hours, and then the packing done by six females takes twenty-one hours forty-two minutes. Obviously, says Engineering, a packing machine was needed, for of the labour cost for making the matches — about \s. per 100,000 — 9^. went for packing and only id. for the actual work of manu- facture. The cost of making the matches by hand was, in 1844, about Js. 6d. per 100,000, or nearly eight times more. In costing the various processes in cotton mills, finer combs or qualities at certain stages of production require a longer time to produce the same weight than do the coarser combs or qualities, and the expenditure after these stages has to be allocated on a different basis from those applicable to the preparatory stages, in which the same considerations do not arise. A description, from a politico-economical point of view, of the advantages arising out of the division of labour does not fall within the scope of this treatise. These advantages have been ably expounded by Mr. Babbage, by Professor Alfred Marshall and Mary Paley Marshall, and other writers. The principles applied in these pages to recording the cost of production of any article are equally applicable to recording the cost of any or all of the parts of that article. Either subsidiary stock orders numbered con- secutively may be passed, or the stock orders for parts may be denoted by the number of the original stock order and a letter of the alphabet. Upon the completion of all the component parts, the accounts in the Cost Ledger of the various stock orders could be grouped, so as to constitute in the aggregate the cost of the complete article. For the purpose of booking the expenditure upon small parts with the minimum amount of labour, a nomenclature enabling every detail to be accurately and concisely INDIRECT EXPENSES. IO5 defined by a symbol is exceedingly desirable. It would, on account of the labour involved, be an obstacle to the attainment of the object in view if the size, Notncncla- 1 1 • • • r ture of purpose, and relative position 01 every separate piece had to be expressed in ordinary language. We reproduce, therefore, a paper by Mr. Oberlin Smith,* in which is suggested a symbolic nomenclature of the kind required, if the system of taking out cost is to be applied to small parts, as is especially desirable where such parts are standardised and interchangeable. This mnemonic system has been amplified by Mr. Henry R. Towne, of the Yale & Towne Co. of Stamford, Conn. As all labour and material are not directly spent in the manufacture of articles, but are partly devoted to the maintenance, repair, or renewal of buildings, machinery, and plant, and to other objects, it becomes necessary to record the expenditure upon the subsidiary purposes, other than and to providc for its distribution over the for manu- . r , • . • 1 facturing vanous manutactunng operations or orders. purposes. Whilst the cost of setting tools and machinery to perform certain operations may be charged directly to the stock order on which the expenditure is incurred, labour or material spent in the erection of additional, or the maintenance, repair, and renewal of existing machinery, cannot be apportioned with the same precision to any particular stock order, as the cost of the use of machinery is the product of many variable factors. The considera- tions which should determine the amount to be debited to any stock order on this account will be most conveniently referred to, and considered in connection with the question of the charges to -be made for the use of machinery, in Chapter VII. In some cases the machine setter's time is charged to the Machine Account, as described in that * See Appendix A. I06 PRIME COST AND THE COST LEDGER. chapter. In other cases it is charged as a percentage on the machine operator's wages. In some other cases the machine hour rate is made to include the labour of the machine operators, whereby little, if any, direct labour charge appears in the account dealing with the particular order. Another direction of expenditure lies in the maintenance, repair, and renewal, extension, or erection of workshops, warehouses, stores, and other buildings. All such expendi- ture maybe recorded under general or various sub-headings in the Cost Ledger, or preferably in separate Plant and Buildings Ledgers. These ledgers, in addition to the ordinary rulings, should, for aide iiievioire purposes, con- tain records of the number of the building or the plant, location, description, and original cost and name of maker. The utility of these separate ledgers will be Localisation ■' ^ i r i i of tnaintcn- morc apparent after a perusal of the chapter ance ex- ^ ^ i, penses. already referred to. So as to ensure the maximum amount of localisation of cost, the recurring items in the maintenance of machinery and buildings, and the renewal and replacement of tools may receive a distinctive series of numbers or standing orders, and thus the cost for each floor, or wing of a building, may be ascertained. For expenditure on such recurring items, the manager of the works may receive standing instructions ; but expenditure on special items of maintenance or on additions to fixed capital and loose plant and tools should be estimated for, and authorised in the same way as the execution of Stock Orders. When in order to proceed with a certain stock order it is necessary to make special tools to enable the work to be done, it will be convenient to charge all time and material spent on their production to a tool order bearing the same number as the stock order number to which the goods are to be made. The cost of these will be recorded in the same way as the cost JOBBING ORDERS. I07 of other tools, but the number to which they are made serves to identify them, and as they have been made specially, and may or may not be again required, their cost must be con- sidered in the determination of the selling price of the articles, the manufacture of which necessitated their production. The same general principles are also applicable for re- cording the cost of machinery or apparatus sent to the works for repairs or alterations. If such cases are not numerous it may suffice to introduce some letter or numeral in the Stock Order Number, to show that the order is not a manufacturing, but a repairing or jobbing one. In other cases it may be desirable to start a series of what are often called "Jobbing Orders," and to record the costs in a special Jobbing Ledger, which would be supplementary to the Cost Ledger. This latter course is certainly convenient where a " Jobbing Shop " is constituted in a special part of the works. In some cases the principle is adopted of charging a percentage on the actual cost of Jobbing Work as a charge for the use of plant and machinery. As has been pointed out by Mr. A. Cathless, O.B.E., C.A., although there is only one system of costing there are three different methods of grouping the resultant financial statistics, viz., Job Costing Process (or Continuous Production), Costing, and Operation Costing. In this case the word " Job " is used in a different sense from that in which it is used in the preceding paragraph. Mr. Cathless applies the term Job Costing to cases in which the order is for a single article, or a number of articles to be produced within a short period. Process Costing he applies to the production of articles that are constantly being made, whilst Operation Costing is applied to a further analysis of process costing. Other channels of expenditure, such as the cost of the drawing office, and the wages of foremen, gatemen, time- keepers, and others who are engaged in supervision, or in I08 PRIME COST AND THE COST LEDGER. the distribution of stores, in keeping time records, or in any similar work, may be recorded either under a special heading for General Charges in the Cost Factory ° general Ledger, or in a Factory General Charges Book. arges. j^^ some cases the whole of the expenses of the Stores Department are charged off by a loading or percentage commission being charged on the price of the stores. It has also been suggested that the discount obtained on the purchase of goods should be placed against the expenses of the Stores Department, but in this connec- tion it should be remembered that the benefit of trade or scale discounts would thus not be accurately recorded in the accounts. As will be explained in a subsequent paragraph, the factory general expenses may be summarised at any period for the purpose of distributing their incidence and a ratio established between them and the total amount of the wages expended on the various orders during the same period. We are now able to consider the functions of the Cost Ledger in which the prime cost of any manufactured « ^, ^ article is aggregated and recorded, with a view Cost ledger. !=.t> t. of obtaining the cost of production. This book is often in the form of the loose leaf or perpetual ledger, which by the facility it gives for separation of, and reference to, accounts without sacrifice of security, has more manifest advantages in the case of the Cost Ledger than in the case of the ordinary ledger. In it are summarised the allocation of wages spent on manufacture, alluded to in Chapter II., and the various warrants for stores used in manufacture, alluded to in Chapter III. In addition to these two channels of expenditure it will be observed that the Cost Ledger (Specimen No. 34) provides a column for machinery charges, arrived at on the principles set out in BALANCING THE COST LEDGER. 109 c 1 S < •ajB^ . £ % 6 •ON ajoN •SJBI •ajEQ Other Dis- burse- ments. «5 u 1 V 13 •3JBH 1 j J 1* ^ 1 6 •OM ••'^AV 1 1 •■srz\ •3;t:a 1 1 the following chapters, and a column for sundry disburse- ments which are allocated to the respective working or stock orders, from the Petty Cash Book or its equivalent, or from any similar source. The items of sundry disburse- ments thus charged are of course debited to manufac- turing account in the Com- mercial Ledger, a process which is facilitated by means of inserting in the Petty Cash Book a column showing the accounts to which the items in question are chargeable. These records having been made, the clerk keeping the Cost Ledger will periodically draw out the total of his debits for the given period, under the various heads for the several items of wages, materials, machinery use, and miscellaneous disbursements. He will see that in the case of wages the total agrees with the amount of the wages account in the Commercial Ledger, which also coincides with the totals of the Wages Book for the corresponding period. He will also see no PRIME COST AND THE COST LEDGER. that in the case of materials his totals agree with the credits to the stores account in the Commercial Ledger for stores issued, cognisance being taken of the credits in the Cost Book ; the corresponding debits to stores repre- sent the materials drawn out to a given number but not consumed on that job, and therefore returned to store, as explained later. In the case of Machinery Use, he will STOCK DEBIT NOTE .—Specimen N 0. 35- No. ♦ No. Sent into warehouse 19 • Sent to and received by warehouseman : 19 ♦ Stock Received Book folio Article. ofc S50 * No. or Weight. ♦ 1^ 250 d 2; Weight. 6 Amount. d 2: i o> 3 : 3 £ s. d. Sent into warehouse by_ Received into warehouse by_ see that his total agrees with the total credit for the same period to Machinery Account, as explained in Chapter VII. As regards petty cash, the totals should agree with the debit through the commercial books to sundry disburse- ments on manufacturing account. Before explaining the credit side of the Cost Ledger it will be well to give a specimen of the form called a Stock stock Debit I^ebit Note (Specimen No. 35), which is made Note. Qu^- concurrently with the sending of commodi- ties into stock. STOCK RECEIVED BOOK. Ill This form, which may have a counterfoil, or be copied by means of carbon sheets, emanates from the leading hand in the shop. The monetary column is filled in by the prime cost clerk from such data as he has in his Ledger, and the contents of the note are entered by him on the credit side STOCK RECEIVED BOOK.— Specimen No. 36. 6 15 No. of Stock Debit Note. No. of Order. Article. Dimen- sions. d "Weight. V £ Stock Ledger folio. & .0 1-1 s. d. Stock Ledger of that book. The warehouseman or other person in charge of the manufactured goods will, in his turn, make stock Re- ^^^ necessary entry in the Stock Received Book ceivcd Book. (Specimen No. 36), which bears the same re- lation to stock that the Stores Received Book, explained in Chapter III., bears to stores. The entries in the Stock Received Book are posted in the Stock Ledger (Specimen No. ^y)- Besides the Stock Debit Note there are posted to the credit side of the Cost Ledger the credit notes (referred to in Chapter III.) for surplus or scrap raw material returned to the store. By abstracting the credit side of the Cost Ledger periodically, it will be seen that it agrees with the Balancing amounts passed through the commercial books Cost Ledger. ^^ ^.j^g ^jgj^j^. ^f ^^^^y. account (and credit of stock orders account) for stock sent into warehouse, and with the debit to the stores account (also credited to stock 112 PRIME COST AND THE COST LEDGER. O o IS S S v.* 1 On 0^ 00 jl^lOOO 00 10 ONiOilO 0\ 00 N 2 1^ u By Profit and Loss Depreciation By Balance . By Profit and Loss „ Balance . By Profit and Loss „ Balance . By Profit and Loss „ Balance . By Profit and Loss H End of 1st Year End of 2nd Year End of 3rd Year End of 4th Year End of 5th Year -d = ' ' -^ vO f^ 0^ ONfo ; s '*■ Tj- ^ :: :: :: »/■> f> 10 "^ 10 N CX3 00 as ::: S? >-r)M r^|^i-"CXD|0O>-|a^ O" |OlO\ O Cash, Purchase price . Interest at 5 7o Balance . Intel est at 5 7^ c. Balance . Interest at 5 7^ 3 Balance . Interest at 5 7„ D Balance . Interest at 5 7o H H H - H " H " H " j Of purchase End of 1st Year End of 2nd Year End of 3rd Year End of 4th Year End of 5 th Year I50 MACHINERY USE. be required for renewal purposes. The sums charged meanwhile will either have been utilised as working capital, or placed on deposit, or invested in securities, the interest return in the last two cases probably being small in comparison to that which would accrue from the first-mentioned course being adopted. Recently there has been considerable discussion as to the comparative advantages of what has been termed the " straight line," as compared with the " sinking fund," method of charging depreciation. By the straight line method, if plant costs ;!^ioo and will last twenty years, £S is the annual depreciation. The " sinking fund " method takes interest into account. For the same plant for the same period it would be necessary to pay about £S per annum to a sinking fund if you reckon interest at 5 per cent., and since interest ought also to be paid upon the capital employed, a further ;^5 would be provided for interest, making together £8 per annum. As has been well pointed out by Sir William Schooling, the straight line method is only the sinking fund method with interest at o per cent. It has been urged with justification that, so far as a depreciating or wasting asset is concerned, what is known as the " Annuity " system should be employed for the purpose of deciding whether it is more advantageous to expend capital in one direction than in another. The pro- cedure adopted under this system is to set aside annually an amount which will write off the amount of capital originally sunk, plus interest thereon, during the time it remains sunk in the asset. As the amount of capital is in course of reduction each year, the interest credited to Revenue becomes less each year, but it is urged that in practice this reduction is in large measure, if not altogether, compensated for by the greater earning power of the ANNUITY SYSTEM. 15I accumulated instalments, if used in the working capital of the business. The " Annuity " system as compared with the " Fixed Instalment" system lightens the earlier years of amortisation, but necessitates heavier charges in later years, and involves in addition a heavier average charge. In either case the residual value of the plant should be deducted from the original cost before calculating the amount to be written off each year, as the residual value should be realisable at the end of the term. Where the life of the asset, be it leasehold or other property, is of long duration, the more economical course is, by insurance or otherwise, to invest annually such a sum as will with the aid of compound interest accumulate to the amount of the original capital expenditure at the end of the life or lease. If the investment be as by way of an insurance policy, no question would arise as to provision against fall in values of the securities in which the sinking funds were invested. That such question may be one of great importance is shown by calculations made in 19C9 by the City Registrar of Glasgow, that if the corporation had invested its sinking funds year by year in Consols for the last twenty years, the loss at prices current at the time the calculation was made would have amounted to ^^500,000. Messrs. Gill & Cook,* in a paper on " Principles Involved in Computing the Depreciation of Plant," pointed out that depreciation concerned the engineer, the financier, and the accountant, and that for these three there was only one common method. This, in the opinion of the writers of the paper, was best studied in the annual charge for plant based upon first cost, residual value, and the physical and economic lives of various classes of plant, by estimating the charge for return on capital and by * Paper read before the Scottish Section of the Institution of Electrical Engineers, January 9, 1917. 152 MACHINERY USE. placing the interest earned on reserve funds to the credit of its source. They urged the creation of two funds — a Reserve Fund for providing the necessary money at the end of the physical life of the plant, an Improvements Fund for providing sufficient additional money to enable the plant to be taken out of commission for reasons within the owner's control, and whilst it was still rendering the service originally expected of it. The question of the liabilities of lessees for dilapidation and waste of premises calls for some consideration in refer- ^., ._, ence to the matters here referred to. If, under Dilapida- tions, the conditions of the lease, dilapidations require to be made good upon its expiration, provision for the necessary outlays should periodically be made, preferably through a sinking fund. A convenient summary in tabu- lated form of the law relating to dilapidations will be found in Mr. Fletcher's book on the subject.* In many businesses it may be found advisable, for the purpose of estimating depreciation, to divide the objects into classes, for although the general result of the business operations during a given time may be normal, yet by dealing separately with the depreciation of each class of appurtenance it may be found that some of the depart- ments show abnormal results. A general rate Classifica- - , . . , , . , , , tion of of depreciation may lead principals to neglect what, comparatively, may be more profitable operations ; or to push a department of the business which, if it bore its full proportion of depreciation, would yield less than the average rate of profit. This separation of departments is the more desirable as the same method of allocation will obvi- and loose ously not apply to loose plant and tools and to plant and tools which are fixed. * "Dilapidations.'" Banister Fletcher. London: Batsford. LOOSE PLANT. 153 Although it is theoretically possible to frame a scheme which would enable the cost of the loose plant and tools to be allocated to the various working orders, generally it would in practice be found not worth while to carry it out. The cost of these tools, even in a large establishment, is comparatively small, and under ordinary circumstances the depreciation of loose plant, tools, and patterns so slight on any one working order that it simply suffices to book all these implements out to a loose tools and plant account for each shop or department. In many cases it is usual at the end of the year to allocate this account to profit and loss, and in others, to make an inventory of the tools and their value at that period, and to write off to profit and loss account through a shop expenses or similar account a proportion, often 25 to 35 per cent., of the total of the book value of the loose tools and plant in use. It is evident that, if desired, some percentage ratio could be established between this loose tools and plant account and the amount spent on wages, and thereby the cost be allocated to any given working number ; or the loose plant and tools might be re-valued annually, the difference in value being carried to profit and loss, and the cost of their repair during the year charged direct to profit and loss account. In either of these cases the amount charged to profit and loss could be allocated in common with the indirect factory expenses as a percentage upon wages, as explained in the chapter on the allocation of indirect or incidental expenses. That there may be a more effective check on the cost of tools, and to aid in the prevention of their misappropriation, it is often made a shop rule that no tools to replace any worn out are issued without part or parts of the latter being returned to the stores. Kits of, or additional, tools supplied to out-workers 154 MACHINERY USE. U 3=S H6 " c o Q 1 (Si II 0^ Si 0) J3 O '(5 Q should be charged out to the employees responsible for their custody, who should periodi- cally certify as to the charac- ter, quantity, and condition of the tools in their charge, any difference in value being charged in the same way as the difference found to exist in the similar account at the factory. The more valuable of the loose tools, when not in use, may be kept in the custody of the foreman, who, when issuing them, should record such issue and obtain a receipt in a Loose Tools Register. When lockers are provided at the benches for storing the loose tools usually used by the workmen, a card should be placed in the locker, recording the contents from time to time. The value of the loose tools in the shops will not, under normal circum- stances, vary very widely at stocktaking periods, and any large mistake should be dis- covered by comparison. If the store system suggested in previous chapters is adopted, the mistake of loose plant EXPENDITURE ON PLANT. 155 being sometimes included in the stores surveys cannot arise, and thus when the loose plant is either not surveyed or incorrectly appraised, unduly increasing the profit earned. The same methods are applicable to the patterns account, save that it may be desirable to place a heavier deprecia- tion rate on some patterns or moulds than on others, as a provision against their becoming obsolete. Patterns made for a special order, which is not likely to be repeated, or repeated only after a considerable interval, should be taken at a merely nominal value, and the balance of the amount spent on them should be transferred to the stock order, for the execution of which the patterns were made. In the valuation of patented patterns, it must be remembered that the special value is in the patent, and not in the material of which the pattern is made. The rates of depreciation on patterns will vary very widely, and it is desirable that, as far as can be done, the patterns should be classified. With fixed plant and machinery the case is different. Each distinctive object should be numbered, and its value, Plant together with a description of the machine, a Ledger. record of its loose parts, and the name of the supplier, be entered in a Machinery or Plant Ledger (Specimen No. 39). All material issued for, or time spent on, any Ex cnditurc "^^chine or implement belonging to this cate- on Plant. gory, whether for running, maintenance, or renewal, should be duly recorded in the same way as the materials and wages consumed in the manufacture of stock (see Chapters II., III., IV.). The expenditure on the various machines and other objects constituting the Plant may be carried direct to the respective accounts in the Plant Ledger, in which case the total amount of wages, material, and sundry disbursements in the Commercial 156 MACHINERY USE. Ledger would, for any given period, agree with the totals under similar heads debited to the Plant Ledger and the Cost Ledger taken together, or the expenditure may appear in the Cost Ledger to the debit of the respective Plant Working Numbers. Instead, however, of the latter accounts in the Cost Ledger being credited by a transfer to stock, as in the case of a Stock Order, they would be credited by a transfer to plant — a Plant Debit note (Speci- men No. 40) being the medium. In either case the cost PLANT DEBIT NOTE.— SPECIMEN No. 40. Machines at "Work in Shop on 19 . No. of Machine. Employed on Order No. Time Working between. To be filled in by Time Clerk or Machine Checker. Time Working. Rate to be Charged. Amount. of, or expenditure upon, plant is carried to the debit of the various accounts in the Plant Ledger, and the process by which the amount written off in respect of use and depreciation is credited to the Plant Ledger, and debited to the Working Orders, which are to bear their proportion of the charge, is as follows. The time clerk or an assistant, or in a large establishment a machine checker, should obtain each day from the foreman of the shop an account of the time during which each machine has been working, „, , and to what order number the work was done. Plant return. j\^ the end of each week, or other convenient period, a Plant Return (Specimen No. 41) should be compiled and sent to the counting-house. The back of this form could be used for recording the PLANT LEDGER. 