GIFT OF GENERAL INFORMATION ON THE' GEORGIA C. P. A. EXAMINATIONS and TYPICAL QUESTIONS EDITED BY JOEL HUNTER, C. P. A. PRICE ONE DOLLAR ATLANTA, GA. PRESS OF APPEAL PUBLISHING COMPANY January* 1913 I GENERAL INFORMATION ON THE GEORGIA C. P. A. LAW. EDITED BY JOEL HUNTER, C. P. A. Certificates are granted under the au- thority of a law enacted by the Legislature and approved by the Governor, August 17, 1908. The examinations are conducted by a board of three examiners, consisting of two Certified Public Accountants and one Attorney. The examinations are held on the third Wednesday of May and Novem- ber of each year. The present Board (1912) is made up of Messrs. R. W. Jemison, C. P. A., of Macon, Joel Hunter, C. P. A., of At- lanta, and Hudson Moore, Esq., Attorney at Law, also of Atlanta. Upon the recommen- dation of this board, certificates are issued by the Governor to candidates who pass the examinations. Certificates may be re- voked by the Governor, for sufficient cause upon the recommendation of the Board of Examiners. Applicants must be citizens of the United States, residing and having an of- fice for the regular transaction of busi- 6 General Information on the ness in the State of Georgia and must be over the age of twenty-one years, and of good moral character. Any person unlawfully using the title "Certified Public Accountant'' or the ini- tials "C. P. A." is guilty of a misdemeanor and liable, upon conviction, to a fine, not exceeding five hundred dollars and not less than two hundred dollars. All applications must be filed with the Board, at least ten days before the date fixed for any examination. A grade in each subject of at least sev- enty-five points, out of a possible hundred points will be necessary to pass any exam- ination. Georgia C. P. A. Examinations AN ACT Passed by the Senate and House of Represen- tatives and Approved by the Governor, August 17, 1908. To ESTABLISH A BOARD FOR THE EXAMINATION OF ACCOUNTANTS, TO PROVIDE FOR THE GRANTING OF CERTIFICATES TO ACCOUNTANTS AND TO PROVIDE A PUNISHMENT FOR THE VIO- LATION OF THIS ACT. Section 1. Be it enacted by the Senate and House of Representatives of the Common- wealth of Georgia in General Assembly met and it is hereby enacted by the authority of the same, That any citizen of the United States re- siding and having an office for the regular transaction of business in the State of Georgia being over the age of twenty-one years and of good moral character and who shall have re- ceived from the Governor of the State of Geor- gia a certificate of his qualification to practice as a Public Expert Accountant as hereinafter provided, shall be designated and known as a Certified Public Accountant, and no other per- son shall assume such title or use the abbrevia- tion C. P. A., or any other words, letters or fig- ures to indicate that the person using the same is such Certified Public Accountant. Every 8 General Information on the person holding such certificate, and every co- partnership of accountants, every member of which shall hold such certificate may assume and use the title of Certified Public Account- ants or the abbreviation thereof C. P. A., pro- vided that no other person or co-partnership shall use such title or abbreviation, or other words, letters or figures to indicate that the per- son or co-partnership using the same is such Certified Public Accountant. Section 2. The Governor of the State of Georgia shall appoint a board of three exam- iners for the examination of persons applying for certification under this Act. Two of said examiners shall be Public Accountants who shall have been in practice for at least five years, one of whom shall be appointed for the term of two years, and one for the term of three years, and upon the expiration of each of said terms an examiner shall be appointed for the term of three years, and after the year One Thousand Nine Hundred and Eight, these two examiners shall be Certified Public Accountants. The other examiner shall be a practicing attor- ney in good standing in any of the Courts in the State of Georgia, who shall be appointed for the term of two years, and upon the expira- tion of said term a successor shall be appointed for the term of three years. The examination Georgia C. P. A. Examinations 9 for certificates shall be based upon an examina- tion in Theory of Accounts, Practical Account- ing, Auditing, Commercial Arithmetic and Commercial Law. Said Examinations shall take place twice a year in the City of Atlanta, during the months of May and November of each year under such rules and regulations as may be adopted by the board. The fees pro- vided by this Act shall be twenty-five dollars for each applicant, from which shall be paid the expenses incident to each examination, in- cluding stationery, clerk hire, and traveling ex- penses of the Examining Board. The results of such examinations