ROUTLEDGE LIBRARY EDITIONS:

ACCOUNTING

Volume 11

BRITISH COST ACCOUNTING 1887–1952

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 BRITISH COST ACCOUNTING 1887–1952
Contemporary Essays from the Accounting Literature

Edited by
TREVOR BOYNS,
MALCOLM ANDERSON, AND
JOHN RICHARD EDWARDS
First published in 1996
This edition first published in 2014
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© 1996 Trevor Boyns, Malcolm Anderson, and John Richard Edwards
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BRITISH COST
ACCOUNTING
1887-1952
Contemporary Essays from
the Accounting Literature

Edited by
Trevor Boyns,
Malcolm Anderson,
and
John Richard Edwards

Garland Publishing, Inc.

New York and London 1996
Introduction copyright © 1996 by Trevor Boyns, Malcolm Anderson, and John Richard Edwards

Library of Congress Cataloging-in-Publication Data

British cost accounting 1887-1952: contemporary essays from the accounting literature/ edited by
Trevor Boyns, Malcolm Anderson, and John Richard Edwards.
p. cm. - (New works in accounting history)
includes bibliographical references.
ISBN 0-8153-2240-2 (alk. paper)
I. Cost accounting-Great Britain-History. 2. Managerial accounting--Great Britain-History.
I. Boyns, Trevor. II. Anderson, Malcolm. III. Edwards, J. R. IV. Series.
HF5686.C8B6765 95-37266
657' .42'0941-dc20

All volumes printed on acid-free, 2SD-year-life paper.

Manufactured in the United States of America.

Design by Marisel Tavarez

CONTENTS
Introduction xi
1. Gibson F. C. A, Arthur H. "Trading and profit and loss accounts,"
The Accountant (18 June 1887): 359-67
2. Warwick, T. H. "Shipbuilders' accounts," The Accountant (20 October
1888): 663-65 10
3. Review Article. "Engineering costs book-keeping," The Accountant (12 July
1890): 366-368 13
4. Mann, John "Notes on cost records: a neglected branch of accountancy,"
The Accountant (1 891): 29 August 1 891 : 61 9-621 ; 5 September: 631 -637 16
5. Plumpton, Thomas. "Manufacturing costs," The Accountant (26 March
1892): 267-271 26
6. Plumpton, Thomas. "Manufacturing costs as applied to engineering,"
The Accountant (1892): 19 November 1892: 880-8; 26 November:
899-903; 3 December: 932-936 31
7. Leading Articles. "Cost accounts-I-IV ," The Accountant (1894): 28 July:
655-657; 4 August: 673-675; 11 August: 687-689; 18 August: 702-704 50
8. Leading Article. "Cost accounts," The Accountant (3 November 1894):
968-70 62
9. Plumpton, Thomas. Letter, "Cost accounts," The Accountant (1 0 November
1892): 990-91 65
10. Leading Article. "Cost accounts," The Accountant (24 November 1894):
1025-1026 67
11. Cudworth, A J. "Some notes on cost accounts," The Accountant (18 April
1896): 312-19 69
12. Caldicott, G. Holt. "Chartered accountants as experts in commerce and
manufacture," The Accountant (22 May 1897): 524-29 77
13. Addinsell, W. A "A new system of cost-taking in trade," The Accountant
(20 May 1899): 577-81 83
14. Goode, G. E. "The methods of ascertaining costs in a factory where a
variety of articles are made, which mostly pass through several processes
in the course of manufacture and are turned out in large quantities,"
The Accountant (30 June 1900): 600-607 88

v
15. Cowan, David. "Workshop administration, with special reference to tracking
work and promptly ascertaining detailed costs and profits" (discussion in-
cluded), The Accountant (1901): 19 January: 85-92; 26 January: 114-120; 2
February: 148-155; 9 February: 188-193 (Reprinted by permission from the
Transactions of the Institution of Engineers and Shipbuilders in Scotland.) 96
16 Showell A. S. A. A., A. E. "Cost accounts," The Incorporated Accountants'
Journal (December 1901): 59-66 125
17. Urie, John. "Oncost and its apportionment," The Accountant (11 January
1902): 50-53 133
18. Bardsley, John, B. "Hints to students in devising systems of engineers' cost
accounts," The Accountant (1902): 18 October: 1053-1061; 25 October:
1087-1098 137
19. Leading Article. "The cost accounts of small manufacturers,"
The Accountant (27 April 1907): 549-51 158
20. Hamilton, W. R. "Some economic considerations bearing on costing,"
The Accountant (5 February 1910): 200-206 161
21. Jenkinson, M. Webster. "Some principles of accounting affecting cost ac-
counts," The Accountant (18 April 1914): 564-82 168
22. Belt, Robert, E. "Importance of true cost," The Accountant
(26 August: 1916): 177-80 187
23. Bulletin published by the Federal Trade Commission of Washington USA.
"Fundamentals of a cost system for manufacturers," The Accountant
(28 April 1917): 411-21 191
24. Leading Article. "Cost accounts and accountants," The Accountant
(1 March 1919): 149-51 202
25. Fells, J. M. "Cost accountancy: its evolution and its trend,"
The Accountant (28 June 1919): 548-52 205
26. Massey, James R. "The relationship of costing to management,"
The Accountant (5 July 1919): 12-17 210
27. Boyd, J. H. H. "Costing in relation to scientific management,"
The Accountant (12 July 1919): 33-40 216
28. Allen, G. T. H. "Costing in Relation To Selling," The Accountant
(19 July 1919): 58-59 224
29. Jenkinson, M. Webster. "The importance of efficient cost accounting
to coal industries and the means which should be adopted to secure it,"
The Accountant (26 July 1919): 81-86 226

vi
30. Fells, John M. "Some principles governing the ascertainment of cost,"
The Incorporated Accountants' Journal (November 1919): 31-34 232
31. Cathles, A. "The general principles of costing," The Accountant
(28 February 1920): 249-56 236
32. Editorial. The Cost Accountant (June 1921): 1-2 244
33. Bird, C. F. "Costing-principles and practice/' The Accountant
(26 November 1921): 745-48 246
34. Todman, J. C. "The necessity for scientific costing" (including introductory
comments), The Cost Accountant (March 1922): 178-83 250
35. Elbourne, E. T. "Costing as a branch of administration," The Accountant
(11 November 1922): 694-95 256
36. Editorial. "Costing," The Accountant (6 January 1923): 3 258
37. Gill, S. l. "The place of the cost accountant in industry," The Cost
Accountant (March 1923): 331-39 259
38 Jenkins, H. G. "Standardisation in cost accountancy" (together with an
introduction to conference session by Sir Herbert Austin), The
Cost Accountant (April 1923): 352-57 268
39. Gill, S. l. "Are costs the best basis for estimating and fixing selling prices?,"
The Cost Accountant (May 1923): 425-28 274
40. Bryden, W. "Are costs the best basis for estimating and fixing selling
prices?," The Cost Accountant (May 1923) : 428-31 277
41. Blyth, J. R. "Uniform methods of costing," The Cost Accountant
(September 1923): 120-25 281
42. Stelling, R. "Standard costs, with particular reference to the Sheffield
industries," The Cost Accountant (January 1924): 277-81 287
43. Jenkins, H. G. "The function of costing in industrial relations," The Cost
Accountant (August 1924): 106-11 292
44. Lunt, H. J. "Costing," The Accountant (17 July 1926): 89-94 298
45. Renold, C. G. "What I expect of a cost accountant," The Cost
Accountant (May 1927): 351-61 304
46. Rose, T. G. "The use of graphics in cost accountancy," The Cost
Accountant (January 1930): 204-13 315
47. McCallum, E. D. "The economics of cost accounting," The Cost
Accountant (March 1930): 270-75 325

vii
48. Walker, W. B. "The development of cost accounting towards budgetary
control," The Cost Accountant (November 1930): 151-52 331
49. Annan, W. "Cost accounts from the professional accountant's point
of view," The Cost Accountant (December 1930): 183-90 333
50. Walker, P. H. "Ceneral principles of factory costing," The Accountant
(22 August 1 931): 297-304 341
51. Editorial. liThe cost accountant and labour problems," The Cost Account-
ant (Apri I 1932): 305-306 349
52. Staniforth, L. "The measurement and control of industrial activity by cost
standards-(b) application and interpretation," The Cost Accountant
(December 1923): 183-87 351
53 Dunkerley, R. "Budgetary control-a review," The Cost Accountant
(August 1935): 68-73 356
54. Dunnigan, W. Y. "The measurement of economic factors in costing-
I and II," The Accountant (1936): 4 July: 13-15, 11 July: 53-56 364
55. Council of the ICWA. "Costing Terminology" The Cost Accountant
(March 1937): 318-26 371
56. Edwards, Ronald S. "Some notes on the early literature and development
of cost accounting in Britain," The Accountant (1937): 7 August: 193--95;
14 August: 225-31; 21 August: 253-55; 28 August: 283-87; 4 September:
313-16; 11 September: 343-44 380
57. Review Article. "The treatment of oncost in cost accounts," The
Accountant (23 October 1 937): 558-61 404
58. Editorial. "Cost accounting theory," The Cost Accountant
(November 1937): 161-62 408
59. Saunders, F. W. H. "Will your costing system stand up to the
test of rising prices?," The Cost Accountant (November 1937): 165-67 410
60. Reece, J. A. "Costing-marginal and conventional," The Cost
Accountant (October-November 1940): 63-64 413
61. Impey, F. L. "Costing-marginal and conventional," The Cost
Accountant (May-June 1941): 146 415
62. Editorial liThe development of cost accounting," The Cost Accountant
(February-March 1943): 57-58 416
63. Editorial. "Uniformity in costings methods," The Accountant
(3 July 1943): 1--2 418

