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Accounting for Non-Accounting
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ACCOUNTING
for non-accounting students
Ninth Edition
John R. Dyson & Ellie Franklin

Accounting
for Non-Accounting
Students
Ninth edition
John r. dyson
ellie franklin
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First edition published in Great Britain under the Pitman Publishing imprint in 1987 (print and electronic)
Second edition published 1991 (print)
Third edition published 1994 (print)
Fourth edition published under the Financial Times Pitman Publishing imprint in 1997 (print)
Fifth edition published 2001 (print)
Sixth edition published 2004 (print and electronic)
Seventh edition published 2007 (print and electronic)
Eighth edition published 2010 (print and electronic)
Ninth edition published 2017 (print and electronic)
© Pearson Education Limited 1987, 1991, 1994, 1997, 2001 (print)

© Pearson Education Limited 2004, 2007, 2010, 2017 (print and electronic)
The rights of John Dyson and Ellie Franklin to be identified as authors of this work have been asserted by them
in accordance with the Copyright, Designs and Patents Act 1988.
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ISBN: 978-1-292-12897-9 (print)

978-1-292-12904-4 (PDF)
978-1-292-12898-6 (ePub)
British Library Cataloguing-in-Publication Data

A catalogue record for the print edition is available from the British Library
Library of Congress Cataloging-in-Publication Data

Names: Dyson, J. R. (John R.), author. | Franklin, Ellie, author
Title: Accounting for non-accounting students / John R. Dyson, Ellie Franklin.
Description: Ninth Edition. | New York : Pearson, 2017 | Revised edition of
Accounting for non-accounting students, 2010.
Identifiers: LCCN 2016057004| ISBN 9781292128979 (Print) | ISBN 9781292129044
(PDF) | ISBN 9781292128986 (ePub)
Subjects: LCSH: Accounting.
Classification: LCC HF5636 .D97 2017 | DDC 657—dc23
LC record available at https://lccn.loc.gov/2016057004
10 9 8 7 6 5 4 3 2 1
21 20 19 18 17
Print edition typeset in 10/12pt Sabon LT Pro by SPi Global

Printed and bound by L.E.G.O. S.p.A., Italy
NOTE THAT ANY PAGE CROSS-REFERENCES REFER TO THE PRINT EDITION.

Brief contents
Preface xiii
Guided tour xvii
Acknowledgements xix
Abbreviations xxi
Part 1 INTRODUCTION TO ACCOUNTING 1

1 Accounting and the business world 2
2 Accounting rules and regulations 24
Part 2 FINANCIAL ACCOUNTING 47

3 Recording data 48
4 Sole trader accounts 77
5 Company accounts 109
6 Other entity accounts 133
7 Statement of cash flows 151
Case studies 179
Part 3 FINANCIAL REPORTING 187

8 The annual report 188
9 The annual accounts 207
10 Interpretation of accounts 226
11 Contemporary issues 259
Case studies 272
Part 4 MANAGEMENT ACCOUNTING 277

12 Foundations 278
13 Direct costs 291
14 Indirect costs 306
15 Budgeting 330
16 Standard costing 352
17 Contribution analysis 376
18 Decision making 400
19 Capital investment 421
20 Emerging issues 446
Case studies 470
Appendices 477
Index 512
Contents
Preface xiii Part 2

Guided tour xvii FINANCIAl ACCOUNTINg 47
Acknowledgements xix
Abbreviations xxi 3 Recording data 48
About this chapter 49
Learning objectives 49
Part 1
Why this chapter is important 49
INTRODUCTION TO ACCOUNTINg 1
The accounting equation 49
Double-entry bookkeeping 52
1 Accounting and the business world 2
Working with accounts 53
About this chapter 3 A ledger account example 58
Learning objectives 3 Balancing the accounts 59
Why accounting is important 3 The trial balance 61
Nature and purpose 4 Trial balance errors 64
Historical development 5 Computerisation 65
Branches of accounting 8 Questions you should ask 65
The accountancy profession 13 Conclusion 66
Public and private entities 15 Key points 67
Questions you should ask 19 Check your learning 67
Conclusion 19 News story quiz 68
Key points 20 Tutorial questions 68
Check your learning 21
News story quiz 22 4 Sole trader accounts 77
Tutorial questions 22
2 Accounting rules and regulations 24
About this chapter 24 Preparing basic financial statements 78
Learning objectives 25 Year-end adjustments 82
Why this chapter is important 25 Inventory 83
The rules of the game – why have them? 25 Depreciation 84
Conventional accounting rules 27 Accruals and prepayments 87
Sources of authority 32 Bad and doubtful debts 88
The Companies Act 2006 33 A comprehensive example 91
UK Accounting Standards 35 Accounting defects 94
International Accounting Standards 36 Questions you should ask 96
An accounting framework 37 Conclusion 96
Questions you should ask 40 Key points 97
Conclusion 40 Check your learning 97
Key points 41 News story quiz 98
Check your learning 42 Tutorial questions 99
News story quiz 42
viii CONTENTS
5 Company accounts 109 Accounting policies 181

Statement of cash flows 184
Limited liability 110
Part 3
Structure and operation 111 FINANCIAl REPORTINg 187
The statement of profit or loss 117
The statement of changes in equity 117 8 The annual report 188
The statement of retained earnings 117 About this chapter 188
The statement of financial position 119 Learning objectives 189
A comprehensive example 121 Why this chapter is important 189
Questions you should ask 124 Overview 190
Conclusion 124 Introductory material 191
Key points 125 Corporate reporting 196
Check your learning 125 Shareholder information 203
News story quiz 126 Questions you should ask 204
Tutorial questions 126 Conclusion 204
Key points 205
6 Other entity accounts 133 Check your learning 205
About this chapter 134 News story quiz 206
Learning objectives 134 Tutorial questions 206
Manufacturing accounts 135 9 The annual accounts 207
Service entity accounts 139 About this chapter 208
Not-for-profit entity accounts 142 Learning objectives 208
Government accounts 145 Why this chapter is important 208
Questions you should ask 146 Setting the scene 209
Conclusion 146 Consolidated statement of profit or loss and other
Key points 147 comprehensive income 211
Check your learning 148 Statement of changes in equity 212
News story quiz 148 Consolidated statement of financial position 214
Tutorial questions 149 Consolidated statement of cash flows 216
Notes to the financial statements 218
7 Statement of cash flows 151 Independent auditor’s report 218
About this chapter 152 Periodic summary 219
Learning objectives 152 Questions you should ask 222
Why this chapter is important 152 Conclusion 223
What is cash? 153 Key points 223
Nature and purpose of the statement Check your learning 224
of cash flows (SCF) 153 News story quiz 224
Preparation 155 Tutorial questions 225
FRS 102 (Section 7) presentation 161
IAS 7 format 165 10 Interpretation of accounts 226
Questions you should ask 168 About this chapter 227
Conclusion 168 Learning objectives 227
Key points 169 Why this chapter is important 227
Check your learning 169 Nature and purpose 228
News story quiz 170 Procedure 230
Tutorial questions 170 Ratio analysis 234
Illustrative examples 236
CASE STUDIES Questions you should ask 246
Preparation of financial statements 179 Conclusion 246
CONTENTS ix
Key points 247 Other direct costs 301

Check your learning 248 Questions you should ask 301
News story quiz 248 Conclusion 301
Tutorial questions 249 Key points 302
11 Contemporary issues 259 News story quiz 303
About this chapter 259 Tutorial questions 303
Why this chapter is important 260 14 Indirect costs 306
Overview 260 About this chapter 306
Fraud 261 Learning objectives 307
Audit rotation 263 Why this chapter is important 307
Changing standards 265 Production overhead 307
IASB projects 266 A comprehensive example 314
FRC projects 267 Non-production overhead 317
Questions you should ask 269 Predetermined absorption rates 318
Conclusion 269 Activity-based costing 319
Key points 269 Questions you should ask 322
Check your learning 270 Conclusion 323
News story quiz 270 Key points 323
Tutorial questions 270 Check your learning 324
News story quiz 325
CASE STUDIES Tutorial questions 325
The communication of financial information 272
Interpretation of accounts 275
15 Budgeting 330
Part 4 Learning objectives 331
MANAgEMENT ACCOUNTINg 277 Why this chapter is important 331
Budgeting and budgetary control 331
Procedure 333
12 Foundations 278
A comprehensive example 337
About this chapter 278 Fixed and flexible budgets 341
Learning objectives 279 Behavioural consequences 343
Why this chapter is important 279 Questions you should ask 345
Nature and purpose 279 Conclusion 345
Historical review 281 Key points 346
Main functions 282 Check your learning 346
Behavioural considerations 285 News story quiz 347
Questions you should ask 287 Tutorial questions 347
Conclusion 287
Key points 288
16 Standard costing 352
News story quiz 289 About this chapter 352
Tutorial questions 289 Learning objectives 353
Operation 353
13 Direct costs 291 Performance measures 357
About this chapter 291 Cost variances 359
Learning objectives 292 A comprehensive example 362
Why this chapter is important 292 Sales variances 366
Responsibility accounting 293 Operating statements 368
Classification of costs 293 Questions you should ask 369
Direct materials 295 Conclusion 370
Direct labour 300
x CONTENTS
Key points 370 19 Capital investment 421

News story quiz 371
Background 422
17 Contribution analysis 376 Main methods 423
About this chapter 376 Net cash flow 434
Learning objectives 377 Sources of finance 436
Why this chapter is important 377 Questions you should ask 438
Marginal costing 377 Conclusion 439
Contribution 379 Key points 439
Assumptions 380 Check your learning 440
Format 380 News story quiz 440
Application 381 Tutorial questions 441
Charts and graphs 383
Reservations 388 20 Emerging issues 446
Formulae 389
Limiting factors 392
Questions you should ask 394
Conclusion 395
The business environment 447
Key points 395
Management accounting changes 449
Selected techniques 450
News story quiz 396
Questions you should ask 466
Conclusion 466
Key points 467
18 Decision making 400 Check your learning 468
About this chapter 400 News story quiz 468
Learning objectives 401 Tutorial questions 469
Nature and purpose 401 CASE STUDIES
Cost classification 403 Fixed and flexible budgets 470
Types of decision 405 Standard cost operating statements 472
Questions you should ask 414 Pricing 474
Conclusion 415
Key points 415 Appendices
Check your learning 416 Further reading 477
News story quiz 416 Discount table 479
Tutorial questions 417 Answers to activities 480
Answers to tutorial questions 483
Index 512
CONTENTS xi
Supporting resources
Visit www.pearsoned.co.uk/dyson to find valuable online resources:
Companion website for students

● Multiple choice questions to help test your learning
● Extra question material
● Links to relevant sites on the web
● Glossary explaining key terms mentioned in the book
For instructors
● Complete, downloadable Lecturer’s Guide
● PowerPoint slides that can be downloaded and used for presentations
● Answers to extra question material in the Companion Website
● Extra case studies and guidelines on using them with students
Also: The Companion website provides the following features:

● Search tool to help locate specific items of content
● E-mail results and profile tools to send results of quizzes to instructors
● Online help and support to assist with website usage and troubleshooting
For more information please contact your local Pearson Education sales
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Preface
Why study accounting?

