Part 1

Cyclopedia _of_ Commerce, Accountancy, Business Administration

_A General Reference Work on_ ACCOUNTING, AUDITING, BOOKKEEPING, COMMERCIAL LAW, BUSINESS MANAGEMENT, ADMINISTRATIVE AND INDUSTRIAL ORGANIZATION, BANKING, ADVERTISING, SELLING, OFFICE AND FACTORY RECORDS, COST KEEPING, SYSTEMATIZING, ETC.

_Prepared by a Corps of_ AUDITORS, ACCOUNTANTS, ATTORNEYS, AND SPECIALISTS IN BUSINESS METHODS AND MANAGEMENT

_Illustrated with Over Two Thousand Engravings_

TEN VOLUMES

CHICAGO AMERICAN TECHNICAL SOCIETY 1910

COPYRIGHT, 1909 BY AMERICAN SCHOOL OF CORRESPONDENCE

COPYRIGHT, 1909 BY AMERICAN TECHNICAL SOCIETY

Entered at Stationers' Hall, London All Rights Reserved

Authors and Collaborators

JAMES BRAY GRIFFITH, _Managing Editor_ Head, Dept. of Commerce, Accountancy, and Business Administration, American School of Correspondence.

ROBERT H. MONTGOMERY Of the Firm of Lybrand, Ross Bros. & Montgomery, Certified Public Accountants.

Editor of the American Edition of Dicksee's _Auditing_.

Formerly Lecturer on Auditing at the Evening School of Accounts and Finance of the University of Pennsylvania, and the School of Commerce, Accounts, and Finance of the New York University.

ARTHUR LOWES DICKINSON, F. C. A., C. P. A. Of the Firms of Jones, Caesar, Dickinson, Wilmot & Company, Certified Public Accountants, and Price, Waterhouse & Company, Chartered Accountants.

Of the Firm of Lybrand, Ross Bros. & Montgomery, Certified Public Accountants.

F. H. MACPHERSON, C. A., C. P. A. Of the Firm of F. H. Macpherson & Co., Certified Public Accountants.

CHAS. A. SWEETLAND Consulting Public Accountant.

Author of "Loose-Leaf Bookkeeping," and "Anti-Confusion Business Methods."

E. C. LANDIS Of the System Department, Burroughs Adding Machine Company.

_Editor-in-Chief_, Textbook Department, American School of Correspondence.

CECIL B. SMEETON, F. I. A. Public Accountant and Auditor.

President, Incorporated Accountants' Society of Illinois.

Fellow, Institute of Accounts, New York.

JOHN A. CHAMBERLAIN, A. B., LL. B. Of the Cleveland Bar.

Lecturer on Suretyship, Western Reserve Law School.

Author of "Principles of Business Law."

HUGH WRIGHT Auditor, Westlake Construction Company.

GLENN M. HOBBS, Ph. D. Secretary, American School of Correspondence.

JESSIE M. SHEPHERD, A. B. Associate Editor, Textbook Department, American School of Correspondence.

GEORGE C. RUSSELL Systematizer.

Formerly Manager, System Department, Elliott-Fisher Company.

OSCAR E. PERRIGO, M. E. Specialist in Industrial Organization.

Author of "Machine-Shop Economics and Systems," etc.

DARWIN S. HATCH, B. S. Assistant Editor, Textbook Department, American School of Correspondence.

CHAS. E. HATHAWAY Cost Expert.

Chief Accountant, Fore River Shipbuilding Co.

CHAS. WILBUR LEIGH, B. S. Associate Professor of Mathematics, Armour Institute of Technology.

L. W. LEWIS Advertising Manager, The McCaskey Register Co.

MARTIN W. RUSSELL Registrar and Treasurer, American School of Correspondence.

HALBERT P. GILLETTE, C. E. Managing Editor, _Engineering-Contracting_.

Author of "Handbook of Cost Data for Contractors and Engineers."

R. T. MILLER, JR., A. M., LL. B. President, American School of Correspondence.

WILLIAM SCHUTTE Manager of Advertising, National Cash Register Co.

E. ST. ELMO LEWIS Advertising Manager, Burroughs Adding Machine Company.

Author of "The Credit Man and His Work" and "Financial Advertising."

RICHARD T. DANA Consulting Engineer.

Chief Engineer, Construction Service Co.