VIII
64. Roddick, C. "Costing in relation to management," The Accountant (28
August 1943):112-13 420
65. Dunkerley, R. "Cost accountancy: its contribution to management and
efficiency in the future," The Cost Accountant (March-July 1944): 52-57 422
66. Smallpeice, B. "More about the industrial accountant," The Accountant
(24 February 1945): 90-93 428
67. "Econacon." "Economics and costing," The Accountant (14 April 1945):
171-73 432
68. Brown, E. F. "The indivisibility of accountancy," The Cost Accountzmt
(June 1949): 13-18 435
69. Nicholson, U. L. "The relationship between time and motion study dnd
costing," The Cost Accountant (April 1950): 30913 441
70. Rickard, E.B. "A study in decentralisation," The Cost Accountant
(April 1950): 313-14 445
71. Glendinning, R. "The functions of the accountant in largf~-scale industry,"
The Accountant (27 May 1950): 601-604 447
72. Risk, W.S. "Efficiency in nationalised industries----the necessity for
measurement," The Accountant (15 July 1950): 56-58 451
73. Morrow, LT. "Cost accounting as an aid to the measurement of
productivity," The Cost Accountant (November 1950): 205-208 454
74. Editorial. "Management accounting," The Cost Accountant
(18 November 1950): 505--507 458
75. EditoriaL "The management accounting report," The Cost Accountant
(December 1950): 221-222 461
76. "British team's report on mdnagement accounting." The Cost Accountant
(December 1950) : 225-35 463
77. Marshall, A. "Integration or reconciliation?," The Cost Accountant
(October 1951): 155-·60 474

78. Kirkham, H. "Overhead in perspective," The Cost Accountant

(May 1952): 389-94 480

IX
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INTRODUCTION
Solomons' seminal article entitled "The Historical Development of Costing" (1952) is
divided into two parts which, respectively, focus on developments prior to "The
Costing Renaissance"-considered to start around 1870-and
The second part of the story, wh i ch spans the th ree-q uarters of a centu ry
down to our own day, [1952 which] is concerned, not with a rather
narrow technical problem in book-keeping [seen as the focus of
developments over the preceding 500 yearsl, but with the broader issue
of making the accounting records mean something, of making them
flexible and capable of providing information which would be signifi-
cant not for one purpose (say, the measurement of profit or loss) or two
(say, in addition, the fixing of selling prices) but for any of the purposes
which, in modern business, figures may be called upon to serve (1952:
2).

In the second part of his paper Solomons focuses on the accounting treatment of
overhead cost in the endeavour to identify "actual" cost (1952: 20), before moving on
to examine early recognition of the variation of costs with output, the developing
literature on standard costing and budgetary control and the growing interest in
uniform costing stimulated by the actions of trade associations beginning with the
National Association of Stove Manufacturers in America in the 1880s.
Much of the material used for the purpose of Solomons' masterly exposition is
drawn from the overseas literature, particularly from the United States, and there are
relatively few citations dated later than the second decade of the twentieth century. It
is of course well known that Solomons drew heavily on Ronald Edwards' earlier work
(1937a and 1937b) when tracing developments in Britain and France before 1870 and
in Britain thereafter. The lack of citations in Solomons (1952) post-1920 is consistent
with Edwards' conclusion that "I do not think that in the last 30 years cost accountants
have added much to the theory of their subject" (1937a: 344). However, it may also
reflecttoo great a reliance on Edwards' work and/or a fai lure to investigate the full range
of relevant literature, espeCially that contained in contemporary accounting journals.
The purpose of this anthology therefore is to provide readers with a flavor of the
development of cost accounting and emergi ng management accounti ng I iteratu re from
"The Costing Renaissance" down to the date of Solomons' paper. We agree with
Solomons and Edwards that many of the issues which were prominent in the middle
of the twentieth century and, indeed, are still pressing issues today, received important
early treatments. A more balanced longitudinal coverage of the relevant material

xi
however enables readers to trace the development of new attitudes to problems which
had been recognized early on, and to become aware of the fact that different issues
tended to dominate the literature as time went by.
Sources
In his work, Solomons gave particular attention to the content of engineering
journals such as Engineering, The Engineer, and The Engineering Magazine, especially
the last named. These are important sources of illumination concerning early costing
developments which would undoubtedly repay further study. Indeed, other contem-
porary journals, such as and The Mechanical Engineer, The Railway Times, TheJournal
of Gas Lighting, Water Supply and Sanitary Improvement and The Electrician, contai n
a great deal of material which is worthy of examination by those interested in the
development of costing techniques and management information systems.
A distinct feature of this anthology, however, is that it focuses on material
published in accounting journals. The relevant sources examined in the process of
compiling this text include The Accountant, first published in 1874, The Cost
Accountant (1921), now called Management Accounting, the Incorporated Accoun-
tants Journal (1889), today called Accountancy, and The Accountant's Magazine
(1897). We have chosen to focus principally on the contents of the first two named
publications partly because of limitations of space. 1 We also chose to focus on The
Accountant and The Cost Accountant because their contents enable a contrast to be
made between attitudes from what might be regarded as the two sides of the profession.
The Accountant claimed to represent the interests of chartered accountants whereas
The Cost Accountant was established by The Institute of Cost and Works Accountants
(today called The Chartered Institute of Management Accountants), whose formation
has been attributed, in part at least, to the failure of the elite Institute of Chartered
Accountants in England and Wales to cater for accountants working in industry.

The publication of Garcke and Fells' Factory Accounts (1887) is often referred to
as heralding the emergence of a costing literature in Britain, followed two years later
by the publication of George Pepler Norton's Textile Manufacturers' Book-keeping2
Garcke was of course an electrical engineer while Fells was, at the time of writing, the
assistant secretary of the Anglo-American Brush Electric Light Corporation. He became
a member of the Society of Incorporated Accountants and Auditors in 1902 and, in due
course, a fellow of the Institute of Cost and Works Accountants. Norton, on the other
hand, was a chartered accountant with the firm of Armitage, Clough and Norton,
having previously been a "prize man" in the final examination of the ICAEW, June
1883. Another chartered accountant, Arthur H. Gibson had already written (1887) the
first article published in The Accountant to give significant attention to costing
matters (reproduced as item no. 1 in this anthology). Other writers, reproduced here,
possessing the chartered qualification include Warwick (item no. 2), Mann (4),
Plumpton (5, 6, 9), Cudworth (11), Caldicott (12), Addinsell (13), Goode (14), Urie (17),
Hamilton (20), Jenkinson (21,29), Allen (28), eathles (31), Gill (37, :~9), Lunt (44),
Annan (49), Smallpeice (66), Glendinning (71), Risk (72), Morrow (73).

One might imagine that the interest of chartered accountants in costing matters
reflected a focus on this area of activity by the firm for which they worked. Certainly

xii
this was the case with Norton who tells us that his knowledge oftextile operations was
derived from general practice and from the investigation of corporate failure (1889,
Preface). In other cases it is probably a consequence of the fact that the chartered
accountant had already moved over to industry and had become directly involved in
costing matters on a day to day basis. Basil Smallpeice, for example, moved from
Bullimore & Co. immediately on qualification, in 1930, to become accountant and
assistant secretary at Hoover Ltd. He joined Doulton & Co. Ltd in 1937 where he
became secretary and chief accountant responsible for costing and accountancy at the
factories (The Accountant, 7 January 1950: 10-11 ).3

There are of course numerous contributions from cost and works accountants
including articles by Fells (25, 30), Todman (34), Jenkins (38, 43), Blyth (41), Walker
(50), Staniforth (52), Dunkerley (53, 65), Saunders (59), Reece (60), Roddick (64),
Brown (68), Marshall (77), Kirkham (78). The chartered accountants Gill, Lunt, Annan,
Allen, Glendinning, Risk and Morrow also held the cost accounting qualification.
Some of the accountants in industry were in prominent management positions, e. g.
Roland Dunkerley was Director and General Manager, Quilt Manufacturers Ltd.

Certified accountants represented amongst the list are Showell (16), Edwards (56),
Roddick (also a cost and works accountant) and the thrice qual ified Fells. There are also
three chartered secretaries-Allen (28), Lunt and Roddick (triple qualification)·--and
three engineers Elbourne (35), Jenkins (also a cost and works accountant) and Rose (46).
The series of papers by David Cowan (15) was reprinted by The Accountant with
permission from the Transactions of the Institution of Engineers and Shipbuilders in
Scotland. Cowan's qualification is unknown but, as he also wrote extensively in The
Mechanical Engineer, it is likely that he was a practising engineer. The academe is
represented by W. Annan who was Professor of Accounting and Business Methods al
Edinburgh University, Ronald Edwards, then Assistant Lecturer in Accounting and
Business Administration atthe London School of Economics, and E. D. McCallum (47)
who was Lecturer in Economics at Armstrong College, University of Durham.

The papers were in the main initially presented as lectures (Edwards' series of
papers is a notable exception). In the early years these lectures were generally
presented to chartered accountants student societies in London and the provinces; later
on principally to district branches of the Institute of Cost and Works Accountants and
the annual costing conferences held by the ICWA commencing 19n. There are also
pUblished a significant number of leading articles and editorials, a letter (9), two book
review articles (3, 57) and individual publications by the Federal Trade Commission
of Washington USA (23, "Fundamentals of a cost system for manufacturers"), and by
the Council of the ICWA (55, "Costing Terminology").
Issues
A summary of the main topics covered in the papers reproduced is given in Table
1. This can be read in conjunction with the list of contents to provide a fuller idea of
the way in which the literature developed as lime went by.

xiii
 3. He was appointed director of costs and statistics at the British Transport
Commission in 1948 and became financial comptroller ofthe British Overseas Airways
Corporation in 1950. He was the elected to the council of the ICAEW in 1948-the
third non-practising member to be elected to this position.

References
Battersby, Thomas. The perfect double entry book-keeper (abridged) and the perfect
prime cost and profit demonstrator (on the departmental system), for iron and brass
founders, machinists, engineers, ship-builders manufacturers &c., Manchester &
London: John Heywood, 1878.
Edwards, R. S. "Some notes on the early literature and development of cost accounting
in Britain," The Accountant (1937a), 7 August: 193-95; 14 August: 225-31; 21
August: 253-55; 28 August: 283-87; 4 September: 313--16, 11 September: 343-44.
Edwards, R. S. A Survey of French Contributions to the Study of Cost Accounting during
the 19th Century, London: Gee & Co., 1937b.
Garcke, E., and Fells, J. M. Factory Accounts, London: Crosby Lockwood, 1887.

