Business Accounting Volume II Constructive Accounting

526 Pages·2017·7.35 MB·English

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V U M E I I
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CO S T UC T IV E A C C O U T I G
A M nu l o f S y s t m Bui ld in
a a e g
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G EO RG E E BEN N ET T A B L L
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C r tifi Acc ou t t Pr f sso r
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h D A S U i
t e e a en coount g a e n vers ny
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E D I T OR I AL P RE F A CE
2
V
T y ar s lm o s t any c ontributi on t o h li t r
t
en e a g o a e e
at ur o f ccount ncy w oul d h v b n w l c om d
e a a a e ee e e
.
T od y h ow v r wi t h h in cr s in g numb r o f x c l
t
a e e e ea e e e
, ,
l nt p ubli cat ions i i s in cum b nt up on wh o p ut s
t
e e one
,
fo rt h a ac countin g w ork t o j u s ti fy hi s action
n w
e
.
Much m or i s i t n c s s ary t o x p l i n h p ubl ic tion
t
e e e e a e a
o f a o f c ou ting b o ok s H nc i t i s d s ir b l t o
t
se ac n e e e a e
.
s t at h out s t h p u rp os o f “ B s in s s Acco unt
t t t
e a e e e e u e
”
ing d t o outlin it s s c op and g n r l m th od s o f
an e e e e a e
p r s ta ti on
e en
.
Wh il m ny b ook s h v b n p ubli sh d on a c count
e a a e ee e
i t op ic s in lmo s t v ry c s th y un r l t d vol
ng a e e a e e are e a e
,
um I n s om f i n s tan c s vol m on ccou ting
es e ew e a u e a n
. ,
h as l o gi c lly fo ll ow d noth r b y h s m u th or but
t
a e a e e a e a
,
wi th th es f x c p ti on v ry p ub lish d h b n
w n
e e e e s e e o e e as ee
wri tt n with out c onn ctio n w ith or dj u stm t t o
e e a en any
, ,
o f th o s l r dy x i s ting Un d r th s c ond iti on s h
t
e a ea e e e e e
. ,
stu d nt o f c c ou ntin g t o co n ct d d l o gic l
t
e a g e any n e e an a
,
kn owl dg o f hi s s ub j ct mu s t fi n d o f hi s b ook s
e e e one
,
h r an oth r th r t hir d s om wh r l s d b ri dg
e e e e e a e e e e e an e
, , ,
m
ov r h g p s b tw n th m b s t h T h p ro c
t
e e a e ee e as e e ay e
.
i s diffi cult an d h acc ou nting kn owl dg h ob t in s
t
ess e e e e a
,
i s n ot lw y s w ll or din t d d l o gi c l ly d v l op d
a a e co- a e an a e e e
.
”
T h vol um s o f “ B u s in s s Ac counting int n d d
e e e are e e
t o m t thi s s itu ti on T h y c n ot it i s tru p r ovi d
ee a e an e e
. , ,
.
cou s o f st udy i n h s ns th t p r s cr ib d r di ng s
t
a r e e e e a e e ea
r c omm nd d writt n an sw r s t o qu s tion s r qui r d
are e e e e e e e e
, ,
N
an d p rs onal in s tr cti on giv n ith r d o th y c on
e u e e e e
.
111
iv ED ITORIAL PREFACE
nc cl op a di a o f u nc onn ct d d i s ol t d
i
t t t
s u e an e y e e e an a e
rtic l s R th r th y a n t t mp t t o p r s nt i n
a e a e a re e a e e e
.
simp l non t chnic l l ngu g h b si c p rin c ip l s o f
t
e - e a a a e e a e
,
ac co un t k p i g d th i r p p li ca ti on t o v ri ou s lin s
- ee n an e a a e
o f bu s in s s t og th r w ith g n r l d ir cti on s for p r p r
e e e e e a e e a
,
ing n lyz in g an d i nt rp r ting cc ount ing s t t m nt s
a a e e a a e e
.
