Test bank Health Assessment for Nursing Practice 6th Edition Wilson

Health Assessment for Nursing Practice 6th

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Chapter 01: Introduction to Health Assessment

Wilson: Health Assessment for Nursing Practice, 6th Edition

MULTIPLE CHOICE

1. A patient comes to the emergency department and tells the triage nurse that he is “having a
heart attack.” What is the nurse’s top priority at this time?
a. Determine the patient’s personal data and insurance coverage.
b. Ask the patient to take a seat in the waiting room until his name is called.
c. Request that a nurse collect data for a comprehensive history.
d. Ask a nurse to start a focused assessment of this patient now.
ANS: D
The nurse needs to begin an assessment as soon as possible that is focused on this patient’s
cardiovascular system. The type of health assessment performed by the nurse is also driven by
patient need. Personal data and insurance information will be obtained, but in this situation,
these data can wait until after the patient is assessed. Based also on Maslow’s hierarchy of
needs, physiologic needs take precedence. Rather than asking the patient to wait, the nurse
needs to begin data collection, such as vital signs, immediately to determine the patient’s
health status. Complications can be prevented if an immediate assessment is made to analyze
the patient’s symptoms. A comprehensive history is not indicated in this situation at this time.
Some subjective data will be collected, such as allergies and medical history related to
cardiovascular disease. Eyes, ears, or a complete musculoskeletal or mental health assessment
is not a priority at this time.

DIF: Cognitive Level: Apply REF: Box 1-3 | p. 3

TOP: Nursing Process: Assessment
MSC: NCLEX Patient Needs: Safe and Effective Care Environment: Management of Care:
Establishing Priorities

2. Which situation illustrates a screening assessment?

a. A patient visits an obstetric clinic for the first time and the nurse conducts a
detailed history and physical examination.
b. A hospital sponsors a health fair at a local mall and provides cholesterol and blood
pressure checks to mall patrons.
c. The nurse in an urgent care center checks the vital signs of a patient who is
complaining of leg pain.
d. A patient newly diagnosed with diabetes mellitus comes to test his fasting blood
glucose level.
ANS: B

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 A health fair at a local mall that provides cholesterol and blood pressure checks is an example
of a screening assessment focused on disease detection. A detailed history and physical
examination conducted during a first-time visit to an obstetric clinic is an example of a
comprehensive assessment. Assessing a patient complaining of leg pain in the triage area of
an urgent care center is an example of a problem-based/focused assessment. A patient’s return
appointment 1 month after today’s office visit to report fasting blood glucose levels is an
example of an episodic or follow-up assessment.

DIF: Cognitive Level: Understand REF: Box 1-3 | p. 3

TOP: Nursing Process: Assessment
MSC: NCLEX Patient Needs: Health Promotion and Maintenance: Health Screening

3. For which person is a screening assessment indicated?

a. The person who had abdominal surgery yesterday
b. The person who is unaware of his high serum glucose levels
c. The person who is being admitted to a long-term care facility
d. The person who is beginning rehabilitation after a knee replacement
ANS: B
A screening assessment is performed for the purpose of disease detection. In this case this
person may have diabetes mellitus. A shift assessment is most appropriate for the person who
is recovering in the hospital from surgery. A comprehensive assessment is performed during
admission to a facility to obtain a detailed history and complete physical examination. An
episodic or follow-up assessment is performed after knee replacement to evaluate the outcome
of the procedure.

DIF: Cognitive Level: Understand REF: Box 1-3 | p. 3

TOP: Nursing Process: Assessment
MSC: NCLEX Patient Needs: Safe and Effective Care Environment: Management of Care:
Establishing Priorities

4. For which person is a shift assessment indicated?

a. The person who had abdominal surgery yesterday
b. The person who is unaware of his high serum glucose levels
c. The person who is being admitted to a long-term care facility
d. The person who is beginning rehabilitation after a knee replacement
ANS: A
A shift assessment is most appropriate for the person who is recovering in the hospital from
surgery. A screening assessment is performed for the purpose of disease detection, in this case
diabetes mellitus. A comprehensive assessment is performed during admission to a facility to
obtain a detailed history and complete physical examination. An episodic or follow-up
assessment is performed after knee replacement to evaluate the outcome of the procedure.