P. H. BOGARDUS Publicity Manager, American School of Correspondence.

WILLIAM G. NICHOLS General Manufacturing Agent for the China Mfg. Co., The Webster Mfg. Co., and the Pembroke Mills.

Author of "Cost Finding" and "Cotton Mills."

C. H. HUNTER Advertising Manager, Elliott-Fisher Co.

FRANK C. MORSE Filing Expert.

Secretary, Browne-Morse Co.

H. E. K'BERG Expert on Loose-Leaf Systems.

Formerly Manager, Business Systems Department, Burroughs Adding Machine Co.

EDWARD B. WAITE Head, Instruction Department, American School of Correspondence.

Authorities Consulted

The editors have freely consulted the standard technical and business literature of America and Europe in the preparation of these volumes. They desire to express their indebtedness, particularly, to the following eminent authorities, whose well-known treatises should be in the library of everyone interested in modern business methods.

Grateful acknowledgment is made also of the valuable service rendered by the many manufacturers and specialists in office and factory methods, whose coöperation has made it possible to include in these volumes suitable illustrations of the latest equipment for office use; as well as those financial, mercantile, and manufacturing concerns who have supplied illustrations of offices, factories, shops, and buildings, typical of the commercial and industrial life of America.

JOSEPH HARDCASTLE, C. P. A. Formerly Professor of Principles and Practice of Accounts, School of Commerce, Accounts, and Finance, New York University.

Author of "Accounts of Executors and Testamentary Trustees."

HORACE LUCIAN ARNOLD Specialist in Factory Organization and Accounting.

Author of "The Complete Cost Keeper," and "Factory Manager and Accountant."

JOHN F. J. MULHALL, P. A. Specialist in Corporation Accounts.

Author of "Quasi Public Corporation Accounting and Management."

SHERWIN CODY Advertising and Sales Specialist.

Author of "How to Do Business by Letter," and "Art of Writing and Speaking the English Language."

FREDERICK TIPSON, C. P. A. Author of "Theory of Accounts."

CHARLES BUXTON GOING Managing Editor of _The Engineering Magazine_.

Associate in Mechanical Engineering, Columbia University.

Corresponding Member, Canadian Mining Institute.

F. E. WEBNER Public Accountant.

Specialist in Factory Accounting.

Contributor to The Engineering Press.

AMOS K. FISKE Associate Editor of the _New York Journal of Commerce_.

Author of "The Modern Bank."

JOSEPH FRENCH JOHNSON Dean of the New York University School of Commerce, Accounts, and Finance.

Editor, _The Journal of Accountancy_.

Author of "Money, Exchange, and Banking."

M. U. OVERLAND Of the New York Bar.

Author of "Classified Corporation Laws of All the States."

THOMAS CONYNGTON Of the New York Bar.

Author of "Corporate Management," "Corporate Organization," "The Modern Corporation," and "Partnership Relations."

THEOPHILUS PARSONS, LL. D. Author of "The Laws of Business."

E. ST. ELMO LEWIS Advertising Manager, Burroughs Adding Machine Company.

Formerly Manager of Publicity, National Cash Register Co.

Author of "The Credit Man and His Work," and "Financial Advertising."

T. E. YOUNG, B. A., F. R. A. S. Ex-President of the Institute of Actuaries.

Member of the Actuary Society of America.

Author of "Insurance."

LAWRENCE R. DICKSEE, F. C. A. Professor of Accounting at the University of Birmingham.

Author of "Advanced Accounting," "Auditing," "Bookkeeping for Company Secretary," etc.

FRANCIS W. PIXLEY Author of "Auditors, Their Duties and Responsibilities," and "Accountancy."

CHARLES U. CARPENTER General Manager, The Herring-Hall-Marvin Safe Co.

Formerly General Manager, National Cash Register Co.

Author of "Profit Making Management."

C. E. KNOEPPEL Specialist in Cost Analysis and Factory Betterment.

Author of "Systematic Foundry Operation and Foundry Costing," "Maximum Production through Organization and Supervision," and other papers.

HARRINGTON EMERSON, M. A. Consulting Engineer.

Director of Organization and Betterment Work on the Santa Fe System.

Originator of the Emerson Efficiency System.

Author of "Efficiency as a Basis for Operation and Wages."

ELMER H. BEACH Specialist in Accounting Methods.

Editor, _Beach's Magazine of Business_.

Founder of The Bookkeeper.