shall be certified to the Governor, and filed in the office of the Secretary of State, and kept for reference and inspection for a period of not less than five years, and the Governor to issue the certificate. Section 3. The Governor of the State of Georgia may revoke any such certificate for suf- ficient cause upon the recommendation of the board of examiners, who shall give written no- tice to the holder thereof, and after he has had a hearing thereon. Section 4. The board of examiners may in its discretion waive the examination of any per- son who shall have been for three years imme- diately preceding the passage of this Act prac- ticing in the State of Georgia or a sister State 10 General Information on the as a Public Accountant, and who shall apply in writing for such certificate within three months after the passage of this Act. Section 5. If any person shall hold himself out as having received the certificate provided for in this Act or shall assume to practice there- under as a Certified Public Accountant or use the initials C. P. A. without having received such certificate, or after the same shall have been revoked, he shall be deemed guilty of mis- demeanor, and upon conviction thereof shall be sentenced to pay a fine not exceeding Five Hun- dred Dollars nor less than Two Hundred Dol- lars. Georgia C. P. A. Examinations 11 STATE OF GEORGIA RULES OF EXAMINATION FOR C. P. A. CERTIFICATE UNDER THE LAWS OF GEORGIA Approved August 17th. 1908 1. Examinations shall include questions on: Commercial Arithmetic, (a) Theoretical Accounting, (b) Practical Accounting. (c) Auditing. (d) Commercial Law. (e) 2. The examination will take approximately two days and will be written. 3. The answers to the questions in all subjects must be completed within the time allotted and mentioned on the paper for each ex- amination. 4. All answers must be written on blanks fur- nished by the examining board at each ex- amination. 5. The writing must be in ink and legible. 6. The board will not be responsible for mis- construing any writing which may be diffi- cult to decipher. 7. All examination papers must be written in accordance with the instructions given prior to each examination. 12 General Information on the 8. The examination question papers cannot be taken away, and shall remain the prop- erty of the board. 9. When applicant enters the examination room he will be handed an unsealed en- velope containing a blank card. Upon this card applicant writes his name, and the ex- aminer in charge puts a number. Appli- cant is notified of his number, after which the envelope is sealed and filed. 10. The applicant is then handed another en- velope unsealed, containing the examination questions. These he will answer and sign by the number which he has been given. At the expiration of the time limit he will en- close in the original envelope, the printed questions and written answers, and all memoranda he may have made, seal the en- velope, and hand it to the examiner in charge. 11. Applicants are strictly enjoined from bringing into the examination room any printed or written matter, blank books, blank paper or any material which might be referred to or used in the examination. Except a fountain pen or its equivalent (steel pen and holder). No notes, papers or memoranda of any kind to be taken out of the room. Georgia C. P. A. Examinations 18 12. A candidate to pass an examination must receive seventy-five points in each subject. 13. The marking of papers shall be mainly governed by the correctness of the answers ; general appearance and expression will, however, be considered. 14 All applications shall be made on blanks provided by the board, accompanied by a fee of Twenty-five Dollars, and filed in ac- cordance with the rules and regulations stated herein, and at least ten days prior to the taking of an examination. 15. Applicants must be over the age of twenty- one years and of good moral character. Per- sons convicted of a felony, misdemeanor, or declared by any Court as having committed fraud or other crimes, shall not be consider- ed as of good moral character. 16. Certificates will only be issued to those ap- plicants who furnish positive evidence of good moral character, and the Board will judge as to such character and cannot be compelled to divulge the reason for its de- cision. 17. Ample notice will be given to each appli- cant of the time and location selected for holding the examination, and each one must be present and prepared to engage in his task promptly at the appointed hour. 14 General Information on the 18. Failure to do so will be considered as suffi- cient cause for exclusion from attendance at any session of the examination when once begun. 