157 number of hours the different machines were running or were idle, and comparing the amount earned with the value of the hours lost. The rulings should show the machine number, the rate per hour, hours working, hours idle, the amount earned and amounts earnable, but not earned. PLANT DEBIT SUMMARY.— Specimen No. 41. Return of Machinery at Work ami Charges to be made for ■ ending ig . No. of Machine. Order No. Order No. Order No. Order No. Order No. Order No. Total for each Machine. Total for each Order The life of a machine, or, in other words, the number of working hours of average effective service a machine will Original ^^st, being known, the principal or some other ii?|*o*'^^ competent person would establish a ratio between object. gyj,j^ working hours and the cost of the machine, including therein its original value, installation, mainten- ance, and other charges, and allowing for residual value.* In fixing the ratio or ratios, consideration is necessarily- given to the fact that the depreciation of the moving parts of a machine stand in more direct relation to the number of hours worked than do the structural portions. These, however, are but some of the considerations which enter into the fixing of the rates for machinery use; the "rest" time for overhauling, and many other factors, enter * As indicative of the greater attention now being given to the matter of effective working hours, it may be mentioned that in 1910 the charge for depreciation of machinery at the Glasgow Cotton Spinning Mills was reduced on account of shortened hours of work. 158 MACHINERY USE. into a scientific make-up of the rate.* On this basis a voucher would be prepared in the office for passing through Plant ^^^ Cost Ledger the debits to the various Journal. working orders, and the credits to machinery accounts under the various numbers of the machines ; or, in place of these vouchers, it may be found convenient to enter all the details through a Plant Journal. When the machine is worn out, it should be sent into Stores with a Plant Recovered Note showing its estimated realisable Residual value, at which amount it becomes a credit to value. capital. Any credit or debit balance that remains on the book value of the machine may, as thought desirable, either be carried to the profit and loss account or to a reserve fund, should one have been opened to pro- vide against loss on plant. Should it be found that the machine is likely to have a longer life, or to give more working hours than was expected, the rate per hour may of course be diminished, so that future working orders may not be debited at a higher rate than is necessary, and equilibrium on the debit and credit sides of the Plant Ledger be produced. In some cases, instead of each machine being dealt with separately, the machinery is grouped, and the rate fixed is applied to the group. This method does not bring out the results of the working of each machine, but only of a class of machines. Whatever method is adopted, the account or accounts will be charged not only with the expenditure directly incurred on the * The depreciation problem may be viewed from two standpoints — that of the accountant and that of the engineer. The engineer deals with physical conditions, studies plant deterioration, the necessity of replacement, and so on. The accountant devises the ways and means of recording, in the most intelligent manner, the facts in connection with the charges. The work of the two should be correlated through a common understanding of the character and extent of depreciation. " Principles of Depreciation." Earle A. Salicis. Yale University. UNIT OF PRODUCT BASIS. 159 machine, but with its due proportion of site or rental charges, rates, lighting and heating, in proportion to the space occupied by it. Charges also arise in connection with the supply of power, of participation in the general services of the works and the undertaking. The capital charge in connection with the purchase and installation of the machine has already been referred to, and for com- parison with hand labour, the interest on such capital should also be included. The increasing recognition of the need for the system- atic treatment of depreciation is evidenced by the atten- tion now given to the subject by accountants,* engineers,^ and managers.^ To a large extent the discussion has centred on one or two general principles, such as the adequacy of the amount written off, the rates of percentage on various classes of machinery, and whether the rates should be based on original cost or yearly diminishing values, as these two methods produce widely divergent results in the accounts year by year. The incidence of depreciation on the cost of the product has received but scant attention. It has been proposed that by means of a register of plant, separate accounts should be kept for different classes of machinery, showing the original cost, the maintenance and renewal expenditure, the yearly percentage written off original value, and the present value of each machine.§ * F. M. Burton, F.S.A.A., "Commercial Management of Engineering Works." t " Repairs, Renewals, Deterioration, and Depreciation of Workshop Plant and Machinery." Paper read before the Institution of Mechanical Engineers, by James Edward Darbyshire. X "System in Factory Costs." James Rider. § F. D. Leake, "The Question of Depreciation and the Measure of Expired Outlay on Productive Plant : a Plea for the Study and Use of Better Methods." Paper read before the Institute of Directors. Leake's " Register of Industrial Plant for the Measurement of Depreciation." Good & Son. l6o MACHINERY USE. The continuously increasing use of machinery, and the larger ratio the cost of its use bears to the total cost of production, emphasises the desirability first advocated in the first edition of this book, of systematically charging machinery costs over the processes, or articles manufactured. The problem is not, as has been said, what system most fairly charges the profits of successive years, with the bene- fits respectively derived by these years from the use and enjoyment of the assets, but what system most fairly charges each unit of product with the proportionate cost of the machinery and plant expended on its production. It has been suggested that the time rate for each machine should be based on the assumption that it is being worked continuously to its full capacity. Thereby the advantage, or the disadvantage, of the use of the particular machine relatively to manual labour or other machines, the effect of insufficiency of orders to keep the plant fully employed, will be more manifest, and the extent to which economies in pro- duction could be carried under other circumstances more clearly shown. As machinery is often not continuously employed to its maximum extent the adoption of this pro- cedure would generally entail less than the actual lessened value of the machinery being written off to the various Stock or other orders during any given period. The further sug- gestion has therefore been made that the balance remaining on each plant account, being the difference between the amounts charged off on the before mentioned assumption, and the actual lessened value should be charged off by means of a supplementary rate to an Idle Capacity account, as representing a loss, or more correctly, a non-realised gain, consequent upon the non-utilisation of the plant to its full capacity. The information thus obtained would be of great value to the manufacturer in considering how he can, having regard to market and other conditions, realise from his plant LIFE BASIS. l6l the maximum economic advantage. The importance of this consideration cannot be too strongly emphasised, for whilst in the case of labour the number of employees directly engaged in production can be regulated from time to time by the volume of trade, such readjustment is not possible in the case of machines whose maintenance, standing charges, and depreciation have to be provided for, whether idle or employed. Another mode of dealing with machine rates is to fix a normal rate per hour for the use of any particular machine, and charge the stock or other order accordingly, and to adjust these results from time to time by means of an additional rate which would be based on the fluctuations of trade, and the abnormal use or otherwise of the machine. If the results of the additional rates are charged off to the Stock or other orders, without being specially noted, it would seem that so good a measure of the idle capacity of the plant would not be obtained as by the procedure before described.* It is desirable that separate rates should be fixed for the Productive Hour and the Idle Hour. This system of charging depreciation on the Cost of fuel. ,..-\,,^^ ^,? ^,, ,, basis or the Iiie oi a machme and its cost would equally apply to the apportionment of the cost of engines and boilers and of the fuel used in them. The total number of hours the machinery is running will, when the life and cost of the engines and boilers have been ascertained, enable working orders to be charged with their proportion of cost. Similarly, the aggregate number of hours the machinery is in use being known, the division of the fuel account for that period by this number will give the cost of fuel per hour for each working order, * Interesting data on the matter is to be found in " Factory Accounting as applied to Machine Shops," Whitmore ; "Proper Distribution of Expense Burden," A. Hamilton Church ; "Oncost," John Mann, jun., M.A.C.A. M i62 Machinery use. The continuously increasing use of electricity as a motive power, and the attachment of motors to individual machines, permits by its possible subdivisions of cost, a much greater accuracy in the allocation of power charges than is practi- cable in the case of steam. When depreciation is allocated to the various processes in the carrying out of which the plant has been deterio- rated, it will not, of course, appear as a separate profit and item in the profit and loss account, but will diminish the gross profit by increasing the cost of production of the articles manufactured, instead of show- ing larger gross profit only to be reduced by a general charge for depreciation, as is the case when a lump sum is charged to profit and loss account in respect of such depreciation. The explanation of the prime cost system given in Chapter IV. was not complicated by a reference to the subject of machinery use and depreciation, which, Prime cost i i i i • • ^ and dcprc- at that Stage, would have been mconvenient ; but no difficulty will be found in assimilating this method of charging for the use of machinery with that of recording cost of labour and stores as described in that chapter, and thus ascertaining cost of production. It should be mentioned that there are items in the books of a private firm or joint-stock company to which no general rule of writing off is applicable. Such are the cost of good-will, patents, trade marks, copyright designs, etc. ; for Dcprccia- although, as in the case of patents, the life of w?ii,°^ ^°°*^' the asset is clearly defined, the incidental advan- patcnts, etc. j-^ggg derived from the possession for a term of years of a valuable monopoly do not necessarily cease upon the expiration of the term of the patent. On the contrary, the value of the good-will may increase although the term of the patent is expiring. Whether there is a GOODWILL. 163 patent or not, good-will generally increases with age if profits are maintained, or are expanding. Assets such as these should be considered as having a combination value, differing altogether from their value per se. The obvious rule, therefore, is that in the balance-sheet such assets should appear at their cost value,* and need not be written down unless their realisable value as integral parts of a going concern falls below their cost value. It is nevertheless desirable to create gradually special reserve funds against such values as a provision against change of conditions. Any estimated increment may be accounted for by the creation of a special fund, as explained on p. 143, but until such estimated increased value is realised it should not be considered as an element of profit. A different set of considerations apply, however, to the writing down of wasting assets. In some cases, such as timber plantations, where the approximate value per acre of the timber is known, it is not difficult to arrive at the sum, having regard to the areas in the plantations in which the trees are felled, and the cost of felling in, and transporting from that area as compared with the other areas, which should yearly be debited to an appropriate Trading Account, and credited to the account making provision for the amortisation of the capital originally spent on the plantation. * The Accountant of Dec. 6, 191 3, contains an interesting article from an American correspondent in which this view is ably criticised. The writer of that article urges that Good-will should be evaluated for the Accounts and Balance-Sheet from the general results of the business from time to time. In his opinion capital is a derived value from income or profits, and Good-will in an improving business may be debited with a reasonable additional capitalisa- tion. He adds, " Cost does not make value." There are no tangible assets in the sense used by accountants. Values represent human judgments : they vary as judgments vary ; at best they are perhaps extremely uncertain things. If this be true, why should not the fact be frankly recognised in accounting? 164 MACHINERY USE. In the case of mineral ownerships where the contents of the mine cannot be ascertained, or of oil springs, or brine runs where the extent of the supply is not known, a reasonable rule would seem to be to charge revenue on the quantity extracted or drawn at the rates of royalty usually charged to their lessees by owners of such properties in the district. Although from the decisions previously quoted, it is apparently not legally necessary to make provision for these and similar wasting assets, profits cannot, from an accountancy point of view, be truly ascertained without such provision being made. CHAPTER VIII. STOCK. We are now prepared to consider the final stage of the book-keeping appertaining to the production and disposal of commodities. In the preceding chapters we have endeavoured to show as comprehensively as the limits of this treatise admit, the manner in which the multifarious transactions relating to the expenditure of labour and material are recorded in the factory books, and how those books assimilate to the commercial accounts of a manufacturing business. In the second chapter we have dealt with the employ- ment of labour and the payment of wages ; in the third, with the purchase and consumption of materials or stores ; in the fourth, with the prime cost of the manufactured article called stock ; in the fifth, with indirect or incidental expenses and their allocation ; in the sixth, with the rela- tion of fixed capital to cost ; and in the seventh, with the mode of charging the product with the cost of the provision and use of machinery. In this chapter we propose to trace the records which should be made in connection with the realis- turedcom- ation or distribution of the manufactured com- Foifr*ciasses "lodities. This branch of our subject embraces, of trans- so far as book-keeping is concerned, four dis- actions. . , ^ tmct classes of transactions : — 1 66 STOCK. 1st. The transfer of the finished article called stock from the factory into the warehouse. 2nd. The return of some articles from the warehouse to the factory for the various reasons which will be mentioned. 3rd. The sale or distribution of stock or manufactured articles. 4th. The return to the warehouse of stock issued, or of stock which was originally sold, but has been rejected or returned by the purchaser. All these transactions have to be traced into both the stock books and the commercial books, and in the case of the sale of stock, and in that of the return or rejection of the stock issued or sold (the third and fourth classes respec- tively), the book-keeping is complicated by the fact that each transaction has to be brought into the Commercial Ledger at two different prices. That is to say, when an article is sold it is taken out of stock at the price at which it stands in the Stock Ledger, and, in the case for same of an absolutc sale, it is generally invoiced to the article. 1 • , • a customer at a higher price. As a consequence, a sale will appear in the Commercial Ledger to the debit of a customer, and to the credit of trading account, at the invoice price ; whilst by a corresponding but independent process of book-keeping, the same transaction will appear at a lower or the cost price to the credit of stock account, and to the debit of trading account. The converse will be the case when stock is taken back from a customer and sent into the warehouse, the price at which it is credited to a customer's account not generally being the same as that at which it is debited to stock. In this way the stock Books. , • 1 T 1 1 1 stock account in the Ledger shows the aggre- gate cost value of the stock-in-trade ; the personal accounts, DISTRIBUTION OF COMMODITIES. 167 the amount received, or to be received, by the firm in respect of the goods sold ; while the trading account (which is debited with the items representing the value of goods issued from stock, and credited with the sales debited to personal accounts) will bring out the difference between the cost price and the selling price, which will be carried to profit and loss account, as the gross profit or loss. This process is effected by entering the sales in two separate books corresponding to each other, the one dealing with the invoice prices, the other with the cost prices, and likewise by entering the stock returned to warehouse in two books which perform similar functions for the cancelled sales. The two books in the first of these cases would be respec- tively the customary Sales Day Book, often called Invoices Outward, containing records of the invoices rendered, and the Sales Analysis Book, containing records of the stock requisition forms (Specimen No. 47) for stock issued. In the case of the return of stock the two books would be respectively the Sales Cancelled Book, containing records of the credit notes sent to customers, and the Stock Returned by Customers Analysis Book, containing records of the Stock Returned Debit Notes (Specimen No. 48). The advantage of carrying out the suggestions made in the introductory chapter as to distinguishing books by their bindings will be manifest in the case of these four books. The Stock Issued Book and the Stock Returned Book are kept by the warehouseman, whilst the corresponding books, viz., the Sale Analysis Book, and the Sales Cancelled Analysis Book, are kept in the counting-house. In giving titles to some of these books we do so primarily Titles of with the desire to indicate their functions, and, books. ^3 already stated, the forms suggested must be taken to mark the transactions which it is necessary to 1 68 STOCK. register rather than the outlines of records universally applicable. The four counting-house books are posted to the Ledger ; the Day Book individually to the debit of personal accounts, and collectively, by means of the Journal, to of stock the credit of trading account ; the Sales or Stock Commercial Issued Analysis Book to the credit of stock Ledger. account and to the debit of trading account ; the Sales Cancelled Book, the converse of the Day Book, individually to the credit of personal accounts, and col- lectively to the debit of trading account ; and the Sales Cancelled or Stock Returned Analysis Book, being the converse of the Sales Analysis Book, to the debit of stock account and to the credit of trading account. (See Diagram IV.). We can now proceed to a detailed examination of the book-keeping relating to this branch of our subject. The first class of transactions is, as before stated, the First class transfer of the finished article from the factory of trans- to the warehouse. The form by means of which actions : Factory to this transfer is effected has already been re- warehouse. ^gj.j.g^ ^Q ^g ^^^ g^Q^^ j3^^j^ ^^^g (Specimen No. 35). This debit note is entered by the warehouseman in the stock Re- Stock Received Book (Specimen No. 36), and ceived Book, posted to the debit of the Stock Ledger. Upon reaching the counting-house the Stock Debit Note is entered to the credit of the Cost Ledger, as ex- stock Debit plained in the preceding chapter, and the total Note. debits to stock, in respect of articles finished, are journalised month by month to the debit of stock account in the Commercial Ledger DISTRIBUTION OF COMMODITIES. 169 With regard to the return of articles from the ware- house to the factory, which constitutes the second class , , of entries, it may be remarked that although Second class ' -' ° of transac- the articles made for stock may all have been tious: Ware- . , , 1 1 bouse to manufactured under the personal supervision factory. ^^ those who will more or less be connected with their sale, and questions as to the rejection of goods are not likely to be nearly as numerous as if the articles Rejected had been made by an outside contractor, still stock. ^j^g question of the return to the factory of finished articles may arise either on account of bad workmanship or alteration of design, and must be provided for in the book-keeping. In all such cases it will be desirable to send into the store, at the time the finished article is refused as stock, a Transfer Note (warehouse debit to store). In Specimen No. 42 this Transfer Note is shown with a counterfoil ; but a duplicate, by means of carbonised paper, can be substituted. The articles rejected as stock having been sent into store, it remains to be determined what alterations, if any, are to be made. Should further labour or material be required to be expended, a new^ stock order will be issued, and the recording of the expenditure will follow the routine laid down for the manufacture of commodities. The adjustments as between warehouse and store are best recorded by the warehouseman and storekeeper entering the transfer notes in a Transfer Book. Transfer ° Books and The warehouseman will, of course, enter on the I^0^6S credit side of his Transfer Book the credits to his stock for the finished articles forwarded by him to the store. On the debit side of his Transfer Book he will enter the debit notes received by him from the I/O STOCK. w H O fa ^ CO j japjQ •pajiajsuBJ} .2 a 3 O e •33UJ •sqq •sa5 •SJA13 d •ON JopJQ •pojjajsuBj; ro HI ^ H o o iz; c ^^ ?, -3 a o o W s H ^ c Pi -^ O ^ ^ go ■"itoj 3 O S •3DUd [5 •sq-i ■sj5 ■SJA\3 •ON •poujn;3J '^KAV Xq pai[ddnt; •apipv ■ON 3»oN ja^suBJx •..^a 1 1 ♦♦♦♦♦>•» □ 3 o & •♦«*«♦♦♦♦«♦♦♦ •3DIJd 1 •sqi •sa5 •SJA13 ■ON •paujnisj ^qAV Kq paijddnc^ •dpHjy ■ON 3;oN jajsuwx •^?^CI TRANSFERS BETWEEN STORE AND WAREHOUSE. I/I Storekeeper for articles transferred from store to warehouse. The latter class of entries arise out of transactions of a Retail trans- retail character, not always carried on in con- actions, nection with a manufacturing concern ; but the concluding part of this chapter will be devoted to its consideration. With regard to the Transfer Books, the entries made by the storekeeper will, naturally, be the converse of those made by the warehouseman, and the store will be credited with all articles forwarded to, and debited with all articles received from, the warehouse. The two Transfer Books will therefore always balance. It will be necessary to post the items in the Transfer Books to the Stores and Stock Ledgers respectively, so as to bring out the correct balances, not only as between these Factory Ledgers in the aggre- gate, but also as between the individual Stores and Stock Ledger accounts. The specimen ruling of the Store Transfer Book (No. 43) will, with necessary alteration of headings, apply equally to the Warehouse Transfer Book of which it is the counterpart. Whilst we think it necessary to state in full detail the principles to be remembered in dealing with these transfers, it must in any individual case be left to the accountant to determine whether the circumstances of any particular business admit of the functions of the two Transfer Books being adequately performed by one book. The transfer notes between store and warehouse, and vice versa, can, if the nature and extent of the trans- actions warrant it, when forwarded to the counting-house, be entered in a Transfer Analysis Book, and the Journal entry for the commercial books be based on the amounts so arrived at ; or, if the transactions are few they can be recorded from the Transfer Notes into the Journal direct. 1/2 STOCK. ORDERS RECEIVED BOOK,— Specimen No. 44. 1I ^0 6 Z u \. 6 is 60 l-i Nature of Order. 0^ •6 Q » 3 rt.H c Remarks. Enter in this column route by which goods are to be sent, also marks for cases, and any special instruction. The book-keeping in relation to the sale of commodities may be said to be initiated by the receipt of an order, and Sale of com- ^s regards the factory, will hold good whether modities. received direct from a customer or through an agent. The questions of discount or commission which present themselves in the latter case are transactions which it is necessary to deal with in the commercial books only. The principal of the firm, if he accepts the order, when it Specimen No. 45. Stock Requisition and Advice to Warehouseman- 19 -No. Please forward the undermen- tioned Articles to at per Marking Cases Customer's Order No. or Reference- Stock Requisition Book, fol. Sales Analysis Book, fol. Article, with Full Description. No. Weight. (ii rt E c H 1 O- .a Amount. Ready for dispatch 19 Warehouseman. Approved STOCK ISSUES. 