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Business
Accounting
and Finance
FOURTH Edition
Catherine Gowthorpe
Australia • Brazil • Mexico • Singapore • United Kingdom • United States
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Catherine Gowthorpe
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Print Number: 01 Print Year: 2017
Brief contents
1 The role of accounting in business 1
SECTION I financial accounting and reporting 23

2 The statement of financial position 24
3 The statement of profit or loss 44
4 Applying accounting conventions 64
5 Depreciation and amortization 90
6 The statement of cash flows 108
7 Financial reporting by limited companies 134
8 Understanding financial reports: trend analysis 156
9 Understanding financial reports: using accounting ratios 173
SECTION II management accounting 203

10 Management and cost accounting information 204
11 Costing: overview and basic techniques 213
12 Costing: accounting for overheads 228
13 Pricing 249
14 Marginal costing and decision making 264
15 Capital investment decisions 289
16 Budgets 311
17 Accounting for control 334
18 Performance measurement 356
SECTION III financial management 373

19 The management of working capital 374
20 Financing the business 393
Answers to self-test questions 410

Answers to exercises 430
Glossary 494
Index 499
iii
Contents
Figures xii 1.3.4 Leasing and hire purchase 8

Preface to the fourth edition xiii 1.3.5 Grant finance 9
1.3.6 Financing companies: share issues 9
1.3.7 Financing companies: venture capital 9
1 The role of accounting 1.4 Short-, medium- and long-term finance 9
in business 1 1.5 Fundamentals of taxation 10
Aim of the chapter 1 1.5.1 Income taxes (personal taxation) 10
Learning outcomes 1 1.5.2 Corporation tax 10
1.5.3 Capital gains tax 10
Introduction 1
1.5.4 Value added tax 10
1.0.1 Special notes for the suspicious 1
1.6 The need for accounting information 11
Accounting is boring and it’s not relevant to what I’m
1.6.1 Sole trader 11
doing anyway 2
Annual information 11
Accounting should be left to the accountants 2
Quarterly information 12
Accounting is all about maths, and I’m no good at
Accounting information within the business 12
maths 2
Recording and summarizing information 12
I won’t be able to understand the jargon 2
1.6.2 Partnership 12
Content of this chapter 2
Audit 13
1.1 Forms of business organization 2
1.1.1 Sole trader businesses 2
1.6.3 Limited company 13
Characteristics of the sole trader form of business 3
Provision of financial information outside
1.1.2 Partnerships 3
the business 13
Characteristics of the partnership form of business 4
Separation of ownership and management 14
1.1.3 Limited companies 4
Characteristics of limited companies 5
1.7 Users of accounting information 15
1.2 Sole traders, partnerships and limited companies
1.7.1 Access to information 16
contrasted 5
1.8 Characteristics of useful financial
1.2.1 Sole trader – advantages 5
information 16
1.2.2 Sole trader – drawbacks 6
1.9 Financial accounting and management
1.2.3 Partnership – advantages 6
accounting 16
1.2.4 Partnership – drawbacks 6
1.10 The role of the accountant in business
1.2.5 Limited company – advantages 6
organizations 18
1.2.6 Limited company – drawbacks 6
1.10.1 The accounting profession 18
1.3 Finance for business 7
1.11 Organization of the remainder of this book 18
1.3.1 Existing resources 7
1.3.2 Retained profits 8 Chapter summary 19
1.3.3 Borrowing money 8 Internet resources 19
The cost of borrowing 8
Exercises: answers at the end of the book 20
The risk/return relationship 8
Security 8 Exercises: answers available on the lecturers’
Overdrafts 8 section of the book’s website 21
vi
Contents v
SECTION I Gross profit margin 51

3.7.2 Net profit analysis 52
Financial accounting Comparing two consecutive years 52
Net profit margin 52
and reporting 23
3.8 Analyzing financial information in large companies 52
3.9 Statement of profit or loss accounting in a service
2 The statement of financial position 24
business 53
Aim of the chapter 24 3.10 Preparing both the statement of profit or loss and
Learning outcomes 24 the statement of financial position 54
Introduction 24 Chapter summary 58
2.1 Basics of business accounting: the three principal Internet resources 58
financial statements 24
2.2 The statement of financial position: definitions
of elements 27 Exercises: answers available on the lecturers’
2.2.1 Assets 27 section of the book’s website 62
2.2.2 Liabilities 27
2.2.3 Capital 27 4 Applying accounting conventions 64
2.2.4 Terminology 27 Aim of the chapter 64
2.3 The accounting equation 28 Learning outcomes 64
2.3.1 The statement of financial position format 28
Introduction 64
2.4 Drawing up a statement of financial position 30
4.1 Returns of goods, discounts and delivery charges 64
2.4.1 Changing the value of capital 33
4.1.1 Returns 65
2.5 More practice with statements of financial position 33
4.1.2 Discounts 65
2.6 Communicating meaning: what does the statement
Trade discounts 65
of financial position say? 35
Financial discounts 65
2.6.1 Characteristics of useful financial information 36
4.1.3 Delivery charges 66
2.7 Financial reporting by large companies 36
4.2 Accounting conventions 70
Chapter summary 37 4.2.1 Going concern 70
Internet resources 37 4.2.2 Recognition 70
Exercises: answers at the end of the book 38 4.2.3 Accruals (matching) 71
4.3 Comprehensive example: accruals 72
Exercises: answers available on the lecturers’
4.4 Current asset measurement: inventory
section of the book’s website 41
and trade receivables 75
4.4.1 Inventory 75
3 The statement of profit or loss 44 4.4.2 Trade receivables 77
Aim of the chapter 44 Specific and general allowances against receivables 80
Learning outcomes 44 Chapter summary 80
Introduction 44 Internet resources 81
3.1 The statement of profit or loss: terminology 45 Exercises: answers at the end of the book 81
3.2 Categories of commercial activity 45 Exercises: answers available on the lecturers’
3.3 Statement of profit or loss for a sole trader 45 section of the book’s website 86
3.4 Movements in inventory 47
3.5 Calculating cost of sales 48 5 Depreciation and amortization 90
3.6 Calculating net profit 49
Aim of the chapter 90
3.6.1 Typical business expenses 49
3.7 What does the statement of profit or loss mean? 50 Learning outcomes 90
3.7.1 Gross profit analysis 51 Introduction 90
Comparing two consecutive years 51 5.1 Accounting for the use of non-current assets 90
vi Contents
5.2 Impact of depreciation on the financial 7.1 The limited company 134
statements 92 7.2 Limited liability 135
5.3 Intangible assets and amortization 93 7.3 Information needs of company creditors 137
Brands 94 7.4 Information needs of company shareholders 137
Mineral extraction rights 94 7.5 Information needs of people other than shareholders
Patents and licences 94 and creditors 137
Newspaper titles 94 7.6 Regulation of company accounting
5.3.1 What about the staff? 94 and other issues 137
7.6.1 Companies Acts 137
Football players – a special case? 94
7.6.2 Company formation and types
5.4 Accounting for amortization 95
of company 138
5.5 Another method of depreciation 96
7.6.3 Company constitutional arrangements including the
5.6 Land and buildings 98
issue of shares 138
5.7 The role of judgement in estimating
7.6.4 Shares 138
depreciation 98
7.6.5 Role of directors 139
5.8 Sale of a non-current asset 99
Directors’ responsibilities in respect of company financial
5.9 Buying and selling assets during the year 100
statements 140
Chapter summary 100 7.6.6 Publication and presentation of accounting
Internet resources 101 information 140
Exercises: answers at the end of the book 101 7.6.7 The audit of companies 141
7.6.8 Accounting standards 141
7.6.9 International Financial Reporting Standards 142
Terminology 142
7.7 Accounting for limited companies 142
6 The statement of cash flows 108 7.7.1 Components of a set of limited company
accounts 142
7.7.2 Presentation of accounting information 143
Learning outcomes 108 Statement of financial position 143
Introduction 108 Statement of changes in equity for the year ended 31
6.1 The distinction between profit and cash 108 December 144
6.2 Preparing a statement of cash flows 110 Statement of profit or loss 144
6.2.1 Preparing a statement of cash flows: a business Note about taxation 144
start-up 110 7.8 Accounting for listed companies: additional
6.3 Direct and indirect approaches to cash flow 115 requirements 146
6.4 Statements of cash flow in an established 7.8.1 Regulations for listed companies 146
business 116 7.8.2 The annual report for a listed company 146
6.5 The high profit/no cash paradox 121 7.8.3 Corporate governance requirements 147
6.6 Statements of cash flow in large businesses 124 7.9 Accounting for listed companies: non-financial
Chapter summary 125 information 147
7.9.1 Advantages of publishing non-financial
Internet resources 125
information 148
7.9.2 Drawbacks of publishing non-financial
Exercises: answers available on the lecturers’ information 148
section of the book’s website 129 7.9.3 The strategic report 148
7.10 Corporate reporting on the internet 148
7 Financial reporting by limited Chapter summary 149
companies 134 Internet resources 150
Aim of the chapter 134 Exercises: answers at the end of the book 150
Learning outcomes 134 Exercises: answers available on the lecturers’
Introduction 134 section of the book’s website 153
Contents vii
8 Understanding financial reports: 9.8 Preparing an analysis of financial statements 188

