Digitized by the Internet Archive in 2007 with funding from IVIicrosoft Corporation http://www.archive.org/details/bituminouscoalmiOOreedrich BITUMINOUS COAL MINE ACCOUNTING ^iMiiiUniumHUUiinPJJimiPm JikQraW'Ml Bock QxJm PUBLISHERS OF BOOKS F O B^ Bectrical World "^ Engineering News -Record Power V Engineering and Mining Journal-Press Chemical and Metallurgical Engineering Electric Railway Journal v Coal Age American Machinist ^ Ingenieria Intemacional Electrical Merchandising ^ BusTransportation Journal of Electricity and Western Industry- Industrial Engineer TTTffil^MfififTM'^II^TllMf^^ BITUMINOUS COAL MINE ACCOUNTING BY W. B. REED SECRETARY OF THE NATIONAL COAL ASSOCIATION, CONSULTING ACCOUNTANT, FEDERAL TAJ^ATION; FORMERLY AUDITOR, THE NEW RIVER COMPANY, THE WHITE OAK COAL COMPANY First Edition McGRAW-HILL BOOK COMPANY, Inc. NEW YORK: 370 SEVENTH AVENUE LONDON : 6 & 8 BOUVERIE ST., E. C. 4 1922 Copyright, 1922, by the McGraw-Hill Book Company, Inc. PREFACE In response to numerous requests to the National Coal Asso- ciation for suggestions and more detailed forms than contained in the "Report and Suggestions" of its Cost Accounting Com- mittee, the author prepared a series of articles on ''Cost Ac- counting in the Bituminous Industry" which were printed in Coal Review. To meet the desire of many who wish to have these articles in more permanent and usable shape arrangements have been made to issue them in book form. Several new chap- ters have been added, and the subject matter has been expanded. In their original scope the articles were intended to cover only cost matters, but in this book some questions of general account- ing pertinent to the bituminous coal mining industry have been touched upon also. The importance of proper accounting has probably never been more clearly felt than at the present time. The necessity for having an adequate cost accounting system has been stressed within the past few years by trade associations, government agencies and accountants generally. In the coal industry this was a particularly important subject during the recent war, sales prices being fixed by the Fuel Ad- ministration based on cost. At all times a knowledge of the cost of production is an absolute prerequisite to price making. A corporation without a cost system is like a ship without a com- pass. Business is conducted for the purpose of making a profit, and the business man is entitled to a margin between his cost and selling price. An adequate cost finding system is intended to eliminate guess work. To be of value to the industry such a cost system should be more than a historical record of trans- actions long closed. It is questionable when a cost system is maintained merely for the purpose of history, whether it is worth the cost of its com- piling. If this is its entire use the question might reasonably 500G21 vi PREFACE well be asked ''How much does your cost system increase the cost of production ? " A cost system properly employed should be so arranged that it will tell from day to day the variations from a standard or theoretical cost. By its proper arrangement the management may feel each day, so to speak, the pulse of operation, and know from time to time what is happening in the industry. Knowing what is happening, those charged with the management are able to fix^ the responsibility and control the operation. An adequate cost system must not only give current infor- mation, but must be a historical record as well, and being such a record, must tie intimately and accurately into the general ac- counting scheme. The drafts and descriptions of forms which accompany the text are suggestions only and are not introduced with the idea that they are the only ones which can be used or are better than those prepared by accountants in the industry. The trained ac- countant familiar with the problems of his own organization will be better able to devise methods and detailed forms which will fit his particular organization and answer his particular prob- lems than is one not on the ground. They are presented rather with the idea of being helpful in smaller organizations which have not had the benefit of expertly trained assistants. In this book the assumption is that the general office and the mine office are located at different points and that the general office is dependent upon the local office for certain reports which will uniformly bring to the management and the accountant the pertinent facts connected with the operation, in order that the former may know what is happening from day to day, and that the latter may be able systematically to build up his accounts. May I also add a word in behalf of the accountant. Too fre- quently the accounting department of an organization is looked upon by the management either as a useless expense or as a necessary adjunct which, although expensive, must be endured. Absolutely the reverse is the case. The well trained accountant, particularly the one who has spent some years with the business, is and should be in many respects one of the best informed and most valuable of the concern's officers or employees, and the ac- counting department one of the most valuable to all departments of the business. PREFACE Vll The accountant should have advance information on all ex- penditures, that he may be able to lay his accounting plans ac- cordingly and without delay. It is essential that he have this in- formation, because to him falls the decision as to whether certain charges are capital accounts or items of expense. His must be a long-range vision. As charges come to him he must visualize them in their final resting place on the balance sheets. It is to him that the management and the directors must look for lucid statements of the cost of operation and of their financial affairs, and he should at all times be in their confidence. Generally speaking, in corporations of medium size, the or- ganization will take somewhat ^of the following form: Board of Directors President " General ^ Manager Treasurer Secretary Manager of Mines Account- ant L Sales Mgr. Superin- tendents Account- ing Staff Sales Force Mine Foremen Weigh Masters Mine Clerks Mine Staff This will vary, of course, according to the form of organiza- tion. In some cases the secretary and treasurer are responsible also to the general manager. In some instances the mine clerks and weighmasters are directly responsible to the general man- ager rather than to the local superintendent, and in some cases mine clerks are directly responsible to the accounting depart- ment. Kegardless of the form of organization there must be the clos- est kind of cooperation between the operating staff and the ac- counting department if proper results are to be achieved. The accountant should be consulted regarding any change of forms even if only remotely related to the accounting procedure. The forms for cost accounting which accompany the text fol- lowing are gathered from a number of sources ; all have actually been used in bituminous coal mine accounting. Many are origi- nal forms prepared by the author ; others have been prepared in the main by the accountants of various companies and adapted for use in the accounting of the mining companies with which the author was formerly connected. Acknowleds^ment is made to the Anthracite Operators for the general form of the balance viii PREFACE sheet and tlie text whicli accompanies it. Both have been con- siderably changed to fit more nearly the needs of the bituminous mining industry. W. B. Reed. Washington, D. C, July, 1922. CONTENTS PAGE Preface v CHAPTEB I. Uniform Cost Accounting 1 II. The Mine Tonnage Record 54 III. The Day Labor Record 62 IV. Yardage and Dead Work JIecord 66 V. Daily Cost Sheets 80 VI. Accounting for Supplies 84 VII. Power House Fuel 91 VIII. Royalties 95 IX. Depletion of Mineral 99 X. Amortization of Leasehold Values 107 XL Depreciation 119 XII. Insurance and Taxes 129 XIII. General Expenses 136 XIV. Sales Statistics 147 XV. Miscellaneous Profit and Loss Accounts .... 169 XVI. The Store Department 173 XVII. Interest 177 XVIII. The Voucher System 180 XIX. The Balance Sheet . 191 Index 217 rx BITUMINOUS COAL MINE ACCOUNTING CHAPTER I UNIFORM COST ACCOUNTING Prior to the World War little attention had been given by coal operators generally to the fundamentals of cost accounting. Some talked in terms of long tons, others in terms of short tons. Some few operators had a cost sys- tem which was complete and exhaustive, others had worked out a system not so complete. The larger number of the cost forms were either incomplete or misleading. In some sections of the country coal operators' associa- tions had been formed for the study of economic condi- tions affecting the industry, and in this connection some attention had been given to the study of mining costs. Shortly after the United States entered the war it be- came evident that power should be given the administra- tion to control the necessities of life, primarily food and fuel. With this in view, the Lever Act, House Bill No. 4961, was passed by the Sixty-fifth Congress and ap- proved by the President on August 10, 1917. It was officially entitled *^An Act to Provide further for the National Security and Defense by Encouraging the Pro- duction, Conserving the Supply, and Controlling the Dis- tribution of Food Products and Fuels.'' Under the pro- ^isions of this Act the Fuel Administration was set up, and after some preliminary study of such costs as were available it became the policy of the administration to fix selling prices by fields upon a basis of cost, plus a margin of profit fixed by the Fuel Administrator above a bulk 1 2 BITUMINOUS COAL MINE ACCOUNTING line, which included the major portion of the tonnage of a given field or district. In connection with the study of costs it became neces- sary that they be ascertained in a uniform manner. In furtherance of this plan the Federal Trade Commission in the fall of 1917 sent out a blank form of coal cost sheet to bituminous coal operators asking for a return of costs for the year 1917 to date of August 31. This form was probably the first attempt to secure uniform methods of cost accounting for the industry, and became, to some extent at least, the basis of such future attempts on the part of governmental agencies. The cost sheets thus ob- tained were turned over to the Engineers^ Committee of the United States Fuel Administration for study, and the condition existing in the industry is well illustrated in the report of the Engineers' Committee of the United States Fuel Administration, published in 1919, from which the following quotation is made : Without desiring to impugn either the honesty or the accuracy of the cost sheets as presented, it was found essential to study and adjust them for use as a basis of scientific and accurate cost finding. Besides correcting slips and palpable mathematical errors, a considerable amount of revision was necessary. Many, especially of the small operators, were inexperienced in bookkeeping and submitted cost sheets which, while accurate in totals, were grievously mixed in details. Supplies. — The item of supplies was found to vary so widely in the same mines in different months that the returns for single months were practically abandoned, and the figures were replaced by averages from all reports available, resulting in increases or deductions from the monthly costs as reported. Reserves. — The item of maintenance was frequently misunderstood, in some instances all supplies and much labor being charged to this account; in others a fixed sum, and in still other cases nothing at all Avas charged. Depreciation was often put in as a guess; in some cases it was f i-ankly stated that this seemed a good time to charge off improvements, and such were charged to the limit, and beyond. Depletion of lands was also an item which appeared greatly to trouble some of the accountants. While generally understood, many very wild guesses, even up to the market price of the product, were UNIFORM ACCOUNTING 3 found; also, many instances of depletion charges for lands operated on royalty or lease and not the property of the operator. Contingent funds noted on the blank were generally omitted, but in a few cases, especially when the need of such funds had recently been felt, most ample allowances were made. After being considered, it was decided to apply in each district amounts obtained by studying the claims of the better operators of such district, after obtaining, from the best available sources, reliable figures as to the cost of lands and amount and value of improvements characteristic of the district. The question of contmgent reserves is a serious one. From a strict cost-accounting standpoint, no cost can be permitted until incurred. Kevertheless, such reserves are essential to an industry involving the great risk incident to coal mining, and with the full knowledge that such reserves are used only for major accidents or calamities, and that ordinaiy losses regularly incurred are charged to the cost of operation, it was decided to include a small amount for contingent reserve in the general allowance. Salaries. — Executive and even superintendent's salaries were fre- quently omitted. In many cases of personal ownership, undoubtedly none were paid. It was considered only just to add to such returns reasonable allowances for salaries to place such reports on a parity with the majority of the operations which paid for such necessary service. On the other hand, occasional instances were found of reported salaries so excessive as to require adjustment downward to a reasonable parity with the general practice of the district. The following sliding scale of salaries, adjusted within broad limits to the monthly tonnage of an operation, was finally devised. Reported salaries between these limits were accepted as correct. Those salaries missing or below the minimum were raised to the minimum, and those above the maximum were lowered to the maximum. Salary Memorandum Used by the Committee Monthly tonnage Per month rer ton per month cents 1,000 and under . $150 to $250 160 to 400 180 to 450 200 to 480 200 to 500 250 to 600 300 to 700 400 to 800 500 to 1,500 750 to 2,250 1,000 to 2,500 15 up. 8 to 20 2,000 3,000 6 to 15 4,000 5 to 12 5,000 4 to 10 7,500 31/2 to 8 3 to 7 10,000 20,000 2 to 4 50,000 1 to 3 75,000 1 to 3 100,000 .... 1 to 2% V2 to 2 Over 100,000 4 BITUMINOUS COAL MINE ACCOUNTING Special Charges. — Special charges were generally treated in detail, often spread over a reasonable time rather than allowed in a single month. In treating these a careful study of all reports available was made. Special Records. — The Federal Trade Commission had required special explanation of all charges out of the ordinai-y, and all these records were available and were carefully studied and had great in- fluence in deciding doubtful points. Outside Profits. — The profits from farms, dwellings, or stores are not properly mining profits, and accounts of these should be kept sepa- rate from mining expense. Where it is found that such accounts are separated, no deduction for such profits should be made, but where dwellings, particularly, are so intimately connected with the mining that no separation is possible, it is proper to include their operation with mining accounts. Fuel for Power. — In general, charges for fuel for colliei'y power were allowed, and the tonnage divisor was made to include such fuel. In the opinion of the committee it would, however, be advisable to eliminate colliery fuel from both sides of the account, and merely to keep a record of the amount used. By this method the tonnage divisor represents the amount shipped and sold, and is susceptible of accurate determination, while the fuel used is approximated, or even guessed at, too often to make the general records containing this item reliable. Other items requiring occasional adjustment were the inclusion of washing costs, for which an extra charge is allowed, in the mining cost, and the inclusion of labor and supplies used in coking operations con- ducted by the same operators. In a few instances, the coke tonnage, or a mixed tonnage of coal and coke, was reported and used as a divisor to obtain costs per ton, resulting, of course, in a notably exces- sive cost. On Jan. 1, 1918, the Federal Trade Commission issued a second form differing, to a considerable extent, from the form prepared by them during the year 1917. Costs were collected by the Federal Trade Commission from the coal producers on the basis of this report during the calendar year 1918, and these costs as revised by the En- gineers' Committee of the United States Fuel Adminis- tration were the basis of the revised prices granted by the Fuel Administrator during the period in which the prices were under the control of the government. With the beginning of the year 1919 the Federal Trade UNIFORM ACCOUNTING 5 Commission prepared a third form much more elaborate than those which had preceded it. This form was, in the opinion of coal operators and accountants who had made a study of coal costs, absolutely unworkable as a practical proposition because of the vexatious refinements of detail into which the items of cost were sub-divided. Failure of the Congress to make a sufficient appropriation for the Commission to carry on this work, coupled with the op- position raised by the operators and the veto of the Engi- neers ' Committee of the United States Fuel Administra- tion, resulted in the failure to introduce this form, and during the year 1919 no coal costs were collected by this agency of the government. On Jan. 1, 1920, the Federal Trade Commission issued a fourth form embodying some of the features of the pre- ceding ones, but very much abridged, and containing sev- eral departures from the preceding forms prepared by the Federal Trade Commission. Careful study of this form by accountants in the coal mining industry devel- oped a strong objection to some of its features. To test the right of the Commission to require reports from coal operators in a form which practically meant the regula- tion of the manner of keeping books on the part of the coal industry, an injunction suit was instituted by the Maynard Coal Company asking the court to restrain the Federal Trade Commission from requiring such reports. This injunction suit was instituted only after conferences between representatives of the coal industry and the Federal Trade Commission in which it was apparent that the viewpoints of the industry and of the Federal Trade Commission could not be harmonized. The case was argued before Justice Bailey in the Supreme Court of the District of Columbia and an injunction was issued, and to date of this writing the case has not been vacated. On motion of the Federal Trade Commission this case came up before Justice Bailey on June 22, 1922, for argu- ment as to the issuance of a permanent injunction. After 6 BITUMINOUS COAL MINE ACCOUNTING argument the justice took the matter under advisement. In the Claire Furnace Company case in which the same questions are raised, Justice Bailey made the order per- manent and the Federal Trade Commission has appealed to the higher courts. The opinion of the judge who granted the injunction is important because of its bearing on other lines of indus- try. The opinion of Justice Bailey follows: The sub- headings are mine. This is an application for an injunction to restrain the Federal Trade Commission from taking steps to collect a penalty for failure on the part of the plaintiff, The Maynard Coal Company, to make certain reports called for by the Commission. The bill is supported by several affidavits of expert accountants. The defendant Commission has filed its answer, but on account of insufficient verification, it cannot be treated as an affidavit. It has also filed with its answer several affi- davits, which will be noticed hereafter. The plaintiff is a corporation engaged in the mining, production and sale of bituminous coal. It owns and operates mines in Kentucky and Ohio. Practically all of the coal mined in Kentucky and about one- half of the coal mined in Ohio is shipped to points without those States, and the remainder of that mined in Ohio to points in that State. Plaintiff's Claim. — On January 31, 1920, the defendant Commis- sion served upon a large number of coal-mining corporations, including the plaintiff, an order requiring them to report "monthly costs of pro- duction and other data," as set out in specification accompanying the order, for each calendar month of the year 1920 and until further notice. The information and reports required are very full and de- tailed as to production, sales, management, financial condition, deprecia- tion, etc., and all to be calculated as prescribed in the specifications. The plaintiff claims, and from the affidavits filed such appears to be the fact, these reports cannot be made without a large change in the plaintiff's method of bookkeeping and accounting, and at a very con- siderable expense. Commission's Claim. — The Commission claims that it may require these reports under the authority placed in it by the act of Congress creating the Commission approved September 26, 1914, and that Con- gress has the authority to so empower the defendant under the clause, known as the Commerce Clause of the Constitution of the United States : UNIFORM ACCOUNTING 7 "Congress shall have power ... to regulate commerce with foreign nations and among the several States with the Indian Tribes." The parts of the Federal Trade Commission Act pertinent to this inquiry are substantially as follows: Commerce is defined, Section 4, as "commerce among the several States or with foreign nations, or in any Territory of the United States or with foreign nations, or between any such Territory and another, or between any such Territory and any State or foreign nation, or be- tween the District of Columbia and any State or Territory or foreign nation." Section 5 provides that unfair methods of competition in commerce shall be unlawful, and empowers the Commission to take steps to pre- vent such unfair methods and prescribes the procedure for carrying out such purpose. Section 6 of the act provides: "That the Commission shall have power — "a. To gather and compile information concerning, and to investi- gate from time to time the organization, business, conduct, practices, and management of any corporation engaged in commerce, excepting banks and common carriers subject to the act to regulate commerce, and its relations to other corporations and to individuals, associations, and partnerships. "b. To require, by general or special orders, corporations engaged in commerce, excepting banks, and common carriers subject to the act, to regulate commerce, or any class of them, or any of them, respectively, to file with the Commission in such form as the Commission may pre- scribe, annual or special, or both annual and special, reports or answers in writing to specific questions, furnishing to the Commission such information as it may require as to the organization, business, conduct, practices, management, and relation to other corporations, partnerships, and individuals of the respective corporations filing such reports or answers in writing. Such reports and answers shall be made under oath, or otherwise, as the Commission may prescribe, and shall be filed with the Commission within such reasonable time as the Commission may prescribe, unless additional time be granted in any case by the Commission." Subsection "c" authorizes the Commission, when a final decree has been entered against a corporation under the Anti-Trust Acts, to in- vestigate the manner in which the decree is being carried out. Subsection "d" authorizes the Commission, upon direction of the President of either house of Congress, to investigate alleged violations of the Anti-Trust Acts. "f. To make public from time to time such portions of the informa- tion obtained by it hereunder, except trade secrets and names of cus- 8 BITUMINOUS COAL MINE ACCOUNTING tomers, as it shall deem expedient iii the public interest; and to make annual and special reports to the Congress and to submit therewith recommendations for additional legislation; and to provide for the publication of its reports and decisions in such form and manner as may be best for public information and use. "g. From time to time to classify corporations and to make rules and regulations for the purpose of carrying out the provisions of this act. "h. To investigate, from time to time, trade conditions in and with foreign countries where associations, combinations or practices of manufacturers, merchants, or traders, or other conditions, may affect the foreign trade of the United States, and to report to Congress thereon, with such recommendations as it deems advisable." The defendant in its answer admits "that no complaint has been filed by or before it charging the plaintiff with unfair methods of competi- tion or with the violation of the Federal Trade Commission Act or the Anti-Trust Acts and admits that the information sought to be secured from the plaintiff may not throw any light or have any bearing upon any possible violation of any of the acts aforesaid, but asserts that such information is sought for a lawful purpose within the scope of the powers conferred upon the defendant by Section 6 of the said Com- mission Act. The authority of Congress to enact this legislation is claimed under the power to regulate commerce above set out. The reports demanded of the plaintiff are not limited to questions connected with the ship- ment of coal in interstate commerce or the contracts in reference to, or the prices of coal so shipped, but relate almost entirely to the mining of coal and the price at which it is sold, and the financial condition and operations of the company, and all without any attempt to limit the inquiry to matters pertaining to the coal shipped in interstate com- merce. In fact, the Commission in its answer "denies that the plaintiff has the right to segregate its business and to say that part of its business is interstate and part is intrastate, but in order to ascertain if de- fendant is engaged in commerce, the courts will look to the entire busi- ness transactions of the plaintiff, and if any part of its business is intrastate and a part interstate and the whole business is conducted under one organization, as is set forth and admitted in the plaintiff's bill, then the defendant insists that the plaintiff, considering its busi- ness as a whole (is engaged in) interstate commerce and the defendant has the right to ask the information sought. And the information sought in this case is such as would apply as well to a corporation whose business was wholly intrastate as to the plaintiff. The defendant unquestionably is demanding information as UNIFORM ACCOUNTING 9 to intrastate commerce and as to coal production, and frankly asserts the right to do so." That there is a radical distinction between production and commerce is clear. In Kidd vs Pearson, 128 U. S. 1, Mr. Justice Lamar said, page 20 : "Manufacture is transformation — the fashioning of raw materials into a change of form for use. The functions of commerce are different. The bujdng and selling and the transportation incidental thereto con- stitute commerce; and the regulation of commerce in the constitutional sense embraces the regulation at least of such transportation. The legal definition of the tenn, as given by this court in County of Mobile vs Kimball, 102 U. S. 691, 702, is as follows: 'Commerce with foreign countries and among the States, strictly considered, consists in inter- course and traffic, including in these terms navigation, and the trans- portation and transit of persons and property, as well as purchase, sale, and exchange of commodities.' If it be held that the term in- cludes