This book provides a solid introduction to accounting for those students who are
required to study it as part of a non-accounting course. It is also of benefit to those
managers in business, government or industry whose work involves them in dealing
with accounting information.
Non-accountants are often puzzled why they are required to take a course in account-
ing, and even more so when they have to take a demanding examination at the end of
it. The fact is that these days, no matter what your job, you need to have some knowl-
edge of accounting matters. The main reason for this is that for different specialists to
talk to each other they have to speak in a language that everyone understands. In busi-
ness (in its widest sense) that language is money and that happens to be the accountants’
language. The use of a common language enables all the various activities that take place
within a business to be translated into monetary terms and for all reports to be prepared
on the same basis. So if you need to know what is going on in other departments (as
you almost certainly will), you will find it much easier if you speak the language of
accounting.
The book’s purpose

The problem with many accounting textbooks is that they are written primarily for
accounting students. As a result, they go way beyond what a non-accountant needs.
This book is different. The subject is not covered superficially but it avoids going into
the technical detail that is of relevance only to accountants. Nevertheless, by the time
you get to the end of the book you will have gained a perfectly adequate knowledge and
understanding of accounting that will enable you to talk to accountants with great
confidence and which will help you to do your job much more effectively.
Some guidance for lecturers

The book is divided into four parts. Part 1 introduces students to the world of account-
ing, Part 2 deals with financial accounting, Part 3 with financial reporting and Part 4
with management accounting.
As you will probably be aware, many further and higher education institutions now
operate a modular structure for the delivery of their courses. This book is particularly
useful if your own institution does the same. Some accounting syllabi for non-account-
ing students combine both financial accounting and management accounting in one
module while others split them between separate modules. The book is designed so that
it can easily be adapted irrespective of whether you combine them or split them.
It is highly unlikely, of course, that the contents of the book will match precisely the
syllabus requirements of your own course. There are bound to be topics to which you
give more or less emphasis and there will be others that are not covered at all in the
book. Nevertheless, the book has now been widely used throughout the UK and in many
overseas countries for over 25 years. From the feedback that has been received, the
contents appear to continue to meet the main requirements of most introductory
accounting courses for non-accounting students.
xiv PREFACE
There is one topic, however, that splits opinion right down the middle: double-entry
bookkeeping. Some lecturers are absolutely convinced that non-accounting students
need to have a grounding in this topic if they are to understand where the information
comes from, what problems there are with it and how it can be used. Other lecturers
are adamant that it is totally unnecessary for non-accounting students.
As opinion is so evenly divided on this subject we have decided to retain double-entry
bookkeeping in the main part of the book. If you do not include the topic in your syl-
labus it can be easily left out by skipping the whole of Chapter 3 (Recording data) and
possibly parts of Chapter 4 (Sole trader accounts). You could then pick up the thread
of the book in Chapter 5 (Company accounts), provided you are sure that your students
know something about a trial balance, a statement of profit or loss , and a statement of
financial position.
In this edition we have taken the opportunity to revise and update the eighth edition.
There are no structural changes made to this edition but a number of chapters have been
significantly rewritten or updated:
1 Chapter 2 (Accounting rules and regulations),
2 Chapter 7 (Statement of cash flows), and
3 Chapter 10 (Interpretation of accounts).
By their nature, substantial additions and revisions have had to be made to two other
chapters: Chapter 11 (Contemporary issues) and Chapter 20 (Emerging issues). It has
not been too difficult to select contemporary financial issues for Chapter 11 because the
various accounting bodies have a clearly established development programme and the
financial reporting world has been sufficiently dynamic to present us with ample exam-
ples to choose from for discussion.
It has proved much more difficult to select emerging management accounting issues
for the Chapter 20. Management accounting is not as fast moving as financial account-
ing and, as yet, there is no such body as a ‘management accounting standards board’
driving the discipline forward. The main source comes from accountants pursuing aca-
demic research in universities but as yet there is no consensus on what changes are
needed. When preparing this chapter, therefore, we examined the syllabi of several
accounting bodies and also took note of various suggestions made by reviewers. These
two sources enabled us to select some likely emerging management issues over the next
few years.
The old feature of interspersing the text with news clips has been retained. News clips
are brief extracts or summaries of recent newspaper articles that are of relevance to the
particular chapters in which they are placed. They are intended to demonstrate that the
accounting matters discussed in the various chapters are not theoretical but that they
are of practical importance and relevance in the real world.
The news stories introduced into an earlier edition at the beginning of each chapter
have been replaced with more recent ones. As before, broad questions on each of these
stories may then be found towards the end of the chapter. Students are strongly encour-
aged to have a go at answering these questions even though some of the issues covered
may sometimes appear to be somewhat beyond non-accountants. However, it would be
surprising if this were to be the case since most of them were first published in newspa-
pers intended for a general audience.
As publicly traded companies in the European Union (EU) are now required to pre-
pare their financial statements in accordance with International Accounting Standards
(IASs), various amendments have had to be made throughout the text. Most notably
this has resulted in the update of the terminology in the financial accounting part of the
textbook. This has caused a problem for a book aimed at non-accountants as financial
PREFACE xv
statements have become more and more difficult to understand. However, strenuous
attempts have been made to keep the text as simple and as relevant as possible.
An additional complexity is that non-listed companies in the UK can adopt UK
accounting standards while listed companies must adopt international ones. A similar
problem may arise in other EU countries if non-listed companies are allowed to adopt
their own accounting standards.
This problem was particularly acute when choosing the names of the financial state-
ments to be used throughout the text. As far as published accounts are concerned, we
have limited our discussion to IAS-prepared statements as these are of relevance to all
EU-based students as well as to students based in other non-EU countries.
Some guidance for college and university students

If you are using this book as part of a formal course, your lecturer should have provided
you with a work scheme. The work scheme will outline just how much of the book you
are expected to cover each week. In addition to the work done in your lecture you will
probably have to read each chapter at least twice.
As you work through a chapter, you will come across a number of ‘activities’. Most
of them require you to do something or to find something out. The idea of these activi-
ties is to encourage you to stop your reading of the text at various points and to think
about what you have just read.
There are few right and wrong answers in accounting so we want you to gain some
experience in deciding for yourself what you would do if you were faced with the type
of issues covered in the activities.
You are also recommended to attempt as many of the questions that follow each
chapter as you can. The more questions that you do, the more confident you will be
that you really do understand the subject matter. However, avoid looking at the answers
(there are some at the back of the book) until you are absolutely certain that you do not
know how to do the question. If the answer is not at the back of the book, ask your
lecturer to download it for you from the Lecturer’s Guide.
Some guidance for students studying on their own

If you are studying accounting without having the opportunity of having face-to-face
tuition, we suggest that you adopt the following study plan.
1 Organise your private study so that you have covered every topic in your syllabus at
least two weeks before your examination. A proven method is to divide the number
of weeks (or perhaps days!) you have available by the number of topics. This gives
you the average time that you should spend on each topic. Allow for some topics
requiring more time than others but don’t rush though a topic just because you are
behind your timetable. Instead, try to put in a few extra hours that week.
2 Read each chapter slowly. Be careful to do each activity and to work through each
example. Don’t worry if you do not understand each point immediately. Read on to
the end of the chapter.
3 Read the chapter again, this time making sure that you understand each point. If
necessary, go back and re-read and repeat until you do understand the point.
4 Attempt as many questions at the end of each chapter as you can, but do not look at
the answers until you have completed the question or you are certain that you cannot
do it. The questions are generally graded so the more difficult ones come towards the
end. If you can do them all without too much difficulty, then you can move on to the
next chapter with great confidence. However, before you do, it is not a bad idea to
re-read the chapter again.
xvi PREFACE
More guidance for all students

At this early stage of your accounting career we want to emphasise that accounting
involves much more than being good at doing simple arithmetic (contrary to popular
opinion, it is not highly mathematical). The solution to many accounting problems often
calls for a considerable amount of personal judgement and this means that there is
bound to be an element of subjectivity in whatever you decide to do.
The simplified examples used in this book illustrate some complicated issues and
problems in the real world that are not easily solved. You should, therefore, treat the
suggested answers with caution and use them as an opportunity to question the meth-
odology adopted. This will mean that when you are presented with some accounting
information in your job, you will automatically subject it (rightly) to a great deal of
questioning. That is as it should be because, as you will shortly discover, if you were an
accountant and you happened to be asked ‘What do 2 +2 make?’ you might well reply
by asking another question: ‘What do you want it to make?’
Puzzled? Intrigued? Then read on – and good luck with your studies.
An explanation
In order to avoid tedious repetition and tortuous circumlocution, the masculine pronoun
has generally been adopted throughout this book. No offence is intended to anyone,
most of all to our female readers, and we hope that none will be taken.
Guided tour
FINANCIAl ACCOUNTINg Part Chapter Statement of cash flows

2 7
Is the end of cash near?. . . .
In Part 2 we outline the principles of double-entry bookkeeping and explain how to prepare financial
accounts for sole traders, companies and for some other types of entities in the not-for-profit sector. Cash is king, says UK banknote
The relationship of Part 2 to the rest of the book is shown below. printer De La Rue
Alan Tovey, Industry Editor for The Telegraph
You might not know the company’s name, adding that about 85% of De La Rue’s
but you are definitely familiar with its big- business is for foreign markets, with the
gest product – the £64bn of UK banknotes company involved in the design, produc-
in circulation. tion or issuing of banknotes in about 140
De La Rue is the company which pro- countries.
duces the £5, £10, £20 and £50 notes for De La Rue is the biggest commer-
the Bank of England; and despite the rise cial printer of banknotes in the world –
Part 1 of contactless payment and people’s will- in some countries print works are
INTRODUCTION TO ingness to pay by plastic, it has no worries state-owned – and it’s also one of the
ACCOUNTINg about the future of printed money. most historic. The company has been
‘Even though we’re using credit and printing banknotes for more than two
1 Accounting and the debit cards more than ever, people still centuries.
have cash in their wallet,’ says chief execu- Just over a year ago De La Rue had its
business world
tive Martin Sutherland. ‘It’s convenient, 10-year deal with the Bank of England –
2 Accounting rules and it’s free at point of use, classless – not eve- believed to be the company’s biggest con-
regulations ryone has a bank account – and most of tract – renewed for another decade.
all, it’s reliable. Cash is the payment ‘We are generally seen as the leading
mechanism of last resort, it will still work designer of banknotes and passports but
when there’s a power cut or the card reader we have to be innovative about the secu-
won’t scan.’ His confidence is backed up rity features we introduce because we are
Part 2 Part 3 Part 4 by data. Industry analyst Smithers Pira in an arms race with counterfeiters,’ he
FINANCIAl FINANCIAl MANAgEMENT says the banknote market in Western says. ‘The longer a particular feature is in
Europe is growing at about 2.5% a year, circulation, the more time they have to
ACCOUNTINg REPORTINg ACCOUNTINg with much higher rates in regions with work out how it is done and how to repro-
more developed nations. duce it, so we have to be constantly intro-
3 Recording data 8 The annual report 12 Foundations ‘We’re focused on emerging econo- ducing new ideas. We’re a
4 Sole trader accounts 9 The annual accounts 13 Direct costs mies where cash is king,’ says Sutherland, counter-counterfeiting business.’
5 Company accounts 10 Interpretation of 14 Indirect costs
6 Other entity accounts accounts 15 Budgeting
7 Statement of cash 11 Contemporary issues 16 Standard costing Source: Extract from The Telegraph, 30 December 2015.
flows 17 Contribution analysis Questions relating to this news story can be found on page 170. ➨
18 Decision making
19 Capital investment
20 Emerging issues
Part openers contain a diagram to help you find Chapter openers feature a topical news article relat-
your way around the book. ing chapter content to the real world, and there are
shorter News clips throughout.
78 PART 2 FINANCIAL ACCOUNTING 166 PART 2 FINANCIAL ACCOUNTING
assets and investments while financing activities include cash from the sale and purchase
learning By the end of this chapter you should be able to: of the company’s own shares, debentures and loans.
objectives ● prepare a simple set of financial statements for a trading entity;
● make adjustments in sets of financial statements for inventory, depreciation, accru-
als and prepayments, and bad and doubtful debts;
News clip
list the main defects of historical cost accounting;
●
Walt Disney’s cash flow in 2015
● explain why accounting profit is not the same as an increase in cash.
In 2015, Walt Disney Co increased its cash addition, the company used $4.25bn on
reserves by 24.79%, or $848m. The com- investing activities and also paid $5.51bn
pany earned $10.91bn from its operations in financing cash flows
Why this chapter is important
Learning ! for a cash flow margin of 20.79%. In
This chapter is important for non-accountants for the following reasons:
1 To distinguish between capital and revenue items. This is often a matter of judgement and it is not
objectives one that is always easy to make. You should not leave the decision entirely to your accountants
because it has a major impact on the profit that your entity makes. Make sure that you get
Source: Adapted from www.ft.com, accessed 26 March 2016.
are provided involved in the decision

2 To be aware of the impact of subjective judgements on the accounts. Subjective judgements are
involved in preparing annual (or periodic) accounts. The main adjustments are for inventory,
The direct method
in each depreciation, accruals and prepayments, and bad and doubtful debts. The decisions that are taken
can have significant effect on how much profit you make. So once again, don’t leave it to your
accountants to decide what to do.
Under the direct method an SCF is prepared directly from entries made in the cash book
(hence the name). It is a conceptually easy and simple way of preparing a SCF.
chapter. 3 To understand that cash is not the same as profit. It is vital that you understand the difference
between cash and profit. If you don’t, your entity is likely to go bankrupt. Just because you have made
a profit doesn’t necessarily mean that you’ve got the same amount of money in the bank. All sorts Example
7.1 Preparation of a statement of cash flows
of adjustments are made to the cash position before accountants arrive at what is called ‘profit’.
Profit is not, repeat NOT, therefore, simply the difference between cash received less cash paid. The following information summarises all cash-related transactions for Durton Ltd in 2016:
1 Durton Ltd had £20,000 cash in its Barclays Bank account at the start of 2016.
2 On 1 January 2016 the company took out a £100,000 loan from Barclays Bank. The loan has an
News clip annual interest rate of 10%. The interest on the loan was paid on time in 2016.
3 Durton Ltd sells its products to customers on credit (the agreed credit term is 30 days). During
Banks to face €61.5bn hit from new account- 2016, it received £970,000 from customers in respect of sales of inventory made to them.
ing rules 4 Durton Ltd purchases components for its products on credit (the agreed credit term is also 30
days). During 2016, it paid £680,000 to suppliers for purchases of components.
New accounting rules could force Europe’s would see the slightest impact include Credit 5 A new production line was acquired in the year at a cost of £150,000.
top banks to recognise an extra €61.5bn in Suisse, UBS, Virgin Money and Nordea.
6 Salaries paid for the year amounted to £35,000. Various other operating expenses paid for by the
loan losses, new analysis shows. Spain’s While the rules do not come into force until
business amounted to £100,000 for the year.
Caixa, Italy’s UBI and the United Kingdom’s 2018, Barclays said some banks with excess
Standard Chartered are the most affected by capital might ‘soften the one-off impact’ by 7 £30,000 was paid to shareholders as dividends.
the change in the IFRS 9 rules. Banks that taking higher provisions in 2016 and 2017. 8 Last year’s tax liability to HMRC of £40,000 was settled in 2016.
The above transactions are posted to the cash book by the accountant. It looks like this:
Source: Adapted from www.ft.com, 1 September 2015. Durton Ltd
Cash book summary for the year to 31 December 2016
Preparing basic financial statements Receipts £000 Payments £000