1 9. Any applicant failing to attend at the open- ing of any subsequent session or who may be excluded for tardiness or misconduct will forfeit the amount of his fee. 20. Applicants must appear when so required before the Board in person to answer any question, or produce additional evidence re- quired by the Board to sustain such facts as are necessary to determine the qualifications prescribed by the law. 21. The Chairman will communicate to each ap- plicant in writing the decisions reached by the Board in his case, but in no event will any information be given as to reasons leading to an adverse decision to anyone, nor will any of the papers be accessible for inspection at any time. 22. The act of filing an application for exami- nation shall be deemed to be and shall con- stitute an agreement upon the part of the applicant that he will observe and conform to the requirements expressed in these rules, or such as may be promulgated hereafter. Georgia C. P. A. Examinations 15 PRE-EXAMINATION PAPERS For the purpose of carrying out the C. P. A. law, the Georgia Board has found it necessary to provide certain blanks for the applicant to sign. These are: 1 Application for a C. P. A. Certificate. 2 Evidence as to Age, etc. 3 Certificates of Moral Character (three blanks) . On the pages following, copies are given of each of these blanks. Georgia C. P. A. Examinations 17 STATE OF GEORGIA APPLICATION FOR A CERTIFIED PUBLIC ACCOUNTANT'S CERTIFICATE To the Georgia State Board, Examiners of Public Accountants, Atlanta. Gentlemen: I desire to become an applicant for a C. P. A. Certificate, which will entitle me to practice, and be styled and known as a Certified Public Ac- countant under the rules adopted by the Board in conformity with the C. P. A. Law of Georgia. I enclose you herewith, 1. Required evidence as to age, citizenship, pre- liminary and professional education. 2. Three Certificates of Moral Character. 8. A certified check for $25.00 made payable to the order of the Georgia State Board of Examiners of Public Accountants. I will appear before your Board whenever so re- quested by you in writing, to take such examination or submit such additional evidence respecting my qualifications as may be required, or answer such questions as may be propounded by your Board. Signature of Applicant P. O. Address Telephone No. Date 18 General Information on the STATE OF GEORGIA Evidence as to Age, Citizenship, Qualifi- cations, Etc. To the Georgia State Board, Examiners of Public Accountants, Atlanta. I submit for your consideration the following evi- dence : 1. Full name? ~ 2. Date and place of birth? 3. A citizen of the United States? 4. Residence this date? 5. How long a resident of Georgia? 6. Office or place of business? 7. Present business or occupation? 8. How many years have you practiced as a Pub- lic Accountant on your own account? 9. Have you ever opened and closed a full set of books of an extensive business? If so, in what lines of business ? 10. Have you ever conducted an independent audit? If so, in what lines of busi- ness? 11. How many years as an assistant to a Pub- lic Accountant? 12. If so, give names of Public Accountants you have assisted? 13. Experience in the study or practice of ac- counting (give here by years your experience in the study or practice of accounting, stating how, along Georgia C. P. A. Examinations 19 what lines, and where employed during the periods indicated). Prior to January 1st, 190 During 190 , .... During 190....... . During 190 , . During 190. , . 14. Have you read the full text of the law and are you familiar with its provisions ? 15. Have you completed any of the courses given by Schools or Institutes of Commerce, Accounts and Finance ? If so, name them - 16. Are you a graduate of any bookkeeping or commercial college? If so, name them 17. Give any other general information which may aid the Board in passing on your qualifications. I have never been convicted of a felony or misde- meanor or declared by any Court of competent juris- diction to have committed any fraud. I am not ad- 20 General Information on the dieted to the excessive use of intoxicating liquors and am of good moral character. Signature of applicant STATE OF GEORGIA, \ \ ss. County of . I * J Undersigned, being duly sworn, says that the state- ments contained in the foregoing seventeen questions and answers are true. Subscribed and sworn to before me this day of A. D. 190... My commission expires Notary Public. Georgia C. P. A. Examinations 21 STATE OF GEORGIA CERTIFICATE OF MORAL CHAR- ACTER To the Georgia State Board, Examiners of Public Accountants, Atlanta. This is to certify that I, the undersigned, am per- sonally acouainted with ~.