173 is found to be in proper form with regard to price, terms of payment, drawings or specification, date of delivery, penalties (if any) as to time of completion, cost of carriage, and mode of delivery, will probably initial it by way of authorising its execution. Should the stock of the com- modities ordered be exhausted, or should the articles require to be specially manufactured, an order to manufacture the given or a larger number of similar articles for stock, should be passed concurrently with the acceptance of the order as already explained. The customer's order having been accepted may be registered in an Orders Received Book (Specimen No. 44). Orders Re- The order may then be passed on for execution ceived Book, ^-q ^j^g warehouseman, who should have received a standing instruction to return all orders to the counting- house when completed. If it be thought unadvisable to pass the original order (which may contain references to the terms of payment, commission, or discount, Adviceto ^ , ^ \ , ' . , warehouse- etc.) to the warehouseman, he may be provided with a copy or with extracts from the Orders Received Book, or a special form of advice may be sent to him. The advice may take the form shown in Specimen No. 45. The form could also be made to serve the warehouse- man as a Stock Requisition, and it would, in that case, stock Issued be entered in the Stock Issued Book. In cases Book. in which the goods are ready for shipment, and further instructions have to be given concerning them, the form would be sent to the counting-house, and if the dispatch of the goods be approved, the requisition could be returned to the warehouseman with the information inserted thereon. It is necessary to follow this routine if, as is sometimes the case, it is not possible for the customer 174 STOCK. to give complete instructions as to forwarding when placing the order, or if special arrangements as to payment before, or on, delivery have to be made. In some cases it is desirable to supplement the Stock Requisition by a " Forwarding Note," issued on the request of the warehouseman. This note not only gives the ware- houseman the final instructions as to shipment, but also attaches to the signatory the responsibility for seeing that the final tests or examinations of the apparatus have been made. STOCK ISSUED BOOK.— Specimen No. 46. Date. Sale Order No. Article. No. Weight. Price. 1 Ledger Fol. J3 Amount. 1 Should the original order be sent to the warehouseman the stock may be drawn from the warehouse, according stock Re- to the conditions of the business, either by quisitions. posting the order direct to a Stock Issued Book (Specimen No. 46), or by means of a Requisition Form (Specimen No. 47). The requisition would likewise require posting in the Stock Issued Book. In this case that book would require, for purposes of reference, an additional column for the No. of the Stock Requisition. The Stock Issued Book will of course in turn be posted to the credit side of the Stock Ledger. STOCK REQUISITIONS. I75 Where there is great variety in the articles sold, or multiplicity of transactions, it may be desirable that the ^ .. counting-house should be kept regularly in- Daily return ° , r- t> / of stock formed of the stock issued each day. This can be done either by alternate Stock Issued Books being kept, so that the previous day's record of stock issued may be always at the counting-house and the current day's record in the warehouse ; or the warehouse- man may send in every morning a Stock Sent Away Form, showing all stock that has been issued during the previous day, giving in each case the Order No., so that the clerk invoicing may immediately turn to the Orders Received Book and see the stipulations and conditions on which the order was accepted. It is also desirable that the amount of the stock re- quisitions should, in the counting-house, be entered and stock Issued analysed in a Stock Issued or Sales Analysis A^afysis ^ook. This book (of which we do not give Book. a specimen ruling, as it pertains to the count- ing-house) should be so ruled that the various items entered from the Stock Requisitions may be analysed under the various branches of the business. The agcrre- gates of the totals of such branches would necessarily agree for any given period with the totals of the stock requisitions for the same period, and necessarily also with the totals of the warehouseman's Stock Issued Book. The fourth class of transactions referred to at the out- ^ _^^ , set of this chapter involves the procedure to be Fourth dass ^ ^ of trans- adopted in the factory with regard to stock stock back which is rejected or returned, after having been houser^' ^^"^ °^* ^^^ inspection or approval, on loan, hire, or exhibition. 176 STOCK. fe w, « ^ i ° S o ° •sq-I I •S45 •SJMD Pi IS Pi o In ^ i o h-t C/3 "^ 3 a M Pi •sqi •SJ15 s;m3 w Q Q W ci H td Pi t_> o H •10a _J o< 3 a < J3 •3011 J -t3 3 ■sqi 1 0) XI il 1-1 5? S ■si^\ f^ ^ s;m3| 1 ■ojsr 1 T 1 I (1 C -S'd ° 3 ^JQ 1h ^ ;. C u: ^ >^ o„» ,^A account, and that of the vehicles to a vehicle Horses and > vehicles. accouut, and each account should periodically be debited with interest on the amount of the capital sum. The carters should send in weekly a return of the work done by them, and this should be summarised in a Cartage SPECIMEN No. SI. Cartage advice, .19 To Mr. Please supply me with the undermentioned. No. of tlorses. Description of Vehicle. Time Required. Time Arrived. Time Returned. Time on Job. Order to be charged. Ordered by Signature of Carman Book. A cartage account should be opened, to which should be debited the wages of the carters, stablemen, the cost of forage, stable expenses, etc., and at regular intervals an amount from the horse account and the van account for depreciation. The depreciation on the horse account can, P 2IO SUBSIDIARY BOOKS. it is thought by many, be best provided for on the basis of annual revaluation, rather than on the basis of a yearly depreciation rate. The cartage account will, of course, be credited with the journeys performed at such rates as will equal the amount charged to it. It is only through keep- ing some such account that the employer can ascertain accurately whether it pays him better to purchase and keep horses and carts than to employ a contractor. In the consideration of the results thus shown, the proprietor if he has an agreement with the War Office by which he obtains a subsidy for keeping a certain number of horses in stock, on which the War Office can draw if the necessity arises, has to bear this relevant fact in mind. Procedure similar in principle should be adopted when transport is by means of motor lorries or similar vehicles. In such case, and until reliable data based on experience is ob- tained, the important consideration will be the adequacy of the charge for depreciation. In view of the larger capital outlay necessitated by the use of motor vehicles, it is desirable to establish checks on the loading of the vehicles, and to ascertain cost on the basis of a combined mileage and weight factor generally described as a ton mileage basis. In many cases this unit of cost can be usefully and informatively supplemented by one which takes cognisance of time, and shows the ton mileage on an hourly basis. In view of the need that often arises of giving quota- tions for goods inclusive of free delivery, and of checking Freight ^^^ rates charged by the railway companies, book. i^- is very desirable to record the quotations obtained, or rates paid, for freightage. At present many of the provisions of the Acts of Parliament which have been passed for the protection of consignors and consignees are in abeyance, or in course of modification, under the new RAILWAY RATES. 211 procedure instituted by the Railways Act of 192 1, It would seem desirable, however, pending the bringing into operation of the whole of the new procedure, to briefly summarise the main principles of the legislation now under revision. Under the various Railway (Rates and Charges) Order Confirmation Acts passed in 1891 and 1892, consequent upon the Railway and Canal Traffic Act of 1888, the maximum tolls and charges for various classes of traffic over the various railways were prescribed. By an Act of 1894, the railway companies could not increase their rates without public notice, and, subject to the provisions of the Railway Rates Act of 191 3, they could be called upon to justify such increase of rate before the Railway and Canal Commission Court. In checking the accounts or the rates quoted, the classification of the traffic should receive primary consideration. Having regard to the varying conditions of the traffic, it was very desirable to compare the actual rates charged with the maximum authorised, and this could best be done by means of a book ruled as shown (Specimen No. 52). The goods should be delivered to the railway company on a " Consignment Note," prepared by the senders. If a form prepared by the railway company is accepted for use, it should be carefully examined to see that none of its clauses create a special contract with regard to owner's risk or other matters, and that the railway company are not by any of its clauses released from their special or general liabilities. Care should be exercised in declaring the weio-ht and character of the merchandise consigned, as the Railway Clauses Consolidation Act prescribes heavy penalties in cases of fraud. Accuracy in these matters is of importance to the consignor, the railway company, and the consignee. 212 SUBSIDIARY BOOKS. 6 Z. •S3iaEUI9^ V <*- " te o a rt U rt QtS CO a ^ •}unomv •3;e^ oSEinEH u "o a ,2 « S o y •s ii " S " Q "o It rt <4 H|a- m J2 a H « o c <« >^ li > (J a O U u ^ > rt o siri^ °«ii^ •I^JOX j 1 1 w J) O s 1 ^rr^ ojeii « go •33E^ 1 1 V 3 O a< d H D Q > P oj o fa o . w Kg I w « W Q •s^jBiaa^ Demurrage charged. ■6 " SJ Average earn- ings per Ton. u 1 Average earnings per Wagon and Van. bj) a 'e rt •6 m •hJ Number repaired on Railway. Total under repairs. Average Number of Trips Wagon and Van. Number of Trips made. Number of Wagons and Vans working. Month of 19 Wagons Vans WAGON BOOKS. 21 3 In the case of firms enjoying the advantages of a raihvay siding, a special book should be kept on the same principle Railway ^^ ^^^^ applied to the Cartage Book just sidings. described. If a yearly rental is paid for sidings and trucks, this rental and any incidental items should be debited to an account to which is credited any receipts from this source. If the siding is on land belonging to the owner or occupier of the works, and if it has been laid or is maintained by such owner or occupier, the railway rate charged him, either for the receipt or forwarding of goods, should not contain a charge for the provision of such terminus, or if it does, the owner of the siding is entitled to a rebate or allowance. The railway company may, however, have a right to make a charge for services rendered at or in connection with sidings not belonging to the railway company. The Association of Traders known as " The Mansion House Association on Railway and Canal Traffic," carefully watches all proceedings in connection with private sidings and other matters which come before the Railway and Canal Commission Court, and from time to time notifies its members of the decisions of that Court in test cases, and through this channel manu- facturers can obtain much information enabling them to check in principle the accuracy of the constituent items in the railway rates charged them. If the trucks are owned by the firm, then their pur- chase price, together with interest, should be debited to a Wagon and Van A.ccount, which should be credited each year with an amount for depreciation, the amount so credited being charged to an account which would in turn be credited with any amount received for the use of the vehicles. A Wagon and Van Book should also be kept, showing under the number of the wagon or van the date it was 214 SUBSIDIARY BOOKS. dispatched, destination, load, date of return, and number, if any, of days' demurrage incurred. The book should be so ruled as to permit of the earnings of the wagons and vans being ascertained, and the results tabulated monthly in a form convenient for comparison, as shown in Specimen No. 53. The book should also give the dates on which the wagons or vans are tared. There are considerable variations in tare owing to weather and other causes, and it is desirable that the weight of the vehicle itself should be verified from time to time. The cost of maintenance of wagons and vans should also be kept in the same book, or in a Wagon Expenditure Book. In either case the amount provided or written down yearly for depreciation and obsolescence should be included. The financial results of the working of the wagons and vans would then be obtainable in detail. When wagons or vans, belonging to manufacturers or merchants, have to be repaired on the railway company's sidings by a wagon-repairing company or by the railway company's workpeople, it is advisable to keep a record of such repair in a Wagon Journey Repairs Book (Specimen No. 54). In large establishments better utilisation of wagons and vans and theavoidance of demurrage charges can be brought about by the use of tabulating boards or tables so constructed that by means of indicating tablets and pins the position of any wagon or van, and the length of time it has been in that position, may be known from hour to hour by the head or controller of the wagon department. It may also be serviceable to allude briefly to the desirability, where steam lighters or barges are used, of recording the work done by each lighter or barge, so that full advantage may be taken of any possible economies in cost of transit. The captain or hand in charge of each craft should be given a Time Sheet (Specimen No. 55). TIME SHEET FOR LIGHTER, ETC. 215 The Time Sheet may be so ruled on the back as to permit of the recording thereon of any back freights, Specimen No. 54. WAGONS REPAIREE) BY No. Dates. Station or siding. Materials sent. Nature of Repairs. Carriage on Materials. Charges. Ad- vised. Re- paired. Specimen No. 55. ( LIGHTER. TIME SHEET FOR BARGE. BOAT. Name of Craft. Date and Time of leaving Works. Loaded with Quan- tity. Desti- nation. Date and Time of Arrival at Desti- nation. Date and Time Dis- charged. Date and Time started Return Journey. Date and Time of arri%al at Works. return cargoes, towage, or other services performed, and will form the voucher on which payment will be made by the cashier of the amount due to the crew when the journey is finished. This Time Sheet should be recorded in a Craft Register (Specimen No, 56). 2l6 SUBSIDIARY BOOKS. This Register may also usefully contain a record of the earnings of the craft whether from the carriage of raw material to, or finished products from, the factory, the carriage of goods on return journeys for other manufac- turers or persons, or from the towage of other craft on the THE Specimen No. 56. CRAFT REGISTER. CAPTAIN 19 •^3 .J. c si Hi < re-? q c Sou u a E H Particulars of Payment. waterways navigated. It is desirable that the class of earnings as well as of expenditure should be kept distinct. The cost of towage of craft not moved by steam or other motive power should be recorded in a Towage Book, the cost for each barge or other vessel being kept separately. In cases in which stores, wharves, or warehouses are used for the storage or stocking of a commodity or com- modities in bulk, it is found to be of great assistance in the practical administration of the business if the stocks on hand are reported on a diagrammatic form, which shows the position of the various component parts of the stock in the store, the wharf, or the warehouse relative to the loading or unloading facilities with which the depot is equipped. CASES BOOK. 217 In dealing with the question of transit of goods, it will be well to point out that casks, cases, containers, skips, Packing sacks, bags, barrels, syphons, tarpaulins, and accounts. sheets for the packing or covering of goods should be considered as package stock, and should be registered. In some cases the package is of more value than the contents. The cases, tarpaulins, sheets, and other forms of package should be made to a Stock Order No., and credited to stock in the same way as any other articles, and should bear distinctive and consecutive numbers. Thus a cases or sheets account respectively would be debited with the cost of each case or sheet sent out, and credited with all charges made to customers under these heads. If any allowance be made for the return of a case, the case should be put into stock at a figure not exceeding the amount so allowed, and the process would be repeated until it was no longer of value as a packing- case but merely as old material. It is further desirable that the warehouseman should keep an "empties," "cases," or "returns" book, showing the packages sent out and those received back, in order to keep an effectual check upon, and prevent the loss or too rapid multiplication of packages of various descriptions. Credit notes issued or cash paid on the return of these coverings should be systematically recorded. This register should always be open to the inspection of the head of the packing-case makers' department, or he should be advised daily by the warehouseman of the packing-cases that have been returned. It is also necessary that the storekeeper should carefully record all the packing- cases received by him from suppliers of goods, and the dates on which they were returned. In the case both of Stores and Stock the cost of coverings should be kept distinct from the prices of the raw material and the finished 2l8 SUBSIDIARY BOOKS. goods. Provided records are kept of their receipt or manufacture, and return or issue respectively, the articles themselves can be considered as constituents of Stores or Stock, and dealt with on the same principles as regulate transactions in other articles. There are many other subsidiary books of a similar character, the need for which will arise in every factory, but their detailed description is outside the scope of this work. Such are the Coal Test Book for recording calorimetric analysis, the Coal Book for recording the contracts for coal and deliveries made, as well as the consumption of coal, when this is systematically charged to each working number, as explained in previous chapters. If this procedure be adopted, the Coal Book may contain on the debit side the turn-out weight of coal received, under the heading gross, tare, and net, and be compared with the entries in the columns of weights advised. The credit side would give an account compiled from the statement (already referred to) showing how the coal has been used. The difference between the debit and credit sides would represent the balance of coal on hand. The Coal Book and accounts may usefully be summarised monthly (Specimen No. 57), to show the various ele- ments in the price at which it was bought, and is also serviceable for checking the accounts for coal supplied. The record of the weight of coal and the truck or wagon containing it is first made, both as regards gross, tare, and net, in the Weighing Machine Book kept at the Weigh House. The weights of all vehicles and goods passing over the Weighbridge are entered in this book, a carbon duplicate being sent to the office. A record should also be kept of all inspections or tests of weighbridges, weighing machines, or weights, whether such tests are made by the proprietor or by a firm engaged by him to maintain COAL BOOK. 219 and test such weighing apparatus. Such register of inspec- tion is of considerable service in connection with any proceedings under the Weights and Measures Acts. A somewhat similar service is performed by the Machinery Examination Register, recording the dates on which the various machines should be, and were, cleaned and inspected. There are also the Surprise Visits Book recording the Specimen No. 57. SUMMARY OF QUANTITY AND COST OF FUEL RECEIVED . 19 DURING THE MONTH OF Q 3 ^ 1 'S s o> Quan- tity. T. C. 2 V c 3 Q a M • % go Net Amount. Re- marks. and Elec- tricity Books. visits at irregular periods and unusual hours of the princi- pals or leading officials, with notes and observations as to the condition of affairs at the time such visits were made. Gas, Water, and Electricity Meter Reading Books, which Gas. Water, show the readings of the various gas, water, and electricity meters at regular periods, and the consumption during such periods, whilst by the aid of subsidiary m.eters the consumption in different parts of the factory is obtained and the cost Precaution localised. There is also the Brigade or Fire against Sire. Hq^q Book, in which IS recorded the periodical examination of the hose and apparatus for the extinction of fire, as also the number and position of the fire-buckets, the names and addresses of the men (usually those resi- 220 SUBSIDIARY BOOKS. dent near the works) who constitute the brigade, and the record of the date of consent of the owners of the street mains to the attachment of the hose pipes in case of need ; the Casualty Book, containing records of acci- dents which happen in the factory ; the Pat- tern Book, containing particulars of patterns received and issued, in which each pattern is referred to by its symbol or number, a constituent therein being the office number of the Drawing, the Patterns Ledger showing the original cost of each set of patterns, and the amounts from time to time written off such cost ; the Delivery Books, for obtain- ing carriers' receipts for goods ; the Visitors' Book, record- ing the names of visitors to the works, the dates and purpose of such visits, with, in some cases, a portion of the book set apart for the autographs of distinguished visitors ; the Stores Delivery Diary or Calendar of Deliveries due, used for entering the due dates of stores ordered, and by daily examination leading to systematic reminders to suppliers of overdue goods ; and a variety of other books too numerous to be enumerated. In many industries, especially those in which operations are influenced by weather or atmospheric conditions, a Weather Chart Book may advantageously be kept, recording meteorological conditions during working days. There are also a number of books facilitating the working and general oversight of the business by the principal or his assistants, which, although they do not necessarily form part of the system of accounts, afford data for comparisons of expenditure in different periods on general and estab- lishment charges. Among such books may be mentioned the Staff Register, containing the names, addresses, posi- tion, and salaries of members of the staff; the Stationery Register, containing a record of the quantities and qualities of the books, forms, prints, and papers ordered, with the SICK AND PROVIDENT FUNDS. 221 names of their suppliers, and the costs, with the reference numbers, and code letters or symbols appearing on the forms, thereby enabling the last supplies to be traced ; the Catalogues Issued Register, chronicling the various dates of issue of catalogues, and the names and addresses of those to whom they were issued ; the Advertisement Con- tract Register, containing particulars of contracts entered into or orders given for advertisements, with specimens of the advertisements, and the rates at which they are in- serted ; the Notices Book, containing copies of all notices issued to the staff or members thereof, or posted in the works, with regard to the conduct of the business ; the Licences Book, recording all licences taken out or to be taken out, whether in connection with the storage of gun- powder or other explosives, or inflammable oils, for the employment of male servants as coachmen, for light loco- motives, or for any purposes for which licences have to be taken out ; the Boiler Inspection Book, containing records of the inspection of the boilers, and a copy of the report which, under the Factory and Workshop Act, has to be entered in or attached to the general register of the factory or workshop, showing the result of such inspection by a competent person. A reference to books relating to sick, provident, super- annuation, and similar funds might be looked for in this chapter, but inasmuch as these are generally and other couducted by a committee of those interested, a description of the books required does not fall within the limits of this volume. For the convenience of the employees, their subscriptions to these funds may, as described in Chapter II., be deducted from the amounts due to them as wages, but at this point the connection of the funds with the factory books generally ends. The dis- posal of the amounts deducted from the wages of employees 222 SUBSIDIARY BOOKS. on account of fines, rests of course with the principal, in the absence of any other arrangement with the employees. If, as is often the case, they form a contribution to the sick fund, the necessary entries are made in the commercial books. The books which have to be kept under the Factory and Workshop Act also require to be mentioned. We do not, Books however, consider it necessary to describe them Factor^^ ^^ "^ detail, as all registers, books, forms, certifi- A*=**- cates, etc., prescribed by the Secretary of State in pursuance of the Act can be purchased ready for use.