Norton, G. P. Textile Manufacturers' Book-keeping for the Counting !-louse, Mill and
Warehouse . ... , Huddersfield: Alfred Jubb, 1889.
Solomons, D. "The historical development of costing," in D. Solomons (ed.), Studies
in Costing. London: Sweet & Maxwell, 1952, pp. 1-52.

Acknowledgments
We are grateful to the Economic and Social Research Council for financial support
for the research which has enabled the preparation of this text. The editors also wish
to thank the Chartered Institute of Management Accountants and Lafferty Publications
for their kind permission to reprint articles previously published in The Cost Accoun-
tant and in The Accountant.

xvi
 J nne 18, 1887. THE ACCOUNTANT.
BIRMINGI1AM ,\CCOUWI'AN'J'S' S'l'U])fDNTS'
SOCIBTY,
"TRADING AND PROFl'l' AN)) LOSS
ACCOUNTS."
By Mn. AUTIlUn. H. GIBSON, P.U.A.
At the Sixth Ordinary Meeting of Lhe SO.<siOll' heM [l,t Lb"
Uolonno.de Hotol, Now Street.
Present :-l\fr. O. O. 'P. Parson, B'.C.A., Chairman; Mr.
Howard S. Smith, I,'.IJ.A., Mr. A. n. Gibson, P.C.A., Mr. J.
Findllty, o\.C.A., ~fr. H. J. CroSH; 1[r. 'r. S. M. MulJard,
A,a.A., H. Walker, (Hon. Seety.), and 23 other •.
A letter of (tpolo~y for non-attendance wa.s received CroUl
Mr. Walter N. Fisher.
Mr. Parson, in a few wonls, introducod the Lecturer, Mr.
Gibson to tho .Meeting:-
Mr. Gibson delivered the following address:
1'he subject of my lecture this ovening iR not one which
at any point padscs over mto the tBrritory of lep;a.l training,
the boundaries of which arc so jealously guanled by voting
solicitor8. I sometimes think cha.t tho model ll.ccQuntant,
according to the ideas of some young la.wyers, would be an
animate.d 1rith~omcter, simila.r to tha.t ingenous pieco of
mechamsm whtch Mr. Howard Smith has in his priva.te
office-a. being which, when plu.ced before a. column of
figures, should instinctively beglll to add, and there its
powers shoulll end. If it wanted to WrIte R. letter, however
simple, or givo a rcC'.eipt for a sum of money however BIIlf.toll,
it should then, a.lso instinctively, run at once to its legal
a.dviser, and ask him to dra.ft the epistle, frame the receipt,
and state the value of the stamp to be aftixed. Such ideas
prevaIl, but only among very young praotitioners. With
solicitors of experience dimclll~ies on this head never arise,
a.n~,. in matters in which the two professions are enga.ged,
Sohcltors are as gla.d to ha.ve the pain ts expla.ined by
a.ccounta.n~s who can grasp the lega.l questions involved, as
accounta.nts arc to explain them to solicitors who hp.ve a
knowledge of accounts. The fact is, every profession is
entitled to and necessa.rily must know the law retatiJ)(J to its
pa.rticular calling. Of wha.t use would a.n arcilitcct l~e who
was ignorant of all details of the l"wof party walls, l.. teral
support, and o.ncient lights? Must not a. mining: engineer
know every deta.il of mining law, fi. doctor of medical la.w?
and so a.n accountant, who is required to have technical
skill in all commercial matters, must have a. sound know~
ledge of all branches of commercio.l law. rrhc knowledge of
the law, and the prnl~tlce of the law as a. profession, are
however, two distinct things; a.nd so long" A.~ we keep away,
a.s we are bound to do, from the la.tter, our friends the solici-
tor$ will not compla.in', a.s they havo no right to complain,
a.bout the former.
~m'lever, the subject of my leoture this evening is one
W~lch is p':lculia.rly our own. The legRol mind which has only
fa.lnt glimmerings of the meaning of a. ba.lance sheet, has
none of the effect and purpose of n. Tre.ding Account. Thi8
lack of knowledge extend. through the whole legal body from
bott~m to summit. Our Courts of La.w, for example, know
nothmg of tho differenoe between an Income and Expendi-
ture, or Profit a.nd Loss Account, and A. C0.5h Account, ana
2
359
whon they wi,.,h to impound from 1\ Receiver the net
revenue of 0. going concern, they seize on the balance of the
Cash Account, \. . hich of cours~ may ho moro than, or lc~s
than, tho net rtlVCnIlO, ju:-;.t as tho HoceivlH likes to advancn
or retard his pH.ymcnt':l.
My purpose this evening- ig not to ta.ke you through tho
simplo COJl8trilctioil of u. 'l'rading or Profit anll Loss AC('.()llnt,
which would only WIl.Rto your tune and millA, for that forms
indeed tho rudiments of all f1.ccountn.nt'ij training. The
partwull1r VieW I wi,,;h to impresA upon you is, tha.t our
profession i,; n. progres'livCl onCj th,Lt (\xcellcnce in it. is
not aLtai ned by IUf're theorotieal knowledge of ligllrrs, how·
e . . er purfect" hut thll.t the oldest accountant, as wull a.s tbt;
youngest, h:v.; t.he daily 0pp0rtunity of n.JJillg to hi}> s~orc t1f
technical skill, alld theroby not only in8rCitt;C~ hi!'! OWll
utility, but all->o pllshes onwllxds the wholn profession. And
I am going to illll~trf1te this by the development, whIch
within my own experience as an accountant going back for
something over twenty years, has bcconw apparent in rollt
tion to 'rrading and Profit a.nd Los:; Accounts. I do HoI;
want, for my present purpose, to enforce the distinctions
which wc often mu.kc between 0. 'rr<l.diHg Account and :1,
Profit and Loss Account, hut I want you to look upon tht'
two indi:=:criminatcly and collectively U.R the summary of the
transa~tionB of a trading concern for any perion. A ha,\n.nee
sheei shows WhH.~ are tho results of such transnct!f1D:l, fI,
Trn.ding or ProfIt and Loss Account shows, or Rhollld show p
how those rC!:iults have come about.
But 0. Trading or Profit and Loss Account, also answur..,
another purpose of special moment to accountants. It
proves the corrcdnesH, not of tho ba.lance l'lheet but of
the mere hook.keeping. A preliminary POlHt I \</ould Illsist
upon, beCI1Uf:i6 it touches an prror whieh 10 my experience
Joung accounta.nts are prollo to, is that tht'::l Tn\dillg
Aecount does not prove tho correctness of the ba.lanco
gb£wt. \V}Wll a.fter wading Doe's wa.y through !l. n1l1SR of
figure~, sorting and arranging them in proper llominn.l
or personal accounts, at th.o end, one gets a figure
bah,nce. tho whole looks so s'ymm~tric"..l a.nd pretty
that one f~els oue's labours are happily cOllcluJed, an I that
the whole tbmg is right. But that is not neceRsllri!y tWo
Double entry book-keepmg is a very llseful mill \,hich wIll
grind ant anything, but it n.1l depends on whA.t you Pilt In
what you wJll get Ollt of it. ACCOllllt~ y;ill balance although
you have put on the debit ~ille in your ledgers n.s,>ets which
are not as::;cts, ana thongh )'OU huse left out on the credit
Side many thmg~ which should come in. My wor..1 of wa.rn-
ing is then: Don't be mislead by a figure agreement
between the TrA.ding Account a.nd balance-sheet, l)lIt, after
you hrwe got such agreement, investigate fiercely Loth side!:>
of the balance-sheet. to be IL,;:.;ured that it agrees, not \\'ith
tile 'rra.ding Aeef'unt, but wlth tho actu~d fiLets. YOll(
halo.nce-sheet is the priJll:ip3.1 u.ccount: the Trn. ding Account
is purely subsidiary. The truth of tho balance-sheet lnw;t
he a~cettail1C'd independently and the Trn.dillg Account mUf:t
be IJIa.Je to Ll.ccord with It.
Ont Traoing Ar('.onnts then Rone two purpose~, they prove
the correctness of t.he book.keeping, l.nd they surnrnn,nsc
the transactions of trading concel'ns. Nuw, twenty years a~0
I saw mn.ny insta,nceR, and I not unfrequontly see somo
now, of sets of aceounts wh(}re the ma.n wbo oflfmed them
knew nothing of the detnils of the bl!sines~, and the ma.n
(proprietor or manager) conversa.nt with the detail~ of the
business knew nothing about the possibiltties of a. 'rrade
Account. The consequence wa.s that the books were opened
to construct 0. Trading Account, which proved the correct-
ness of the book~keeping it is true, but which had no
practical nse \vhatever as a. summa.ry of the trading tra.nF-fi.C'-
tiona. This pomt will be clearer for a.n illllst,ratioll LeI
me refer you to a.ccount No. 1.
 360 THE ACCOUNTANT.
Dr. ACCOUNT
1881. £ s. d.
Dec. 31-To Stock 2570 10 0
" Contracts in progress 15690 0 0
1882.
Dec. 31-To Purcha.ses 65210 8 6
" \Va.ges 42700 18 9
" Ca.rriage .. .. .. .. .. .. 1169 2 7
Engine and Machinery Expenses. 1160 8 1
Rents, Ta.xes, a.nd Insurance 1210 5 4
Sala.ries .. 700 18 6
" Interest a.nd Ba.nk Cha.rges 300 16 10
I! Deprecia.tion .. 676 4 8
H Incidenta.l Expenses 460 2 8
" Ba.lance, being profit .. 4777 13 3
£136627 9 2
This is the trading account of a. builder, and is in the pre-
cise form of a.ctual accounts which ha.ve come before us.
Now, this account except tha.t it is Il. link in the chain
which estAblishes the correctness of the book-keeping is
utterly useless. It shows that during the ye ... the builder,
who hs.s completed contracts to the amount of £116,446, and
bOoS incompleted contra.cts in progress, the work on wbieh
he value. at £16,420; has in the SRme period bought goods
to the value of £65,210; has paid wages to the amount of
£<J2,700; has paid for carriage £1,169, and so on. But this
information serves no pra.ctica.l purpose. It does not
enlighten the trader whether such puroha.ses or wages arc
too DlUCh, or too little. If you work out the percentages and
...y that hi. purchases come to So much and hi. wages to
~o mnch per cent on the work done, the· statistics a.re still
useless, for there is no sta.ncla.rd of relation between expendi~
turo nnder those he!>ds and the work done. One contract
mRV he of a. kind requiring 8. ll\rge amount of WA.B"q nnd 1\
s11Io.ll amount of materia.ls, a.nd in another one the propor-
tions mav be rcversed. A tru.de account in sucb a form with
its awfuI"' and purposeless arra.y of figures wa.s akin to H 1\ tale
told by ..n idiQt full of sound and fury specifying noth-
ing.'" The tr..der re~ ..rded it with that mingled awe and
admiration whIch is a.lways inspired by the incomprehensible,
hut if a brother trader a.aked him wha.t use it was, be \va.s
likely to be nOD-plusRed.
Now, all the while the very information which a Tradmg
Account ought to have afforded to the trader was absolutely
nccesaary for him, but was prepared not by,hut independently
of, the accountant. For the pnrpose of obt.aining a.rchitects'
certificates, and for the purpose of ma.king out his accounts
for extras, the builder was obliged to follow both the pur-
chases a.nd wa.ges to their destina.tion, a.nd divide them over
the particular contracts to which they belonged. In large
bnilding a.nd contra.cting concerns a. sepa.ra.te departntent-
the prime cost department-was crea.ted, with which the
n.ccountant ha.d no concern. The prime costing formed no
part of the system of a.c~ounts, a.nd wa.s a. sort of It-tn"
ixcognila to the young a.ccounta.nt of the past.
In Do building concern whcre I wo.s caned upon to continue
the plan which, in this particular had been adopted for mBny
YCA.rs-o.nd tll'l)Q...tsant let me SR.Y tha.t traders a.nd their
principa.J darks in matters of l\ccounts are the most stupidly
eonservo.tive section of the comruunity-l remember sub-
mitting the proved results, a.ccording to my Balance Sheet
and incomprehensible Trade Account, to the partners who
said to me that the results could not be right, that their prime
CQ!;;t accounts showed tha.t they had made so much on this
contract and 80 much on that, and where bad the money gone
to? I told them I could not make my Balance Sheet agree
with their prime cost accounts, but, if they would give me
time and pay my fees, I would make their prime cost
accounts agree with my Balance Sheet. The difference
involved amounted to several thousands, and I w.... instructec1
2
June 11, 1887.
No. 1. Cr.
1882. £ s. d.
Dec. 31-By Contracts completed and Sundry
Sales .. 116J46 11 3
" Stock 3760 U 4
" Contracts in progress .. .. 16·120 8 7
£136627 9 2
accordmgly. My friend Mr. Whitehall, who took up the
work for me, soon demonstrated the worthlessness of prime
cost accounts constructed mdependently of tbe trading
account, and from that time onwards the prime costing ha.s
been part of the system of a.ccounts, and on lts results the
Tra.ding Account ~8 built.
Similarly in ma.nufacturing a.nd mining concerns prudent
ma.na.gers ha.ve found it necessary to workout elaborate stock
and stores a.CCQunts ana a.na.lysis of wa.ges resultinR in Cost
Sheets. Such a.ccounts are almost conditions of successful
management in times of general depression, such as we
have recently seen. A little time of idleness o.nd .. small
Il.mount of ma.terial wasted by each workman ea.ch da.y,
multiply the cost of such time and material by the number
of workmen in a concern, a.nd by the number of working days
in the year, a.nd you will probably a.rrive at 0. figure of waste
equal to 0. handsome p.f!)fit on the ca.pital of" a. concern.
Econuwictflol t.lUJl~u,"ption. through the somewha.t childisb
cha.racteristics of our working classes, can only be assured
by such statistical and analytic!>1 methods. The manager's
eye ca.nnot always be on everybody, and ·wha.t is necessary
is a. system which shows by results tha.t the men a.re working
u.s well a.nd as economically when his eye is not on them, as
when he is overlooking them. Such a.ccounts in the past
were constructed generally quite independently of the pro-
fessional accounta.nt. In this class of concerns a.lso,
insta.nces have come before rue where the works manager has
disbelieved in the Ba.lance Sheet, because his cost sheets
showed different results. Such cost accounts a.re the proper
work of an a.ccountant, and to be really reliable should be
made the b.... i. of the Trading Accoun ts.
r will now illustrate sho.cly the methods r have been
discussing by reference to the o.ccounts given here-
with. Let me first montion three common types
of businesses, which come frequently before us, and
which, in rela.tion to their respective Trading Accounts,
require distinct treatment. I Will call these Constructive
trades, Convertive tra.deR, a.nd Distributive trades.
C:mstructive trades are those which are concerned with
wha.t a.re called large constructions, i.e. lnrge works not of
identical cha.racter. Types of these are builders. road and
railwa.y contractors, heavy cngineel1', f\nd ship~builders.
Convf>rtive trades are those which are concerned with the
continuous conversion of certain mn.terin.ls into products
identical with each other, but essentially different from the
origine.l materie.ls. Such o.s miitering, producing flour from
whea.t; ironworks producing, pig, ba.r and sheet iron from
ore and coal; woollen and cotton mills producing textile
fa.brics from ra.w wool, a.nd cotton.
Distributive tra.des are those which are concerned with
the sale of goods in the SBme, or neo.rly the same, condition
as they are pnrcha.sed. This includes the business of the
large class of middlemen, merchants, factor., shop-keepera,
&:e.
 J nne 18, 1887. THE ACCOUNTANT.
'rho foregoing do not of course lnclude all, or oven the
larger portion, of trading: concerns, but only attcmpt3 ft.
cln.s:,ificEIotion oC some very oommon industries. Neither lS it
intended to imply thJ.t all of such trades ca.n be distinctly
IlHtfshalled under one or other of the above classes.
:,\lany trades will part.a.ke of the characteristics of two of
suell C};\,fiSCS or lwriln.ps of all three. '!'hc dassific(\,tion is
01111' intenued to mark distinct types, La which pa.rticull1[
trades lllay morc or los!" n.pproximo.tc.
I will ta.ke as an iHublratlOn of the constructive tra.des the
builder to whom I have a.lready referrol, and the results of
whose trading acc supposed to be summarised in the Trade
Account No.1 a.lready nlcntioned. It is of coun,e obvious
at a gln.nce how the accollnts would be constructed to bring
out those results. The Purchase Journal or Guard Book
would be arranged in columns, one of which would bo hea.ded
" 'Materia.ls" a.nd the others to correspond with the other
361
several hea.ds of expenditure. \Va.ges and expenses, which
did not PI1.SS throug-h the PUfcha:,;e .Jollrna.I, would I:)e pOf->teu
dired from the Ca.s.h Book to the Ya.r.ous nom!n3.1 aecounts.
In tlli:-; clas8 of tra.lles --\.... hieh 1 ll,\'vc ca.llcu the Constructive
-the welding of the clln.in between tho n.CCQllntn.nt work and
the pra.ctica.l work is very easy.
InRtca.d of jumhling up 0.11 lUn.teria.ls in n." 'Material!)'!
a.ccount it is. just as easy to hl\,\"o [I. column in the Purcho.so
Journal headed" Prilne Cost Lc(lger," und then to PORt tho
itcms tl:crefrom, as lL fiubsidin.ry pOliting to tho prime ('ost
lodger.
Similarly tho wages, instead of being all muddled together
to show no result, may he just as easily distributed at once
to the po.rticulo.r contracts to which they relate. In account
No.2. I give you the Trading Account which results from
the new method.