~. and that to my knowledge he has never been convicted of a felony or misde- meanor, or declared by any Court of competent juris- diction to have committed any fraud. I know him to be of good moral character, and also to be a good citizen, recommending him as entirely worthy to be- come a Certified Public Accountant should he meet the requirements as to knowledge and experience pre- scribed by your board. I am willing to answer any questions you may ask in regard to the applicant hereinabove mentioned, and will treat the same as strictly confidential. I have known the above applicant for the C. P. A. degree for years. Signature ~ Business _ P. O. Address NOTE: Three of these certificates should be signed by sub- stantial and representative commercial men, well known in the State of Georgia and residents of the State. None of these parties should be a relative of the applicant, or should maintain any financial or business relations with the applicant, except that of a client or employer. SCOPE OF THE EXAMINATION IN EACH SUBJECT Georgia C. P. A. Examinations 25 COMMERCIAL ARITHMETIC. This subject has been selected to serve as an index to the candidate's preliminary business education. Questions are given in Percentage, Interest and Discount, Ra- tio and Proportion, Equation of Payments, Complex Problems, Standard Short Meth- ods and Bookkeeping. BOOKS RECOMMENDED. New Higher Arithmetic, Robinson. New Commercial Arithmetic. Moore. Practical Arithmetic, Williams & Rogers. High School Arithmetic, Wentworth & Hill. Commercial Arithmetic, Bryant & Stratton. Commercial Arithmetic, Cornell & Holt. 26 General Information on the THEORETICAL ACCOUNTING. The Theory of Accounting is that knowl- edge of the correct underlying principles of accounting, which will enable one to ap- ply it practically. The accountant is called upon at times to append a certificate to a balance sheet of a corporation. Among the best forms of certificates may be consid- ered the following : This statement is prepared so as to pre- sent an accurate view of the Company's affairs, is in agreement with the books and sets forth its true financial condition. Thus it may be seen, that a Balance Sheet may be drawn up so as to disclose the truth in totals, but not be prepared in such style as to present an accurate view of the Company's affairs. BOOKS RECOMMENDED ARE: Improved Bookkeeping, Goodwin. Bookkeeping and Accountancy, Rowe. Factory Accounting, Garcke & Fells. Modern Accounting, Hatfield. Science of Accounts, Bentley. Philosophy of Accounts, Sprague. Accounting in Theory and Practice, Lisle. Accounts of Executors, Hardcastle. PRACTICAL ACCOUNTING Georgia C. P. A. Examinations 29 PRACTICAL ACCOUNTING The applicant is expected to have a thor- ough knowledge of the theory and appli- cation of accounts, the various forms of business organization and the methods of administration under which they are con- ducted, and to be prepared to examine and report upon all matters relating to ac- counts and accounting practice. Under this head, questions may be asked upon the following subjects: BANKING AND FINANCIAL. (a) National banking System. (b) State Banks in Georgia. (c) Savings Banks and Building and Loan Asso- ciations in Georgia. (d) Trust Companies in Georgia. (e) Private Bankers and Brokers. (f) Foreign Exchange. (g) Clearing Houses. (h) Loan and Investment Companies. INSURANCE LIFE,, FIRE, MARINE,, ACCIDENT, FIDELITY AND OTHER FORMS OF INSURANCE. Principles of Insurance. Organization of (1) Stock Companies, (2) Mutual Companies. Accounting Organization and Administration. Reserves, Income Accounts, Balance Sheets, Audits. 30 General Information on the MANUFACTURING. (a) Accounting Organization and Administration of factories. (b) Financial Accounts. (c) Manufacturing Costs. (d) Audits. TRANSPORTATION. (a) Steam Railways. (b) Street Railways. (c) Water Transportation and Docks. (d) Express Companies. Accounting organization and administration of Capital accounts. Revenue and Operating accounts. Balance Sheets. Audits. PUBLIC UTILITIES. (a) Gas and Heating. (b) Electric Light and Power. (c) Telephone and Telegraph. (d) Water Works. SELLING. Accounting organization and administration of (a) Wholesale. Manufacturing. (b) Retail. Distribution. (c) Financial Accounts of Selling Organizations. (d) Stock and Cost Records. (e) Audits. MINING. (a) Accounting organization and Administration of a Mining Company. (b) Financial accounts of mining companies. (c) Mining Costs. (d) Audits. Georgia C. P. A. Examinations 31 GOVERNMENTAL. (a) The distinction between public and private Companies. (b) Revenue and Expenditure. (c) Appropriations. (4) Funds, Special and General. (e) Balance Sheets. (f) Audits. LEGAL. Correct preparation and presentation of State- ments of Accounts in litigated cases. 