* The Act deals with the sanitary conditions of factories and workshops, and with the safety of the workpeople, fixes the hours of work and of meals, prescribes holidays, provides for the education of children employed in factories, requires certificates of fitness for employment to be ob- tained, and contains regulations as to the investigation of the cause of accidents. The Act also contains condi- tions as to overtime, night work, domestic employment, etc., and special provisions for particular classes of fac- tories and workshops. It is also desirable that one or more of the responsible officials at the works should be well posted as to the pro- visions of the Public Health Acts, the Notice of Accidents Act, the Trades Boards Act, and other Parliamentary enactments relative to labour, as also in the bye-laws of the local authorities of the district, particularly those relating to the emission of black or other smoke, and as to sanitation. Copies of the local bye-laws should either be posted in the works, or supplied to the foremen or leading hands. Where electricity is used, the regulations issued by the Home Office with regard to such user in factories * A useful summary of Government Regulations appears in " Factory Administration and Cost Accounts." Elbourne. The Library Press. BOOKS REQUIRED BY FACTORY ACTS. 223 should be posted in the offices of those responsible for such regulations being effectually carried out, as should also the regulations published by the Home Office under the Factory and Workshop Act (1901), as to the use of locomotives and wagons on private lines and sidings. APPENDIX A. NOMENCLATURE OF MACHINE DETAILS. By Oberlin Smith, President of the Ferracute Machine Company, Bridgeton, N.J. A Paper read before the American Society of Mechanical Engineers, and repri7ited by the kind permission of t/ie Author. That the nomenclature of machinery, and of the tools and apparatus with which it is constructed is, in this country, in a state of considerable confusion scarcely needs demonstrating. If we look from an international point of view, and include the other English-speaking countries — Great Britain and her colonies — the confusion becomes worse confounded. A reform is destined, in due time, to come, doubtless to be promoted in great degree by such societies as ours. This reform movement cannot be begun too soon, and should aim at giving brief and suggestive names to all objects dealt with, — each object to have but one name, and each name to belong to but one object. A simple method of beginning such a reform would be a common agreement among all our engineering schools to use each technical word in but one sense, and with no synonyms. A lesser field of reform and one which hes more particularly within the jurisdiction of individual manufacturers, is the comparative designation of a number of sizes or kinds of the same machine. There is now no common under- standing whether a series of sizes shall be numbered or lettered from the largest down, or from the smallest up. The latter is undoubtedly the most natural and suggestive method, but usually becomes confused by want of careful forethought (when starting a series) in providing " gaps " for the insertion of future sizes. If a numerical series has been already started and become commer- cially established, the only systematic way to insert new sizes Q 226 iSroMENCLATURE OF MACHINE DETAILS. (either at the beginning or through the middle of the series) is to use fractional numbers. This, though awkward in sound and appearance, seems to be the only means of suggesting the com- parative size of the article by its name. The use of arbitrary higher numbers between the other is, of course, worse than no numbers at all. The use of a series of letters does not supply this fractional loophole of escape, the euphony of A-and-a-half, K-and- three-quarters, etc., being somewhat doubtful. Another method in much favour is the use of " fancy" names such as " Diminutive Giant," " Eureka," " Firefly," etc. These are far preferable to confused numbers as they are not intended to convey any ideas between manufacturer and customer, and admirably succeed in their purpose. All this is a very difficult subject to deal with, and one in regard to which we can scarcely hope for any exact system. We can but point out to manufacturers two general principles to be followed : ist, of leaving abundant ^aps — that is, let a regular series run lo, 20, 30, 40, etc., instead of i, 2, 3, 4, etc. ; and 2nd, of using the smaller numbers for the smaller objects. The second is similar in idea to the well-known Philadelphia house-numbering system, which has worked so admirably in practice, and which has been copied by numerous other cities. The two foregoing paragraphs are intended respectively as but casual allusions to the technical and commercial nomenclature of machinery in general. The subject is too elaborate to be treated at length in this paper, the main purpose of which is to set forth the results of the writer's experience in establishing a system of names and symbols for all the component parts, commonly called "details " of machines, or, in fact of any manufactured articles. That some such system is necessary, no engineer who has attempted to manufacture machinery by the modern system of duplicate (or approximately duplicate) parts, will, for a moment, question. The necessity for a specific name for each piece, which name is not, never has been, and never will be, used for any different piece of the same or any other machine, is evident, simply for purposes of identification. This identification is required me- chanically at almost every stage of production. The name, or a symbol representing it, should be marked upon the drawings, the patterns, and the special tools pertaining to each piece, and, when convenient, upon the piece itself. Commercially, it is required on time cards and in indexes and pattern lists and cost books as per- taining to production. Pertaining to sales these names or symbols must appear in illustrated price lists, and in orders by and charges REQUISITES OF A GOOD SYSTEM. 22/ to customers. This, our modern method of repairs, by selling duplicate parts, renders imperatively necessary. The requisites for a good system of names and symbols are : ist, isolation of each from all others that did, do, or may exist in the same establishment ; 2nd, suggestiveness of what machine, what part of it, and if possible, the use of said part — conforming, of course, to established conventional names, as far as practicable ; 3rd, brevity, combined with simplicity. Of the importance of isolation to prevent mistakes and confusion ; of suggestiveness to aid the memory ; of brevity to save time and trouble, it is hardly necessary to speak. Regardmg the systems now in use in our best shops, this paper will not attempt detailed information. It is understood that the names are more or less scientifically arranged ; depending, of course, upon the amount of study and the quality of the brains that have been expended upon them. In cases where symbols are used, supplementary to the names, they usually consist of letters or numbers, or (oftener) a combination of both. Many of them (both names and symbols) fail in symmetry and suggestive- ness, because little attention has been paid to the names of the machines themselves, as regards the serial consecutiveness hinted at in paragraph 2nd. The quality of brevity often suffers, severely, because the name and symbol must, in most cases, each have the machine name prefixed, to secure their perfect isolation. The latter quality is rarely dispensed with, simply because the manu- facturer's pocket would be too directly touched by the expensive resulting mistakes. A perusal of some machinery catalogues which give detailed lists of parts is very harassing to a systematic mind. They are apt to derive one part name from another, prefixing the latter as an adjective each time, until some such pleasant title as " lower-left-hand-cutting-blade-set-screw-lock-nut " is evolved. If there are symbols provided, they consist of some unknown combinations of letters part way down the list, and then change to arbitrary numbers, or perhaps to nothing at all. It will often be noticed also that no particular order appears to be followed in numerical arrangement, similar parts being scattered at random through the list. The scheme to be described further on has been evolved gradually from the experience gained in managing a growing machine business. This scheme is far from perfect, and is probably inferior to others which have not been made public ; but it seems to answer the purpose aimed at, viz., a comprehensive and elastic system which will accommodate itself to an unlimited 228 NOMENCLATURE OF MACHINE DETAILS. growth and any variation in quantity or kind of goods manu- factured. This, the methods we first tried would not do, being too Hmited in their scope. It should be here explained that the word " we," as just used, refers to the above-mentioned machine works, with which the writer has long been connected ; and the scheme in question will be spoken of as " our symbol system." To further define terms : " machine name " and " machine symbol " refer respectively to the name and symbol of the whole machine — or other article of manufacture ; for it will be noticed that the system is applicable to almost any products, except those of a textile or chemical nature. " Piece name " and " piece symbol," in like manner, refer to the separate pieces of which the whole is composed. The terms " detail," " part," and " piece," have so far been used synonymously. It is doubtful which is really the best to establish as a standard, but we have adopted " piece " as best expressing the idea of one piece of material, reduced to the last condition of subdivision. In our practice, exceptions are made to this require- ment of homogeneousness in such cases as chains, ropes, belts, etc., — also material glued or welded together — in short, anything which may (like a man) be called one piece, because it is not intended ever to be taken apart. The character for equality ( = ) will be used to show connection between a name and its symbol. A brief glance at the history of our system shows that at first we (like many others) hit upon the plausible idea of using numbers for machine symbols and letters for piece symbols. The numbers were somewhat "gapped," but not to such an extent as we now should practise. Examples : If four sizes of pumps were symbolled I, 2, 3, and 4, their barrels might = i-A, 2-B, etc., and their handles = i-B, 2-B, etc. If the next product made was a series of lathe dogs, they would probably be symbolled 11, 12, 13, etc. Their frames would = ii-A, 12-A, etc., and their screws, ii-B, etc. This all worked beautifully until the products became so complicated as to contain more than twenty-six pieces ! After tampering a little with the Greek alphabet (which seemed calculated to scare our new workmen), and trying to use a mixture of small and capital letters (which looked too near alike), we fell back upon the clumsy device of repeating the alphabet, with letters doubled or tripled. When we finally abandoned the above plan, several methods were carefully studied. The next most obvious was to use letters for machines and numbers for pieces. This allowed any quantity of the latter, but limited the machine to twenty-six even with no gaps USE OF SYMBOLS. 229 provided. A certain modification of this method is, perhaps, more in use than any other system, In it letters are used for different sizes or styles of a certain kind of machine, and used over again for some other kind ad infinitum. This answers the purpose, because there are not likely to be more than twenty-six varieties of one machine. It has, however, the fatal objection of requiring the whole machine name prefixed to each symbol, in all cases where the symbol stands alone, and does not happen to be written with the others of the set in tabular form. As the general name of a machine usually consists of at least two words, a complete piece symbol becomes too long for convenience in labelling. Examples : Force pump, K — 26 ; Lathe dog, H — 2, Another system consists in using numbers for the machines and numbers for the pieces. This gives isolation and brevity, but no suggestiveness. A serious objection to it is the danger of blurring the numbers together, or of transposition in writing or reading them ; also in the fact that either number cannot be used alone, as it can in the case of letters and numbers. A similar system to the above consists in the use of letters for both symbols. It has the same disadvantages, and the additional one of a limitation in the quantity of letters at disposal. Our system, as finally decided upon, is as follows : Machine names and piece names are determined by the designer, in general according with the principles already pointed out, being, of course, made as brief and suggestive as possible, with no two machine names alike, and no two piece names alike in the same machine. In this nomenclature no positive laws can be followed but those of common sense and good English. A machi?ie symbol consists of a group of three arbitrary letters — capitals. X piece symbol con- sists of an arbitrary ?mmber and follows the machine symbol, connected by a hyphen ; thus FPA-2 might symbolise the force- pump handle before alluded to — smallest size. The machine symbol may, be used alone when required, as EPA. As thus described, these symbols fully possess the qualities of isolation and brevity. To make them also suggestive, some atten- tion must be paid to what letters to use. In practice, we aim to make the first two letters the initials of the general name of the machine, and the last letter one of an alphabetical series whicn will represent the sizes of the machine. An example of this is shown in the symbol for the smallest-sized force pump EPA. if there is any chance of a future smaller or intermediate size, gaps should be left in the ali)habetical order. This " initial " method cannot always be strictly followed, because of such duplicates as 230 NOMENCLATURE OF MACHINE DETAILS. FPA for force pump and foot press. The remedy would be to change one initial for one beginning some synonymous adjective, that is, foot presses might be symbolised TPA, assuming that it stands for treadle press. Usually the least important machine should be thus changed. From this it will be seen that, in defining the theory of this scheme, the words " arbitrary letters " were purposely used. The idea is to make the system thoroughly com- prehensive. There might be such a number of machines having identical initals that the letters would be almost arbitrary. In practice, the designer can usually succeed in making the symbols sufficiently suggestive. In considering how many letters to use in a symbol, considera- tions of brevity advised two, suggestiveness three or four. Two letters did not allow of enough permutations, nor indicate well enough the kind and size of machine. Three seemed amply sufficient in the first respect, as it provided over 17,000 symbols. If, for any reason, in the future four letters should seem desirable, the addition of another would not materially change the system. If three letters hyphened to a number of one, two, or three digits should seem bulky, remember that this symbol can stand by itself anywhere and express positively the identity of the piece. Its com- parative brevity is shown by comparing the second and third columns of the following table (A). In the different lines an idea is given of the application of the system to a variety of products not usually made in any one shop. TABLE A. ISt. 2nd. 3rd. 4th. a 5tb. 6th. Full name of machine and piece. Our Symbol for it. Symbolic name as often used. P .a U U °> M 6" • 4' Engine lathe, spindle head .... No. 4 Power Press, frame EL A— 4 PPD— I Engine Lathe, A— 4 . . Power Press, D — i . . 4 4 13 12 9 8 7" X 14" Steam Engine, crank shaft . . . . SEG— 51 Steam Engine, G — 51 5 14 9 Buckeye Mowing Machine, left axle nut . . . . MMD— 81 Mowing Machine, D — 81 5 16 II No. 3 Glass Clock, main spring GCC— 105 Glass Mantel Clock,C— 105 6 20 14 One -hole Mouse Trap, choker wire . . . . MTA— 3 Wooden Mouse Trap, A — 3 4 17 13 A SYMBOL BOOK. 231 FPL TABLE B. No. 3 Foot Press. Weight. u 4) Same as I 2 3 4 5 6 7 8 FFH-8* 9 10 FPH-io 21 26 FPJ-26 1 1 Piece name. Material. Frame .... Cast Iron Gib ... Side Bar . . Front Leg . Back Leg Treadle . . Lever . . . Lever Weight Pitman . . Clamp Sleeve Lever Pin . . . Steel . Treadle and Pitman Bolt .... Iron . Rough weight 220 10 45 30 40 17 85 5 12 3 Finished weight. 200 9 40 30 40 15 80 5 10 2 Aggregate finished weight. 200 9 40 60 40 15 80 20 ID 4i i I* Table B is a specimen of part of a page of our " Symbol Book," in which are recorded any machines which have arrived at such a state of perfection and saleability as to be marked " Standard " on our drawings. This table almost explains itself. The piece numbers in ist column do not have the letters prefixed, because the latter stand at the top of the column. " Same as " means that the piece is identical with a piece belonging to some other machine, and can be manu- factured with it. If it is common to several machines in a set, the smallest of the set in which it occurs is given. The " quantity " column tells the number of pieces of a kind required. The last " weight " column, added upward, shows total weight of machine. The piece numbers are " gapped " after each kind of material and also at the ends of " groups " as described further on. This is to allow for future changes and additional pieces ; also that other nearly similar machines, having more pieces, may in general have the same piece numbers. The order in which the pieces are numerically arranged cannot follow positive rules in all cases. In our list of instructions (too long to be here quoted) we direct a classification by materials. In each class we group pieces of the same general character, in regard to the prevailing work to be done upon them, and in natural " machine shop " order ; i.e., first planing, then drilling, or boring, then turning. We also aim to place the heaviest and 232 NOMENCLATURE OF MACHINE DETAILS. most important pieces first. Between each group we *' gap " the numbers. Regarding position in naming pieces, we assume a front to the machine (where the operator is most likely to be placed), and define direction tersely as " forward," " back," " right " " left," "down," "up." The adjectives of position prefixed to piece names are, of course, derived from these words, as " upper," "lower," etc. A perpendicular row of similar pieces, say five, would be rated "upper," "second," "third," "fourth," and " lower." A number of different-sized pieces of similar name may, in like manner, be prefixed " smallest," " second," " third," etc. Before closing, a brief reference to certain (two) supplementary symbols may not be out of place. One is a small letter after a piece symbol (as FPL-21-a), signifying that the piece is obsolete, the standard FPL-21 having been altered.* After a second alteration, the last obsolete piece would be suffixed " b, " and so on. Thus duplicate pieces of old-style machines can be identified and supplied to customers. The other symbol referred to is to indicate the number of the operation in the construction of a piece, and is written thus : FPL-21-ist, FPL-2i-2nd, etc. Its use is of great value on detail drawings, time cards, and cost cards. It enables any operation (no matter how trivial), on any piece of any machine, to be identified by a symbol alone. An operation we define as any work which is done by one perso7i at one time, before passing the piece along and commencing upon another. * In a letter to the authors, Mr. Oberlin Smith writes : " I have not yet changed the system in my own practice, and do not see anything which I think it desirable to change except the first supplementary symbol mentioned in the first part of the last paragraph. The principle there mentioned is not strictly logical, as it gives the same symbol to a piece in present use which in a previous year was given to a somewhat different one now obsolete. This matter I intend to modify somewhat, but have not yet had time to do so." APPENDIX B. THE RATING OF FACTORIES CONTAINING MACHINERY. As, for a long time, questions have arisen as to how far machinery and plant is to be taken into consideration in estimating the Questions rateable value of the premises in which the business as to is carried on, it may be useful to give a brief rateabiUty. outline of the present position of this subject. The assessments originate with Overseers of the Poor, and assessment committees, and in practice the greatest diversity ■jijjg prevails in computing them. When there are a few assessing small factories in a district the value of the machinery authorities, jg often ignored in framing the assessment, which is in such cases based on the estimated or actual net rental value, as with a shop or dwelling-house. In districts in which industry is localised the assessing authorities often take the capacity of production as the guide to the assessment, and base their Varying computations on the spindle, horse-power, or other modes of common factor in the trade,* whilst in many instances assessment, ^j^g assessors have adopted rules originally intended for very different kinds of property, or formulated entirely new * Such an assessment, does not take cognisance of the wear and tear of machinery and its tendency to obsolescence, and thus bears unduly and unfairly against those factories which have been longer established than their rivals, and are already burdened with older t)pe machinery. In a pamphlet on the " Incidence of Local Taxation," Mr. Hedley states that in 1S83 the Hunslet Union Assessment Committee decided to disregard the law laid down by the High Court (in the Bishopswearmouth case) and resolved to exclude 234 RATING OF FACTORIES CONTAINING MACHINERY. modes of valuation. This want of uniformity as between district and district, handicaps certain trades in the one as compared with similar trades in the other district, whilst inequality or uncertainty of allotment is unfair as between individuals trading in the same district, for " it must always be remembered that the real end and object for the assessment of property is not to determine as a mere speculative question the rent at which it might let from year to year, but to bring the particular property down to a common basis, so that the burden of the poor-rates may be equally borne by the occupiers within the parish. This being so, it does not seem unreasonable, when any should be difficulty arises in ascertaining how a particular on common property or class of property is assessed, that reference basis. should be made to the rules that prevail in the valuation of ordinary classes of property in the parish. Special properties may require special rules, but where there is no such necessity the occupier of property has a right to have applied to his occupation the principles which determine the rateability of other property." * That machinery per se is not rateable is generally admitted ; indeed, any other conclusion would be inconsistent with the Act of 1840 by which personal property was declared not rateable.""* ^^ ^^ rateable. The question is as to how far in factories or works, the machinery is to be taken into account, as enhancing the rateable value of the hereditaments. The law on this point, if law there can be said to be, is to be found in the judge's decisions in cases of appeals dec^ions against assessments^ and these decisions have so widely differed that the author of the legal text-book already referred to admits that it is impossible to reconcile them, whilst many factory occupiers believe that certainty and equality in assessment are only to be obtained by legislative definition of what machinery is to be considered in the assessment. machinery from the assessment of the works, and to rate all engines at a uniform rate of ^^4 per horse-power. And he adds, "To rate all engines on a uniform rate of ;^4per horse-power, irrespective of whether they are common engines with egg-end boilers and a few feet of shafting, or high-class engines with tubular boilers, super-heaters, and many yards ol shafting, is clearly as unfair and unequal as it would be to rate all agricultural lands in the Union at a uniform rate of ;^2 per acre, irrespective of whether the land is worth £^i or ;^5 per acre." ♦ " A Practical Treatise on the Law of Rating," by E. J. Castle, K.C. London : Stevens. LEGAL DECISIONS. 235 The cases referred to extend over the last hundred years, but only four of these need now be taken as landmarks of the subject. The Phoenix ^" 1866 the assessment of the Phoenix Gas Company Gas Com- was appealed against, but it was held that the steam- pany case, engines, boilers, gasholders, retorts, and purifiers at the works and the mains in the public streets added to the per- manent value of the freehold, and as such were rightly considered The Hal- ^^ '^^ assessment. In the following year, however, in stead silk the case of a silk factory at Halstead it was held that factory case, looms and other machines merely screwed to the floor came under the category of movable fixtures, and were not to be considered in the assessment.