Dr. ACCOUNT No.2. (Jr.

18S>I. £ s. d. £ s. d. 1882. £ s. 0. £ s. d.
Dl~C. :n--To General Cha.rgos, viz. : - Dec. 31-By Profits on Contract!':, &c.,
Wages not chargeable to vi7..:-
contract~ .. G14 !) ;~ Windsor Hotel ()50 (j
Engine and Machinery Criterion Theatre .. · .101217 1
Expenses ditto .. .. 2.3;"; 8 (j Routhwark !>tation .. 87~1 14 10
Rent, Ta.xes, and Insur- Whitby Dock •.. · .3553 1 !J
a.nce diLto " 61G .i Leeds Arcade .. · .15An 2 1
Salaries and Office Ex- Padoington Stahles .. 741 2 A
penses dItto.. . . .. 646 18 (j Snndry Jobbin/\ Work _. HH:') 2 3
Incidental Expenses ditto S!8 18 11
Interest & Bank Charges 300 16 10 9102 2 2
Depreciation .. .. 676 4 Il [jess Lo~ses, viz. :--
-----:~B3S 1t 1 POlltcfract Har-
To Balance, being net profit.. . .4777 13 3 ro.C'ks .. . .£'.21 8 ~I
Bc~ c hwood
1ln.1l _ .::~O
gl\stbournc
PullE(; OJlices ~:-3 18 10
- 983 14 10
----8116 7 4
£1l116 7 4 £811G 7 4