DIF: Cognitive Level: Understand REF: Box 1-3 | p. 4

TOP: Nursing Process: Assessment
MSC: NCLEX Patient Needs: Safe and Effective Care Environment: Management of Care:
Establishing Priorities

5. For which person is a comprehensive assessment indicated?

a. The person who had abdominal surgery yesterday
 b. The person who is unaware of his high serum glucose levels
c. The person who is being admitted to a long-term care facility
d. The person who is beginning rehabilitation after a knee replacement
ANS: C
A comprehensive assessment is performed during admission to a facility to obtain a detailed
history and complete physical examination. A shift assessment is most appropriate for the
person who is recovering in the hospital from surgery. A screening assessment is performed
for the purpose of disease detection, in this case diabetes mellitus. An episodic or follow-up
assessment is performed after knee replacement to evaluate the outcome of the procedure.

DIF: Cognitive Level: Understand REF: Box 1-3 | p. 3

TOP: Nursing Process: Assessment
MSC: NCLEX Patient Needs: Safe and Effective Care Environment: Management of Care:
Establishing Priorities

6. For which person is an episodic or follow-up assessment indicated?

a. The person who had abdominal surgery yesterday
b. The person who is unaware of his high serum glucose levels
c. The person who is being admitted to a long-term care facility
d. The person who is beginning rehabilitation after a knee replacement
ANS: D
An episodic or follow-up assessment is performed after the knee replacement to evaluate the
outcome of the procedure. A shift assessment is most appropriate for the person who is
recovering in the hospital from surgery. A screening assessment is performed for the purpose
of disease detection, in this case diabetes mellitus. A comprehensive assessment is performed
during admission to a facility to obtain a detailed history and complete physical examination.

DIF: Cognitive Level: Understand REF: Box 1-3 | p. 3

TOP: Nursing Process: Assessment
MSC: NCLEX Patient Needs: Safe and Effective Care Environment: Management of Care:
Establishing Priorities

7. Which is an example of data a nurse collects during a physical examination?

a. The patient’s lack of hair and shiny skin over both shins
b. The patient’s stated concern about lack of money for prescriptions
c. The patient’s complaints of tingling sensations in the feet
d. The patient’s mother’s statements that the patient is very nervous lately
ANS: A
The lack of hair and shiny skin over both shins are objective data or signs that are part of the
physical examination. A patient’s concerns about lack of money are subjective data and are
part of the health history. A patient’s complaints of tingling sensations in the feet are
subjective data and are part of the health history. A patient’s family statements are considered
secondary data, are subjective data, and are part of the health history.