Balance b/f 20 Trade payables 680
10% loan 100 Salaries 35
In this section we are going to explain how to prepare a basic set of financial statements
Trade receivables 970 Operating expenses 100
for a sole trader. Such a set is usually made up of the following:
Loan interest 10
(a) a calculation of annual profit, which is known as the statement of profit or loss ➨
(SPL);
M04 Accounting for Non-Accounting 28979.indd 78 20/03/2017 11:35
Why this chapter is important explores Examples are spread throughout the
the applications and benefits of chapter chapter.
content for the non-accountant.
xviii GUIDED TOUR
Activities test student understanding at regular intervals throughout the chapter.
CHAPTER 12 FOUNDATIONS 287 CHAPTER 16 STANDARD COSTING 19
● Helpful. Assist in digging out the information that they require.

● Considerate. Take into account your other responsibilities and give you a realistic Conclusion
amount of time to provide any information that they require.
● Courteous. Avoid threatening implicitly or explicitly any disciplinary action.
● Instructive. Guide you through the mechanics of the management accounting system
that relate to your responsibilities.
We have come to the end of a complex chapter. You may have found that it has been
extremely difficult to understand just how standard cost variances are calculated. For-
tunately it is unlikely that as a non-accountant you will ever have to calculate them for
Key points recap
In practice, the above requirements may be somewhat idealistic. Sometimes, for ex-
ample, senior managers do not encourage a participative approach and they may not
always be willing to provide appropriate training courses. The management accountants
yourself. It is sufficient for your purposes to understand their meaning and to have some
idea of the arithmetical foundation on which they are based.
Your job will usually be to investigate the causes of the variances and to take neces-
the main concepts
in the entity then have a responsibility to point out to the senior managers that the plan-
ning and control systems that operate in such an environment are not likely to be
particularly successful.
sary action. A standard costing system is supposed to help managers plan and control
the entity much more tightly than can be achieved in the absence of such a system.
However, it can only be of real benefit if managers find that the information that they
studied in the
It must also not be forgotten that the relationship between management accountants
and non-accountants is not one-sided and that non-accountants have an equal responsibil-
ity to be cooperative. Clearly, management accountants will find it difficult to work with
receive helps them do a better job.
chapter.
staff who adopt a resentful or surly manner and who try to make life difficult for them. Key points 1 A standard cost is the planned cost of a particular unit or process.
2 Standard costs are usually based on what is reasonably attainable.
Activity 12.2 Suppose that as a departmental manager you received an e-mail from the chief management
accountant containing the following statement: 3 Actual costs are compared with standard costs.
I wish to inform you that you overran your budget by £10,000 for March 2016. 4 Corrective action is taken if there are any unplanned trends.
Please inform me immediately what you intend to do about this overspend. Furthermore, 5 Three performance measures used in standard costing are the efficiency ratio, the
I will need to know why you allowed this gross piece of mismanagement to occur. capacity ratio and the production volume ratio.
How are you likely to respond to such an e-mail? Write down your thoughts.
6 Variance analysis is an arithmetical exercise that enables differences between actual
and standard costs to be broken down into the elements of cost.
7 The degree of analysis will vary, but usually a total cost variance will be analysed into
! Questions you should ask direct material, direct labour, variable overhead and fixed overhead variances and
such variance will be sub-analysed into quantity and expenditure variances.
Some entities impose a management accounting system on their managers and they are
expected to do just as they are told. However, experience suggests that such an approach does 8 Sales variances may also be calculated, the total sales variance being analysed into
not work. It is much better to involve staff in the detailed implementation and operation of a selling price variance and a sales volume profit variance.
information systems. What approach does your own organisation take? We suggest that you
ask the following questions (but remember to be tactful!). 9 The variances help in tracing the main causes of differences between actual and
budgeted results but they do not explain what has actually happened – they are
● Who wants this information? merely the starting point for a more detailed investigation.
● What is it for?
● What’s going to happen to it?
● Will I get some feedback?
● What will I be expected to do about it?
● May I suggest some changes? Check your learning
● How can I help to improve what is done?
1 Explain what is meant by the following terms: (a) a standard, (b) a standard cost,
(c) a variance, (d) variance analysis.
2 List four uses of standard costing.
Conclusion
3 What type of entities might benefit from a standard costing system?
4 How long should a standard costing period be?
This chapter has provided a foundation for a more detailed study of management
accounting. Management accounting is one of the six main branches of accounting. Its 5 What is (a) a basic standard, (b) an attainable standard, (c) an ideal standard?
main purpose is to supply information to management for use in planning and
Questions you should ask are questions busi- Check your learning tests absorption of chapter con-
ness managers might ask to assist in tent and offers a useful revision aid.
the decision-making process.
20 PART 4 MANAGEMENT ACCOUNTING
6 Name four types of information required for a standard costing system.

7 What is meant by ‘a standard hour’?
Case
8 Name three standard cost performance measures.
study Pricing
9 What are their respective formulae?
10 Complete the following equations:
(a) direct materials total = _________ + _________
(b) direct labour total = _________ + _________
(c) variable production overhead total = _________ + _________
(d) fixed production overhead total = _________ + _________ learning After preparing this case study you should be able to:
objectives
11 What is (a) an adverse variance, (b) a favourable variance? ● distinguish between an absorption costing approach and a marginal costing
12 Complete this equation: total sales variance = _________ + _________ approach;
● prepare a quotation for a customer using a number of different costing approaches;
13 Complete this statement: a standard cost operating statement links the budgeted
profit to the _________ _________ for the period. ● identify a number of other factors that must be considered when preparing a
quotation.
News story quiz Location: Dewsbury, West Yorkshire

Background
Company: Pennine Heating Systems Limited
News story Remember the new story at the beginning of this chapter? Go back to that story and
reread it before answering the following questions. Personnel: Ali Shah, Managing Director
In a relatively short piece this news story suggests that standard costing is a business Hugh Rodgers, Production Manager
quizzes strategy. The basic procedures behind it appear to be fairly straightforward. However,
as you worked your way through the chapter, you probably began to realise that there
is a great deal more to standard costing than the piece suggests. Pennine Heating Systems Limited is a small heating and ventilation system company
Synopsis
provide Questions
located in the West Yorkshire town of Dewsbury. It provides customer-designed sys-
tems for small businesses. The systems are designed, manufactured and installed spe-
cially for each customer. This means that each individual contract has to be priced
thought- 1
2
What is a ‘business strategy’?
Can selling prices be based solely on what they cost to make?
separately.
The company had expanded rapidly in recent years but as it had done so its overhead
costs had continued to increase. The managing director, Ali Shah, had always insisted
provoking 3 Does this news story provide a reasonable summary of standard costing?
that contracts should be priced on an absorption cost basis. This was not a problem
in the early days of the company. There was then a considerable demand for what
Pennine Systems was able to offer and customers almost always accepted whatever was
questions Tutorial questions
quoted.
More recently, however, the demand for heating and ventilation systems had become
less strong, competitors had come into the market, the national economy was in reces-
relating to The answers to questions marked with an asterix can be found in Appendix 4.
sion and customers were much more conscious about their costs than they used to be
when the economy was expanding.
16.1 Is it likely that a standard-costing system is of any relevance in a service industry? So while Pennine’s reputation was good, it had to be particularly sensitive about the
topical news 16.2 ‘Standard costing is all about number crunching and for someone on the shop floor
price that it charged for its orders. Indeed, Ali sensed that the company was beginning
to lose some business because its quotations were too high. He wondered whether he
it has absolutely no relevance.’ Do you agree with this statement? should review the pricing system in order to make sure that the company attracted suf-
articles. 16.3 ‘Sales variance calculations are just another example of accountants playing around
ficient business.
Ali was reminded of what he had intended to do late one Friday night when a request
with numbers.’ Discuss. for a quotation landed on his desk. On the Monday, he asked Hugh Rodgers, his pro-
duction manager to cost and price it. He had the results on the Wednesday morning.
Hugh’s calculations were as follows.
Tutorial questions offer ideas for Case studies appear at the end of
assignments or class discussion. parts.
Visit the Companion Website at www.pearsoned.co.uk/dyson to find further practice questions, study material
and links to relevant sites on the World Wide Web. See page vii for full contents.
Acknowledgements
We are grateful to the following for permission to reproduce copyright material:
Figures
Figure 11.1 from http://www.actionfraud.police.uk/fraud-protection/false-accounting-
fraud, June 2016, Open Government Licence v3.0; Figure 20.2 adapted from ‘Using
the balanced scorecard as a strategic management system’, Harvard Business Review
(Kaplan, R.S. and Norton, D. P. 1996), with permission from Harvard Business School
Publishing; Figure 20.3 from ‘A framework for functional coordination’, Atlanta
Economic Review, 23(6), pp.8–11 (Fox, H. 1973), with permission from the Federal
Reserve Bank of Atlanta.
Text
Extract on page 11 adapted from ‘In search of the right note’, Financial Times,
24/08/2015 (Agnew, H.), © The Financial Times Limited. All Rights Reserved; Extract
on page 44 from ‘Principles of good regulation’, https://www.fca.org.uk/about/princi-
ples-good-regulation, The Finance Conduct Authority, accessed 15 April 2016; Extract
on page 48 adapted from ‘Blockchain promises back-office ledger revolution’, Financial
Times, 13/10/2015 (Kaminska, I.), © The Financial Times Limited. All Rights Reserved;
Extract on page 52 adapted from ‘Toshiba scraps dividend after finding accounting
irregularities’, Financial Times, 08/05/2015 (Inagaki, K.), © The Financial Times Lim-
ited. All Rights Reserved; Extract on page 77 adapted from ‘ANZ flags increase in bad
debts amid commodity price slump’, Financial Times, 24/03/2016 (Wells, P.); Extract
on page 78 adapted from ‘Banks to face €61.5bn hit from new accounting rules, says
report’, Financial Times, 01/09/2015 (Agnew, H. and Noonan, L.), © The Financial
Times Limited. All Rights Reserved; Extract on page 84 adapted from ‘Fractional own-
ership: Appreciation of depreciation shapes an industry’, Financial Times, 16/11/2015
(Moscrop, L.); Extract on page 87 after ‘£2bn wiped off Tesco’s value as profit overstat-
ing scandal sends shares sliding – as it happened’, The Guardian, 22/09/2014 (Wearden,
G.); Extract on page 88 after ‘Debt, defaults, and devaluations: why this market crash
is like nothing we’ve seen before’, The Telegraph, 17/04/2016 (Khan, M.), © Telegraph
Media Group Ltd 2016; Extract on page 109 adapted from ‘IASB rule change to bring
more transparency to balance sheet’, Financial Times, 20/01/2016 (Burgess, K. and
Agnew, H.), © The Financial Times Limited. All Rights Reserved; Extract on page 116
adapted from ‘Prudential to pay special dividend after beating expectations’, Financial
Times, 09/03/2016 (Ralph, O.), © The Financial Times Limited. All Rights Reserved;
Extract on page 119 adapted from ‘BHS seeks to offload pension deficit worth £571m’,
Financial Times, 07/03/2016 (Vandevelde, M., Cumbo, J. and Evans, J.), © The Finan-
cial Times Limited. All Rights Reserved; Extract on page 133 from ‘Accountability to
parliament for taxpayers’ money, https://www.nao.org.uk/press-releases/accountability-
to-parliament-for-taxpayers-money, National Audit Office, accessed 23 February 2016;
Extract on page 142 adapted from ‘Kids Company trustees ‘negligent”, Financial Times,
01/02/2016 (Viña, G.), © The Financial Times Limited. All Rights Reserved; Extract on
xx ACKNOWLEDGEMENTS
page 145 adapted from ‘Public sector needs to do a better job with assets’, Financial
Times, 15/04/2016 (Wolf, M.), © The Financial Times Limited. All Rights Reserved;
Extract on page 151 adapted from ‘Cash is king for the future, says UK banknote printer
De La Rue’, The Telegraph, 30/12/2015 (Tovey, A.), © Telegraph Media Group Ltd
2016; Extract on page 152 adapted from ‘Colt Defense files for bankruptcy after debt
restructuring deal misfires’, Financial Times, 15/06/2015 (Paton, E.), © The Financial
Times Limited. All Rights Reserved; Extract on page 154 adapted from ‘Theo Pahpitis
quote’, The Guardian online, accessed 23 March 2016, Starting a new business: how
to avoid failure, by Rahul Thakrar Monday 22 February 2016 http://www.theguardian.
com/small-business-network/2016/feb/22/starting-a-new-business-how-to-avoid-failure;
Extract on page 188 adapted from ‘Brussels in corporate transparency push’, Financial
Times, 15/04/2014 (Agnew, H.); Extract on page 190 adapted from Bank annual reports
too long or ‘complex’, Financial Times, 08/06/2014 (Fleming, S. and Agnew, H.);
Extract on page 201 adapted from ‘FTSE 100 bosses face fresh revolt over pay’, Finan-
cial Times, 16/08/2016 (Oakley, D.), © The Financial Times Limited. All Rights
Reserved; Extract on page 208 adapted from ‘Toshiba says it inflated profits by nearly
$2bn over seven years’, Financial Times, 07/09/2015 (Inagaki, K.), © The Financial
Times Limited. All Rights Reserved; Extract on page 218 adapted from ‘Auditors’ fears
increase over Hong Kong companies’, Financial Times, 23/08/2015 (Hughes, J.), © The
Financial Times Limited. All Rights Reserved; Extract on page 226 adapted from ‘Inves-
tors mine Big Data for cutting-edge strategies’, Financial Times, 30/03/2016 (Wiggles-
worth, R.), © The Financial Times Limited. All Rights Reserved; Extract on page 259
adapted from ‘Ten UK companies fell short of FRC reporting standards’, Financial
Times, 14/10/2014 (Agnew, H.); Extract on page 261 from ‘Tesco to be investigated by
FCA over accounting scandal’, The Guardian, 01/10/2014 (Farrell, S); Extract on page
264 adapted from ‘Audit firms called to account for cosy tenures’, Financial Times,
14/06/2015 (Marriage, M.), © The Financial Times Limited. All Rights Reserved;
Extract on page 265 adapted from ‘Schroders dumps PwC as its auditor after 57 years’,
Financial Times, 27/03/2016 (Devine, A.), © The Financial Times Limited. All Rights
Reserved.
Abbreviations
AAT Association of Accounting Technicians