trend analysis 156 9.8.1 Collecting the data 188
9.8.2 The focus of the analysis 188
Aim of the chapter 156 9.8.3 The analysis 189
Learning outcomes 156 9.8.4 Limitations of the analysis 189
Introduction 156 Chapter summary 190
8.1 Usefulness of financial reports to various interest Internet resources 191
groups 157
8.1.1 Owners and investors 157
8.1.2 Potential investors in a business 157 Exercises: answers available on the lecturers’
8.1.3 Creditors 158 section of the book’s website 198
8.2 Analytical techniques: changes in figures 158
8.3 Analytical techniques: horizontal and trend analysis 159
8.3.1 Some problems with horizontal analysis 161 SECTION II
Changes in the business 161
Failure to take the effects of inflation into account 161 Management accounting 203
8.4 Analytical techniques: vertical analysis and common
size analysis 161 10 Management and cost accounting
8.5 Comparing businesses with each other 164 information 204
8.5.1 Problems in comparison 164 Aim of the chapter 204
Differences in accounting policies 164
Learning outcomes 204
Differences in business activities 165
Industry averages may be misleading 165 Introduction 204
8.6 Segment analysis 166 10.1 What is management and cost accounting? 204
10.1.1 Characteristics of management accounting
Chapter summary 167
information 205
Internet resources 168 10.1.2 Some useful features of cost and management
Exercises: answers at the end of the book 168 accounting information 206
Exercises: answers available on the lecturers’ Lack of regulation 206
section of the book’s website 171 Orientation towards past and future 206
Timely production 206
Frequent reporting 206
9 Understanding financial reports: 10.2 Definitions of management accounting
using accounting ratios 173 and cost accounting 207
Aim of the chapter 173 10.3 The management accounting process 207
Learning outcomes 173 10.3.1 The objectives of the organization 208
10.3.2 The effect of uncertainty 208
Introduction 173
10.4 Organization of the rest of the book 209
9.1 Financial ratio analysis techniques 173
9.1.1 A word of caution about financial ratio analysis 174 Chapter summary 210
9.2 Performance ratios 174 Internet resources 210
9.2.1 Return on capital employed (ROCE) 174 Exercises: answers at the end of the book 210
9.3 Liquidity ratios 177
9.4 Efficiency ratios 178
9.5 Investor ratios 182
9.5.1 Market capitalization 184
9.6 Lending ratios 185 11 Costing: overview
9.6.1 Gearing 185 and basic techniques 213
9.6.2 Interest cover 185
9.7 The effects of gearing 186
9.7.1 Why are ordinary shareholders interested Learning outcomes 213
in gearing? 186 Introduction 213
viii Contents
11.1 Costing in business 213 13 Pricing 249

11.2 Product costing 214
11.2.1 Cost classification: product and period Aim of the chapter 249
costs 217 Learning outcomes 249
11.3 Approaches to costing 217 Introduction 249
11.3.1 Materials costs 219 13.1 The relationship between price and quantity 249
First in, first out (FIFO) 219 13.1.1 Elasticity and inelasticity 250
Weighted average cost (AVCO) 219 13.1.2 Problems in applying the economic model
11.3.2 Labour costs 221 to the real world 250
Employee performs a combination of direct and indirect 13.2 Competition in the market 251
labour tasks 221 13.2.1 Price setters and price takers 252
Variation in methods of payment 221 13.3 How do producers decide on prices? 252
Idle or non-productive time 221 13.3.1 Market-based pricing 252
Chapter summary 223 13.3.2 Cost-based pricing 253
Cost-plus pricing 253
13.4 Special cases 255
Exercises: answers at the end of the book 224 13.4.1 Tendering 255
Exercises: answers available on the lecturers’ 13.4.2 Highly restricted supply of unique
section of the book’s website 225 products 255
13.4.3 Target pricing and costing 256
13.4.4 Discounting 256
12 Costing: accounting
13.4.5 Auction 257
for overheads 228 13.5 More issues in pricing decisions 257
Aim of the chapter 228 13.5.1 Product life cycle 257
Learning outcomes 228 13.5.2 Product life cycle issues 258
Introduction 228 13.6 Pricing in context 258
12.1 Production overheads: allocation and 13.6.1 Building contractor 258
apportionment 229 13.6.2 Toothpaste manufacturer 259
12.1.1 Allocation to cost centres 229 13.6.3 Writer 259
12.1.2 Apportionment to cost centres 229 13.6.4 Solicitors 259
12.2 Overhead absorption 232 Chapter summary 261
12.2.1 Overhead absorption rates: some other Internet resources 261
approaches 234
Percentage of direct labour 234
Percentage of direct materials cost 235
12.3 Costing of services 235
12.4 Costing of public sector services 237
12.5 Activity-based costing (ABC) 237 14 Marginal costing and
12.5.1 Principles of ABC 238 decision making 264
12.5.2 Applying ABC in a manufacturing business 238
Contrasting ABC with traditional absorption
costing 241 Learning outcomes 264
12.5.3 Applying ABC in a service industry 241 Introduction 264
12.5.4 ABC: benefits and problems 241 14.1 Issues in decision making 265
Continuing focus on quantifiable costs only 242 14.1.1 Relevant costs and revenues 265
Chapter summary 242 Opportunity cost 266
14.2 Cost variability 266
14.2.1 Variable costs 266
Exercises: answers at the end of the book 242 14.2.2 Fixed costs 267
Exercises: answers available on the lecturers’ 14.2.3 Stepped costs 268
section of the book’s website 245 14.2.4 Semi-variable costs 269
Contents ix
14.2.5 Typical cost behaviour in different business Calculating NPV 299