the regulation of all such manufactures as are intended to be the subject of commercial transactions in the future, it is impossible to deny that it would include all productive industries that contemplate the same thing. The result would be that Congress would be invested, to the exclusion of the States, with the power to regulate, not only manufactures, but also agriculture, horticulture, stock raising, domestic fisheries, mining — in short, every branch of human industry. For is there one of them that does not contemplate, more or less clearly, an interstate or foreign market? Does not the wheat grower of the Northwest, and the cotton planter of the South, plant, cultivate, and harvest his crop with an eye on the prices at Liverpool, New York, and Chicago? The power being vested in Congress and denied to the States, it would follow as an inevitable result that the duty would devolve on Congress to regulate all of these delicate, multiform, and vital interests — interests which in their nature are and must be, local in all the details of their successful management." In United States vs Knight, 156 U. S. 1, page 12, Mr. Chief Justice Fuller said : "Doubtless the power to control the manufacture of a given thing involves in a certain sense the control of its disposition, but this is a secondary and not the primary sense; and although the exercise of that power may result in bringing the operation of commerce into play, it does not control it, and affects it only incidentally and indirectly. Commerce succeeds to manufacture and is not a part of it." In Addyston Pipe & Steel Co. vs United States, 175 U. S. 211, which involves the Anti-Trust Act of July 2, 1890, Mr. Justice Peckham, after holding that Congress under the power to regulate interstate coromerce could not regulate any agreement on combination that operated upon 10 BITUMINOUS COAL MINE ACCOUNTING the sale, transportation and delivery of an article of interstate com- merce, on page 27, said: "Although the jurisdiction of Congress over commerce among the States is full and complete, it is not questioned that it has none over that which is wholly within a state, and therefore none over combina- tions or agreements so far as they relate to a restraint of such trade or commerce. It does not acquire any jurisdiction over that part of a combination or agreement which relates to commerce wholly within a State, by reason of the fact that the combination also covers, and regulates commerce which is interstate. The latter it can regulate, while the former is subject alone to the jurisdiction of the State. The combination herein described covers both commerce which is wholly within a State and also that which is interstate. "In regard to such of these defendants as might reside and carry on business in the same State where the pipe provided for in any particu- lar contract was to be delivered, the sale, transportation and delivery of the pipe by them under that contract would be a transaction wholly within the State, and the statute would not be applicable to them in that case. They might make any combination they chose with reference to the proposed contract, although it should happen that some non- resident of the State eventually obtained it." In Delaware, L^ackawanna d: Western Railroad Co. vs Yurkonia, 238 U. S. 439, a case involving the Federal Employers' Liability Act, Mr. Justice Day, page 444, said: "The averments of the complaint as to the manner of the receiving of the injury by plaintiff showed conclusively that it did not occur in interstate commerce. The mere fact that the coal might be or was intended to be used in the conduct of interstate commerce after the same was mined and transported did not make the injury one received by the plaintiff while he was engaged m interstate commerce. The injury happening when the plaintiff was preparing to mine the coal was not an injury happening in interstate commerce, and the defendant was not then carrying on interstate commerce facts essential to recovery under the Employers' Liability Act." In Coe vs Errol, 116 U. S. 517, it was held that logs cut in New Hampshire and hauled to Errol, N. H., to be transported to Maine were not in interstate commerce. Mr. Justice Bradley, page 525, said : "When the products of the farms or forest are collected and brought in from the surrounding country to a town or station serving as an entrepot for that particular region, whether on a river or a line of railroad, such products are not yet exports, nor are they in process of exportation, nor is exportation begun until they are committed to the common carrier for transportation out of the State to the State of their destination, or have started on their ultimate passage to that UNIFORM ACCOUNTING 11 State. Until then it is reasonable to regard them as not only within the State of their origin, but as a part of the general mass of property of that State, subject to its jurisdiction, and liable to taxation there, if not taxed by reason of their being intended for transportation, but taxed without any discrimination, in the usual way and manner in which such property is taxed in the State." On page 528, he said: "It is true, it was said in the case of the Daniel Ball, 10 Wall, 557, 565 : 'Whenever a commodity has begun to move as an article of trade from one State to another, commerce in that commodity between the States has commenced. But this movement does not begin until the articles have been shipped or started for transportation from the one State to the other. The carrying of them in carts or other vehicles, or even floating them, to the depot where the journey is to commence is no part of the journey. That is all preliminary work, performed for the purpose of putting the property in a state of preparation and readiness for transportation. Until actually launched on its way to another State, or committed to a common carrier for transportation to such State, its destination is not fixed and certain. It may be sold or otherwise disposed of within the State, and never put in course of transportation out of the State. Carrying from the farm or forest, to the depot, is only an interior movement of the property, entirely within the State, for the purpose, it is true, but only for the purpose, of putting it into a course of exportation ; it is no part of the exporta- tion itself. Until shipped or started on its final journey out of the State it is a matter altogether in fieri, and not at all a fixed and certain thing." In order for the Federal Trade Commission to have the power to require the plaintiff to make reports as to the mining of coal and as to its intrastate shipments, it must appear that this information is necessary to or connected with some subject over which the general government has power. There is no claim made that there is any pro- ceeding pending, involving the Anti-Trust Act, or unfair methods of competition, or under the Clayton Act, but in its order defendant de- mands reports in all the business of the plaintiff. The defendant relies upon the visitorial powers of Congress over corporations. In this connection it must be borne in mind that the power of Congress over an instrumentality of commerce, such as a common carrier, is far different from its powers over an ordinary business corporation which merely ships its products or a portion of its products over such carrier. In fact, as said by Mr. Justice Holmes in Smith vs Interstate Commerce Commission, 245 U. S. 33, on page 45, "It is not far from true — it may be it is entirely true, as said by the Commission (referring to the Interstate Commerce Commission) — that 12 BITUMINOUS COAL MINE ACCOUNTING there can be nothing private or confidential in the activities and ex- penditures of a caiTier engaged in interstate commerce." Powers of Congress. — Apart from the fact that plaintiff is a cor- poration, it is clear that Congress could not compel the production of the private books and papers of a citizen, except in the progress of judicial proceedings. Kilbourne vs Thompson, 103 U. S. 168, Harriman vs Interstate Commerce Commission, 211 U. S. 407. Mr. Justice Field then sitting on the Circuit Court, in the case of In re Pacific Railway Commission, 32 Federal Reporter 241, said: "And in addition to the inquiries usually accompanying the taking of a census, there is no doubt that Congress may authorize a commis- sion to obtain information upon any subject which, in its judgment, it may be important to possess. It may inquire into the extent of the productions of the country of every kind, natural and artificial, and seek information as to the habits, business, and even amusements of the people. But in its inquiries it is controlled by the same guards against the invasion of private rights which limit the investigations of private parties into similar matters. In the pursuit of knowledge it cannot compel the production of the private books and papers of the citizen for its inspection, except in the progress of judicial proceedings, or in suits instituted for that purpose, and in both cases only upon averments that its rights are in some way dependent for enforcement upon the evidence these books and papers contain." (And again on page 254) : "But in accordance with the principles declared in the case of Kil- bourne vs Thompson, and the equally important doctrines announced in Boyd vs United States, the commission is limited in its inquiries as to the interest of these directors, officers and employees in any other business, company or corporation, or to such matters as these persons may choose to disclose. They cannot be compelled to open their books, and expose such business to the inspection and examination of the Commission. They were not prohibited from engaging in any other lawful business because of their interest in and connection with the Central Pacific Railway Company, and that other business might as well be the construction and management of other railroads as the planting of vines, or the raising of fruit, in which some of these directors and officers and employees have been in fact engaged. And they are entitled to the same protection and exemption from inquisi- torial investigation into such business as any other citizen engaged in like business." But the Conmaission claims that, inasmuch as the plaintiff is a cor- poration, it has the authority claimed under the visitorial power of Congress. That the power sought is visitorial in its nature is clear. UNIFORM ACCOUNTING 13 For in order to give the information and make the reports required, it will be necessary (that it is, so appears from the affidavits on file) for the plaintiff to keep records and books in addition to those now kept by it and by other corporations engaged in a like business, at a considerable expense, and to make monthly reports based on calcula- tions made from such records. This is not the simple obligation of a witness under a subpoena duces tecum, to answer questions and to pro- duce books and records for inspection, but in addition to keep records and make calculations and reports. Such a burden cannot be imposed upon an ordinary witness. Northern Pacific Railway Co. vs Keyes, 91 Federal Reporter 47. 4 Wigmore No. 2203, page 2969. The Commission contends that the order served upon the plaintiff does not undertake to prescribe methods of bookkeeping, nor to keep additional records, but under the allegations of the bill and the affidavits filed, I am of the opinion that this contention cannot be sustained. The plaintiff cannot comply with the orders of the Commission without changing its methods of bookkeeping. That the Act undertakes to vest such powers (certainly as to matters connected with interstate commerce) in the Commission is clear from Section 10 of the Act which provides penalties for any person who shall willfully "neglect or fail to make or cause to be made, any false entry in any account, records or memorandum kept by any corporation subject to this act, or who shall willfully neglect or fail to make full, true and correct entries in such accounts, records or memoranda of all facts and transactions appertaining to the business of such corpora- tion." These powei*s could only be justified under visitorial power. It has been held that Congress has such visitorial power over cor- porations engaged in interstate commerce in Wilson vs United States, 221 U. S. 361, and in Ellis vs Interstate Commerce Commission, 237 U. S. 434, but in these cases the power was limited to that portion of the business which was under the control of the Federal Government. No such power would seem to exist, however, as to other matters, and the two cases referred were cases in which subpoena duces tecum has been issued, requiring the production of a corporation's books in the one case before a grand juiy investigating charges of fraudulent use of the mail and in the other before the Interstate Commerce Com- mission. And in the latter case the Court, through Mr. Justice Holmes, on page 444 (237 U. S.) said: "If the price paid to the Armour Car Lines was made the cover for a rebate to Armour & Co., or if better cars were given to Armour & Co. than to others, or if, in short, the act was violated, the railroads are responsible on proof of the act. But the only relation that is subject to the Commission is that between the railroads and the ship- 14 BITUMINOUS COAL MINE ACCOUNTING pers. It does not matter to the responsibility of the roads whether they own or simply control the facilities, or whether they pay a greater or less price to their lessor. It was argued that the Commission might look into the profits and losses of the Annour Car Lines (one of the matters inquired about) in order to avoid fixing allowances to it at a confiscatory rate. But the Commission fixes nothing as to the Armour Car Lines except under No. 15 in the event of which we shall speak." "The appellant's refusal to answer the series of questions put was not based upon any objection to giving much of the information sought, but on the ground that the counsel who put them avowed that they were the beginning of an attempt to go into the whole business of the Armour Car Lines — a fishing expedition into the affairs of a stranger for the chance that something discreditable might turn up. This was beyond the powers of the Commission. In re Pacific Railway Com- mission, 32 Federal Reporter 241. Interstate Commerce Commission vs Brimson, 154 U. S. 447, 478, 479. Harriman vs Interstate Com- merce Commission, 211 U. S. 407. The Armour Car Lines not being subject to regulation by the Commission, its position was simply that of a witness interested in but a stranger to the inquiry, and the Com- mission could not enlarge its powers by making the company a party to the proceedings and serving it with notice. Therefore the matter to be considered here, subject to the qualification that we are about to state, is how far an ordinary witness could be required to answer the questions that are before the Court." In the case of a corporation doing a wholly intrastate business, could it be said that Congress had any visitorial power under the Commerce Clause of the Constitution of the United States? Clearly it has not. The fact that it happens to be the same corporation in this instance which mines and ships the coal does not give Congress any greater powers to regulate production and the intrastate commerce of such corporation. The visitorial power of Congress is limited to that part of the busi- ness over which it has control, and which under the Constitution it has the power to regulate. In Hammer vs Dagenhart, 247 U. S. 251, it is said (page 260) : "While the power to regulate commerce among the several States is in the same grant and in the same terms with the power over foreign commerce, yet there is a difference with respect to the extent of that power gTowing out of the difference in the relation of the United States to the two kinds of commerce, and the difference in the right of the citizen of the United States and the foreigner to engage therein. As to foreign commerce, the United States possesses and exercises all the attributes of sovereignty. As to interstate commerce, it exercises only that portion of sovereignty delegated to it." UNIFORM ACCOUNTING 15 (And again, page 261) : "However much the Knight ease, 156 U. S. 1, may be weakened by later decisions, its distinction between production and commerce is still effective to prevent direct congressional regulation of production as distinguished from sale and transportation." The power claimed by the Commission is vast and unprecedented. The mere fact that a corporation engaged in mining, ships a portion of its product to other States does not subject its business of produc- tion or its intrastate commerce to the powers of Congress. Doubtless the business of every coal-mining corporation, whether engaged in interstate business or not, to some extent affects interstate prices and commerce, but, as stated in United States vs King, 156 U. S. 1 (above), "The power to control the manufacture of a given thing involves in a certain sense the control of its disposition, but this is a secondary and not the primary sense." No sound reason is given why there is any difference in the business of coal mining of a corporation which ships its coal to another State and that of a corporation which does not. Interstate commerce is not affected any more in the one case than in the other. Concerning Search and Seizure. — In the case of United States vs Basic Products Co., 260 Federal Reporter 472, in which it was urged that Section 6 of this act was unconstitutional, not only in so far as it authorized investigation and compulsory disclosure of matters which are beyond the commercial powers of Congress, but also in so far as it attempted to authorize a search or seizure by an administra- tive agency of the Government without charge or suspicion, Justice Orr of the District Court of the Western District, Pennsylvania, said: "While the contention of counsel is probably sound, this Court does not deem it necessary to go further than to hold that the Commission has not the power to carry on investigations which it has assumed in the present case." In the same decision he also said: "Imagination, if not experience, can suggest that persons, partner- ships, and corporations may be engaged in interstate commerce by the transportation of merchandise solely by water; that their activities may give them their income from lighterage; or they may be engaged in the sole business of forwarding goods, with no interest in the vessels or wagons on which they are transported. The foregoing are merely the illustrations of activities which may perhaps be within the scope of the powers gi-anted to the Commission by the act as found in the fifth section thereof." "Imagination, however, cannot suggest such an extension of consti- tutional limitation as may justify the investigation undertaken by the Commission in this case. Indeed, so far as it has been brought to the 16 BITUMINOUS COAL MINE ACCOUNTING attention of the Court no such assertion of power has ever been made to the courts. Investigation under subdivision 'a/ section 6, is limited to corporations engaged in interstate commerce. The defendant is en- gaged in manufacture." I am of the opinion, therefore, that no such visitorial power as that claimed by the Commission in the instant case has been vested in Con- gress by the Constitution, nor could Congress delegate such power to the Commission. But did Congress undertake to vest such power in the Commission? It is the duty of the courts, if possible, to give the statute a construction which would not conflict with the Constitution. Knight Templar Co. vs Jarman, 187 U. S. 197, 205. The corporations referred to in the Act are, by its terms, limited to those engaged in "commerce" as defined in the Act, and all the powers vested in the Commission should be and it seems may be con- strued wdth this limitation. But the Commission has undertaken to construe the Act otherwise, and to take steps under its construction of the Act to require informa- tion and reports not relating to interstate commerce, but relating chiefly or wholly to production, and under its order the information which it has the power to demand cannot be separated from that over which it has no control. While as in other matters, as stated in In re Pacific Railway Com- mission, supra. Congress may authorize the Commission to obtain in- formation upon any subject which, in its judgment, it may be im- portant for it to possess, it may not compel the production of such information in respect to matters over which the Federal Government has no control. It follows, therefore, that the Commission cannot compel the making of the reports which it has demanded of the plaintiff. The plaintiff further contends that this power of the Commission has been taken away by Presidential order. Much proof, in the form of affidavits, has been introduced by the defendant to show contemporane- ous constructions of this order, and that the power claimed by the Commission in this case was not taken from it. The order is ambiguous, but, in view of my opinion as to the power of the Commission, it is not necessary to decide this question in passing upon the application for a preliminary injunction. Section 10 of the Act provides that "if any corporation required by this Act to file any annual or special report shall fail to do so within the time fixed by the Commission for filing the same, and such failure shall continue for thirty days after notice of such default, the corpora- tion shall forfeit to the United States the sum of $100 for each and every day of the continuance of such failure, which forfeiture shall be UNIFORM ACCOUNTING 17 payable into the Treasuiy of the United States, and shall be recoverable in a civil suit in the name of the United States brought in the district where the corporation has its principal office or in any district in which it shall do business." The plaintiff has failed to file the report demanded and the Com- mission has notified it that steps will be taken to recover the penalty prescribed above. The jurisdiction of a court of equity is not ques- tioned by the defendants, and as I am of the opinion that the Com- mission has not the power to exact the reports and information sought, the injunction prayed for will issue upon plaintiff executing bond with surety to be approved by the Court in the penalty of $5,000. Following this injunction -^tlie Federal Trade Commis- sion continued for several months to receive data with respect to coal costs from those who sent in the reports voluntarily. The volume of these gradually decreased to a point where the tonnage reported was no longer repre- sentative, and about the middle of the year 1920 the Fed- eral Trade Commission discontinued the compilation of coal costs. The various forms prepared by the Federal Trade Commission are reproduced as a matter of history. Form Prepared by Federal Trade Commission for 1919. — (Costs were never collected on this form on account of lack of funds to carry on the work.) The 1919 Cost Sheet.— The Federal Trade Commis- sion's cost sheets for 1919 which was sent to coal opera- tors in mimeographed form were never actually put into use. The cost sheets as planned provided a number of schedules in which labor and supplies were separated. The balance sheet for that year which formed a portion of the report was practically duplicated in the forms is- sued for the year 1920 and for that reason will here be passed over. The following tabulation shows the accounts in the sequence in which they appeared in the profit and loss sheet, this sheet being supported by detailed schedules : 18 BITUMINOUS COAL MINE ACCOUNTING ACCOUNTS Sales and Transfer of Coal Commercial Sales (Schedule 1 ) Departmental Transfers (Schedule 1 ) Purchased Coal Sales — Commercial (Schedule 1 ) Purchased Coal to Departments (Schedule 1 ) Total Sales Allowances Freight Prepaid and Charged, if any Total Deductions Net Sales Cost of Sales Mining (Schedule 2 ) Ventilation ( Schedule 3 ) Drainage ( Schedule 4 ) Yardage and Dead Work ( Schedule 5 ) Stripping ( Schedule 6 ) Haulage ( Schedule 7 ) Tipple Operating (Schedule 8 ) Preparation — Commercial Coal ( Schedule 9 ) Power (Schedule 10 ) Mine Overhead (Schedule 11 ) Fixed Charges to Mining (Schedule 12 ) Other Charges to Cost (Schedule 13 ) Total— Gross Mine Cost Deduct— Credits to Cost (Schedule 14 ) Net Mine Cost Tons Inventory of Coal Beginning of Period (Add) Tons Total Inventory of Coal End of Period (Deduct) Tons Total Selling Expenses (Schedule 15 ) General Expenses and Administration (Schedule 16 ) Cost of Production Purchased Coal Cost Total Cost of Sales Profit from Coal Sales Miscellaneous Income (Add) (Schedule 17 ) Total Deductions from Income (Deduct) (Schedule 18 ) Net Income Form 1. — Profit and Loss Account The profit and loss sheet was followed by a Coal Sales Statement which called for information as to production and realization of and for the various sizes and the dis- position of the production, such as Local Deliveries, Sales to Consumers, Sales to Other Coal Operators, Sales to Eailroads other than Those Owned, and departmental transfers specified as Coal to Own Coke Ovens, Coal used by Own Eailroads, Steamboats, etc. Similar accounts were provided for Purchased Coal statistics. UNIFORM ACCOUNTING 19 The following tabulation represents the Coal Tonnage Statement, designated Schedule la and shows the rather unusual method of arriving at the tonnage produced, and the divisor of cost : DESCRIPTION Production of Coal (Per Tipple Weights) Coal to Power-house (Per Tipple Weights) Coal sent for Preparation (Per Tipple Weights) Coal Realized on after Preparation (Per Mine Weights) Tonnage of Slate and Waste Unrealized on % of Preparation Loss as to Tonnage Sent for Preparation ( % ) % of Preparation Loss as to Production ( %) Total Coal Not Realized on Net Production of Coal (Divisor). Coal Stored at Mine at Beginning of Period Coal Stored at Mine at End of Period Increase or Decrease Coal to be Accounted for Departmental Transfers (Per Tipple Weights) Sales: (Per Railroad Weights) Prepared Run of Mine Slack Total Sales Coal in Transit not Invoiced Total Sales, Transfers, and Coal in Transit Net Production Not Accounted for % of Shipping Loss as to Tonnage to be Accounted for ( %) % of Shipping Loss as to Production ( %) COAL SHIPPED FROM MIXES By Rail By Water By Wagon or Truck Total Shipments Form 2. — Coal Tonnage Statement (Schedule la) The voluminous details of the profit and loss accounts required to be kept as contained in Schedules 2 to 18 in- clusive follow: ACCOUNTS Mining (Schedule 2 ) Pick tons @ Machine tons @ Other Mining tons @ Company Coal tons @ Mining Machine Repairs Total Timbering Total Mining FOBM 3. — Schedules to Profit and Loss Account 20 BITUMINOUS COAL MINE ACCOUNTINQ FoBM 3. — Schedules to Profit and Loss Account — Continued Ventilation (Schedule 3 ) Operation Equipment Repairs Total Ventilation Drainage (Schedule 4 ) Operation Equipment Repairs Total Drainage Yardage and Dead Work (Schedule 5 ) Grading Removal of Slate and Waste Driving Entries (not included under Development) Total Yardage and Dead Work Stripping (Schedule 6 ) Stripping Clay and Rock Removing and Loading Coal tons Contract Stripping and Loading tons @ Equipment Repairs Total Stripping Haulage (Schedule 7 ) Animal Mechanical Equipment Repairs Stable Expense Total Haulage Tipple Operating (Schedule 8 ) Operation Equipment Repairs Box Car Loading Switching to Main Railroad Tracks Total Tipple Operating Preparation — Commercial Coal (Schedule 9 ) Screening (Tons over Screens) tons Operation — Picking Table Disposal of Waste Equipment Repairs Total Screening tons Washery (Tons Washed) tons Operation Disposal of Waste Equipment Repairs Total Washery Total Preparation Power (Schedule 10 ) Generating Power (Exclude own Fuel) Equipment Repairs Purchased Power Total Power Mine Overhead (Schedule 11 ) Superintendence Engineering General Inside Labor General Outside Labor UNIFORM ACCOUNTING 21 Form 3. — Schedules to Profit and Loss Account — Concluded Mine Office (Clerks and Supplies) Insurance — Liability and Compensation Welfare Work at Mine Ordinary Repairs to Buildings Total Mine Overhead Fixed Charges to Mining (Schedule 12 ) Royalty, Current tons @ Depletion tons @ Depreciation 1 Structures % 2 Equipment % 3 Development tons @ Rental of Equipment Total Fixed Charges to Mining Other Charges to Cost-Specify - (Schedule 13 ) Extraordinary Repairs to Buildings Extraordinary Repairs to Equipment Total Other Charges to Cost Credits to Costs-Specify (Schedule 14 ) Explosives and other Miners' Supplies Revenue from Smithing Revenue from Heat, Light and Power Revenue from Houses (Dwellings) Total Credits to Costs Commissions Advertising Salesmen's Salaries Traveling Expenses Total Selling Expenses General Expenses and Administration (Schedule 16 ) Officers' Salaries Officers' Expenses Office and Clerical Salaries General Office Expense Insurance, General Taxes (Except Income and Excess Profit) Total General Expenses and Administration Miscellaneous Income (Schedule 17 ) Stores Transportation Facilities — Railroad Transportation Facilities — Floating Coke Sales $ Less Cost $ Royalty from Owned or Leased Lands Interest on Securities Owned Dividends on Stocks Owned Total Miscellaneous Income Deductions from Income (Schedule 18 ) Taxes (Income and Excess Profits) Interest on Bonds Other Interest Bonus to Officers Bonus to Employes Total Deductions from Income 22 BITUMINOUS COAL MINE ACCOUNTING FEDERAL TRADE COMMISSION Pii.N.. SEMIBITUMINOUS, BITUMINOUS OR SUBBITUMINOUS COAL OR LIGNITE Report on Co»t, Income and Tonnage for Month of -1918 (Full DBHie ot reportinif operntor) (Address of principal oIKce) No* '**^°"°' ACCOUNTS (cur4??rntM Per ton* Amount Jan. 1. 