Accounting record

“ Clearly here the record does not actually disclose the useful life of each of the assets involved which remained at the time petitioners received the assets from est, a.e.c. From the affidavit of the accountant and computations attached thereto we conclude that the computed remaining useful life of each asset is an accounting opinion of the accountant who did the computations and raises a new issue as to whether in fact these computations do properly result in the remaining useful life of each asset. ”

“ Accounts which record income and expenses usually comprise only similar items, as where all sales of merchandise are recorded under one head or account and all purchases under another.
The Account Title.—The title given to an account is important. It should indicate clearly the content of the account. Accuracy is a basic necessity in accounting. ”

“ 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 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. ”

“ 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. ”

“ To determine whether the useful lives as so computed are appropriate to use in computing depreciation for petitioners would require a reopening of the record to permit the accountant to give her opinion testimony and to afford respondent the opportunity to cross-examine with respect to her opinion, and, if appropriate, to offer the opinion of another accounting expert. ”

“ Since the closing of the books contemplates the drawing up of financial statements and since all record-keeping must have in view from the very beginning a proper classification of accounts giving the desired information to be reflected finally in the statements, it seems best at this point to consider some phases of account classification before proceeding with a detailed explanation of the method used in adjusting and closing the books. ”

“ Whenever the analysis of recurring transactions in the general journal is facilitated by the use of separate columns, the advisability of opening a new journal for the record of such items as appear in the general journal most frequently should be considered.
Subdivision of the Ledgers.—The next step in the subdivision of the records is made in the ledgers. The general or impersonal accounts of the business are of a more permanent character than the accounts with persons—customers and creditors. ”

“ Accounts are kept both with persons, as the accounts receivable and payable already mentioned, and with things, such as land, buildings, machinery, merchandise, cash, and the like. Some asset accounts and some accounts kept with persons are usually composed of both similar and dissimilar items. For example, the cash account is composed of both cash received and cash paid out items; the accounts receivable record both the items for which the person is in debt to the business and those which show the cancellation or settlement of the debt, in part or in full ”

“ There should follow a complete record of the deliberations and authorizations of the board of directors as affecting the management and control of the corporation’s policy. The minute book is often the source of authority for many of the most important entries made on the books of account, and great care must be used to make the record full, complete, and accurate. Such matters as leases, purchase and sale of properties, bond issues, dividends, and other similar items should have very careful record. ”

“ Adjusting and Closing the Merchandise Records.—Unlike the method shown in the debit and credit schedule for merchandise in Chapter XIII, [Pg 117] the modern practice is to keep the merchandise record by means of the separate accounts used in the profit and loss statement, viz., Merchandise Inventory, Purchases, Inward Freight and Cartage, Returned Purchases, Purchases Rebates and Allowances, Sales, Returned Sales, and Sales Rebates and Allowances. ”

“ 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. ”

“ In the ultimate analysis the best safeguard is the integrity of the employee; still the employer should not tempt the employee by making the abstraction of his cash an easy performance.
Principle of the Double Record.—A fundamental principle in the handling of cash is to secure a double—not a duplicate—record of its receipt and disbursement. The practice of depositing in a bank all cash receipts and making disbursements only by check should be followed invariably, because it secures this double record—the bank’s record and the cashier’s record. ”

“ A third account, John Doe, Principal, is used for current record. This account is charged with the expenses incurred in connection with the consignment and is credited with the sales made therefrom; it is charged also with the consignee’s commission. The balance of the account is, at the completion of the sale, the amount due the consignor, Doe. When this is paid, the account is closed by a debit to John Doe, Principal, and a credit to Cash or Notes Payable. So long as the balance is unpaid, the account, John Doe, Principal, shows the factor’s liability to his principal. ”

“ The record in each journal shows the individual vendor’s account, but at posting time no vendor account is set up in the ledger, neither the credit to the vendor’s account shown in the purchase journal nor its offsetting debit shown in the cash disbursements journal being posted. ”