sectors 270 15.3.3 Machine A 299
A manufacturer 270 15.3.4 Machine B 299
A commercial airline 270 Ratio of cash inflows to initial investment 300
Restaurant 271 15.3.5 Machine A 300
Holiday tour operator 271 15.3.6 Machine B 300
14.3 Marginal costing for decision making 271 15.3.7 Internal rate of return (IRR) 300
14.3.1 Contribution 272 Linear interpolation 300
14.3.2 Break-even 272 Using a computer 301
14.4 Cost-volume-profit analysis 272 Machine B 302
14.4.1 Break-even charts 273 Significance of IRR for decision making 303
Step 1 273 15.4 Choosing between projects 303
Step 2 274 15.5 Strengths and weaknesses of the common
14.4.2 Break-even analysis using formulae 274 investment appraisal techniques 303
Break-even in practice 275 15.5.1 Accounting rate of return (ARR) 304
14.5 Further applications of break-even in practice 276 Strengths 304
14.5.1 Target profit 276 Weaknesses 304
Showing profit on a graph 277 15.5.2 Payback 304
14.5.2 Margin of safety 277 Strengths 304
14.6 Special decisions 278 Weaknesses 304
14.6.1 Accepting contracts 278 15.5.3 Net present value (NPV) 304
14.6.2 Major increases in activity levels 279 Strengths 304
14.6.3 Limiting factors 279 Weaknesses 304
14.7 Limitations of analysis based on marginal 15.5.4 Internal rate of return (IRR) 304
costing 281 Strengths 304
Chapter summary 281 Weaknesses 304
15.5.5 The best technique? 305
Chapter summary 305
section of the book’s website 286 Exercises: answers at the end of the book 306
15 Capital investment decisions 289

16 Budgets 311
Introduction 289
15.1 Capital investment in context 290 Learning outcomes 311
15.1.1 Capital rationing 290 Introduction 311
15.2 Simple appraisal techniques 291 16.1 The relationship between strategy and budget
15.2.1 Accounting rate of return 293 setting 312
Calculating average expected return 16.2 Principal types of budget 313
(accounting profit) 293 16.2.1 Approaches to budgeting 313
Calculating average capital employed 294 16.3 The budget process 314
15.2.2 Payback 294 16.3.1 Who sets the budget? 314
15.3 More complex appraisal techniques 296 16.3.2 Imposition of budgets 315
15.3.1 The time value of money 296 16.3.3 Participative approach 315
Compounding 296 16.3.4 Stages involved in setting a budget 316
Discounting 297 16.4 Setting the budget: a practical example 317
15.3.2 Net present value (NPV) 298 16.5 Monitoring outcomes 324
Establishing a discount rate 298 16.6 Budgeting: its benefits and drawbacks 324
x Contents
16.6.1 Benefits 324 18 Performance measurement 356

Planning and coordination of operations
and activities 324 Aim of the chapter 356
Providing motivation 325 Learning outcomes 356
Control of operations and activities 325 Introduction 356
Basis for performance evaluation 325 18.1 Performance reporting and organizational
16.6.2 Drawbacks 325 objectives 357
Demotivational budgets 325 18.2 Divisional responsibility in large business
Unrealistic targets 325 organizations 358
Budgetary slack 325 18.2.1 Centralization and decentralization 359
Incremental budgeting 325 18.3 Assessing divisional performance 359
Use it or lose it 325 18.3.1 Cost/revenue centre 360
Inflexibility 325 18.3.2 Profit centre 360
Depletion of ethical standards 326 18.3.3 Investment centre 362
Cost 326 18.3.4 Determining investment in net assets 362
16.7 A radical alternative 326 18.3.5 Determining divisional net profit 364
16.7.1 Beyond budgeting 326 18.4 Non-financial performance measures 365
Chapter summary 327 18.5 The balanced scorecard 366
Internet resources 327 18.5.1 The four key perspectives of the balanced
scorecard 368
Customer perspective 368
Exercises: answers available on the lecturers’ Internal business perspective 368
section of the book’s website 330 Innovation and learning perspective 368
Financial perspective 368
17 Accounting for control 334 18.5.2 The balanced scorecard in practice 368
18.5.3 Is the balanced scorecard successful? 369
Chapter summary 369
Introduction 334
17.1 Standard costing, flexible budgeting and variance
analysis 334 Exercises: answers available on the lecturers’
17.2 Standard costing 335 section of the book’s website 371
17.2.1 Establishing standard costs 336
17.3 Overhead variances 343
17.4 Investigating the reasons for variances 347
17.4.1 Deciding which variances merit investigation 347
SECTION III
17.4.2 Principal reasons for the occurrence Financial management 373
of variances 347
Sales variances 347 19 The management
Direct materials variances 347 of working capital 374
Direct labour variances 347
Overhead variances 348
17.5 Standard costing: issues and problems 348 Learning outcomes 374
Chapter summary 349 Introduction 374

19.1 Elements of working capital 375
19.1.1 Management and mismanagement of working
Exercises: answers at the end of the book 349 capital 375
Exercises: answers available on the lecturers’ Too much inventory 375
section of the book’s website 353 Too little inventory 376
Contents xi
Trade receivables too high 376 Commercial borrowings 395