1 and including current montb Perton^ 1 61. LABOR: 2 a Mining 3 b Yardage and dead work 4 c Haulage 6 d Tipple 6 e Removing stripped coal 7 t Power 8 g Washery 9 h Other operating labor 10 i Maintenance and repairs: 11 1. Structures 12 2. Equipment 13 j Superintendence and engineering t •♦••••» t > • c. 1 . 1 • • 14 Total Labor 15 . 62 SUPPLIES: 16 a Mine timbers 17 b Feed and other sUble supplies 18 c Power house fuel, .. tons, @ f . » • 19 d Power purchased 20 e Water purchased 21 f Washery supplies, including water 22 g Other operating supplies 23 h Maintenance and repairs: 24 1. Structures 25 2. Equipment 26 Total Supplies 27 Total Labor and Supplies (add lines 14 and 26) 28 63. DEBITS AND CREDITS TO COST: (crediU in red) 29 • Profit or loss on explosives and miners' fupplies 30 b Revenue from smithing 81 c Revenue from heat, light and power 32 d Miscellaneous debits and credits 33 Total Debfts and Credits 34 Total Operating Cost (take line 27 and add or dednrt 38) 35 64. FIXED CHARGES AND GENERAL EXPENSES: 86 a Royalty, tons -. 37 b Depletion, tons @ $ 38 c Depreciation: 39 1. Structures 40 2. Equipment 41 8. Development 42 d Deferred charges: (pro-rated) 43 1. Stripping 44 2. Royalty (unrecoverable) 46 • Taxes (except income and excess profits) 46 f Insurance— general 47 g Insurance— liability or workmen's compensation 48 b Officers' salaries and expenses % 49 i Clerical salaries and office expenses % 60 j Legal expenses 51 k Miscellaneous 63 Total Mining Cost (add lines 34 and 52) 1 *Line 130 (M) is the divisor to be used to determine the rate per ton for lines 2 to 63 inclusive. fLine 130 (N) is the divisor to be used to determine the rate per ton for lines 2 to 63 inclusive. FoBM 5. — Federal Trade Commission coal report blank for 1918. UNIFORM ACCOUNTING 23 The informftlion required bj this report U ordered to be fumiahed pursuant to the power of the CommiBsion under ■ubdiv{«ion b of uction 6 of "An Act to* create Federal Trade Commission, to deflne its powers and duties, and for other purposes," and under paragraph 12, section 26, of "An Act to provide further for the atiooal McurHr and defense by encouraging the productron, conserving the supply and controlUng the distribution of food and fuel." which is as follows: . "The books, correspondenece, records, and papers in any way referring to transactions of any kind relating to the mining, production, sale, or distribution of all mine operators or other persons whose coal and coke have or may become subject to this section, and the books, correspondence, records, and papers of any penoQ •{»• plrinff for < purchase of coal and coke from the United 3Utes Aball at all times be subject to inspection by the said agency" Palhir* to 1 failure Section 10, Federal Trade Commission . Any person who shall wilfully make « than $6,000. or imprisonment for a term ol for each and every day of Um contlnuaac* of ttieli Une Account ACCOUNTS (cu^.'Srrn-^nth) h"'""' Amount Jhd. 1 to C-u-'^.'S^'i^. |p«too.| 56 65. SELLING COST: 66 a Commissions 67 b Advertising 68 c Salesmen's salaries and expenses 59 d Offlcers'salaries and expenses ...% 60 e Clerical salaries and office expenses ooks, correspondenece. records, and papers in any ra or other persons whose a purcbaa* ' • ■ ' the supply and eontrollinff the distribution of food and fuel," which is as follows: referring to transactions of any kind relating to the mining, production, sale, or distribution of ali „ _ _ come subject to this section, and the books, correepondence, records, and papers of any person ap- coal and coke from the United States shall at aU t^mea be^subject to f r«llur« to m«ll thli report within the time required wiU lubject the corporation to ■ forfeiture of the lani of 1100 for each and every day of the eentinuance of lucli '^""xnt'pireon'whoVhril li'/uUy^r.ke"'?" au." to be mad. any falae entry or .tatement of faet 1. thta report .haU be .ubtet to a line of not leM than tlOOO u, ..re than tl.OOO. or impriaonment for a term of not more than three yeara or to both aueh fine and imprtaonment Section 10. FedoraJ Trade CommiMlon Act no" ^-iJS"" ACCOUNTS (current month) per ton* Amount Jan. 1 to and moludtng current mo. per tont 1 161. LABOR: 2 a Labor, mining $ washery % 8 b Superintendence and engineering ... 4 Total Labor 5 162. SUPPLIES: 6 a Operating and repair supplies, mining $ , washery $ 7 b Power purchased 8 c Power house fuel, .^ tons @ $ 9 Total Supplies 10 Total Labor and Supplies (add lines 4 and 9) U 163. DEBITS AND CREDITS TO COST: (crediU in red) 12 a Profit or loss on miner's supplies 13 b Revenue from smithing 1« c Miscellaneous debits and crediU IB Total Debits and Credits j 16 Total Operating Cost (take line 10 and add or deduct 15) l! 17 164. FIXED CHARGES AND GENERAL EXPENSES: 18 a Royalty, tons 19 b Depletion, tons @ $ .....»• 20 c Depreciation (exclude depreciation on delivery equipment) 21 d Taxes (except income and excess profits) 22 c Insurance— general 28 f Insurance — liability or workmen's compensation 24 g Officers' salaries and expenses 26 h Clerical salaries and office expenMs 26 i Miscellaneous f f ft t 28 Total Mining Cost (add lines 16 and 27> 29 166. SELLING AND DELIVERY EXPENSES: 30 a Commissions SI b Uncollectible accounU 32 c Delivery expenses 38 1. Labor 34 2. Supplies as 3. Depreciation 36 d Other selling or delivery expenses •• per lent .. pertoDi I 87. Total Selling and Delivery Expenses 1 38 Total Mining and Selling Cost (add lines 28 and 87) 1 S» INCOME STATEMENT 1 , 41 157. COST OF COAL SOLD: 42 a Purchased coal cost 43 b Coal inventory, add decrease, deduct increase (Unes 81 or 82, col.I) 44 Mining and selling cost (line 38) !•!! 46 Total Cost op Coal Sold (add lines 42. 43 and 44) 46 Profit from Coal (deduct line 45 from 40) 47 158 MISCELLANEOUS INCOME: (Net) 48 a Dwelling. 49 b Commissaries or stores 60 c Coke 61 A Miscellaneous * * • 62 Total Miscellaneous Income .63 Total Income (add lines 46 and 62) carried forward !H"' fZ {?? .'" *?" divisor to be used to determine the rate per ton for tLine 87 (L) is the divisor to be used to determine the rate per ton for Form 6.— Federal Trade Commission coal report blank for small companies in 1918. UNIFORM ACCOUNTING 27 1 0- t e. 64 Total Income (Brooght forward) 66 169. DEDUCTIONS FROM INCOME: 69 a Taxes (income and excess profiu) 67 b Interest 68 c Miscellaneous 69 Total Deductions 60 Net Income (deduct line 69 from 64) 61 CHARGES TO FIXED ASSETS 62 Surface Lands 63 Coal 64 Structures 65 Equipment 66 Development COAL TONNAGE (2.000 POUNDS) | N.meorSlie (A) De»crlptloo of Scweo Power House Fuel fB) Co.1 wubed (black) aod Coal to coke OTeD.(re» ^ !3 cr t 34 BITUMINOUS COAL MINE ACCOUNTING Average thickness of seam ( inches ) Number or name of seam a *a a .2 2 3 1 i i 1 j i Total Number of men on pay roll during month CD Average Number of men employed per day worked fl m ^ ^ a I s Number days Worked b- t^ : ao : ; o o QO 00 ^ I u o UNIFORM ACCOUNTING 35 X X X X X X X 1 X X X « X H X X o p^ o o o X X X X X X X X X X X X X X X X X X X X I X X X X H 8 el §1 c3 .S <4-i to 3^ Ph Sh O "73 c o m O » O H Q O oT 'd "tS * O) Oi 0) ^-^ I— 1 Jh ^^ ee o o o -t-> e^ cS o O O O c H O O 5 36 BITUMINOUS COAL MINE ACCOUNTING I CO <5 «5 (J -:: 'i X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X «t: X X X X X X X X X X X X X X X X X X X X X -^ n X X X X X X X «5«- X X X X 1 1 1 i IE OS i i i S '5 J 1 2 i 3 i 2 1 -d > P5 g H GO t (S > .£ 1 g QQ c 1— 1 Oi 1 > a 1 1 t c > or ■• .2; 1 p-i a e c P-H 1— 1 < p g UNIFORM ACCOUNTING 37 « « X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X H X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X > II li G 00 .2 *s u Ci o o 1 I-H 1 i o o CO G O m OQ 1 1 .2 • i; 1— 1 < 6 I-H 1 00 G pq I-H g 1, 1 00 1 0) a 1 CO 00 1 'c 1 I-H 1 00 a 3 OQ QO CO . '■§ : OS OQ < Q < i 1 CO 00 '0 1 CO CO -4- > t 1 1 H C I ^ 38 BITUMINOUS COAL MINE ACCOUNTING a X X X X X X X X X X ^x X X X X X X X X X ^ X « X X |X X X X X X II >< X X X X X X X X X Q 5h 1 1 .^ >< X X X X X X X X X ^x X X X X X X X X X o a* H H in «o t^ CO 05 o CC CO CO 5*5 CO tM -t^ a a* r, T! H HH P CO CO Tt* if3 ^^ TP ^^ Tt^ UNIFORM ACCOUNTING 39 ( 1 - 1 i 1 « X « X X X X X X X X X X X X X 1 X ~ >< « X :3 X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X >< X X X X X X X X X X X X X X X X X X X X X 1 X X !x X X X X ^1 ii 03 S o h- 1 1 o o I CO a» § a i 1 00 3 o o o 1 1 S : ^ • ^ ; <^ : >* . CO CO g 1 1 2 'T3 "i o 1 1 OS 1 > o in CO lO 03 'E. lO 00 o lO o CD ?o 2 s 13 h-t i P3 40 BITUMINOUS COAL MINE ACCOUNTING REPORT ON BITUMINOUS COAL PRODUCTION, COST AND INCOME OF FOR. Account COST No. 1 2 3 4 5 6 7 8 MINING COST LABOR Amount Per Ton Miae Office and Superintendence 9 Total Labor 10 11 12 13 14 15 10 OTHER CHARGES AT MINE Power Plant Fuel-^Ton^ ' .' .' .' :::: ;.:: .Price's l! i! i! l,' ^ l!! l! ] Electric Current Purchased Loss or Gain on Explosives and Smithing (Gain in Red) 17 Total Other Charges at Mine 18 COST AT MINE 19 20 21 22 23 24 26 • 26 27 28 29 30 OVERHEAD Royalty Depletion . Depreciation Taxes (Other than Income and Excess Profit) Insurance (General) Insurance (Liability or Workmen's Compensation) i )fficer8' Salaries and Expenses .' '..._( %) Other Genersl Office Salaries and Expenses ( %) 31 Total Overhead 32 ToUl Mining Cost (Divisor— Tons of Production— Account No. 107) 33 u 36 37 38 39 40 41 42 SELLING COST Bad AccounU Salaries and Expenses of Salesmen and Sales Agencies . 8fhrGe^nS^°c^ Errand Expen.e.::::::::::l.;:::::.l^ 43 Leas Selling Cost applicable to Items charged against Miscellaneous 44 Total Selling Cost (Divisor-Total Production Salcs-Acct. No. 67) 45 Total Cost per Ton * ♦ ♦ • ♦ • J? 48 49 DEDUCTIONS FROM INCOME Taxes— Income Und Excess Profit . Interest (Paid and Accrued) 50 Total 61 u 64 45 CAPITAL CHARC Improvements DevelopmenU Tot ES ... S • ti.. 1 FoBM 8. — Form prepared by Cost Accounting Committee of National Coal Association for submission to Federal Trade Commission. UNIFORM ACCOUNTING 41 REPORT ON BITUMINOUS COAL PRODUCTIOM. COST AND INCOME OF FOR. .19. Account INCX)ME No. 56 57 58 59 60 61 62 63 64 65 66 COAL SALES (ExcloBive of Purchaaed BitumiE and Anthracite) ous Tons of 2000 Lbs Per Ton Amount To Railroads:- ^ Sbipped Other Shipments:- Via Rail Via Water Coal Coked (including Coal Washed) Local Salcs-ReUil Sales at Mine»-(Net Return.) Power House Fuel 67 Total Production Sales « » • 68 69 70 Cost of Sales. Total Mining Cost (Account No..32) ... Inventory First of Month . . ! « * 4 • • - - — — 71 72 Total Inventory Last of Month 73 Total Cost of Sales 74 75 * * * J J J * Deduct Selling Cost (Account No. 44) 76 Income from Sales • ,,,, * 77 78 79 80 11 83 84 85 86 87 88 89 Miscellaneous Income (Net): Standard Gauge Railroad Equipc Water Transportation Equipmen Coke and By-Producta Washed Coal Purchased Anthracite Purchased Bituminous Dent t ;;:;:: ::":::::;::::::;;:;:.i Tons;::::;;:::; :;::;; :::::::: 1 Tons Tons — Tons ' total Miscellaneous Income "J ~90~ 91 Total Income (Sales and Misccllaw ■ous) ' 92 Net Income ' PRODUCTION TONNAGE (2000 Pounds) Prepared Run-of-Mine Slack Total 93 94 95 96 97 98 99 100 101 102 SALES: To Railroads:- At Tipple Shipped Other Shipmenta:— Via Rail Via Water Coal Coked (incl'g Co«l Washed). . Power House Fuel. 103 104 Total Sales -- -- Add-Inventory End of Month. . 105 106 Total .. Deduct-Invcntory First of Month 107 PRODUCTION = ^ ^ ^ 1 1 1 _ _ J FoEM 8. — Form prepared by Cost Accounting Committee of National Coal Association for submission to Federal Trade Commission (reverse). 42 BITUMINOUS COAL MINE ACCOUNTING In the fall of 1917 the National Coal Association ap- pointed a Committee of competent accountants charged with the duty of devising cost report forms which would give the government the information required for the pur- pose of a study of costs in connection with the price fixing powers of the Fuel Administration and, at the same time, show true costs in a manner which would not work a hard- ship upon the industry. This Committee, after mature consideration, prepared a tentative short form of report which, in their opinion, would meet the requirements and submitted it to the Federal Trade Commission, where it received scant consideration. In the winter of 1918 a second committee was ap- pointed for further consideration of this matter. This committee gave considerable time to its study, and at the annual convention of the National Coal Association in May, 1919, submitted a tentative report which was later completed and adopted by the Directors of the National Coal Association as a standard for the industry. This form has been very widely distributed among bituminous coal operators throughout the country and has been adopted by a large number of them. During the period when the Federal Trade Commis- sion was not collecting cost data, namely, the year 1919, the forms were submitted to the economists and account- ants in charge of the Coal Section of the Federal Trade Commission with the advice that if the system recom- mended obtained their approval the endorsement of the entire coal mining industry might be secured. This ap- proval was not forthcoming and as has been heretofore shown, the Commission issued a new form of cost sheet for use on January 1st, 1920. It will thus be seen that the interest of the government in coal costs has been at times beneficial and at times harmful. Without doubt the impetus given to the study of coal costs by the Commis- sion was in the first instance helpful because probably UNIFORM ACCOUNTING 43 only through necessity could the industry have been brought so quickly to the study of costs and their com- pilation in a uniform manner. On the other hand, the unsettled policy of the Commission and the frequent changes of forms wore out the patience of coal producers and made them loath to adopt any uniform system of cost determination until the courts should finally pass upon the right of the Federal Trade Commission to di- rect their accounting methods. Each of the forms pre- pared by the Commission required some adjustment in the classification of accounts by coal operators, and the 1920 report in particular required the ascertainment of some portions of cost in a manner which is not entirely in harmony with the opinions contained in the regula- tions of the Internal Revenue Bureau. The form recommended by the National Coal Associa- tion's Cost Accounting Committee will be made the basis of the treatment of costs in the articles in this book. Instructions for Compiling Reports. — The following instructions for compiling reports are taken from the Report and Suggestions of Committee on Standard Sys- tem of Accounting and Analysis of Cost of Production of the National Coal Association.^ MINING. (1) Hand Mining. Miners, Helpers, Shot Firers, etc. (2) Machine Mining. In machine mines this item should be subdivided into Under- cutting AND Pit Car Loading. Undercutting should be charged with — (a) Generation and Transmission of Power, i. e., the propor- tionate share of Cost of power generated and its transmission to machines (see Note on Power below). (b) Maintenance of Machines, i. e., repair parts, machine picks, 1 Any one desiring to make a study of coal cost accounting should ask the secretary of the National Coal Association, Commercial Bank Building, Washington, D. C, for a copy of this report. 44 BITUMINOUS COAL MINE ACCOUNTING Report of Cost, Income and Tonnage For Month of_ Form 9. — National Coal Association coal cost report blank. UNIFORM ACCOUNTING 45 Shesta F or Naoe of Company teport of Cost, Income and Tonnage F«ir Month of COST Um ACCOUNT CURRENT MONTH YEAR^TO DATE LABOR ! SUPPUES TOTAL TOTAL Amotint i Amount Amount Per Ton Amount Per Ton 33 84 35 36 37 38 39 40 Qeiieral Expense Officrt- Sal.riti and Exptnict.. nent iDd UlmlluiMui Ofle* Er- 41 ToMt Central Expenie 43 Total OperaDng and General Expenae (add Knea ja and 41) 43 44 46 46 47 48 49 SO 61 62 63 64 Sclline Expense Officers' Salaries and Expenaes. . Saleamen-a Salaries and Expeoacs Other Office Salariea Rent and Oier Office Expense. . Miscellaneous Total Selling Expenae 65 Total Operating, General ind Selling Expenae (add 4s k 5J) Form 9. — National Coal Association coal cost report blank (continued) 46 BITUMIN0U8 COAL MINE ACCOUNT IN a Report of Cost, Income and Tonnage For Month o£ INCOME Coal Sales Salct Per Railroad Weighti. Delivered to Locomotivet. . . . Local Sale* at Mines Coal Coked Raw Coal to Wathery To Power Plant To Dwellings Adjusiment of Inventories Current Mo. Year to Date. Amount CURRENT MONTP YEAR TO DATE Qross Sale* (produced coal). Deductions Less Freight Prepaid less Allowances sod Total Deductions. Net for Coal at Mine Less Total Operating Charges (line ss). Margin on Coal. Other Income Profit or Loss, Expio Heat, Light and Power Dwellings and Farms Stores Profit or Loss, Washer Operatioo*. Profit or Loss, Coke Plaat Floating Equipment Railroad Euipment Purchased Coal Total Miscellaneous Income Gross Income. (Add lines 74 anH l«>. Charges to Income Ds4uctlble for Federal Taxes . Interest (Paid or accrued) Cbsrges to Income Not DsdiKtIble (or Federal TsYea Income and Bfxcess Profits Taxes Cootingent Reserve (Mining hazard) Maiatenaoce Reserve Total Charges to Net Income (Subtract 98 from 89) . Taxable Net Income (Subtract 91 fm-i 330 Form 9.— National Coal Association coal cost report blank (continued) UNIFORM ACCOUNTING 47 WieM 4 For Mum e( Coapuy Report of Cost, Income and Tonnage Tonnage Statement— Nc (Report put ton Ifnr Month of 5t Tons of 2000 Pounds 1 as ^;9KMo.te. 1 Form 10. — Tipple s'.ieet blank. to show the tons cut by each machine. The tons credited to the cutters will always equal the tons credited to load- ers when both classes of men are paid upon the tonnage basis. It is necessary that the weighmaster be informed by the mine foreman, or whoever employs the men, as to the nature of the work to be performed by the miners; that is, whether a new man is employed as a pick miner, as a cutter, or as a loader after machine. This is neces- sary because each of these occupations pays a different rate per ton. If a man has been employed in pick work and is trans- ferred to work of loading, immediate notice must be given to the weighmaster of such a change in occupation. 56 BITUMINOUS COAL MINE ACCOUNTING It is generally well that the miners' check numbers be assigned by the weighmaster. The best method of carry- ing this out is to have the mine foreman, or whoever em- ploys the operative, inform the weighmaster, in writing, that John Doe has been employed on a certain date and request that he be assigned a number and given a set of checks, the mine foreman stating whether the work to be done is pick or machine mining. A suggested form for transmitting this information follows : Mine 191 .... To Superintendent Company Dear Sir: The Bearer, , Address , desires employment as at your mine. '.".'.'.'.'. V. ". '.*'.'.'.".'.'.'.'. V.'.V.V.y.'. Title Checks furnished , Amount charged Mr , Weighmaster Dear Sir: machine Please furnish him with a set of pick checks. Rate cutting for coal Superintendent Check number furnished Where last employed , Nationality Certificate No , Age , Height , Weight Complexion , Mining experience Married or single , Characteristics Form 11. — Miner's Employment Slip and Check Requisition. This form, it will be noticed, can be used for the pur- pose of indicating the former experience and place of work of the man employed. The weighmaster should note on the form the serial number of the checks assigned to the miner and at the close of that day transmit the mine foreman's order attached to his tipple-sheet to the mine clerk that in connection with the entry of this man's name upon the payroll he also may have information as to the kind of work to which the new employee is as- signed. THE MINE TONNAGE RECORD 57 It may here be noted that in Illinois and possibly in some other States, the law requires that each miner so employed must have a certificate of competency, and for that reason the space is provided ^ * Certificate No " In connection with the proper reporting of the tonnage produced by miners in order to avoid over-payments or under-payments because of different mining rates for pick and machine mined coal, when men are transferred from one class of mining to another, the mine foreman should notify the weighmaster of such a change in occu- pation. A very simple form, along somewhat the follow- ing lines, will answer : Weighmaster. John Doe jj, J^\^j„g check No , is trans- ferred to jjjJpj^ijjg mining. Please assign him another number. Mine Foreman. Assigned check No Weighmaster. FOBM 12. — ^Notice to Weighmaster of Change of Miner's Number. This form, after having been noted by the weighmaster and his classification of the employee having been changed, should be attached to his tipple sheet and sent at the close of the day of receipt with the tipple sheet to the pay-roll office. It then becomes a notice to the mine clerk of the change in rate. Where pay-roll auditors are employed they should carefully check this notice covering change in rate to see that necessary changes in classi- fication have been made. In addition to weighing the coal, the weighmaster is usually charged with responsibility for showing what dis- position was made of the product. He should show on his tipple sheet daily before turning it over to the pay- 58 BITUMINOUS COAL MINE ACCOUNTING roll clerk all of the necessary data indicating the total pick, machine, ^'company,'' and no credit coal produced, how it was used, etc., something in the following manner : Recapitulation All Figures Cwts. Pick Machine ...... Company No Check R. R. Cars Mine Fuel . . . R. R. Engines Houses No Check Credited Wrecked Cars .... Total Total Signed Weighmaster. Form 13. — Weighmaster's Daily Report Blank. This recapitulation may, for convenience, be printed on the corner of the tipple sheet itself and should be signed by the weighmaster since he is the only man who knows what disposition is made of the coal and is responsible for its proper report. Where the coal is dumped directly over the screen or from the weigh-pan into the railroad car and it is possible to obtain such a record, a check-sheet should be carried showing how much coal is loaded in each railroad car placed under the tipple. This check-sheet should show the number of the miner who produced the coal and the weight of each mine car. The aggregate weights of a number of mine cars dumped into this railroad car shows the total pay-roll weight of coal thus dumped. Such a check sheet is illustrated in Form 14. If the coal shipped is mine-run, the wage scale being the same, and the loading equipment will permit such a record, a direct comparison can thus be had between the aggregate of these mine car weights and the railroad THE MINE TONNAGE RECORD 59 Aveight of coal loaded in any given car as afterwards as- certained by weighing on railroad track scales. If other grades of coal are loaded, statistics kept for that purpose will very soon show what should be the relative weight of the grade other than that upon which the wage scale is based, as a check upon the railroad weight. After completing all these records they should be rmifPAVv Forward Sheet When Mine is Idle, Noting EIGHMASTEK'S CHECK SBLEET :" Nothing to Report" MTXFCl 101 . Grade 1 Initial Number Kind of Car Capacity Light Wcijiit ' Loading ^l _ = __^ i ' 1 1 1 Total Weight Total Wagons !ll FoBM 14. — Weighmaster's check sheet. turned over to the payroll clerk, where they become the basis of his payroll entry. The total of the weights of the contents of mine cars dumped into railroad cars, as ascertained from this com- pilation, must agree with the amount shown by the weigh- master's recapitulation on the tipple sheet as *^Coal Loaded Into Kailroad Cars." The pay-roll clerk, having received from the mine weighmaster a record of the coal loaded by each miner, enters the total daily credits of each miner on his pay- roll. Before doino: so he should see that the statement 60 BITUMINOUS COAL MINE ACCOUNTING showing production has been properly balanced against that showing disposition. It is necessary that some forms be prepared to bring together in semi-monthly totals the entire production and disposition figures. For this purpose a coal-proof, ruled to show a concise tabu- lation is convenient, similar to Form 15. This form can conveniently be combined with the sup- plementary report of coal produced, covering deliveries to railroad locomotives, miners' houses, local sales, etc. More fully treated under ^* Sales Statistics'* in a later chapter. "~" Mine rOAl PROOF Month of 192 All figures repreaent cwts. >rtr» r^ ^^ F^^^ No check fe^<£U.n PRCc. -^ft-e. -m". "o?^^^^^ e;i T 2 3 ^ ^ f — ^ ■ """^^ , 16 — .— — «^<-. :=3i=^ ^ f" — 1 z:r: : ■''"■""'""■^ i:lj^ — Form 15. — Coal proof. The totals of the coal produced during these semi- monthly periods can be readily combined in order to make any statistical reports required showing a month's production. The aggregate individual items as carried to the pay-roll, when totaled for each of these semi- monthly periods, must balance with the coal proof, which is in effect a *' control" account. The daily report of cars shipped, which will be handled in a later paper, should carry a column to indicate the mine weight of the coal loaded in each individual railroad car. The totals of this column, accumulated for the month, taking into consideration the part loads at the be- ginning and end of the month, will again check the total production as carried on the coal proof, again taking into consideration the difference between the *'no check" coal THE MINE TONNAGE RECORD 61 (that coming out of the mine without a proper miner's check) debited and credited. To insure a proper check upon the quantity of coal delivered direct from the mine in wagon lots to tenants and other purchasers it is important that orders for such deliveries uniformly originate at the mine office, and be transmitted to the proper person charged with the deliv- ery of such coal (usually the weighmaster or outside No.1375.1. 