32 General Information on the BOOKS RECOMMENDED. Perhaps the best course of study to pre- pare for an examination in practical ac- counting is to solve the problems submitted by the C. P. A. Boards of other States. These may be had by subscribing to the Journal of Accountancy, 32 Waverly Place, New York City, and Greendlinger's Accountancy Problems, Business Book Bu- reau, 13 Astor Place, New York City. (Other books recommended may be found under Auditing.) Georgia C. P. A. Examinations 33 AUDITING. Webster defines "audit" in the words "to examine and adjust." This limited definition shows that a simple examination of figures recorded does not cover the whole scope of an audit. Even from books not properly kept, the experienced auditor is enabled to discover the omission of en- tries that should have been made. After being thoroughly grounded in Commercial Arithmetic, Business Organi- zation and Procedure, with the Theory of Accounts properly applied in Practical Ac- counting, the student is then prepared to take up successfully the great subject of auditing, which, as understood by the modern accountant, is one of great breadth and scope. In preparing himself for the examina- tion on this subject, the student should make a careful study of its best literature. Among others, the following books are recommended : Accounts, their Construction and interpretation Cole Advanced Accounting Dicksee Auditors, their Duties and Responsibilities Pixley 34 General Information on the Auditing (American Edition) Dicksee Auditing Montgomery Corporation Finance and Accounting Bentley Corporation Accounting and Law Rahill Depreciation of Factories Matheson Depreciation, Reserve and Reserve Funds Dicksee Factory Organization and Costs Nicholson Funds and their Uses Cleveland Goodwill and its Treatment in Accounts Dicksee Modern Banking Methods Barrett Modern Trust Co Sterrett Partnership Accounts Child Practical Accounting Wolff Practical Auditing Renn Practical Cost Accounting Wood Georgia C. P. A. Examinations 35 COMMERCIAL LAW. The student should be well grounded in those branches of Commercial Law that relate to the work usually undertaken by a public accountant. Thus, he should be fa- miliar with the Georgia Law in its relation to the rights and duties of shareholders in a corporation and of the scope and powers of directors. He should know the legal difference between partnerships and cor- porations. What constitutes partnerships where the rights of creditors are con- cerned. The law of contracts. The laws relating to State banks. The relationship of principal and surety. The law on negotiable paper, including Bills of Lading. The student is expected to have such a knowledge of the law relating to frauds or other crimes arising out of business rela- tions as can be obtained by careful study of text books on the subject. He should have a working knowledge of laws concerning Real Estate and Personal Property, of the law governing Receiver- ship, Bankruptcies and the Administration of Estates. 36 General Information on the It is to be borne in mind that the ac- countant is to acquire such knowledge of Commercial Law as affects Accountancy. Keeping this point in view will enable him to determine where his responsibility ends and the advice of a practicing attorney should be sought. The practicing accountant will find it much to his advantage to study in the Codes of those States in which he prac- tices, the subjects in which he is inter- ested. The Georgia Code is considered to be particularly valuable in the elucidation of the underlying principles of Common Law. The following books are recommended: Georgia Bankers' Code Park Commercial Law Curtis-Gano Commercial Law Huffcut Commercial Law Spencer American Corporations Sullivan American Business Law Sullivan Manual of Elementary Law Fishback Law of Mortgages Jones Law of Contracts Anson Law of Agency Mechem Sureties and Guarantors Baylies Law of Insurance Biddle Law of Partnership Parsons Public Corporations Beach Law of Bankruptcy Collier Bills, Notes and Checks Bigelow QUESTIONS SET BY GEORGIA BOARD OF EXAMINERS SELECTED FROM VARIOUS EXAMINATIONS. Georgia C. P. A. Examinations 39 QUESTIONS SET BY GEORGIA BOARD OF EXAMINERS SELECTED FROM VARIOUS EXAMINATIONS. THEORY OF ACCOUNTS. 1. What should be done regarding the books on the admission of a new partner into a firm? What entry should be made (a) when Cash is invested for a certain share in the gains and losses (b) when a specified amount is paid to the old members for a certain share in the gains and losses ? 2. Define the following terms as applied to Accounts: Personal, Real, Nominal, Resource, Liability. Mention two real and three nominal accounts. 3. State generally how the books of a firm doing a manufacturing business would differ from those kept by a trading concern as to (a) Books of Record, (b) Ledger Accounts. 4. Suggest one or more plans by which an inventory may be corroborated or impeached. 5. Describe a method of keeping accounts so that the aggregate sums due from customers and due to creditors can be known without pre- paring a schedule of the accounts of such cus- tomers and creditors, and so that an indepen- 40 General Information on the dent balance of the ledger, containing only the real, nominal, special and controlling accounts, exclusive of the individual accounts of custom- ers and of trade creditors, may be taken. 