* In 1877-8, however, the late Lord Chief Justice Cockburn, in the case of " Laing and the Overseers of Bishopswearmouth," expressed some ca^e ^^"^ doubt as to the decision in the Halstead case, and with reference to the case then before the Court, said : " This strikes me as being a case the principle involved in which is of very considerable importance, in which I should hope there would be a final and binding authority upon the subject, and in which we may have to consider the effect of these cases (the cases quoted in the argument), which perhaps may prove to be somewhat in con- ^n flict with one another." In this instance it was held important that the lathes and machines, for planing, driUing, decision. punching, and riveting were properly included in the assessment, as such machinery, though some of it might be capable of being removed without injury to itself or the freehold, was " essentially necessary to the shipbuilding business to which the appellants' premises are devoted, and must be taken to be intended to remain permanently attached to them so long as these premises are applied to that present purpose." In 1886 the Court of Appeal gave a decision which confirms and * Trade fixtures generally (using the term as inclusive of both removable and permanent fixtures) are said to be both theoietically and legally rateable, but the practice of exempting removable fixtures has become almost universal. "The law is that they are part of the premises, and pass under a mortgage, and a tenant is allowed to remove them during his term, not in the same way as he may his carpets, but only because the Courts were induced to relax the strictness of the old rules of law in order that the commercial interests of the country might be enhanced by the encouragement given to tenants to employ their capital in making improvements for carrying on trade, from the certainty of having the benefit of the expenditure secured to them to the end of their term." — " A Practical Treatise on the Law of Rating." E. J. Castle, K.C. London : Stevens. 236 RATING OF FACTORIES CONTAINING MACHINERY. extends that given in the case of Laing v. the Overseers of Bishops- wearmouth. This decision has been given in a case stated for the opinion of the Court by the Northumberland Quarter re^eSt"^* Sessions, who held that the Tyne Boiler Works Corn- decision : pany had been rightly assessed to the relief of the poor, The Tyne the rateable value of their premises being arrived at Boiler ^y ascertaining the gross estimated rental which a Works case. . r , • 1 111 tenant from year to year might reasonably be ex- pected to be willing to give for the use of them (inclusive of the machinery and plant), and by making the statutory deductions from such rental. The premises were occupied under a lease from the Corporation of Newcastle upon-Tyne, and they were described as being rendered suitable for boiler-making by their proximity to the Tyne and as containing machinery for boiler- making, part of such machinery being affixed to the soil, but part, such as a hydraulic riveting machine, two hand-power travelling cranes, and shear legs with engine and boiler, was not attached either to the soil or the buildmg but rested by their own weight. There was a boiler set on a brick seating outside the main building, and the main engine was fixed by iron screw bolts to masonry foundations, in which a well was constructed for the fly-wheel, and other machinery was affixed by bolts or brackets to the walls, or to a foundation of stone or cement. As to the machinery that was not affixed to the soil or building, the hydraulic riveting machine rested upon cement or stone foundations, the travelling cranes ran along the whole length of the main building on rails laid on balks of timber resting upon brackets, and the shear legs were placed on the edge of a timber jetty on the river. The main shafting ran along the entire length of the main building, and all the machines were worked by belts from the main shafting. All the machines and plant belonged to the Company, and were arranged and adapted for use upon the premises for the manufac- turing and setting up of boilers, but there was no intention of permanently annexing them to the soil or premises. Each of the machines was separate, and was from time to time removed for repairs or otherwise without injury to themselves or structural damage to the premises, the object of the attachment described being to steady the machines when working. The Divisional Court having confirmed the order of the North- umberland Quarter Sessions, the Company appealed, with the result that the judgment of the Queen's Bench Division was affirmed. The Master of the Rolls, in giving judgment, reviewed TVNE BOILER WORKS CASE. 237 the various prior decisions on the subject, and stated that the rule might be laid down thus : — Things which were on the premises to be rated, which were there for the purpose of making A rule of ^^^ which made the premises fit as premises for the particular purpose for which they were used, ought to be taken into consideration as enhancing the rateable value of those premises. Anything that would come under this category would pass by demise as between landlord and tenant, and would as such be rightly considered in the assessment.* In 1889 the Chard (Somersetshire) Assessment Committee in assessing lace factories took into consideration the lace-making machinery on the premises. The assessment was appealed against, and the amount thereof was considerably reduced at the Somerset- shire Quarter Sessions : the Assessment Committee was ordered to pay the costs. Against the reduced assessment appeals were carried to the Queen's Bench Division and the Court of Appeal, and in these appeals the original question as to the rating of machinery />er se appears to have become ignored, for the Chard Assessment Committee, after a decision in their favour in the Court of Appeal, suggested a compromise by which, each party paying their own costs, the sum in dispute should be equally divided. The manufacturers accepted the compromise offered, as they were advised that the reduced assessment would represent the rateable value. In similar circumstances the Gloucester and Sunderland Assess- ment Committees have, without there being an appeal to the Queen's Bench Division or Court of Appeal, acted on the lines of compromise carried out by the Chard Committee. The case of Crockett and Jones v. the Northampton Union, which was before the High Court in 1902, referred to very small • The case is thus noted in the Law Times of December 4, 1886 : — "Poor Rate — Rating of Premises used for a particular purpose — Chattels on the Premises— Boiler Works — -Machinery and Plant. In assessing premises to the poor rate, the question whether chattels on the premises are affixed to the soil or not is not an absolute test in determining whether or not they are to be taken into account as enhancing the value of the premises. But things which are on the premises to be rated, and which are there for the purpose of making them, and which do make them, fit as premises for the purpose for which they are used, ought to be taken into account for rating purposes. Therefore the machinery and plant of a boiler works which (whether affixed to the soil or not) is essentially necessary to the carr)'ing on of the business to which the premises are devoted, and which is intended to remain upon the premises so long as they are used for the same purpose, ought to be taken into account as enhancing the value of the premises." 238 RATING OF FACTORIES CONTAINING MACHINERY. machines used in the manufacture of boots and shoes. The premises in question consisted of a boot manufactory fitted with two classes of machinery, the first class consisting of gas engine, boilers, shafting, etc., and which were admittedly part of the freehold and which both sides agreed were to be taken into con- sideration in arriving at an assessment of the premises ; the second class is what is usually known as Tenants' Machinery, consisting chiefly of small sewing and cutting machines necessary for the manufacture of boots and shoes, none of the machinery being so fixed as to be part of the freehold. Some of the machines did not need to be bolted to the flooring, but were steadied by putting the footplates under wedges. They were driven by power from overhead shafting and pulleys. This latter class the Union Authorities had included in their assessment of the premises, whilst the appellants contended that such machines were "chattels." The High Court held that the Assessment Com- mittee were right in taking the second class machinery into consideration in fixing the assessment, and that the rateable value was to be based upon the suitability of the premises to receive the second class machinery, and on the fact that such machinery was on the premises. Throughout the judgments in the Bishopswearmouth, Tyne and Northampton cases, there seems to run an assumption that a hypo- thetical tenant might give a higher rent for premises The decisions ^ reason of his having the opportunity of taking the criticised. ■' , . . , ,° . KL, ■ ■ 1 i 1 ^ machmery contamed therem. 1 his is probably true as regards motive power and the machinery common to most trades, which is generally attached permanently to the premises, and these, on account of being so furnished, let at higher rentals. But specially designed machinery can only increase the probable rental, and therefore the assessment, if the premises are let to an incoming tenant carrying on the same trade as the outgoing tenant and by means of similar mechanical appliances, and in that case part of the increased rental would be due to the opportunity of entering furnished premises, and part to the opportunity of acquiring by purchase from the outgoing tenant some of the machinery which he might otherwise remove.* The decisions referred to will probably so intensify the confusion * " Trade fixtures attached to the soil are to be taken as landlord's property, subject only to the special privilege granted to the tenant who has put them up of removing them during his tenure." — " A Practical Treatise on the Law of Rating," by E. J. Castle, K.C. TYNE BOILER WORKS CASE. 239 in the minds of the various rating authorities with regard to what is and what is not to be considered as assessable, as to lead to useful controversy with regard to what should and what should not be assessable, and eventually to legislative enactment on the subject. In view of these varying decisions or interpretations of the law, and the uncertainty and want of uniformity in assessments, a Bill to amend the law relating to the Rating of Machinery was introduced into the House of Commons in 1885, but was not proceeded with until 1893, when, owing to the exertions of the National Society for the Exemption of Machinery from Rating, a somewhat similar Bill was introduced into Parliament to amend the law. This Bill and similar Bills have been carried on second reading in the House of Commons in the various sessions in which they have been introduced. The Royal Commission on Taxation considered the subject and reported in igoi. The Commissioners favoured an alteration of the law in the sense proposed by the Bill, stating, " We therefore recommend that in estimating the rateable value of any hereditament occupied for trade, business, or manufacturing purposes, there shall be excluded from the assessment any increased value arising from machines, tools, or appliances which are not fixed, or are only so fixed that they can be removed from their places without necessitating the removal of any part of the hereditament, but the value of any machinery or plant used on the hereditament for producing or transmitting first motive power, or for heating or lighting a hereditament should be included." On December 18, 1905, the House of Lords gave judgment in the appeal case of Kirby, and the Assessment Committee of Hunslet Union and others, and dismissed the ratepayers appeal on the ground, mainly it would seem, that the lower Courts had for fifty years passed successive judgments to the same effect. This was the first time the question had been raised in the House of Lords. In effect it was in this case held by the final Court, that in assessing the value of premises used as engineering works, the value of user of the machinery, which is on the premises for the purpose of making the premises fit, as such, for engineer- ing works, must be taken into account as enhancing the value of the premises, even if such machinery is not fixed to the freehold by physical attachment so as to form part thereof. The work of educating public and parliamentary opinion on this matter has been ably taken up by the Machinery Users 240 RATING OF FACTORIES CONTAINING MACHINERY. Association who, in the session of Parliament in 1906, introduced a Bill applicable to England and Wales by which it was provided " From and after the passing of this Act in estimating for the purpose of any valuation list, or poor or other local rate, the gross estimated rental or rateable value of any hereditament occupied for any trade, business, or manufacturing purposes, any increased value arising from machines, tools, or appliances which are not fixed or are only so fixed that they can be removed from their place without necessitating the removal of any part of the said hereditament shall be excluded. " Provided that the gross estimated rental of any such heredita- ment shall be estimated at not less than the sum at which it might reasonably be expected to let for the purpose for which it is used on a tenancy from year to year void of the machines, tools, and appliances which it might reasonably be expected would be supplied by the tenant, if the tenant paid all the usual tenants' rates and taxes and if the landlord undertook to bear the cost of the repairs and insurance and the other expenses (if any) necessary to maintain the said hereditament in a state to command such rent. " Provided also that the terms machines, tools, and appliances for the purposes of this Act shall not apply to any machinery, machine, or plant used in or on the hereditament for producing or transmitting first motive power, or for heating or lighting the said hereditament." On the promise of the Government to introduce a Valuation Bill of their own the Bill of the Machinery Users Association was not re-introduced in the following session, and in the opinion of the Association no favourable opportunity for the introduc- tion of a Bill of a similar proposal presented itself till 1920. In the preamble of the Bill then introduced, it was declared that doubts have arisen as to how far machinery is to be included or taken into consideration in estimating the value for purposes of local rates of hereditaments occupied for any trade, business, or manufacture, that the practice of estimating such value is not uniform throughout England and Wales, and that the law relating thereto in England and Wales differs from that in force in Scotland, and that it is desirable to secure uniformity, it should be enacted that — (i) In the construction of any enactment relating to the gross estimated rental, gross value, annual value, rateable value, or assessable value of any hereditament for the purpose of any local rate, or of the basis or standard thereof, THE BILL OF I906. 24 1 or of any valuation list, or of any water rate or water rent, the word hereditament shall be deemed to include such machinery only as is fixed or attached to the hereditament. (2) In the case of any hereditament occupied for any trade, business, or manufac- ture, the expression " fixed or attached " in the preceding section shall be construed as applying to all machinery, machines, or plant, in or on the hereditament, for producing or transmitting first motive power or for heating or lighting such hereditament, but save as herein provided shall not apply to machine tools or appliances which are only so fixed that they can be removed from their place without necessitating the removal of any part of the hereditament. Pending settlement of the question it may be serviceable to enumerate some of the points to be considered before agreeing to or dissenting from assessments. The basis of assessment on factories rented from year to year is naturally the actual net rental value. Questions only arise where the occupier's interest is that of a freeholder or a lessee as^*s** °nt ^°^ ^ term of years, and where machinery has been * erected by the occupier qua occupier. In either case the basis of assessment would be the gross estimated rental which in a particular district, under ordinary circumstances, a tenant from year to year might reasonably be expected to give for the use of the premises inclusive of the machinery and plant, with the deduction on account of maintenance, repairs, fire insur- ance, and any charges which in a term of years would have to be met before profit could be reckoned.* In the case of fac- tories occupied by the owner it should be remembered that the assessment is made on him as an occupier, and that he should discriminate between his dual interests. Whilst calculations on the basis of the capital sunk in the building and on his plant, and the interest thereon, are aids in checking the estimated rental that would be receivable, they cannot be considered as final, or as yielding a basis of assessment, owing to numerous accidental circumstances, such as the increase or decrease in the value of ground -rents, and of variation of cost in the construction of new, or structural alteration in, old factories. The same basis of assessment is often applied to the rating * This deduction should, in our opinion, include a provision for obsolescence. All machinery is of a changeable nature, and provision has constantly to be made for its going out of fashion. R 242 RATING OF FACTORIES CONTAINING MACHINERY. of workshops, using that term as distinctive of places where production is not made for profit, but where pro- asscs-^'cnt* duction Or repairs are effected for the sole use and on work- benefit of the occupiers. In this category fall the °'**' shops of railway, gas, tram, water, and similar under- takings, as also national and municipal workshops. Aid in checking that portion of the assessment which may be said to be on account of machinery, is derivable from a Machinery Ledger, if such be kept (see Chapter VII.). The value of the machinery that would pass with the freehold would be ascertainable from it. The statute law in Scotland as regards the rating of machinery differs from that of England. In the former country, the main statutes are the Lands Valuation Act of 1854, which under the term " lands and heritages " includes " all machinery fixed or attached to any lands or heritages " as liable to assessment, and the Valuation Act of 1902. In the case of the North British Railway Co. (1887, 25 Sc. L. Rep. 4), Lord Fraser held that machinery that could be " detached without destruction to itself or injury and destruction to the building," was not attached and was not assessable. In 1894, Lord Wellwood held, in the case of Cowan & Sons, Limited, that such machinery was assessable provided it could be shown to have been attached to the premises in order to be permanently or quasi-permanently used in that position, and that the buildings had been altered and specially adapted to the use of the machinery, and would require to be reconstructed or altered if the machinery were removed, unless replaced by machinery of precisely the same size or shape. This view was upheld by the Lands Valuation Appeal Court in March, 1902, when, in the case of James Carmichael & Co., Limited, it was held that machines in an engineering foundry attached by bolts to specially prepared foundations were assessable. Under the Act of 1902, machinery or plant for "producing or transmitting first motive power" are rateable. The ambiguity of the phrase, " first motive power," has led to several appeals against assessments, but the results of such appeals have not on the whole been satisfactory to manufacturers. The practice by which surveyors arrive at the deduction to be made from the gross to produce the rateable value, varies in different districts, and with different surveyors. It is of consider- able importance to the occupiers of factories, however, to see that they are obtaining the full abatement to which they are entitled. ANNUAL VALUE OF MACHINERY. 243 In London, by the Statute of 1869, the maximum deduction is one-third, and this, in cases where the gross value of the machinery is small relatively to the value of the lands and build- ings, may lead, where varying rates of deduction are allowed on land, buildings, and machinery respectively, to the anomaly of a property containing machinery being assessed at a lower rateable value than a similar property not containing machinery. The London Assessment Conference of 1904, conscious of the anomaly thus produced, adopted the suggestion made by Mr. Harper, the statistical officer of the London County Council, that as a working rule the difference between the gross and rateable value should be computed as follows : — 1. Arrive at the gross value of the lands and buildings in the usual way, and deduct therefrom the usual proportion to arrive at the rateable value. 2. Arrive at the gross value of the machinery by taking a percentage of ten per cent, on the capital value, and deduct therefrom a portion of two-fifths to arrive at the rateable value. 3. The total of these two deductions will represent a fair amount to be deducted from the gross value to arrive at the rateable value of the hereditaments as a whole. In January, 19 14, the Machinery Users Association (Incor- porated) established a rating and valuation department to render advice and assistance in connection with rating. APPENDIX C. TABLE FOR DETERMINING AMORTIZATION OF LEASES, &c, [For examples, see page 250). Years Pur. Years Pur. Years Pur. Years Pur. Years. Years. 3 per Cent. 4 per Cent. 5 per Cent. 6 per Cent. 1 5 •489 i -485 I •482 1 -479 ^ i I •971 I •962 I -952 I •943 I I I^ 1-446 l| 1-438 I^ I-4II li 1-395 ij I^ 2 1-913 2 1-886 2 I-S59 t 1-833 if 4 2 4 2-374 2i 2-335 2i 2-297 H 2-259 H 3 2-829 2| 2-775 2| 2-723 3i 2-673 2f 3, 3i 3-276 3I 3-207 3| 3f 3-140 3075 3 3l 4 3-717 i 3-630 3-546 3^ 3-465 3h 4 41 4-152 4-045 4 3-942 4 3-S44 3l 4i 5 4-580 4? 4-452 4l 4-329 4i 4-212 4i 5 51 5-002 5 4-851 5^ 4-707 4f 4-570 4J l^ 6 5-417 5i 5-242 5-076 5 4-917 5, 6 6^ 5-827 sf 5-626 1* 5-435 '^h 5-255 ^1 6J 7 6-230 b\ 6-002 6 5-786 5? 5-582 7 n 6-628 ^1 6-371 6^ 6-129 6| 5901 6 7i 8 7-020 7 6-733 6|- 6-463 6^ 6-2IO 6i 8 8i 7-406 7| 7-087 7 6-789 6| 6510 6| 8J 9 7-786 8? 7-435 7^ 7-108 7 6S02 6| 9 9| 8-i6i 7-776 7f 7-419 7i 7-035 7 9| 10 8-530 82 8-III 8 7-722 7t 7-360 -1 /4 10 10^ 8-894 9 8-439 8^ 8-oi8 8 7-627 71 loi II 9-253 9\ 8-760 H 8-306 8i 7-887 8 II "i 9-606 9\ 9-076 9 8-588 8^ 8-139 8i "^ 12 9-954 10 9-385 9^ 8-863 8| 8-384 8| 12 14 10-297 loi 9-688 9f 9-132 9I 8-622 ^ "J 13 10-635 lOf 9-986 10 9'394 9i 8-853 8f 13 13^ 10-968 II 10-277 lOi 9-649 9f 9-077 9, 13^ 14 11-296 "J 10-563 10^ 9-899 10 9-295 9i 9 14 14I 11-619 "^ 10-843 io| 10142 .oi 9-507 143 IS 11-938 12 ii-iiS II 10-380 lOj 9-712 9i •5 15^ 12-252 I2i 11-388 11^ IO-6l2 10^ 9-912 10 15^ 16 12-561 I2J 11-652 ii| 10838 lOf IOI06 10 lb l6i 12-866 I2I 11-911 12 1 1 059 II 10-294 lO; 16^ 17" 13-166 13? 12-166 12I 11274 Hi 10-477 10- • 17 I7i 13-462 I3i 12-415 12^ 11-484 I'l 10-655 ID; I7i 18 13-754 13I 12-659 I2f 11-690 III 10-828 lOj 18 i8| 14041 14 12-899 13, 11-890 12 10-995 II 18J 19 14-324 I4f 14I 13-134 I3J 12-085 12 11-158 "t 19 I9i 14-603 13-364 I3i 12-276 12^ 11-316 "1 i9i 20 14-877 15 13-590 I3i 12-462 122 11-470 20 DETERMINING AMORTIZATION OF LEASES, ETC. 245 TABLE FOR DETERMINING THE AMORTIZATION OF LEASES, &c. {For examples, see page 250.) Years. Years Pur. Years Pur. Years Pur. Years Pur. 7 per Cent. 8 per Cent. 9 per Cent. 10 per Cent. Years. \ •475 \ •472 1 •469 i •465 i 1 2 I •935 I •926 I -917 I -909 I I I^ 1-379 li 1-363 li 1-347 H 1-332 'i I| 2 I -808 if 1-783 2I 1-759 i| 1-736 If 2 2^ 2223 2I 2-188 2-154 -4 2-120 2 2| 3 2624 4 2-577 2i 2-531 2| 2-487 2| 3 3i 3-012 3, 2-952 3, 2-893 3" 2-836 H 3i 4 3-387 l\ 3-3'2 l\ 3-240 3l 3-170 3i 4 4^ 3-750 3l 3-659 3-572 3i 3-488 3* 4h 5 4-100 4 3-993 4 3-890 4 3-791 -.3 J4 5 5J 4-439 4? 4-314 4i 4-194 4i 4-080 4 5i 6 4-7t>7 4f 4-623 4i 4-486 4i 4-355 4f 6 6^ 5083 5 4-920 5 4-765 4f 4-6 1 s 4i 6i 7 5-389 l\ 5-206 5i 5-033 5 4-868 4l 7 "1 ' 2 5-685 51 5-482 5i 5-289 5i 5-107 5 71 8 5-971 6 5-747 5J 5-535 5i 5-335 5? 