DIF: Cognitive Level: Apply REF: Box 1-3 | p. 3

TOP: Nursing Process: Assessment
MSC: NCLEX Patient Needs: Physiologic Integrity: Reduction of Risk Potential: System Specific
Assessments
 Another random document
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shall state “the amount which the holders of each of such preferred shares shall be
entitled to receive on account of principal from the surplus assets of the
corporation in preference to the holders of other shares.” With this exception,
none of the certificates may express any nominal or par value and this statement
of the amount of preference is regarded as an expression of par value for this
purpose. Each share is equal to every other share within its class.
Every certificate of such stock must bear plainly on its face the number of
shares which it represents and the number of shares the corporation is authorized
to issue. Regardless of the price paid for a share of such stock, all shares issued
by the corporation shall be “deemed fully paid and non-assessable and the holder
of such shares shall not be liable to the corporation or its creditors in respect
thereof.”
To the heedless a named value on a certificate of stock is sometimes
misleading as to the real value of the stock. The no-par-value stock overcomes
this in that a prospective purchaser is at once put on his guard to find out the
worth of the stock. Another advantageous feature is that the questionable
practices sometimes indulged in of booking stocks sold at a discount have no
place here because the stocks, having no par value, cannot be sold at a discount
and the record of their sale will carry therefore the price at which they were sold.
Some points in connection with booking this stock will be discussed later.
Watered Stock
So-called watered stock is stock which has a higher nominal value than the
true value of the properties for which it has been issued. Thus, if $1,000,000
worth—par value—of stock is issued for the purchase of property which has a
marketable value of only $750,000, the stock is said to be watered to the extent of
$250,000. The bookkeeping equation requires that an equality be shown between
the properties purchased and the par value of the stock, and this is usually done
by inflating the value of the properties when they are brought onto the books.
Treasury Stock
Treasury stock, when the term is used properly, is stock which has been once
issued as fully paid and which through purchase or gift comes back into
possession of the issuing company. Stock which has never been issued should not
be called treasury stock. The distinction between the two lies in the liability (or
freedom from it) to further contribution, in case of need to meet the claims of
creditors, on the part of stockholders who have bought their shares at less than par
value.
 In some states the sale of stock at less than par is forbidden. In those states
where the practice is allowed, the purchaser of a previously unissued share at less
than par is liable to the creditors (if the assets are insufficient to satisfy their
claims) for a further contribution equal to the difference between par value and
the price paid for the stock. If, though he pays less than par, the stock is issued to
him by the corporation as fully paid and non-assessable, he is not liable to the
corporation for any further payment to entitle him to all the rights and privileges
of a shareholder; but he may be liable in case of need to outside creditors who
have a right to expect always that assets of equal value to the stock issued
therefor have come into possession of the corporation. As mentioned above, this
trouble is obviated in the case of no-par-value stock. However, after stock has
once been paid for in full, all future purchasers may hold it without liability for
further contribution regardless of the price they pay for it. Because of its freedom
from this liability, treasury stock has a readier marketability than unissued stock.
In some enterprises, particularly those of a speculative character where it is
extremely difficult if not impossible to place a true valuation on the property to be
used or exploited, the practice is very prevalent of issuing the entire authorized
capital stock in payment for the properties to be acquired. The stock so issued
thus becomes fully paid and its owners liable to no further contribution. To
provide working capital, some portion of the stock is usually donated to the
company for resale. This is sometimes called donated stock and is, of course, true
treasury stock. In states where a corporation is permitted to buy its own stock,
treasury stock may be acquired by purchase. Theoretically, stock which has been
issued under a contract providing for redemption becomes treasury stock when
redeemed and may be reissued until it has been canceled through charter
provision to reduce the capital authorized. (See also pages 15, 16.)
Forfeited Stock
Stock is said to be forfeited through failure to make the agreed purchase
payments on it. The laws of the different states vary with regard to the conditions
under which stock may be declared forfeited. In some states the instalments paid
on the stock—or all but a small amount to cover the cost of handling the
transaction, or a specified portion of the amount paid in—must be returned to the
purchaser. In others, the entire amount paid in may be declared forfeited. In the
State of New York the provision in the law is as follows: “If default shall be made
in the payment of any instalment ... the board may declare the stock and all
previous payments thereon forfeited for the use of the corporation, after the
expiration of sixty days from the service on the defaulting stockholder, personally
or by mail directed to him at his last-known post-office address, of a written
notice requiring him to make payment within sixty days from the service of the
notice at a place specified therein, and stating that, in case of failure to do so, his
stock and all previous payments thereon will be forfeited for the use of the
corporation. Such stock, if forfeited, may be reissued or subscriptions therefor
may be received as in the case of stock not issued or subscribed for. If not sold for
its par value or subscribed for within six months after such forfeiture, it shall be
canceled and deducted from the amount of the capital stock.” The provisions are
very specific and must be carefully followed. The method of accounting is given
on page 19.
Bonus Stocks or Bonds
Bonus stocks or bonds are stocks or bonds given as a bonus upon the purchase
of other stocks or bonds. Thus, upon the purchase of a share of preferred stock,
one share of common may be given as a bonus.
A S
Accounting for the original issue of stock has been treated in Volume I. There
several different methods of opening the records of the corporation were given
and the manner of treating premiums and discount and instalment subscriptions
was shown. Here some additional problems peculiar to corporation accounting
will be discussed.
Discount on Stock
In the State of New York the stock of a corporation cannot be sold below par.