6. Define the following: (a) stock, (b) capital, (c) surplus, (d) deficiency, (e) capital stock, (f) preferred stock, (g) common stock, (h) share capital, (i) loan capital. 7. Describe the nature of the following ac- counts: (a) merchandise, (b) construction, (c) consignment, (d) joint, (e) subscription, (f) ex- pense, (g) maintenance, (h) venture, (i) sus- pense, (j) dividend. 8. Describe the process of changing single entry books to double entry. What additional accounts are required? Is it necessary to dis- turb any accounts already opened in the ledger, or to keep such accounts differently after the change ? 9. How should executors' and administra- tors' accounts be stated for the. purpose of filing in court? What does the summary of accounts usually include ? What are assets of the estate ? When are dividends, interest and rents to be treated as principal? Define an intermediate account. What is a final account? With what does the executor charge himself? For what does he take credit? Georgia C. P. A. Examinations 41 * 10. Formulate and explain a rule for deter- / j mining whether an account should be debited I or credited in any given transaction. Explain the application of the principle. PRACTICAL ACCOUNTING Georgia C. P. A. Examinations 45 PRACTICAL ACCOUNTING. PROBLEM No. 1, No. 1. The following is the Trial Bal- ance and Inventory of the Georgia Cotton Oil & Manufacturing Co., as at June 9, 1909. The books were closed last, June 16, 1908. TRIAL BALANCE JUNE 9, 1909. Dr. Cr. Plant $50,552.30 Real Estate 2,500.00 Stinson Gin Building 2,653.45 Office Fixtures 242.73 Cash on Hand and in Banks 2,324.91 Accounts Receivable 1,002.18 Cotton Seed, 4,828,832 Ibs 42,185.68 Mill Labor 3,050.76 Salaries 2,069.41 Fuel 2,282.46 Interest, Exchange and Disc 1,113.31 Press Cloth 1,622.94 Meal Bags 943.83 Taxes 597.50 Mill Expenses 519.23 Hull Sacks 194.26 Office Expense 97.63 Telegraph and Telephone 84.70 Carried Forward $114.037.27 46 General Information on the Brought Forward $114,037.27 Traveling 68.54 Insurance _ 150.08 Lubricating Oil 131.92 Repairs and Supplies 655.20 Oil Inventory, 6-15-08, 35,357 Gals 1,725.00 Meal Inventory, 6-15-08, 82,000 Ibs 1,027.00 Hulls Inventory, 6-15-08, 136,000 Ibs ~ - 408.00 Linters Inventory, 6-15-08, 7,418 Ibs 111.28 Loss by Burglary 9.82 Capital Stock $50,000.00 Accounts Payable 273 24 Oil Sales, 812,167 Ibs 33,964.19 Meal Sales, 1,987,600 Ibs 23,475.06 Hull Sales, 1,665,246 Ibs 4,684.01 Linter Sales, 183,610 Ibs 1,421.78 Receipts from Standard Gin Co _ 112.88 Receipts from Farmers' Gin Co 734.40 Receipts from Storage _ 1,203.01 Profit and Loss 2,455.04 $118,323.61 $118,323.61 INVEXTOMES JUNE 9, 1909. Meal, 68,500 Ibs _ $976,12 Hulls, 73,500 Ibs 220.50 Linters, 4,343 Ibs - 86.86 Seed, 3,920 Ibs - 34.22 Georgia C. P. A. Examinations 47 Hull Sacks 10.70 Fuel 30.00 Supplies and Repairs 539.15 "Warehouse storage accrued to June 9th amounted to $748.22. You are requested to extract from this data a Balance Sheet and a Statement of Expenses and Earnings from June 16, 1908, to June 9, 1909, showing the average cost per ton of Seed worked for every pur- chase, material and Expense Account, av- erage price per ton, pound or gallon re- ceived for the total Sales of product, cost per ton of Seed worked, working cost, then total prime and working cost and price (per ton of Seed worked) received for Product Sold. Show profits per ton on the crushing operations and Receipts from other Income separately. Show also the yields in pounds (7 1-2 Ibs. Crude Oil to Gallon) for each of the four products, Oil, Meal, Hulls and Linters, and show the av- erage yield in pounds for the four products per ton of Seed crushed. You are also requested to make such comment on these Costs as may seem nec- essary. 48 General Information on the PRACTICAL ACCOUNTING. PROBLEM No. 2. No. 2. From the accompanying Trial Balance and Inventories of the Blankville Cotton Mills you are requested to prepare a Balance Sheet and statements of Manu- facturing Cost, Selling Expenses and In- come Account. The books were closed pre- viously at August 31, 1908. In the twelve months ended August 31, 1909, they have produced 1,372,428 Finished Cloth and 161,906 Ibs. Visible Waste. In addition to the financial and manufacturing, etc., statements, you are also requested (a) to find the prime cost of cotton consumed per lb., (b) the increase in this pound price by reason of Waste made, less money received from Sales of Waste, (c) the cost of the Cotton in the finished cloth per pound, (d) the cost to manufacture per pound, (e) to- tal raw material and manufacturing cost, (f ) Gross selling price per pound of goods made and sold (include Inventory in this), (g) Selling Expenses per pound, (h) gross profit on sales, (i) Other Expenses per pound, (j) profit or loss per pound on man- ufactured cloth. Georgia C. P. A. Examinations 49 BLANKVILLE COTTON MILLS TRIAL BALANCE AUGUST 31sT, 1909. Dr. Machinery $118,514.99 Real Estate 48,774.48 Office Fur. and Fixtures..... 