Now 1 this is something which is both intelligible and
Ilseful to tbe pra.ctical ma.nager of the business. It follo\~s
the opera.tious of his mind in the control of his tm,de, It
shows definit.ely how far his estimates h[l.\'e been proved by
results; it ensures tha.t e'r-erything for which he hets paid ho.s
found a.n acknowledged resting place; it follows out what
ha.s becomo of the gross profits which be has made; and
particula.rly it directs his attent.ion to the figures of wn.ges
and expenses which a.re not. alloto.ble to any contra.ct, wlnch
"'re unprouuctive a.nd must be a.llowed for n.~ 8.. percentage
in making bis estima.tes.
Let U8 follow this fir,t ex...mple ... little into details, and
see what hAts been done_ Tuc purchases, u.monnting: to
£6a,210 in Account No. I, have, unless they belong to one
or other of the items of Genern.l (JlJa.i'ge~ in Account No_ 21
been charged item by item again:-;t t.he se ....cral contract.s
appearing on the credit side of Accouut :-';o.~. No invoice
ha.s therefore been passed for pa.ymcnt unless the responsible
foreman of the· contract it referred tu has acknowkcdged
that It is a. cha.rgc against the cost of the contract belllg
executed under his supervision. On the other he.nd, no
prime cost a.ccount is rendered incorrect because of the
omission to charge to it goods used up in the execution of
the contract, for every item of goods for which the trader is
coJled upon to pay must be tra.ced out to its ultimate COD-
8wnption. The wages in Account No.1, '£42,700, are, in
ACcount No.2, similarly sorted awa.y to the respective con-
tr""'t., except £614, which consi.t of wages in the nature of
genera.l charges :loud allottn.ble to specific co~ttll.cts_ ,!he
,!;epa.r_'~ion of the ll\ttcr item {rom the prudnctlvc w3.~cs IS a
m:\ttcr of first importallce to the su,:ce~sfnl management of
a husiness of the kilHl we nre llea.1in:~ with, n.nd SHch sep.UI\-
tion is never a,(·cul'o.tcly done when the prime costs il.I'C not
made the haseR of th(' Trade AccOlmt. The next item in
Acconnt No.1 is u Cauiagc, .tl,lIi~J; ,. in Account No.2,
this item has disa.ppeared ; its constit.uents ho.vc hecn spread
over the several contrn.cts, in rc~pcct of wInch the c .... pellse
was incurred. I think therc i:i no item in the old· fas.hloned
Trade Ac(-ount~ whkh waH treated with more ~tllpjd 111-
conSIstency thl\ll ca.rnage. f£'hc cn.rriiLge on goous boug-ht is
£L pa.rt of tIle CO:5t of such goods: the carriage on goous :->olil
is a deduction from the :-.elling prir:c of such good~. In pur-
chasing goods, such as tiudlc,;: f0f exa.Ulp'?, there are .n.i\\:ILYS
two prices qllot(:t1 or qllot .."hlc-onc th~ price at the shIJlPu:!{-
port or wherever the timber may Lc I png, tho other t.he p[,lcn
delivered a.t tho pt,rchn.ser's )·a.rd. It IS 8. matter of
aruitrary &rr311~emCIH.o on which of these p[inciplc~ B
builder buy~; if on the former, he 11l1.s to pa.y tho carn!l.ge
himself, and the amount of it increases P'-o tanto the cost of
the timber. Now, in the oid us.eless form of trade a.ccount.
such 8.'i Account No. I, It would ha.ppen thA.t, if the trader
bought a. lot of timber delivcred at his yard, the whole cost
of it would be rightly analy~ed as purchases. If the follow-
ing week he bought a. precisely Himi1o.r lot of timl?er a.t .the
sanle cost delivered, but n.rra.ngcd to pay the carna.?,e him-
self and deduct it from the cost. tho reduced pnce only

3
 362 THE ACCOUNTANT.
would be enterea os purchases, and the carrin.ge wonld be
a.nalysed as carriage. The account of carria.ge once opened
would also be the receptacle for carriage on goods delivered
by the trader, and would result in a figure which was a
JDeaninglm~s jnmble, having no logical rela.tion to the other
figures in the 'trade Account. The carriage on goods pur-
chased should always be analysed as part of the cost of suoh
purchases. The carria.ge on goods sold, when an enha.nced.
price 18 obta.ined in respect of delivery, should alwa.ys be
deducted from the selling price of the goods; when there is
only ono common priee for the goods whenever delivered,
the cost of carriage on the s[\les may in such case be rightly
regarded as a genem.l expense, and I have so treated it in f\,
suhsequent account I shall presently refer to. When my
friend, Mr. \Vhil:.ehill, WfLS engaged in harmonisin~~ tho
Prime Cost Aecounts and R:da.nce Sheet to which I have
referred, !\ principal source of error in the former wa.s the
omission to charge the contracts with carriage on the goods
bought; tho invoices of the goods had be('n h"nded o\'er to the
prime cost clerk, ntlll entered by him, but with the monthly
f1.ccounts deJivrred by the rA.ilwn.y companies, in which pur-
ehases a.nd deliveries were mixecl up, he had not coneerned
himself. I do not think I need follow the rema.ining items
in Account No. 1, o.s they only fllTtherillustrn.te wha.t I have
a.lrca.rJy said. By comparing it with Account No. ~, YOll will
find that mllny a.mounts of salaries, rents, e~o., in the first
account ha.ve in the second account founu re:lting pLtces by
being ohA.rged to the several contra-:::tH. The general
cho.rges left on Account No.2 a.re legitima.te general charge,;
only, and n.fford reliable da.ta on which the trader Ca.ll base
his calculations, when sending in his estimate~, Thero rHO
numerous incidental advantages in ama.lgam!1ting the prIme
nost in slloh ca.ses with the system of book-keeping. 'rime
will not allow me to enlarge upon them, bnt your cxporiencc
will make them sulJil!ientiy obvious to you.
The second class of trades to which I shall refer is what I
June 18, 1887.
have called convertive trades. In this class the systematis_
ing of tho practica.l production accounts, so a.s to work in
with the book-keeping, is a. tax of much more complexity
and difficulty than in the constructive trades; but it is in
this class of trades that the labours of an a.ccountant are
most likely to lead to substantial results in economising the
cost of production. In the principle of ta.king costs there is o.n
esaential difference between these and the constrnctive trades.
In the la.tter the co,t of the particular thing constructed
is followed tlJrough ab initio, so as to say in the end whalJ
thn.t pa.rticular house, or road, or ship has cost. In the eon-
vertive tra.des, where IfLrge numbers of identical things arc
pronnced, this is imprJ1.et:.icfLblc. In a cloth works or a ttn-
pla.te we do not earmark all the prol!csses on a partieuh.r
piece of cloth or pa.rticular box of plates a.nd say this piece
of cloth or this box of pla.tes ba.s cost 80 ·much.
Rut we SIl.y, the production of 0. box of plates involve::.
twelve distinct processes; in this or thf\t week the cost of
each of thmle processes per box WiLS so much, and the eost
of producing a box of plates is t.ho a.ggrega.te of the cost of
those several processes.
Thus, it ma.y be tha.t 0. particular box of pla.tes w~nt
through part of the processes on6 week ann: part 3.nothnf.
But that is Jmmaterial. It is the cost of the several pro·
cesses which is re(luirerl, not the ('ost of a partioular box
produced.
To illustrate what is possible in this class of trading con·
cerns I a.m going to t.ake o.n example of some complexity-
the manufact.ure of woollen fabrics. In the case supposed
please Jmagine that there A.re two sta.ple articles produced
in considera.ble qU:1.ntities-tweNl n.nd sergo-and fl,lso a
number of other fabrics in smaller quantities. Pirst let me
give you a. Trade Account of this business in t.ho old form.
This is Account No B, and it i!5 llnnecos!'>ary for me to arld
anything to what I have alce3.dy Htatod as to its useless
character.

Dr. ACCOlJNl' No.3. (Jr.

188!. £ B. d. 1882. £ s. d.
Dec. 31--To Stock 36540 18 2 Dec. ol-By Salcs . 52651 HI 11
1882. " Aba.tements on Purchases 145 8 7
Dec. in-To Purchases 28710 1 I t Stock .. 34·130 16 2
" \Va.ges paid for ma.nufacture 9175 2
" Aba.tements on Sales 4D66 1 1
" C~rria.ge .. 618 2 10
Sala.ries .. 1D81 9 5
It fj'ra.vclling "Expenses 690 5 1
" Hent, Rate..::, Taxes, &c. 1620 4 1
.. Inter~st nnd Bank Charges ,j21 8 I)
Depreciation .. 62·1 8 ;)
" Bad. Debt" 410 1 8
" Balance, heing profit .. 1464 1 \l

£87228 4 8 £87228 4 8

Now, Jet us shortly trace the cost of producing a. piece of
tweed cloth from the raw matcrJR.I. The complicationg
begin with the purchn.!1c of the wool, which mav be in one
of three :->In.tt;s--·grea,fi.v, which is just a.s it i& cut off the
:sheep's bu.,ck j Jieece, which hf\s beell Rcoured on tho shcep'~
baek before 6hearing; and sconren, which haA been more
completely sconred after silea.ring. It follows tha.t the yield
of ya:n frOJn !leeca is greater tlmn from grcllsy wools, and
the Yield from ~coured wools is greater than hom fleoce.
Grea.t judgmen t is, therefore, wanted. in the purchaRe of
~he wools; the buyer. from inspecting the sample, has to
pulge the percentage of yield, Ilnd the variation 18 so grcf\L
that ono lot of wool a.t Dd. per p(lunn will prove to be 0. very
much dea.rer purchase t.han anot.her lot at. ls. tid. per
pound.
Judgment in the purchase of the wools is, perhaps, the
I most important element of success in this trfldo. From an
employer's point of view, it thus becomo~ of vital importance
to know whether his buyer's judgment is reliable ---i.e_,
whether the actua.l prodllction of yarn from the wool
corresponds with the buyer's anticlpa.tions. It is, therefore,
essential to the proper mn..nagement of a. concern that the
!Lctnal yield of every lot of wool should he worked out. But,
to continuf', the bIdes of wool a.re first broken up, as it is
called, which is separating wha.t is suitable for warp from
what if> suited for shoot, and the separated wool is then
scoured.
It is in this process that the great loss of weight occnnL
The next step is dying such portions e.s are intended for
colonred yarns. Now dye wn.res a.re very expensive materials,
(lnd n. careless or wa.steful dyer may easily injure tho Profit
and Loss Account to the extent of hunQrods of pounds por