8 ^ 6248 6f ^1 6-002 6 5-770 5| 5552 8i 9 6-515 6-247 6i 5-995 6 5-759 J4 9 9^ 6-774 6483 6| 6-2II 6i 5-956 6 9h 10 7-024 7 6-710 6| 6-418 6| 6-145 6i 10 lOl 7-265 7i 6-929 7 6-6i6 6* 6| 6-324 6| loi II 7-499 l\ 7-139 7i 6 805 6-495 II "1 7-724 7i 7-341 if 6-987 7 6658 6f '4 12 7-943 8 7-536 7-161 "t 6-814 6| 12 I2| 8-154 8i 7-723 7f 7-327 7I 6-962 7 I2| 13 8-358 8| 7-904 8 7-487 7i 7-103 7 13 n\ 8-555 8-077 8 7 640 7f 7-238 7i 7l '3l 14 8-745 8f 8-244 8| 7-786 7| 7-367 14 Ml 8-930 9 8-405 7-926 8 7-489 71 14^ '5 9-108 9 8-559 8 -06 1 8 7-606 7k 15 ^l\ 9-280 9i 8-708 8f 8-189 8i 8| 7-717 7t 15I 16 9-447 9i 8-851 8| 8-313 7-824 7f 16 i6| 9-608 9| 91 8-989 9 8-431 81- 7-925 8 i6i 17 9-763 9-122 9 8-544 H 8-022 8 17 J 7^ 9-914 10 9-249 9i 8-652 8| 8-II4 8 '7^ 18 10059 10 9-372 9* 93 8-756 8| 8-201 H 18 \^ I0-20O lOi icj 9-490 8-855 8| 8-285 H 18^ 19 10-336 9604 q| 8-950 9 8-365 8| 19 '9i 10-467 lo| i 9-713 9| 9-041 9, 8-441 ^1 i9i 20 10-594 lOl 9-818 9129 9i 8-514 20 246 DETERMINING AMORTIZATION OF LEASES, ETC. TABLE FOR DETERMINING THE AMORTIZATION OF LEASES, &c. Continued. Yeari. Years Pur. 3 per Cent. 17-647 17-877 18-104 18-327 18-547 18-764 18-978 19-188 19-396 19-600 19-802 20-000 20-196 20-389 20-579 20-766 20-950 21-132 2I-3II 21-487 2I-66I 21-832 22-OOI 22-167 22-331 22-492 22-652 22-808 22-963 23-"5 Years Pur. 4 per Cent. 1 91 X3-812 14-029 14-242 14-451 14-656 14-857 15054 15-247 15-436 15-622 15-804 15-983 16-158 16-330 16-498 16-663 16-825 16-984 17-139 17-292 17-442 17-588 17-732 17-874 18-012 18-148 18-281 18-411 18-539 18-665 18-788 18-908 19-027 19-143 19-256 19-368 19-477 19-584 19-690 19-793 13-799 13-948 14-094 14-236 H-375 14-511 14-643 14-772 14-898 15-021 15-141 15-258 15-372 15-4H 15-593 15-699 15-803 15-904 16-003 16-099 16-193 16-285 16-374 16-462 16-547 16-630 16-711 16-791 16-868 16-943 17-017 17-089 17-159 Years Pur. 6 per Cent. II-619 11-764 11-905 12-042 12-174 12-303 12-429 12-550 12-669 12-783 12-895 13-003 13-108 13-211 13-310 13-406 13-500 13-591 13-679 13-765 13-848 13-929 14-008 14-084 14-158 14-230 14-300 14-368 14-434 14-498 14-561 14-621 14-680 14-737 14-792 14-846 14-898 14-949 14-998 15-046 Years. DETERMINING AMORTIZATION OF LEASES, ETC. 247 TABLE FOR DETERMINING THE AMORTIZATION OF LEASES, &c. Cojttinued. Years. Years Pur. Years Pur. Years Pur. Years Pur. 7perC ent. 8perC ent. 9 per Cent. 10 per Cent. Years. 20\ IO717 io| 9-919 10 9-212 9\ 8-583 8^ 20^ 21 10-836 io| 10-017 10 9-292 8-649 H 21 2'^ 10-950 II 101 1 1 10 9-3^9 9\ 8-712 H 2'l 22 ii-o6i II 10-201 lOi 9-442 9| 8-772 H 22 22^ II-I68 "i 10-288 loi 9-513 8-829 8| 22| 23 11-272 "i 10-371 I0| io| 9-580 9J 8-883 9 23 23^ 11-372 "4 10-451 9-645 9f 8-935 9 23i 24 11-469 III 10-529 10^ 9-707 9f 8-985 9 24 24 11-563 Hi 10-603 io| 9-766 9f 9-032 9 24^ 25 11-654 III 10-675 io| 9-823 9i 9-077 9 25 25i 11-741 ii| IO-744 IO| 9-877 10 9-120 9 25I 26 11-826 iif io-8io io| 9-929 10 9-161 9i 26 26i 11-908 12 10-874 9-979 10 9-200 9\ 9i 26i 27" 11-987 12 10-935 10-027 10 9-237 27 27i 12-063 12 10-994 10-072 10 9273 9i 27h 28 12-137 1 21 11-051 IO-II6 10 9-307 9? 9} 28 28i 12-209 I2i 1 1- 106 10-158 io| lol loi 9-339 28| 29 12-278 I2i 11-158 10-198 9-370 29 29^ '2-344 I2i 11-209 10-237 9-399 9\ 29I 30 12-409 12^ 11-258 I ri 10-274 lOi 9-427 9\ 30 30^ 12-471 I2j "•305 iii 10-309 loi 9-454 9h 30^ 31 12-532 12^ 11-350 1I4 IO-343 loi loi 9-479 9h 3', 3i| 12-590 I2I "•393 11^ 10-375 9-503 9? 9i 3'! 32 12-647 I2| "•435 "i 10-406 I05 9-526 32 32i 12-701 I2f 11-475 "i 10-436 I02 9548 9j 32| 33, 12-754 I2| 11-514 Hi 10-464 io| 9-569 9? 33 33i 12805 I2| "•551 III 10-492 io| 9-589 9* 33i 34 12-854 12| 11-5S7 1 1 J 10-518 io\ 9-609 9\ 34 34 12-902 13 11-621 "2 10543 loi 9-627 9f 34i 35 12-948 13 "•655 4 10-567 I05 9-644 9f 35 35^ 12-992 13 11-686 I T^ ' '4 10-590 loj 9-661 9f 35i 3(> 13-035 13 11-717 Ilf 10-612 loi -9-677 9: 36 36I 13-077 13 11-747 \\l 10-633 lol 9-692 9. 36i 37 i3-"7 13 11-775 10-653 I of 9-706 9. 9:- 37 37i 13-156 i3i 11-803 "f 10-672 .lOf 9-720 37i 38 13-193 I3i 11-829 ' '4 10-691 loj 9-733 9f 38 38^ 13-230 '4 11-854 ' '4 10-709 10 J 9-745 9. 38^ 39 13-265 I3i n-879 12 10-726 I of 9-757 9: 39 39i 13-299 nk 11-902 12 10-742 io| 9-768 9 39^ 40 13332 I3i 11-925 12 10-757 lOf 9-779 9: 40 248 DETERMINING AMORTIZATION OF LEASES, ETC. TABLE FOR DETERMINING THE AMORTIZATION OF LEASES, &c. Contimied. Vears. Years Pur. 3 per Cent. Years 4perC Fur. ent. Years Pur. 5 per Ceut. Years Pur. 6 per Cent. Years. 40j 23-265 23i 19-894 20 17-228 15-093 15 40^ 41 23412 23I 19-993 20 17-294 i7f 15-138 '5^ i5t "^^ 4H 23-558 23i 20-090 20 17-360 I -1 '/4 15-182 4'^ 42 23-701 23f 23I 20-186 20I 20|- 17-423 I7i 15-225 '5i 42 42J 23-843 20-279 17-485 171 15-266 i5i 42| 43 23-982 24 20-371 20| '7-546 '/2 15-306 I5:- 43 ^^\ 24-119 24 20-461 20,- 17-605 15-345 15- 43^ 44 24-254 244- 20-549 20.^ 17-663 '7r 15-383 15 44 44i 24-387 241 20-635 20| 2o| 17-719 ■7| 15-420 '5; 445 45 24-519 24i 20-720 17-774 ' / 4 15-456 153 45 45^ 24-648 24I 2O-S03 20| 17-828 I7f 15-491 15^ 45^ 46 2+-775 24I 20-885 21 17-880 j8 15-524 153 46 46^ 24901 25 20-965 21 17-931 18 15-557 '5i 46I 47 25025 25 21-043 21 I7-9«I 18 15-589 i5i 4^ 471 25-147 25i 21-1:0 21 18-030 18 15-620 ijj 47i 48 25-267 254 21-195 21I 18-077 18 15-650 I5f 48 48^ 25-3S5 255 21-269 ^^k 18-123 18 15-679 15;- 48I 49 25502 25^ 21-341 2ii 18-169 'l^ 15-708 15;- 49, 49| 25-617 25t 21-413 2>l 18-213 'l^^ 15-735 15:- 49a 50 25-730 25f 21-482 2i| 18-256 i8i 15-762 i5i- 50 51 25-951 26 2i-6r7 2li 18-339 181 15-813 i5i- 51 52 26-166 261 21-748 2l| 18-418 i8i 15-861 i5i- 52 53 26-375 26i 2I-S73 18-493 i8| 15-907 16 53 54 26-578 26i 21-993 22 18-565 ^^ 15-950 16 54 55 26-774 26| 22-109 22 18-633 iH 15-991 16 55 56 26-965 27 22-220 22I 22I 18-699 i8| i8| 16-029 16 S6 57 27-151 27i 22-327 18-761 16-065 16 57 58 27-33' 27i 22-430 22i 18-820 i8f 1 6-099 16 58 59 27-506 27i 22-528 22i 18-876 19 16131 I6i 59 (jo 27-676 27^ 22-623 22i 18-929 19 i6-ibi I6i 60 65 28-453 28^ 23-047 23 19-161 19} 16-289 l6| i6| 65 70 29-123 29 23-395 231 19-343 194^ 16-385 70 75 29-702 29f 23-680 231 19-485 19^ 16-456 16| Z5 80 30-201 30i 23-915 24 19-596 19I 16-509 16^ 80 85 30-631 30f 24-109 24 19-684 194^ 16549 I6i 85 90 3 1 -002 31 24-267 24J 19-752 I9f 16-579 i6| 90 95 3'-323 l^\ 24-398 H\ 19-806 I9| 16-601 95 100 31-599 3>5 24-505 24i 19-848 1 91 16-618 i6| 100 Perp. 33-333 33i 25-000 25 20-000 20 16-667 i6| Perp. DETERMINING AMORTIZATION OF LEASES, ETC. 249 TABLE FOR DETERMINING THE AMORTIZATION OF LEASES, &c. Continued. Years. Years Pur. Years Pur. Years Pur. Years Pur. 7per C ent. 8perC ent. 9 per Cent. 10 per ::ent. Years. 402 n-i^i '4 11-946 12 10-772 10'' 9-789 9; 40^ 41 13-394 i3i 11-967 12 10-787 IO| 9799 9: 41 41^ 13-424 «3i 11-987 12 10-800 io| 9-S08 9i- 9i- 4i| 42 13-452 •3l 12-007 12 10813 10^ 9817 42 44 13-480 •3i 12-025 12 10-826 io| 9-826 9; 42i 43 13-507 i3i 12-043 12 10-838 io| 9-834 9t 43 43i 13-533 133 I3a 12-060 12 10 849 lOf 9-842 9f 9|- 9| 432 44 •3-558 12-077 12 IO-86I io| 9-849 44 44^ •3-582 13I 12-093 12 10-871 lol 9-856 44 45 xybod 132 12-108 12 10-881 11 9-863 n 45 45i 13-628 '31 12-123 12 10-891 9869 91 45i 45 13-650 i3i 12-137 I2i 10-900 9-875 10 46 46i 13-671 I3f 12-151 12| 121- 10-909 9-881 10 46I 47 13-692 I3f 13I 12-164 10-918 9-887 10 47 47J 13711 12-177 10-926 9-892 10 47^ 48 13-730 '31 12-189 '1 i2i 12! •0-934 9-897 10 48 48I 13-749 i3t 12-201 10-941 9-902 10 48i 49 13-767 i3f 12-212 10-948 9-906 10 49 49i 13-784 '4 12-223 I2i 10-955 9-911 10 49i 50 *i3-8oi •3? 12-233 i2i 10-962 9-915 10 SO 51 13-832 '4 12-253 12! I2I 10-974 9-921 10 51 52 13-862 I3t 12-272 10-985 9-930 10 52 53 13-890 14 12-288 10-996 9-936 10 53 54 13-916 14 12-304 I2| I2i 1 1 -005 9-942 10 54 55 13-940 14 12-319 11-014 9-947 10 55 S^ 13-963 14 12-332 I2| 11-022 9-952 10 56 SI 13-984 14 •2-344 I2| I2I 11-029 9956 10 57 58 14003 14 12-356 11-036 9-960 10 58 59 14022 14 12-367 I2i 11-042 9-964 10 59 60 14-039 14 12-377 I2i 11-048 9-967 10 60 65 14-110 H 12-416 I2i 11-070 9-980 TO 65 70 14-160 Mi 12-443 IH 11-084 9-987 10 70 75 14-196 Mi 12-461 I2i 11-094 9-992 10 75 80 14-222 Ml 12-474 I2i II-IOO J . 9-995 10 80 85 14-240 Ml 12-482 ^^l 11-104 9997 lOi 85 90 14-253 Ml 12-488 I2J 11- 106 9-998 10 90 95 14-263 mJ 12-492 •2^ 11-108 9-999 10 95 100 14-260 12-494 I2i 11-109 9-999 10 100 Pel p. 14-286 Mi 12-500 12^ ii-iii lOOOO 10 Perp. 250 DETERMINING AMORTIZATION OF LEASES, ETC. Examples. The foregoing Table is reproduced from the twenty-second edition of Inwood's "Tables for the Purchasing of Estates, etc," by kind permission of the publishers, Messrs. Crosby Lockwood and Son, and shows the annual amounts to be debited to Profit and Loss Account, and credited to account of Lease or other object to be amortized in a given number of years with interest at 3) 4) 5) 6, 7, 8, 9, and 10 per cent, per annum. The table is also serviceable for ascertaining the value of a Lease at the several rates of interest.* Example: — A Lease or Annuity for 14 years, to make 3 per cent, and to get back the principal, is worth 11 "296 or 115 years' purchase of the clear annual rent; at 4 per cent., io'563, or 10^ years' purchase: at 5 per cent., 9'899, or 10 years' purchase; at 6 per cent., 9"295, or 9^ years' purchase. In calculating the value of Annuities, Leases, etc.. Compound Interest is always reckoned and allowed. A hypothetical Ledger Account, showing the amortization of a Lease at 5 per cent, per annum, will be found, with a description in Chapter VII. * For other rates of interest than are shown in the Table here reproduced < the reader may be referred to the current edition of "Inwood's Tables" (London : Crosby Lockwood & Son), where a similar Table is given, but extended to many more rates of interest — 16 in all : namely, l|, if, 2, 2^, 2i, 2f, 3, 3i, 4, 4i, 5, 6, 7, 8, 9, and 10 per cent. GLOSSARY OF TERMS. GLOSSARY OF SOME OF THE TERMS USED. The definitions do not extend to terms used in quotations or in the Appendices. Amortization. — The process by which provision is made for the expiration of value in an asset. Appreciation. — The increase in value of assets either through special or general causes. (Opposed to Depreciation, g. v.) Assets. — Property of all kinds, possessed or in reversion which can be applied in satisfaction of liabilities, or turned into money or money's worth. (Opposed to Liabilities, g. v.) Balance Sheet. — A complete summary of debit and credit balances as they appear in the accounts in the Ledger at a given date. Book Value. — The monetary value of any asset according to the books of account. (Distinguished from Market Value, g. v.) Capital. — The money or properties invested in the business. Assets applied to production of further wealth, or assets used as a source of income, or set aside for the satisfaction of future needs. Cash Books. — A commercial book recording the cash trans actions. Commercial Books. — The books pertaining to the counting- house, such as the Ledger, Journal, Cash Book, recording mercantile transactions, as distinguished from Factory Books treating of merchandise. Commercial Ledger. — The Mercantile Ledger (as distinguished from the Stores, Stock, and Plant Ledgers). Cost Journal. — The book in which adjusting entries as to cost are made. Cost Ledger — Cost Book. — The book in which are collected all entries relating to prime cost, and to cost of production. Cost of Production. — The total expenditure incurred in the production of a commodity. 254 GLOSSARY OF TERMS. Counting-House. — The place in which the mercantile book- keeping is conducted. Craft Register. — The book recording the work done by, and the earnings of, each of the Craft. Credit Note. — If received, an advice of indebtedness to the firm. If issued, an advice of indebtedness by the firm. Credit Note Register. — A commercial book in which the credit notes received are registered. Day Book. — A commercial book in which the sales of stock are recorded. Delivery Note. — A request to receive, and a description of, material tendered. Depreciation. — The falling off" in the value of buildings, machinery, plant, and other assets. (Distinguished from Appreciation, q. v.) Dilapidations. — Those defects in a tenement which have arisen from neglect or misuse ; and of use or age, if the efficiency of the structure is destroyed. Establishment Expenses — General Charges. — The general expenses which cannot be directly charged to any particular process or branch of a business. Estimate of Cost. — A calculation of the probable cost of a commodity. Factory. — The place in which manufacturing operations are carried on. Factory Accounts. — The systematic registration for purposes of account of transactions appertaining to manufacture. Factory General Charges. — The general expenses incurred in the factory which cannot be directly charged to any particular Order No. Factory Order. — {See Stock Order.) Factory General Charges Book. — The book in which the Factory General Charges are collected. Fixed Capital. — That part of the capital of a firm which con- sists of the instruments of production of a more or less per- manent character, and the return from which is spread over a period of time. Fixed Plant. — The machinery and appurtenances required for the purpose of manufacture, and permanently located in one position in a factory. (Distinguished from Loose Plant and Tools, q. V.) GLOSSARY OF TERMS. 255 Foreman. — A superintendent of a floor, wing, or shop in a factory, or of a set of men. Fuel Summary Form. — A form summarising the various items of cost in the delivered price of fuel. General Charges. — (See Establishment Expenses.) General Stores Account. — The account in the Commercial Ledger in which the receipts and issues of stores, as recorded in the Commercial Books, are collected. Going Concern. — A business the efficiency of which, for the purpose of profit, is maintained. Goodwill. — The value pertaining to the cHentUe^ or interest in the business. Indirect Expenses. — Outlays not directly remunerative. (Dis- tinguished from General Charges and Establishment Ex- penses, q. V.) Indirect Factory Expenses. — Outlays made in the factory which are not directly remunerative. (Distinguished from Factory General Charges.) Inventory. — A detailed and descriptive catalogue of properties. Invoice. — If received, an advice of indebtedness by the firm. If issued, an advice of indebtedness to the firm. Invoice Allocation (or Bought Day) Book. — A commercial book in which invoices for goods purchased are entered and analysed. Invoice Register Book. — A commercial book in which the invoices received are registered. Issue Notes. — {See Stores Warrants.) Joint Stock Company. — An association of individuals who combine by the subscription of capital to carry on a business. Labour. — That factor in the cost of production which in a given trade represents the work of adapting materials either manually or by machinery. Leading Hand. — The senior hand of a floor, wing, or shop in a factory, or of a gang of men. Liabilities. — The debts and obligations of a firm. (Opposed to Assets, q. v.) Loose Plant and. Tools. — The machinery, tools, and appur- tenances temporarily located in any position in a factory for the purpose of manufacture. (Distinguished from Fixed Plant, ^.z^.) Magazine.— (6V {See Maintenance.) Repairs. ) Reserve Fund. — A provision for contingencies. Residual Value. — The ultimate selling value of assets when worn out or superseded. Retail Warehouse. — The repository for commodities which have been purchased from the makers or other vendors for reselling. Revenue. — The gross return from capital employed. (Distin- guished from Profit and Loss, q. v.) Sales Analysis Book. — A commercial book in which an analysis is made of the sale of stock. Sales Cancelled Book. — A commercial book in which the credit notes given to customers in respect of stock returned are entered. Scrap. — The minimum value of articles, i.e. the price that may be depended on for waste material. S 258 GLOSSARY OF TERMS. Shop Cost. — {See Prime Cost.) Shop Returns Book. — A book in which are recorded the Stores Debit Notes. Shop Work Order.— (.Si?^ Stock Order.) Sinking Fund. — A fund invested in order to provide for an eventual loss or claim. Stock — Stock-in-Trade. — Those commodities which, having been manufactured or purchased, are on hand for sale ; manufactured commodities on hand; contingently, articles purchased for retailing. (Distinguished from Stores, g. v.) Stock Account. — The account in the Commercial Ledger in which are summarised the monetary transactions relating to stock. Stock Books. — Books relating to the receipt and issue of stock. Stock Debit Note. — A factory form used to record the com- pletion of articles manufactured for stock, and their transfer from the factory to the warehouse. Stock Issued Book. — A factory book in which the stock requisitions are recorded. Stock Ledger. — The book in which all entries relating to stock are collected. (Distinguished from Stores, Plant, and Com- mercial Ledgers.) Stock Order. — The instruction to manufacture commodities for stock and to record the expenditure. (Distinguished from Working Order, q. v.) Stock Order No. — The number given to a Stock Order. (Distinguished from Working Order No., g. v.) Stock Received Book. — A factory book recording the receipts of stock. Stock Requisition. — A form used to record the withdrawal of stock from the warehouse. Stock Returned by Customers Analysis Book. — A com- mercial book in which the Stock Returned Debit Notes are analysed. Stock Returned by Customers Book. — A factory book in which the Stock Returned Debit Notes are recorded. Stock Returned Debit Note. — A factory form used to record the return of stock to the warehouse by customers. Stock-taking. — {See Survey.) Stock Uncompleted. — Articles in course of manufacture for stock. Store. — The repository for stores. GLOSSARY OF TERMS. 259 Stores. — The raw material or partially completed articles em- ployed in manufacture or for other purposes. (Distinguished from Stock, q. v.) Stores Account. — {See General Stores Account.) Stores Debit Note. — A factory form recording the return to store of waste or surplus material. Stores Issued Book. — A factory book in which the Stores Warrants are entered. Storekeeper. — The officer in charge of stores. (Distinguished from Warehouseman, q. v.) Stores Ledger. — The book in which all entries relating to stores are collected. (Distinguished from Stock, Plant, and Commercial Ledgers.) Stores Received Book. — A factory book in which the invoices for goods purchased are entered. Stores Rejected Book. — A factory book in which are recorded all the credit-notes received from vendors of goods returned. Stores Requisition. — A requisition from the storekeeper for the purchase of material. Stores Requisition Book. — The book in which stores requi- sitions are entered. Stores Warrant. — A factory form used for the withdrawal of stores. Survey — Stock-taking. — The process of taking an inventory and of examining the condition, etc. of properties. {See Valuation.) Suspense Account. — An impersonal account in the Commer- cial Ledger to which items in abeyance are charged. Symbolic Nomenclature. — The designation by symbols of machines and parts. Time Allocation Book. — The book in which the time records are entered, and in which their apportionment to the various orders is carried out. Time Book. — A factory book used by the timekeeper to record the time made by the employe's. Time Clerk. — The clerk who enters the employe's' records of time, and analyses the same under the various working orders. Timekeeper or Gatekeeper. — The employe whose duty it is to record the time the other employe's enter and leave the factory. Time Record. — A factory form used by the employe's, recording how their time has been spent. 26o GLOSSARY OF TERMS. Time Sheet. — A form used to record the time of lighters, barges, or boats on their journeys. Tools. — Instruments or implements of production of a more or less permanent nature. Tool Order. — An instruction (subsidiary to a Stock Order) to manufacture tools, and by means of which the cost of those to be used in the manufacture of a commodity is ascertained. Tool Order No. — The number given to a Tool Order. Trading Account. — The account in the Commercial Ledger which represents the trading transactions. The debit side of the account records the cost of stock issued, and the credit the proceeds of sales. Transfer Analysis Book. — A commercial book analysing the transfer from stores to warehouse, and vice versa. Transfer Book. — A factory book used to record Transfer Notes. Transfer Note. — A form employed to record transfer of com- modities from store to warehouse, or vice versa. Unclaimed Wages Book. — The book in which are entered the names and wages of those employes who are not paid in regular course. Valuation. — The process of ascertaining by examination and survey the present and prospective value of properties or the earning power of any asset. Viewer. — The examiner of manufactured articles or parts. Wages. — Payment for labour. Wages Account. — The account in the Commercial Ledger in which are collected all the entries relating to wages. Wages Advice. — The form used to record the engagement, or dismissal, or resignation of employe's, any alteration in their rates, fines levied, or premiums allowed. Wages Book. — The book which records the amounts payable to each employe'. Wages Rate Book. — The book in which the rates of wages paid to employes are entered. Wagon and Van Statement Form. — The form on which the earnings of the wagons and vans are shown. Wagon Journey Repairs Book. — The book recording the repairs done to wagons whilst on journeys. Warehouse. — The repository for stock. Warehouseman. — The custodian of the stock. (Distinguished from Storekeeper, q. v.) GLOSSARY OF TERMS. 261 Wear and Tear. — The gradual and normal deterioration of plant and buildings. Working Order. — An instruction to expend labour and material in the maintenance, repair, and renewal of plant and build- ings, and to record this expenditure. (Distinguished from Stock Order, q. v.) Working Order No. — The number given to a Working Order. Writing Down — Writing-off. — The process by which the book value of an article is reduced. JUST PUBLISHED Sixth Edition, Revised and Enlarged, 8^ x 6J. Strongly Bound. 872 pages. Price 25^. net. THE NUMBER, WEIGHT, & FRACTIONAL CALCULATOR Containing upwards of 250,000 Separate Calculations, showing at a glance the Value at 430 Different Rates, ranging from yis^^ of ^ Penny to 20J. each, or per cwt., and ;^20 per ton ; also rates of 30J. , 40^. , 50J-. , 6oj-., 70J-., Soj. , 90J-., and looj. each, of any number of articles consecutively, from I to 470. Any number of cwts., qrs., and lbs., from I cwt. to 470 cwts. Any number of tons, cwts., qrs., and lbs., from i to 1,000 tons. By WILLIAM CHADWICK LONDON: CROSBY LOCKWOOD AND SON INDEX, A BSEi^TEE BOOK, 39 -^-^ Accidents, records of, 220 — Act, notice of, 222 Accountancy, simple form of, 13 — and accountants, 1-12 Accountants, and commercial ledger, 23 — accuracy in accounts, 20 — and accountancy, 1-12 — and technicians, 11 — broad results, I — concentration of transfer books, 171 " Accounting of Industrial Enterprises," 197 Accounts, accurate adjustment of, 16 — and insurance, 144 — applicable to factories, 15 — assimilation of, 24, 27, 206 — commercial, 24 — concentration of, 24, 27, 206 — converging of, 28 — depreciation sometimes ignored in, 132 — fundamental principles of, 15 — in Government factories, 202, 206 — in municipal workshops, 202, 206 — purchase hire system, 203 — statements of, 77 — subdivision and localisation of, 25, 26, 27 — surveys, 183 — utility of system of, 22 Address Book, 71 Adjustment Account, 123 Administration, 8, 14 Advertisement Contract Register, 221 Advice Note, 79 Advice to Warehoiiseiiian, 173 Agriculture, 13 Algebraic formulae in costing, 12 Allowances, 58 — (see Credit Notes) Alterations for customers, 169 Alverstone, C.J., 127 American Association of Public Ac- countants, 197 Amortisation, definition, 253 — of leases, 147, 14S, 149 — tables for, 244-250 Analyses, qualitative, 11, 12 — quantitative, II, 12 Anderson, Mr. W. H. P., C.A., 184 Annuity system, 150 Antiquation (see Obsolescence) Appendices, 31, 225, 233, 244, 253 Appreciation, definition, 253 — direct mode of determining, 135 — practical view of, 143 — reserve fund, 143 Approximation in Factory Accounting, 196 Approval, goods on, 178 Army cost accounting, 3 — Council, 3 Arnold, Mr. H. L., 208 Arsenals, expenditure in, 206 Articles (see Commodities) 263 264 INDEX. Ashley, Professor W. J., 18, 119 Assessments for rating, 233 Assets, appreciation of, 135 — available, 200 — capital account, 143 — Companies Act of 1887, 200 — copyright designs as, 162 — definition, 253 — depreciation of, 135 — determination of life of, 147 — goodwill and patents as, 162 — Income Tax Acts, 144 — opportunities for writing down, 2CX5 — - periodical valuation of, 135 — profit and loss account, 143 — reserve funds, 143 — sinking funds, 143 — stock as, 199 — stores as, 200 — trade marks as, 162 — valuation of, in going concern, 135 — waste of, 164 Audit and surveys, 185 "Auditors, Their Duties and Respon- sibilities," 148 Auxiliary capital, 5 — services, 9 Automatic time recorders, 34 BABBAGE, Charles, 103, 104 Bags, 217 Bad debts, 9 Balance-sheets, advantages of frequent, 183 — definition, 253 — element of uncertainty in, removed, 86 — special assets, 162 — without survey, 183 Barber, M. R. N., F.C.A., 129 Barge Return, 214 — Time Sheet, 215 Barrels, 217 "Basic" value, 195 Bins, 186 Black money, 56 — smoke, 222 Board of Trade Orders and Wages, 62 Boat (see Barge) Boiler Inspection Book, 22 1 Bolton V. Natal Land and Colonisation Co., Ltd., 139 Bond V. the Barrow Hematite Steel Co., Ltd., 140 Book gains, and writing down, 200 Book-keepers, 25 Book-keeping, art of, 22 — basis as regards stores and stock, 30 — cash, 19 — double entry, 14 — economy and efficiency, 24 — fixed capital, 126, 204 — fundamental principles, 15 — labour, 32 — localisation in, 24 — ordinary commercial, 15 — prime cost, 29, 100, 108 — purchase hire system, 203 — recording production and distribu- tion, 165 — science and art of, 23 — special methods, 16 — stock, 165-182 — stores, 74-99 — surveys, 183-201 — treatises on general, 26 Books, concentration, 179 — exteriors, 27, 167 — merging in commercial ledgers, 31 Book value, definition, 253 Boot factories and piece wages, 49 Brewers' accounts, 27 Brigade (Fire) Books, 219 Buckley, Lord Justice, 127, 139 Builders, timekeeping, 41 INDEX. 