Accounting theory and practice, Volume 2 (of 3)

A knowledge of the subject matter of Volume I is a prerequisite to the profitable study of the present work. Therefore, it may be well to review briefly the contents of the latt...

In Volume I, Chapters XLVIII and XLIX, the fundamental characteristics of the corporation were explained and discussed briefly and some of its peculiar accounting features were...

Accounting for the business which manufactures its own product is a much larger problem than that for the concern which limits its activity to purchase and sale of a stock-in-tr...

management item, though it is sometimes looked upon as a purchase department item. The handling of the voucher register so as to record properly the purchase discount will depen...

As was stated in Chapter II, the accounting records of a concern making its own product are much more complex than those of a concern which limits its activities to the buying a...

The balance sheet is occupying an increasingly large place in all affairs of business and even of state, because the state is taking cognizance of business as never before. All...

are made contains the data for both the financial statement and the operating statement. After the operating data, i.e., the income and expenses, have been summarized through th...

The problems of content and valuation strike at the very heart of the balance sheet. Form, framework, and method of presentation are important and their usefulness should not be...

Depreciation is intimately related to practically all problems of valuation. The engineering profession has made many valuable investigations and contributions to the literature...

Having cleared the ground with this definition of terms and the general statement of what the depreciation problem is, attention will now be directed to a consideration of the c...

Most definitions of the term depreciation set the boundaries or limits of its meaning by naming the causes. These are normally: (1) wear and tear, or physical factors; (2) inade...

1. The purpose of the depreciation charge. 2. Rates of depreciation and their relation to repairs, renewals, and replacements. 3. Methods of reckoning depreciation and their eff...

The determination of the rate of depreciation of a given asset is essentially an engineering problem. But as the accounting for depreciation is dependent on the rate, and the re...

Another method, used in plants where a very accurate determination of the costs of production is desired, has as an outstanding feature a preliminary estimate, made at the time...

Many methods of reckoning depreciation have been devised; some good, some bad, and some too theoretical and involved ever to serve the practical needs of business. It is propose...

No method of estimating depreciation will ever be devised which will be applicable under all conditions and to all kinds of property. Such a panacea for the ills of wasting asse...

This method of carrying the depreciation charge is analogous to the policy practiced by some concerns of taking care of their fire losses by carrying their own insurance. If phy...

Two methods of booking depreciation in the ledger are commonly employed. The periodic adjusting entry on account of depreciation has as its basic purpose the separation of the m...

In Chapter V an effort was made to establish the general principles of valuation as applicable to the main classes of assets found on the average balance sheet. In doing so, the...

to lapse, it is generally advisable to insist on the giving of new notes in place of the old. There may be circumstances in which this is not advisable, but the proper method wi...

Stock-in-trade, as the term is usually understood, comprises all commodities purchased for resale. Thus, assets, which in one concern belong to the fixed asset group, may be the...

It should be said that, due to the particular method of handling purchasing, delivery, and storage, it frequently is not practicable to take cognizance of all items which theore...

The next item to be considered for valuation in the current assets section of the balance sheet is temporary investments. These are assets, such as stocks and bonds of ready mar...

As distinguished from the type of investment discussed in the preceding chapter, investments of a more or less permanent character will next claim our attention. These may be pe...

The valuation of assets grouped under the head of equipment presents nothing new in principle but requires consideration of many points in the application of principles and of s...

all others, giving satisfactory results and being easy of application. The fixed rate of diminishing value method also has many adherents, and depreciation based on the number o...

The movable fixed assets—paradoxical as the limiting adjectives may seem—having now been considered, the present chapter will treat of the immovable tangible fixed assets. By im...

be realized so long as the land is employed in operation. Its cost represents the capital tied up in it and the amount on which profits must be earned. This is therefore the val...

The final place among the assets of the balance sheet is given to the intangible items. Because this class of assets has so frequently been used for doubtful or illegitimate pur...

The problem of handling liabilities on the balance sheet is usually not so complicated as that of assets. The questions of arrangement, form, groups, and suitable nomenclature h...

_Deferred Expenses._ These expenses have been explained in detail in Chapter XIV. Here it is to be noted that, while this group of adjustment items is always an asset, for the p...

Fixed liabilities, called also capital, bonded, long-term, and funded liabilities or debts, comprise all debts of which the date of maturity is some distance ahead and considera...

The problems in connection with the valuation of the assets and the liabilities and the manner of showing them on the balance sheet—and in some cases the manner of booking them—...

What constitutes a profit is oftentimes a perplexing question and at all times its determination is more an estimate than an absolute fact. This arises from the nature of accoun...

Under the corporate form of organization, “surplus” in its broadest sense represents the difference between the net worth of the business and the capital stock issued and outsta...

account rather than by way of the current Profit and Loss. Donations from the outside, such as factory sites and other bonuses, sometimes given to induce enterprises to locate i...

In connection with covered reserves, attention is called again to the use, in the interest of standard practice, of the caption “reserve fund” as a suitable title for the assets...

Dividends, as the term is generally used, may be defined as those profits of a corporation which are divided among the owners. Except in the case of wasting assets, the law is v...

The sinking fund is a recognized and well-established instrument for the financing of business. A great deal has been written about the subject, and over some of its phases much...

Because of the supplemental character of the profit and loss summary to the balance sheet, no study of the latter is complete or adequate, whether viewed from the standpoint of...

As stated in Chapter XXVI, the profit and loss summary is supplementary to the balance sheet and should always accompany it whenever it is desirable to make a full and comprehen...

surplus as a dumping ground for items which it is desired to conceal was mentioned. To prevent this misuse of surplus the final section of the profit and loss statement is often...

There are a number of ways in which a corporation may cease to exist and a liquidation take place. The charter, if created for a fixed number of years, may expire. The state may...

The primary purpose of the formation of a combination or a consolidation of two or more corporations, or of the taking over of a partnership business by a corporation, is to sec...

The branch and agency forms of increasing sales in large enterprises are an outgrowth of the policy of “service” combined with economy of management which dominates all present-...

The foreign trading of American firms has grown of late years to such proportions that a practical acquaintance with the exchange values of foreign currencies is necessary for t...

Any account which is used as a place of temporary record for items pending a determination of their final status or allocation may be called a suspense account. The definition p...

Because of the complexity of modern business it is practically impossible for the management or an executive of a large organization to rely on personal observations and impress...

The consolidated balance sheet is a form of statement distinctively American. As indicated in previous chapters, its use has arisen as a result of the corporation laws of some o...

A condition of bankruptcy does not necessarily exist in order to secure the appointment of an officer of the court or a representative of a business for the purpose of taking po...

The receiver in bankruptcy takes possession of all the property of the bankrupt with the expectation of its ultimate disposal and the application of the amounts realized therefr...

3. Draw up a form of voucher register for a manufacturing concern desiring to segregate manufacturing, trading, and general expenses under which there are twelve, ten, and fifte...

XIII. Take cognizance of the accrued commission. For (e) see Chapter XVIII, and for (f) see Chapter XXI. For the surplus statement to show all adjustments made through it, see C...

As to the method of attacking problems, the student is perhaps already aware that before attempting solution it is best to read and study the problem carefully to determine exac...

Averaging the bonds sold at par with those sold on a 7% basis places the whole issue approximately on a 6.787% basis. Use that as the effective rate for the amortization schedule.