Where sale below par is allowed, the proper booking of the discount requires
consideration. The Interstate Commerce Commission requires that discounts or
premiums be shown on the books under those titles, i.e., Discount on Capital
Stock and Premium on Capital Stock. This method is to be commended as being
true to fact and presenting a full and sufficient record of the facts. In the case of
other concerns over whose accounting practices there is no regulation, that
method is honored more in the breach than in the observance. A prevalent feeling
is that the appearance on a balance sheet of such an item as discount on stock is a
serious reflection on the standing of the corporation and is to be avoided in any
way possible. Discount on stock is not an attractive item on a balance sheet, but
there is little justification for such sentiment in those states where the sale of
stock at a discount is a perfectly legitimate transaction. The balance sheet ought
to represent facts as they are until they change; then the new conditions should be
shown. So long as the discount on stock remains a fact it should be so shown.
When the discount has ceased to exist through its absorption against premium on
stock or the general surplus, it should no longer be reported because it is then a
matter of ancient history with which the present is not concerned.
A favorite method of charging the discount on stock to organization expense
is not approved, not because it is a misnomer, for discount may well be looked
upon as one of the expenses of organization, but because it is an item of sufficient
importance and interest to require separate record. Charging the discount to some
asset account, when payment of stock is made by property instead of by cash, is
to be severely condemned. Inflation of asset values to cover up such an item
cannot be justified.
Premium on Stock
The premium on stock sold above par is best recorded in a premium account
which should remain on the books as a part of the permanent capital and not
therefore be transferred to surplus and returned as a dividend to the shareholder. It
may be legitimately used to cancel any discounts.
In the State of New York a corporation cannot issue its stock “except for
money, labor done, or property actually received for the use and lawful purposes
of such corporation.” A broad interpretation has been given the word labor so that
under the law it may comprise both manual and mental labor and services of
almost any kind legitimately received at the time of organization of the
corporation or at any subsequent time. Stock may thus be used to pay for
organization expense, promoters’ fees, etc.
Property Exchanged for Stock
Where stock is issued for property, no more is supposed to be issued than has
a par value equal to a fair market value of the property received therefor. In
valuing the property the judgment of the directors is conclusive, unless fraud can
be shown. Any stock issued for property becomes full-paid and the owner is
neither subject to further call by the corporation nor liable to contribution for the
benefit of creditors. In all statements and reports required by law to be published,
stock issued for property purchased must be so reported.
Treasury Stock Donated
When treasury stock comes into the possession of the company by donation,
the entries needed to show the transactions are somewhat as indicated below,
some variations from the form shown being sometimes met with. Practice varies
as to the value at which treasury stock shall be brought onto the books, some
concerns booking it at an arbitrary value based on an estimate as to what it will
probably bring when sold; others booking it always at par. Practice varies also as
to the manner of showing treasury stock on the balance sheet, some listing it
among the assets at the value at which it was brought on the books; others
treating it as a deduction from authorized capital, a sort of valuation account for
the capital stock. These points are discussed in Chapter XXI and will not be
treated here except to state a conclusion on which the booking of the transactions
depends. Manifestly, if treasury stock is to be treated as a deduction from capital
stock, it will have to be brought onto the books at par. Such treatment usually
results in an inflated showing of the surplus arising from the donation until that
has been adjusted to the values realized from its sale—an adjustment which
cannot be completed with accuracy until all treasury stock has been disposed of.
If treasury stock is to be shown among the assets on the balance sheet, it is
perhaps best booked at an estimated realizable price, a method which will show
the donated surplus also at an estimated realizable figure. While authorities differ
on these points, the weight of opinion seems to favor booking treasury stock at
par and showing it as a valuation account on the balance sheet.
For the sake of illustration assume that the stockholders donated $100,000 par
value of common stock to the corporation and that $50,000 of it is sold at 60
cents on the dollar. The entries to record the transactions would be:
(1) Treasury Stock, Common $100,000.00
Donated Surplus $100,000.00
(With suitable explanation.)
(2) Cash 30,000.00
Discount on Treasury Stock, Common 20,000.00
Treasury Stock, Common 50,000.00
Other titles for Donated Surplus are “Donated Working Capital,” “Donation
Account,” etc. The account “Discount on Treasury Stock, Common” will
ultimately be closed against Donated Surplus, and there is no objection to making
the charge for discount directly to Donated Surplus instead of as shown above,
although the method shown perhaps makes more easily available the information
as to the discounts allowed on sales of various portions of the treasury stock. If it
is sold at one price, the charge for the discount should be direct to Donated
Surplus. A balance sheet drawn up at an intermediate period, i.e., before Discount
on Treasury Stock is closed, should show Donated Surplus at its adjusted figure,
viz., book value less discount. After all treasury stock has been sold, the Donated
Surplus account, as adjusted, will show the true surplus arising out of the
donation transactions. The proper disposition of this—as to whether it should be
maintained as a permanent increase in capital, be transferred to general surplus
and so be made available for dividends, or be treated as a deduction from plant
values on the theory that they have been overstated as originally booked—is
discussed in detail in Chapter XXI.
Bonus Stock
Bonus stock is usually treasury stock for the very good reason that, if it
carried a liability for contribution in amount up to its par value, recipients of such
stock might not be overly appreciative of the gift. Instead of being an incentive to
purchase the securities which it accompanies as a bonus, it might act as a
deterrent. Bonus stock is a gift on the part of the corporation and is therefore an
expense. While custom favors recording the expense under the title “Bonus”—or
even including it with organization expenses—and treating it as a deferred