Editor of _The American Business and Accounting Encyclopedia_.

J. J. RAHILL, C. P. A. Member, California Society of Public Accountants.

Author of "Corporation Accounting and Corporation Law."

FRANK BROOKER, C. P. A. Ex-New York State Examiner of Certified Public Accountants.

Ex-President, American Association of Public Accountants.

Author of "American Accountants' Manual."

CLINTON E. WOODS, M. E. Specialist in Industrial Organization.

Formerly Comptroller, Sears, Roebuck & Co.

Author of "Organizing a Factory," and "Woods' Reports."

CHARLES E. SPRAGUE, C. P. A. President of the Union Dime Savings Bank, New York.

Author of "The Accountancy of Investment," "Extended Bond Tables," and "Problems and Studies in the Accountancy of Investment."

CHARLES WALDO HASKINS, C. P. A., L. H. M. Author of "Business Education and Accountancy."

JOHN J. CRAWFORD Author of "Bank Directors, Their Powers, Duties, and Liabilities."

DR. F. A. CLEVELAND Of the Wharton School of Finance, University of Pennsylvania.

Author of "Funds and Their Uses."

Foreword

With the unprecedented increase in our commercial activities has come a demand for better business methods. Methods which were adequate for the business of a less active commercial era, have given way to systems and labor-saving ideas in keeping with the financial and industrial progress of the world.

¶ Out of this progress has risen a new literature—the literature of business. But with the rapid advancement in the science of business, its literature can scarcely be said to have kept pace, at least, not to the same extent as in other sciences and professions. Much excellent material dealing with special phases of business activity has been prepared, but this is so scattered that the student desiring to acquire a comprehensive business library has found himself confronted by serious difficulties. He has been obliged, to a great extent, to make his selections blindly, resulting in many duplications of material without securing needed information on important phases of the subject.

¶ In the belief that a demand exists for a library which shall embrace the best practice in all branches of business—from buying to selling, from simple bookkeeping to the administration of the financial affairs of a great corporation—these volumes have been prepared. Prepared primarily for use as instruction books for the American School of Correspondence, the material from which the Cyclopedia has been compiled embraces the latest ideas with explanations of the most approved methods of modern business.

¶ Editors and writers have been selected because of their familiarity with, and experience in handling various subjects pertaining to Commerce, Accountancy, and Business Administration. Writers with practical business experience have received preference over those with theoretical training; practicability has been considered of greater importance than literary excellence.

¶ In addition to covering the entire general field of business, this Cyclopedia contains much specialized information not heretofore published in any form. This specialization is particularly apparent in those sections which treat of accounting and methods of management for Department Stores, Contractors, Publishers and Printers, Insurance, and Real Estate. The value of this information will be recognized by every student of business.

¶ The principal value which is claimed for this Cyclopedia is as a reference work, but, comprising as it does the material used by the School in its correspondence courses, it is offered with the confident expectation that it will prove of great value to the trained man who desires to become conversant with phases of business practice with which he is unfamiliar, and to those holding advanced clerical and managerial positions.

¶ In conclusion, grateful acknowledgment is made to authors and collaborators, to whose hearty coöperation the excellence of this work is due.

Table of Contents

VOLUME V

WHOLESALE, COMMISSION, AND STORAGE _By James B. Griffith_[1] Page [2]11 ACCOUNTS

Wholesale Business—Controlling Accounts—Sample Transactions— Order and Sales Record—Abstract of Sales—Sales Expense—Trial Balance Book—Commission and Brokerage Business—Merchandise Broker—Manufacturer's Agent—Shipments—Agents' or Factors' Account—Principal's Account—Commission Account—Produce Shipper's Books—Commission Merchants' Books—Consignment Ledger Account—Storage Accounts—Special Records

SINGLE ENTRY BOOKKEEPING _By James B. Griffith_ Page 91

Distinctive Features—Books Used—Debit and Credit—Posting— Proprietor's Account—Proving Work—Model Set—Determining Profit—Closing Books—Changing to Double Entry—Trial Balances and Comparative Statements—Comparative Statements—Proof without Trial Balance—Book Inventories—Demonstration of Proof—Reverse or Slip Posting—Special Accounting Forms—Cash Books—Cash Journals—Tabular Sales Books—Pay-Roll Records