“ Because of the fact that the purchase journal is limited to the record of purchases of stock-in-trade, and that information in regard to expenses incurred is not usually brought on the books until payment of them is made, not only do the books fail to give the service which a management has a right to expect of them but they fail to reflect many liabilities at the time they are assumed. ”

“ Temporary proprietorship accounts make temporary and immediate record of the results of the agencies or forces at work within the business to produce a profit. They set forth the efforts to increase the net worth of the business. They record the costs of the effort and its yield in earnings, the record being made under appropriate titles to show the kind of cost and the source of the yield. Vested proprietorship accounts record the ultimate or summarized results of business transactions. They therefore record the original investment and its subsequent net increases and decreases. ”

“ Similarly, the beginner oftentimes confuses the sales income record with the cash record of a cash sale transaction. Also, when cash is disbursed for expense purposes, the decrease in the asset is often confused with the expense record. When an expense is incurred it brings about either a decrease in assets, usually cash if the transaction is settled at once; or an increase in liabilities, usually an accrued expense item if the transaction is not immediately settled. ”

“ 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 and selling of stock-in-trade. A much larger mass of detailed information is needed for the proper conduct of the business. In this chapter it is purposed to study in a broad way the fundamental principles involved in factory accounting and to examine some of its distinctive problems. Factory accounting does not differ in the real fundamentals of account-keeping from any other kind of accounting. ”

“ 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. ”

“ The accounting department, therefore, deals largely with the internal activities of the business, while the statistical department provides knowledge of the external relations of the business. A proper control and management of business affairs cannot be exercised without the information supplied by both departments. In the accomplishment of its function to supply the internal information, the accounting department reaches out into all of the main departments indicated above for data from which to make its record of the various activities of the business unit. ”

“ In this Act, unless inconsistent with the context or subject-matter—
‘‘accounting records’’ [2] include— (a)
invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes, vouchers and other documents of prime entry ”

“ The methods last described for handling proprietors’ withdrawals and cash sales are the ones most frequently used in large businesses where simplicity of routine for current entry must be secured.
The Problem of the Purchase Journal Summary.—The practice of recording extraneous transactions in the purchase journal brings about at summary time a situation similar to that of the sales journal, when a controlling Accounts Payable account is maintained. The purchase journal is, and should be, the place of record for purchases made for the business. ”

“ Where several bank accounts are kept and a check register—in addition to the cash book—is used to keep record of the accounts with the various banks, it may happen that checks drawn on one bank are wrongly charged to another; that checks drawn, or deposits made one day, are not credited until the next; that certain drafts deposited with the bank for collection are not credited to the depositor’s account until collection is made, whereas the depositor debited the bank at the time of the deposit ”

“ The asset Delivery Equipment is increased by the same amount as the asset Cash is diminished. Or if a bill of goods is purchased on credit, an increase of assets is exactly offset by an increase in liabilities. These changes are illustrated in the second example in Chapter I, showing Runyon’s proprietorship.
It is seen, therefore, that the changes in individual assets and liabilities are not so certain an index of changes in proprietorship as those registered by the temporary proprietorship records. The vital history of a business is its profit and loss record, the story of its economic life. ”

“ When a customer returns goods to us, he is credited to decrease the original charge to his account and Sales or Returned Sales is debited to reduce the income originally credited to Sales. It is not necessary to make any other record of the returned goods, because, as was explained in Chapter VI, no day-to-day record is kept to show the decrease of the asset Merchandise through Sales. ”

“ Each day the entries on the sales journal are checked against the cashier’s record of cash received from sales and the bookkeeper’s record of charges posted to customers.
C. O. D. Sales.—For this class of sales the credit is booked in the usual way but the debit is made to a C.O.D. account. The packages are charged on the shipping department’s memorandum records to the various delivery men who are credited with the collections turned in. These collections form the basis for the credit to the C.O.D. account on the ledger. ”

“ Whatever costs are necessarily incurred to make the land serve its intended use are proper capital charges and should be recorded in the land account unless better purposes are served by record in some supplementary account. ”

“ 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. ”