265 Buildings, depreciation, 144 — evidence of deterioration, 22, 127 — expectation of service, 147 — gross and rateable value, 233-243 — insurance of, 144 — interest on capital, 72 — leases of, 147 — Ledgers, 106, 130, 149 — life of, 147 — maintenance, 28, 105, 106, 126, 131 — repairs and renewals, 105, 126 — surveys and valuation of, 135, 136 Bundy time recorder, 37 Burton, Mr. F. G.,on Depreciation, 159 Business appearing profitable, 196 — conversion of, 22 — development, 9 — disposal of, 22 — expansion, 9 — improvement, 9 — man of, 1 1 — management and cost accounts, i — organisation and management, 12 — profit or loss on branches, 17 — volume of, 204 Buyer, 75 Bye-laws, 222 Bye-products, 98 CALCULAGRAPH, 42 Calendar of deliveries due, 220 Cambridge Gas Co., 141 Capital, buildings, and machinery, 126 — auxiliary, 5 — circulating, 5-S, 127 — consumption, 5 — definition, 253 — expired outlay, 159 — fixed (see Fixed Capital) — income tax, 144 — interdependence with revenue ac- count, 137-142 — loss of, 137 Capital, maintenance, and depreciation, 135 — purchase hire system, 203-206 — rating, 237 — reduction of, 199 — repairs charged to, 131 — specialised, 5 — surplus, 142 — vehicles and horses, 209 — water companies, 133 — working, 8 Cards as records of expenditure, 26, 206 Carmichael & Co. , Ltd. , and rating, 242 Carriage of goods, 77, 208 — law of, 78 Cartage, 203, 208, 210 — Advice, 209 — Book, 208, 209 — contractor for, 208 — cost of, 206 — gatekeeper's check on, 208 — goods bought, 78, 80 sold, 208 — incidence of cost, 20S Carters, wages of, 209 — Weekly Returns, 209 Carver, Professor T. N., 121 Cases, 217 Cash, balance of, 19 — book, definition, 253 — discounts, 77 — purchase hire system, 203 — Sheet, 67 — wages, 68 Cashier, comparison with storekeeper, 190 — wages, 32, 62, 67 Casks, 217 Castle, Mr. E. J., K.C., on rating, 227, 234> 235, 238 Casualty Book, 220 Catalogues Issued Book, 221 Cathless, Mr. A., 107 "Changes in Trade Organisation," 18 266 INDEX. Chapman, Professor Sir S. J., 21 Character Book, 71 — Form, 71 Chard Assessment Committee, 237 Charges, Municipal, 9 — State, 9 Charts, 122 Chattels, non-rating of, 234 Check boards, 34 — boxes, 34 Checks, time, 34 Chemists, manufacturing, accounts of, 27 Children, employment of, 14, 222 — registers of, 72 Church, Mr. A. Hamilton, 161 Circulating capital, 5-8, 127 Classification of traffic, 211 Cleaning factory, 115 Clerks, 24, 25, 58, 79 — invoicing, 175 — prime cost ledger, 109, in — salaries and prime cost, 115 Coachmen, licences for, 221 Coal, consumption of, 9, 218 — Book, 218 — Contract Book, 218 — factors' accounts, 219 — measurement, 186 — Test Book, 218 Coefficients in cost, 1 1 Commercial books, definition, 253 — — external transactions, 23 — — factory books, 23 inadequacy of, 23 manufacture and sales, 166 — — petty cash and prime cost, 109 stores, ledgers, 85 — — stores' warrants, and prime cost, 88 substantiation of, 22 surveys, 183 — Ledger, cash, 19 converging of accounts, 28 Commercial Ledger, definition, 253 — — depreciation of stock, 203 — — — — stores, 200 leases, 148 merging of departmental books, 24. 31 retail transactions, 180 sale of stock, 166, 168 securities, 19 self-balancing, 124 stock account, 166 — ■ debit notes, 168 — — stores, 30 — account, 108 sundry disbursements, 108, 109 surveys, 179, 184, 186 wages account, 109 Commission, Royal, on Taxation, 239 Commodities, classes of expenditure, 29 — cost of manufacture, 17, 113 — production of, 29, 100-113 — sale of, 30, 100, 165, 171-182 — wages and material, 16 Communal undertakings, 7 Companies Acts, 200 " Comparative Depreciation Tables," 131 Comparative Cost Register, 122 Complaint account, 96 "Complete Cost Keeper," 208 Compounding Rates, 73 Containers, 217 Consignment ledger, 179 — notes, 211 Consignments and surveys, 185 Contingency services, 9 Contractors, timekeeping, 39 Contracts Register, 78 Cook, Mr., 130, 151 Coopering Factories and Piecework, 49 Copyright designs, 162 Cost accounting and cost accounts (see also Factory Accounts) INDEX. 267 Cost accounts (see Factory Accounts, also Cost Accounting), 2, 3, 12 — book and symbolic nomenclature, 226 — business management, I — Journal, 114, 253 — Ledger, definition, 253 account clerk keeping the, 102 factory general charges, 108 functions of, 30, 98, 108 goods in manufacture, ill, 112 indirect charges, 120 manufacture of parts, 104 — — material, 88, 90, 94 materials in, 108-113 parts, 105 petty cash, 109 Petty Cash Book, 109 plant charges, 155-157 — — pricing stock from, 110-112 scientific analysis, 1-12 — — self-balancing, 199 stock, 166 — — — account, 11 1 time records, 43 valuations, 154, 155, 193-197 wages, ^2' ^9> 'oo entries, 69, 108, 109 — and expenditure, 6, 7 — and prices, 2 — coefficient, 11 — conditional, 3, 4, II — constituent demand of, 3, 4 — of production 2, 5, 8, 18 — aggregated and recorded, 108 definition, 253 — — distinguished from prime cost, 29 employees' rent, 73 establishment charges, 114, 153, 195 estimate of expenditure, 87 increasing output, 121 Master of the Rolls, 6 material, 95 Cost of parts, loi, 102, 182 — — pressure to minimise, 102 prime, 5-7, 100-113 — — qualitative, 11, 12 — — quantitative, 11, 12 — — Rail way and Canal Commission, 6 — — relative, 6 — — standing charges, 22, 108, 194 valuations, 193-201 — — when not for profit, 206 — — working, 6 — supplementary, 5-7, 119 units of, 10, 1 1 Costing, 2, 3, 7 — business technique, 8 — distinct function of accounting, 4 — Government controls, 2 — methods of, 2, 3 Costs, a system of (see Factory Accounts) — actual, 7, 125 — algebraic formulae, 12 — apparent, 125 — comparison of, 162 — definition, 30 — direct, 7 — factory, 125 — full, 7 — generic, 7 — historical, 125 — marketing, 29 — of production, 8 — relative, 10, 1 1 — standard, 125 — systematic compilation, 4 — total, 5 — true, 7, 125 — ultimate, 8 — various kinds of, 21, 28 Cotton mills, 96, 104 Cotton-weaving factories and piece wages, 49 Counting-house, check on excess sup- plies, 192 — credit notes from vendors, 92 268 INDEX. Counting-house, definition, 254 — factory, 24 — forwarding of goods, 175 — invoice allocation book, 84 — invoices, 80 — invoicing of goods, 177 — records of depreciation, 157 — requisition book, 76, 175 — retail trading, 180 — sales, 167-178 — stock, 175 — stock returned debit notes, 177 — stores debit note, 96 Cowan & Sons and rating, 242 Cowan, Mr. David, 208 Craft Register, 216 definition, 254 Credit Notes, definition, 254 — — from vendors, 92 references on, 92 register, 92 register, definition, 254 their registration, 92 — — to customer, 167, 177 Customers, alterations for, 169 — cartage of goods to, 208 — delivery of goods to, 211 DAILY maintenance, out-workers, 65 Darbishire, Mr. J. E., and deprecia- tion, 159 Davisson, Professor, 16 Day-book, analysis of sales, 172 — definition, 254 — invoices rendered, 167 — trading account, 179 Dead expenses, 114 Debts, bad, 9 Defective products, 169 Delivery Books, 220 Delivery of goods from vendors, 79 — to customers, 211 Delivery Note, 8 1 , 254 Demurrage, 214 Dent V. London Tramways Co., Ltd., 139 Departmental cost books, 24, 123 — transfer books, 123 — transfers, 97 Departments, accounts for, 23, 24 — depreciation in, 135, 147 — localisation of cost in, 24, 163 — subdivision of, 24 Depreciation, accountant and engineer, 157 — actual, rarely charged, 135 — annuity system, 150 — building, 22 — classification of objects, 147 — cost, 2, 21, 29, 162 — definition, 254 — direct method of determining, 135 — engines and boilers, 161 — factors in determining, 128 — fire loss, 144 — fixed capital, 127-145, 203 instalment principle, 148 — horse account, 209 — ideal way, 147 — Income Tax Acts, 144 — life of object, 133, 147 — loose plant and tools, 152 — methods in vogue of charging, 135 — Mr. Justice Swinfen Eady on, 145 — of factories, 127 — patterns, 152, 155 — periodical valuation, 145 — plant, 22, 126-164 — purchase hire system, 203 — railway companies' accounts, 132 — rate of, 132 for leases, 148 — ratio between, and expenditure, 132 — stock, 30, 199 — stores, 30, 156, 159, 199, 200 — straight line system, 148 INDEX. 269 Depreciation, telephone accounts, 134 — tools, 22, 152 — trucks accounts, 213 — unskilled labour, 136 — van accounts, 210 — volume of trade, 135 — water companies' accounts, 133 — weather exposure, 128 Designer, 87 Details (machine), nomenclature for, 225-232 Deterioration (see Depreciation) Development, business, 9 Dey time recorder, 37 Diagrams, 27 Dick, Mr. John R., 12 Dickinson, Mr. A. Lowes, 20, 21, 196, 199 Dicksee, Mr. L. R., 19, 131 Dilapidations, 152, 254 Direct goods and stores, 80 Direction, 9 Dirty money, 56 Discount, 172 Distillers, accounts of, 27 Distribution, 5 Disturbances, 9 Dividends, capital and revenue accounts, 137-143 — depreciations, 132 Dockyards, accounts in, 206 Domestic system, 23 Double account system, 131 Draughtsmen, 87 Drawing office costs, 118 Drawings and symbolic nomenclature, 225 Dubois, Mr. C. G., 134 "Dummy men," 33 'ARNINGS, management, 5 , — task, 5 — time, 5 Easements, 8 Ebbw Vale Steel and Iron Co., Ltd., 139 Economic Arithmetic, the new, 121 Eionomu- Journal, 18, 1 16 Economics and accountancy, 5, 6 — of actuality, 11 " Economics of Industry," 49, 96, 104, 119 — enlargement of, 18 Economists, 11, 12 — and works cost, 12 — division and specialisation of labour, 103 — unproductive workers, 16 Economy in division of labour, 103 — of " Machinery and Manufactures," 103 — specialisation of labour, 24 Elbourne, Mr., 194, 222 Electric light companies and double account system, 131 Electrical regulations in factories, 222 Electricity costs, 9, 219 Employees absenting themselves, 39 — address book, 71 — addresses of, 34 — allowances to, 55, 56 — change of address, 71 — character book, 71 — characters of, 34 — confidence in accounts, 22, 32 — deductions for rent, 33, 72 — disabled, 62 — dismissal of, 56 — disposal of fines, 221 — engaged outside factory, 33, 44, 45 — engagement of, 56 — entr)' and exit, 34-36, 49 — factory rules, 71 — fines of, 33, 49, 56, 62, 222 — interdependence of, 49 — leaving work at irregular times, 38 — length of service, 56 270 INDEX. Employees, mode of paying wages, 52- 69 — moral effects of accurate accounts, 22 — occupying houses of firm, 35, 72 — overtime minimised, 33, 45, 47 of, 41 outside factory, 44 — payment by time, 32 to deputies, 65 — piecework, 48-51 balances, 33, 53 — premiums, 49, 55, 58, 60 — provision of mess-room for, 35 — punctuality of, how secured, 49 — rates of pay, 33, 56, 58, 72 — receipts, 34, 63 — remittance of wages, 66 — resignation of, 55 — savings bank funds, 33, 60, 72, 221 — sick funds, 33, 61, 72, 221 — superannuation funds, 33, 61, ']2, 221 — tendency to demand excess time and material, 86 — time checks, 34 records and boards, 34, 35, 40, 41 — transference to other departments, 56 — unclaimed wages, 64 — unpunctuality of, 39, 49 — wages of, 34, 72, 220 — — receipt forms, 66 — working hours of, 222 in more than one shift, 38 — work requires registration, 16 Employers' Liability Act, 62 Empties Book, 217 Engineering Magazine, 53, 208 Enginee7-ing on cost of manufacturing matches, 103 Envelopes, pay, 64 Establishment expenses, definition, 254 — and extensions, 201 Establishment, profit and loss, 118, 119 — valuations, 195, 196 Estimate forms, 87 — of cost, definition, 254 — of expenditure on fixed capital, 105 — should precede manufacture, 87 Estimated values in relation to survey, 185, 186 Evolution of industrial organisations, 14 Exchange, 5 Expansion, business, 9 Expectation of service, 147 Expenditure, analysis of, required, 16 — and cost, 67 — auxiliary operations, 200 — average per mile on railways, 132 — labour and material analysed, 28 — maintenance of fixed capital, 106 — making good rejected stock, 169 — not for profit, 185, 206 — plant and machinery, 155 — recorded on cards, 206 — repairs and renewals on railways, 132 — responsibility for, 3 — vigilance as to, 25 Expenses burden, 161 Explosives and licences, 221 Extensions, cost of, 201 Extras, 45 FACTORIES, cost of gas and water in, 219 — definition, 254 — depreciation of, 118 — economy of, 202 — initial step in organisation of, 32 — legislation as to, 14 — municipal, 202 — national, 202 — railway, 202 — rating of, 233 — regulation by empirical methods, 15 INDEX. 271 Factories, rent of, 117 — routine in, 202 — rules of, 71 — solidarity of labour in, 49 — subsidiary books in, 202 — warehouses and, 113, 169 — working for profit, 206 Factory accounts (see Contents gene- rally) definition, 15, 254 — — essential books in system, 29 — — moral effect of proper system, 22 — — non-competitive concerns, 206 — — proper system not memoranda, 23, 184 — — subsidiary books, 202 — and Workshop Acts, 14, 62, 222 — books, advantages, 24 and registers under, 33 assimilation of, 27 — — — with commercial books, 24 exteriors, 27, 167 — — home trade and manufacture, 23 methods of keeping, 23 misconceptions as to, 15 nature of, 24 need for system, 23 relation of, 27 " Factory Administration and Cost Accounts," 222 Factory books, relation to memoranda books, 24, 184 — — relation to subsidiary questions, 202 represent state of affairs, 23 special columns, 23 — rulings of, 27, 28, 36, 40, 41, 43, 44, 45> 46, 47. 48, 50> 52, 56, 57' 58, 59, 60, 61, 62, 64, 65, 66, 67, 68, 69, 70, 76, 77, 81, 82, 83, 84, 87, 88, 89, 90, 92, 93, 94, 109, no. III, 112, 149, 154, 156, 157, 170, 171, 172, 173, 174, 175, 176, 177, 187, 188, 208, 209, 212, 214, 215, 216, 218, 219 Factory books substantiating com- mercial books, 24 utility in cases of fire, 23 Factory books and forms : — Absentee Book, 39 Address Book, 71 Advertisement Contract Register, 221 Advice Note, 79 — to Warehouseman, 173 Barge Return, 214 Boiler Inspection Book, 221 Brigade (Fire) Books, 219 Buildings Ledger, 106, 130, 140 Cartage Advice, 209 — Book, 208, 209 Carters' Weekly Returns, 209 Cash Sheet, 67 Casualty Book, 220 Catalogues Issued Book, 221 Character Book, 71 — Form, 71 Coal Book, 218 — Contract Book, 218 Colours of, 27 Comparative Cost Register, 122 Consignment Note, 211 Contracts Register, 78 Cost Journal, 114, 253 — Ledger, 30, 70, 107, 108, 109, iro. III, 112, 120-123, 154, 155. 157, 166, 253 Craft Register, 215, 216 Delivery Books, 220 — Note, 81, 254 Departmental Transfers, 97 Electricity Meter Reading Book, 219 Empties Book, 217 Estimate of Cost, 81, 105, 254 272 INDEX. Factory books and forms — couiiinted. Factory General Charges Book, io8, 112, 193, 254 Fines Book, 61 Fire Hose Book, 219 Forwarding Note, 174 Fuel Summary Form, 219 Gas Meter Reading Books, 219 Gate Book, 191 Invoice Allocation Book, 84 — Register, 81, 82 Jobbing Ivcdger, 107 . — Orders, 81, 107 Licences Book, 221 Lighter Return, 215 Loose Tools Register, 154 Machinery Examination Register, 220 Notices Book, 220 Orders Received Book, 172, 173, 175. 256 Outworks Time Record, 43, 44, 45. 256 Overtime Book, 40, 41, 47, 256 — Comparison Book, 41, 47, 256 — Return, 41, 46, 47, 256 — Slip, 45 Packing Case Register, 217 Pass Out Note, 38 Patterns Book, 220, 256 — Ledger, 220 — Register, 77 Pay Bills, 63 Pay Sheets, 63 — Slips, 63 Petty Cash Book, 78, 109, 256 Piecework Analysis Book, 52, 256 — Log Book, 51 — Register, 51 — Return, 48, 49, 50, 51, 256 Plant Debit Note, 156, 257 — — Summary, 158, 257 — Journal, 158 — Ledgers, 106, 155, 156, 257 Factory books and forms — continued. Plant Recovered Note, 97, 158 — (Loose) Register, 154 Printed in copyable ink, 27 Railway Rate Book, 211, 212, 257 Rate Book, 58, 59, 62, 257, 260 Registers under Factory Acts, 72 Rent Roll, 73 Rents Receivable Book, 73 Samples Register, 77 Shop Returns Book, 97, 258 — Transfer Note, 95, 96 Staff Register, 220 Stationery Register, 220 Stock Debit Note, no, in, n2, 168, 182, 258 — Issued Book, 16S, 173, 174, 181, 201, 258 — Ledger, 19-21, in, 112, 168, 171, 174, 177, 180-185 — Order, 70, 86, 87, 91, 100-113, 182, 258 — Received Book, in, 168, 181, 258 — Register, 189 — Requisition, 172-176, 181, 258 Book, 166, 172-177, 181, 189, 258 — Returned by Customers Book, 167, 177-179. 258 — — Debit Note, 167, 177, 178, 258 — Transfer Book, 169, 170 Stock Survey Sheet, 187, 188 Stoppages Agreement Form, 61 Stores Debit Note, 93, 94, 95, 96, 259 — Delivery Diary, 220 — Issued Book, 89, 90, 259 Note, 89 — Journal, 91 — Ledger, 19, 24, 29, 83, 85, 90, 97, 171, 183-186, 187, 259 — Received Book, 82, 85, in, 259 lNt)EX. 273 Factory books and forms — continued. Stores Register, 189 — Rejected Book, 92, 93, 259 Note, 92 — Requisition Book, 75-79, 93, 259 — Requisitions, 75, 76, 259 — Sent Away Form, 92 — Sold Analysis Book, iSi — Transfer Book, 169-171 — Warrants, 88, 89, 182, 190, 259 Surprise Visits Book, 220 Survey Sheets, 186, 187 Time Allocation Book, 43-45, 50, 70, 259 — Boards or Sheets, 41, 43 — Book, 35-44, 259 — Records, 32, 41, 42, 44, 259 Tool Order, 106, 260 Towage Book, 216 Transfer Analyses Book, 171, 260 — Book, 97, 169-171, 181, 182 — Notes, 169-171, 260 Unclaimed Wages Book, 64, 65, 260 Visitors' Book, 220 Wages Abstract, 70 — Advice, 57, 58, 59, 260 — Book, 32, 33, 44, 47, 52, 59- 70, 260 — Journal, 70 — Pay Note, 66 — Rate Book, 56, 58, 62, 260 — Receipts, 63 — Remittance, 66 — Summary, 33, 60, 62 Wagon and Van Books, 213, 214, 260 — Journey Repairs Book, 214, 215 Water Meter Books, 220 Weather Chart Book, 220 Weighing Machine Book, 218 Working Orders, 41, 69, 77, 87, 91, 152, 156-161, 261 Factory Costs, System in, 30, 158 — Forms, colours of, 27 printed in copyable ink, 27 — and extensions, 201 — Book for, 108, 254 — general charges, 108, 254 — their allocation, 114 — their relation to valuations, 192 — Order (see Stock Order) " Factory System, History of the," 15 Factory System, development of the modern, 13, 23 — — extension of, 14 — — industrial conditions, 14 — — new power in civilisation, 14 — — specialisation of labour, 102 Falk, Mr. H. J., 18 Family System, 23 Fees, professional, 9 Fines and the Truck Acts, 61 — appropriation, 72 — Book, 61 — change of address, 71 — recorded and deducted, t,},, 57, 61 — unpunctuality, 49 Fire insurance (see Insurance) Fire Hose Books, 219 Fixed capital, 5-8 (see generally Chapter VI., 126-145) — — definition, 254 machinery, 126 Mill's definition of, 126 — — overtime, 47 • purchase hire, 203 surveys, 186 — Charges, 114 — instalment system, 148 — - plant, definition, 254 Fletcher, Mr. Banister, 152 Forage, cost of, 209 Foreman, clerical work, 24, 25 — dummy men, 33 — exchange of material, 84 — instructions to manufacture, 102 274 lNt)EX. Foreman, overtime, 47 — payment of wages, 62 — permits, 39 — piecework, 50 — plant, 156 — purchase of material, 74 — stores warrants, 88 — surplus material, 94 — time records, 40, 41 — wages of, 107, 115 advice, 57 Formation expenses, 58 Forwarding note, 174 Foster v. The New Trinidad Lake Asphalte Co., Ltd., 141 Foundries, 116 Fraud, chances of, minimised, 32 — instance of, 32 — prevention of, 16 Freeholds, 8 Freight note, 210-214 Freightage, 210 Fuel, cost of, 9, 115, 161 — its allocation, 161 — records of, 203, 218, 219 — summary form, 219, 255 Fundamentals of a Cost System, i8-2i Furniture, manufacture of, lOi GALLOWAY V. Schill, Seebohm, &Co., 127 Gas, consumption of, how checked and j localised, 219 I Gas companies' accounts, 23 double account, 131 — — expenditure in workshops, 9, 206 factory, books required for, 23 — — Meter Reading Books 0/, 2ig — Works Clauses Act (1871), 23 Gate Book, 191 Gatekeeper (see Timekeeper) — cartage, 208 — permit to remove goods, 190 Gatekeeper, wages of, 107 Gaux, Mr. Edmund C, 120 General charges, 195-196, 255 (see Factory General Charges) — ledgers account, 124 — stores account, 255 Gibbins' "Industrial History of England," 13 Gill, Mr., 130, 151 Glasgow Cotton Spinning Mills, 157 Glossary, 29, 253-261 Goddard, Mr. F. R., 20 Going concern, definition, 255 Goodwill, definition, 8, 162, 255 Goodwin, Mr. A. E., 30 Government factories, 202, 206 Graphs, 122 Guild system, 24 Gunpowder licences, 221 HALSBURY, Lord, 140 Halsall, Mr. F., A.C.A., 205 Halstead silk factory and rating, 235 Hamilton, Mr. W. R., F.C.A., 121 Handling, in surveys, 185 Harlen, Mr. Joel, 96 Harper, Mr., gross and rateable value, 243 Health contributions, 61 Heating factories, cost of, 9, 115 Hedley, Mr., on rating, 233 Henley,'. Walter de, 13 Hire (see also Purchase Hire), horses and vehicles, 208 — trucks, 213 Historical costs, 122 Hollerith machines, 26 Home Office and sidings, 223 Hops, pricing of, 196 Horse account, 209 House of Lords' decisions, 140 House rent, deductions for, 61 Hunslet Assessment Committee, 233 INDEX. 275 IDLE Capacity Plant, 160 — hour, 161 Implements (see Machinery, Plant, Tools, etc.) Improvement, business, 9 Improvements Fund, 152 " Incidence of Local Taxation," 233 Income, 5 Income Tax Acts, 144 depreciation, 145 employees', 61 profits, 5, 144 — — valuations, 144 and wagon hire, 205 Indirect expenses, cost of production, 29, 103-107, 114-121 — — definitions, 255 loose plant and tools, 152 profit and loss, 114 ratio to direct, 1 14-120 skilled labour, 116 wages, 105, 114, 116 working orders, 114, 120 Industrial economy, measure of, 116 — economists, 2, 125 "Industrial History of England," 13 Industrial organisations, their evolu- tion, 13-15 — waste, 125 Industrialists, 12 " Industry and Trade," i " Industry, The Economics of," 96, 121 Instalments on purchase hire, 203 Insurance, 5, 9, 144 — claims on companies, 22 — profit and loss, 144 — uninsured ships, 137, 144 Interest and rating, 242 cost of production, 5-8, 119, 199 — depreciation, 147 — horse and vehicle account, 209 — leases, 147 — on capital in employees' houses, 202 Interest, purchase hire system, 203 Inventory (see Surveys), 255 — of premises, 77 Invitation-to-tender forms, 76 Invoice Allocation Book, 84, 255 Invoice Register, 80, 84, 255 Invoices, definition, 255 — directions to vendors, 80 — endorsement, 84 — examination, 81 — goods loaned, 178 purchased, 28, 80, 181 retailed, 181 sold direct, 166, 167, 175, 179 — on Order forms, 80 — • outward, 167 — references, 83 — ■ registration, 80 — - Stores Requisition Bool;, 76 " Inwood's Tables," 250 Issue Notes, 88 Issuer of material, duties, 188-192 JOB costs, 28 Jobbing shop, 107 Jobbing orders, 107 — ledger, 107 Joint-stock companies, definition, 255 — conversion of private firms, 22 — depreciation, 130 — law, capital, and revenue, 135-144 — valuation of assets, 162 KIRBY V. Assessment Committee of Hunslet Union, 239 Knoepel, Mr. F. J., 125 LABELS (Stores Survey), 190 Labour, combination, 14 Labour, definition, 255 276 INDEX. Labour, division, 103 — economy in clerical, 24 — employment, 16, 24 — expenditure, 70 — machine labour, 8 — maintenance of buildings, 105 — — on machinery, 105 — rejected stock, 169 — remuneration, 4 — skilled and unskilled, 116 — solidarity, 49 — specialisation, 13, 24, 102 Laing rating case, 235 Land, gross and rateable value, 243 Lands Valuation Act, 242 Law Times and rating, 237 Leading hand, definition, 255 outside work, 43-47 piecework, 50 stock debit notes, 1 10 store warrants, 88 time records, 32, 42, 43 Leakage, prevention of, 16 Leake, Mr. F. D., on depreciation, 159 Leases, amortisation of, 8, 148, 149, 244, 250 — buildings, 133, 146 — Ledger Account, 149 — ■ Table for amortising, 244-250 Ledger account, 123 Ledgers (see under Commercial Ledger) Lee V. Neuchatel Asphalte Co., 137 Legal decisions on rating, 234-243 Legislation, rating of Machinery, 233- 243 Leigh, Mr. A. A. Austin, 30 Lessees, liabilities of, 152 Lever, Sir S. H., 19 Liabilities, definition, 255 Licences Book, 221 Life of machinery, 126-135, 145-163 Lighter return, 214, 215, 216 Lighting of factory, 115 (see also Gas) Lindley, Lord, 139 Liquid trades, accounts of, 27 Loading, 216 Local bye-laws, 222 Localisation of cost, 24, 94, 102, 106 Lockers, 190 Locomotives, light, 221 — use of, in sidings, 222 Lodging money, 65 London Assessment Conference, 243 — Brighton and South Coast Railway, 141 Looms, deductions for rent of, 61 Loose leaf ledger, 26 — plant and tools, 153, 255 Loose Tools Register, 154 Loss (see under Profit and Loss) Lost Time Account, 43 Ticket, 43 Lubbock V. British Bank of South America, Ltd., 140 Lybrand, M. William, P.C.A., 197 MACHINE hour rates, 2, 157 — labour, 8 — name, 228 — symbol, 228 Machinery, assessment of, 31, 233-243 — charges for use, 105 — checker, 156 — comparative cost of, 105, 126 — congealed labour, 120 — cost of setting, 105 — depreciation, 127, 147 — details, 225-232 — Examination Register, 219 — expectation of service, 147 — expenditure, 155 — fixed capital, 126, 163 — gross and rateable value, 241, 242, 243 — hand labour, 118 — labour on, 105 — life of, 105, 126-136, 145163 INDEX. 