expense for a number of periods, a correct analysis of a bonus stock transaction
may dictate other method of record. If the bonus stock is given with an issue of
bonds which could by themselves be disposed of only at a discount, the difference
between the market value of the bonds alone and their par value should be
charged to Bond Discount, and the rest of the loss on the transaction may be
charged either to Bonus account or Discount on Treasury Stock. This distinction
is important, as will be seen in Chapter XX where the true nature of bond
discount is discussed. When data are available for making the separation it should
always be done. Thus, if a $1,000 par bond has a market price of $950 but when
sold with one share ($100) of treasury stock as a bonus brings $1,000, the record
should be:
(3) Cash $1,000.00
Bond Discount 50.00
Bonus (or Discount on Treasury Stock) 50.00
Bonds Payable $1,000.00
Treasury Stock 100.00
The customary method of showing, as in entry (4) below, is theoretically
incorrect, though it may be necessary to use it when the data needed for the other
entry, i.e., (3) above, are not available.
(4) Cash $1,000.00
Bonus 100.00
Bonds Payable $1,000.00
Treasury Stock 100.00
 If a bonus of treasury stock is given with the sale of preferred stock, similar
treatment would make possible a showing of the portion which is really discount
on stock and the portion, if any, which is true bonus. Inasmuch as discount on
stock and bonus are very similar in kind and in manner of treatment on the books,
nothing of real value is perhaps gained in making the separation. The ultimate
disposition of the Bonus account is, as indicated above, to treat it as a deferred
expense, charging it against profits as rapidly as conditions warrant. It is an
undesirable item on the balance sheet or ledger and should be expunged as soon
as possible.
Treasury Stock Purchased
Treasury stock which is created by purchase by the issuing company requires
consideration. If the price paid is less than par, carrying the treasury stock on the
books at par requires an offsetting credit account similar to the Donated Surplus
account used above when the stock is created by donation. This credit account
simply represents a book surplus and should not usually be made the basis for a
dividend. This account may be called “Treasury Stock Surplus,” “Contingent
Profit on Treasury Stock Bought,” or other title indicating the true nature of the
item. When the treasury stock is resold and the discount or premium on it is
charged against this surplus or credited to it, as the case may be, the balance of
the Treasury Stock Surplus account will then show the realized profit or loss on
the completed treasury stock transactions and may be disposed of as indicated
above for Donated Surplus.
On the other hand, if the price paid by the company in the purchase of its own
stock is more than par, the premium paid must be charged against general surplus
because there is usually no other place for the charge unless there is still open on
the books a Premium on Stock account arising out of a previous sale of stock at a
premium. Purchase of stock at a premium may represent simply the payment to
the owner of the stock of his share in the general surplus of the company, in
which case the premium paid must be shown as a reduction of that surplus.
Redemption of Preferred Stock
Handling redemption of a preferred stock issue is exactly the same as
handling treasury stock by purchase. If by contract agreement at the time the
preferred stock was issued it can only be redeemed at a premium, the premium
must be charged, as indicated above, to an open premium account or to general
surplus. The effect is similar to the payment of a special or extra dividend at the
time redemption is made.
Forfeited Stock
Payments made on stock which is declared forfeited constitute an item of
surplus but of a permanent nature, i.e., not a surplus applicable to the declaration
of dividends, though there may be no legal inhibition to that use. If the stock is
resold any discount on the resale is properly charged against the surplus arising
from the forfeiture. By way of illustration, assume that $1,000 worth of stock has
been subscribed for and payments amounting to $400 have been made when the
stock is forfeited for failure to pay further instalments. The stock is offered again
for subscription and is sold for $900 and payment has been received in full. The
entries necessary to show the above are:
(5) Subscribers $1,000.00
Capital Stock Subscriptions $1,000.00
(6) Cash 400.00
Subscribers 400.00
(7) Subscribers 400.00
Surplus from Forfeited Stock. 400.00
To transfer the forfeited
payments to Surplus.
(8) Capital Stock Subscriptions $1,000.00
Subscribers $1,000.00
To reverse.
(9) Subscribers 900.00
Surplus from Forfeited Stock 100.00
Capital Stock Subscriptions 1,000.00
(10) Cash 900.00
Subscribers 900.00
(11) Capital Stock Subscriptions 1,000.00
Capital Stock 1,000.00
Stock of No Par Value
Booking capital stock of no par value presents no new principles. Inasmuch as
the stock has no fixed par value, its sale is recorded for what it fetches. There can
be neither discount nor premium. Payment of the subscription may be made, just
as in any other case, by means of cash, property, or services, and the same care
must be exercised in placing proper valuations on the property taken over. Here
there is not the danger of inflating property values to show them equivalent to the
par value of the stock issued therefor. Rather, subscription for the stock is made at
the figure of the fair value of the property to be turned over in payment of the
subscription. In the case of no-par-value stock even greater care must be
exercised to see that the contributed capital shall never be encroached upon in the
declaration of dividends, and careful supervision is somewhat more difficult
because the number of shares issued bears no relation to the amount of the capital
stock.
Distinctive Records
The accounting and other records peculiar to a corporation are explained in
Volume I, Chapter XLVIII. These records are the subscription book and
subscription ledger or instalment book, the stock certificate book and stock
ledger, the stock transfer book, the minute book, sometimes a dividend book, in
large companies a register of transfers (which classifies the information as to
transfers given in the stock transfer book, and so may serve as a convenient
posting medium for the stock ledger), and a stock register (a record kept by the
officially appointed registrar of the corporation, whose duty it is to see that there
are no irregularities in the issue of stock and that there is no overissue). The stock
register should show the amount of stock authorized and the amount issued at any
given time, the balance being the stock not yet issued. A form for the stock
transfer book and several forms for stock ledgers as prescribed by the
Comptroller of the State of New York are shown below.[3] The two latter forms of
the stock ledger are applicable only to the State of New York.