19 * Outside Foreman or Weighmaster Deliver to „ House No Check No ONE LOAD f;«,p COAL and attach this order to your coal sheet on the day of delivery. _. ,^ Scrip Clerk Ooal$ Hauling! ^ Form 16. — Retail delivery slip and order. foreman) in writing. Such an order becomes his voucher for the delivery. It should be returned to the mine office each day attached to the weighmaster *s tipple sheet, the aggregate tonnage equaling the quantity reported on that sheet as sold locally. When so received by the payroll clerk it is the basis of his charge to the purchaser. A simple form of such order is illustrated in Form 16. If prepared for use with carbon paper and printed in multiple on sheets 8% x 13 in. it will make a very convenient record. Notation should be made on carbon copies showing date of deliv- ery, or the returned order may be pasted back on the stub for that purpose. CHAPTER III THE DAY LABOR RECORD On the mine foreman usually devolves the duty of keep- ing a regular and systematic report of the time worked by day men. In some large organizations the operating department has made it a rule that only the mine fore- man be allowed to keep time. In other organizations time is kept in the inside by the mine foreman or assistant foreman and on the outside by an outside foreman. Con- ditions at each mine or with each company frequently jus- tify a departure from the first mentioned method. That the record may be kept systematically, it is usually advisable for the payroll clerk, or some other employee charged with that duty, to lay out the time book, under proper sub-headings, in the method in which time is to be reported and in a method which lends itself to ready transfer of data to daily cost sheets or to the payroll summary. This can usually be done before the close of one pay period for the next one and even the names of employees may be written in by the clerk on the time book which is kept by the mine foreman, although some operations, for safety in auditing and that names may not be added by unauthorized people, require all of the names on the time book to be in the handwriting of the timekeeper. This last is a wise precaution, providing the timekeeper has been trained to work out his time book in a neat and legible manner. For convenience, two time books should be used; one for the first half of the month, the other for the second half. They should be of a convenient size that they may be carried in the pocket of the timekeeper. They should be so ruled as to show the name (for convenience, the sur- 62 THE DAY LABOR RECORD 63 name first), rate per day, the hours worked daily and the amount of earnings for the period. It is desirable that at the head of the page provision be made so that the number of hours worked by the mine (measured by the period dumping coal) will be shown. A comparison of these figures with the amount of time reported as being worked by the various employees will immediately indicate whether the employee worked a full day, was released before the expiration of the day, or worked overtime. By examining the time books, which he should do fre- quently, the superintendent can readily ascertain by this comparison whether any favoritism is being shown by the mine foreman or other foremen toward certain em- ployees by giving them employment beyond the average. The superintendent and the mine auditors are also given an opportunity, through this method, of checking up vio- lations of the wage scale. Mine foremen have been known to allow nine or ten hours a day in an eight-hour field for eight hours' work and thus, in effect, increase the wage rate. For this reason the management should insist upon an explanation of all overtime. Another abuse frequently indulged in is the notation on time books, with a corresponding allowance, ** Short Last Pay.'' Investigation of a number of these cases by operators has shown that frequently they were made to cover compensation other than time. Of course, some- times these allowances are entirely legitimate; at other times auditors have found them a mere subterfuge to cover unauthorized payments. For this reason, where a notation appears indicating a shortage in a previous pay period, the timekeeper should be required to state the date upon which the service was performed, and the payroll clerk, by reference back to the time book for that period, may readily determine whether the allowance is one for omitted time or is some other allowance. There is illustrated by using the *^ haulage" schedule 64 BITUMINOUS COAL MINE ACCOUNTING of the National Coal Association's recommended form of cost sheet, a method of "blocking out" the time book. (For complete schedule see ''The Payroll Summary'* in a later chapter.) If this method is used throughout the schedule and the book is prepared by some one who has a knowledge of the results desired to be obtained, the com- pilation of daily cost sheets or payroll summaries will be a comparatively easy matter. This is shown in Form 17. Form 17. — Time book. In many organizations since the time book is for the major portion of the day in the possession of the mine foreman, a duplicate time book, very much larger in size and giving more room for compilation, is kept for con- stant reference in the mine office.' Where mine auditors are employed, the mine foreman's book is first checked against the office book to determine the accuracy of the latter and the totals from the office book are carried to the payroll. In order that the payroll record be kept up to date it is necessary that the mine foreman turn his THE DAY LABOR RECORD 65 time records into the office daily. This is particularly necessary in the case where stores are operated by the mining company and the miners are allowed to draw against their credits. In the posting of this daily time book in the office it will be found a convenience and it will avoid error, if an entry is made in the space assigned for each day, indi- cating by zero when no labor is performed. If at the same time a similar mark in ink is made on the book of the timekeeper, so that no subsequent entries may be made without the knowledge of the payroll clerk, such an ink mark, under the pencil figures of the timekeeper, will generally show that an item has later been added. Before turning in his time book at the close of each pay period the timekeeper should sign it on the last page used. The superintendent should examine the time book in detail and also sign it to indicate approval. Some concerns have found it convenient to have a daily time sheet prepared and turned into the office each day by the timekeeper. Most operators consider the daily preparation of such a sheet wasteful of time and it is certainly not conducive to ease or accuracy in checking on the part of the traveling auditor or mine accountant. CHAPTER IV YARDAGE AND DEAD WORK In addition to the tipple sheet which brings to the pay- roll clerk the report of the mining of the coal and the time book which brings into his hands the earnings of the day men, it is essential that he have also from the hands of the mine foreman a report of '^Yardage and Dead Work/' ''Dead Work'' is an item which is imposed very largely by physical conditions and its general acceptance in- cludes such things as yardage, break thronghs, room necks and various allowances for working in wet places, etc. The allowance for ''Yardage" is in addition to the regu- lar tonnage rate because of the fact that miners working in narrow places are unable to produce as much tonnage and therefore earn less money than those working in rooms or wide places. It is, in effect, an allowance to in- crease earnings. Additionally, it is frequently necessary in the entries to take down the roof or to rip up bottom to gain height for travel ways, haulage roads, etc. This narrow-work handicap in mine earnings is recognized in the making of the wage scale and is properly compensated for by an allowance to the miner in addition to his tonnage credit. In addition to the items enumerated such things as the dumping and storing of gob, cleaning up falls and re- timbering after them, handling squeezes and mine-tires and all other work imposed by adverse physical condi- tions should be charged to this account, which is, in short, "dead" work which does not primarily produce nor fur- ther the production of additional tonnage. It is, of course, understood that in the development of 66 YARDAGE AND DEAD WORK 67 the mine the driving of the entries, break throughs, etc., necessary to the development, that the projected tonnage capacity may be reached, shall be capitalized, but after that point is reached all work of this nature is simply ex- pense. The ruling of the Federal Trade Commission in its 1918 Instructions for the Compiling of Coal Costs, providing that all rock tunnels, etc., more than fifty feet in length in an operating mine shall be capitalized is, in the opinion of most accountants and engineers, unreason- able and is one difficult of carrying out because of the fact that the ultimate length of such tunnels is not always known at the time when work is begun upon them. They Mine Foreman's Report of Yardage and Dead Work Mln. P«yEndin, LOCAlfoN T^^ R.I. YARDAGE B TK.I COAL SLATE 4- ^ 'te' tin & 1... tB Ub W>l« , -^ " 1 TMd. 1 1 Supt. .' Min* Fonnun Form 18. — Foreman's yard report blank. add nothing to the value of the plant, produce no revenue coal and the cost of this advance work where the mine is already in operation, is properly a portion of the current operating expense. There is reproduced in Form 18 a condensed form to be filled out by the mine foreman at the close of each pay period showing the information necessary to be conveyed to the payroll clerk to properly authenticate credits to employees for yardage and dead work. Under most wage scales different rates are provided for pick and machine work, the allowances for yardage being divided in the case of machine mining between the cutter and the loader, while in the case of the pick miner the credit is, of course, not divided. 68 BITUMINOUS COAL MINE ACCOUNTING It is important that the total yardage, whether entry, hreak through or room necks, paid to the loaders, be checked against the yardage of the same classification paid to the cutters, since one class of labor cannot ad- vance beyond the other where both are paid on tonnage. To illustrate, if loaders are paid for 50 yards aggregate advance, the cutters may not have an allowance in excess of that. The superintendent, payroll clerk and payroll auditors, in the examination of such yardage and dead work reports, should see to it in their examination that this yardage check is maintained. The form provides a column under '' Remarks, '* in which should be explained any unusual allowances. Pro- vision is also made for the reporting of the thickness of coal and slate to be used in the instances in which an al- lowance on account of thin coal is made or where slate is to be taken down to gain height for working. These yardage allowances are subject to an additional check by way of safeguard. Almost every mine has a survey by mining engineers, quarterly or more fre- quently. If the engineers be instructed to give a report of advance work, particularizing as to the number of feet advanced in each entry or break through and the numbers of the rooms turned from various entries, the mine fore- man's semi-monthly report can readily be checked against the record and occasional duplicate payments may be caught. A good way to prevent such duplications is to sketch in on the engineer's projections semi-monthly the development reported by the mine foreman. To sum up, the yardage report should cover all items to the credit of the employee for work performed not com- pensated for either by tonnage or by a rate per day or per hour. A properly ruled payroll sheet will permit the totals of the mine foreman's report to be readily checked to the payroll. The Payroll. — The payroll clerk, having now in his possession a report from the weighmaster showing the YARDAGE AND DEAD WORK 69 coal produced daily throughout the pay period ; from the mine foreman or other timekeepers a record of the labor performed by day men, and from the mine foreman a record of the yardage and deadwork to the credit of such miners as performed any such work, is in position to make his payroll and daily cost sheets. An adequate payroll must provide in compact form necessary spaces to provide for the registration of the name of the employee, his check number, daily credits for mining and labor of any nature, and for the accumulation of these daily credits semi-monthly. It must further provide a record for the various transactions usually made covering merchandise, cash, rent, coal and hauling, smithing, charges for workmen's compensation when the laws so provide and for many miscellaneous charges for such things as may be furnished the employee by the com- pany for his comfort and convenience. While overdrafts on an employee's account are always to be discouraged, in the nature of things, they will at times occur, and the form should also provide for a debit of that account. Since it is the custom in most districts where stores are operated by the company, or where, through arrange- ments with other stores, orders are given on them to advance credit at the beginning of a pay period equal to the amount standing to the credit of the employee at the close of the preceding pay, it has been found by many operators a convenience to have the amount standing to the credit of the employee carried forward to the suc- ceeding payroll where it is merely a memorandum and does not, of course, enter into the cross addition of the sheet. As has been indicated heretofore, because of the dif- ferent classes of work performed by the same man within a pay period, for convenience in keeping the time record as well as because of the necessity for arranging a sepa- ration between pick mined and machine mined coal, it may be necessary to carry an employee's credits upon the 70 BITUMINOUS COAL MINE ACCOUNTING payroll in more than one place. At the close of the pay period, however, these credits should be transferred to a single number in order to bring together the total of each employee's earnings and that deductions for items due the employer may be made. For this purpose a column should be provided for such a transfer. It is, of course, apparent that the debits and credits in these transfer columns will balance. A reproduction of a payroll sheet that can be used to considerable satisfaction is repro- duced. It is ruled on both sides, 20% x 18 in., and should be made in loose-leaf form. When placed in the binder, open, a complete record of the earnings and deductions of each employee is readily accessible. The daily totals of the coal columns may be checked against the daily totals of the analysis on the tipple sheet and the total for the pay period against the total produc- tion column on the coal-proof. The total amount earned by miners can be proved within a few cents by multiply- ing the total tons produced by the proper mining rate and checking the result against the aggregate amounts to the credit of miners as ascertained in detail, and indicated by the total ^ ^ coal ' * column on the payroll. The day labor column can be checked against the time book. The yardage can be proved by the totals of the yardage sheet. Amounts held out of employees' envelopes to protect overdrafts should be reported on the cash book. If a multiple column cash book is kept, the *^cash" column of the payroll may be checked against the ^^ payroll" column on the cash book. It will readily be seen that every item here is subject to quick and easy verification by the pay- roll auditor. On the debit side columns are provided for charges against the miner for store checks or ^^ scrip" issued daily, the aggregate of these being shown in the merchan- dise column. This daily '* scrip" issue is readily checked against the stubs of the checks torn from the books, and YARDAGE AND DEAD WORK 71 w i 8 V 1. 1^ ^ :i i - / 11 -\ WW — \t / 1- — ^ 1? — j 3 -\ u -j 1 i — ilH J 1' \ % ! li 1 i : 1 i s : £ : i i,: t ■ : } 0. , fi i? i! ^: \ . 5 \ ' s ' i I . • - :: \ -1^ \ 1!^ J « 72 BITUMINOUS COAL MINE ACCOUNTING the semi-monthly total is subject to quick audit by multi- plying the difference between the beginning and ending number of each denomination of ^^ scrip," which check should always be obtained by those assigned to the pay- roll audit. The other items of cash, rent, safety lamp charges, etc., need no explanation but are the ordinary deductions com- mon in almost every mine office. In this same class should also be provided a column for deductions on ac- count of the check-weighman in the districts in which the wage contract provides for such a person. The form it will be noticed, also provides, in addition to a column showing the balance due the employees, a separate column showing the amount overdrawn, if any. If the dates as shown on the left of the top of the sheet are also reprinted at the bottom, below the total line it will be found very convenient in following through the columns and will frequently avoid error in posting coal, or the time credit, reduced to money, to the wrong col- umn. It will also be found a convenience to carry a check number at either side of the payroll for the same reason. When an office time book is kept it will be found un- necessary to post to the payroll in detail the earnings of day men, reference to the office time book itself giving the amount to their credit, but many concerns prefer to have the payroll show the full detail, or at least the daily amount standing to the credit of the day men. Transfer of Accounts to Other Mines. — ^It frequently happens that employees may reside in houses belonging to one mine and work at another, or that their dealings with the merchandise department may be at two or more stores. They may leave one mine because of lack of em- ployment and go to another of the same company. Un- der any of these conditions, that their accounts standing on the payroll may be collected, it is desirable that charges be transferred to the payroll over which the col- YARDAGE AND DEAD WORK 73 lection will be made, and the originating office be relieved. Columns have been provided on the payroll form for these transfers and the transfers between payroll num- SeM|.MONTHI.Y TRANSFER OF ACCOUNTS MKtPT. OH CUERK. _ W. VA. ON VOUIt... MINK PAV noia. KNDINO M.XASK COtUeCT THE ITEMS L.ISTKO BKUOW AND MINK. WHKN KNTRV HAS BEEN MAOK ON YOUR PAY I •AMK TO ACCOUNTING OEPARTMENT. )IT SAMK TO . . OKTACH RKCKIPT. •ION AND RKTURN YOURS TRUUY. ^ _. _ W. VA. DEAR SIR:- WE BEG TO ADVISE THAT THE ITEMS ABOVE HAVE MINE PAY ROUU MONTH ENDING. YOURS TRUL.Y. ENTERED ON „.l©1.._. Form 20. — Transfer-of-account blank form. The lower part is detachable. bers, where an employee is working in two or more classes of labor. It is important that one payroll be not relieved of these accounts until the items are taken up on the payroll to which transferred. For that purpose the form illus- trated, Form 20, entitled. Semi-monthly Transfer of Ac- 74 BITUMINOUS COAL MINE ACCOUNTING counts, will be found useful. It should be made in tripli- cate, the original copy going to the office to make the col- lection, a duplicate to the auditor, and the triplicate copy should remain at the office issuing it. When this transfer is accepted the detachable portion of the form should be torn off and sent to the auditor as his notice that the transaction has been completed. The Payroll Summary. — After the payroll has been completed, the proper deductions made and the net credits to the miner obtained, it is necessary that an abstract or summary of the details of the labor charges be made in order that the accountant may have the data necessary to be incorporated in the monthly cost sheets, and that the management may have something with which to study these costs in detail, if so desired. It is always desirable that the payroll itself, containing as it does the intimate details of miners' earnings and the deductions necessary to be made from them to bring them to a cost basis, be retained in the payroll office for reference. Form 23 will bring labor details together concisely. This form follows in exact order the divisions recom- mended by the Cost Accounting Committee of the Na- tional Coal Association. The data required with respect to mining will be obtained from the ^'CoaP' column of the payroll and will be proved against the *^pick'' and ^ ^machine'' items on the coal proof. The details of the *'day labor'' will be found in the same sequence on the time book and will be checked against the *^Day Labor" column on the time book. Where the time book is prop- erly kept, abstracting the amounts to the payroll sum- mary will be a very easy matter. The details of the '^dead work" will be found on the mine foreman's report of yardage and dead work and will check against the ** Yardage" column on the payroll. It will be understood, of course, that in addition to the items entering directly into the cost of coal, for which the detailed analysis sheet is illustrated, there will be YARDAGE AND DEAD WORK 75 other items such as dwelling repairs, the cost of labor performed on incomplete plant, etc., which will also need to be provided for on the payroll summary. These items and others necessary to balance the payroll are shown in the following tabulation, Form 21. CL-ASSIFICATION 1 AMOUNT OF LABOR n (DETAIl.) y A WIOUN TALe o VISION r 2_ Carpenters Painters Sanitary Work Cleaning up Total liwellin; Repaint Overdrawn Accounts Petty Cash Pay Roll Clerk Merchandise Salaries Merchandise— Teamster Mdse. Prop'n of Scrip Qerk Clearance Refund Merchandise Rent Lights Insurance (List Names) Transportation (List Names) Propwood -Itemize Total Pay Roll CREDIT AMOUNT Mdse. Store Mdse. Store Mdse. Store Overdrawn Last Pay Cash Rent Rent (Advance) Electric Lights Coal Hauling Smithing Hospital Workmen's Compensatioi Clearance Brass Checks Water Rent Safety Lamp Transportation (LUt Names) Total Uednctions Amonnt Required to Pa TOTAL PAY ROLL Form 21. — Some of the payroll accounts. Form 22. — Credit accounts against payroll. The payroll summary should also contain an additional column, or a supplementary sheet be provided which will permit the report to the accountant of the deductions for merchandise, cash advances, rent, charges for safety lamps, coal and hauling, smithing, workmen's compensa- tion fund, payments for check-weighman, etc., etc., the total amount of the payroll chargeable to operation, other BITUMINOUS COAL MINE ACCOUNTING YARDAGE AND DEAD WORK 77 expenses and capital items being balanced by the above mentioned deductions plus the amount required to pay. A tabulation of the items generally deducted is found in Form 22. Ko. .19... IN ACCOUNT WITH NATIONAL COAL CO For month of. CR. Bv Cwt. at DR. To Store By Cwt. nt ^ To Overdrawn Last Month... To Cash By Cwt. nt By Hours at To llent ns' Previously e Left employ] nnployfy^ ment Pay Period Days Wor- ked Occupation Tonnage Mining Am't Yardage and Dead Work Day Labor Gross Earnings Occupational 1 Deductions | flate Am't .9 I 1 1} Dec. 2 Hf Jan.l Hf Jan.2 Hf Feb.l Hf Feb.2 Hf Mar.lHf Mar. 2 Hf Apr.l Hf Apr.2 Hf May 1 Hf May 2 Hf June 1 Hf June 2 Hf July I Hf July 2 Hf Aug.l Hf Aug.2 Hf Sept.l Hf 8ept.2 Hf Oct.l Hf Oct.2 Hf Nov.l Hf Nov.2 Hf Dec.l Hf Dec.2 Hf Totals FoEM 25. — Record of employee's earnings. YARDAGE AND DEAD WORK 79 and that he has personally examined the payroll in detail. It will be found a great convenience if these payroll summaries be made up in manifold books, a carbon copy being retained at the mine and copies furnished the ac- countant for incorporation in the cost sheet and to the mine management for study of the details of labor cost. The payroll being completed, some periodic statement of earnings of each individual employee is necessary, that he may have knowledge of the standing of his account both for services performed and for occupational deduc- tions, rent, store account, etc. This form is usually com- bined with a receipt, and niay be in form something on the order of Form 24. Some prefer the issuing of a pay envelope somewhat larger than the ordinary, on which a duplicate of the pay statement appears. The payroll receipts should be arranged numerically after pay day to expedite the audit of the accounts by the payroll auditor. Record of Earnings of Employees. — It will be found convenient in the compilation of reports to the federal and state government departments to have a record kept currently showing the earnings of miners and other em- ployees. Such a record will be valuable in the prepara- tion of facts for use in wage negotiations. Lack of such data cannot fail to put those negotiating a wage scale at a disadvantage. A simple form of such report is illus- trated in Form 25. CHAPTER V DAILY COST SHEETS Since the cost of operating a coal mine cannot be ob- tained completely for a given month until usually 15 or 20 days after the month has closed, because of the diffi- culty of securing railroad weights to obtain the tonnage, which is the basis of cost, it is desirable, if not indeed absolutely necessary, that the mine management be fur- nished from day to day with a report which will show at least the labor cost in detail. By having such a daily report of labor, the manager has, so to speak, his hand upon the pulse of operation. The daily report should follow the ordinary and natu- ral method of operation of the mine and should, in all respects, contain the same day labor items in the same sequence as on the payroll summary, which was dealt with in the preceding chapter. The ruling of the form for the daily cost sheet should provide for data as to number of men of each class employed, the hours worked by each, the rates per day, the amount for each occupa- tion and a short extension to show the total cost by sub- divisions to expedite comparisons. The classification of labor is the same as that shown upon the payroll sum- mary. The arrangement of the headings of such a daily cost sheet is as follows : OCCUPATION Id CO OJ p. AMOUNT (each occupation) TOTAL (Division Only) Form 26. — Headings of Daily Cost Sheet. Many operators have recognized the value of establish- DAILY COST SHEETS 81 ing a normal or standard cost sheet in which, after study of all conditions, there will be incorporated all of the labor necessary to produce the normal tonnage of the mine, taking into consideration always in fixing the nor- mal tonnage the probability of partial car shortage, mine disability, etc. In other words, in fixing upon such a standard cost sheet the highest possible productive ca- pacity, with no handicaps, should not necessarily be the gauge. In such a theoretical or standard cost sheet will be included the number of men of each class of labor ordi- narily employed, the rate per day and the aggregate cost. The total, divided by the normal or standard number of tons of coal to be produced will give a theoretical cost per ton of production. With such a standard cost sheet should be compared the daily cost sheets showing actual performance and the variations from the standard cost can be readily deter- mined and made the subject of inquiry by the manage- ment. These daily cost sheets should also be examined in days in which for any cause the full number of hours ordinarily worked is not operated by the mine, in order to see what labor, if any, is retained beyond the number of hours which the tipple operated. The reason for re- taining such labor beyond the operating period should be made the subject of investigation. Every manager recognizes the fact that some classes of labor can be more advantageously employed when the mine is not in full operation and this class is, to the ex- perienced manager, of course, immediately apparent, but these daily cost sheets will at times bring to him cases in which unnecessary labor is retained, due either to lack of judgment on the part of the foreman or to favoritism. The daily cost sheet, for convenience, should carry the necessary details to show not only the result of the cur- rent day's operation in total and in such subdivisions as the mine management may feel necessary, but should 82 BITUMINOUS COAL MINE ACCOUNTING show also the previous period and the cumulative figures to date, something in the order shown in Form 27. PRODUCTION STATISTICS Hours Worked Plus Lost Time Muit Equal Total Poieible Working Time w"o?.