4
 June
.June 18, 1887.
]887. THE ACCOUNTANT.
ACCOUNTANT . 363
l\.nnUlJL
fLllllUlll.
1\.l1l1tltJL It is is,, therefore, o~gre[l.t
of great importanco
o!great importance that his results, charn-eten,. rl'he
chftrn.cters.
charn.cter~. 'rho subsequent proeessiJs
rrho proeessos a.re-doubling
proecssos are-doubling tho
in weight
wc.ight dyed and a.nd consumption of dye wares, should be warp, warping, weavil~g,
W[UP, weaving, scouring the cloth, drying, burling,
weavir;_g, hurling,
known from week ' . . eek to week. Next follow naIi lot of processes milhng,
millmg, and floa number of other prOCf':3SeS
millIng, proo8sscS involved in finish~
procrsscf:> finish-
fiuch as willoughing,
such willoughjng, picking, p[cking, oiling etc.,
plcking, eto., which leadlea.d up 1..0
Lo ing, and in one and a.nd all of Lheso
u.nd lheso what 1 have ~a.it1
sn.ill respncting
sl1ill respecting
spinning. Now, in spinning, although it is done mainly by
spin.ning. dyeing a.nd and spinning appJies
applies with
wlth equa.l
equal force.
mt\.chincry,
machinery, thore is, as in everythiIlg
mu,chinery, everythiug else,
everythillg cllle, all the difference
cille,
between
botween good fmd and bn.d workmen. Ono One ma.n m,Lrt will bring out a
mrLn each one, if waste of ma.terial
In ea.ch uH\.teriu'} or careless
carele~l)
ca.rele~s work is to be
full yield in yarn and very little wasto: was
waste:to: another, with tho the pre,'cntcd, production and consumption iI.ccolmts
prevented, a.ccounts from
same
sa,me IIl!l.teriu,}s,
ma.terials,
materiu,}s, will furnish a short yield in yarn and a dis- week to week must be kept. Now, Ir wIll wlll not trouble Lroubleyollyou by
proportionate quantity quantity, ( f wa.ste.
waste. ':ro
'ra
~ro iusure
insure tho best
the hest results, sketching
sketchiug the character of books required to get tho results
charl1cterof resuHs;ji
1\ record must be kept of the weight of wool issued to each
H. eaoh tha.t
that is very simple
simplo work for an Bon accountRout Lf
a.n accountR.ut
accountfLut H he only take::!
t.akes
takes
mfl,n,
mao, and of the ft'sults
mn.I1, ft)sults of his work in ya.rn and waste. the trouble to properly investigate
investiga.te oach process, the right
proces£, t}H~
UH~
Each man's
ma.n's results are thus in continual continua.l comparison
continuu.l compa.rison
oompa.rison form of book at once occurs to him. I will, win, therefore,
therefom, carry
cn.rry
en.rry
with the re::lults
re1:mlts of other men, anu
re~ults and with his own previous
anel you forward
forwl1rd to the focul:ising 0.11
focu!:)sing of all
a.ll those
the so rosulLs
thesu results in n. (\, weekly
weokly
record,
rocord, and good and
recora, a.nd bad
ba.d workmen alike aliko build up their own cost sheet, which you will find in Account No.4. No, 4.

ACCOUNT No.4
WEEKLY
WEEKr~Y YAHN COS'I'
COS'l'
COST il3HlcgT.
Ill'; ET.
BH1'E'l'.
'lIWEED.
'l'WEED. SEllOE
SEHnE SnooT.
SEnOE

Weight Per lb. Amount. Weight l'er

Per lb.
I'er Amount.
R.
A. d. £ 8. B. (I.
d. n.
H.
R. d_
d. £ n.
1;
); H.
/-i. d.
Yarn Produced

..
2200 1 6'50 169
16!J 11
6'5016:1
0·50 II 8 3146 7 14 !lH
71-1
711 !ICl !l 10
\1,1 11
II to
Pel' centage
Per centR.ge for Joss
centftgc loss r, HI
1-11
l'll 10 H ~ 6 12
1~ ·8r. JII1 fi fi
·8r,
'811
s. d.
£ B. lbs.
lb•.
llreaking
13reaking up a.nd Scouring-\.Vages ..
and Scouriog-,\Vages
~couriDg-'\VR.ges " 3 13 8)81
81 2100 o010
Materials 1 3 OJ OJ 2,100
' ·55
-55
'55 fi 10
Deying Wa.ges
Wages 510 01 0)
3,550
3.550 1·63
1'63 14 15 2
Materials
.Materials 18 G 55fJ'
r, 5;'
Spinning Wages .. 42 1 91
Materials 27 14 ~:8) 1l,44fl
6,44G
G,44(j 2-60
2·60 II}
Ifl
23 Hi ~ 2,GO
2,GU 31 1 ti
Doubling Wages .. 5 8~ 101
Materials o0 12 (;J Z,647='fj5
2.647 = '!}5
'f>5 ·26
'26 2 7 8
HI

2 0-05
065 225 15
0·05 6 10 60 1:18 18 11
GO 138

WEICKLY cos'r
WEEKLY COST SHEET
SHEICT OF FINISHED PRODUCE
PIWDUCE
PHODUCE
TWEEn.
TWEED. SBRGE
SERGE SU:-WHI1::S.
SU:WH[1:;S.
SU:-WHIBS.

Pro-
l)ro~
IJro~
Cost p. yd. Production
duction. Amount Amount Cost p. yd,
yd. Production
Prodnction
l)rodnction Amount
Amonnt
8~
8~ oz. If) oz.
IG oz..
07.. 16oI..
16 ox.
160".
8~ oz.
8~
£ H. d.
s. s.
f:i.
8. d. £ s.
8. u.
J. R.
H. d. £;; s. d.
Ya.rn consumed in pieces woven
Yarn 2,100 138 G 6 9gV
f) 1 3'81
3·81 2,OOu
2,000
2.000 135
105 0 0 1 4'20
4·20 77 2 7
Warping
\Vll.rping 1,710 2 ,I4 2 '31
·31 422
4~2 o011
11 0
()
\Veaving
Weaving
W~aving
Scouring, Drying a.nd Milling
1,710 13
1~ 17 10 1'95
1·9S 1,810 1'6 i'3g '414
16 " 2'21
2·21 USO
680
tiSO ;:; 10
1U 6ti
2,610
2,615
2,fi15 Ij
Ii 10 9
(j 'GO
·00
'00 1,810 0 1 0 1'20
1·20 1,01(;
1,01G 210 10 !I
\1II
Burling 1.710
1,710 41411 1
4 14 ·66
'6fl
'61l 1,810 1 5 B
R
S '17
·17 70B
70M 1I HI 0
Finishing 1,710 G6 1!)
10
19 8 ·98
'08 1,810
I,BIO J1
II 15 ·i.j 1-1;6
1'56
1·56 1,IH
1,1 J.l
1,11-1 1 11 0()
Engine & Machinory Expenses 2,100
"
H ()6 3 ·95
'95
'05 2,000 13 R
H 4 l'5H 7HO
7tlO :< 1 \1:1
!I
Pattern ¥leaving
Pa.ttern
Pa~tern Wea.ving 2,100 2 12 6G ·30
'30 5;)0
560
5fiO ()(} 1:1
1/ la
L! !I
Dyeing Pieces .. 2.000 38
38 55 0ii 4~59
4·5g
4'59 (imJ
GOO
GmJ 1:1 .j.J
I:l 0
General
Ci-eneraJ Charges 2,100 32
3~ jG
16 ".'l3 :i-7s
;]'75
:3·75 2,000 31
~1 5
Ii 0 3'75
3·75 1,207
1,'207
1,20"/' 211 :1
20 ·1-I

216
21G H B
.~ 1':11
2 1·:l1
l':l1 25tj
2[)fi H 8 2 'j·2/)
'j'2() 1 ~~~
:2~) l {j(j H

~~hat
~'']'ha.~ttaccount
a.ccount I think sufficiently explains itseH,
Bufficiently explfl..ins itself, but, at tioublmg (as
UOllb1ll1g
uoubllng n.lJOut half
(llS only auout haH the weight
weighL of yarn has
hn.s to 1)(:
ht~
the riskfiSk ofo[ repeating
repea.ting what is ohviou:i,
obviou:-l, I will sn.y
obvioUil, say 0. fow
su.y few word::;
words doubled) it'
i8 cqUlv;tlent
is eqlllvltlent to
eqlllv:tlent ait much la.rger
lo fir larger production,
pr()dudwlJ, ill
pcodudlUn. In dIU
Lho
t-hc
a.hout it. Firstly, let me a~k
a,Lout
a.Lout ask you to notIce
nO~lce
notrce that the propor.
propor- following week these proportions might he reversed. though
be revcl':)ctl.
reyor~ed.
tlOn
tlon of the weekly wages wage!; and materin,ls
materin.ls other tht\n tho:::e tho£8
tho£e let me saysa.y t.hat, weH-ma.naged concerns,
thali, in w'cll-managed
thl1.~, \"elJ~ma.n(tged conCGrns, we generall} ~enerall}
~enemll}
belongmg
belong 109 to the two sta.ples,
belonglllg staples, tweed and serge, are n.1l 1l.11 thrown
nil flnd
find the productIOn
fmel productIon in each process UO(!8 does adva.nce
Joes advlLlIco neuly
advlLllce ne.t.rly //(Jri IJ(JTi
Ih11'i
together in the sundries column. These are a number of passu, and one ~reat n.dvantage of proper cost
t-::reat n.dvauta..ge co::st shf~el~
s[leet~ is thn.t
i:-; tlUl,t
small dissimill\r
Small
snlall dissimilar products, the working out of the separate
dissimiln.r they
tboy enable the ma.nager manager
ma.nn.ger to see that the differeIlt
difTerent dep<1l'tmcnts
difTercllt (iepiLrtlllents
(lepl.l,r~ll1eHts
cosb
cost of which would Involve too great labour. are
I.\.IO working up to oach
a.to each other. 'the
ea.ch 'l'he
rrhe second it.em item
it.ctu of the Yil,tn Y,l.l"1l
Yi.\.tll
L~oking
. Looking now at the weekly yarn cost, we find the tho neces-
ncces- Cost Sheet, "Percentage
II Percentage for Loss,"
Loss, nII is the llscertn,incd loss
tho ascerta,incu
ascerta.iucu
Sity
sity
~lty is IS obvious of ta.king
taking the oost
cost of each proceRs
proceRS separo.tely,
sepa.rately,
sepa.ra.tely, of weight for that week in all e.1l the several
a.1l sevora.l processef>
processes Involved ITlvolved
ITivolved
bec.ausc
bee.a.uso scvera.l processes do not a.dvance pari lJa3su,
ec.a.usc the several pa$su,
lJa~su, in turning rawra.w wool into yarn. ya.rn. 'I'hug111m:>! 2,200
1'hu~ Ib:-i. of ttwedl
2,':200 Ibs, weud yarll
tweed yarn
whIle 2,200 Ib,.
whlle
While lb •. of tweed yarn have been produccd,
Ibs. prodllccd, tho the produced represents aa. consumption of raw \.,.'001 \vool G
wool U
lj P(,f pc.'1'
P<"l' cellt.
CCltt.
CCltt.
dyelDg
dyeIng has ha.s represented a production of 3,550 lb •. , and the
lbs., more than
tha.n tha.t
that weight, and tho prioe price of r/l,wnl.W wooJ
raw wool is there· there-