390.89 Unsold Stock (in Treasury )...... 1,650.00 Accounts Receivable - 33,498.66 Cash in Bank and on Hand 7,744.68 Advances to Hands 307.28 Starch 1,859.85 Burlap and Rope 1,198.19 Insurance and Taxes 3,299.42 Salaries 5,100.00 Repairs _ 481.64 Discounts and Commissions ...... 11,897.62 Freight 5,623.57 Tallow 859.55 Wages 31,767.27 Supplies 7,846.34 Expense 1,435.56 Oil 400.28 Fuel 5,339.75 Discount and Interest 8,790.49 Inventories, 8-31-08: Raw Cotton, 92 B-C, 87,149 Ibs 4,134.68 Stock in Process, 45,739 Ibs 6,960.83 Finished Goods, 123,373 Ibs. 20,114.35 Waste, 16,134 Ibs 591.36 Cr. Carried Forward 50 General Information on the Brought Forward $328,581.73 Cotton Purchased, 3,161 Bales, 1,584,318 Ibs ; 148,919.42 Capital Stock $80,000.00 Bond Account 40,000.00 Bills Payable 77,576.73 Accounts Payable 11,154.66 Dividend Account 3.50 Sales, 1,435,376 Ibs 228,992.62 Waste, 96,597 Ibs 2,618.62 Outside Warehouse Storage Receipts 2,023.70 Rent Operatives' Houses 1,069.07 Undivided Profits, August 31, 1908 34,062.25 $477,501.15 $477,501.15 N. B. Inventories September 1, 1909: Raw Cotton, 170 Bales 86,700 Ibs $9,970.50 Cotton in Process, 46,172 Ibs 6,123.70 Finished Goods, 56,556 Ibs , 9,457.85 Goods Consigned 2,392.40 Waste . 1,863.83 General Supplies _. 2,916.85 Fuel 265.50 Starch 678.35 August 31, 1909, there was an amount of Unearned Insurance, $892.70. Also accrued charges of wages, $550.00, Commissions $1,812.54, interest $315.74 and taxes $700.00. Georgia C. P. A. Examinations 61 PRACTICAL ACCOUNTING. PROBLEM No. 3. No. 3. The following trial balance is handed you, with the request that you pre- pare a revenue account and a balance sheet : A B's Capital $20,000.00 A B's Personal Account $1,000.00 Bank of North America 600.00 Cash in hand 90.00 Merchandise account 8,600.00 Repair account 87.50 Bills Receivable 6,400.00 Bills Payable 4,000.00 Real Estate 1,350.00 Bank Stock 1,566.00 General Expenses 1,860.00 Freight 1,000.00 Accounts Receivable 8,000.00 Accounts Payable 10,000.00 Profit and Loss 3,446.50 $34,000.00 $34,000.00 If all the information required is not pre- sented in this trial balance, supply what is wanting and submit the statements called for. 52 General Information on the PRACTICAL ACCOUNTING. PROBLEM No. 4. No. 4. The trial balance of a manu- facturing firm taken January 1, 1897, is as follows: Capital A $40,000.00 Capital B 20,000.00 Plant and Machinery $35,000.00 Purchases 38,000.00 Sales 95,000.00 Stock on hand Jan. 1, 1896 15,000.00 Labor 24,000.00 Salaries 6,000.00 k Traveling Expenses 2,500.00 ^ Interest 600.00 Stationery and Printing 1,200.00 -. Rents and Taxes 3,500.00 - Discounts and Allowances 1,250.00 Fuel 8,000.00 Insurance (1 year from 7-1-96)... 1,150.00 - Freight 1,500.00 " General Expenses 600.00 Bank Overdraft 5,000.00 Creditors 4,000.00 Accounts Receivable 25,000.00 Rent of Steam Power 1,500.00 Cash on hand 200.00 Loan account 7,000.00 $165,500.00 $165,500.00 Georgia C. P. A. Examinations 53 Stock on hand January 1, 1897, $23,000 ; each partner to be credited 6 per cent, on his capital for one year before profits are ascertained; 3 per cent, to be written off book debts for discount ; 10 per cent, to be written off machinery and plant for depre- ciation; unexpired insurance to be taken into account ; net profit to be divided 2-3 to A and 1-3 to B. Draft journal entries for closing books and prepare final balance sheet and profit and loss account. COMMERCIAL LAW Georgia C. P. A. Examinations 57 COMMERCIAL LAW. 1. (a) What is a corporation? (b) What are the general powers of a board of directors of a corporation and what are its general duties ? 2. (a) Give briefly the substance of the Federal Corporation Tax Law and its various essential provisions. (b) Prepare correct returns of a manufacturing corporation, supplying fig- ures and data in compliance with the Fed- eral Corporation Tax Law. 3. (a) To what extent is a stockhold- er liable for the debts of an insolvent cor- poration? (b) To what extent is a partner lia- ble for the debts of an insolvent partner- ship? (c) Assuming that you are one of six shareholders in a corporation where the stock is fully paid up, the capital being $120,000.00, assuming that you are also a partner in a firm where the total invest- ment is $120,000.00, equally divided among six persons ; both concerns fail and can pay only 50 cents on the dollar of their indebt- 58 General Information on the edness; two of the stockholders are dead and insolvent, and likewise two of the partners are dead and insolvent, what is your partnership liability and what is your liability as a stockholder? 