TRUSTEES' AND EXECUTORS' ACCOUNTS _By James B. Griffith_ Page 163

Executors' Accounting—Inventory—Intermediate Account—Final Account—Schedules—Form of Account—Sample Accounts—Accounts with Trust Provisions—Exercise—Realization and Liquidation Account—Statement of Affairs—Resources and Liabilities— Balance Sheet—Affairs of a Bankrupt—Appraiser—Statement of Affairs—Deficiency of Account

STOCK BROKERS' ACCOUNTS _By Chas. A. Sweetland_ Page 195

Grain Purchases—Bulls and Bears—Broker's Commission— Securities—Transfers—Clearing House—Ring Settlement— Commodities Handled—Cornering Market—Value of Wire— Settlement of Contracts by Offset—Adjustment of Balances or Settlement—Commission Allowed Brokers—Books and Forms Used— Glossary of Board of Trade Terms

BILLING AND ORDER RECORDING _By Geo. C. Russell_ Page 235

European Methods—Machines for Manifolding—Development of Billing Machines—Loose-Leaf Sales Sheets and Invoices— Duplicate Invoices—Condensed Billing—Traffic Department Records—Analysis of Quantities and Amounts—Unit Billing—Back Orders—Split Orders—Loose-Leaf Sheets—Binders—Designing Stationery—Styles of Type—Carbon Papers—Blinds—How to Handle Orders on Billing Machine—Invoices in Blanket Form— Tabulators—Computing Machines in Billing—The Colored Sheet System—Compound Forms—Retail Dry Goods Billing—Devices of the Future

REVIEW QUESTIONS Page 303

INDEX Page 319

Footnote 1:

For professional standing of authors, see list of Authors and Collaborators at front of volume.

Footnote 2:

For page numbers, see foot of pages.

WHOLESALE, COMMISSION, AND STORAGE ACCOUNTS

WHOLESALE BUSINESS

In this section complete methods of bookkeeping as practiced in wholesale houses are demonstrated. Numerous modern methods that are readily adaptable to other lines of business are illustrated and explained in detail.

DIVIDING THE LEDGER

=1.= There are many advantages in dividing the ledger into sections. The subdivisions most commonly used are purchase ledger, sales ledger, and general ledger. Such divisions greatly facilitate posting and reduce the chances of error. While it is advisable in most cases to use a separate book for each division, the three ledgers may be combined in one book by setting aside a section for each. This practice is not recommended except where the number of accounts is small, when general and purchase ledgers or purchase and sales ledgers may be combined. The division of the ledger into three sections does not necessitate radical changes, either in form or method of handling, in the other books.

=2. Purchase Ledger.= The purchase ledger contains only accounts with those from whom we are making purchases. The balances of the accounts in this ledger will be on the credit side and represent a liability. The total balance of the purchase ledger is the amount we owe on open accounts. If, for example, our purchases on account during a stated period amount to $964.50, and the amount paid on account by us is $320.30, we still owe $644.20. If the work is correct the combined balances of all open accounts in the purchase ledger will exactly equal this amount.

=3. Sales Ledger.= The sales ledger contains only accounts with customers to whom goods are sold on account. The balances of the accounts in the sales ledger will be on the debit side and represent an asset. The total balance of the sales ledger is the amount that our customers owe us on open accounts. Suppose that a business is started with no open accounts receivable—during a stated period the sales on account amount to $1,427.75, and the total payments received on account are $965.50—the amount still outstanding is $462.25, and this amount should exactly equal the combined balances of all the open accounts in the sales ledger.

The sales ledger is sometimes subdivided into two or more parts. The divisions may be City and Country or they may be according to the letters of the alphabet—as A-K, L-Z, etc.

=4. Accounts in Both Ledgers.= Occasionally one from whom we are purchasing goods will also be a customer. For reasons which will appear later, accounts should, in these cases, be opened in both the purchase ledger and the sales ledger. When settlement of such an account is made, the necessary adjusting entries are made through the journal.

=5. General Ledger.= The general ledger contains the investment accounts of the proprietor or partners, and all real, representative, and nominal accounts. Accounts with the purchase and sales ledgers are also kept in this ledger. These are _controlling accounts_ which represent at all times the total balances of the purchase and sales ledgers.

When statements of the other ledgers have been made and proved correct, a trial balance of the general ledger is made.

CONTROLLING ACCOUNTS

=6.= A controlling account is one which exhibits a summary of all of the accounts in a ledger, or of all accounts of the same class.