^ LOST TIME. Give detail under Remark.. PICK COAL MACHINE COAL TOTAL TOTAL LABOR COSTS No. Cor. No. Order. AecidenU 8i^. Miner. Ton. srn Minen Tou _S^ Me. Ton. ^ *— ' t"^ ■■ ToD.le... E.tin,.t«|- ^ niff<-r-nrr Give Detul of AccidenU, Delay., Etc. . Form 27. — Daily Cost Sheet. Summary for recording hours of labor and labor cost. Some operators have found it desirable to establish an idle day cost, incorporating in the standard or theoreti- Bou Driver'* DaOy Rqiort Mi^M 101 Ne. L.CMI.. Of Mnle N..b. C» CI FUlUed C« Ta.1 Ubor T«l., How REMARKS (Ci«ec.o«.llo.1>ii») 1 2 10 11 12 13 14 15 TOTAL TODAY Form 28. — Boss driver's daily report blank. cal idle day cost sheet only such labor as it is absolutely necessary to retain on Sundays or idle days in order to DAILY COST SHEETS 83 ventilate the mine, keep the pumps running and for the time of watchmen and other such labor. Any variations from standard in this respect must also be the subject of complete investigation. Supplementing the daily cost sheet, that the mine fore- man and superintendent may have information as to the daily performance of locomotives and drivers it may at times be desirable to have a report from the various sec- tions of the mine as to pertinent phases of transporta- STABUE BOSSES' DAILV REPORT MINE _ I01 HAY j OATS CORN 1 ALFALFA SALT •B^ginnmg o( day j; Pound* dtlivtred to Slorf i| Pounds fed today 1 Pounds detivfrfd lo ottKr Minn Pounds on band at lh« dost o( day Pound, r^^ today Toul pound! to tx ; Number mulct fed. .Number mulct working. .Number mole* received today. Did mulct have tufficient How many diaabled muletio ttable_ FOBM 29. — Stable bosses' daily report blank. tion. Such a report, Form 28, designated Boss Driver's Report, is herewith shown. The cost of care and feeding of the livestock is an item of much importance, and one which demands the careful attention of the local management. Unless carefully supervised, the animals may be underfed, but more likely is feed wasted because of improper handling or careless- ness. A short form of report of feed used and inventory of quantities on hand daily, as sho^vn in Form 29, will bring the facts to the attention of the superintendent and form the basis of the charge to the monthly cost for the value of such supplies consumed. CHAPTER VI ACCOUNTING FOR SUPPLIES In importance second only to the proper accounting for the labor in connection with costs in coal mines, is the accounting for supplies. In fact, it is sometimes even more difficult to draw the proper distinction between capi- tal investment and expenses in supplies than it is in the matter of labor. The proper distinction between capital and operating expenditure is set out in the ^* Report and Suggestions of Committee on Standard System of Accounting and Analysis of Cost Production,'' of the National Coal Asso- ciation, on page 8, as follows : "The drawing of distinctions between capital and operating expendi- tures, in the accounting involved in permanent enterprises, is a favorite field for discussion among accountants, but in the case of coal mining or other wasting enterprises, experience teaches that the field for dis- cussion, if indeed there be any, is extremely limited. "After a coal mine has been developed and equipped to its contem- plated or possible capacity, it is a constant consumer of material and supplies and equipment, which, though nominally of a durable nature, are subject to destructive wear and tear, by reason of the uses to which they are put, and all these appliances must be kept in repair to do their work or the output cannot be maintained. "Mules and pit cars are constantly worn out and have to be replaced and as the working faces advance with the exhaustion of the coal, the length of haul, the consequent time of circulation of pit cars between the working face and dump increases, more motors, mules and pit cars have to be supplied to maintain the output and the more motors, mules and pit cars in the mine, the greater expense for replacements and repairs. "Also, with the advance of workings, more rails have to be laid and more copper wire or other conductors put up to carry power to the working faces to maintain the output. They remain in place until the 84 ACCOUNTING FOR SUPPLIES 85 mine is exhausted and when they are recovered have but little net scrap value. In fact, any net salvage is relatively very small. "The fact that these expenses are continually recurrent and prac- tically a fixed factor in the cost of production per ton from year to year, proves that they constitute an operating rather than a capitalizable expense. "This being so, it makes no difference to taxable income whether they are charged immediately to operating expense or written off by deduc- tions representing depreciation allowances which would have to be re- adjusted and compounded from year to year. As a practical matter, it is better to dispose of such expense by direct charge to operating expense rather than taken care of by vexatious refinements of account- ing, that would be necessary if these items be capitalized and 'depre- ciated.' "That this proposition is now acceptable to the Department is sub- stantiated by: "Regulations 45 — Revenue Law of 1918 "Art. 222. Charges to capital and to expense in the case of mine, — In the case of mining operations all expenditures for plant, equip- ment, development, rent and royalty prior to production and thereafter all major items of plant and equipment, shall be charged to capital account for purposes of depletion and depreciation. After a mine has been developed and equipped to its normal and regular output capacity, however, the cost of additional minor items of equipment and plant, including mules, motors, mine cars, trackage, cables, trolley wire, fans, small tools, etc., necessary to maintain the normal output because of increased length of haul or depth of working consequent on the ex- traction of mineral and the cost of replacements of these and similar minor items of worn-out and discarded plant and equipment, may be charged to current expense of operations, unless the taxpayer elects to write off such expenditures through charges for depreciation." Article 222, of Regulations 45, as first issued, which is reproduced in the paragraph immediately preceding, was later altered by the Bureau of Internal Revenue to read as follows : "Art. 222. Allowable Capital Additions In Case of Mines. — (a) All expenditures for development, rent and royalty in excess of receipts from minerals sold, shall be charged to capital account recoverable through depletion, while the mine is in the development stage. There- after any development which adds value to the mineral deposit beyond the current year shall be carried as a deferred charge and apportioned and deducted as operating expense in the years to which it is ap- plicable. 86 BITUMINOUS COAL MINE ACCOUNTING "(b) All expenditures for plant and equipment shall be charged to capital account recoverable through depreciation, while the mine is in the development stage. Thereafter the cost of major items of plant and equipment shall be capitalized but the cost of minor items of equipment and plant, necessary to maintain the normal output, and the cost of replacement may be charged to current expense of opera- tion." Members of the Internal Eevenue Bureau staff have stated that this charge does not in any way affect the in- terpretation by the Bureau of the distinctions between capital and operating expenditure. The importance of this division, which is based on sound accounting prin- ciples and the equity of which is recognized by the Treas- ury Department, cannot be too carefully observed. It naturally follows that anything which will permanently and materially increase production and decrease costs should be capitalized and that all other items of minor importance should be treated as items of expense. Any other method of handling is merely borrowing earnings from the future. If a single item is of sufficient value as to materially disturb the general cost level it should be spread over a sufficient period to avoid such a disturbance through a charge to deferred expense. It naturally follows that supplies used in the operation of a mine should be charged to the same general account as the labor of installing them. Method of Accounting for Supplies Used. — Where at all practicable, the proper method of handling supplies is through a supply house to which all material when pur- chased should be charged to be delivered to the mine on requisition of the proper operating official. Practical difficulties frequently make it inexpedient, even impossible, to actually provide a supply house. It is recognized that coal mines cover large areas and that bulky supplies, such as mine rails, pit props, etc., are fre- quently delivered to a number of places outside the mines for convenience of handling when needed. Eegardless of ACCOUNTING FOR SUPPLIES 87 this fact, however, it is possible to keep a record of such supplies as they are taken into the mines, and while not directly under the eye of the storekeeper such supplies can be accounted for through the regular requisition form just the same as the supplies which are taken from a supply house. Where a supply house is maintained, a requisition or ORDER FOR MIN Mine E SUPPLIES 19 wins deaeribed article*: Supply Clerk. Pleaie cive b«ar*r the folic Qu.nl,ty Dc«TipUooo (M flfr 6(1 3 III < «* 9 1 § g 5 1 at § M s «»■ t^ a < a III! a t-'WMw < «fr li f^-c ls| WOJCOW «s| a o 0. ;5 P5 Q. "u oT. * * 1 '^ o dw 2* s1!^^ ^1 dai a£i g*5« O 3 •r'^ n >Cli >>Ml-5 o u Sti"^ d •- a M 2 || J noi-foo ^l^2W^ -««i(©M > "^ 3«riQ0 » c ^IW S 5 illl GENERAL EXPENSES 145 Special Work Authorizations. — As a general propo- sition the mine superintendent is clothed with all au- thority for the contracting of all expenses in connection with the ordinary and regular operation of the mine. CSTIMATC No... aCNIWAL MANAQKR. DEAR SIR:-I WOULD ASK FOR AUTHORITV TO DO THE FOLLOWING WORK AT „ THE COST. FOR LABOR AND MATERIAL NOT TO EXCEED MINE. . DOLLARS. . AUTHORIZED CHARGE TO GENERAL MANAGER. rHurncd 10 mine, and c 1 el Ibe mine. BiUmatt Form 39. — Special work authorization. Many companies require that the superintendent obtain special permission prior to the outlay of any consider- able amount of money for general repairs and improve- ments. In such cases it is frequently desirable to open a special account, in order that the total cost of such repairs and betterments may be ascertained. The work 146 BITUMINOUS COAL MINE ACCOUNT IN O to be done may be the construction or rebuilding of some building of minor importance, such as a blacksmith shop, etc., the painting of operating buildings or dwellings, the construction of concrete foundations for engines or gene- rators, the work in connection of which may be spread over a considerable period of time. It may be desirable to accumulate these expenses in a separate account until the work has been completed, and then to charge them otf through the Deferred Expense account over a sufficient number of months, that the general level of costs be not materially distorted. This method of handling is also convenient to obtain the total value of a structure for fire insurance purposes, or in connection with the installation of some item of equipment which will be capitalized. Of course in the last mentioned case when the authorization account is closed it will be to a proper asset account. A simple form for obtaining such authority is shown in Form 39. CHAPTER XIV SALES STATISTICS The Shipping Report. — That the sales statistics of a coal mining company may be readily prepared, it is neces- sary that uniformity of report begin with the shipment of the coal from the mine. For this purpose, it is desir- able that the weighmaster, or whoever is charged with the duty of waybilling and shipping the coal, make a daily report to the general office which will show full informa- tion as to the consignee, destination, routing, initials and number of the car, whether it is a hopper, box or flat- bottom gondola, the capacity in tons, light weight, size or grade of coal. Where loading facilities are such as to permit the in- formation to be obtained, the form should also show the mine weight of the coal dumped into each individual car. This is usually possible where the coal is loaded by grav- ity. It may be that coal is being shipped of a different grade than the grade on which the miners' wage scale is based, but under any condition the payroll weight should be shown. Statistics kept for the purpose will very quickly produce ratio values which will enable the ac- countants to determine whether the railroad weight re- ported is in accordance with the mine weight, even though the coal sold may be of a different size than the payroll basis. When shaker or other mechanical screens are employed and where the coal is loaded by a loading boom, it is usually impossible to obtain this detailed information, the only check being at the end of the day or at a period when the mine stops operation. Where separate offices are maintained for the shipping 147 148 BITUMINOUS COAL MINE ACCOUNTING 1 ! I I I I ! I i' n ! 5 1 u 1 > sl !»i li 3 1 " — ' — — — ■ — — — i P i > I 1 1 i ^ 1 < \ i t 1 ! h V ■»• VO t~ 2 8ALE8 STATISTICS 149 department and the accounting department, it is desirable that the report of shipments be manifolded in order that both the accountant and the shipper may have full infor- mation as to shipments. A copy should also be preserved at the mine office for future reference. The report should show information with respect to the number of hours worked and lost and the reason for closing down before the end of the regular working day. This information is necessary because of the fact that some leases provide for abatement of royalties in the event of shutting down the mine due to strikes, failures of machinery, etc., and this report becomes a valuable permanent record for that pur- pose. A cut of such a report is reproduced in Form 40. Its full size is 17 x 11 in. It should be perforated on the end for the purpose of binding. Where it is possible to ob- tain the mine weights of the individual cars the sheet should be totaled daily, all partly loaded cars added, de- ductions being made for the part loads under the tipple at the beginning of operation in the morning, the total thus obtained being the payroll weight for each day's operation. From the copy of the report to the shipping or sales department the notices of shipments are made, post- ing being made to the shipment record to indicate to what extent the contracts have been filled, etc. The sales department record should show complete in- formation as to order number of both customer and seller, full charge and shipping instructions, quantity and price, the effective date, etc., etc. A form for such information is illustrated in Form 41. It is on ledger paper of good weight to permit frequent handling, punched for filing in post binder. If additional posting space is needed a continuation sheet can be pro- cured, considerably condensed as to headings. These data may very conveniently be compiled on a card system similarly ruled. 150 BITUMINOUS COAL MINE ACCOUNTING Practically all coal is sold upon the basis of railroad weights. With comparatively few exceptions, the weights are ascertained at a point different from the point of shipment, the cars being weighed on railroad track scales by railroad weighmasters situated at points varying from White Oak Coal Company MACOONALO. W. VA. General Office Order No. SALES - " " PURCMAIERJ ■• " 191 .._ CHAR< SHIP 1 DESTII »K TO 'NATION . •• OUTINa.. _ ,, „ .?SS O fi!fi«uer»»- rwis ORnFP FFFFmvF let and fxpires lai urn -" MITIM. «.-« E*»Ae. ««««. MINI am INITWl «,-« mr ' »»«. Form 41. — Record of Coal Shipped. one to 300 miles from the mine, depending upon the dis- trict from which the coal is shipped and the destination of the car. Coal consigned to tidewater points is commonly weighed only at the time of dumping into vessel. For this reason unavoidable delays occur in obtaining tlie necessary information with which to invoice cars to cus- tomers. SALES STATISTICS 151 It is the custom of the railroad companies to send weights daily to the shippers on weight sheets which are either the original or carbon copies of the railroad com- pany's records. These records show the consignee and destination, car number, initial, kind of coal, kind of car and should show the gross, tare and net weights as ascer- tained by the railroad company's weighing. The tare weight reported by the railroad company is usually the stenciled one. Upon receipt in the office of the coal company of the railroad company's report, deduction of the tare from the gross weight should be checked with a view to deter- mine the correctness of the net weight. Errors in sub- traction are very frequent, because of the fact that these railroad weights are usually ascertained in considerable hurry and frequently under circumstances which do not make for accuracy. It is, therefore, always advisable that the deductions be proved before the weights are entered on the shipping report. The next step is to transcribe the weights from the railroad weight sheets to the shipping report, the entry being usually in hundredweights, not in pounds. The weight should be placed in the proper column as repre- sented by the size of coal loaded, viz., lump, egg, mine- run, slack, or whatever it may be. When entering such weights the tare weight as shown by the railroad scale report should be checked by the entry clerk against the light weight as shown by the report of shipments and any discrepancy noted made the subject of investigation through correspondence with the railroad scale office. In case the information then obtained is not sufficient to clear up the discrepancy, it should be pursued through further correspondence with the car accountant or super- intendent of transportation of the road which owns the car, where information can always be obtained as to the stenciled light weight of the car. At the time of entering the weights a mental compari- 152 BITUMIN0U8 COAL MINE ACCOUNTING son should also be made between the railroad net weight and the mine weight of the coal loaded into the car. Fre- quently very marked shortages in railroad weights may be detected in this manner. Reconsignment of Coal in Transit. — Because of em- bargoes and for other reasons it not infrequently hap- DEAR SIR:— rOLLOWS:— CONSIGNEE. THE FOLLOWING CARS OF COAL ARE NOW ENROUTE BILLED AS RFSTINATION cniiTiNr; OATE OF MINE OILUING POINT W. B. .NiT.AL. CAR GRADE KINDLY DIVERT SAME TO THE FOLLOWING : DESTINATION. REMARKS IN YOUR REPLY PLEASE REFER TO OUR Fiue YOURS VERY TRULY. OAK COAL CO. Form 42. — Diversion Order. pens that coal must be reconsigned to another consignee after it has left the mine. Such reconsignments are suffi- ciently frequent as to warrant in many cases the printing of special forms to transmit to the railroad officials, the accounting and sales departments, as well as to the branch offices, if any, interested, the orders for and information as to such diversions. The illustration, Form 42, covers SALES STATISTICS 153 a form of such diversion order. It should be made with sufficient carbon copies that all departments interested may be fully advised. In the arithmetical proving of deduction of the tare from the gross weight on the railroad weight sheet very frequent errors are found. If this were made the subject of letter correspondence in order to determine which of the three weights — gross, tare or net — reported is incor- rect, the work would sometimes become burdensome. This work can be greatly simplified by the printing of a small form through the use of which the information may be obtained without greaf labor. This form should be made in duplicate, a copy being retained until such a time as the information has been returned by the railroad weighmaster. In order that scale sheets may not be held out of the files awaiting the return of such information, it is de- sirable that a rubber stamp impression ^* Transferred to Supplementary Scale Sheef be placed over the entry on the original report and that the report be allowed to go to the files and the carbon copy of the supplementary scale sheet, or inquiry addressed to the railroad weigh- master, be retained as the record until such a time as the correct weight has been returned. Such a form is illus- trated herewith. (See Form 43.) A frequent examination of the shipping reports is nec- essary in order that cars may not be held open without record of weight an undue length of time. Here again the matter of correspondence with the railroad weigh- master can be very greatly reduced through the printing of a form on which will be listed the data with respect to the shipment of certain cars for which railroad weights have not been received. This form will answer in all purposes as a scale sheet and may serve the good pur- pose also of calling attention of the railroad weighmaster to the fact that he has failed to make revenue billing at 154 BITUMINOUS COAL MINE ACCOUNTING ii U I «"_; u H P-, Ph z s z z fi > u . K \\ B * h K z t w r « u ^ t 9 CD ^Z ?" s I •a 8ALE8 STATISTICS 155 the same time lie omitted the report of weights to the shipper/ (See Form 44.) As heretofore indicated, weights may not be received in the office of the shipper with any degree of promptness, dne to the fact that coal from one mine may travel in different directions and the weights be ascertained over any one of a dozen scales. At the end of any month there may be outstanding coal from one to fifteen or more different days, depending upon the geographical location of the mine. It is usually desirable to hold the shipping records open for a few days in order to obtain a reasonable percentage of actual weights on the cars shipped during the latter days of the month and in most districts it is not usually desirable to begin closing the sales record until probably the 5th of the month — in many districts even the 10th may be too early. Sufficient weights having been ascertained, the weight sheets checked and weights entered, the columns on the shipping report representing the various sizes should be totaled for each day and carried to a recapitulation sheet, by which the monthly totals of shipments will be ascer- tained. The Tonnage Recapitulation. — The recapitulation of tonnage as compiled from the shipping record of weights posted from railroad scale sheets may be made on a sheet of a report similar to the Daily Eeport of shipments of which it is a recapitulation. Form 45. The work will be expedited considerably if a properly ruled and printed blank be prepared for this purpose. Such a form selected from a company producing a num- ber of sizes of coal is illustrated. It provides columns that the total mine (payroll) weight of each size of coal dumped each day may be shown, and in parallel columns the railroad or gangers' weights which are the basis of 1 It is also a convenient form on which to furnish a certificate of weight to the purchaser who may request such a record, as a supporting paper in connection with a claim for shortage, etc. 156 BITUMINOUS COAL MINE ACCOUNTING I «^ i t M I > j t - 1 ! 1 1 1 i 1 j 1 r ^ jl: i ' 1 1 — ) 1 1 n iu 1 1 J . . . i S S § ; . t f i 1 if i I I Hi. 1 i r£2 -a 1 id SALE 8 STATISTICS 157 sales. The totals of payroll weights will balance the pay- roll and coal proof, and if audited carefully will check the omission of any cars of prepared or mine-run coal from the shipping report. The railroad weight columns will balance in size the same columns on the sales sheet. A comparison of the payroll weights with the railroad weights of prepared sizes will show the proportion of screenings which will in turn be checked by the total of such sizes shipped. Inventories. — A number of cars will usually be found at the end of the month to be standing open on the daily report of shipments without weights. The full record with respect to these cars should be transcribed to a similar sheet headed ^* Inventory — Coal in transit'' and be so accounted for in the recapitulation at estimated weights. This estimate can be a very close one, because of the fact that usually other cars of a similar classifica- tion are loaded with the same size or grade of coal and, when the mine weight is shown in comparison it is easy to reach a close approximation of the weight for the car for which the railroad has not yet reported. On the daily report where such a car appears there should be stamped, in the weight column, ^* Carried to inventory.'' These inventory sheets should be filed with the reports for the succeeding month so that when a weight report sheet is received after the day of monthly closing covering a car shipped in the preceding month, it will not be necessary to go back to the record of a pre- ceding period to complete the accounting record. In making the monthly recapitulation of tonnage shipped, the inventory page covering cars of a preceding month will, of course, be listed in the sales as actual ship- ments, the estimated weights of the coal carried to inven- tory at the end of the preceding month being deducted from the recapitulation, so that the shipping record ton- nage will contain in the way of discrepancies only the difference between the actual and estimated weights of 158 BITUMINOUS COAL MINE ACCOUNTING one month's inventory coal, each month's reversal of in- ventories ^^ washing'' all prior discrepancies. In addition to the shipment of coal in railroad cars there is at almost all mines a considerable amount of other coal which must be taken into consideration in the accounting so that all of the production may be accounted for. This is made up of coal burned under boilers, that sent to the blacksmith shop, coal wrecked in the mine, for which the miner must be paid, coal sold to employees and others at the mine, either through deduction from the payroll, by cash, or through transfer of the charge to the general office for collection; the sale of coal at the tipple for railroad locomotive fuel, etc. There should also be taken into consideration the estimated weights of any part loads of coal remaining under the tipple on the last day of the month. This last mentioned coal would, of course, be charged to ''Inventory — Coal on hand," as should also any fully loaded cars held uncon- signed on the sidetracks of the operator. Production of the nature noted in the preceding para- graph is usually the most troublesome to account for and it is sometimes desirable that a supplementary re- port of coal produced be prepared and sent to the ac- counting department at the close of the month to sum- marize the coal of this nature. Such a report is illus- trated in Form 46. This report may conveniently be combined with the Coal Proof which was illustrated on page 60, the full size of the sheet being 17 x 22 in., the same as the daily report of shipments. The Sales Record. — The invoicing of bituminous coal to the customer presents some phases which are peculiar to the coal industry and which are not met with in most lines of business. In other industries it is usually pos- sible to invoice immediately upon the shipment from the works or factory. Coal, however, as indicated hereto- fore cannot be billed until the railroad weight is re- ceived. SALES STATISTICS 159 SUPPLEMENTARY REPORT OF COAL PRODUCED AT MINE. Month of , 19.. CHARGE TO No. Wa. tons Min. Wfht. Kind cVa, Run Mil. Slack W'i'h AMOUNT Boilers 1 1 Blacksmith Shop 1 1 Wrecked Coal 1 1 1 Total Fuel— Cwt. 1 Tons: To b« filled in by Accounting Department Coked /Deducted from \ Pay Roll Coal V. Pay-roll ) /To beCollected\ Cash Sales VByThisOflice / 1 1 1 of General Office (Collections to be Made by Them) List 1 1 1 1 1 1 1 1 1 Total Local Sales— Cwt. .R. R. Enrine Coal— Cwt. i 1 1 Total Local Sales and Fuel— Cwt. 1 ' 1 1 1 TOTAL— TONS 1 1 1 1 1 PART LOADS ON HAND AT END OF MONTH Give car initial, number, kind of coal. Estimate weights and enter in iSroper column. Initi.1 Namber Kind of Car Mint Kind ot Coal s M R.M. Slack Cok. 1 1 - 1 1 1 1 1 I 1 1 Bin Coal 1 1 Coke on Yard 1 1 '- 1 1 1 1 J Form 46. — Supplementary report of coal produced. 