Accounting machine

“ Where the number of machines is large, proper accounting requires a subsidiary record known as a machinery ledger or register controlled by the machinery account on the general ledger. In this subsidiary record accounts should be kept with each class of machines, and with each machine separately if the record as to the performance of any specific machine furnishes essential information. ”

“ The most modern methods of accounting are in use, mechanical labor-aiding equipment being utilized wherever it is practicable. The method followed is to perforate a card by means of a small electric machine, so that the perforations show the various data upon the paid money-order that are required to record the payment, the amount, etc. These machines are operated by skilled women employees, trained in methods of accuracy and speed, and whose rating and advancement depend on their efficiency. ”

“ The key-driven machine, which was the first produced of these two types of modern machines, does not print, and is used for all forms of calculation, but is generally behind the scenes in the accounting rooms of all lines of business, and for that reason is not so well known as the key-set crank-operated or motor-driven machine, which is designed to print and is always in full view in the bank where it is used to print your statement of account from the vouchers you have issued. ”

“ Opposition to the use of machines for accounting
In the early days, when the key-driven calculator was marketed, and later when the recording-adder was also placed on the market, the efforts of the salesmen for each of these types of machines, in their endeavor to interest possible purchasers, were met with anything but enthusiasm. Of course, now and then a wide-awake businessman was willing to be shown and would purchase, but ninety-nine out of the hundred who really had use for a machine of either type could not at that early date be awakened to the fact. ”

“ Where a machine or other asset is limited in its use to a few operations equally wearing in their effect, this method should give satisfactory results. Where, however, one asset can be used for many different processes, involving inequalities in wear and tear, if the service rendered is the controlling factor, an inequitable distribution will result. Similarly, beyond-capacity operation, i.e., operation beyond the normal speed at which depreciation cost has been predetermined, will not be taken care of automatically by this method. ”

“ To an individual machine performing several different processes the method would scarcely be applicable. To a group or battery of machines, turning out a uniform product in finished form or in the same degree of partly finished condition, the method could be well applied. The estimated total output of the group would then be taken as the basis for calculating the service output of each machine in the group. When calculating service life in whatever units, that speed of operation which secures the highest efficiency is taken as the figure of normal operation. ”

“ To make the periodic revision of the estimate of depreciation accord with the fact or rather with the best possible estimate of the fact, any abnormal operation of the machine should be considered. Thus, if the machine has been worked overtime, say on a three-shift day instead of one-shift, or if it has been crowded beyond its capacity, if repairs have not been made when they were needed, if the wage policy has been [Pg 286] changed from a per diem or per hour basis to a piece-work basis—all these points must be considered.
Machines which are seldom used require careful consideration. ”

“ On the question of the value of machine rates there is probably more argument by mechanical engineers and accountants than on any question in factory accounting; in fact, engineers themselves are very far apart in their opinions and do not seem to agree among themselves. ”

“ A computerwise accountant, for instance, can tell you if a general ledger package has a good audit trail—a way to keep track of what was done on the computer system to make the records 322come out the way they did. A computer-literate lawyer or accountant can also make certain that the software is reasonably crook-proof.
Follow the same rule as with hardware. Find someone already using the program you want to buy. Is he happy with it?
The nearer his work is to yours, the better. The best authority on accounting software, for instance, isn’t a computer guru: it’s an accountant. ”

“ Effort has been made to keep to a minimum the purely mechanical work of computation. While emphasis should be placed always on the principles involved, the need for accuracy should not be lost sight of; in its practice in business, accountancy requires accurate and, where possible, proven results.
Of the budget of stationery provided for this work, the loose-leaf supplies—statement, journal, and ledger paper—are for the first half-year’s work. The three-column paper is to be used for balance sheet and profit and loss statements, unless other directions are given for particular assignments. ”

“ It is stated by competent witnesses that a cash book, a journal, and a ledger are indispensable books of account for an efficient system of accounting, and that, in the smaller shops, even simpler entries showing merely the daily records of sales and record of purchases of merchandise would be sufficient. ”

“ As the size of the individual business has increased and the territory covered by its operations has widened and the period of time involved in its calculations has lengthened, the need of carefully kept records has become apparent. The growth of the corporate form of business organization, furthermore, has made it necessary to protect the interest of shareholders by complex systems of accounting, involving sufficient checks and balances and frequent audits. ”

“ For purposes of management, which must control all the phases of business activity, a balance sheet is insufficient. A review of the factors producing results up to a given time must be had. Accordingly, the accounting department must supply not only information as to the present state of the assets and liabilities, but also information which indicates how the changes in assets and liabilities since the last fiscal period were brought about—what volume of transactions occurred, what expenditures of assets and energy were necessary to accomplish the results attained. ”

“ It should always be borne in mind that any satisfactory method of account-keeping must be adapted to individual conditions. If efficient results are expected, a business man should beware of ready-to-wear accounting systems. There are conditions in which the voucher system gives excellent results. ”

“ The character of the records compiled from this data determines the real value of the entire system of cost accounting. If, as is so often the case, the compiling extends no farther than a mere tabulation of costs of individual jobs, it does not reach its full value as a part of the accounting records. Like single-entry bookkeeping, such records are no more than mere memoranda. The full value is reached only when the records of the cost department are made a part of the general accounting system of the business; where controlling accounts absorb all individual items of cost. ”