ABB Activity-based budgeting
ABC Activity-based costing
ABCM Activity-based cost management
ABM Activity-based management
AC Average cost
ACCA Association of Chartered Certified Accountants
AMT Advanced manufacturing technology
ARR Accounting rate of return
ASB Accounting Standards Board
ASC Accounting Standards Committee
ASSC Accounting Standards Steering Committee
BB Beyond budgeting/Better budgeting
BBC British Broadcasting Corporation
CA Chartered Accountant/Companies Act
CE Capital employed/expenditure
CI Capital investment
CIMA Chartered Institute of Management Accountants
CIPFA Chartered Institute of Public Finance and Accountancy
Cr Credit
DCF Discounted cash flow
Dr Debit
EA Environmental accounting
ED Exposure draft
EMA Environmental management accounting
EPS Earnings per share
EU European Union
FA Financial accounting
FASB Financial Accounting Standards Board
FCA Financial Conduct Authority
FIFO First in, first out
FRC Financial Reporting Council
FRS Financial Reporting Standard
FTSE Financial Times and London Stock Exchange
GAAP Generally accepted accounting principles
GBV Gross book value
HCA Historic cost accounting
HP Hire purchase
IAS International Accounting Standard
IASB International Accounting Standards Board
IASC International Accounting Standards Committee
xxii ABBREVIATIONS
ICAEW Institute of Chartered Accountants in England and

Wales
ICAI Institute of Chartered Accountants in Ireland
ICAS Institute of Chartered Accountants of Scotland
IFAC International Federation of Accountants
IFRS International Financial Reporting Standard
IFRSF International Financial Reporting Standards
Foundation
IRR Internal rate of return
JIT Just-in-time
KPI Key performance indicator
LCC Life cycle costing
LIFO Last-in, first-out
LLP Limited liability partnership
LSE London Stock Exchange
LTD Limited
MA Management accounting
MV Market value
NBV Net book value
NCF Net cash flow
NPV Net present value
PBIT Profit before interest and tax
PFI Private finance initiative
PI Performance indicator
PLC Public limited company
PLCC Product/project life cycle costing
R&D Research and development
RI Residual income
ROCE Return on capital employed
SBU Strategic business unit
SC Standard cost/costing
SCE Statement of changes in equity
SCF Statement of cash flows
SFP Statement of financial position
SI Statutory Instrument
SMA Strategic management accounting
SME Small and medium-sized enterprise
SPL Statement of profit or loss
SRE Statement of retained earnings
SSAP Statement of Standard Accounting Practice
TB Trial balance
TOC Theory of constraints
TQM Total quality management
UK United Kingdom
VA Value added
VCA Value chain analysis
WACC Weighted average cost of capital
ZBB Zero base budgeting
Part
INTRODUCTION TO ACCOUNTINg
1
This book is divided into four main parts, as shown below. Part 1 contains two chapters. In Chapter 1
we provide some background about accounting, the accountancy profession and the organisations
that accountants work for. In Chapter 2 we outline the rules and regulations that accountants are
expected to follow when preparing accounting statements.
Part 1
INTRODUCTION TO
ACCOUNTINg
1 Accounting and the
business world
2 Accounting rules and
regulations
Part 2 Part 3 Part 4

FINANCIAl FINANCIAl MANAgEMENT
ACCOUNTINg REPORTINg ACCOUNTINg
3 Recording data 8 The annual report 12 Foundations
4 Sole trader accounts 9 The annual accounts 13 Direct costs
5 Company accounts 10 Interpretation of 14 Indirect costs
6 Other entity accounts accounts 15 Budgeting
7 Statement of cash 11 Contemporary issues 16 Standard costing
flows 17 Contribution analysis
18 Decision making
19 Capital investment
20 Emerging issues
Chapter Accounting and the business world
1
News clip
The most common routes to the

top job in FTSE 100 companies
The general career backgrounds of Britain’s biggest businesses as the ability to
today’s FTSE 100 CEOs remain similar provide strong financial leadership and
to those analysed in previous years’ commercial acumen continues to be a key
studies with 52% having a financial asset of FTSE 100 CEOs. Professionals
background. with an education or background in
Phil Sheridan, the UK Managing Direc- finance are highly sought after by organ-
tor at Robert Half, said: ‘Finance has again isations and demand continues to out-
proven itself to be the route to the top of weigh supply in today’s job market.’
Source: Extract adapted and graphics reproduced from The 2015 Robert Half FTSE 100 CEO Tracker
report, with the permission of the copyright owner.
Questions relating to this news story can be found on page 22. ➨

CHAPTER 1 ACCOUNTING AND THE BUSINESS WORLD 3
About this chapter

This chapter sets the scene for the rest of the book.
The chapter begins with what accounting is and an explanation of why it is vital for you as a non-
accountant to study accounting. It then gives a brief explanation of the nature and purpose of account-
ing and of its historical development. This is followed by an outline of the main branches of accounting
and how one becomes an accounting professional. The last main section of the chapter gives a brief
overview of the main forms and structures used to set up and run businesses and other enterprises.
learning By the end of this chapter you should be able to:

objectives ● summarise the nature and purpose of accounting;
● outline its history;
● explain why you need to know something about it in the context of your main sub-
ject of study and your career aspirations;
● identify the main branches of accounting;
● list the principal UK accountancy bodies;
● describe the most important types of public and private entities.
Why accounting is important

!
News clip
The importance of financial education

The importance of financial literacy and stability. The relevance of financial educa-
specifically the need to promote financial tion policies is acknowledged at the highest
education has been recognised as an impor- global policy level and has received
tant contributor to improved financial endorsement by the G20 Leaders and
inclusion and individuals’ f inancial APEC Finance Ministers.
well-being, as well as a support to financial
Source: Adapted from the abstract of Financial Education for Youth, an OECD Report, April 2014.
You’ve probably got hold of this book because you’re a student. You may be doing a certificate,
diploma or degree course in perhaps business, marketing, human resource management, economics,
banking, engineering, languages, law, management or one of the sciences, to name but a few pos-
sibilities. And then you find to your horror that you have to do some accounting. Why?
OK, we’ll try to explain. You probably have a vague idea that accounting has something to do with
numbers and profits and tax and, er, stuff but you are certainly not sure what that has to do with the
subject you’re studying. And you resent it.
Right. You might be surprised then to find out that accounting information has to do with many
things in a business (from procurement of a new IT systems, through hiring or firing staff, to financing
the development of a new product) and impacts on many people in a business (from the marketing
manager who has to manage an advertising budget to a banker who has to make lending decisions
to a small jewellery shop owner who has to price her products appropriately). Not to mention that
we all use accounting in our personal affairs – managing the income that we get from our employer
or business and allocating that to various items of spending, calculating and paying our taxes and
saving and investing to grow our personal wealth.
4 PART 1 INTRODUCTION TO ACCOUNTING
Accounting information is just information. And like all information it can be useful for making
decisions – if you get hold of it, understand it and act on it.
Accounting (the process by which accounting information is generated) is basically about record-
ing business transactions and summarising them in a way which is useful to people who need to
know that information to make decisions – like shareholders and managers (e.g. the marketing
managers, the human resource managers and the production managers). Perhaps just like you hope
to be. ‘So what?’ you might well ask. ‘If I need it or want it, I’ll just ask the accountants to get it for
me.’ That’s fine, but if you were a manager, would you really be quite happy to accept at face value
all that the accountants gave you? Would you know what it meant, how reliable it was, what you
were supposed to do with it or what are the right decisions to be made on the basis of it? We suspect
that if you really think about the repercussions of not questioning what your accountants gave you,
you would be (to say the least) a little unhappy. Maybe even a bit worried, especially if you were
legally responsible for it all (and under UK law, the directors are responsible for the accounting
records and the preparation of accounts by the businesses they manage).
The point we are making is that accountants provide a service for other people. Most accountants
are probably highly qualified, experienced and good at their job, but as accountants they should not
make the decisions. That is the manager’s job – it could be your job and you will know much more
about your business than any accountant. Rest assured that there is no doubt that you will be able
to make even better decisions: (a) if you have some knowledge and some understanding of the
nature of accounting information and (b) if you know what it can and what it cannot do in helping
you plan and control your business.
So in a sentence, if you know something about accounting, you will become a better manager. By
the end of this book you will be well on the way to becoming one.
This first chapter sets the scene for what follows. It is important because it provides you with the
necessary background information to enable you to become a better manager.
Nature and purpose
We begin our accounting studies by giving a brief explanation of what accounting is

and what it does. We will then tell you something of what it doesn’t do. For our purposes
we will use the following definition of accounting:
Accounting is a service provided for those who need information about an entity’s
financial performance, its assets and its liabilities.
This definition contains a number of features that require some explanation:

● Service. Accounting is of assistance to other people – if nobody wanted the service,
there would be no such thing as accounting.
● Information. The information traditionally collected by accountants is restricted to
what can be quantified and translated into monetary terms.
● Entity. An entity is a jargon term used by accountants to describe any type of organi-
sation, e.g. a person running his (or her) own business or a company.
● Financial performance. The financial performance is usually judged by matching
incomes received with expenditure incurred over a period of time (usually one year)
to calculate profit made in that period.
● Assets. In accounting, an asset is regarded as being a resource acquired by an entity
as a result of a past event and that will result in a future economic benefit for the
entity. For example, the purchase of plant and machinery will provide a benefit over
very many years and thereby help the entity generate income in those years.
● Liabilities. A liability in accounting is defined as an obligation arising from a past

event. For example, you may have bought some furniture but you don’t have to start
paying for it until next year. So for the time being, what you owe is a debt or an
obligation, i.e. a liability.
The above summary shows that accounting information is somewhat restricted:
● It relates to only one entity (although it is possible to aggregate accounting informa-
tion for groups of entities).
● It has to be quantifiable.
● It must be capable of being converted into monetary terms.
● It relates to an arbitrary period of time.
● A distinction is made between economic benefits that relate to past, current and
future periods.
Non-accountants are often surprised when they realise that accounting information is
restricted in such ways. This gives rise to what is sometimes called the expectations gap,
i.e. when users expect accounting to do more than it can.
The expectations gap often causes considerable misunderstanding between account-
ants and the public, especially when an ‘accounting scandal’ erupts from time to time.
Such scandals are often the result of genuine accounting problems but the public tend
to think that they can all be put down to fraud. There have been many examples of
high-profile financial fraud and accounting scandals in recent times. In 2008, Lehman
Brothers, a global financial services firm, went bankrupt (curiously only in 2007 it had
been voted Number 1 ‘Most Admired Securities Firm’ by Fortune Magazine). It alleg-
edly hid billions of loans disguised as sales. Closer to home, in early autumn 2014, we
saw billions wiped off Tesco’s value as the profit overstating scandal broke: Tesco had
been artificially manipulating payments to and from suppliers. Questionable accounting
practices certainly come to the fore in such high-profile cases.
We now move on to give you a review of the historical development of accounting.
We do so in the next section.
Activity 1.1 Look up the definition of accounting in three different sources. Copy the definitions into your
notebook. Then outline your ideas about how accounting and accounting information, as defined
in the sources you referred to, could be helpful to you in the job or career you aspire to be in (in,
say, 5 or 10 years time). Maybe you plan to run your own business, or to be involved in product
design, or work in an advertising agency, or invest on the stock market while working for a big
bank? Whatever your dream is – explain how accounting and accounting information might be
used in your professional and personal life and what benefits would that bring to you.
Historical development
The word account in everyday language is often used as a substitute for an explanation or a
report of certain actions or events. If you are an employee, for example, you may have to
explain to your employer just how you have been spending your time or if you are a manager
you may have to report to the owner on how the business is doing. In order to explain or to
report, you will, of course, have to remember what you were doing or what happened. As it
is not always easy to remember, you may need to keep some written record. In effect, such
records can be said to provide the basis of a rudimentary accounting system.
In a primitive sense, man has always been involved in some form of accounting. It
may have gone no further than a farmer measuring his worth simply by counting the
number of cows or sheep that he owned (Figure 1.1).
His possessions A year ago Now Change

Cows •••••••••• ••••••••••••••• +5
Hens [• = 10] •••••••••• ••••••• - 30
Pigs ••••••••• •••• -2
Sheep [• = 10] ••••• ••••••• + 20
Land [• = 1 acre] •••• •••• No change
Cottage • • No change
Carts ••• • -2
Ploughs • •• +1
Figure 1.1 Accounting for a farmer’s wealth
Activity 1.2 A-a-a-a-h! Counting! Is that what accounting is all about?

So how many sheep do you count in this flock?
Figure 1.2 How many sheep can you (ac)count in this flock?
Accounting may be about counting, but that is not quite so straightforward as you
may think. Are rams sheep? Or do we need to introduce categories to be able to (ac)
count for what we have got here – 2 sheep, 1 ram and 3 lambs? And after how many
days does a lamb become a sheep? We can make up an arbitrary rule (say, 3 months)
so on the last day of that period there are 2 sheep, 1 ram and 3 lambs in the field but
as soon as the clock ticks over to the next day there is all of a sudden a 150% increase
in the population of sheep – 1 ram and 5 sheep, no lambs! If one of them dies – do we
still (ac)count for it? If yes, why yes? If no, why not? (Ac)counting is full of judgements
and not as straightforward as you may think!
The growth of a monetary system enabled an even more sophisticated method to be
developed. It then became possible to calculate the increase or decrease in individual
wealth over a period of time and to assess whether a farmer with perhaps 10 cows and
50 sheep was wealthier than one who had 60 pigs. Figure 1.3 illustrates just how dif-
ficult it would be to assess the wealth of a farmer in a non-monetary system.
Even with the growth of a monetary system, it took a very long time for formal docu-
mentary systems to become commonplace, although it is possible to trace the origins of
modern bookkeeping back to at least the twelfth century. We know that from about
that time, traders began to adopt a system of recording information called double-entry
Better or
Owed/ A year
Now worse off
owned ago
now?
Animals
1 cow 2 cows Better
owned
Owed 50 kilos 100 kilos Worse

to Jim of barley of barley
Due from 4 gross 3 gross Worse

Hetty eggs eggs
Taking
everything
into account
?
Figure 1.3 An owner’s vital questions
bookkeeping. By the end of the fifteenth century, double-entry bookkeeping was widely
used in Venice and the surrounding areas (the first-known book on the subject was
published in 1494 by an Italian mathematician called Pacioli, who is often referred to
as ‘The Father of Accounting’). Modern bookkeeping systems are still based on princi-
ples established in the fifteenth century, although they have had to be adapted to suit
modern conditions.
There are two main reasons why a recording system devised in medieval times has
lasted for so long:
● It provides an accurate record of what has happened to a business over a given period
of time.
● Information extracted from the system can help the owner or the manager to operate
the business much more effectively.
In essence, the system provides the answers to three basic questions that both owners
and managers want to know. They are as follows:
● What profit has the business made?
● How much does the business owe?
● What does the business have and how much is owed to it?
The medieval system dealt largely with simple agricultural and trading entities. In the
eighteenth century, however, the United Kingdom underwent the Industrial Revolution.
Economic activity gradually moved away from growing things to making or manufac-
turing them and the size of some businesses grew so much that managers had to be
employed to run them on behalf of the owners.
In the early days of the Industrial Revolution the type of information supplied to the
owners of the then ‘big business’ was to meet their needs for financial purposes, i.e. to
calculate how much profit they had made and what the assets of their business were
now worth (after taking into account how much they owed and what was owed to
them). Financial information was prepared infrequently (perhaps only once a year) and
then not in any great detail.
Managers, on the other hand, needed information largely for costing purposes, so
they could work out the cost of making individual products and so that they can price
these products appropriately. The information required needed to be in much more
detail and prepared much more frequently.
As a result of the different information needs of owners and managers, separate
accounting systems were developed. However, as much of the basic data was common
to both systems, they were gradually brought together. It would be rare now to find any
entity that had a separate financial accounting system and a separate costing system.
Another change that has come about over the years is that it is possible to identify more
than two user groups (often referred to in the press as ‘stakeholders’). Besides owners and
managers, accounting information may also now be required by other users such as regula-
tors (e.g. for the purpose of granting operating licences in some regulated industries and
monitoring standards over time), lenders (e.g. for making a decision whether to lend to a
business and what interest to charge for the loan) or the government (e.g. for the purpose of
calculating taxes). Other stakeholders such as employees and potential investors also may
find accessing accounting information useful for their own purposes and decision making.
While accounting gradually evolved into two main branches in the late nineteenth
century (financial accounting and cost accounting), there were additional developments
in the twentieth century. We examine the structure of accounting as it is today in the
next section.
Branches of accounting
The work that accountants now undertake ranges far beyond that of simply preparing
financial and cost statements. It is possible to identify at least six main branches of
accounting and a number of important sub-branches. We will deal with each of them
broadly in the order that they have developed over the past 100 years, i.e. financial
accounting, management accounting, auditing, taxation, financial management, and
insolvency. You will see from Figure 1.4 how they all fit together.
Financial accounting
Until about the middle of the nineteenth century, the nature, purpose and development
of accounting described in the last two sections were mainly about the type of account-
ing that we would now describe as financial accounting. We do not, therefore, need to
add much more to our outline except to give you a more formal definition of financial
accounting. We will adopt that used by the Chartered Institute of Management Account-
ants (CIMA). It is as follows:
Classification and recording of the monetary transactions of an entity in accordance

with established concepts, principles, accounting standards and legal requirements and
their presentation in [financial statements], during and at the end of an accounting
period. (CIMA, Official Terminology, 2005)
The
accountancy
profession
Accounting
Financial
Management Cost
Bookkeeping accounting
accounting bookkeeping
and reporting
Taxation
Financial
management
Auditing
Insolvency
Figure 1.4 The main branches of accounting
‘Concepts, principles, accounting standards and legal requirements’ are the rules and
regulations that govern accounting. We shall be dealing with them in Chapter 2. The
financial statements, namely, the statement of profit or loss and other comprehensive
income, statement of changes in equity, statements of financial position and statements
of cash flows, are dealt with in Part 2 of this book. A statement of profit or loss and
other comprehensive income (we will refer to it for short as ‘statement of profit or loss’)
is a calculation of what profit or loss you might have made over a period of time. A
statement of changes in equity shows how much of a dividend is paid to shareholders
out of the profit for the period and any other contributions to or from shareholders. A
statement of financial position (also known as a balance sheet) is a summary of what
you own and what you are owed at the end of the period, and a statement of cash flows
is a summary of what cash you have received and what cash you have paid in that par-
ticular period. The statement of profit or loss, statement of changes in equity, statements
of financial position and statements of cash flows are known collectively as the financial
statements.
A distinction is sometimes made between financial accounting and financial reporting.
We do so in this book mainly for practical reasons in order to break the information
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upon him, and his breath grew short while heavy beads of
perspiration stood out on his brow.
“Cleaned out!” he muttered. “Cleaned out, just as I was cleaned out
by Dan Market! Oh, what a fool I’ve been!” And tears of rage filled
his eyes, while he pounded his fist on the top of a barrel. Then he
leaped up and shook the fist in the air.
“But he shan’t get the best of me! I’ll make him square up if I have to
go to the police and tell everybody! He shan’t get the best of me!”
His hat had rolled to the floor, and putting it on he hurried to the
warehouse door, which was unlocked. Beyond was a dock extending
to the waterfront and close at hand was a road leading to the city,
four miles away. A cart was passing and he hailed the driver. By
signs and a few words of broken Spanish he let the cart driver know
he wanted to get to Ponce as soon as possible and the native made
room for him on the rough seat.
The drive in the early morning air did Hockley good, and by the time
the cart rattled along on the uneven pavements of the city the lank
youth felt somewhat like himself. At a public fountain he left the
native and got a drink. Possibly the native expected pay for his
service, but if so he was disappointed, and he drove on looking as if
such were his feeling.
Now that he felt a little better Hockley sat down in one of the city
parks to review the situation. It was all well enough to go after J.
Rutherford Brown and have him arrested, but what would Professor
Strong say to the whole proceedings?
“Hang the professor!” he exclaimed, and gave the park bench a
savage kick with his foot. “I’m going to have satisfaction. I’m going to
catch that fellow and make him give up my money and things if I die
for it!”
Leaving the park he espied an American, and from this man received
directions which speedily took him to the café where he had first met
J. Rutherford Brown. Going inside, he asked for the man.
“Haven’t seen him this morning,” replied the keeper of the resort.
“Do you know where he lives?” went on Hockley. “It’s a matter of
importance to him,” he went on, shrewdly.
“He has a room at the Snug Corner, I believe.”
“Where is that?”
“Three squares up the street, on the corner.”
Waiting to hear no more, Hockley strode out and up the street in the
direction indicated. It was now ten o’clock, and he had had no
breakfast, but just then he had no thought of eating.
Walking into the corridor of the hotel he glanced around. Only a few
people were present. Then he glanced into the smoking and reading
room.
His heart gave a bound. J. Rutherford Brown was there, smoking
contentedly. He had his feet cocked up on a table and was reading a
newspaper.
Going up to the man from Montana, Hockley tore the newspaper
from his grasp.
“You villain, you!” he cried, wrathfully. “You swindled me!”
CHAPTER XXIII
THE BULLY IS HUMBLED
Many a man would have been startled by such a direct accusation,