, ,
O wh o s t rt s at h b ginni ng o f Vo lum I and
t
ne a e e e
w ork s f ith fu ll y thr ough t o h d o f Vol um I V and
t
a e en e
,
th n s olv s h p robl m s d x min s h s ol uti on s o f
t t
e e e e an e a e e
Volu m V sh oul d a cqu ir s om r l u nd r s t ndin g o f
e e e ea e a
,
—
h th o ry d p r c tic o f cc ou nt s knowl dg th at
t
e e an a e a a e e
,
s up p l m nt d b y x p ri nc s houl d n b l h i m s u cc s s
e e e e e e e e a e e
,
full y t o s t nd h t s t o f p r ac tic l w ork in o rdi n ry
t
a e e a any a
b u s in s s offi c an d fu rni s h a foun d t ion fo r g oi ng as
e e a
mu ch furth r int o h s tu dy o f ac c ou t ncy h may
t
e e n a a s e
d s ir
e e
.
m
I t b not d in p s s in g th t h v olum s o f
t
ay e e a a e e
”
B u s in s s Ac c ou nting h av b n i nd x d i n su ch
e e ee e e a
t o p r ovi d m ny o f h f t ur s o f an l
t
w ay a s e a e ea e encyc o
di s o th t h p rs on d s iring h p ractic on a
t t
pae a a e e e e e
,
p rticu l r p oi nt or ccou ting i d s o f s ug g s tiv valu
a a a n ea e e e
in p rti cul r l in s o f i ndu s try will b b l t o h
t t
a a e e a e use e se
t o ad v nt a g
a e
.
—
T king u p h volu m s o f h i n o rd r Volum
t t t
a e e e se e e
I pr s nt s h fund m nt l p r incip l s o f a c c o unt k p
t
e e e a e a e - ee
ing an d s tat m nt p r p ar ti on Up on th s b s i c p rin
e e e a e e a
.
i l al l s ys t m s o f a c c ount b u ilt Volum I I
c p es e are e ex
.
pl ains h p ri ncip l s g ov rnin g h d v l op m nt f h
t t t
e e e e e e e o e
s imp l a c co untin g p roc dur s d s crib d i V olum I
n
e e e e e e
t o m t h n d s o f mo r c omp li c t d an d m o t
t
ee e ee e a e re ex en
s iv s ys t m s o f fi n an ci l ac c oun tin g Volum I I I
e e a e ex
.
pl in s i mu ch h sa m h ow h b s ic p rincipl
t t
a n e e w ay e a es
,
EDITORIAL PREFA C E
h v b n ap pli d t o f cto ry or c o s t ac c ou nti ng H av
a e ee e a
.
i ng thu s tr c d h fu nd m nt l p rincip l s int o m or
t
a e e a e a e e
l b o r t fin nc i l d c o s t c co unt in g p r c dur s Vo l
e a a e a a an a o e e
,
m
I V tr t s c c ounting p rinc ip l s an d p r ctic s
u
e ea a e a e
which m or dv an c d th n h b a s ic on s d s crib d
t
are e a e a e e e e
i Volum I T h s dv nc d p rinci pl in mo st
n s
e e e a a e e are
.
c s s s ub j c t t o di ff r nc s o f op i ni on a s t o th i r n tu r
a e e e e e e a e
,
o r ap pli c at io n m ong p r s on s qu li fi d t o d l wi th
a e a e ea
,
th m d i t i s for this r s on th t th ir di s cu s s ion i s
e an ea a e
,
m
c onfi d t o Volu I V S u p pl m ting h illu s tr
t
n e e e en e a
.
t ion s o f ac c ou nting p rin cip l s d s t t m nt p r p r
n
e a a e e e a a
ti on th r foll ows i Volum I V p racti c l di s cu s s i on
n
e e e a a
,
o f h m th od s o f v ri fyi n g ac c ount s d s t t m nt s an d
t
e e e an a e e
o f th i r int rp r t ti on an d n lys i s
e e e a a a
.
T h c lo s s wi th Volum V which iv s a num
t
e se e e g e
,
b o f p rob l m s o f a p r cti c l n tur t og th r wi h
t
er e a a a e e e
,
th ir s olu ti on s T h worki g o f th s p rob l m s will
n
e e e e e
.