“ In determining the amount of earnings or profits (whether of the taxable year, or accumulated prior to March 1, 1913) due consideration must be given to the facts, and, while mere bookkeeping entries increasing or decreasing surplus will not be conclusive, the amount of the earnings or profits in any case will be dependent upon the method of accounting properly employed in computing net income. ”

“ For such purposes the statistical totals of the sales and purchase records, and of the cash book, where analytical columns are used, furnish the only information available under single entry. Its only advantage, then, is brevity, the saving of labor in making the record. No difficult analysis is met with in the original record and posting is a less heavy task than in double entry. But brevity and labor-saving are secured at the expense of the very information which the business man needs. ”

“ The establishment of standard or efficiency labor costs means predetermined costs. This is a radical departure from established custom; on its face, contrary to recognized accounting practice; in results, wonderfully efficient. To determine standards in men, material, and machines is a function of the engineer; the recording of facts—the actual cost—is the function of the comptroller or accountant. ”

“ Sometimes subsidiary expense ledgers are used to carry a minute division of each expense group, with corresponding controlling accounts, such as Selling Expense, Office Expense, General Expense, Factory Expense. Similarly, if the consignment sales of a business are large enough to justify a separate record in a consignments ledger, a controlling account is set up in the general ledger. In a manufacturing business, Raw Materials, Goods in Process, and Finished Goods accounts are often controlling accounts for the stores, jobs, and finished stock ledgers. ”

“ With such information to point the way to economies in the future, instead of records that show us merely the amount of an expense already incurred, accounting takes its rightful place as one of the most important functions of a business enterprise. ”

“ In ringing up each sale, the clerk sets the indicator at “cash”, “coupons” or “charge”, as the case may be, before turning the handle; the total sales of any kind can be read at any time by anyone possessing the key which unlocks the reading window. Thus, the Steward, at the close of business on any day, can ascertain these totals in a few seconds, instead of having to transfer them from the cash register record tape to the adding machine. Thus, considerable time and labor are saved. ”

“ Again, the duties or a greater part of them, may fall on the office manager or the chief accountant. Even in a small partnership where one of the partners is the bookkeeper, the duties exist, and are performed by that partner who keeps the accounts. It must be remembered that the comptroller's office is primarily statistical. It matters not whether the statistical operations involve the keeping of a simple set of books or require large commercial and factory accounting forces with a third division to compile statistics from their records, every business demands certain statistical work. ”

“ Don’t computerize a multi-million-dollar business without a consultant—at least not if you’re running an extra-hairy program like an accounting one—unless you’re willing to talk and think computerese or at least take a training course. Accounting software, anyway, just isn’t simple and reliable enough yet. Any idiot can flick on a computer and stuff a floppy disk into a drive or crank up a hard disk ”

“ If the enterprise is more complicated, it may be required to set up a number of separate accounts, or even a separate set of records, but the summary or clearing account for these will still exhibit costs set over against returns. If the partners are all in the same city and have access to the records, one set of accounts is all that is necessary. Where the partners are in different places, each should keep a record of all transactions as reported by the manager of the venture. ”

“ THE PHILOSOPHY OF DEBIT AND CREDIT
Double-Entry Bookkeeping.—Several systems or methods of keeping business records have at various times been in use. The method which at the present time is used by all businesses, excepting those of the simplest sort, is called “double-entry bookkeeping” and is the method which is being set forth here. It is based on the proprietorship equation expressed in the form: Assets = Liabilities + Proprietorship. It is possible to make a balance sheet if only asset and liability records are kept, because proprietorship is always the difference between them. ”

“ There is no Profit and Loss account because it is impossible to determine on the branch books the correct profit and loss for the period. All expense and income accounts are closed directly into Head Office General. The entries necessary to book properly the activities as set forth in the illustrative problem are as follows:
In closing the branch books the inventory is brought into the Purchases from Head Office account which by its balance shows at billed price the goods disposed of by sale. ”

“ For the report form, it may be said that this method follows the reasoning of the average business man, particularly the man unacquainted with accounts, who subtracts his liabilities from his assets to find how much his present net worth is. The account form rests on the fundamental desire, deep-rooted in the system of double-entry bookkeeping, to show the two sides in balance. ”

“ It’s the fondness of many data-processing managers for what one consultant calls a “Cecil B. De Mille production” with “a cast of thousands, millions of dollars and years in the making.” [32]
The poor, ignorant people outside Data Processing, meanwhile, can’t enjoy all the micros or advice they need. “Last year,” went a plaintive letter to a computer columnist, “we purchased a microcomputer and VisiCorp’s VisiCalc software for the company accounting office. ”

“ In all problems calling for financial statements, the trial balance should first be tested as to the equality of debits and credits. As stated above, the method of the work sheet is usually the best method for summarizing results, although sometimes skeleton ledger accounts will be found helpful in order to visualize the effect of entries and to trace their course through the accounts. Only painstaking work and the solution of many problems will produce facility and confidence in work of this kind. ”

“ Nearly every business with a well-developed accounting system can, at any time, without the formal periodic inventory or closing of its books usual at the end of a fiscal year, determine approximately the amount of its current earnings, the amount accrued since the beginning of its fiscal year, and the part thereof undistributed. ”