Ledger Folio 27

Transfer No. 556

A A C

For value Received, I hereby sell, assign and transfer

unto John H. Lansing, of Newark, New Jersey, Seventy-
six Shares of the Capital Stock of the above-mentioned
Company, now standing in my name on the Company
 books and represented by surrendered Certificates Nos.
32, 37, and 44.
Witness my hand and seal this 28th day of September,
1918.

G B. G [L. S.]

By G G , Attorney.
New Certificate No. 224
Issued to John H. Lansing
Ledger Folio 84

Stock Transfer Book

J H. K , 230 Broadway, New York

T W C N
D
S N
T
T S R S
1917
March 13 W. K. Howard 15 70 10
July 15 Robert Moyer 70 145 40
July 31 Harold McKain 145 40
December 3 James McNeil 85 175 20
December 16 James Archer {175} 231 105
{165}
December 31 Balance 180
395
 J H. K , 230 Broadway, New York
T W C N
D
S N
T
T S R S
F W N
D A P C
S
T S N
T S
1917
January 10 Original Issue Full-Paid 15 90
March 25 George Holmes ” 85 75
August 1 Harvey Cornell ” 150 35
August 15 Howard Gaines ” 160 50
”
September 2 John Woodwell ” 165 100
October 5 Henry Simpson ” 42 45
395
1918
January 3 180

Stock Book or Stock Ledger

 Stock Book to be Kept by Brokers
(New York Form Prescribed by Comptroller)

Stock Book to be Kept by Corporations and Transfer Agents

(New York Form Prescribed by Comptroller)