Trade receivables too low 376 20.1.2 The business plan 396
Trade payables too high 376 20.1.3 Why do businesses fail (and why do some of them
Trade payables too low 376 succeed)? 396
Cash too low 376 20.2 Stages in business growth and expansion 396
Cash too high 376 20.2.1 Employing people 397
19.2 Asset and liability components in practice 376 Advantages of employing people in a small business 397
19.3 The management of inventories 378 Disadvantages of employing people in a small
19.3.1 Holding costs 378 business 397
19.3.2 Economic order quantity 379 20.2.2 Developing the business organization 398
Using a formula for economic order quantity (EOQ) 379 Professional management 398
Drawbacks of the EOQ model 380 Communication issues 398
19.3.3 Other approaches to the management of Growth in bureaucracy 398
inventories 380 20.2.3 Sources of finance for the growing business 399
Limiting management input 380 Venture capital 399
Just-in-time (JIT) 380 Individuals: ‘angels’ and ‘dragons’ 399
19.4 The management of trade receivables 381 Leasing 399
19.4.1 Addressing the risks of offering credit to 20.3 Sources of finance for large businesses 400
customers 381 20.3.1 Issue of shares 400
Non-payment risk 381 20.3.2 Rights of shareholders 400
Administrative costs 381 20.3.3 Benefits of limited companies 400
Reduction in cash resources and potential loss 20.3.4 The London Stock Exchange (LSE) 401
of interest 382 Primary market 401
19.4.2 The credit control function 382 Secondary market 401
19.5 The management of cash, overdrafts and 20.3.5 Organization and operation of the LSE 401
trade payables 384 The main market 401
19.5.1 The operating cycle 384 The alternative investment market (AIM) 401
19.5.2 Managing cash and overdrafts 386 Share prices 402
19.5.3 Managing trade payables 386 Stock market indices: the FTSE 402
Chapter summary 386 Which companies are in the FTSE? 402
20.3.6 Flotation and other types of share issue 403
Floating a company 403
Exercises: answers at the end of the book 387 Other types of share issue 403
Exercises: answers available on the lecturers’ Mergers and acquisitions 404
section of the book’s website 389 20.3.7 To list or not to list? 404
Advantages of listing 404
Drawbacks of listing 405
20 Financing the business 393
Chapter summary 405
Introduction 393
20.1 Financing the small business 393
20.1.1 Sources of finance for a new business
start-up 394
Existing cash resources 394
Family or friends 394 Answers to self-test questions 410
Crowdfunding 394 Answers to exercises 430
Grant finance 395 Glossary 494
Peer-to-peer lending 395 Index 499
Figures
1.1 Separation of ownership and management in a limited company 14

1.2 The production of financial reports and management accounting reports 17
4.1 Matching and accruals 72
9.1 Examples of P/E ratios of companies listed on the London Stock Exchange 184
10.1 The relationship between management and financial reporting 205
10.2 Characteristics of financial and management reports 205
10.3 The process of management 207
12.1 Improving costing of NHS services 237
13.1 Price and quantity: the demand curve 250
14.1 Graph of variable cost behaviour 266
14.2 Sparks Kitchenware Ltd: variable materials cost graph 267
14.3 Fixed cost behaviour 267
14.4 Sparks Kitchenware Ltd: fixed cost (factory rental) graph 268
14.5 Stepped cost behaviour 268
14.6 Sparks Kitchenware Ltd: supervisors’ salaries cost graph 269
14.7 Semi-variable cost behaviour 269
14.8 Sparks Kitchenware Ltd: semi-variable cost (sales salaries) graph 270
14.9 Graph of total costs, split into fixed and variable 273
14.10 Graph of total costs, split into fixed and variable (alternative presentation) 273
14.11 Break-even chart 274
14.12 Mulberry Piggott Ltd: cost–volume–profit graph 277
15.1 Net present value of Machine A cash flows at various discount rates 301
15.2 Net present value of Machine B cash flows at various discount rates 302
16.1 Principal budget areas within a manufacturing business 315
17.1 Summary of the variances covered in the chapter 346
18.1 Scope of divisional control 360
18.2 The balanced scorecard 367
19.1 The movement of cash around the business 375
19.2 Economic order quantity: graph 379
The following figures appear in the answers section

Answers to Self-Test Questions 410
Figure 1 Marshall Mexico Ltd: total costs, split into fixed and variable, for 20X9 421
Figure 2 Marshall Mexico Ltd: break-even chart for 20X9 422
Answers to Exercises 430

Figure 1 Billericay Ashworth Limited: Raw materials cost 470
Figure 2 Billericay Ashworth Limited: Factory insurance 470
Figure 3 Billericay Ashworth Limited: Telephone charges 471
Figure 4 Fullbright Bognor Limited: Break-even chart 472
Figure 5 Foster Beniform Limited: Break-even chart (fixed costs at £40 000) 473
Figure 6 Foster Beniform Limited: Break-even chart (fixed costs at £50 000) 474
xii
Preface to the fourth edition
Who is this book aimed at?

The aim of this book is to provide an introduction to business accounting and finance. The book is suitable for
students on introductory accounting courses, or on business and management courses generally, or on more special-
ized courses such as marketing, human resources management, tourism, hospitality management and information
systems. Students outside the business area following courses in engineering, computer science, fashion and fine
and applied arts will also find the book a very suitable introduction to accounting and finance.
While the principal intended audience for the book comprises students taking a formal course of instruction at
college or university, it is also intended that the book should lend itself to self study by anyone who is interested in
extending their knowledge of basic business accounting and finance. This could include people who are starting,
or thinking of starting, their own businesses. Also, the book could be useful for people who are already engaged in
business but who are aware that they do not quite understand what their accountant is telling them.
The overarching aim of the book is to develop understanding of accounting. It is not, primarily, a book about
how to do accounts. Some of the chapters do, indeed, require students to prepare fairly straightforward accounting
statements. However, the principal purpose of this approach is to aid understanding; it is often easier to understand
how accounting figures hang together if you have had some experience of working them out for yourself.
If you are a student specializing in a non-accounting subject you may find that you are obliged, unavoidably, to
study business accounting and finance. Students in this category are sometimes very unwilling to engage with a
subject that they find to be alien and unhelpful. If this describes you, you may find it helpful to read the ‘special notes
for the suspicious’ in Chapter 1 of the book.
Chapter structure
All chapters start with Aims and Learning Outcomes. Diagrams and tables aid the narrative explanations and illus-
trate concepts, and frequent use is made of worked examples.
Most chapters include self-test questions within the text, so that students can test their understanding as they
progress through the chapter. At the end of each chapter is an extensive set of exercises so that students can test
their knowledge and understanding. Students are often worried and may become demotivated if the end-of-chapter
exercises are too difficult. Therefore, the exercises are designed to test the full range of learning points in the chapter,
from simple to complex. If students wish to test their understanding with even more exercises, further examples are
provided on the book’s dedicated website (see below). About half of the end of chapter exercises contain answers
within the book. Answers to the remainder are available on the lecturers’ section of the book’s website.
Supplementary material
In addition to the material presented in the book, a variety of supplementary material is available.
xiii
xiv Preface to the fourth edition
DEDICATED WEBSITE
The lecturer section of the website is password protected and the password is available free to lecturers who confirm
their adoption of the book. Lecturers should complete the registration form on the website to apply for their password.
For Students and Lecturers (Open Access)
●● Multiple choice questions. This contains supplementary questions for every chapter, comprising multiple
choice questions (usually five or ten per chapter) and a bank of additional questions, all with answers.
In addition, there are one or two case studies (with answers) for almost all of the chapters.
●● Links to accounting and finance sites on the web, including links to the sites mentioned in the book.
●● Additional questions and answers.
For Lecturers Only (Password Protected)
●● Answers to the end-of-chapter questions for which answers are not provided in the book
●● A downloadable Instructor’s Manual including teaching notes
●● PowerPoint presentations to accompany each chapter
●● Testbank
●● Case Studies
●● Additional questions and answers
●● Supplementary chapters on double-entry book-keeping.
Changes to the fourth edition