277 Machinery, maintenance of, 128 — numbering of objects, 155 — obsolescence, 133, 241 — personal equation in working, 128 — purchase hire system, 203 — rates, 155-163 abnormal, 161 normal, 161 — rating of, 233-239, 243 — record of working hours, 157-161 — residual value, 15S — rest, 157 — running, 161 — scrapping of, 136 — sinking funds, 143 — specialisation of labour, 27 — supersession of, 129 — symbolic nomenclature for, 225-232 — the economy of, 103 — unskilled, 136 — use of, 16, 120, 146-163 — valuation of, 135 — wear and tear of, 135 — yearly replacement of, 134 Machinery Users' Association, 239, 240 Magazine (see Store), 255 Maintenance, definition, 255 — roads, 9 Male servants, licences for, 221 Management, earnings of, 5 Man of business, 1 1 Mann, Sir John, 25, 147, 161 Mansion House Association for Rail- way and Canal Traffic, 213 Manual power, 8 Manufactory (see Factory) Manufacture, checks upon wasteful, 26 — material for, 27 — stage of, 7 Manufacturer, distinction between re- tailer and, 180 — and selling price, 17, 122 Manufacturing account, 109, 208, 255 — cost, 22, 28 Margin of error in stores, 187 Market price, 135, 196, 200, 256 — value, 143, 193 Marketing, 9, 30, 119 Marshall, Dr. Alfred, 1-5, 96, 119, 127, 128 and Mary P., 104 Marx, Karl, 119 Master of the Rolls' decisions, 6, 236, 237 Matches, manufacture and cost of, 103 Material, cartage, 208 — ■ definition, 256, 257 — distinction between raw and manu- factured, 9, 30 — economy in purchasing, 74 — economy in use, 74 — employer sanctioning purchase, 74 — estimated expenditure, 85 — expenditure on rejected stock, 169 — implements and building becoming, 126 — indirect charges, 115 — initiative in expenditure, 86 — initiative in purchase, 74 — issuer of, pricing, 189 — — receiving warrant, 190 — keeping stock, 190 — limitation of issue,' 86 — pricing, 154, 192-200 — purchase, 74 — receipt and issue, 74-98, 180 — requisition from storekeeper, 74 — reserve store, 84'" — return to store, 94, 97 — returned to vendors, 92 — scrap, 1 1 1 — storage, 16 — ■ store of, 19, 190 — stores, 259 — surplus, 88, III — survey, 187, 188 278 INDEX. Material, use of, i6, 27, 85 — — in manufacture, 100, 112 — used for tools, 106 — used on plant and machinery, 155 — weights in factory books, 23 Matheson, Mr. Ewing, 134 Maturing material, 193, 194 Maughfling, Mr. J., 194 May, Mr. G. O., 120 Mechanical aids, 26, 42 Measure of industrial economy, 116 Memoranda books and factory books, 24 Merchants and selling prices, 18 Merger companies, 197 Mess-room, 35 Metcalfe, Captain H., 206 Metalliferous mines accounts, 102 Mill,;. S., 5, 126 Miller, Mr. F. R., 20 Mining royalties, 164 Mistakes account, 96 Mixing trades, accounts of, 27 Moisture and stocks, 186 Money, cost, 5 — expression in, 3-5 — trays, 68 Monthly and 4-weekly payments, 43 Monopolies, 163 Morawetz, Mr., 142 Motor lorries, 209 Multiple costs, 27 Municipal charges, 9 NATIONAL Expenditure— Select Committee on, 3 National Insurance Act, 33, 61 Neuchatel Asphalte Company, 137 Nomenclature, symbolic, for machine details, 31, 105, 206, 225-232 North British Railway and factory rating, 242 Normal Value, Law of, 96 Notices Book, 221 Notices of Accident Act, 222 OBSOLESCENCE, definition, 256 — comparative risk of, 182 — in relation to profit and loss, 133 — in relation to purchase hire, 204 — of machinery and tools, 134 — of patterns, 155 — of stock, 200, 201 — of stores, 200, 201 — risk of, universal, 134 Office, organisation of, 25 — rent of, 115 — routine of, 25 Oil, costs of, 9 Oils, inflammable, and licences, 221 Old material, 94 — — accounts for, 200 valuation of, 200 On Approval Ledger, 179 Oncost, 161 (see also Factory General Charges), 114 Operation costing, 107 Order forms and invoicing, 78 Orders Received Book, 172, 173, 256 Orders received, examination of con- ditions, 173 — to manufacture (see Stock Order) — to vendors, 77, 256 Out-Station Stores Account, 85 Out-workers, 65 Out -Works Time Record, 43, 44, 256 specimen ruling, 45 Overlooker, definition, 256 — purchase of material, 74 — return of material, 94 Overtime, 37-40, 256 — allocation, 47 — Book, 40, 256 — check upon, 47 INDEX. 279 Overtime Comparison Book, 46, 47, 256 — comparison with ordinary, 47 — depreciation, 135 — economic aspect of, 47 — factory Acts, 223 — fixed capital, 47 — made outside factory, 47 — minimising amount of, 29, 33, 47 — Rettirn, i\6, 47, 256 — slip, 47 — specimen ruling of forms for, 40, 46 — time records, 41, 42 Owner's risk, 211 PACKING, 77, 203 — account, 203, 217 — cases, 217 — case register, 217 Panics, 9 Paper trades accounts, 27 Parts, costs should be known, loi, 182 — list of, 192 — manufacture of, 9 — standardised and interchangeable, 182 — supply and sale, 192 — symbolic nomenclature, 104, 225- 232 Pass-out note, 39 Patented patterns, 155 Patents, 8, 9, 162 — account, 256 Patterns, Rook, 220 — definition, 256 — depreciation, 155 — Ledger, 220 — Register, 77 — symbolic nomenclature, 225 Paula, F. R. M. de, 196 Pay Bills, 63 — clerk, "dummy men," 33 — envelopes, 67 Pay, payment of wages, 62-70 — rates of, altered, 33, 50-56 recorded, 33, 50-56 — rolls, 63 — unclaimed wages, 64 Pay Sheets, 63 — slip, 63 — tins, 67 — Wages Note, 65, 66 Payment by results (see Piecework) — of wages, how made, 34, 52-70 minimising errors in, 32 — — -to deputies, 65 Penalties for non-completion, 173 Penalty clause, 76 Permits, 8 Personal accounts, 166, 204 Petty Cash Book, 109, 256 purchases through, 78 Phoenix Gas Company, 235 Pick-up Mechanical Messenger, 42 Piece name, 228 — symbol, 229 — work, 50, 256 Piecework Analysis Book, 36, 256 specimen ruling, 52 — balances, how recorded, 33, 50, 51 — compared with day work, 52 — definition, 256 — gangs, 52 — Log Book for, 51 — method of recording, 50 — non-continuous working, 50 — publication of particulars of, 50 — register, 51 Book, 51 — regulating and recording rates, 33, 50 — Return Form, 50, 52, 257 — — specimen ruling, 48 — viewer, duties, 50 — wages, 52, 60 Pins, manufacture of, 104 Pixley, Mr. F. W., 148, 197 28o INDEX. Planning department, 87 Plant, 15, 16, 74, 126, 164, 257 — and extensions, 201 — books, 27 — cost of maintenance, 105 — current value, 127 — Debit Note, 156, 257 specimen ruling, 156 — Debit Sum inary, 157, 257 specimen ruling, 157 — definition, 257 — depreciation, 127, 132, 135 — deterioration on railways, 132 — idle capacity of, 160 — incidence of deterioration, 22 — Journal, 1 58 — Ledgers, 80, 155, 156, 257 specimen ruling, 154 — loose, 154 register, 154 — maintenance, 29, 105, 128 — material expended, 155 — numbering objects, 156 — purchase, 203-206 — Recovered Note, 97 — repairs and renewals, 29, 105 — residual value, 158 — sinking fund, 137, 138 — surveys, 188 — use of, 2 — valuation, 135 — wages expended, 155, 156 — wear and tear, 2, 135 — working numbers for, 156 — yearly replacement, 134 Police, 9 Power costs, 2, 161 — labour, 8 — manual, 8 " Practical Treatise on Rating," 234, 235 Premises, waste of, 147 Premiums to employees, 49 Prevention of Corruption Act, 76 Price, Mr. E. E., F.C.A., 26 Prices, 2 Price sheets, symbolic nomenclature, 226 Pricing, average, 89 — matters between departments or companies, 197 Prime cost, 5-7, 29, 100-125, 257 admits of varied treatment, 19 books, 28, 29 definition, 257 employees' rent, 72 — products, 98 " Principles of Economics," 127, 128 " Principles of Political Economy," 126 Private sidings, 213 Processes, 2, 8, 9, 98, 102 — profit or loss on, 18, 81 Produce companies, 197 Production as an auxiliary operation, 202 — betterment, 116 — cost of (see Cost of Production) — engineer, 121 — evolution of methods of, 15 — home, 161 — of tools, 106 — order (see Stock Order) — organisation of, 14, 15 — return, 87 — without industrial organisation, 13 Products, seasoned, 197 Profit and capital, income tax, 144 — valuations, 192-201 — and loss, 19, 166, 257 cartage account, 208, 210 — — departmental depreciation, 152 depreciation, 114, 127, 162 — — ■ establishment expenses, 118 estimated increments, 163 — — income tax, 145 — — indirect charges, 114 insurance, 144 INDEX. 2SI Profit and loss, leases, 148 loaned goods, 178 loose plant, 152 market price, 195 Mr. Justice Buckley on, 137 not savings, 201 on branches, 16 on individual transactions, 16 patterns, 153, 155 — — transfers between departments and allied companies, 197 purchase hire system, 203-206 railway accounts, 132 receipts and expenditure, 127 residual values, 157 retail trading, 180 revenue and capital, 137-144 sales, 168, 195-197 — — trading account, 179 water companies' accounts, 133 — — yearly valuations, 135 Profits, 5 Pro-forma orders, 78, 178 Progress Department, 65 — Report, 87 Public Health Acts, 222 Publicity, 9 Punctuality, premiums for, 49 Purchase hire system, 203-206 book-keeping entries, 204 capital account, 204 instalments, 203-206 interest account, 204 non-completion, 205 obsolescence, 204 plant account, 204 profit and loss, 204 Purchases through petty cash, 78 Purchasing department, 75 Q UALITATIVE analyses, II, 12 | Quantitative analyses, il, 12 I RAILWAY and Canal Commission Court, 6, 211 — classification of traffic, 211 — Clauses Consolidation Act, 213 — companies and consignment notes, 211 — companies and double account system, 131 — cost of working, 6, 7 — deterioration of plant, 131 — factory books required for, 23 — factories, 202, 206 — fares, 65 — Order Confirmation Acts, 211 — rates charged by, 2 1 x — Rates Act, 211 — Rates Book, 257 — Returns and Accounts Act, 23 — sidings, 213 — units of cost, 10, II Rate Book, 56, 62, 257, 260 Rates, 9 — compounding, 72 Rating of assessments, 234, 241 — Bill, 236 — Carmichael & Co., Limited, 242 — Chard Assessment Committee, 237 — chattels, 234 — checks on assessment, 241 — Cowan & Sons, Limited, 242 — factories and machinery, 31, 233-242 in Scotland, 242 — gross value, 240-243 — Halstead silk factory, 235 — interest account, 241 — Laing case, 235 — Lands Valuation Act, 242 — Law Times, 237 — legal decisions, 234, 235 — legislation proposed, 237, 240 — Lord Chief Justice Cock burn, 235 — machinery, 233-243 — Master of the Rolls, 236 — mode of computing assessments, 233 282 INDEX. Rating, Mr. Hedley, 233 — North British Railway Company, 242 — Phoenix Gas Company, 235 — " Practical Treatise on," 235, 238 — Rateable value, 240-243 — recent decision, 236 — rule of rating, 237 — Tyne Boiler Works, 236 Raw Material (see Material) Receipts, stamps, and wages, 64 Records, differentiation of, 27 Register of Women and Children under Factory Acts, 72 Registration, economy of methods of, 14 — of expenditure, 16 Regulations as to periods and condi- tions of employment, 14 Renewals and repairs, 257 Rent, deduction from wages, 33, 73 — factory, 1 14 — houses occupied by employees, 72 — office, 115 — roll, 73 Rents Receivable Book, 73 Repairs, 257 — for customers, 106 Replacement, 8 Research, 9 Reserve funds, appreciation of assets, 143 — — definition, 257 — — profits of water companies, 133 — — provision for insurance, 144 — — residual values, 158 Residual products, 98 — value, definition, 257 — — depreciation, 128, 147 — — profit and loss account, 158 Retail transactions, store and stock, 169, 180 — warehouse, 180, 257 Returns Book (see Shop Returns Book) Returns (see Stock Returns and Stores Rejected) Revenue, capital account, 137-143 — definition, 257 — fluctuations of market value, 143 — Government factories, 202 — Income Tax Acts, 144 — opinion of Mr. Justice Buckley on, 137-139 — sinking and reserve funds, 143 Rider, Mr. Jas., 159 Roads, maintenance of, 9 Roland, Mr. Henry, 208 Routes, 77, 173 Royalties, 8 Rules and regulations in factories, 71, 72 SACKS, 217 Salaries, 9 Sale of Goods Act, 78 — of parts, 192 — or return, 178 Sales analysis book, definition, 257 converse of, 177 purpose, 166, 167, 175, 180 stock requisitions, 175 — and symbolic nomenclature, 226 — book, 178 — — purpose, 166, 178, 179 — Cancelled Book, definition, 257 — goods on loan, 178 Sales Day Book, 167, 177, 178 Salicis, Earle A., 158 Samples Register, 77 Sanitation, 9 Savings bank fund, ^ili 60, 222 — not profits, 201 Scale adjustments, 161, 187 — costs, 98 Scientific management, 19 Scrap material, 11 1 — (see Residual Value, 257) INDEX. 283 Seasoning material, 194 Self- balancing, 125 Selling prices and cost of tools, 106 competition and cost, 18, 120, 121 Services, auxiliary, 9 — contingency, 9 — State, 9 Shafts, deductions for rent of, 61 Sheets, 217 Shipment of goods, 173 Shop cost, 117, 124 Shop Hetitrns Book, definition, 258 purpose and specimen ruling, 94 Shop sweepings, 95 — Transfer Note, 94, 95 — Work Order (see Stock Order) Shops, cleansing of, 72 — expenses in, 114 Sick fund, employees', 33, 60, 72, 221 — — books, 222 Sidings, private, 213 — railway, 213 Sinking fund, 143-152, 258 Skips, 217 Sliding scale, 23 Small articles, 86 Smith, Professor Robert II., 116 — Mr. Oberlin, and nomenclature, 23, 105, 203-210, 225-232 Smoke, 222 Specialised capital, 5 Specifications, 87 Specimens of rulings (see Factory Books) Spoiled work, 96 Stable expenses, 209 Staff Kegistei- Book, 220 Standard costs, 28 Standing charges (see General Charges) — orders, 105 State charges, 9 — services, 9 Stationery, cost of, 115 Stationo-y Registe7-, 220 Steam cost, 9, 161 Stock, 165, 182, 258 — account, definition, 258 — amalgamation with stores, 189 — balancing prime cost book, ill, 1 13 — books, 15, 166, 181, 188, 258 — cost of special tools, 106 — cost value of, shown in ledger, 108 — costs of parts, 106 — definition of, 28, 258 — depreciation of, 199, 200 — distinguished from stores, 30, 100, 189, 192 — efficiency of control, 190 — generally kept till demand arises, 199 — identification by numbers, 1S9 — in relation to prime cost, 29 — in relation to solvency, 193 — in relation to stores, 28, 100, loi — in relation to surveys, 189 — insurance, 144 — interest on, 8 — in warehouse known to storekeeper, 191 — knowable without survey, 19 — losses on, 201 — manufacture for, 86, 88 — manufacture of parts, 182 — moisture in, 186 — obsolescence, 200 — packing cases, 217 — posting, to ledger, 168 — pricing of, at surveys, 193, 194, 199 — production should be for, 98 — reduction in value of, 200 — rejected by customers, 177, 179 — responsibility for, compared with cash, 188-191 — retail transactions, 180 — return of, to factory, 166 — return of, to warehouse, 167 — sale or distribution of, 166 — sent out on loan, 178 — sent out on loan, invoicing of, 178 — surplus material, 88 284 INDEX. Stock survey sheets, 187 — taking (see Surveys) — transfer to stores, 94, 95 — uncompleted, 112, 258 — value of, ready for sale, how ascer- tained, 180 — when realisable at market rates, 196 Stock Debit Note, definition, 258 function of, 168, 182 specimen ruling, no Stock Issued Book, alternate, 175 definition, 258 — — losses on stock, 201 purpose of, 166, 174 — — retail transactions, 171, 180 specimen of, 174 Stock Ledger, commercial books, 19, 23 definition, 258 losses on stock, 201 posting of, loi, 168, 171, 177, 178 prices of articles in, 166 retail transactions, 180 — — specimen ruling of, 112 — — stock in hand, 19 subdivision of warehouse, 188, 189 substantiation of balances in, 185 surveys, 185-188 transfer book, 97, 171 — — utility of, as regards stock in trade, 182 Stock Order, account, lOI — — balances, Ii2 booking time and material, 85, 86, 100, 105 — — definition, 258 estimate, 87, 106 general charges, loS, 114 generic, 86 initiation, 86, 91 Stock Order, number, 41, 91, 258 plant, 105, 156 time allocation book, 70 tools, 107 — — uncompleted, 112 Stock Received Book, definition, 258 Debit Note, 168 purpose of, no, 168, 181 retail transactions, 180, 181 Stock Register, 189 Stock Requisition, definition, 258 orders received, 174 retail transactions, 181 sales, 167, 174, 175, 177 — — specimen ruling of, 172, 176 Stock Returned by Customers' Analysis Book, 258 purpose of, 167, 177, 179 Stock Returned by Customers' Book, 258 purpose of, 167, 177 specimen ruling, 177 Stock Returned Debit Notes, definition, 258 — — purpose, 167, 177, 1 78 specimen ruling, 176 Stock system, essential condition, 190 Stocktaking, 258 (see Survey) Stock Transfer Book, 1 70 Stoppages Agreement Form, 61 Storage accommodation, 2 Store, 258 Stores account, 259 — amalgamation with warehouse, 188 — and warehouseman, 191, 192 — articles retailed, 180 — at seller's works, 85 — bookkeeping, 74-9S, 189 — building location of, 190 — carriers' wharf, 85 — definition, 30, 100, 259 — department and prices, 162 — depreciation, 200 INDEX. 285 Stores, direct goods, 80 — distinguished from stock, 30, 100, 188, 190, 259 — excess supply, 192 — general, 82, 85 — identification by numbers, 190 — in bonded warehouses, 85 — interest on, 8 — in transit, 85 — labels, 190 — lockers, 190 — losses, 201 — margin of error in, 187 — mechanical divisions, 189 — obsolescence, 200 — out-stations account, 85 — parts in, 192 — pricing, 90, 190, 193-201 — purchase comparison, 122 — railway shed, 85 — reduction in value, 200, 201 — relation to prime cost, 29, 108 — relation to stock, 76, loo, loi — sectional, 189, 190 — special, 61, 82 — subdivisions, 188 — sub-stores, 90 — surveys, 19, 183-201 — transfers of, 97, 169, 181, 182, 192 — wages of distributing, 106 — warrant, 89-91 — waste in, 187 Stores Contract Register, 77 Stores Debit Note, definition, 259 purpose, 94, 95 specimen ruling, 93 Stores Delivery Diary, 220 , Stores Issued Book, 89, 259 Stores Issued Notes, 89 Stores Journal, 91 Stores Ledger, account, 82 agreement with commercial ledger, 85 Stores Ledger, commercial and subsi- diary books, 23, 29, 82 — — commercial ledger, 19, 82, 153, 184 — — definition, 259 — — duty of clerk keeping, 83 posting of, 82, 85 pricing warrants, 190 — — specimen, 83 — — stores in hand, 19 Stores Issued Book, 89 — — Stores Received Book, 82, 83, 259 — — subdivision of stores, 188 surveys, 183, 184, 185 Transfer Books, 169 utility as regards quantity on hand, 183 Storekeeper, adjustment of accounts, 169 — cartage, 208 — definition, 259 — deliveries due, 220 — effects of survey, 187 — efficiency of control, 191, 192 — estimates of cost, 87 — goods retailed, 180 — invoices, 80, 81 — mechanical aids, 189 — numbering warrants, 90 — purchase of material, 74 — quantities on hand, 19 — receipt of goods, 94 — rejection of goods, 92, 93 — - removal of goods, 190, 191 — requisition for material, 88 — responsibility, 187 — scrap material, 94 — Shop Returns Book, 97 — Stores Issued Book, 89 Ledger, 183 — — Received Book, 82 — surplus material, 86, 94 — surveys, 185 286 INDEX. Storekeeper, Transfer Book, 97 — transfers, 97, 169, iSi, 182 Stores Price and Index Book, 192 — notes, temporary, 72 Stores deceived Book, definition, 259 register, 82, 189 specimen, 81 — form, 80 Stores, invoices, 80 — purpose of, 82, 85 — stock, no Stores Register, 189 Stores Rejected Book, 92, 259 specimen of, 92 Stores Rejected Note, 93 Stores Requisition, definition, 259 how entered, 75 specimen of, 76 Stores Requisition Book, definition, 259 Credit Notes, 92, 93 — — description of, 75 need of, 79 purpose, 74 specimen, 76 Stores Sent Away Form, 92 Stores Sold Analysis Book, 18 1 Stores survey, 200 sheets, 188 — system, essential conditions of, iS6, 190 Stores Tags, igo Stores Transfer Book, 169, 170, 171 Stores viewer's advice form, 84 Stores Warrants, definition, 259 distinguished from Stores Requisition, 89 numbering, 90 prime cost, 91, 108 specimen, 109 transfer books, 181 Strachan, Mr. W., Cost Accounts, 17 Straight Line system, 148 Strikes, 9, 22 Subbing, 61 Subdivision of departments, 24 Subsidiary Companies, 197 Sudnian, Frank G., 124 Sundry disbursements, 109 Superintendence, 114 Supersession, 9, 135 Supervision, economy of methods, 14, 75 Supplies Delivery Diary (see Stores Delivery Diary) Surplus Account, 199 Surprise Visits Book, 219 Surveys, 19, 30, 183-201 — agreement with commercial ledger, 85, 179, 184 — agreement with stores and stock ledgers, 85, 180, 185 — and single entry, 184 — and valuation, 187, 193 — at one time, 184 — based on "handling," 186 — by degrees, 185 — efficiency of, 186 — epitome of, 186 — periodical, 185 Swvey Sheets, 186, 187 Surveys, simultaneous, 185 — transactions during, 184, 185 Suspense account, 259 Suspension of business in connection with surveys, 185 Swinfen Eady, Mr. Justice, 145 Symbolic nomenclature, 105, 225-232, 259 Syphons, 217 System in factory costs, 158 TABULAR Forms and Ledger, 82 Tabs, 186, 190 Stores tNDEX. 2S7 Tags, 186, 190 Tailoring factories and piecework, 50 Tare of wagons and vans, 214 Tarpaulins, 217 Task earning, 5 Taxation, Royal Commission on, 239 Taxes, 9 Taylor, Mr. Miles, 12 Taylor, Mr. R. Whately Cooke, 15 Technicians and accountants, 9 Telephone accounting and depreciation, 134 Tenders, invitations for, 76 Terminal charges, 213 Terminology, 4, 5 Terms of payment, 77, 173 Test costs, 28 Timber, valuation of, 194 Time Allocation Book, 43, 44, 259 — Boards or sheet, 41 — Book, 16, 35-46, 259 — cards, 34, 42 — checks, 34, 35 — clocks, 34, 42 — contracts, 136 — earnings, 5 — how recorded, 35, 45 — lost, 39 — office, 41, 44 — outside factory, 33, 44, 45 — Recorders, 34, 43 Time Records, 32, 41, 42, 43, 259 Time Registers, 42 Time Sheet, 215, 260 Time Clerk, Allocation Book, 43, 50, 70, 71 Time clerk, allocation of wages, 34 duties, 34, 43-49, 50, 63, 70, 156 interruptions to piecework, 50, 52 machine hours, 157 • — — out-works time sheet, 44 Time clerk, overtime return, 47 — — piecework returns, 50, 52 possibility of fraud by, 32 — — receipts for wages, 63 Time clocks (see Time Recorders) Timekeeper, changing shifts, 38 — definition, 259 — duties, 34, 35, 42, 45, 72 — entry and exit of employees, 34, 35 — possibility of fraud by, 32 — summary of time book, 41 — time records, 44 Tins, pay, 64 Tolls, 9 Ton miles, 10, II, 209 Tools, ascertainment of cost, 106 — cost of setting, 106 — definition, 260 — depreciation, 16, 126 — incidence of cost, 22, 126 — kits, 154 — loose, 152 register, 154 — manufacture, 16, 106 — obsolescence, 133 Tools, Order, 106, 260 Tools, out-stations, 85 — surveys of, 188 — symbolic nomenclature, 226 — worn-out, 154 Towage Book, 216 Towages, 214, 216 Towne, Mr. Henry R., 105 Trade expenses, purchase hire, 204 — marks, 162 — unions, piecework, 51 — volume of, and depreciation, 136 Trades Boards Act, 222 Trading account, 113, 179, 181, 260 Tramway companies and double account system, 131 expenditure in shops, 206 Transfer Analysis Book, 171, 260 288 INDEX. Transfer Book, 97, 169, 170, 171, 182, 360 articles retailed, 181 Transfer Notes, 169, 170, 17 1, 260 Transfers, departmental, 171 Transport, Ministry of, Act, 211 Transportation, 9 Troughs, rent of, 61 Truck Acts, 61 Report of Departmental Com- mittee, 61 Trust Companies, 197 Tyne Boiler Works, rating, 236 T JNCLAIMED Wages Book, 64, 65, ^ 260 Undertakings, communal, 7 Unemployment contributions, 61 Uniform accounting, 193 Units of cost, 10, II Unpunctuality, fines, 49 Unskilled labour, 136 VALUATION assets, 143 — definition, 260 — depreciation, 135 — Income Tax Acts, 144 — in war time, 197 — loose plant and tools, 152 — stock and stores, 188, 193 — surveys, 185 — value, 5 Value, "basic," 194 Variables, change in, 12 Vedder, Professor H. C. M. (Cost Accounting), 24 Vehicles account, 209 — motor, 209 Verner v. General and Commercial Trust, 50, 139 Viewing advice form, 84 Viewer (see Piecework), 260 Visitors Book, 220 ■t 1 rAGES, 5 V V — Abstract, 70, 260 — account, 260 — advance on account of, 62 — Advice, 57, 58, 59, 260 — allocation of, 32, 33, 70, 109 — and accountants, 15 — banking account, 62 — Bargain theory, 16 — Board of Trade Order, 62 — Book, 32, 33, 44, 47, 52, 59-70, 260 and overtime, 47 and piecework balances, 52 and rents, 72, 73 clerk, 42, 47, 52 • commercial ledger, 109 — broken periods, 64 — cost of production, 19 — deductions from, t^t,, 221 — definition, 260 — "dummy men," 32, 33 — estimate, 87 — factory general charges, 108 — foremen, 107 — four-weekly periods, 64 — frauds in, 33 — gatekeepers, 107 — general charges, 107 — Journal, 70 — loose plant and tools, 152 — mode of payment, 63-70 — monthly period, 64 — payment, 15, 16 — Pay Note, 65, 66 — peculation, 59 — plant and machinery, 152-155 — prime cost, 29, 109 — Rate Book, 56, 58, 62, 260 — — specimen ruling, 59 INDEX. 289 JVages Receipts, 63, 64 — record of rate, 56 — reduction of, 22 — Reiitittaiice, 66 — — form, 66 — rent, 72 — registration of, 16 — rolls, 64 — sliding scale, 22 — ■ specimen ruling, 56-60 — Sti/nma>y, 33, 60, 62 — system, 28, 32-72 — timekeeper, 107 — Truck Acts, 61 — unclaimed, 33, 64 book, 65 Wagon and Van Book, 213 Wagon controller, 214 — hire and Income Tax, 205 Wagons and purchase hire system, 203 IVagons Repaired Book, 214, 260 Wagons, tare of, 214 — use of, on private lines and sidings, 222 Walking time, 65 War, 9 Warehouse, advice, 173 — definition, 260 — excess supplies, 192 — loading, 216 — location of, 189 — orders received, 173 — records of issues, 175 — repairs of, 105 — repository of parts for sale, 182 — retail, 180 — return of loaned goods, i6'6, 175- 177 — return of rejected goods, 166, 175, 176 — Stock Issued Book, 175 — stock received, 1 1 1 — storekeeper and stock, 190 Warehouse, subdivisions, 189 — subsidiary books, 202 — supply of parts, 190, 191 — transfers to and from factory, 168- 171 — transfers to stores, 97 Warehouseman, adjustments with store, 97, 169 — cartage, 208 — daily return, 175 — definition, 260 — ■ effect of surveys, 187 — efficiency of control, 191 — Empties Book, 217 — goods retailed, 180 — material, 190 — mechanical aids, 189 — permits, 191 — schedule of stores, 192 — stock, 19 — Stock Issued Book, 167 Ledger, 183 Received Book, in — stock returned, 167 — subdivisions, 1S9 — surveys, 1 80- 190 War Ofifice, 3, 210 — time values, 196 Wastage, prevention of, 16 Waste account, 96 — in cotton mills, 96 — in stores, 187 — of premises, 152 Wasters, 96 Wasting assets, 164 Watchmen and permits, 191 Water companies' accounts, 23, 133, 205 — — factory books, 23 — consumption, 9, 219 Water Meter Reading Books, 219 Wayleaves, 8 Wealth, production of, 25 Wear and tear, 2, 135, 204, 261 U 290 INDEX. Weather Chart Book, 220 Weekly and Monthly Records, 43 Weighbridges, 21 8, 219 Weigh House, 21S Weighing and Moisture, 186 Weighing- Machine Book, 218 Weights and Measures Act, 219 Wharves, 216 \^hite washing shops, 72 Whitmore, Mr. John, 27, 61 Wilmer v. McNamara & Co., Ltd. 140 Wilson, Mr. Gordon, 96 Wine, valuation of stock of, 196 Women, regulations as to employ- ment of, 14 Working capital, 8 IVorh'ng- Orders, 41, 69, 77, 87, 91, 152, 156-161, 261 Workpeople (see Employees) Works accounting, lecture on, 129 — manager, 82, 86, 97, 102, 106, 113 Workshop administration, 208 Workmen's Compensation Act, 62 Work in progress, 1 14 — valuation of, 193 Writing off, 22, 128, 163, 200, 261 Printed in Great Britain at The Darien Press, Fdinhuroh. D.Van nostrand Company are prepared to supply, either from their complete stock or at short notice. Any Technical or Scientific Book In addition to publishing a very large and varied number of Scientific and Engineering Books, D. 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