Stock Ledger
The stock ledger is a subsidiary ledger controlled by the Capital Stock
account or accounts on the general ledger. It may, of course, be made self-
balancing just as any other subsidiary ledger. There has been some controversy as
to whether the stock ledger is normally a credit or a debit balance ledger. In some
concerns the stockholder is debited with the shares owned, and in others he is
credited. Theoretically, in accordance with the principle of all other controlling
accounts, the subsidiary ledger—in this case, the stock ledger—merely carries the
detail of the controlling account. If, then, the controlling account is a credit
balance account, the accounts on the subsidiary ledger must similarly have credit
balances. Accordingly, the stockholder should be credited with his net holdings.
Practically it makes little or no difference because the subsidiary ledger is no
integral part of the debit and credit scheme of the general ledger. Of course,
unless practical difficulties prevent, practice should always follow the
theoretically correct method. No difficulty need be experienced, however, in
accommodating oneself to either method of record on a subsidiary ledger. In the
stock ledger the record of holdings is kept in terms of the number of shares
owned rather than by the par value of the holdings.
Minute Book
Before leaving the subject of the records peculiar to a corporation, it is desired
again to call attention to the keeping of a careful record in the minute book. This
book should contain first a copy or duplicate of the corporation’s charter.
Following this should be the by-laws of the corporation. Sufficient blank space
should be left at the end of each of these documents to make record of any
amendments to charter or by-laws. There should follow a complete record of the
deliberations and authorizations of the board of directors as affecting the
management and control of the corporation’s policy. The minute book is often the
source of authority for many of the most important entries made on the books of
account, and great care must be used to make the record full, complete, and
accurate. Such matters as leases, purchase and sale of properties, bond issues,
dividends, and other similar items should have very careful record.
Conclusion
Other features of the corporation from the accounting point of view are
treated under their respective heads in later chapters. These include such items as
bond issues, sinking and other funds, reserves and surplus, scrip and stock
dividends and other dividend considerations.
It is proposed in the next two chapters to discuss the corporation from the
manufacturing viewpoint, types of accounting records sometimes used therefor,
and the elements of manufacturing costs. After that the problem of the balance
sheet and the principles of valuation applicable to it will claim attention.
 CHAPTER II
THE VOUCHER SYSTEM
Purchasing for the Manufacturing Business
Accounting for the business which manufactures its own product is a
much larger problem than that for the concern which limits its activity to
purchase and sale of a stock-in-trade. To the activities of a trading concern
the manufacturing business adds those of the factory. Not only must more
property, and a larger variety, be kept account of and handled so as to get
the most efficient return therefrom, but also in the handling and operation of
this property a somewhat distinct type of expenses is incurred. The
problems of financial and factory management and control are different and
more complicated than those of the trading business. The period between
the expenditure of funds for the purchase of materials and the payment of
expenses and the receipt of money from the sale of the finished product is
much longer. More working capital must therefore be provided and its rate
of turnover is less. A larger element of risk enters in. Raw materials must be
worked and fashioned, machinery must be employed, a different class of
labor must usually be handled, perhaps will have to be trained—these are
problems calling for a special type of management for the manufacturing
end of the business.
The accounting department must be organized to serve these additional
demands and complexities of management and to give the needed
information. The amount and cost of the materials consumed in making the
product, the labor cost expended on it, and the various items of factory
expense incurred, during one period as compared with the same items for
previous periods—all must be kept under constant review if successful
operation is to be secured.
Expansion of the Purchase Journal
To make this information available as soon as the transactions giving
rise to it are entered into, a different method of gathering the information
becomes necessary. Because of the fact that the purchase journal is limited
to the record of purchases of stock-in-trade, and that information in regard
to expenses incurred is not usually brought on the books until payment of
them is made, not only do the books fail to give the service which a
management has a right to expect of them but they fail to reflect many
liabilities at the time they are assumed. Thus a new type of record is needed.
This has led to an extension or expansion of the purchase journal. The
way in which this journal can be used so as to analyze purchases of stock-
in-trade on a departmental basis has been explained and illustrated in
Volume I. This new use of the purchase journal is merely an extension of
the principle of analysis there developed. Instead of limiting it to a record of
transactions involving purchases of stock-in-trade, every purchase
transaction, whether of assets, supplies, or of service of any kind, finds this
its place of first record. By introducing sufficient columns, as detailed an
analysis of all the purchasing activities of the business can be secured as
may be desirable. Furthermore, entry here being made at the time of the
purchase rather than at the time of payment for the purchase, the books
make available a mass of valuable data needed for purposes of management
much sooner than it becomes available under the former restricted use of
the purchase journal.
Development of Voucher System