but J. Rutherford Brown had been in a similar position before and
was not to be scared thus easily. He turned slowly, put his feet on the
floor and gazed coldly at Hockley.
“Young man, you are mistaken,” he said. “And if you dare to repeat
your words you will be sorry.”
“But I say—” went on the youth, and then the look in the eyes of the
man made him pause. It was a merciless, crafty face that peered into
his own and it made Hockley shiver in spite of himself.
“We had several fair and square games of cards,” went on the man
from Montana. “And you lost your money. Don’t be a calf to cry over
it. If you are in hard luck say so, and I’ll—well, I’ll lend you ten
dollars.”
As he concluded J. Rutherford Brown calmly took from his hip pocket
a big roll of bills—a large portion of them Hockley’s bills—and drew
forth one of the denomination mentioned.
“Do you want this?” he asked, extending the bill between the tips of
his fingers.
“Ye—yes,” stammered the youth, and took it. “But—but——”
“I don’t want to talk over the affair of yesterday,” interrupted the man.
“If you will remember, I lost something before the luck turned. If you
had quit the game then, I should not have squealed. Besides that, I
took you away, so that you would not get into trouble while you slept.
I spent ten dollars for carriage fare, but we will let that pass.”
Having thus delivered himself, J. Rutherford Brown hoisted his feet
to the table once more and resumed the reading of his newspaper.
Hockley looked at him in amazement not unmixed with
consternation. He had never before met such a fellow as this. He did
not know how to proceed, and walked away revolving the situation in
his mind.
The more he thought it over, the more Hockley became convinced
that he could do little or nothing. Of course, if it came to the pinch, J.
Rutherford Brown would deny everything, and as there were no
witnesses to what had occurred, legal proof would be hard to obtain.
“I’ve been a chump,” he muttered as he walked out of the hotel. “A
downright chump.”
As there seemed nothing else to do, he turned his footsteps in the
direction of the hotel at which the professor and the other boys were
stopping. His heart felt like lead in his bosom and he could not for
the life of him conjure up what to say. He knew that excuses would
be unavailing, that Professor Strong would insist upon making a rigid
investigation.
As he turned a corner leading to the hotel he came face to face with
Professor Strong, who was walking with another man, a native hired
to show the party the sights.
“Jacob Hockley,” cried the professor. “Where have you been? We
have been hunting everywhere for you.”
“It’s a long story, sir,” answered Hockley, meekly. “And if you please,
I’d like to get breakfast before I tell it.”
“So you have had nothing to eat? Then come to the hotel by all
means. But where have you been?”
“Out of town, a good many miles, I guess.”
“Out of town?”
“Yes, sir. And I’ve lost the most of my money,” went on the lank
youth, desperately.
“How did you lose that?” And now Professor Strong’s face grew
stern.
Hockley felt a certain quaking within him. It would never do to say
that he had been playing cards—worse, that he had been gambling.
Professor Strong had read the young travelers more than one lecture
on evils of this sort.
“I—I got in a crowd and somehow I either lost the money or it was
taken from me,” stammered the bully. “But please don’t tell the
others,” he went on. “They’ll only have the laugh on me.”
“Just give me the details,” said Professor Strong, briefly, and then
Hockley had to invent a long tale of how he had gone carriage riding
down to the seashore and how, while he was getting a lunch at a
restaurant, there had been a horse runaway and he had gone out to
see the excitement.
“There was more of a crowd than I thought,” he continued. “I was
shoved around by a policeman and a number of natives. I had been
counting my money and when the excitement began I rammed it in
my hip pocket. When I went back to the eating place the money was
gone.”
“And what made you remain away all night?”
“It was growing dark when the runaway happened and I thought I
could find the money this morning. But I didn’t find anything.”
“Humph! How about your watch and that ring you are in the habit of
wearing?”
Hockley felt a certain cold chill steal over him. In his haste to smooth
matters over he had forgotten about the watch and the ring.
“They—er—they got lost too,” he said, lamely, his face growing very
red.
“Quite likely,” was Professor Strong’s comment. “Come with me. We
will get to the bottom of this later on—after you have had something
to eat.”
Hockley was hungry, but eating breakfast came very hard to him that
morning. As soon as he had finished Professor Strong plied him with
questions, and at last he broke down and confessed all—how he had
received the money order from home and how he had started out to
have a little quiet fun, as he called it. And then, when the professor
insisted that he take him to the spot where the runaway had
occurred, he had to admit that there had been no runaway but that
he had fallen into the hands of a sharper, and that the sharper now
had all the money excepting ten dollars and the amount spent for the
dinner.
“I am sure he drugged me,” said Hockley, weakly. “He wouldn’t have
gotten the money from me if he hadn’t.”
“I will see the man,” returned Professor Strong, shortly, and insisted
that the youth show the way to where J. Rutherford Brown might be
found.
The man from Montana stood upon the hotel steps, just preparatory
to going on a hunt for another victim. He was smoking a black-
looking cigar. He felt particularly elated, for between Hockley and a
victim picked up two days before he had come into the possession of
over three hundred dollars. To be sure, this was no fortune,
especially to one supposed to own valuable gold mines in the West,
but to J. Rutherford Brown, who had often had less than a dollar in
his pockets, it was a considerable sum.
“Don’t think I’ll stay here much longer,” he mused, as he puffed away.
“That boy or that man from Philadelphia may turn up and make
trouble. Guess I’ll go back to San Juan.”
“There is the fellow!” cried Hockley, to Professor Strong. “The man
with the checked suit, who is smoking.”
The professor took a good look and then he smiled grimly to himself.
“I fancy we are in luck,” he said, briefly. “I know this fellow.”
“You do?” ejaculated Hockley. “Who is he?”
Professor Strong did not answer, but going up to the man from
Montana clapped him on the arm.
“So we meet again, Henry Umbler,” he said.
The man who had called himself J. Rutherford Brown gave a start
and his face changed color. Then he recovered and endeavored to
put on a bold front.
“You are mistaken, sir. My name is not Umbler,” he said.
“We won’t argue the point, Umbler. I want you to pay back to this
young man the money you took from him.”
“Don’t know him, sir. You are making a mistake.”
“Are you sure of this fellow?” questioned Professor Strong of
Hockley.
“Yes, sir,” was the prompt answer.
“Then, Umbler, you must give up the money, every cent of it. Please
to remember that you are in United States territory now—not in
Brazil, where you were when last we met. I fancy some stockholders
of the International Star Rubber Company would be glad to get their
hands on Henry Umbler, one of the promoters of that get-rich-quick
concern.”
“I tell you I am not Henry Umbler,” insisted the man from Montana.
“Very well then. We’ll go to police headquarters and settle this affair.”
“What do you want?”
“I want this young man’s money, his watch and his ring returned to
him.”
“What is he to you?”
“I brought him down here to see the sights,—and I am bound to see
that he is not swindled. Give him back his money and other things
and I will not prosecute you, but if you refuse, I’ll see to it that he not
only gets his money but that you go back to the West, where you
belong.”
At this plain talk the face of the swindler became a study. At last he
turned and faced Hockley.
“We had a fair game,” he growled. “You’re a baby to squeal, nothing
but a baby. But if you want the money you can have it.”
He brought a roll of bills out of his pocket, and began to count out a
sum equal to that the youth had possessed. With this, and the watch
and ring, in his hand he looked again at Professor Strong.
“If I give him this does that close the whole affair?” he asked.
“Yes, so far is I am concerned,” answered Amos Strong.
“Then here you are, baby,” went on the man from Montana, and
thrust the money and other things into Hockley’s willing hand. “Don’t
ever try to be a sport again. You’re only fit to be let loose in a
kindergarten.” And then he walked away, puffing at his black cigar
more furiously than ever.
“Who is he?” questioned Hockley, as he put the money away, after
counting it.
“He is a Western sharp,” replied the professor. “Years ago he was
mixed up in a stock company that proved to be little better than a
swindle. I had some shares in it but managed to get my money back.
I tried to help others in the company, but they wouldn’t listen to my
plan and went ahead on their own account and lost. I met Umbler in
Brazil once and tried to get more money out of him, for the other
stockholders, but he laughed at me, for at that time it would have
been a hard matter to have a man transported from Brazil to the
United States on such a charge as I could make.”
“I—I am much obliged for getting the money back, sir.”
“It was rare good luck, Jacob, nothing else, and now you have it
again I want you to turn it over to me.”
“But, sir——.”
“I will not argue the matter.” Professor Strong’s voice grew stern
once more. “You can either give the money to me, or pack your trunk
and go home. And if you get into any more such scrapes I shall notify
your father and send you home anyway. I want no more gambling
and no more ‘seeing the sights’ on your own account. You have got
to turn over a new leaf.”
For half an hour Amos Strong “laid down the law” to Hockley and at
the end of that time the bully felt very humble indeed. He did not
wish to be sent home, and he promised faithfully to do better in the
future; and there the affair was dropped.
CHAPTER XXIV
SOMETHING ABOUT EARTHQUAKES AND
VOLCANOES
For four days the boys traveled around Ponce with the professor,
taking in all the sights. They also took a trip on the railroad to
Guayanilla and Yauco, and likewise down to several small villages
along the seacoast. They were particularly interested in the
American government of the island, and spent several hours at the
various departments. Here the professor met two officials whom he
knew, and all were made to feel thoroughly at home.
In those trips Hockley had little to say, and the other boys noticed the
change in his manner.
“Something went wrong, that’s certain,” observed Darry. But what it
had been they could not imagine, for neither Hockley nor the
professor said anything, and they did not dare to make inquiries.
At the close of the fourth day a French steamer came into the Port of
Ponce, bound from Hayti to St. Pierre, Martinique. The steamer was
one upon which Amos Strong had sailed once before and he knew
Captain Danvier fairly well. He at once communicated this fact to the
boys.
“If we are to go down to Martinique we cannot do better than sail with
Captain Danvier,” he said. “His steamer, the Vendee, is a
comfortable craft, and we shall be certain of good food and pleasant
company.”
“Then let us sail by all means,” said Mark, who was anxious to get to
St. Pierre and see his father, and Frank said the same. Sam and
Darry were likewise willing, and so, for a wonder was Hockley. As a
matter of fact the tall youth had wished to get away from Ponce long
before, being fearful that the other boys might learn something about
J. Rutherford Brown, alias Henry Umbler, and of the loss of money
by gambling.
The matter of accommodations on board of the Vendee was easily
arranged with Captain Danvier, who was delighted to meet Professor
Strong again, and twenty-four hours later the party bid farewell to the
Port of Ponce and sailed for the island which was destined so soon
to become the center of one of the largest catastrophes known to
history.
“I guess we have quite a sail before us,” said Sam, after land had
become hidden in the distance.
“We have, Samuel,” answered the professor. “Roughly speaking, the
distance from Ponce to St. Pierre is a little over four hundred miles.
We shall sail directly to the south-east, and make no stops on the
way. The Vendee is not a fast steamer, but Captain Danvier
calculates to cover the distance in five days.”
“I have been looking up a map of the Leeward Islands,” put in Mark.
“What a lot of them there are and all in a row, like the tops of a
mountain range.”
“And that is just what they are, Mark, and the tops of a very high
range of mountains at that, only the water covers the larger part of
the range. Between some of these islands and to the east and west
the water is five and six thousand feet deep. If the sea was swept
away some of these peaks would be two miles high.”
“They must have had some terrible earthquakes and volcanic
eruptions to produce such mountains,” said Darry, who had joined
the group.
“They have had, Dartworth, and these eruptions have extended not
alone through the Leeward Islands, but through the whole of the
West Indies and also through Central and South America and parts
of Mexico.”
“Do you know, I have never read much about earthquakes and
volcanoes,” observed Mark. “But it seems to me it ought to prove
interesting reading.”
“It is interesting—more so than any novel you ever read.
Earthquakes alone have enlisted the attention of scientists for years,
and they have to-day the record of over seven thousand which
proved more or less disastrous.”
“Seven thousand!” cried Darry. “Then old Mother Earth isn’t as fixed
as I thought her!”
“No, Mother Earth is not fixed, but continually changing, both inside
and out. There are tremendous fires on the interior and these often
crack open the dirt and rock, letting in large quantities of sea-water.
Then comes an explosion, just as you may have at home if you
throw cold water into a red-hot kitchen range. The steam and gases
don’t know where to go, and consequently there is a volcanic
eruption, or else something breaks loose underground and an
earthquake follows. If this happens close to the sea, or under the
sea, there is a tidal wave, the water going down and up with the
movements of the ocean bed.”
“Do all earthquakes come from volcanic fires?” asked Sam.
“We cannot answer that, Samuel. Some earthquakes seem not to
have any connection with volcanoes, as for instance the earthquake
at Charleston, South Carolina, in 1886. There was no fire there, and
but little gas, and what caused the quaking, with its tremendous
damage to property and human life, is a mystery.”
“What was the very worst earthquake known?” came from Frank.
“That at Lisbon, Portugal, in 1755. It happened late in the year, and
before it occurred there were numerous small earthquakes and
volcanic outbursts throughout Europe. When the big earthquake
came there were three shocks in quick succession and the very
bottom of the harbor dropped out. After many ships were engulfed,
the bottom of the harbor came up again and there was a fierce
onrush of water. What was left standing of the city took fire, and fully
fifty thousand people lost their lives.”
“Isn’t Vesuvius the largest of all known volcanoes?” asked Darry.
“It is certainly the most destructive of volcanoes, having destroyed
Pompeii by covering it with a fine dust, until it was completely buried
from sight, and having covered Herculaneum with a shower of mud,
so that hardly a soul escaped from a territory miles in extent. But the
largest volcano in the world is probably Krakatua, situated between
the islands of Sumatra and Java, in the East Indies. This volcano
was first heard of in 1860, but its greatest outbreak occurred in 1883.
At first there was a tremendous column of vapor over the island,
which, fortunately, was uninhabited. This increased, and explosion
after explosion was heard, each growing louder than the others.
These explosions finally got so terrific that they were heard
thousands of miles away, and the inhabitants of Java, Sumatra, and
other islands in that vicinity were filled with terror. At last, late in
August, came one grand explosion in the morning, and about eight
square miles of dirt and rock were hurled into the air, to fall into the
hissing and boiling sea. The gas, dust, and noxious vapors traveled
for miles and obscured the sun like an eclipse, and the tidal waves
rose to a height of sixty to ninety feet, causing the loss of much
shipping and probably forty thousand lives. Had Krakatua been on
the mainland instead of on an island there would probably have been
such a catastrophe as is unknown to modern history.”
“I’m glad I wasn’t there,” put in Hockley, who had lounged up during
the talk, and felt that he must say something. “I’m willing enough to
stay where there are no earthquakes and volcanoes.”
“What about the volcanoes down here?” asked Mark. “You said
something about Mont Pelee, on the island of Martinique.”
“That is now supposed to be an extinct volcano. It was in eruption in
1813, 1817, 1823, 1839 and 1851. The eruption of 1839 was the
worst and this nearly destroyed Fort de France, the capital of the
island. The volcano is forty-two hundred feet in height and several
miles in circumference. The last time I stopped at St. Pierre there
was an excursion formed to visit the crater of the mountain, which
now forms a beautiful lake of unknown depth. We spent a day in
looking around and took dinner at a fine hotel at the foot of Pelee.”
“Are there any other volcanoes on the island?”
“There is Mount Carbet, near the center of the island, and Mount
Vauclin near the south-east extremity, but they are of small
importance.”
“We must visit all the volcanoes!” cried Frank. “I want to see what
they look like on the inside.”
“I thought there was a big volcano on the Hawaiian Islands,” put in
Hockley.
“There is, Jacob, Kilauea, which is nine miles in circumference, and
one of the largest in the world. But this has never shown the activity
of Vesuvius or of some others. There is also a volcano on the island
of St. Vincent, due south of Martinique, which is well worth visiting.”
“Oh, I don’t care to see them—at least, not if there is any danger of
their shooting off,” added the tall youth, hastily, and in such a manner
that the others could scarcely keep from laughing.
“We will try to avoid all eruptions,” replied the professor, smiling, for
even he did not dream of what was so close at hand.
The boys found Captain Danvier just as sociable as Amos Strong
had pictured him, and the worthy commander of the Vendee gave
them permission to roam over the steamer at will. He could speak
English fairly well and took a delight in explaining his nautical
instruments and other things to them.
“’Tis verra nice for you to do ze traveling around,” he said. “And wid
such a learned gentlemans as ze professair it is von double
pleasure. He is ze fine gentlemans, I know heem well.”
“And so do we know him,” answered Darry. “He’s O. K.”
“O. K. Vot you means by zat?”
“Oh, I mean he is just the cheese,” said Darry, bound to have his fun.
The French captain looked more bewildered than ever. “De cheese?
Ha, you mean de cheese to eat—de caise. But you no mean to eat
him, no.”
“No, I mean he is just the ticket.”
“De ticket, vot is dat? De carte, eh? How is de professair de carte?”
“I didn’t say the professor was a card—or a bill of fare either. I mean
he is just all right.”
“All right? Ha, I see—oui, oui! Surely he is all right, de professair is
nevair wrong. But while he is right how can he be de ticket and de
cheese, and de O. K.? Dat Englis as she is spoke by de American is
von verra funny language, yes!” And the French captain shrugged
his shoulders, while Darry and the other boys had to turn away to
keep from laughing in the good-hearted man’s face. But when Darry
and Mark tried to air the little French they knew before Captain
Danvier he laughed as heartily as they did.
CHAPTER XXV
A COLLISION AT SEA
On the second day on shipboard Professor Strong produced a map