’
no t o l y cl a ri fy h r d r s i d s b ut i n m any ca s s
t
n
e ea e ea e
wi ll p ro vi d m o d l s u p on whic h h c a n b as ac c o unt in g
e e e e
p roc d r s and b u il d s t at m nt s t o m t c oncr t i tu
e u e e e ee e e s a
ti on s ri s in g i hi s own work
a n
.
Th ad r s t o whom thi s w ill ap p al mo s t
t
e re e se e
tr ongly m ay b divi d d rou ghl y int o tw o cl s s s T h r
s e e a e e e
.
m
ill b on h h nd b u s in s s d p r o f s s i on l
t
w e e one a e an e a en
, , ,
b ank rs offic man g r s an d oth r x cutiv s wh o f l
e e a e e e e e ee
, ,
h n d o f u n d rs t n di n g i n a g n ra l h m th od s
t t
w a
e ee e a e e y e e
o f m od rn a c o unt k p in g and st t m n t p r p arati on
e c - ee a e e e
.
T h r h ar dly b x cu s n owadays for th m t o c on
e e ca n e e e e
s i d r b o okk p ing m th od s an d ac cou nt in g s t at m nt s
e ee e e e
m
as t oo c omp li c at d t o und rst an d o r o f s u ch s ligh t i
e e
p o rtanc a s t o m ri t n o at t nti on T h y n d a gr as p
e e e e ee
.
m
f h s ub j ct s o th t th y j u d g fo r th m s lv
t
o e e a e ay e e e es
i EDITORIA L PREFA C E
v
wh th r b ookk p r s d oth r p rs on s wh o k p
n
e e ee e a e e ee ao
c ount s fo r th m d r n d r s t t m nt s t o th m
e an e e a e e e are
gi vin g in form ti on which i s a c cu rat d qu at an d
a e a e e
, ,
p r s nt d in h m o s t i nt lli gib l form T h nti r
t
e e e e e e e e e
.
t nd ncy o f m o d rn b u s in s s an d c i vi c l i f i s t ow rd
e e e e e a
m or x ct c c ounti ng o f which h a c c ou nt in g
t
e e a a e re
,
m
i o f h p r s n t inc om ta x l gi sl ti on b u t
t t
qu re en s e e e e e a are
indic ti on Any p rs o n h aving s ub s tantial int r
one a e e
.
st s st ak s hou l d b ab l t o ap p ra i s int lli g ntly
t
e a e e e e e e
h st w ard shi p o f th os t o wh om h i s i nt r s t s i
t
e e e e e are n
tru st d an d h v ol m s o f “ B u s in s s A c c ou ntin g” w ill
t
u
e e e e
giv h im h t chnic al i nform tio n thi s d m nd
t
e e e a e a s
.
T h oth r cl s s o f p rs on s t o wh om “ B u s in s s A
e e a e e o
”
c ountin g will p p al i s c omp os d f th o s wh os du
t
a e e o e e y
i t i s t o k p ac c ount s an d t o p r p ar st at m nt s T h y
ee e e e e e
.
s hou l d fin d i n thi s i n sp ir ti on d ai d t o m o r
t
se an a an an e
i t n s iv s tu d y whi ch i n tu rn wi ll r sul t in imp r ov d
n e e e e
,
cc ounting b ility d an nh nc d w g T h c r fu l
a a an e a e a e e a e
.
d int lli g nt o f th s b ook s wil l l d b yon d qu s
an e e u se e e e a e e
t i on t o i ncr s d p ow r o f s rv ic t o mp l oy r an d c om
ea e e e e e e
munity
.
H D
G
AROLD U DLEY REELEY
,
E t s A c c u
di B i ti S t
or u ness o n ng e
, .