160 BITUMINOUS COAL MINE ACCOUNTING The choice of forms upon which billing is to be made to the customer is a matter for the individual judgment of the operator. They should be arranged, however, in such a way as to afford carbon copies of the invoice, and be so filed that the information they contain may be read- ily accessible. The form itself should provide, in addition to spaces for the name and address of the buyer, infor- mation as to the destination and the consignee, if the latter is other than the purchaser. It is well that the invoice bear a register number and where the customer desires it, the buyer's order number should also appear. Full information as to date of shipment, car initial and 'number, kind of car and the weight of the coal in hun- dredweights should be shown. Until a few years ago it was quite a common practice of coal operators to have their invoice forms so ruled that many different grades might be shown in parallel columns on the same invoice. Experience has demon- strated that as a general rule coal shipped from a par- ticular mine to one consignee is usually of the same size or grade, and with that in view invoices have in recent years been considerably simplified through providing a separate invoice for each grade of coal shipped. The accounting will be very much expedited if a sepa- rate set of invoices and separate sales sheets be main- tained by the operator for each mine shipping coal. This will avoid many hours of vexatious analysis which is necessitated by including coal for a number of mines on one invoice when sales realization for each mine is wanted. The invoice should contain for working data information as to delivered price, rate of freight if pre- paid, deductions by way of commissions, etc., the price at the mine, and, through calculation, the net amounts for coal, freight and commissions should appear. It will be found quite convenient if a sufficient number of carbon copies be made that the posting may be made to the ledger from a carbon copy of the invoice itself. SALES STATISTICS 161 A very simple invoice in manifold form is illustrated in Form 47. The face copy is in size 8% x 6 in., and is so printed as to tear off without disclosing the analysis of coal, freight, commissions, etc. The file copies, of which there are two, one for a book record and the other for posting, are in size 8% x 7 in. Some companies prefer to JOOO POUND. OAK OOAL OOfflPANY • ^.^^ Accounting department RS^^ MACDONALD. W. VA. • INVOICE OF BITUMINOUS COAL PURCHASED BY ADDRESS SHIPPED TO INVOICE ADDRESS ORDER • "•-"•«-• • DATE PRO. NO. CAR mrriAi. KIND L" # AOOn... CMMCT F* Sak. D.p't "AMOUNT" DIVIOlO *m rOLLOW*. eoAi. W.lMnbrtu «r«lbrtlu.ii..oic««..r. .fod«:.di..c<:.,d..K.«i ■ il>.F«l -7 ral Child Ubof Act TE OAK COAL CO r.«..HT • utM tkal tK* l»>l.c. .l.lM.I9l , TONS OF 2.000 POUNDS SIZE PRICE F. O B. AMOUNT WHITE OAK •MOKKLES* , AddrtMjIl rcmittancn ud communiutioni to the is nrccsurr. nin to Invoice Number. Or Initial and Number, and date of Shipment. •ITTIBMINT OUI ON 1>TH or MONTH >wiNS aHipxa NT _ Form 47. — Coal Invoice. make the invoices direct from the railroad weight sheet. The invoice is then checked against the weight shown upon the daily report of shipments, and thus a three-way check is developed as to the accuracy of the weight en- 162 BITUMINOUS COAL MINE ACCOUNTING tered on both the invoice and the report of shipments, since the entries on both are made from the same source (scale sheet) by two different persons or at different times. Customs Invoices. — Since a considerable tonnage of bituminous coal is shipped to Canadian points, it may be well to say something with respect to the certified in- voices which are necessary that the cars may pass the Canadian Customs authorities. These invoices are neces- sarily made separately for each car shipped, since each car must pass upon its own certificate. It is important that these invoices be mailed to the proper customs official promptly, that they may be on hand when the car arrives at the border, in order to avoid detention with consequent demurrage. For this purpose additional sheets may be added to the invoice form to provide, in addition to the customs invoices, the regular invoice to the customer. The certificate on the face of the invoice should contain information substan- tially as indicated in Form 48. I, the undersigned, do hereby certify as follows : (1) That I am the Auditor of Coal Company, exporter of the goods in the within Invoice mentioned and described ; (2) That the said Invoice is in all respects correct and true ; (3) That the said Invoice contains a true and full statement, showing the price actually paid or to be paid for the said goods, the actual quantity thereof, and all charges thereon ; (4) That the Invoice also exhibits the fair market value of the said goods at the time and place of their direct exportation to Canada, and as when sold at the same time and place in like quantity and condition for home consumption, in the principal markets of the country whence exported directly to Canada, without any discount or deduction for cash, or on account of any drawback or bounty, or on account of any royalty actually payable thereon, or payable thereon when sold for home consumption, but not payable when exported or on account of the exportation thereof, or for any special consideration what- soever. . , . , ^ (5) That no different Invoice of the goods mentioned in said Invoice has been or will be furnished to any one ; and (6) That no arrangement or understanding affecting the purchase price of the said goods has been or will be made or entered into between the said ex- porter and purchaser, or by any one on behalf of either of them, either by way of discount, rebate, salary compensation, or in any manner whatsoever, other than as shown in the said Invoice. And that such fair market value is not lower than the wholesale price of the said goods at the said time and place : and that in the case of new or unused goods, such fair market value is not less than the actual cost of production of similar goods at said time and place, plus a reasonable profit thereon. Dated at ) ,«. . ^ (Signature) this day of ) Auditor. Per- FoBM 48. — Customs Certification. SALES STATISTICS 163 Credit Memo, and Allowances. — It frequently happens that cars shipped to one consignee are diverted in transit to another, wrecked or confiscated by the railroad com- pany. This sometimes occurs after the coal has been billed to the first consignee. In this instance it becomes necessary, of course, to issue a credit memorandum to the original consignee and to charge the coal to the per- son who actually received it. This may be done through the journal, but it is recommended that instead of using the journal for this purpose, credit memoranda be issued on the invoice form suitably marked to indicate that they are credit memoranda and a new billing issued as of the same date. The new billing will take its place on the sales sheet with the current invoices. The credit invoice should be written up on the bottom of the sales sheet or on a separate sheet for that purpose and the credit totals be deducted from the debit in order to obtain a net realization f. o. b. mines. The cars being billed at the same weight, of course there is no adjustment in tonnage and the coal sales account for the current month will absorb the difference, either debit or credit. In the event of allowances being made with respect to price, a similar line of action should be followed, a credit memorandum being issued and the entry made in red on the sales sheet, deducted as above. If the correction is one carrying adjustment in the weight of a particular car, either debit or credit, a cor- responding tonnage entry will, of course, need to be made on the daily report of shipments. If it is a car shipped during the current month the correction is made on the shipping report for the day of shipment against the proper car; if the entry is one affecting a car shipped during a preceding month then the entry, either black (addition) or red (deduction) will be made on the sheet inserted in the file for the current month representing the coal brought forward in inventory. This method is recommended because it will, through 104 BITUMINOUS COAL MINE ACCOUNTING + n II l! :^ SALES STATISTICS 165 one single form of accounting, bring together all of the items which affect in any way the tonnage production or sales realization, and the cumulative figures obtained from the sales sheets themselves will always be in abso- lute agreement with the revenue accounts of coal sales, thus avoiding any adjustments which otherwise become necessary in the event that corrections of the kind men- tioned are made through the journal. The Sales Sheet. — In order that sales statistics with respect to tonnage and average realization by sizes be readily obtained, the invoice should be written up on a sales sheet so arranged as to show that information con- cisely. The data provided by the memorandum form on the invoice becomes the source of information for the entry to the sales sheet, the figures of sales realization being entered in net amounts, freight and commissions deducted. The total of the amounts extended to the ledger columns becomes the balancing factor for the con- trol account of the postings to the ledger from the carbon copies of invoices. The arrangement of the form illus- trated in Form 49 is such that the tons of each size produced and the average realization f. o. b. mines by size, as well as in total, can readily be figured. Columns are provided for the amount of prepaid freight, commis- sions, etc. Inventories. — Coal in transit at the end of the month for which weights have not been received should be esti- mated and changed to Inventory — Coal in Transit — at the price which will be received for it when actually in- voiced to customers. This method of handling, actual prices being used, will not distort the general average of sales from month to month. This entry should, of course, be reversed by credit to the same account at the begin- ning of the succeeding month, this credit being entered in red ink on the sales sheet when by deduction it be- comes a debit to coal sales account. Coal held unconsigned at the mines or part loads 16(i BITUMINOUS COAL MINE ACCOUNTING held there should be charged to Inventory — Coal on Hand — at the average cost of production or at the mar- ket price in the event the market is lower than the cost. This inventory should be reversed as indicated for the coal in transit. Where coal is sent to the stock pile, either mine run or slack, charge should be made to the stock pile at a rate per ton which it is felt reasonably sure can be re- covered at the time when the coal is shipped from stor- age and any later transaction in the sale of coal of this nature should be treated as a separate item. Boiler Coal. — Coal used at the boilers should appear in this sales sheet as an invoice charge at cost of pro- duction or market price in the event that the market price is lower than the cost of production. It will be seen that the intention of the method recom- mended is that all charges and credits in any way af- fecting sales or tonnage be handled in a uniform man- ner. The net sales sheet total of the tons invoiced, by grades, will check the net total of the tons as shown by the recapitulation of the daily reports of shipments plus a supplementary report of coal produced after tak- ing into consideration the tonnage adjustments on in- ventories at the beginning and closing of the period. Any discrepancies between the weights will, of course, be readily subject to audit by checking of the invoice ton- nage reported on the daily report of shipment. The forms of sales sheet adapted to the smokeless fields is illustrated herewith. This form may be elaborated to suit any mine by providing additional columns so headed as to designate the grade of coal customarily sold. The Sales Ledger. — Because of the fact that the bill- ing record of one month's shipments cannot be closed until a considerable portion of the next month has elapsed, it is desirable that the ruling of the sales ledger be arranged to permit the posting of two months' in- voices simultaneously. This is necessary because of the SALES STATISTICS 167 2 i •Jl I I k 3 9 S I i i ; i . ! ; 1 1 "^ i u 5 ^^ * ^ i H 5 , i 1 168 BITUMINOUIS COAL MINE ACCOUNTING fact that invoices for the current month will need to be posted before the tonnage record for the preceding month has been completed. By having a ledger page prepared with double debits and double credits this can readily be accomplished. Such a ruling will be found on the sheet illustrated in Form 50. CHAPTEE XV MISCELLANEOUS PROFIT AND LOSS ACCOUNTS Sale of Explosives. — In the cost sheet prepared by the Cost Accounting Committee of the National Coal Association the option is. given as to whether the profit or loss from the sale of explosives and smithing shall be treated as an addition to or deduction from the mine operating cost, or as a separate item of profit and loss. In some few sections of the country the agreement made between the operators and the miners provides that ex- plosives used by the miner in the production of coal shall be furnished by the operator at a certain fixed price. This price is in some instances below the cost of the explosive plus the handling. In such instances this item may properly be considered as a portion of the operat- ing cost since it is an expense imposed by the wage con- tract. This does not refer to the sale of explosives through the stores or merchandise departments of the operation, when such explosives are sold merely at the current market price and aside from a requirement of a wage agreement with the miners. Under these condi- tions the sales should be treated as a portion of the operation of the store. Smithing. — ^While provision is here made for the handling of the profit or loss on smithing as a separate item, in general practice it may be found much more ad- vantageous to ''melt'' the smithing by credit posting into some one of the other operating accounts in which the time of the blacksmith, who may be at one time 169 170 BITUMINOUS COAL MINE ACCOUNTING sharpening picks and at another period of the day doing other work, may be charged. Where the separate ac- count is maintained the time of the blacksmith should of course be charged to ** smithing '' and the credit rep- resented by the charges made against the miners for this labor performed on their behalf posted to the credit of this smithing account. Heat, Light and Power. — This account should take the credits for heat, light and electric power furnished to miners^ dwellings, stores, and if such current is sold for use in houses not owned by the mining company, to them as well; and in the case of power, the price received for current sold to manufacturing plants or any other in- dustry which may purchase from the coal operation. Against the account should be charged the production cost of the power sold, or if purchased power is used, the purchase price of the same, and in addition thereto the cost of maintenance of the power lines necessary to carry such current to the purchasers, as well as depre- ciation on such equipment, etc. Dwellings and Farms. — It is necessary that accounts be kept to show the profit or loss due to the ownership and operation of dwellings. In almost every bituminous coal operation it has been found necessary that the coal operator construct a sufficient number of dwellings to properly house his employees. These houses are rented at a very low rate per room. The rental paid in many instances covers the coal supplied to the occupant for heating purposes as well. In some cases electric lights are furnished and included in the monthly charges. It is necessary, therefore, in order that the true showing may be made of the profit or loss on houses that proper charges be made against the dwelling account for re- pairs, taxes, insurance, depreciation, house coal and for electric lights in the event the last two mentioned items are included in the lump sum charged for the use of the dwelling. PROFIT AND LOSS ACCOUNTS 171 Where a separate charge is made for coal it is fre- quently covered by the wage agreement at the rate which does not return the cost of production to the owner. Under such conditions the difference between the cost and the amount received for it should be charged against the rental of the dwellings. It is essential also that a proper charge be made for fire insurance. The depre- ciation should be figured against this particular class of property and charged to *^ Depreciation of Dwellings'' and not as a direct charge to ^^Depreciation" as a por- tion of the operating expense. Several instances hav6 come to the attention of the writer in which the miners live at a point considerably distant from the mines, in which case the operating com- pany pays the transportation of the miners to and from work. In an instance of this kind the cost of such trans- portation is properly chargeable to the mining opera- tion and should not go against the cost of dwellings. In many cases, in order to obtain a workable tract of coal, it has been necessary to acquire the surface as well as the mineral, this involving the purchase of farms and farm houses. In these instances the cost of repairs, in- surance, etc., should be allocated against the farm, with due credit given for the rental received for the use of land and houses. Washer Operations. — Where coal is marketed only after being washed the raw coal should be charged to the washery at the cost of production and the washery operations treated as a separate department, full charge being made against the washery for labor, supplies, de- preciation, insurance, etc., and a proper proportion of the salary of the superintendent and other mine staff as well as for the selling, administrative and general ex- penses properly chargeable thereto. Coke Plant. — ^Where a portion of the product of a mining plant is coked the coal should be charged to the coke ovens at cost. All additional items of labor, sup- 172 BITUMINOUS COAL MINE ACCOUNTING plies, and the proper proportion of the administrative, sales and general expenses should be charged against the coking operation — due credit, of course, being given for coke sold. CHAPTER XVI THE STORE DEPARTMENT Because of the fact that mines are in many cases lo- cated at points remote from markets, the practice of operating, in connection with mining operations, a store for the convenience of the miners, has become quite gen- eral. These stores are called upon to furnish the miner with practically all the necessities of life, and are fre- quently department stores on a smaller scale. Although usually merely a side issue in the mining company's affairs, it is necessary that the accounting for the mer- chandise operations be conducted in a way which will clearly reflect the results of the operation from month to month in order that the owner may know whether these stores are being operated at a profit or at a loss. As in almost any other line of industry, a proper ac- counting presupposes a correct inventory as a beginning point, and that such an inventory shall be taken periodi- cally, certainly not less frequently than once a year, and preferably at three or six months' periods. It is the custom in many operations to issue to the employees store checks or script, which is negotiable in the company stores. At the time of issue, an assign- ment of this portion of the employee's earnings is made and this script becomes a charge against the employee's account and is deducted in the semi-monthly pay settle- ment. Store checks are drawn in comparatively small denominations, and, although there is always the cur- rent liability for the amount of unused script outstand- ing, this amount is comparatively insignificant when compared with the volume of sales, and the liability may for the monthly statement be ignored. 173 174 BITUMINOUS COAL MINE ACCOUNTING Many sales are on the cash basis. In not a few in- stances open accounts are maintained with a preferred class of customers. From these three sources, script, cash and open ac- counts, the volume of the monthly sales may be readily obtained, and this record is the basis of the monthly ac- counting for the purpose of ascertaining profit or loss. The amount of sales having been determined, it is neces- sary to ascertain the cost of such sales. If it is desired to carry cost and sales comparisons on individual sales, this information may be obtained through such an ac- counting record. In most instances, however, such rec- ords are not maintained and it is necessary to fix some method whereby the cost may be estimated from the sales. A little study of the comparison of the cost of a num- ber of major items compared with the selling price in each class, weighted properly in proportion to the gross amount of business transacted, will give a ratio of sell- ing price to cost corresponding to the average markup throughout the stock. Assuming the markup to be 30 per cent, the cost will represent 100 and the selling price 130. The amount of sales divided by this figure will give the cost of merchandise sold. If from the gross sales for a given month this calculated cost be deducted, we have the gross profit on sales. From this figure should be deducted the current ex- penses of operation, salaries, rent, heat, light, insurance, etc., the remainder being the net profit for the month. In preparing a statement of the results of conducting the merchandise department it is desirable that figures be produced showing the percentage of profit to sales, the percentage of expenses to sales, etc. Along with such a statement of earnings should be carried a running statement of stock. Monthly entries should be made crediting Merchandise (stock) and charging Cost of Merchandise Sold. To the Merchan- THE STORE DEPARTMENT 175 dise account should, of course, be charged at the time of payment the purchases of additional stock. The mer- chandise account will thus show at each month's account- ing period the book inventory of the merchandise on hand. Periodically when inventories are taken the dif- ference between the book inventory and the actual in- ventory will necessarily be written off to the account Cost of Merchandise Sold. At inventory time when a complete inventory has dis- closed any discrepancies and the proper entries have been made, a new ratio should be obtained which will, unless there is some radical departure in the rate of markup during the succeeding period, more accurately reflect the relative selling price as compared with cost. It may be thought desirable by some to take a semi- annual inventory and without adjusting the inventory account change the ratio of selling price to cost to a figure which applied during the second six months of the year will absorb any errors in estimate during the first six months period. In taking the inventory full consideration should al- ways be given to salability of product and the inventory should be priced by the generally accepted method of pricing inventories, namely, cost or market, whichever is lower, and in the application of this rule unsalable goods should be ignored or reduced to merely nominal value. A failure to follow this simple rule must eventually get the owner of such a merchandise department in serious financial trouble. The statement herewith reproduced will, in a concise form, reflect the results if the accounts are kept in the manner indicated. Separate accounts should of course be kept with each store operated. 