of the Leeward Islands, and told the boys something more
concerning the island they were to visit.
“As you will see by the map,” he said, “Martinique is irregular in
shape. Roughly speaking it is forty miles long by from ten to fifteen
miles wide. The area is less than four hundred square miles, and a
good portion of this is rocky and unfit for cultivation.”
“I see Mont Pelee, in the north,” said Mark, studying the map.
“The principal cities are Fort de France, the capital, located on the
bay of the same name, and St. Pierre and Lamentin. These three
cities are, as you see, located on the western coast of the island. On
the eastern coast is François, a town which has quite a respectable
shipping. The total population of the island is about two hundred
thousand, mostly negroes, half-castes, and French.”
“What do they raise there?” came from Sam.
“Sugar mostly, although there is also some tobacco and also a few
cattle. On an island so narrow, the streams, of course, cannot be of
much importance. The place was discovered by Columbus in 1502
and was first settled by the French, and it is a French colony to-day. I
have been at both Fort de France and St. Pierre and found them
progressive in their way. Each contains from twenty-five to thirty
thousand inhabitants and boasts of a number of fine parks and
public buildings. Just outside of St. Pierre is a suburb in which the
wealthy French population have some beautiful residences. The
drive to this district is delightful.”
“And how far is Mont Pelee from the city?” asked Sam.
“The volcano is five miles north of St. Pierre. The country is very hilly,
but there are several routes by which the crater of the volcano can
be reached with ease. There are a few small rivers to cross but
these are all bridged. Just north of St. Pierre is a large sugar refinery.
The city itself lies right along the waterfront, with high hills directly
behind it.”
After this the talk became general and the professor told them of his
former visits to Martinique, and also to the islands of Guadeloupe,
Dominica, St. Lucia, St. Vincent and Grenada, others of the group.
He told them there might be little or no hunting in store for them, but
a good deal of mountain climbing, and volcano exploring if they
desired it. And they said they did, all but Hockley, who, as usual
hung back for something else, he could not tell what.
For two days the weather remained fine and the time passed swiftly
enough, but on the morning of the third day the sky clouded up and
by noon it was raining in torrents. Then the wind came up and the
little steamer had all she could do to keep to her course.
The first effect of the storm was to drive everybody to the cabin.
Windows and doors were bolted and ports secured, and the
passengers kept their feet with difficulty as they moved around.
Eating at the table was almost impossible, and the professor had a
dish of peas upset in his lap, while Hockley nearly choked himself
with a cup of coffee which went up his nose and into his eyes. Mark
was also unfortunate. He was trying to eat a bit of steak but it slipped
from his plate to his knee and then the whole length of the dining
room floor. A waiter stepped on it and went headlong, bringing down
an armful of dishes with a mighty crash.
“Say! but this is a storm and no mistake!” gasped Mark, after the
laughing had subsided. “And such a nice piece of beefsteak, too.”
“We’re lucky if we don’t all go to the bottom!” sighed Hockley. And
then he made a rush from the room to his stateroom. He had been
taken seasick and was perfectly miserable from that time until the
storm cleared away.
Toward evening the rain let up a bit, and as it was very close and
stuffy in the cabin, the boys begged Professor Strong to let them go
on deck. He finally consented, but warned them to take good care
and not fall overboard.
“This is a treacherous sea,” he said. “The waves sometimes run very
high when least expected. Hold on tight, no matter where you
happen to be standing.”
“All right, we’ll be careful,” said Sam.
They went on deck and secured a position close by the wheelhouse,
where a number of life-lines had been stretched. Captain Danvier
was present and also warned them to be on guard.
“Ze waves run verra high,” he said. “You must hold on hard, oui,
verra hard.”
An hour went by, and the storm seemed on the point of subsiding
altogether. Feeling they could now walk around a little, the boys
moved from one end of the steamer to the other with caution. The
deck was still slippery and it was now dark.
Important events sometimes happen with alarming swiftness and
such proved to be the case in the present instance. It had looked as
if the storm was about at an end, but without warning there came
another blow, which sent the spray flying in all directions. The
lookouts were drenched and for the moment could see nothing. Then
as the spray cleared away for an instant, one of them gave a mad
yell in French:
“A ship! A ship dead ahead!”
The cry had hardly pierced the air when there came a tremendous
shock which shook the Vendee from stem to stern and caused the
steamer to list well over to port. Sam and Darry, who had started
back for the cabin, to change their wet jackets, were pitched
headlong and bumped into each other close to a post.
“Oh!” groaned Sam.
“Are you hurt, Beans?” questioned Darry, catching his chum by the
shoulder.
“A little. What was that struck us?”
“I don’t know.”
Another cry now came out of the darkness. But it was in French and
they could not understand it. Then some sailors rushed past them
with a large square of canvas and some ropes.
“We have been struck and they are going to cover the hole with
sailcloth,” explained another passenger, who could speak both
French and English. “What we struck nobody knows excepting that it
was some kind of vessel.”
With difficulty the two boys gained their feet and ran for the cabin. At
the doorway both halted and each gazed at the other in
consternation.
“Mark and Frank!” burst out Darry. “Where are they?”
“I’m sure I don’t know,” responded Sam, in equal dismay. He raised
his voice: “Frank! Mark! Are you safe?” he called out.
No answer came back, and now Professor Strong rushed up, fully as
alarmed as anybody.
“Are you all right?” he questioned. “Where are Mark and Frank?”
“We don’t know, sir,” answered Sam.
“They were on deck with you?”
“Yes, sir.”
“Pray heaven they haven’t gone overboard,” gasped Amos Strong,
and greatly agitated, he ran out into the darkness of the deck. Then
they heard him call back: “Remain in the cabin until I return.”
A dozen cries now resounded on every side, and bells were jangling
almost as wildly. The Vendee had been struck on the starboard side,
just aft of the bow, and the captain was ordering some of the cargo
to be shifted to the stern, that the bow might come up as far as
possible out of the water. In the meantime the ship’s carpenter had
got out the sailcloth and he and his men were lowering it over the
hole, to keep out the rush of water. Below, the pump had been
connected with the engine and this was already battling bravely to
free the hold of the briny element that threatened to send the gallant
steamer to the bottom.
In the midst of the excitement Hockley appeared. He saw that this
was no “fake” sinking, and his face was pale with terror as he clung
first to Sam and then to Darry.
“It’s awful!” he wailed. “What shall we do? Where are the life
preservers? Where is the professor? Why don’t he order out a boat
to save us? How far do you suppose we are from land? Oh, I know I
can’t swim in such a sea!” And he shook like a leaf.
“We are not going down yet, Jake,” answered Sam. “The professor is
looking for Mark and Frank. I’m afraid they’ve been washed
overboard.”
“There is a signal of distress!” interrupted Darry, pointing out through
the darkness. A rocket had flared through the air, and now another
followed. Then a strong Bengal light lit up the scene.
“I’m going out to look for Frank and Mark,” said Darry, recklessly, and
left the cabin. Sam came close behind him. Hockley did not wish to
go, but to remain alone seemed even worse and he also followed,
but more slowly.
The Vendee had been backed and was now coming up alongside of
the ship with which it had been in collision. The strong Bengal light
showed her to be a three masted schooner, piled high with lumber. A
good part of the lumber on the forward deck had been unshipped by
the collision and was floating in the angry sea.
“Do you see anything of Mark and Frank?” asked Sam, hoarsely, as
he and Darry slipped up beside the professor.
“Not a sign,” was the sad answer. “If they were washed overboard I
fear they were drowned.”
“Oh, don’t say that!” gasped Darry. “Drowned! It’s horrible!”
“Can’t they put out a small boat?” asked Sam.
“No small boat would live in such a sea as this, and besides with so
much loose lumber floating around it would be doubly dangerous to
try going out.”
“But what are we going to do?” demanded Hockley. “I—I don’t want
to drown just yet.”
“I don’t imagine this steamer is going down, Jacob. We received a
heavy blow, it is true, but she is built in a number of compartments.
My whole anxiety, is for Mark and Frank. If they went overboard they
must be lost.”
“Well, it was their business to take care of themselves,” grumbled the
tall youth, unfeelingly.
“And it is your business to look out for yourself,” retorted Darry. “But
don’t let us quarrel; this thing is far too serious,” he added.
The Bengal light had now burnt itself out and no more were lit for the
reason that the storm was again coming up and the crew of each
vessel had to bestow their entire attention to the question of saving
the craft from going down. This was comparatively an easy matter on
board of the Vendee and soon under officers were sent around to
assure the passengers that there was no immediate cause for alarm,
that the hole had been patched up temporarily, and that it would be
thoroughly repaired as soon as the wind abated.
Captain Danvier was extremely sorry to hear that two of the boys
were missing and at once did what he could toward finding them. But
in such a storm, which was again increasing, his first duty was to his
ship, and he said, as had Professor Strong, that to risk a small boat
in such a sea would be foolhardy.
“We must wait until daylight,” he said, in French. “I can do nothing
now.”
Slowly the night wore away. Nobody slept, and at the first streak of
dawn all went on deck. The storm had passed, but the sky was still
dark. The captain had thought best to lay to, thinking the lumber
schooner might need assistance. The other craft was not far away
and soon they came within hailing distance of each other. The
lumber boat flew the Dutch flag and proved to be bound from Saba
to Curaçao.
“I have lost a large quantity of lumber!” roared the Dutch skipper,
wrathfully. “I shall hold you responsible in law for it!”
“Have you seen anything of two boys?” questioned Captain Danvier.
“We have lost them.”
“No, I have seen no boys. Have you seen a man? We lost one of our
sailors in that smash.”
“No, we have seen nobody,” answered the French captain.
“It was your fault we had that smash,” the Dutch skipper continued.
“Remember, I shall hold you for it in law, the first chance I get!”
“Do as you please about that,” returned Captain Danvier, coolly. “You
are as much to blame as myself. But if you see anything of those
boys treat them well and you’ll lose nothing by it.”
“I’ll treat them well enough,” growled the Dutch skipper.
As the Dutchman could speak neither French nor English the
conversation had to be carried on in his native tongue and it was
hard for Captain Danvier to make himself understood. Only a few
words more passed, and then the two vessels separated, and the
lumber schooner proceeded on her way, with every sail set.
“It ees certainly verra sad,” said the French captain, to the professor
and the boys. “I vill do what I can for ze boys—but what is zare to do,
tell me zat?”
“I wish you would remain in this vicinity for a day or so,” answered
Professor Strong. “They may be floating around, and if so I hope to
pick them up.”
The captain agreed readily, and not one day but two were spent in
the vicinity. In the meantime the hole in the bow was repaired, so
that danger from that source became a thing of the past.
