Chapter I: Front Matter

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Cyclopedia
_of_
Commerce, Accountancy,
Business Administration

VOLUME 4

_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.

WILLIAM M. LYBRAND, C. P. A. 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.

HARRIS C. TROW, S. B. _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 cooperation the excellence of this work is due.

Table of Contents

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

VOLUME IV

THEORY OF ACCOUNTS _By James B. Griffith_ Page 11

Dictionary of Commercial Terms--Commercial Abbreviations--Objects of Bookkeeping--Methods--Single Entry--Double Entry--Advantages of Double Entry --Classes of Account Books--Recording Transactions--Promissory Notes--Bank Deposits--Sample Transactions--Classes of Accounts--Classes of Assets--Revenue Accounts--Rules for Journalizing--Rules for Posting--Trial Balance--Sample Ledger Accounts--Treatment of Cash Discounts --Profit and Loss--Merchandise Inventory Accounts--Balance Sheet --Journalizing Notes--Journalizing Drafts

SINGLE PROPRIETORSHIP AND PARTNERSHIP ACCOUNTS
_By James B. Griffith_ Page 119

Retail Business--Proprietors' Accounts--Inventory--Retail Coal Books-- Uncollectible Accounts--Sales Tickets--Departmental Records--Partnership Agreements--Kinds of Partners--Participation in Profits--Interest on Investments--Capital and Personal Accounts--Opening and Closing Partnership Books--Model Set of Books

CORPORATION AND MANUFACTURING ACCOUNTS
_By James B. Griffith_ Page 195

Classification of Corporations--Joint Stock Company--Creation of Corporation --Stockholders--Stock Certificates--Capitalization--Capital and Capital Stock --Stock Subscriptions--Management of Corporations--Powers of Directors and Officers--Dividends--Closing Transfer Books--Sale of Stock Below Par--Corporation Bookkeeping--Books Required--Opening Entries--Changing Books from Partnership to Corporation--Stock Donated to Employes--Reserves--Computing Sinking Funds--Premium and Interest on Bonds--Manufacturing and Cost Accounts--Factory Assets--Factory Expenses--Balance Ledger

THE VOUCHER SYSTEM OF ACCOUNTING _By James B. Griffith_ Page 273

Use of Vouchers--Voucher Checks--Journal Vouchers--Voucher Register--Operation of System--Auditing Invoices--Executing Vouchers--Paying, Filing, and Indexing Vouchers--Voucher File--Demonstration of System--Voucher Accounting--Unit System --Combined Purchase Ledger and Invoice File--Private Ledger --Private Journal--General Ledger--Manufacturing Accounts --Charting Accounts--Chart of Trading Business--Chart of Manufacturing Accounts--Examples of Charts--Explanation of Charts

REVIEW QUESTIONS Page 325

INDEX Page 345

THEORY OF ACCOUNTS