The fourth edition has been revised extensively in response to comments and suggestions from lecturers and
students. Many thanks to all those who provided the useful and constructive comments and reviews on which the
fourth edition is built.
The principal changes are as follows:
1 updating and/or replacement of most of the real-life examples
2 the addition of several questions on statements of cash flows in Chapter 6
3 updating of Chapter 7, and references in some other chapters, to incorporate recent developments in
UK GAAP and in the IASB’s Conceptual Framework.
Acknowledgements
Thanks to all the reviewers and students who have commented on earlier editions of the book, and to colleagues and
students over the years who have influenced and informed the content of this book.
Reviewers whose helpful feedback has helped shape this fourth edition include the following: Tim Price, Anglia
Ruskin University London; Nadia Gulko, University of Lincoln; Anwar Halari, University of Buckingham; and Alan
Goodacre, University of Stirling.
Thanks to the staff at Cengage Learning who have made the production of this book possible, and especially to
Annabel Ainscow, Hannah Close and Phillipa Davidson-Blake.
Teaching & Learning
Support Resources
C engage’s peer reviewed content for higher and
further education courses is accompanied by a range
of digital teaching and learning support resources. The
resources are carefully tailored to the specific needs of
the instructor, student and the course. Examples of the
kind of resources provided include:
• A password protected area for instructors with,

for example, a testbank, PowerPoint slides and
an instructor’s manual.
• An open-access area for students including, for

example, useful weblinks and glossary terms.
Lecturers: to discover the dedicated lecturer digital

support resources accompanying this textbook please
register here for access: login.cengage.com.
Students: to discover the dedicated student digital support

resources accompanying this textbook, please search for
Business Accounting and Finance on: cengagebrain.co.uk.
be unstoppable
Learn more at cengage.co.uk/education
Chapter 1 The role of accounting in business 11
However, Palfrey and Bennett has itself, paid VAT on the purchases it made. During the same three-month period it
has bought goods totalling £70 000 before VAT. VAT at 20% is £14 000. This amount of £14 000 is known as input tax.
The quarterly liability to HMRC is calculated as follows:
Output tax for the quarter £20 000

Less: Input tax for the quarter £14 000
VAT payable £6 000
The company must complete a VAT return immediately following each quarter. In this case, by the end of April
20X4 they must send the VAT return to HMRC together with payment of £6000. HMRC is very strict indeed about
deadlines.
Each of the businesses supplying Palfrey and Bennett will also be obliged to fill in VAT returns and make payments to
HMRC. People in business often complain about the large administrative burden imposed by accounting for VAT. However,
once a business has set up systems to cope with VAT, filling in the VAT return is usually straightforward.
This section provides only a very general introduction to the taxation of businesses. For the purposes of this book
it is regarded as general background business knowledge. Detailed knowledge of tax is not required for any part
of the material which will be covered in the rest of the book. In almost all cases, the exercises ignore the effects of
taxation in order to avoid adding an unnecessary layer of complication. However, students should bear in mind that
the effects of taxation can be a significant factor in the real world.
A Self-test question 1.3

company sells a building at a profit. Which one of the following statements
is correct? The profit is taxable:
(answer at the end of
a) as a capital gain.
the book)
b) under income tax rules on the company’s directors.
c) as a VAT input.
d) at the end of the VAT quarter.
1.6 THE NEED FOR ACCOUNTING INFORMATION

Quite simply, accounting information is produced because people need it. The reasons why they need it vary from
one group of people to another. This section considers, for each of the main types of business organization identified
earlier in the chapter, the range of accounting information that might be required, and the purposes for which it is
needed.
1.6.1 Sole Trader
A sole trader business, because it usually remains small, is not complex in its organization. There is one manager,
the sole trader, who may employ a few staff. The sole trader does not have to make information about his or her
business profitability generally available. The HMRC may be the only external consumer of financial information
about the business.
Annual information Tax returns to HMRC have to be made once a year, within the stipulated deadline. The sole
trader needs to prepare simple accounting statements to accompany his or her tax return. There will be a statement
showing the calculation of profit or loss for the year, and, possibly, a statement which shows the resources owned by
Another random document with
no related content on Scribd:
The Project Gutenberg eBook of Odyssey of a
hero
This ebook is for the use of anyone anywhere in the United States
and most other parts of the world at no cost and with almost no
restrictions whatsoever. You may copy it, give it away or re-use it
under the terms of the Project Gutenberg License included with this
ebook or online at www.gutenberg.org. If you are not located in the
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you are located before using this eBook.
Title: Odyssey of a hero
Author: Vardis Fisher
Release date: November 5, 2023 [eBook #72037]
Language: English
Original publication: Philadelphia: Ritten House, 1937
Credits: Bob Taylor, Tim Lindell and the Online Distributed

Proofreading Team at https://www.pgdp.net (This book was
produced from images made available by the HathiTrust
Digital Library.)
*** START OF THE PROJECT GUTENBERG EBOOK ODYSSEY

OF A HERO ***
ODYSSEY OF A HERO
ODYSSEY of a HERO
VARDIS FISHER
RITTEN HOUSE
PHILADELPHIA
1937
Copyright, 1937, by VARDIS FISHER
All Rights Reserved
Printed in the United States of America