176 BITUMINOUS COAL MINE ACCOUNTINO ) Form 51. — Mebchandise Operation Statement Blank STATEMENT SHOWING MERCHANDISE OPERATIONS MONTH OF , 1922 AMOUNT Sales this month Deduct cost of merchandise sold Gross profit on sales Add miscellaneous earnings TOTAL EARNINGS CURRENT EXPENSES ' ' Salaries Rent Heat and light Hauling Miscellaneous Insurance Taxes Bad accounts DEDUCT TOTAL EXPENSES NET PROFIT Percentage of profit to sales Percentage expenses to sales Pay roll earnings Percentage sales to P. R. earnings Ratio sales price to cost INVENTORY (date) Add purchases this month Add purchases previous months Total inventory and purchases to date Less cost of merchandise sold to date BOOK INVENTORY (date) Sales and earnings to date Less cost and expenses to date 1 NET PROFIT TO DATE CHAPTER XVn INTEREST The question of whether interest expense should be included in the cost of production, or whether interest on an investment should be included as an item of ex- pense has been the subject of a continuous discussion among accountants. At the 1921 meeting of the Na- tional Association of Cost Accountants in Cleveland, the question of the inclusion of interest in cost was made the matter of discussion at a full session, but after being considered from every angle no conclusion was reached. As indicated, interest is of two kinds; that paid for the use of money of others, and that set up by some on the books to represent a return for the capital invested. In the opinion of the writer, interest of either kind has no place in a cost statement, but of course the amount of interest paid will need to be taken into consideration in fixing the selling price. If it is argued that interest on the investment should be included in cost, the difficulty immediately arises as to what is the proper rate at which it should be charged. In the case of some public service corporations the prices have been fixed at a rate which will return 6 per cent to the investor. It is a well rec- ognized fact that this method of guaranteeing dividends destroys initiative on the part of management. If it is assumed that 6 per cent is an adequate return, to whom do the earnings above that rate belong! To the investor or to the public ? If there is any good argument in favor of including interest in cost, the rate should be not 6 per cent, but a rate which is commensurate with the risk of the operation. In the case of a coal mine this rate 177 178 BITUMINOUS COAL MINE ACCOUNTING would necessarily be high. The further difficulty arises of finding a point of separation as between the items which should bear interest chargeable to cost and those which should not. If interest is properly chargeable on the plant and equipment, why not on the inventories and even on the payroll cost of unfinished work! This question can be further tested by the example of a company issuing its stock, part common with no guar- anteed return, and part preferred at 8 per cent, re- deemable at a price above par. In this case what is the proper rate of interest return! This is still further complicated if the same company issues bonds at a rate of interest possibly as low as 5 per cent. Is the stock- holder's money entitled to a higher rate of interest than that of the bond holder! It would seem ridiculous to assume that the rate of re- turn should be 6 per cent, have that amount set up on the books and then, when the year has passed and the profit and loss statement is secured, find that the actual result of operation is but 3 per cent on the investment because that is all that was earned regardless of the fact that 6 per cent was charged into cost as the mini- mum return on the investment. The handling of interest on the investment in this manner is futile for the reason that if set up on the books as cost it must also be set up as profit. The owner of the business has invested as a stockholder and can- not be a creditor in his own business at the same time for interest earned on the investment. It is interesting to examine the practice of various Government agencies with respect to the inclusion of interest in cost. The Federal Trade Commission has uniformly taken the position formerly assumed by the Bureau of Corporations, that interest should not be so included. In the conferences which took place among the various Government agencies at the beginning of the war with respect to the determination of the cost INTEREST 179 of production on cost-plus contracts, the consensus of opinion among accountants was that interest had no place in cost determination. The Federal Trade Com- mission, however, recognizes the fact that for statistical purposes both cost and interest should be taken into con- sideration in obtaining figures from which to obtain a selling price. It has furthermore been the practice of large indus- trial institutions generally in the United States to dis- regard interest in cost. In the practical application to the coal industry, a great difficulty would immediately arise as to a separation between interest on the operat- ing plant and the interest on the bonds or other obliga- tions necessitated by the carrying of undeveloped coal lands. Not infrequently bonds are issued to take care of floating indebtedness of a mixed character and it is generally impossible to make an equitable separation between two classes of property if it were desirable to allocate such interest payments. In the figuring of bituminous coal costs therefore, the consensus of opinion among accountants in the industry is that interest expense should in no way enter into the cost of production, but that on the balance sheet and in the preparation of profit and loss statements it should appear merely as a deduction from income. Further- more, that interest on the investment should not be set up on the books or taken into consideration in the prepa- ration of profit and loss statements. In the accounting practice monthly entries should be made to the credit of Interest-Matured for the interest accruing during the accounting period. When paid these amounts should be charged to this account. ; CHAPTER XVIII THE VOUCHER SYSTEM In order that invoices may be filed in a systematic manner and that they may be readily subject to exami- nation by the accountant and of easy reference, it is desirable that some sort of a voucher system be used. WASHINGTON. D. C TnB CattKBKOIAk Natioral tS-IO OF WASHINGTON. D.& PAY TO THC ORDER or ^AVU ■NDICATm BCLOW. IN rULL rAVMCMT Of ACCOUIfr A* SHOWN ON mVCRn SIDC OF THIS VOUCHCK $ NATIONAL OOAL ASSOCIATION VOID IF DETACHED H It! 11 'A ii-. Ill Mi Form 52. — Voucher Check. Entry to the various accounts through the medium of a voucher or voucher register is very much preferable to the method of posting from the day book, journal, or cash book. This method of handling is one generally understood, but for the benefit of those who may yet not have 180 THE VOUCHER SYSTEM 181 adopted it this chapter is written. It presupposes the setting up of an account under some such caption as Accounts Payable or Audited Vouchers Payable, to which shall be credited all amounts for which disburse- ment is made by check, thus avoiding a multiplicity of accounts which would be brought about if separate ledger accounts were opened with each payee. The invoices bearing approval as to receipt of ma- terial, price, authority of purchase, etc., are listed on the voucher and distribution made to the proper accounts — — II ATMHAL OOAL A9«00IAfl0n .^.^.^r • «».« ^,"::TZ "^ 1 1 «»»• ojj^ - ■ ■ ■ "/ 1 "■" "" UHT mr ; — ACCOUNT* MTA.LI ,^^ Form 53. — Accounts Payable Voucher. expense or capital. A very great saving of time is ef- fected if the vouchers are padded in such form as to permit the details of the voucher check to be written at the same time as the office or file copy of this record. The invoices, after being listed, should be attached by some permanent form of fastener to the office copy and filed in a suitable file. Very simple forms of Accounts Payable voucher and voucher check are illustrated by Forms 52 and 53. They are made in triplicate, the first sheet of bond paper of about 20 pounds weight, the second sheet glazed onion skin and the third the voucher check. The invoices are attached to the face copy which goes to the files. Post- ings are made from the onion skin copy. The voucher 182 BITUMINOUS COAL MINE ACCOUNTING check is completed and after entry in the cash book is mailed to the payee. The data with respect to the ac- counts paid are of course in the inside of the voucher check as folded, leaving the proper space for endorse- ments on the opposite side of the check proper, as folded. This check is so arranged as to be adaptable for mailing in window envelopes. The original copy of the office voucher" bears proper spaces to indicate by whom made, and to carry the neces- sary approval of officers, and if issued on verbal au- thority, the authority of the person under whose in- structions issued. Where the volume of payments is sufficient to war- rant it, a considerable saving of time in posting can be effected by the entering of such vouchers in a voucher register, which is ruled to show on the credit side amounts payable, discount, and a column for miscellane- ous credits. On the debit side are provided columns for such operating and inventory accounts as are most active, columns being provided for the detailed posting of mis- cellaneous accounts. The total of the Accounts Payable as accumulated in this record is posted to the proper account in the general ledger. This account is charged with the cash disbursements to the close of a given month, and with any journal entries affecting ^* Accounts Payable,^' the balance being the unpaid accounts pay- able. As payments are made proper notation should be made on the voucher register in the column marked **Date Paid.'' The sum of the unpaid items should ag- gregate the credit balance of the Accounts Payable. Such a form is illustrated in Form 54. It may be elaborated by the addition of other columns to any size desired as the experience of the accountant may indicate. Where the volume of payments is not too great, it may even be found desirable that direct postings be made TUE VOUCHER 8Y8TEM 183 • - • • « 5 a II 3 "^m 1— f~ !:]:::_: u ! 1 M i 1 1 1 i r^ f 1 ■== - j, --U- m-^ • _ \ -i I I : s 'rrh+T . , ' • " • • £ =3 184 BITUMINOUS COAL MINE ACCOUNTING from the voucher to the ledger account Accounts Pay- able and debit entries made from the voucher itself in detail to the other accounts. Under these conditions a proper check should be made upon the ledger account itself to indicate the items paid, the unchecked items rep- resenting in the aggregate the credit balance at the end of a period. This direct posting gives in the operating and other accounts a detailed record much more quickly accessible than even through the medium of the voucher register, but as before indicated the voucher register saves the bookkeeper a great deal of ledger posting and through its use the work may be more equally distributed by per- mitting more than one person to work on the books. In the voucher register method, of course, only the totals of the various columns are posted. When the cancelled voucher check comes back from the bank it may be filed with the voucher which it pays, or as some prefer, may be filed alphabetically in a check file and when so dis- posed of becomes an index of the payments made to the various payees. Journal. Vouchers What has been said with respect to the filing of papers in connection with Accounts Payable is equally applica- ble in connection with the journal. Vouchers should be prepared to show in proper form the full details as to entries of this nature and the supporting papers should be attached by the use of some permanent fastener to the journal voucher. Here again the use of a carbon copy will be found advantageous, the original being al- lowed to go to the files with supporting papers and the postings made from the carbon copy. These vouchers being numbered consecutively and progressively and postings made direct from the voucher to the ledger, avoid the necessity for keeping a journal book, the THE TOUCH ER SYSTEM 185 vouchers answering all purposes because the posting reference being direct to a voucher number afford a much more ready access to the original entry with the supporting papers than through the medium of the old style journal. In the analysis of accounts and in the building up of statements where reference is necessary to the original papers the voucher system embracing the loose leaf journal will materially expedite matters. Such a form of journal voucher is illustrated in Form 55. .JiSiDOHl^.S* >A«^-ASia ZiATIQI ^ ^BMiBB MONTH — - — -1 AUTMOOTT ru nvcwKi 1 .»T.eC«UNT. ^^ 1 AMOUNT paucT AoeouNT* peue Ai MOUNT 7 r "Ff i i JiuCr Jiy^ /\.l\ ry; • ■ 1 ■ - -^ p. -4 — ■ _L_ Form 55. — Journal voucher blank. These vouchers may be filed in an ordinary vertical file or are so arranged that by proper folding they may be filed in the ordinary document file. The carbon copies are arranged for file in post binders, the size and punch- ing being such that stock binders may be purchased al- most anywhere to fit them. To take care of the miscellaneous cash transactions at the mine offices and stores a running account should be kept with each such unit. The entries can well be han- dled in the mine office through a multiple column cash book. The work in the accounting department can be considerably expedited by having a report form pre- pared, on which the cash items may be systematically reported. 180 BITUMINOUS COAL MINE ACCOUNTING i i n i 1i ] II ■^1 ?s^ :!^ ^^ 9ui)uno33v o) 89|do3 U93JQ pas )IU|J pu9s THE VOUCHER SYSTEM 187 Such a report may as well reach the bookkeeper in such shape as to be immediately available for posting, by having the petty cash report made up on a journal voucher form, as illustrated in Form 56. All necessary supporting papers should be attached, and full information shown on the form in the space provided. It will be found convenient to have prepared a form for the report from the mine office of miscellaneous transactions which require the preparation of journal entries. Such a form can be used for the report of trans- fer of supplies and equipment from one mine to another ; for the report of miscellaneous sales; the charges for electric current sold to other than employees; drayage; and in fact any charges for which special reports have not been prepared. It should be made in sufficient copies to provide a per- manent record in the general office accounting. When issued it should follow, if it covers supplies, the same course as to approval for payment, as bills from outside sources. That proper record be made it is well that it be issued in triplicate. The original should go to the purchasing agent to be handled as other bills for approval. The duplicate should go to the accounting department at the end of the month. The triplicate should be held at the mine office as a permanent record. Such a form is illustrated in Form 57. If used for inter-company transactions it may be de- sirable to use additional copies to provide supporting papers for separate sets of books. To insure the full record reaching the accountant a monthly statement of such memoranda issued should be sent to the accounting department on some simple form, such as the one illustrated in Form 58. 188 BITUMINOUS COAL MINE ACCOUNTING THE NEW RIVER COMPANY wm«S?pink «*™ .-, PUBCHftSINQAOBNT MI8CEI_I_ANEOU8 CHAROK8 REPORT ACCOUNTINe OCPT. f 1 Mnuaa^iv ll DEBIT/ ( M.N.|| " CJve full PtrdeoUra. «ad ComplcM DcmlptiM.cf AitlclM ATTACH aiLJ. OP LAOthM UNIT VAkUC — 1 1 # /r r/ J fmm('//"xf'A' ■ 1 «-'•""»— ' 40. too •KS. O-l* U) Form 57. — ^Miscellaneous charge report THE VOUCHER SYSTEM 180 RepoR No.. Number Reporta Consecutively and ProgreHivelf. Do Not Begin Nev Series when Book Is Completed. Beghi New Book with Next Number. G«acnlOf«e« PRICE Correct, F.O.B. ISfiTr' Purchastos Agent Material Received Mo Quality :— Quantity. :Day Charge To be used as follows: Mining $ Deadwork Ventilation ..' . Haulage and Hoisting .... Roi&oad Car Loading nnd YardExpenae Power Kepair. to Buildinga and Permanent Structures . $- Mine Office.... SuperiAt'nd'nce Engineering .. . Dwelling Re- CapiUl Acc't.. Personal Acc't General Exp. FREIGHT OR EXPRESS fSHIPPER % \'^l^r \ Chargelconsignco s i ' p. < blank. 190 BITUMINOUS COAL MINE ACCOUNTING NOTC THK I /o//Jf'jr-<. f'/^ K J y' Form 58. — Monthly statement of miscellaneous charge reports issued. CHAPTER XIX THE BALANCE SHEET In preparing the Balance Sheet some prefer to state the accounts with the fixed assets first; others with the assets in the order of their ready liquidation. The writer prefers the latter method which has the endorsement of many accountants. The Balance Sheet which is illus- trated in Form 59 has been adapted from a very care- fully prepared one used by some of the anthracite operators. The suggested accounts can be complete only as to general classification and many additional or subsidiary accounts will of necessity be kept to show the details of these general classifications. This need is more fully ex- plained in the description of the accounts which follows. Balance Sheet Accounts — Assets. Current Assets. Cash. Charge to this account money received in the form of United States coin, United States Treasury and Federal Bank notes, National Bank notes. Cheques or drafts pay- able on demand and credits to bank accounts. Credit this account with cash disbursements, by coin, currency, cheque, and bank account debits. Notes Receivable — Customers. Charge to this account notes receivable from customers which are payable within one year from date. Credit this account with notes collected, discounted, charged to ** Reserve for Uncollectible Accounts and 191 192 BITUMINOUS COAL MINE ACCOUNTING W H O 1^ Ed a 1.1 S q; aj Oj U 9 1^ « 5fi.2 a, IK ^ ^ ^ ^ ■T? o _o '^-1 -O g S w 'S 'S Ph ap oi 05 cc X ^ ^ m o) o «tf o o ■—I 0) TO .pH -d .^ ^ g s t^ OJ a a; O 1^ (^ >. ,>,>, o o o -M SJ -♦-> i=l C fl k. 8 ^ ?i ^ ^ P-f <3 hH M h-l l-H a ■^ ■?! O o II •• c3 ^ EH CCV s o o ^1 .S i=5, P?6 be O) O cS Eh O H b -M o 5^ THE BALANCE SHEET 193 o Q O O o ^ a ^ a -^^ I § =« o s m r ^ .5 I « >^ § 0) OJ I-} < H O H o ^:;5«°H« OJ sS 5 5^ Wi o oS ?^ ph <: ph Q a pL, H^ 194 BITUMINOUS COAL MINE ACCOUNTING bo .s m o Oh i I 'cS B oH a* O -M .g TJ PhPh ■*■> ^ -^^^ c 13 '-I THE BALANCE SHEET 196 w & < g Ph fo O CC 196 BITUMINOUS COAL MINE ACCOUNTING Notes ^^ and otherwise disposed of. (See Contingent Lia- bilities.) Notes Receivable — Affiliated Companies, Charge to this account notes receivable from subsidiary or affiliated companies. Credit this account with notes collected, discounted, charged to ^'Eeserve for Uncollectible Accounts and Notes'' and otherwise disposed of. (See Contingent Lia- bilities.) Accounts Receivable — Ciistomers. Charge to this account all amounts due the company from customers other than notes receivable. Credit this account with collections, allowances, dis- counts and amounts charged to *^ Reserve for Uncollect- ible Accounts and Notes.'' Accounts Receivable — Affiliated Companies, Charge to this account all amounts due the company from subsidiary or affiliated companies other than notes or amounts representing loans and investments. Credit this account with collections, allowances, dis- counts and amounts charged to ^^ Reserve for Uncollect- ible Accounts and Notes. ' ' Accounts Receivable — Miscellaneous, Charge to this account all amounts due from miscel- laneous debtors for sales of scrap, supplies, services, roy- alties, etc. Credit this account with collections, allowances, dis- counts and amounts charged to ** Reserve for Uncollect- ible Accounts and Notes." Payroll Overdrafts. Charge to this account the total of overdrawn accounts of employees on payrolls. Credit this account with credits from payroll and items transferred from mine office to general office for collec- THE BALANCE SHEET 197 tion at whicli time debit Accounts Keceivable — Miscel- laneous. Accounts Receivable — Merchandise Department, Charge this account with the balance of uncollected accounts on store ledgers at close of each month and credit Merchandise Sales. Credit this account at beginning of each month with balances and charge Merchandise Sales, less any amount transferred to Accounts Eeceivable — Miscellaneous, for collection through general office which at time of trans- fer are credited to this account. Interest Receivable. Charge to this account the interest accrued on notes, accounts receivable and investments when such interest becomes due. Credit this account with interest received and amounts charged to ^'Eeserve for Uncollectible Accounts and Notes.'' Inventory — Coal, Charge to this account and credit ^*Coal Sales" ac- count the value of coal in transit or unconsigned at end of month. Inventory — Merchandise. Charge this account with all merchandise purchased by the Merchandise Department for resale, and with in- coming freight and drayage on same. Credit this account goods transferred to other stores, and with the estimated cost of Merchandise sold or used in the operation of the mining plant or store. Inventory — Materials and Supplies. Charge to this account the cost of materials and sup- plies purchased during the month, and inventory adjust- ments. 198 BITUMINOUS COAL MINE ACCOUNTING Credit this account with the cost of materials and sup- plies used and sold, and inventory adjustments. Investments, If any investments are pledged to secure liabilities, the securities pledged should be so indicated on the balance sheet. United States Government Obligations, Charge to this account the total cost of United States Bonds, Certificates of indebtedness and other, obligations of the United States other than currency and open ac- counts. Credit this account with the book value of obligations sold, and credit or charge the difference between the book value and the selling price to ** Profit or Loss on Invest- ments'* under ^^Miscellaneous Income'* or *^ Deductions from Income" as the case may be. A separate ledger or subsidiary ledger account should be kept for each class of these investments. Bonds — Other than United States Government. Charge to this account the cost of bonds purchased other than bonds of this company or subsidiary com- panies. This account also includes bonds of states, muni- cipalities and foreign governments. Credit this account with the book value of bonds sold, and credit or charge the difference between the book value and the selling price to ''Profit or Loss on Investments" under ** Miscellaneous Income" or ** Deductions from In- come," as the case may be. Mortgages, Charge to this account money loaned which is secured by mortgages and costs of mortgages purchased. Credit this account with collections and the book value of mortgages if sold. If sold at a price different from the book value, credit or debit ** Profit or Loss on Invest- THE BALANCE SHEET 199 ments'' under *' Miscellaneous Income'' or ** Deductions from Income/' as the case may be, with the amount of the difference. Long Term Notes, Charge to this account notes receivable due after one year from date. Credit this account with collections, notes discounted, and amounts charged to *^ Reserve for Uncollectible Ac- counts and Notes. ' ' ( See Contingent Liabilities. ) Stocks of Other Companies. Charge to this account the cost of stock of other com- panies purchased, except subsidiary or affiliated com- panies. Credit this account with the book value of stock sold. If sold at a price different from the book value, credit or debit *' Profit or Loss on Investments" under ^^Miscel- laneous Income" or *' Deductions from Income," as the case may be, with the amount of the difference. Loans — Affiliated Compames. Charge to this account amounts loaned to subsidiary or affiliated companies on open account. Credit this account with collections. Stocks and Bonds — Affiliated Companies, Charge to this account the cost of stocks and bonds of affiliated or subsidiary companies. Credit this account with the book value of stocks and bonds sold, and credit or charge the difference between the book value and the selling price to *^ Profit or Loss on Investments" under ^* Miscellaneous Income" or ** De- ductions from Income, ' ' as the case may be. Reserve and Sinking Funds, Charge to accounts under this caption, the assets set aside or purchased for Reserve or Sinking Funds. A sub-account should be provided for each fund for which 200 BITUMINOUS COAL MINE ACCOUNTING there is a separate purpose, such as ^'Insurance Fund,'' ^'Bond Eedemption Fund," ^'Preferred Stock Kedemp- tion Fund, ' ' etc. Fixed Assets. Coal Reserves Undeveloped. . . Charge to this account the value of coal undeveloped or that which it is estimated will not be mined within 45 years from present workings. This account will under no circumstances be subject to depletion. If at any time a portion of the coal reserves are within 45 years of be- ing worked, that portion may then be transferred to *'Coal Lands" and become subject to depletion. Coal Lands — Fee. Charge to this account the cost of available coal lands minable within 45 years if purchased subsequent to Feb- ruary 28, 1913, or at a fair market value as at March 1, 1913, if purchased prior to that date. Credit this account with the value of coal lands sold. If the selling price differs from the book value, credit or debit the diiference to * 'Profit or Loss on Sale of Coal Land" under '* Miscellaneous Income" or '^ Deductions from Income," as the case may be. In calculating the profit or loss on the sale of coal lands, consideration must be given to the amount of the depletion reserved and sur- plus arising from revaluation at March 1, 1913, applicable to the land sold. Depletion should not be credited to this account but to account '^Eeserve for Depletion of Coal Lands — Fee." Coal Lands — Leaseholds. Charge to this account the operator's equity in the fair market value of leaseholds, of coal lands as at March 1, 1913, if leased prior to that date, or at cost if acquired subsequently. i THE BALANCE SHEET 201 Mine Plant and Equipment. Charge to this account the cost of Mine Buildings and structures, machinery, equipment, etc., purchased or con- structed subsequent to February 28, 1913, or at the fair market value as at March 1, 1913, if purchased or con- structed prior to that date. This account includes tipples, power houses, office buildings, side tracks, reservoirs, steam and water lines, machinery and equipment, mine cars, motors, steel rail, wiring, and all equipment neces- sary in the first instance to bring the mine into an operat- ing condition. After the mine has been developed to its regular nor- mal output capacity all additional expenditures for minor items of plant and equipment, necessary to maintain but not to increase production, such as motors, mules, mine cars, steel rail, copper wire, etc., should be charged to operation. Should these normal extensions, additions and better- ments be so large as to materially distort the general average of cost if charged to one mine's operation they should be charged to Deferred Expense and distributed to the regular expense accounts, over a reasonable period. Credit this account with the book value of such units, scrapped, sold, dismantled or abandoned. It is generally desirable that a ^^ Plant'' ledger be opened and a record kept in some detail of the items of such property. Mine Developments, Charge to this account the cost of shafts, slopes, tunnels, canals, ditches, sump, stable, office, hospital, engine and pump rooms, main gangway, etc., as is required to bring the mine into a regular operating condition, if such ex- penditures were made subsequent to February 28, 1913. If mine developments were made or purchased prior to March 1, 1913, they should be shown on the books at a fair market value as of that date. All normal develop- 202 BITUMINOUS COAL MINE ACCOUNTING ments, required to maintain the output, such as gangways, airways, chutes, digging up rock, grading, ditching, sec- ondary turnouts, minor tunnels, airshafts and other simi- lar mine developments should be charged to operating ex- penses. Should these normal developments be out of proportion to the regular periodical expenditures for mine developments they should be charged to an account under ^'Deferred Expenses'' and distributed to the regu- lar expense accounts over a reasonable period. Stripping Expenses — Deferred. Charge to this account stripping overburden expenses which are not applicable to the coal being obtained from stripping operations during the current accounting period. Credit this account with a portion of these expenses ap- plicable to coal being obtained by stripping operations during the current accounting period. The portion chargeable to each ton should be based on the estimated amount of coal to be realized from strip- ping operations. Improvements and Developments in Progress. Charge to this account all improvements and develop- ments in progress which, when finished, will be charged to a fixed asset account. A sub-account for each par- ticular improvement should be kept under this heading until such improvement or development is completed, when it should be transferred to the proper fixed asset account. All improvements and developments should be made under Special Work Orders, approved by the proper ofiicers. All charges for work done under these orders should be charged in total to account ^^Improvements and Developments in Progress'' and in detail to each ^^ Special Work Order." THE BALANCE SHEET 203 The ** Special Work Orders^' should be numbered con- secutively and all entries chargeable to such orders should indicate the order number to which they are ap- plicable. Storage Yards. Charge to this account the cost of storage yard land, buildings, machinery and equipment if purchased or con- structed subsequent to February 28, 1913, or at a fair market value as of March 1, 1913, if purchased or con- structed prior to that date. Credit this account with the book value of storage yard land, buildings, machinery, etc., sold, destroyed, dis- mantled or abandoned. Retail Yards (other than at the mine). Charge to this account the cost of retail yard land, buildings, machinery and equipment (other than at the mine) if purchased or constructed subsequent to Febru- ary 28, 1913, or at a fair market value as of March 1, 1913, if purchased or constructed prior to that date. Credit this account with the book value of retail yard land, buildings, machinery and equipment, sold, de- stroyed, dismantled or abandoned. Miscellaneous Non-operatvng Property. Charge to this account the cost of miscellaneous non- operating property if purchased or constructed subse- quent to February 28, 1913, or at a fair market value as of March 1, 1913, if purchased or constructed prior to that date. This account includes the investment in physical prop- erty such as surface land, town lots, farm lands, timber lands, farm buildings, farm machinery and equipment, miners' dwellings, dwellings not occupied by miners, stores, business blocks, parks and other property which is entirely distinct from and not used in connection with the mining operations. 