N
Y ork C ity
w
e
,
A pri l
1 1 9 20
,
P RE F A CE
W ithi n h p as t f y rs m ny b o ok s h v b n
t
w
e e ea a a e ee
,
ri tt n on h p rinc ipl s o f c cou ting B ut s o f a s
t
w e e e a n ar
. ,
h autho r i s aw ar “ C ons tru ctiv A c c ount in g” i s h
t t
e e e e
,
fir s t tt mp t t o p r s nt h p rincip l s o f c c ou tin g c on
t
a e e e e e a n
s t ru ct ion a s di s tinc t from tho s o f p u r ly b u s in s s
e e e op
r ti on T h w ork i s i t nd d t o a s si s t in h d si gni ng
t
c a e n e e e e
.
o f ap p ro p r i t bu sin s s r c ord s d s t t m nt s fo r a
a e e e an a e e
nt rp ri s or for alr dy in op r ti on th t
new e e e on e ea e a a re
,
qu ir s c rt in f atur s f it s ac c ou ting s y s t m t o b
e e a e e o n e e
r p l c d mo difi d or imp rov d
e a e e e
, , .
T h r lly qu lifi d b ookk p r o r a c c ount ant
e ea a e ee e
sh ou l d b c p b l no t onl y o f p r for ming h r ou ti n
t
e a a e e e e
t a sks o f b o okk p i ng b ut al s o o f un d rt king w ork o f
e e e a
,
high r gr d r quirin g i niti tiv d x t f
n
e a e e a e a e ac pro es
,
i l s ki ll H sh oul d kn ow wh t d f ct s i f any
s ona e a e e are
. , ,
t o b foun d i n h sys t m u d r hi s c o tr ol d b b l
t
e e e n e n an e a e
to co rr ct th s s o a s t o s cur fo r h nt rp ri s c om
t
e e e e e e e e e a
l un d rs t n d b l d r di ly v i l b l r c ord o f
t
p e e e a a e an ea a a a e e
, ,
it s t r an s cti on s with oth r s h c o s t o f s cu rin g d
t
a e e e an
,
h ndl in g h c om mo diti s i n wh ich it d l s it s l o s s o r
t
a e e e a
,
g in in p s t p ri o ds d i t s p r s nt tr n d H sh ou l d
a a e an e e e e
, .
b bl t o b ui ld u p sys t m th t will a mi nimum o f
t
e a e a e a a
,
ff o rt d o ll thi s d h s m t im s cu m x i
t t
e a an a e a e e e r e a a
,
mum f p ro t cti on g in s t rro r o mi s s ion or fr u d I t
o e a a e a
, , .
i s in p r p ri g h p r titi o r for su ch w ork th t h
t t
e a n e ac n e a e
uth or t ru st s h p r s nt v olum wil l fi n d d finit
t
a e e e e a e e
p l ac
e
.
I n ll ac c ounti g s ys t m s h u nd rlyin g p ri cip l s
t
a n e e e n e
o f cour s h s m th ir p p li c tion or c omb in a
t
are e e a e e a a
, , ,
PR AC
EF E
t ion varying wi th h r qui r m nt s of h p artic ul r
t t
e e e e e a
bu s in s s R co gni in g thi s fac t h m th od o f h
t t
e e z e e e
.
,
p r s nt vol um i s t o nal y h r c ord s d p r ac tic s
t
e e e a ze e e an e
o f or di nary b o okk p ing and c c oun ting an d s h ow h ow
ee a
th s m ay b c omb in d a n d u til i d t o form a sy s t m
e e e e ze e
d ap t d t o m t s p ci l r quir m nt s I n d oing thi s
a e ee e a e e e
. ,
h vari ou s f orm s o f ordina r cc ount ing r c ord s
t
e y a e are
x am in d an d th ir s p ci l fun ct i o s di s cu s s d s o t ha t
n
e e e e a e
s ys t m s b uilt u p fr om th m will m t s u ch r qu ir m nt s
e e ee e e e
.