5
 364 THE ACCOUNTANT.
fore incre..sed by the s ..me per centage. The whole of the
proce ....s pertaining to tweed ya.m do not .. pply in our suI'-
posed CB.e to serge sboot. We will suppose the serge w..rps
are bought as spun y ..rn, and th .. t breaking up ..nd doubling
are not therefore required; we will Bloo suppose thBt tbe
serge goods, instead of being dyed ... yarns are died a.fter tbe
pieces are woven; for that rea.son no cost is put ag&inst
those Items in the serge column. Turning now to the cost
sheet of fiuisbed products, you will here meet with one of
the principal dIfficulties in preparing reliable cost sheets -
the reduction of all the production to common denomina,..
tors. Tbe production of tweed, for example, will include
cloths of va.rying subota.nce from 6, ozs. per yard np to
20 oz •. ; cboice ha. tben to be made of a. otanda.rd, which
sbould be the cloth of wbicb the production is grea.test. In
June 18, 1887.
the supposed c ..se we ha.ve ....umed this to be cloth weigh.
ing 8~ oz•. per yard. Now, as f ..r as the yarn consumed i.
concerned, the denomin .. tor is readily .. rrived at.-.. y..rd of
cloth weighing 17 oz •. per ya.m (if sucb a size were made) is
the equivalent of two ya.rds weighing B~ ozs. Coming to
tbe next proceos, warping, WI.' muot calcul ..te the cost on ..
different scale. A yard of 17 OZ8. costs no more to warp
than .. ya.rd of 8! OM., and so the divisor in this case muot
he the number of yards .. arped, irrespective of substance.
The same principle governs the we ..ving. Scouring, drying,
a.nd milJing introduce us to a. fresh denomina.tor a.ltogether;
these proces.es follow neither the principle of yarn con·
sumed nor of warping, but the cost va.ries according to the
substance of a cloth on a scale applicable only to tbe pro·
cesses, and ascertained by exporiment·. In like manner

Dr. ACCOUNT
SERGE. SERGE. SERGE. SERGE. SUNDRIES.
per lb. JMr lb.
1882. s. d. £ o. d. 8. d. £ s. d. £ s. d.
Dec. 31~To lb. Raw Wool consumed 1 7·80 8520 7 6 8·n 6140 18 9 1560 17 1
" Breaking·up a.nd Scouring ·58 220 17 0 ·02 12 10 0 60 18 10
" Dyeing .. 1·54 640 1 B ·01 10 14 8 20 4 7
n Spinning 2·63 1095 4 6 2·64 1954 17 2 205 0 4
.. Doubling ·25 106 410 10 6 4
2 0·75 10312 15 6 10·78 8119 0 7 1857 7 2
" Decrease in Stock 89 10 11
.. YBrn bought •. 200 £8 11 36i6 'I 6 1600 2 7
£10513 14 5 £11735 2 £3547 0 8
perya.,d per yard
" Ye.m consumed in piece~ woven brought down 1 3'89 9985 15 1 1 4·16 11312 2 8 3462 IB 7
.. Warping ·32 206 7 8 48 17 1
.. Weaving 1·92 1241 8 2 2'19 14'85 '7 2 464 B 2
..
..
II
Scouring. Drying. and Milling..
Burling ..
Finishing
·Ill
·66
'96
~1l7
420
601
1
17 2
4 1
" 1·22
·18
1·52
591 2
120 8
B02 2
8
6
8
104
70
85
7
4
9
2
3
6
.. Engine and Uachinery Expenses ·93 579 411 1·60 941 2 8 146 2 7
" Pa.ttern \Veaving.. -31 185 9 7 28 17 10
tI Dyeing Pieces 4.'61 aoin 1'4 11 624 18 1
II Geners.l Cba.rges, viz. : -
Packing Materials .. .. £80 2 7
Co.rrin.ge on Sales .. 360 4 8
Office Salaries & Expenses .. 520 6 1
Travellers' Salaries & Expenses.1580 4 2
General Salaries & Wage.. .. 571 4 3
Rent, Rates, Taxes, &c. .. . .1620 4 1 3·69 2342 I!I 3 a·6~14 2639 14 7 795 8 11
Intere"t ann Bank Charges .. 420 8 6
Depre<iation .. 624 8 5

.£5778 2 9
2 1·29 8
15~aO 7 3 2 7-17 20893 15 10 5831 12 2
" Discounts 3·38 2160 4 8 3·13 22-15 8 1 560 8 4
" Decrease in Stocks 2070 8 4 741 2 B
" Balances, being profit on Tweed and Sergo I. g'88 2480
carried down •• J 8 1·08 771 7 2

2 8·55 £22641 8 10 2 11·38 £23910 11 3 £7133 3 2

.. LO~8on Sundries hrought down .. 685 0 5

" Deficiencies in Yarn Stocks brought down, viz.:
Tweeu .. £187 10 6}
Serge .. 320 11 1
Sunuries .. 84 2 1 592 3 8

" Deficiency in Dyewa.res 94 8 3

.. Bad Debt. .. 416 1 8
" Ba.lance. being net profit 1464 1 8
£3251 15 9

6
 June 18, 1887. THE ACCOUNTANT.
ha.ve to bo determined tho principles of division for the other
items of cost. Aga.in, certo.in items, Buch 80S ,. Engine and
Ma.chinery Expenses ., and" Genera.l Charges" are divisible
over tho throe branches of the trade-viz., tweed Berge, and
sundries, snd the rolo.tivo proportions for ea.ch branch ha,ve
to be determined-i.e., for this purpose Bo yard of tweed ha.s
to be brought to 0. common denominator with a yard of
serge. A little patience, however, cnn.blos an Accountant
to overcome all these difllcultics, a.nd, 8.9 I ha.ve a.lready
stated, I ha.ve purposely chosen n. cost a.ccount of special
complexity to Illustra.te this part of my lecture.
Now, having got our cost sheets, the great thing to be
done is to build our Trading Account upon them, for it is
only by the Trading Account tha.t the correctness of the cost
sheet i. proved. The figures of the cost sheet may be all
pretty and sJmmetrical, but when you get out the balance
365
sheet at tho end, the Owner of the mill may bo astounded.
by results a.ltogcther different from what he has been lell to
expect. The mill manager will, of COUfRC, swea.r by his
weekly costs, and unless you cn.n put your finger on tho
discrepa.ncy, the matter will remain Do mystery. It is
obvious that TnL'lc ACl?ount No. :J won't heJp YOll, but it is
also obvious tha.t you can casily frame (1 trade account that
wHl. If we open no wool account, and charge it with all
the wool that comes into the place. and creuit it with all
iSfiued for yarn making a.ccording to the cost sheets, we
shall sec wllcther the cost sheets aro right n.s far a.s wool is
concerned. FoJlowing the sarno process with dye WJ.res,
stores, coal, ya.rn, etc., we shnll be ena.bled to locate exactly
where the difference between the theoretical results of the COit
sheets Bond the actua.l results of the ba.la.nce sheet arises. No.
S Account is a Tra.ding Account constructed on this principle.

No.5. Cr.
TWEED. ~:h~RGll:. SUNDRIES.

1882. £ s. d. £ s. d. £ H. d.
Dec. 3t-By Yam consumed in pieces woven carried down 0085 15 1 1131~ 2 8 3402 18 7
" Increase in Stock 340 8 10 102 S 4 ,.
" Ba.la.nces ca.rried down, being deficiencies in Yarn Stocks 187 10 6 320 11 1 'iH 2 1

£1051~ 14 5 £11735 2 1 £3547 0 S

.. Sales .. 22641 8 10 23562 S 4 6448 2 9

,. Increase in S wck al~ 2 n
" Be.laDoe, being los8 on Mund~ie8 ~~rri~d do':"n .. 685 0 ~