204 BITUMINOUS COAL MINE ACCOUNTING Sub-accounts should be kept under this heading for each class of property. Credit this account with the book value of property sold, destroyed, dismantled, or abandoned. Credit the ac- count also with any tract or panel of land that is required in mining operations and charge the proper operating asset account. Defekred. Prepaid Insurance. Charge to this account prepaid insurance premiums not applicable to the current accounting period. Credit this account with amount charged periodically to the different insurance expense accounts. . Advanced Royalties, Charge to this account royalties paid in advance and credit with royalties charged royalty expense account, when the coal, to which these royalties are applicable, is mined. Charge unrecoverable advanced royalties to ac- count * ' Royalty. ' ' Prepaid Interest, Charge to this account prepaid interest on notes, ac- counts, etc., not applicable to the current accounting period. Credit this account with such interest as is charged to interest account during the current accounting period. Deferred Expenses, Charge to sub-accounts under this heading all expenses which are to be charged to future periods and credit with amounts so charged. This account should include only such expenses as large purchases of mine cars, etc., and repairs which have a continuing value, the expense of which will be distributed over the ensuing year. This account includes all addi- THE BALANCE SHEET 205 tions, extensions and improvements which do not add to or increase the output. No charge should be made to this account for any ex- pense or loss that has not a continuing value such as losses on account of accidents, fires and floods, etc., the reserve for which has been insufficient. Discount on Bonds Sold. Charge to this account the discount on bonds sold which is chargeable over the life of the bonds. Credit this account and charge ^ ^ Premium and Discount on Bonds — Net'' with the amount of discount applicable to the current accounting period. Prepaid Taxes, Charge to this account the taxes prepaid which are ap- plicable to subsequent accounting periods. Credit this account with prepaid taxes applicable to the current accounting period and charge the various tax expense accounts. Interest Receivable — Unmatured. Charge to this account monthly the interest accrued on notes, accounts receivable and investments. Credit this account and charge ^^ Interest Eeceivable'* with the amount of interest receivable which becomes due. Balance Sheet Accounts — ^Liabilities. Current Liabilities. Notes Payable. Credit to this account notes payable issued, except notes of affiliated companies, and charge with notes paid. Notes Payable — Affiliated Companies. Credit to this account notes payable due subsidiary or affiliated companies and charge with notes as paid. 206 BITUMINOUS COAL MINE ACCOUNTING Accounts Payable — Current, Credit to this account all creditors' and other accounts payable, other than inter-company accounts, and charge with payments made. Accounts Payable — Affiliated Companies, Credit to this account accounts payable due subsidiary or affiliated companies and charge with payments made. Payroll Accrued, Credit to this account the total of all payrolls for each accounting period. Charge this account with salaries and wages paid. Interest — Matured, Credit to this account the amounts of interest on in- terest bearing indebtedness which matures during the current accounting period. Charge this account with amounts of matured interest paid. Wages — Unclaimed. Credit to this account all unclaimed wages. Charge this account with unclaimed wages paid or credited to income. Rents Accrued, Credit to this account during each accounting period all accrued rents not including property rented on a royalty basis. Charge this account with rents paid. Dividends Declared. Credit to this account dividends declared. Charge it with dividends paid. Dividends — Unclaimed. Credit to this account all unclaimed dividends. Charge the account with unclaimed dividends paid. THE BALANCE SHEET 207 Unclaimed Bond Interest Coupons, Credit to this account all unclaimed interest coupons. Charge with unclaimed interest coupons paid. Defekred Liabilities. If any deferred liabilities become due and are not paid immediately, the amount of such liabilities due and un- paid should be shown on the balance sheet as current lia- bilities. Taxes — Federal Income and Excess Profits, Credit to this account the amount of Federal Income and Excess Profits Taxes which have been determined as due the Government. Taxes Accrued — General, Credit to this account during each accounting period, the State, Local and Federal Taxes accrued, other than Federal Income and Excess Profits Taxes. Charge this account with State, Local and Federal Taxes paid, other than Federal Income and Excess Profits Taxes. Interest Accrued — Unmatured. Credit to this account the amount of interest accrued on interest bearing indebtedness during the current ac- counting period. Charge this account and credit account *' Interest Ma- tured" with amounts of unmatured interest when such interest matures and becomes payable. Royalties not due. Credit to this account the accrued royalties applicable to each accounting period. Charge this account with royalties paid. Liability Insurance Accrued, If the company does not carry its own liability insur- ance, credit this account with the amount accrued dur- 208 BITUMINOUS COAL MINE ACCOUNTING ing each accounting period based on the payrolls. Charge this account with liability insurance premiums paid. This account should be used only where the pre- paid premium on liability insurance has expired and the company becomes liable for additional premium. Compensation Claims Determined. Credit to this account and charge ^^Eeserve for Com- pensation Insurance" the amount which has been deter- mined* as due employees as compensation for injuries sustained and is payable in some future period. Charge this account with payments made for compen- sation. Mining Hazards Claims Determined. Credit to this account and charge *^Eeserve for Min- ing Hazards'^ the amount of claims arising from prop- erty damaged or destroyed by squeezes, explosions, water, etc., the amount of which has been determined as payable, including judgments rendered against the com- pany, etc. Charge tliis account with payments made on account of these claims. Premium on Bonds. Credit to this account premiums realized from sale of bonds when originally issued. This premium should be proportioned, each accounting period during the life of the Bonds, to account *^ Premium and Discount on Bonds —Net.'' Eesekves. Reserve for Depletion of Coal Lands — Fee. Credit to this account the depletion of coal land owned in fee, applicable to the current accounting period. Depletion should be reserved at a rate per ton ascer- tained by dividing the book value of the fee coal land by the total estimated tonnage to be realized. THE BALANCE SHEET 209 Reserve for Depletion of Coal Lands — Leaseholds. Credit to this account the depletion of leaseholds of coal lands, applicable to the current accounting period. Depletion should be reserved at a rate per ton ascer- tained by dividing the book value of the leaseholds of coal lands by the total estimated tonnage to be realized. Reserve for Depreciation and Obsolescence of Plant and Equipment. Credit to this account the estimated amount of depre- ciation and obsolescence of buildings and structures for the current accounting period. ( See article on Deprecia- tion, p. 119.) Amortisation of Mine Developments. Credit to this account during each accounting period a portion of the cost of mine developments applicable to each ton of coal produced. The rate per ton to be amortized should be ascertained by dividing the estimated amount of remaining coal ob- tainable into the book value of the developments. It is optional whether this amount be treated separately or the development added to the value of the mineral (fee or leasehold) and recovered by depletion changes. Reserve for Depreciation and Obsolescence of Storage Yards. Credit to this account the estimated amount of depre- ciation and obsolescence of storage .yards and storage yard equipment for the current accounting period. Charge this account with the original cost (book value) less the scrap value of storage yards, buildings, machinery and equipment destroyed, dismantled or abandoned. If a sufficient amount has not been reserved to cover the original cost, less the scrap value of storage yards destroyed, dismantled or abandoned, the difference be- tween the original cost, less the scrap value, and the 210 BITUMINOUS COAL MINE ACCOUNTING amount reserved for depreciation and obsolescence should be charged as additional depreciation or to a special *^ Profit or Loss Account. '* Reserve for Depreciation and Obsolescence of Retail Yards Buildings and Equipment. Credit to this account the estimated amount of depre- ciation and obsolescence of retail yards, buildings and equipment for the current accounting period. Charge this account with the original cost (book value) less the scrap value of retail yards buildings and equip- ment destroyed, dismantled or abandoned. If a sufficient amount has not been reserved to cover the original cost, less the scrap value, of retail yards buildings and equipment destroyed, dismantled or aban- doned, the difference between the original cost, less the scrap value, and the amount reserved for depreciation and obsolescence should be charged as additional depre- ciation or to a special ^* Profit or Loss Account." Reserve for Depreciation and Obsolescence of Miscel- laneous Non-operating Property. Credit to this account the estimated amount of depre- ciation and obsolescence of miscellaneous non-operating property explained under '^Miscellaneous Non-operating Property,*' for the current accounting period. Charge this account with the original cost (book value) less the scrap value of non-operating property destroyed, dismantled or abandoned. If a sufficient amount has not been reserved to cover the original cost, less the scrap value of non-operating property destroyed, dismantled or abandoned, the differ- ence between the original cost, less the scrap value, and the amount reserved for depreciation and obsolescence should be charged to accounts as additional deprecia- tion or to a special '^ Profit or Loss Account." THE BALANCE SHEET 211 Reserve for General Insurance. Credit to this account during each accounting period the amount determined upon by the company as suffi- cient to cover its insurable risks if the company carries its own insurance. Charge this account with the value of property de- stroyed by fire, floods or other insurable accidents be- yond the control of the company. If the amount of the reserve is insufficient to cover the loss, the difference between the loss and the amounts reser\^ed should be charged to an account properly designated '* Profit and Loss'' account. Reserve for Compensation Insurance, Credit to this account during each accounting period the amount determined upon by the company as suffi- cient to cover compensation to be paid employees on ac- count of accidents. Charge this account and credit ** Compensation Claims Determined'* with amounts of compensation that have been determined. Also, charge it with all expenses incurred in connection with accidents such as doctors' fees, hospital expenses, etc. Any adjustments of amounts credited to ^* Compensa- tion Claims Determined*' should be credited or debited to this account. Reserve for Mining Hazards, Credit to this account during each accounting period an estimated amount to cover mining hazards. Charge this account and credit ^'Mining Hazards Claims Determined" with the amount of claims which have been determined and are payable. Charge this account also with the expenses of re- opening areas closed by squeezes and caves, mine fires, property damaged by explosions, floods, etc., damages to surface and structures on same, including cost of property acquired in settlement of damage claims in ex- 212 BITUMINOUS COAL MINE ACCOUNTINO cess of the value of such property for the purpose for which it will be used and the expenses of rehabilitating property damaged, not purchased. Also, costs of re- locating and building roads and highways, legal and court costs incidental to property and personal damage ela^ims should be charged to this account. The rate per ton may be increased or decreased from time to time in order to keep this reserve account at an amount representing a safe margin. Reserve for Uncollectible Accounts and Notes. Credit to this account during current accounting period an estimated amount to cover losses on uncollect- ible accounts and notes. Charge this account with amount of accounts and notes which become worthless. It is recommended that this reserve be based on a per- centage of the sales, as shown by experience. Funded Debt. Bonds Authorized and Issued. Credit this account with bonds (at par) authorized and issued. Charge with bonds (at par) retired. Bonds in Treasury. Charge to this account the total of bonds (at par) previously authorized and issued and later repurchased, crediting or debiting the discount or premium to the cur- rent year'§ profit and loss account. When calculating the premium or discount to be debited or credited to the profit and loss account, consideration should be given to the amount of discount or premium previously charged off or amortized if the company issued its bonds at a discount or premium. Mortgages. Credit this account with the total amount for which THE BALANCE SHEET 213 the company becomes liable on mortgages. Charge it with mortgages paid. Capital Stock. Common Stock, Credit this account with all common stock (at par) is- sued. Charge the account with all common stock (at par) retired. Common stock repurchased but not re- tired should be charged to *^ Common Stock in Treas- ury. ' ' Common StocJc — In Treasury. Charge to this account the par value of common stock repurchased which was previously sold and paid for. If this stock is repurchased at a premium or discount, credit or debit the premium or discount to surplus. This account should be shown on the balance sheet as a deduction from *' Common Stock.'' Preferred Stock. Credit this account with all preferred stock (at par) issued. Charge the account with all preferred stock (at par) retired. Preferred stock repurchased but not re- tired should be charged to ** Preferred Stock in Treas- ury. Preferred Stock — In Treasury. Charge to this account the par value of preferred stock repurchased and which was previously sold and paid for. If this stock is repurchased at a premium or discount, credit or debit the premium or discount to surplus. This account should be shown on the balance sheet as a deduction from ^'Preferred Stock. M SUKPLUS. Sinking Fund Reserves. Credit to this account the amount of sinking fund re- serves required to be set aside out of surplus or earn- 214 BITUMINOUS COAL MINE ACCOUNT IN Q ings, as determined upon by the company or specified in mortgages or other agreements. Charge to this account and credit "Earned Surplus '^ with the amount of sinking fund reserves when the ob- jects for which the reserves have been set aside have ceased to exist, for example, the payment of bonds and mortgages or the retirement of preferred stock, etc. Surplus — Arising from a Revaluation of Assets. Credit to this account the difference between the book values of assets revalued and the fair market value of such assets, as of March 1, 1913. Sub-accounts should be kept for unrealized surplus arising from revaluation of assets as of March 1, 1913, for each class of assets revalued. Charge this account with the portion of surplus aris- ing from a revaluation of assets as it is realized and credit the amount to Surplus Earned Prior to March 1, 1913. The amount to be transferred periodically is equal to the difference between the amount of deprecia- tion allowance based on the original book value and that based on the appraised value. The amount so trans- ferred does not constitute taxable income and should not be reported as such. This also applies to the reval- uation of coal lands and leaseholds, and to the amounts charged as depletion. The balance of this account should not be included with the other surplus when calculating the invested capital of the company, as it becomes invested capital only when realized. Surplus Earned Prior to March 1, 1913. Credit to this account the amount of surplus earned prior to March 1, 1913, including the amount transferred periodically from surplus arising from a revaluation of assets. Charge this account with dividends paid from, and appropriations of, this surplus. THE BALANCE SHEET 215 Surplus Earned Subsequent to March 1, 1913. Credit to this account the amount of surplus earned subsequent to March 1, 1913. Charge this account with dividends paid from, and appropriations of, this surplus. Note. Contingent Liabilities. Should the company be contingently liable for notes receivable included in '^ Notes Receivable'' (Customers, affiliated Companies or Long Term) which have been dis- counted, endorsements, guarantees, etc., such liability should be indicated on the balance sheet as a footnote. INDEX Accounts Payable (see vouchers) Affiliated companies, 206 Current, 206 Accounts Receivable Affiliated companies, 196 Customers, 196 Merchandise department, 197 Miscellaneous, 196 Adjustments, 163 Advanced Royalties, 204 Advertising, 138 Allowances, 163 Should be made through sales register, 163 Amortization Of leaseholds, 107 Treasury Department tables for, 112, 113 Appreciation Realized on March 1, 1913, valua- tion not taxable, 105 Realized portion of is earned surplus, 105 B Balance Sheets, 191, 192, 193, 194, 195 Boiler Coal, 159, 166 Bonds, 198 Authorized and issued, 212 In treasury, 212 Premium on, 208 Sold as discount, 205 U. S. Government obligations, 198 Boss Driver's Report, 82 Capital Accounts Allowable additions to, 85 Limitation of charges in devel- oped mines, 85 Cases cited in Maynard Case, 9-16 Cash, 191 Certificate of Weight, 154 Check Numbers, 56 Check Sheet, 59 Claire Furnace Co. Case, 6 Coal Proof. 60 217 Coal Reserves Fee, 200 Coal Reserves Leasehold, 200 Coal Reserves Undeveloped, 200 Coke Plant, 171 Commissions, 138 Common Stock, 213 In treasury, 213 Compensation Claims Determined, 208 Conducting Transportation, 51 Contingencies, Reserve for, 139 Recommendation of Fuel Admin- istration, 139 Contingent Liability, 215 Cost Sheets Daily, 80 Federal Trade Commission, 18-39 Idle Day, 82 National Coal Association, 40, 41, 44, 48 Standard, 81 Credit Memoranda, 163 Customs Invoices, 162 Daily Cost Sheets, 80 Day Labor, 62 Dead Work, 49 Defined, 66 Federal Trade Commission rule not workable, 67 Deferred Accounts, 204 Deferred Expense, 142, 204 Distribution of, 144 Deferred Liabilities, 207 Depletion Accounting for, 99 Comment of Engineers' Commit- tee on, 2 Regulations respecting, 99, 105 Reserve for, 208, 209, 210 Depreciation Comment of Engineers' Commit- tee on, 2 Effect of overtime, 134 Figured on basis of tonnage or depletion, 120, 126 May at times be oflFset by repairs and replacements, 123 National Coal Association Cost Report, 119 218 INDEX Depreciation Rate should be consistent, 120 Treasury regulations, 121 Development Accounting for, 201 When it should be capitalized, 85 Discount on bonds, 205 Diversion of shipments, 152 Dividends declared, 206 Dividends Unclaimed, 206 Domestic Coal, 61 Report form for, 159 Drainage, 50 Driver's Reports, 82 Dumping and Tallying, 51 Dwellings — rent of, 170 Depreciation on, 171 E Employees' earnings, 78 Employee's pay statement, 77 Periodical record of, 78 Employment record, 78 Employment slips, 56 When class of occupation changes, 57 Engineers' Committee U. S. Fuel Administration — Remarks of, 2 Equipment, 201 Executive salaries, 3 Table of, 3 Explosives — Sale of, 169 Farms — rent of, 170 Federal Trade Commission Cost Forms First distributed in 1917, 2 Fourth, 1920, enjoined by court, 17 Illustrated, 18-39 Second form, 1918, basis of price revision by U. S. Fuel Ad- ministration, 4 Third, 1919, not put into use, 5 Federal Trade Commission declines to endorse National Coal Asso- ciation Cost Sheet Form, 42 Feed, 83 Filled Orders, 150 Fire Insurance, 129 Fuel Charges at "cost or market," 91 Charge to cost necessary for com- parison with other mines, 92 Comment of engineers' commit- tee, 4 Fuel Cost may be distributed, 93 Federal Trade Commission's atti- tude regarding, 92 Invoicing, 93 G General expense, 136 H Haulage and hoisting, 50 Hazards — mining, 139 Heat, sales of, 170 Hoskold's formula for present value, 112 I Improvements and Development in Progress, 202 Injunction granted Maynard Coal Co, 17 Insurance, 129 Charges for premium should be distributed, 131 Liability, 132 On life of officers, 133 Prepaid, 204 Interest Accrued, 207 Federal Trade Commission's atti- tude, 178 Matured, 206 National Association of Cost Ac- countants' position on, 177 Not an element of cost, 177 Prepaid, 204 Properly a deduction from in- come, 170 Receivable, 197 Receivable, unmatured, 205 Treatment of, 177 Inventories, 157, 165 Coal, 197 Material and Supplies, 197 Merchandise, 175, 197 Invested capital Need not always be reduced by charges for depreciation prior to 1916 if repairs and replace- ments have property in full productive condition, 123 Realized appreciation properly in- cluded, 105 Investments, 198 Invoices, 161 For Canadian Customs, 162 INDEX 219 Journal (see vouchers) Leaseholds Coal Lands, 200 May be revalued at March 1, 1913, 107 May have considerable non-tax- able value, 109 Tables for finding present worth of, 112, 113 Treasury department, question- naire regarding, 110 Value to be amortized, 108 West Va. tax commissioner's method of valuation, 114 Legal Expenses, 137 Lever Law, 1 Liabilities, Contingent, 215 Liability Insurance, 132 Accrued, 207 Light — sales of, 170 Live Stock — care of, 83 Loans — Affiliated Companies, 199 M Maintenance of way, 50 Maynard Coal Company injunction suit, 6 Justice Bailey's opinion in, 6 Merchandise Department — Accounts for, 173 Inventories, 175 Statement of operations, 176 Mine plant and equipment, 201 Mineral — depletion of, 98, 105 Revaluation of at 1913, 105 Miners — given check number for identification of coal, 54 Mine tonnage record, 54 Mining Hazards Actual losses deductible, 142 Anthracite operators' practice, 141 Claims determined, 208 Deductions for not permitted by the Federal Trade Commission, 141 Not deductible in returns for in- come taxes, 142 Reserve for, 139, 140 Mining — National Coal Association cost sheet, 43 Mortgages, 212 N National Coal Association Adopted by directors as stand- ard, 42 Cost sheet forms, 44-48 Cost sheet not accepted by Federal Trade Commission, 42 Form of cost sheet first sub- mitted to Federal Trade Com- mission, 40-41 Instructions for compiling re- ports, 43 Offers cooperation to Federal Trade Commission, 42 Report submitted to annual con- vention, 1919, 42 Xon-operating Property, 203 Notes Payable Affiliated companies, 205 Current, 205 Notes Receivable Affiliated companies, 196 Customers, 191 Long term, 199 Officers' Salaries Amount allowed l)v engineers, 3 Orders filled, 150 Outside Profits, 4 Overdrafts — Payroll, 196 Pay Roll Illustrated, 71 Overdrafts, 196 Should check Coal, Yardage and Day Work, 70 Statement of earnings, 77 Summary of, 74 Summary to carry credit accounts to reduce to cash basis and to balance payroll, 75 Summary to carry miscellaneous non-mining charges, 75 To show deductions to bring to a cash basis, 68 Transfers between employee's numbers, 69, 71 Petty Cash — see vouchers Plant and Equipment, 201 Power Cost Price to be charged for coal burned, 91 To be apportioned to various sub- divisions of cost, 52 To include coal used at boilers, 52 220 INDEX Power— Sale of, 169 Powers of Congress in intrastate business — Justice Bailey's de- cision, 12 Preferred Stock, 213 Premium on bonds, 208 Prepaid Insurance, 204 Prepaid Interest, 204 Prepaid Taxes, 205 Preparation, 51 Present Worth Hoskold's Formula, 112 Tables used by Internal Revenue Bureau, 112, 113 R Railroad Car Loading, 51 Railroad Weight Reports, 153 Certificates of, 154 Requests for, 154 Reconsignments, 152 Rent, 137 Accrued, 206 Repairs to buildings, 53 Report of Shipments, 206 Reserves Amortization of Development, 209 Comment of engineers' committee on, 2 Compensation Insurance, 211 Contingencies, 140 Depletion, 208 Insurance — General, 211 Mining Hazards, 140 Obsolescence, 208 Sinking Funds, 199 Uncollectible Accounts, 212 Retail Yards, 203 Revaluations at March 1, 1913 Treasury Department tables for finding present worth, 112, 113 Royalties, 95 Advanced, 97, 204 Form of report for, 96 Separate miners' checks for, 96 Unrecoverable — not to be carried beyond recoverable period, 97 S Salesmen's Salaries and Expenses, 137 Sales of coal Sales Sheets, 164 Sales Statistics, 147 Selling Expense, 137 Shipper's record of orders filled, 150 Railroad weights, basis of, 150 Sinking Funds, 199 Smithing, How to handle in cost, 169 Special Work Authorizations, 145 Stable Boss' Reports, 83 Statement of employee's earnings, 77 Stock Common, 213 Preferred, 213 Treasury, 213 Stocks and Bonds, affiliated com- panies, 199 Stocks of other companies, 199 Storage Yards, 203 Stores, accounting for, 173 Stripping Expense, 202 Summary — Pay Roll, 74 Supplementary Report of Coal Pro- duced, 159 Supplies Accounting for, 85 Comment of engineers on, 2 Daily report of used, 87 Internal Revenue rulings, 85 Order blank for, 87 Should be handled througli sup- ply house, 86 Should not be capitalized, 85 When charged as purchased, 89 Supply house, 86 Supply Report, 147 Illustrated, 148 Surplus, 213 Earned prior to March 1, 1913 Earned subsequently, March 1, 1913 From revaluation of mineral, 105, 214 Sinking fund reserve, 213 Taxes, 133 Accrued, general, 207 Capital stock, 134 For local improvements, 134 Income and excess profits, 135, Prepaid, 205 To be distributed, 134 Undeveloped coal lands, 134 207 Timbering, 49 Time Book, 63 Superintendent should examine, 63 Timekeeper should certify to cor- rectness of, 65 Time Sheets, not recommended, 05 INDEX 221 Tipple Sheet, 55 To be balanced, 55 To show how coal is used, 58 Tonnage Record, 54 Recapitulation of shipments, 156 Track Laying, 49 Transfer of credits, 73 U Unclaimed Bond Interest, 207 Unclaimed Dividends, 206 Unclaimed Wages, 206 Undeveloped coal lands, 200 U. S. Government obligations, 198 Ventilation, 50 Voucher Check, 180 Voucher Register, 183 Voucher System, 180 Vouchers, Accounts Payable, 181 Journal, 184, 185 Miscellaneous sales and transfers, 187, 188 Vouchers Petty Cash, 186 W Weighmaster should balance pro- duction with distribution, daily, 58 Weighmaster's check sheet, 59 Weight Reports, 153 West Virginia leases. Method of fix- ing value for local taxation, 114 Yardage and Dead Work, 66 Dijfferent rates for pick and ma- chine work, 67 Engineers can check accuracy of, 68 Reports should be examined by superintendent, 68 Yards paid to cutters and loaders should balance, 68 Yard Expense, 51 THIS BOOK IS DUE ON THE LAST DATE STAMPED BELOW AN INITIAL FINE OF 25 CENTS WILL BE ASSESSED FOR FAILURE TO RETURN THIS BOOK ON THE DATE DUE. THE PENALTY WILL INCREASE TO SO CENTS ON THE FOURTH DAY AND TO $1.00 ON THE SEVENTH DAY OVERDUE. MAR 6 1933 MAR 7 1933 JUN 28 1933 MAY 20 1935 JUN 2 U 1935 NOV 3^' '*• DEC 31970 mfii-m LD 21-50m-l.'33 YC 92629 mm ^■^^V --^ 1 1 ^^H H i! 1 ^v f UNIVERSITY OF CAUFORNIA LIBRARY