HEN, in 1919, Private
John Benton returned
from France, he was not a
hero of the proportions of
three or four who, alone
and unaided, had slain six
or a dozen of the enemy
and captured a hundred;
but he was a warrior not
to be sneezed at. He had
been decorated by three
nations and kissed by half
the women in Paris, and
the welcome given him by natives of his home town was one that
rocked Idaho from end to end. There were seven speeches and a
dozen bands and two truckloads of flowers, and more flags and
friends and goodwill than John had ever seen before. His mother sat
between two mayors, and his gawky young sister was deferred to
and flattered by all the politicians between Boise and the Wyoming
line.
And it all went to John’s head a little; but he remembered, even so,
that war had been a dark and sightless butchery, and that German
soldiers, hungry for cigarettes and peace, were human beings much
like himself. He was sick of war and he wanted quiet and
forgetfulness. He was a little terrified by the sadistic ardor of these
homeland patriots who had never seen horror in young faces or a
bayonet in the belly of a man. “We licked them all right!” cried a
neighbor. “Hey, John, didn’t we whack it to them?” And the man
looked at John and burst with happy, victorious laughter. “The Huns
learned something when the Yanks got over there,” said another. “By
God, don’t tell me they didn’t!” “How was it over there?” asked a
third. “A lot of fun, wasn’t it, now? Hey, John, you lucky devil!” And to
all this, John’s answer was a pitying shrug and a wan smile.
His smile became almost ghastly as he listened to the principal
speaker. The man shouted in furious rhetoric and aroused the great
audience to wild and prolonged applause. “We have with us today
one of the mightiest heroes in that great struggle to make all nations
and all peoples the guardians of peace: a native son, one of our own
boys. We have gathered here to honor his name and to write it high
among the selfless knights who march under the flags of war to
make the world safe for the mothers of men! In profound humility we
are gathered to pay homage to this soldier and patriot, this son of the
Idaho mountains and valleys, who captured, single-handed, the
machine-gun nest of the enemy, and marched his foes, beaten and
vanquished, down the soil of France where the name of the great
Lafayette still rings like a bell in the hearts of civilized nations!”
And when, after seven speeches and such applause as he had
never dreamed of, John Benton was called to the flag-draped stand
to say a few words to his friends and neighbors, he went with a
sinking heart. He looked at ten thousand faces, so hushed and
listening that he could hear his own breath; and for so long a
moment he was speechless, staring at the throng, that a voice from
far out yelled: “Atta boy, John! Tell us how you licked the Huns!” John
cleared his voice and a man yelled: “Louder!” and another shouted:
“Atta boy, John!” “Friends and neighbors,” said John at last, “I am
grateful for this welcome.” A hand clapped and then the great throng
roared with applause that made the rostrum tremble. A thousand
automobile horns picked up the greeting and rolled it in thunderous
volume, and for five minutes John waited, with the tremendous
welcome like madness in his ears. “I appreciate your kindness,” said
John, when silence fell again, “and all that you have done for me.
But war, my friends, is not what you seem to think it is.” He paused
and licked his dry lips and the audience waited. When he spoke
again, those sitting close by were startled by his vehemence. “War,
my friends, is murder. We soldiers learned that the German soldiers
were not our enemy. Maybe it was a good war, fought in a good
cause, and maybe it was not. I don’t know. All I know is that I’m sick
of war and I won’t ever fight in another war and now I want peace
and I want to forget. And—well, I guess that’s about all I have to
say.”
There was no applause now. There was only stunned silence and
then a low murmur that was like that of rage, gentle and baffled.
Private John Benton had spoken simply from his heart, little
suspecting that his words were to lay waste to his life.
John Benton, son of uneducated farmers, was a senior in high
school when English propaganda drew his country into war. He was
a shy and neurotic young man, deeply ashamed of his social
background and his illiterate relatives. He was among the first to
enlist. He went not as a patriot but as one without social or cultural
anchor and without friends, who saw in war an opportunity to prove
his courage and his worth. Nobody in his home town had ever
spoken to him, except one barber and the neighboring farmers
whom he met on the streets. And now he was to be a policeman or a
night watchman or assistant to the sheriff; he was called by his first
name; he was invited into the best homes. And in these first days he
was very happy and loved his townsfolk and began to fancy himself
as a man of national importance. But after his brief reply to the great
welcome there had been a sudden and drastic change. When he
met the mayor now or any of the other plump and prosperous men
who had made his homecoming a memorable day, he was
acknowledged with a curt nod or not at all. He got no job of any kind
and he wandered up and down the streets or sat in pool halls
watching the poker chips, feeling a little vengeful and deeply
unhappy, and wondering why he had become only John Benton of
the Benton farm on Mill Creek.
It was Bill Hawkworth who gave him an idea. Bill was a lean man
with shrewd and cynical eyes and a tubercular cough. He worked in
a pool hall with a cigarette hanging from his white mouth and a fixed
and changeless contempt in his pale eyes. He sat by John one day
and looked at him with leering pity.
“What’s the matter, buddy? Ain’t they treatun you right any more?”
“I don’t know what you mean,” said John, looking at Bill’s wet dead
cigarette.
“Oh, you know, all right. The mayor,” said Bill, and jerked his
sallow head toward city hall. “All them fat guys, buddy.” He smiled.
His upper lip curled and the hair of his ragged mustache fell like a
hedge across his yellow teeth. “You fanned out quick, didn’t you?
Well, buddy, do you know why?”
John turned a little angrily and looked at the lidless cynicism of
Bill’s eyes. “No,” he said.
“Want me to tell you?”
“Well, sure—if you can.”
“All right, buddy, it’s this way. You come back from war a big hero
and the city gives you a big bust and there’s speeches and flags and
popcorn for everyone and they wanted to hear how you licked hell
out of them Huns. And right there’s where you fanned. You come to
bat all right, but you just wouldn’t swing at the ball.” Bill’s lips curled
against his teeth and his eyes flickered. “You get me?” he said.