4. (a) What is the liability of a stock- holder of a bank to its general creditors, and what is his liability to the bank's de- positors ? (b) How much is a State bank permitted to lend any one person, and what is required when a State bank loans money to one of its officers? 5. (a) For what purposes and how long may National banks acquire and hold real estate? (b) What portion of its net profits must be carried to the Surplus fund, and when, by a National Bank? 6. (a) What are the general duties and liabilities of an executor or adminis- trator of an estate? (b) What is a specified legacy, and what constitutes the residuum of an es- tate? (c) What compensation are execu- tors and administrators entitled to receive for their services? Georgia C. P. A. Examinations 59 7. (a) What are considered words of negotiability ? (b) What is understood by the words "without recourse" when accom- panying an endorsement? 8. (a) What is a bill of lading? What do bills of lading represent ? To what ex- tent are they negotiable ? 9. (a) Give the various acts and omissions which will prevent a bankrupt from obtaining a discharge in bankruptcy from the payment of his debts. (b) What are the various obliga- tions from which a bankrupt is not relieved by a discharge in bankruptcy ? 10. (a) What is the penalty for using the terms "C. P. A." without having first received the proper certificate? (b) What are the elements involved in the crime of having fraudulently ob- tained credit, and what is the punishment therefor ? (c) From what funds only can divi- dends be declared by State banks, and what are the consequences of declaring dividends from other sources? (d) Define "false entries" when ap- plied to a National Bank ; and what are the consequences of such an act ? AUDITING Georgia C. P. A. Examinations 63 AUDITING. 1. How would you determine the profits for a given period from a set of books kept on the single entry system, the capital at the beginning of the period being known? 2. In the construction of a large build- ing the proprietors issue $800,000 20-year 6 per cent, bonds which are disposed of to the contractors at 85 per cent, of their face value. You find, upon examination, that the discount of 15 per cent, has been charged to Construction Account in the first place, and then into Building Account. State whether you consider the final entry legitimate or not, and give reasons. 3. You are elected the auditor of a cor- poration by the holders of both common and preferred stock, and it is your duty to safeguard the interest of both classes of stockholders. The preference stock bears 7 per cent, and is non-cumulative. Mention what precaution you would adopt to safe- guard the interests of the preference shareholders, giving reasons therefor. 4. Explain the various measures which you would adopt to verify whether or not all cash received has been duly accounted 64t General Information on the for on the books of the concern you were auditing. 5. A corporation has sold its first mortgage bonds at a premium and its sec- ond mortgage bonds at a discount. How should the premium and discount be dealt with on the books ? 6. After auditing the books of a man- ufacturing company for a period of ten years you are asked to give a certificate as to the net earnings of the business for those ten years for the purpose of a sale based on the earning capacity of the prop- erty. What items of expense heretofore charged annually through the Profit and Loss Account may be properly eliminated in the preparation of your certificate ; and why? 7. Describe in detail the method that should be used to verify the securities rep- resenting the investments of a company under audit, in the case of (a) Real Estate, (b) Mortgages on Real Estate, (c) Certifi- cates of Stock, (d) Railway bonds. 8. Under what circumstances, if any, would it be proper to open an account with Good Will? On finding a Good Will Ac- count on the Ledger of a business for which you are to prepare an account state- Georgia C. P. A. Examinations 65 ment, how would you treat the account, or what special adjustment would you sug- gest in regard to it? 9. Acting as an auditor of a manufac- turing company, state briefly the essential points to be considered in ascertaining the correct profits so far as the inventories are concerned. 10. If a company, duly organized, ac- quires several plants that are found to be in a "run down" condition and to require extensive outlay for repairs and renewals to bring them to the required state of effi- ciency, should such outlay be charged against Capital or against Revenue ? Give reasons. UNIVERSITY OF CALIFORNIA LIBRARY, BERKELEY THIS BOOK IS DUE ON THE LAST DATE STAMPED BELOW Books not returned on time are subject to a fine of 50c per volume after the third day overdue, increasing to $1.00 per volume after the sixth day. 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