I t h n ot b n att mp t d t o p r s nt i n thi s b ook
as ee e e e e
sy st m c omp l t i d t il T h s mu s t v ary ac c or din g
e s e e n e a e e
.
t o h ci c ums t nc s o f ac h b u s in s s B ut h out lin s
t t
e r a e e e e e
.
p r s nt d sh oul d giv a b s i s fo r d v l op m nt T h
e e e e a e e e e
.
m
p o ints o f difficu lty m os t fr qu ntly with in tr adin g
t
e e e
op r tion s an d h g n r l c onduc t o f m o d rn bu s in s s
t
e a e e e a e e
h p oi nt s o f di s cu s s i on i n h sys t m s c on s i d r d
t t
are e e e e e
.
m
I n p s s ing fro m t o n oth r o f th s h i h a s
t
n
a o e a e e e e a
,
m
b n t o w o rk fro m s imp l r s ys t s t o tho s o f m or
ee e e e e
comp l x i ty
e
.
A cc ou nt nt s wil l n tu r ll y d iff r a s t o p arti c l ar
a a a e u
m th o d s t o b mp l oy d i a h c s T h utho r f l s
e e e e n e c a e e a ee
. ,
h ow v r th t h p l s an d m th o d s h r p r s nt d
t
e e a e an e e e e e e
,
h r su lt o f x p ri nc i v s ti gati on d c on l t ati on
t
e e e e e e n e an s u
, ,
—
with p ro f s s ion l as s o ci t s will t ak n a wh ol b
e a a e e as e e
,
,
found h lp ful p ractic l an d i n a c c or d wi th b s t m od rn
e a e e
, ,
p racti c
e
.
Critici s m s c omm nt s d s u gg s tion s fr om t ho s
e an e e
, ,
wh o h v olum wi ll b m os t w l com
t
u se e e e e e
.
G E B
EORG E EN NETT
.
N
York C ity
w
e
,
Ap ril
1 1 9 20
,
C O NTE NT S
—
P I P i i l d P i
t t
ar r nc p e s an ra c ce
C H A T E R
P
I I N TR U C T Y
OD OR
A c o u ti h o ry Pr c tic
1 T d
c n ng e an a e
. Pl c o f Acco u ti r iz tio
s i O
a e n ng n gan a n
c ss ity fo r P rop r Acc ou ti yst m
N
g S
e e e n ng e
r ch s o f Ac cou ti
n B
an e n ng
p r t iv sp ctiv Accou ti
a O d I
e a e an n e e n ng
u c tio o f Co st ructiv Acco u ti
p F
n n n e n ng
!
W GA N I A T I N
T O
H E o ne o R O
cop o f o rki r iz tio
W
" S O
e ng gan a n
2
u m t l iv i sio s o f us i ss p r tio
F d D B O
n a en a n n e e a n
ubsi i ry p r tm ts
S d D
a e a en
yp s o f usi s s Co t rol
T B
e ne n
P rt rsh ip r iz tio
O
a ne gan a n
P rt rsh ip Ac co u ti
a ne n ng
Co rp o r t Co t rol
a e n
Co rp o r tio Ac cou ti
a n n ng
r l i s o f r iz tio
G L O
ene a ne gan a n
r iz tio Ch r t
H Th O
e gan a n a
I I I D E VE L M E N T E C
P R
O o r ORDS
A cco u ti R c o r s
1 d
n ng e
.
impl ri o f R co r s
?
T h S T d d
9 e e a e
v l opm t o f ook s o f ri i l R cor
9 Th D B O d
e e e en g na e
5
v l op m t o f r R co r s
9 D L d d
e e en e ge e
2
A r r m t o f tri s
9 E
ange en n e
I V U VE Y
T S
H E R
P r l imi ry Co si r tio s
d
e na n e a n
bj c t o f u rv y
O th S
e e e
Ch r ct r o f u si ss
th B
a a e e ne
r i M u f c tu ri R co r s Comp r
T d d d d
a ng an an a ng e a e
ook s
B i U
n se
Accou t s
i U
n n se
r l R u s fo r l i wi th p cifi c C s s
G l D S
ene a e ea ng e a e
o rk i P p rs
W
ng a e
—
V A N Y T E M
o
P A S
LA N N xN G c c oe xN S
l utl i Pl
O i
n ng a an
.
r iz tio Pl
2 O
gan a n an
.
ix