Had the evolution of this record stopped here, the resulting gain would
have been secured at high cost. The entry of all expense purchases in the
purchase journal creates the necessity of opening accounts on the ledger
with numerous creditors for small purchases, as well as the more important
items, both to show the liability incurred and to provide a means of
canceling it when payment is made. In large corporations, where oftentimes
the policy of securing bids on all purchases is followed, resulting in a
constant changing of firms from whom purchases are made and no regularly
established trade with any of them, the burden of handling the creditors
ledger becomes an increasingly heavy one with little or no gain in desirable
information furnished by it. Accordingly, a further development took place
which eliminated the necessity of opening regular accounts with every
creditor, but instead made every transaction, whether one or many were
entered into with the same individual, independent of all others. This makes
possible the showing of the settlement of that transaction in the place where
its original record was made, without opening up a ledger account for it.
This use of the purchase journal with some slight additions has given rise to
the so-called “voucher system” of handling purchases.
Definition and Description of Voucher
In a broad sense, a voucher is a statement which certifies, i.e., vouches
for, the correctness of a transaction. As used in the restricted sense to which
it is limited under the voucher system, it is a more or less formal document
which shows a receipt for a particular bill of items. As distinguished from a
receipt in general, this latter term is applied to all acknowledgments of
money paid whether or not for a particular bill; whereas the essence of
voucher accounting requires receipts for particular bills. At law a voucher
has no more weight than an ordinary receipt, and a signed receipt is only
prima facie evidence, capable of refutation, though the burden of proof of
non-payment is placed on the complainant.
A formal voucher must therefore provide for a statement of the bill of
which payment is being made and a place for acknowledgment of receipt of
payment by the payee. Usually provision is made also for: (1) certification
of the correctness of the bill by properly authorized house employee and its
approval for payment; and (2) a proper distribution on the accounting
records of the payments authorized, i.e., an official determination of the
debit and credit entries to be made on the books.
A form of voucher is shown on pages 30, 31. On the face of the form
provision is made for (1) detailed statement of bill; (2) house approval of
same; and (3) receipt form to be signed by payee. On the reverse side of the
voucher the distribution of the charges is provided for. This is the
bookkeeper’s authorization for making the indicated entries on his books.
The form is so devised that, when doubled, it is of a convenient size for
filing in a vertical file.
Operation of Voucher System
When the invoice covering any purchase is received, it is held till the
commodities bought arrive. After inspection and acceptance of the goods, a
voucher is made out in duplicate on which is written a copy of the invoice,
with the cash discount, if any, shown deducted. Vouchers are given
consecutive numbering just like checks. If immediate payment is to be
made, the voucher will be “approved” and check drawn for the amount. The
voucher with check attached is sent to the creditor with a request that he
receipt the voucher and return it. A creditor is not usually particularly
interested in helping another concern keep its books and the result is that a
large number of vouchers find their way into the creditor’s waste basket. It
is here that the duplicate copy retained in the files serves to keep the file of
vouchers complete, though it does not, of course, constitute a receipt for the
payment.
Sometimes before sending the original voucher, the distribution of the
charges is made on it, and it is used as the basis of the bookkeeper’s entries.
An objection to this method is frequently made that the creditor is thus
given some insight into the business and perhaps a more intimate view of it
than may be desirable. Where such is the case, only the office copy of the
voucher shows the distribution and the book entries are made from it. Both
may be filed together when the original is returned, or the one may be filed
numerically according to voucher numbers, the other alphabetically
according to creditors’ names and so serve as an index to the numerical file.
Voucher (face)
 Voucher (reverse)

In some concerns the canceled checks when returned by the bank are
filed with their respective vouchers; in others, they are filed separately in
their own sequence. Inasmuch as each voucher also carries its check
number, cross-reference is easy.
Voucher Check
 The difficulty referred to above in securing prompt return of receipted
vouchers has led to the introduction of a combined voucher and check
called a “voucher check.” The indorsement on the check, which is
necessary for its collection, serves at the same time as a receipt of the bill.
All vouchers thus ultimately find their way back through the bank. The
legality of the indorsement serving also as an acceptance of the check in
payment of the stated invoice has been thoroughly established, particularly
when on the blank space for indorsement attention is drawn to the fact that
such indorsement will constitute a receipt for the bill; or where the face of
the check states that it is full payment for the invoices covered by it.
Two forms of voucher check are in use, the folded check and the single.
Below are given illustrations of both. If such checks are not unduly large,
banks do not object to handling them.
Because of lack of room on the voucher check, provision is not always
made for showing the distribution of the charges. The single form of check
can be used when a detailed statement of invoices is not desirable or when
invoices carry but few items. Such a voucher check, but differing somewhat
from the one shown, is frequently used for the payment of dividends to
stockholders and does away with the need of a formal receipt or of
signature in the dividend book.