£22641 8 10 £23910 11 1 £7133 3 2

Profit on Tweed, brought down 2480 8 7

Dillo Serge ditto 771 7 2

£3251 15 9

7
 366 THE ACCOUNTANT.
Let us invest.igate shortly the information obtained from
account No.5 which could not be obta.ined from account
No.3. By account No.3 we were only enabled to ten the
proprietor that all his transactions, jumbled up together t
resulted in a profit 01 £U64. We are now able to ten him
tbaL tho two staples, Tweed and Serge gave a much larger
profit, but that the production of Sundry Goods resulted in
a. loss of £685. His attention is therefore directed specially
to that branch of his business, in order to ascerta.in whether
the bad result i~ due to causes preventible or non-preventible
to lax control or to the general condition of trade. If the
former, the remedy can be applied; if the latter, we can now
also furnish him with data for determining whether or not he
had better discontinue the production of Sundry GOOdB.
This question is not finally determined by the mere fact that
a loss ha.s resulted, for we now proceed to point ont to the
proprietor that the loss of £685 is after charging the Sundry
Goods with £795 as their share of General Charges, so that
in itl.ct., while the Sundry Goods have made DO profit, they
have provided £110 towards the Genera.l Charges of the con·
cern; we then go through the constItuents of the General
Charges and tletcrmine if any. and if so, what reduction ca.n
be made therein, by discontinuing the trade in Sundry
Goods; if thereby a reduction of more than £110 ca.n be
foreseen, there a.re strong prillu; jacie grounds for relinquish.
lng that branch of the trade. Bllt further, by account No.
5 we are in a. position to infr rm the proprietor that his profi ts
would have been £()86 more but for deficiences not accounted
for in his stocks of yarn a.nd of dye wares, and here we find
the special advn.ntage of bmlding up the Trade Ac(!ount on
the Cost Sheets. We point out that the aggregated results
of the \Veekly Yarn Costs show that so much yarn hIts been
paid for '" produced; the aggregated results of the Weekly
Costs of finished products show that so much yarn only ha.s
been consumed in the pieces woven and that the valuo of
the stocks ascertained by actual weighing at the end of the
DR. AGGUUN'l'
1882. £ s. d. £ s. d.
Dec. ~n.-To UENERAL CEJAROEH, VIZ. :-
Salaries and Office Expenses 4S1 7 3
Commission 705 1 11
Rent, Rates, and Taxes.. 150 a 10
B",nk Charge. and Interest. . 41 8 1
468 7 1
To Bad Debts 65 1 ·1
10
To Balance, being net profit .. 1,485 10 11
£3,018 19 4 £3,018 19
Here end my illustration!=l, but [ wa.nt to refer for A. few
moments to Lbe be.aring of Trade Accounts, such !.LA I ha.ve
indicated, upon aUditing. Twenty years n.~o, after the
collapse of many companies in the storm of lS6G, there were
frequent discussiom~ in commt"rcial circles and in the prM8 0.3
to the utility of an audit. Several audited concerns fa.iled
and it Wd,S then found out tha.t unrerabJe Bala.nce Sheet~
had been issued, whIch were certified by accountants of
whos~ hOlla-fides and high stanlling there could be no
quest.lOn.
In concernR of the kind which I have ca.llecl constructive
and convertive it was found thn.t the auditors had been
compelled to. ta.ke the valuations of the stocks upon trust,
a.nd, when directors had awkward results to face, or when
they wi~hed to inflate the market in order to unloa.d their
own shares, they would qui{>tly write tlP the value of the
stocks by £20,000 or £30,000. The question waR debated
v~ry thoroughly, ~nd some a.ccountants a.ccepted the posi.
tlOn t?o.t as allclttors they were not responsible for the
va.luatlOn of the stock. Now, as the object of 8Jl a.udit is to
8
June 18, 1887.
period was £592 less than, accordingly to the aggregated
results of the Cost Sheets, they ought to have been. We
thus land the practical me.n"ger in thiB trilemma: we say
to him either you have paid the spinners for more yarn than
they actua.lly produced, or you ha.ve understated the
yarn you ha.ve consumed in the woven pieces, or you have
allowed the stock of yarn to be pilfered. Similarly we ph",o
the dyemo.n on the horns of a. dilemma,; either he has
nnderstated his weekly consumption of dye wares, or his
dye wa.res are being pilfered. Thus, the points of leakage are
at once detected and the proper remedy is applied.
The la8t class 01 trarles to which I will refer is the DistrIbu-
tive trades or those concerned with the sale of goods in the
same, or nearly the same, condition as that on which they arA
purchased, I will take- a metal merchant as a type of this
class. The Accountant's duty in this, as in all other CR.t-iep,
is to place himself in the position of the trader, and
determine what form of account is best adapted to aitl the
proprietor's work of supervision. Here there is no qlles~inn
of cost sheets, but profit is built up by prolitable contrad:-.
for purchase and sale of the same materia.l. Let us SllPPO!-H'
the case of a merchant dea.ling in copper, tin, and spelter.
His transa.ctions run into very large figures l and;the ma.tt~!r
of first impor~anee for his accounts to prove is that all his
Rtock iH accounted for, so tha~ by no chance bas any lot of
metal delivered hy him been omitted. +,0 ('n,rry out thIS 11 can·
venicnt form of jonrnal ean be devised, whereby all COPlIN,
tin and <::pelter which he buys a.re charged respectively to cop-
per, tin, or spelter stock acconnt3. Similarly his sales [He
credited to the lika stocl{ accuunts ; and the ledger lS ruled
to provide for weights as well as for amounts. Then cn.ch
stock account proves thnt all he hA.8 paid for has been sold
or remains in stock, and fnrther shows the total profit mn.tll!
in that particular commodity. '£he Trade Account OHm,
takes the form given in account No.6, which is so simple
that no words of explanation are required.
No.6. CR.
1882. £ s. d. £ s. d.
Dec. 31.---By Profit on sale 01---
Copper 2,280 13 4
Tin 1.380 4 4
3,660 17 5
Less Loss on sale of Spel ter . . 641 18 1
3,018 19 4
4
asccrta.in tho result of tho tra.ding, and as that result
depends generally more upon the valuation of tho stock than
upon any other figure, one wondm!'! what is the utility of an
a.udit which declines responsihility for the most importll-nt
figure in the accounts.
If you have flo steed in a l'ta.ble with six doors to it, and yon
only lock five of the doors, you may jus t o.s well leave all
SIX open, because 1 if a. thief comes, he wont waste his time
battering a.t the five doors which a.re locked, but he will
walk through the one which is not. Simila.rly if tho officials
of [\ compn.ny wish to deceive an a.uditor, they will not·
select one of the five figures which he can check, but tho
sixth which he ca.nnot. But if our Trade Accounts arc
built upon tho prime costs and cost sheets, in the manner
indica.tcd in this paper, we can most securely double-lock
and bar this sixth door.
It is impossible to imagine that an accountant could be
deceived 0.8 to the valuation ot the stock on such a system.
The deception would ha.ve to be carried through every
cost sheet from week to week. It would have to be st .. rted
 June 18, 1887. 'l'HE ACCOUN'rANT. 367
nt the beginning of tho yea.r, before tho offIcials could know
whether thoy would want to deceive or not. and it would
throw up the most; contradictory results in the weekty cost
silcott; which tho auditor could Hot fail to notice. Indeed,
by snch fl. system instead of the auditor being doubtful
(tilQut (,ho va.luation of tho stocl{ there is no figure in the
Ba.la.nce Sheet of which he can speak with more certainty.
It is interesting to note as bearing on the subject of my
lecture, that, in recent times, tho Legislature (\,ppears to
havo become a.hvo to tho necessity of proper Trade Accounts.
The references to the Accounts of trading concerns in old Acts
,){ Parliament are all obscure, intangible, a.nd in general
terms and a. literal complifl.nce with them could be arranged
so as completely to hide the information which accounts
a.re intended to show. In certain cases, however, in
wldch the public nature of the undertaking renders a
knowledge of the inner working of the concern advisable,
parlia.ment has now laid down the form in which the
Trading Account shall be drawn up. Examples of this aro
the forms attached to the Railway Regulation Act, and to
the last Gas Works Clauses Act, and compared with the old
regula.tions, these mark a. distInct adva.nce in the direction
of the principles advocated in this lecture.
r have thus sketched out imperfectly a development which
has taken place in our profession Within my recollection,
and which promises .. still more widely extended field for us
in the future. The question will perhaps occur to you
whether this is not expecting too much of Oha.rtered
Accountants-whether it does not involve that, besides
being men of figures, they must also be qualified builders,
engineers, ironworkers, mining ongllleers, woollen manu-
facturers, and 80 on. The answer is no I
The principles of costs of construction and proouction are
alwa.ys tho same; the qualified account.ant htl.s only to learn
to apply thoso principle::; to vltrying circumstances.
An architect has to acquire a complete knowledge of the
science and art of construction. lIe lIali then Lu plo.n Qn&
day Do brewery, then a cotton-mill, a. workhouse, a gaol, or a
club. He must be able to adap~ his knowled"e to each of
thes6; this does not mean that he must be qualified to
manage a brewery, mill, workhouse. gaol or club, but he
mnst know the requirements of each and provide for them.
This is an exact analogy to what is required from us.
We must acquire sufficient knowledge of each kind of
trade to enable us to follow the processes and pick out Lbe
vital points where continued supervision is necessary.
We must then adapt our knowledge of methods to the
requirements of ea.ch pa.rticula.r tra.de and a.s tha.t sentence
shortly summarises all th .. t I have said to you I will therewith
conch. de my leoture.
At the conclusion a general discussion ensued. The
Hen. Sec., refeered to the meeting as being the
closing one of the Session ..nd that although it was
Ia.st on the list it was Dot, by a long \lVa.y the leu.st. instructive,
and would rank as one of the best lectures the Society had ever
had. lIe also congra.tulated the members upon the increa.sed
attendance which had averaged 2n ..gainst 12 in 1885. and
ventured to express the hope tha.t in the forthcoming Sessions
it would still go on increasing; but that that would only be
arrived at by each member taking his individual part. He
then proposed a cordittl vote 01 thanks to Mr. Gibson for
his Lecture, whioh was unanimously a.ccorded.
A simila.r compliment to the Chairman for presiding
brought the evening to .. close.

9
References

Introduction

Battersby, Thomas. The perfect double entry book-keeper

(abridged) and the perfect prime cost and profit
demonstrator (on the departmental system), for iron and
brass founders, machinists, engineers, ship-builders
manufacturers &c., Manchester & London: John Heywood,
1878.

Edwards, R. S. "Some notes on the early literature and

development of cost accounting in Britain," The Accountant
(1937a), 7 August: 193-95; 14 August: 225-31; 21 August:
253-55; 28 August: 283-87; 4 September: 313--16, 11
September: 343-44.

Edwards, R. S. A Survey of French Contributions to the

Study of Cost Accounting during the 19th Century, London:
Gee & Co., 1937b.

Garcke, E., and Fells, J. M. Factory Accounts, London:

Crosby Lockwood, 1887.

Norton, G. P. Textile Manufacturers' Book-keeping for the

Counting !-louse, Mill and Warehouse . ... , Huddersfield:
Alfred Jubb, 1889.

Solomons, D. "The historical development of costing," in D.

Solomons (ed.), Studies in Costing. London: Sweet &
Maxwell, 1952, pp. 1-52.

Acknowledgments We are grateful to the Economic and Social

Research Council for financial support

for the research which has enabled the preparation of this

text. The editors also wish

to thank the Chartered Institute of Management Accountants

and Lafferty Publications

for their kind permission to reprint articles previously

published in The Cost Accoun

tant and in The Accountant. xvi