The loss of Mark and Frank made Sam, Darry and Professor Strong
feel much downcast and even Hockley went around looking very
sober.
“I never dreamed that such a dreadful thing would happen,” said
Darry, and there were tears in his eyes. “I declare, if they don’t turn
up I’m going right back home.”
“And I am with you,” answered Sam. “To go sight-seeing without
them would make me sick.”
“And think of their fathers being at St. Pierre ready to welcome
them,” went on Darry. “That makes it ten times worse.”
And Sam agreed that it did. The loss of their chums cast a gloom
over them impossible to dispel.
CHAPTER XXVI
THE LUMBER RAFT
Let us go back and find out what really did become of Mark and
Frank at the time the Vendee was struck in the darkness of the storm
by the Dutch lumber vessel.
As the French steamer listed to port the chums caught at the railing
before them. But this was wet and slippery and in an instant Frank
found himself over the side.
“Help!” he screamed, but the cry was drowned out in the roar of the
elements around him. Mark made a clutch at him, but he, too, was
carried overboard.
With clasped hands the two boys struck the water and went down
and down, they knew not whither. The accident had occurred so
quickly that both were completely bewildered, and it was purely by
instinct that each closed his mouth to keep out the briny element.
The waves leaped and foamed all around them, and Mark felt
something scrape his shoulder, he could not tell what, although long
after he concluded it must have been the side of the steamer.
Just what occurred during the five minutes that followed it would be
hard to describe. The boys clung to each other, bound to live or die
together. Even in that awful moment the thought of separating was
still more terrifying. Occasionally they saw a light, but soon these
were lost to view, and they found themselves in the blackness of the
night, alone.
“Frank, are you—you alive?” Such were the first words spoken
between the pair.
“Ye—yes,” came with a gasp. “Ho—how are we going to get back to
the—the steamer?”
“I don’t know. I can’t see the vessel anywhere, can you?”
As the waves carried them upward they gazed around eagerly. Not a
light was anywhere.
“The steamer has gone on—we are deserted!” cried Mark, and his
heart sank like a lump of lead in his bosom.
“Oh, don’t say that,” returned Frank. “Surely, they won’t leave us to
drown!”
A period of silence ensued. Then Frank felt something sheer up
alongside of him. He put out a hand and felt a stick of wood—one
washed overboard from the lumber craft.
“A log!” he cried. “Catch hold, Mark!”
Mark was willing enough and they caught hold of the log, to find that
it was fastened with a short chain to a number of other logs. Not
without difficulty they crawled to the top of the crude raft.
“Where did this come from?” queried Frank. “Do you suppose they
threw it overboard for us?”
“Perhaps, although I never saw such a life raft on the Vendee—if it is
a life raft. It looks more to me like some washed-away lumber.
Perhaps we struck another ship—in fact, I am almost sure we did. If
she was a lumber craft, this must be from her.”
Another spell of silence ensued, during which both strained their
eyes to see through the driving storm. Nothing but the waves met
their gaze, carrying them upward at one moment as if to the top of a
high hill, and then letting them sink and sink into a hollow until it
looked as if they should never rise again.
It was a time never to be forgotten, and each boy breathed a silent
prayer that he might be brought through this great peril in safety.
Thus the minutes slipped by, until suddenly Mark gave a cry.
“A light! A sky-rocket!”
He was right, from a great distance they saw the rocket from the
lumber vessel flare out through the storm. Then followed a
brightness lower down, but this Bengal light was not so distinct.
“Can it be the steamer in distress?” they asked each other.
“Looks as if something was on fire,” said Mark. He tried to stand up
on the lumber, Frank in the meantime holding him fast by the ankles.
But now the raft went into a hollow, and when it came up again the
light was gone.
Slowly the hours went by and the storm gradually subsided. The
boys found that the chain was fastened tightly around the lumber
and they clung to this and waited for daybreak. They did not mind
being wet to the skin, for the night was warm, but each was
thoroughly exhausted by his struggles.
At last came the light, low down in the east, and gradually the day
came over the rim of the sea—dull and heavy and bringing little of
cheer. Both stood up and gazed around eagerly.
Not a sail of any kind in sight.
It was a trying moment, and both had hard work to command their
feelings. Here they were, cast away on the broad bosom of the
Caribbean Sea, miles from land, and with no ship to pick them up.
“And nothing to eat or to drink,” said Frank. “Oh, Mark, what shall we
do?”
“I’m sure I don’t know, Frank. All we can do is to remain on this pile
of lumber and trust to luck.”
“We’ll die of hunger and thirst. I’m thirsty already.”
“So am I, but we had better not think of that.”
As the day grew a little brighter they continued to watch for the ship.
Once Mark thought he saw a vessel far to the eastward, but he was
not sure. An hour after this Frank gave a cry.
“Another raft, and somebody is on it!”
Frank was right, close at hand another raft was floating, and on top
of this lay the figure of a man, either dead or asleep.
“Hullo there!” cried Mark. “Hullo! Ahoy!”
At first the figure on the raft did not stir, but as the lumber came
closer the man sat up and gazed around wildly.
On catching sight of the two boys he gave a faint cry in a language
that was strange to them.
“He must be a castaway like ourselves,” said Mark.
“See, he is motioning to us with a rope,” said Frank. “He is going to
throw us one end.”
The end of the rope was thrown not once, but three times before
they could catch it. Then they drew the other raft toward them and
lashed the two heaps of lumber together. Thus united, the piles
made a raft of considerable size.
The man who had thus strangely joined them was evidently a sailor
and he was suffering from an ugly wound on the shoulder. At first he
said but little, but at last they made out that his name was Sven
Orlaff and that he was a Norwegian.
“I be on da Dutch boat, Christiana,” he said, in broken English. “Da
boat strike da steamer an’ I got by da vater in. So you go, too?”
“Yes, we were on the steamer,” answered Mark. “Have you any idea
where the steamer or the Dutch boat is?”
At this question Sven Orlaff shook his head. “Lose da boat—so
dark,” he said. “My shouler much hurt—I sick, fall da vater in and
must swim to da lumber. No see da boat vonce more.”
“We’re in a tough situation,” put in Frank, and heaved a sigh. “Are we
anywhere near to land?”
At this Sven Orlaff shook his head again. “No land near dis blace,”
he said. “No much boats here.”
“No land and very few ships,” said Mark. “Frank, it is certainly a
dismal outlook.”
They saw that the Norwegian’s shoulder needed to be bound up and
went at the work without delay, tearing the sleeves from their shirts
for this purpose. He was thankful, and told them so in his own
peculiar way.
The work had scarcely been accomplished when something odd
happened. Frank had allowed an end of the rope to trail behind the
raft. Now the rope was seized by some kind of a fish who swallowed
the knot. Like a flash the Norwegian sailor pulled in the rope, landed
the fish and smashed its head with his heel.
“Make to eat,” he explained. “I hungry.”
“Why, of course,” cried Mark. “I’m hungry myself. I wonder if we can’t
catch more of them?”
For answer the sailor pulled a stout fishline from his pocket, and also
a knife. With the knife he cut off a portion of the fish’s tail for bait.
“Give it to me, I’ll do the fishing,” said Mark, for he did not want the
hurt man to use his wounded shoulder.
Luckily for them, fish were plentiful in that vicinity, and in a moment
he got a bite and landed another fish, weighing at least two pounds.
Then he tried again and again, and soon had a mess of a dozen.
“We shall not starve to death, that’s sure,” said Frank, who had fixed
a place between the lumber for the catch. “I wish, Mark, you could
catch something else.”
“What’s that?”
“Water.”
“Don’t mention it. I am dry enough without thinking about it.”
All were dry, and as the day wore on their thirst increased until they
could hardly endure it.
There was small danger of the lumber blazing up, with so much salt
water to extinguish a big fire, and so they cut slivers from some
boards and started a little fire on the top of several big timbers, using
a match from Mark’s water-tight safe for that purpose. Soon they had
a fairly good blaze going and over this they cooked their fish, or
rather, half cooked and half burnt it, for the operation proved far from
satisfactory. But even such a meal was better than if the fish had
been raw.
By the time they had eaten their fill it began to cloud up once more
and soon it was raining steadily. They lost no time in spreading their
garments to catch the water and soon each had as much as he
wished to drink. The rain lasted about two hours, then cleared away
quickly, and toward the middle of the afternoon the sun came out.
As the light kept growing Mark stood up and looked around them
once more. Then he gave a cry:
“A ship! A ship!”
CHAPTER XXVII
STONE DUST AND BOILING WATER
Mark’s cry aroused Frank and the Norwegian sailor, and both
looked eagerly in the direction pointed out.
“I see something,” said Frank, after a searching look. “But if it is a
ship or a small island I cannot tell.”
“Da ship!” cried Sven Orlaff. “Da ship sure!”
“Do you mean your ship?” queried Mark.
“I no can say ’bout dat. Look lak my ship, but no sure.”
For several minutes they watched the vessel in silence. Would it
come toward them?
“Let us raise a signal of distress,” said Frank. “Here, I’ll put my shirt
up on the end of a board.” And this was done without delay.
“We mak big smoke—dat be verra goot,” suggested Sven Orlaff, and
began to kindle a blaze where the former fire had been. Over this he
placed some wet bits of board which soon produced so much smoke
that it nearly choked them.
“They ought to see that,” said Frank.
“You must remember that this raft is much smaller than the ship,
Frank,” answered Mark, who was afraid of raising false hopes.
“When we go down into a hollow of the sea we are completely out of
their sight.”
An anxious quarter of an hour went by, during which the ship
seemed to come a little nearer.
“I believe she will come to us,” said Mark, at last.
Both of the boys looked anxiously at the Norwegian sailor, feeling
that he had more experience in such affairs than themselves.
Sven Orlaff shook his head sadly.
“Da ship go ’round—no will come here,” he said.
“It won’t!” gasped Mark and Frank in a breath.
And again the sailor shook his head. The lads gazed eagerly, with
eyes almost starting from their sockets. Sven Orlaff was right—the
distant object was slowly but surely fading from their vision.
The despair of the boys was now greater than ever, and for some
time neither could trust himself to speak.
“It looks as if we were doomed,” said Frank, at last, in a choking
voice.
Mark did not answer. There seemed really nothing to say.
The sun had come out strong and hot, and it was not long before all
began to feel thirsty once more. A little water remained in the hollow
between the lumber and this they drank up, fearful that it would
otherwise evaporate.
Night came on slowly and now they ate another portion of the fish. It
seemed unusually dry and they choked it down with an effort.
“It’s queer,” observed Frank. “This fish tastes to me as if it was
covered with fine dirt.”
“It must be our mouths,” replied Mark. “Mine feels full of grit, as if I
had been licking a piece of emery paper.”
They looked at Sven Orlaff, and found him rubbing his eyes. He
seemed to be trying to get something out of them.
“My eye, he got da dust in,” said the sailor. “I no lak dat. Where da
dust he come from annahow?” and he rubbed his eyes again.
“Why, the air is full of dust!” came from Frank, as he gazed upward.
“Who ever heard of such a thing, so far out at sea!”

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