“You mean—? No,” said John, “I don’t know what you mean.”
“I mean you coulda put this town right in your pocket. You coulda
jumped plumb into the middle of society and married the richest girl
around here and had a truckload of fortune drive right down your
alley. But what did you say when they asked what you thought of the
popcorn?”
“I don’t remember.”
“I’ll tell you, buddy. You said war is murder. You said you guessed
mebbe the Germans wasn’t your enemy at all. You said you wouldn’t
fight in another war to please God Almighty hisself. And all them,”
said Bill, curling his lips in cruel mockery, “was a hell of a crack. Did
you think they got all them-there brass bands and speeches and
popcorn trimmings to hear you throw them Christian sentiments in
their teeth? Was they intendun to make you assistant sheriff if you
didn’t like to fight?” Bill’s smile was evil. “Buddy,” he said, “you
fanned. You swung plumb hard and missed and fell right on your
mug.”
“What did they expect?” asked John, staring, fascinated, at Bill’s
sinister eyes.
“God damn, buddy, that’s a stupid question. They wanted you to
tell how you made them Huns jump back over the Rhine like a
buncha frogs—.”
“But I didn’t,” John said.
“Oh, the jumped-up holy ghost!” Bill drew the weak muscles of his
face down until his upper lip lay across his lower teeth. He smiled
with mirthless cunning and looked at John with gentle pitying
amazement. “Buddy, you wanta know how to be a hero again? I’ll tell
you. You say war’s a swell thing if you’re on the right side—and you
was on the right side, buddy—” Bill’s grin was chilling. “You tell how
you rammed them Huns in their guts and piled them up in the Rhine
until it run backwards. And if you could tell how you saved a virtuous
woman—say, for the love of virgins, couldn’t you tell a story like that?
Buddy, that would put you right on top of the popcorn pile with a
cigar in your face a yard long. Well,” he said, and spit straight down
between his knees, “you get the idea.”
But it was a difficult idea for John Benton to grasp. He walked
around like a tall pale ghost of a man, with spiritual anguish in his
thin, sensitive face. He wanted persons to like him. He wanted
persons to remember Jesus, as he had remembered Him for two
years in France, and to look far into the ways of kindliness and
mercy. But Bill, meeting him now, gave him a cynical yellow smile
and a jab in his ribs. “Be fierce,” he said, smirking wisely, “and blow
your horn.” And again: “Buddy, stop lookun like one of the twelve
apostles, huntun around for the coast of Galilee. Sail out and tell
them-there big stomachs what they wanta hear.” And John, after
days of wretched indecision, resolved to try.
He approached the matter gently, experimentally, at first, telling
only the less horrifying details of war; and in the men here who had
remained at home he found an eager response. They gathered
round him in the pool hall, and when his tale faltered, or when he
broke off, feeling sick and traitorous, they urged him to resume. “Hey,
John, tell us how you captured that there machine-gun nest.” And
simply, without exaggeration, John told of the lone exploit for which
he had been decorated by three nations. He said he crept out at
daybreak and came to the nest and surprised the gunners and
marched them back to the American line. Such a bald narrative, he
learned after a while, would not do at all. His listeners wanted
heroics and a breath-taking clash and a picture of a lone American
fighting hand to hand with a dozen of the enemy and licking the
whole lot of them. It took John a long time and many tellings to learn
what was wanted. The questions helped. “And didn’t them cowards
put up no fight at all?” “Hey, John, you don’t mean they just laid
down like a bunch of sheep!” No, John perceived, he could not afford
to mean anything like that. “You’re too modest,” they said, never
doubting that he had more amazing things to tell; and with increasing
recklessness John became less modest. He elaborated the tale,
adding to it in every recital some breathless episode, some
additional moment in which he missed death by a hair, some new
cunning ferocity in the foe. And he was a strange person, this tall,
grave man, telling his legends and feeling sickened by the telling.
After a while his tale was a gorgeous thing and not like the real
experience at all. But that, he began to understand, did not matter.
Now he crawled forth under a red sheet of artillery fire with shells
bursting like automobile motors all around him and with the sky
above him like a rolling mountain of flame. He crawled inch by inch
through great shell-holes, and the lead falling around him threw earth
into his eyes and stung his flesh like hornets and dug graves across
his path. He crept past dead bodies—American bodies, the slain and
mangled of his own company, all of them gutted in the gray wet
dawn; went slowly, patiently, toward that one infernal nest that was
raining death on the American line; dragged himself foot by foot,
seeing that one gun belching its flame and hearing above and
around him the mad thundering nightmare and smelling dead flesh.
Inch by inch he crawled toward that nest, his hair matted with earth,
his paralyzed hands grasping his pistols, his ears running blood—
inch by inch, until at last he was under the red fire of it; and for a
moment he rested, with his senses reeling and his heart in his
throat....
“And—and then?” gasped one.
Then he crept slowly around the bushes of the nest and forward in
the darkness of underbrush until he could almost touch the five men
there, every one of them like a blackened sweating devil, pouring
lead at the American flag. And here in his narrative John paused,
having learned much of the proper telling of a story; looked at the
choked, almost anguished, suspense in the faces around him. “Then
what?” asked one in a whisper. Then, John said, carefully building
his legend, he examined his pistols and cocked them; and when all
five men were busy, working like fiends out of hell, he sprang to his
feet and covered the distance in one bound; brought his guns
crashing upon the skulls of two of them; kicked a third in his belly
and sent him over the machine-gun; and jammed the pistol barrels
into the bellies of the fourth and fifth. The third, knocked into the line
of fire, was slain by his own gun, and the first and second rose, with
blood gushing from their skulls, and reached for the sky. He marched
the four of them, gory with wounds, out across the surging hell of no-
man’s-land, and that was the end of a nest that had taken thousands
of American lives. It was the end, John learned to understand, of the
most villainous bandits on the whole western front....
The news of John spread, and three months after his return the
local paper announced:
JOHN BENTON TO SPEAK

John Benton, one of the greatest heroes in the World War, and
Idaho’s native son and our own fellow-townsman, will address a
mammoth meeting tonight in the Paramount Theater and relate some
of his most dramatic experiences. He will tell of his capture, alone and
unaided and in a veritable deluge of bursting shellfire, of the most
murderous and treacherous machine-gun nest on the whole German
front.
And John did. The audience went wild with applause and he was
again a hero. On the following Sunday he had dinner at the mayor’s
home and repeated his story to nine distinguished guests; and when
one of them, Harry Cuthwright, a banker, declared that Germany was
a degenerate nation and that America had entered the war with the
noblest of motives, John hastily agreed. Within a month he was the
most respected person in his home city. The girls looked at him with
coy admiration and the men deferred to him when he spoke. Though
happy and proud, he was troubled, too: he no longer knew what the
truth was or was not, and with obstinate ardor he strove not to care.
And he blundered again.
If he had been modest, reciting his legends only after repeated
urging; if he had understood why the persons here wanted his
legends and how fickle their worship was, he might not have become
the pest that he was to be a few years later. But the more he realized
that interest in him was waning, the more he was whetted to invest
fresh details and to tell his bloody fables to those who no longer
cared to listen. After a while he insisted on telling them to persons
who were bored and impatient; and as his nation was restored, year
by year, to prosperity and interest in disarmament and world courts,
John’s power diminished, his exploits were forgotten, and he himself
became a pale and humorless nuisance. He did not understand that
a revulsion against war had overtaken his country. When persons
tried to shrug him into silence, or told him, with a contemptuous
grimace, that he was a bad citizen, he became comically aggressive
in his bearing and blasphemous in his speech. He said there should
be another war—with Japan, perhaps—and declared that he would
be the first to enlist. He swaggered and got into drunken brawls, and
twice for disturbing the peace was thrown into jail.
“You’re a bad citizen,” said Cuthwright, the banker. “The United
States has always been a peace-loving nation. We were dragged
into that last damned war by a cowardly President who promised to
keep us out of it. And now look at our war debts!”
“Sure,” said John. “Why don’t we go over with an army and collect
them?”
“Collect hell! Keep out of Europe, that’s what I say. That’s what
Washington said. It’s men like you, Benton, who get nations into war.
You enlisted in that last one and you came back boasting of the men
you’d killed and you’ve been boasting ever since. Why don’t you
preach peace?”
“Peace!” said John, appalled.
“Yes, peace. Didn’t Jesus command us to seek peace? But you go
around with your damned doctrines of hatred—”
“Preach peace!” cried John, aghast.
“Listen, Benton, you sound just like Mussolini to me. Why the hell
don’t you go over to Italy? Anyway, we’re a peace-loving nation, and
I’m telling you, Benton, you’d better change your tune. This city is
getting awfully sick of you.”
Cuthwright was the greatest man in the city and his rebuke threw
John into a terrific struggle. He felt angry and baffled and lost. He
went to his father’s farm and sulked there, and then went to church
and listened with doubtful ears to a plea for internationalism and the
World Court. He wanted to rise and blaspheme the preacher; but he
learned, after his sulking was done, that he had kept all the while,
overgrown with boasting and anecdote, a belief in peace: it was
there, under the fierce thicket of his words and gestures, and it came
little by little like a thing out of hiding. And he wept one day in bitter
astonishment and then felt a new and frenzied eagerness, as if he
had come out of darkness, a vault, to look at a clear sky. He returned
to the city and the first to greet him said:
“Well, how’s the braggart today? Hey, how’s your one-man war
against Germany?” And another said:
“Hello, John. You still capturing that machine-gun nest?” And John
looked at them with strange, unhappy eyes. He went away from
them without speaking and entered a pool hall and saw the winks
and leers. He sat and read a newspaper or looked at the men,
thoughtfully, gravely, wondering about them and about himself. A
slender, fair-haired youth came up and sat by him.
“John,” he said, “just between me and you, isn’t war plain damned
murder?” John hesitated. He looked at the clear blue eyes, candid
and friendly. “You said so, years ago,” the young man went on. “I
was just a kid then. I heard you. I’ve never forgotten it. And
Professor Jameson heard you, too.”
“Who is Professor Jameson?”
“He teaches in the college here. He would like to meet you.”
“Why?” asked John, feeling a little sick.
“Oh, I don’t know. He—he hates war. And he says you did—once.”
John was thoughtful for a long moment. “Yes,” he said, looking at
the young man with eyes full of memory, “I—I did.” He turned away,
full of bitter loneliness and grief.
It was Arnold Jameson who set John on his feet again. Jameson
was a small unobtrusive man with large tragic eyes. He was gentle
and kind, and he had John over to dinner; after dinner he said:
“I suppose you know Jim Harlan died last week. And Walt
Ainsworth last summer. Both from old wounds. And Dick Roscoe
hasn’t more than two or three years to go. But the world is shaping
up toward peace now, Benton, and I’ve often wondered why you
don’t take a hand in it.” John was silent and ashamed, remembering
how he had boasted of medals and brawls and told of legendary
Germans whom he had run through with a bayonet. “In 1917 I
opposed the war,” Jameson went on, “and nearly lost my job. But
now we can teach peace and get away with it.” He looked at John’s
sensitive, unhappy face and wondered about him. “Seven years
ago,” he said, “you believed in peace. What changed you?”
“I—I don’t know,” John said.
“I’ve some books here,” Jameson said, “that I thought you might
like to read.”
Deeply ashamed, and no longer the town’s worst drunkard and
braggart, John settled down and married a blue-eyed girl and lived in
a tiny house on a quiet street. He talked often with Jameson and
visited his classes in the college and became an ardent apostle of
internationalism and goodwill. He rejoined the church from which war
and bitterness had divorced him; taught a group of boys in Sunday
school; and became a speaker in demand throughout the
countryside. He was again a hero and his heart was in his work.
“There is no need,” said those who introduced him, “to tell you who
John Benton is. His devotion to peace shows that the last war was
not fought in vain. It is with pride.”... And it was with pride that John
faced these audiences on Washington’s or Lincoln’s birthday or on
Armistice Day and spoke out of his heart. It was with pride that he
became Jameson’s closest friend and heard Jameson say: “It’s on
the few of us, John, that civilization depends. We must keep our
heads when the world goes mad.” John was keeping his head. In the
tenth year after his return and in the thirty-second of his life he was
elected a trustee of the college. He was a person of power in his
community.
“John,” said Cuthwright one day, “we’re proud of you. I knew you’d
come to your senses.”
“It took me a long time,” John said.
“Yes, but oaks don’t grow in a season.” Cuthwright laid a friendly
hand on John’s shoulder. “I lost a son in France,” he said, his eyes
misty. “But now—well, that was the price we paid, John, for a better
world.”
No one knew less certainly than John himself how it came or what
it meant. There was at first, of course, a crashing of industrial
pyramids, and then the depression, but everyone spoke of it lightly
and said it would soon pass. It did not soon pass, and there was
growing anxiety and unrest. There were farmers who had been
earnest citizens; but now, with their taxes unpaid, their homes
mortgaged, many of them became bootleggers and drunkards.
There were small business men who had gone into bankruptcy;
doctors and dentists with unpaid bills piling up on their desks;
common laborers who, unable to find work, loafed in the pool halls
and became brutal and cynical. Then there was a new President
and, for a little while, new hope; but when the chief bank here failed
to open its doors there were angry threats and almost a riot. It was
learned that Cuthwright and all the chief stockholders had withdrawn
their money long ago.
Then matters in Germany came to a crisis; the words of the Italian
war lord stood in black type across the newspapers; and Japan was
invading China. After a while, some persons here began to talk of
the next war and they spoke with such hopeless resignation or with
such fierce impatience that John was alarmed. He redoubled his
efforts for peace. The audiences were small now and applause often
ran into hisses; and then he was no longer asked to speak
anywhere. Some of his townsfolk began to look at him with
suspicious or hostile eyes.
And the hostility grew. One by one his colleagues fell away and he
and Jameson stood alone. The bishop under whom he had labored
said a war between the United States and Japan was inevitable and
declared that all the Japs ought to be driven out of the Idaho beet
fields. He said Japan would conquer China and then come over and
conquer the United States, and his talk excited people and made
them argue for a large army and navy. He said all aliens should be
driven from the nation’s shores. He said the depression had been
caused by the millions of foreigners here, most of whom were
communists and spies and the scum of earth. He said that any man
who talked of peace when his country was surrounded by enemies
was a communist and a traitor. “And you,” he said, looking at John
with angry eyes, “you’d better watch your step.”
“I believe in peace,” John said. “And so did Jesus.”
“Our Lord, yes. But what did He know of the menace of Japs and
communists and Fascists?”
And the legend grew. It was rumored that John Benton and Arnold
Jameson were communist agitators. Hadn’t they defended the
Jews? And what were Jews but the worst damned breed of
communist on earth! Didn’t they think that the confounded Japs
should be allowed to thin Idaho beets, even though Idahoans
starved? If they weren’t communists, then what in hell were they?
And John Benton, bewildered, terrified, felt the growth of a mighty
unfriendliness. Idlers in pool halls, on the streets, looked at him with
skulking eyes. Men who had introduced him as our distinguished
citizen did not speak to him now. He wrote a letter to his local paper,
summarizing the argument of an eminent American who said
Roosevelt might lead the nation into war to save his face. And then
the crisis came.
The paper declared one morning that Jameson had made remarks
to his classes which were false and subversive and communistic,
and that John Benton was in the pay of Russia. It demanded the
dismissal of the one and the resignation of the other; and two days
later Jameson was called before the trustees. There were five
members on the board, including John; Cuthwright, the banker; a
druggist; and a lawyer and the editor of the local newspaper. They
sat at the head of a long table in the banker’s office and Jameson
came in, looking anxiously from face to face. Cuthwright waved him
to a chair.
“Jameson, have you anything to say in your defense?”
“What is the charge against me?”
“Why, that your teaching is subversive. It is dangerous to the
welfare of our government.”
“Because I preach peace?”
“Because,” said Cuthwright impatiently, “you talk like a
communist.”
He leaned forward and folded his arms on the table. He was a big
man with stern jaws and a paralyzing gaze. “A week ago you said in
your class in history that the World War was a mistake and we
entered it because our statesmen were outwitted by the English. You
implied, as I understand it, that we’re a nation of fools—”
“I was quoting,” said Jameson, “from a book.”
“What book?”
“A book by Walter Millis called The Road to War.”
“Oh, and what in hell does he know about it? Who is he—a
communist?”
“I don’t think so.”
“Oh, you don’t think so. Jameson, I should say that before you try
to instruct the minds of our sons and daughters you’d find out who
an author is. He may be only a paid agent of Stalin. Besides that,
you said all wars have been stupid.” Cuthwright looked at his notes.
“You said England and the United States don’t intend to let Japan
dominate the East. Why in hell,” demanded Cuthwright angrily,

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1 The role of accounting in business 1

SECTION I financial accounting and reporting 23

SECTION II management accounting 203

SECTION III financial management 373

Answers to self-test questions 410

Figures xii 1.3.4 Leasing and hire purchase 8

SECTION I Gross profit margin 51

8 Understanding financial reports: 9.8 Preparing an analysis of financial statements 188

11.1 Costing in business 213 13 Pricing 249

14.2.5 Typical cost behaviour in different business Calculating NPV 299

Aim of the chapter 289

16.6.1 Benefits 324 18 Performance measurement 356

Chapter summary 349 Introduction 374

Trade receivables too high 376 Commercial borrowings 395

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JOHN BENTON TO SPEAK

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