Factory accounts, their principles and practice; a handbook for accountants and manufacturers with appendices on the nomenclature of machine details; the income tax acts; the rating of factories; fire and boiler insurance; the factory and workshop acts, etc.; including also a glossary of terms and a large number of specimen rulings

Front matter

FACTORY ACCOUNTS

GARCKE &■ FELLS

1 / LIBRARY

Preface To The Second Edition

This work is, we believe, the first attempt to place before English readers a systematised statement of the principles regulating Factory Accounts ; and of the methods by which those principles can be put into practice and made to serve important purposes in the economy of manufacture.

It is not necessary to convince men of business of the advantages and importance of correct mercantile book-keeping ; but as regards their factories and warehouses they are for the most part content to accept accounts which are not capable of scientific verification. Such accounts can only be regarded as memoranda of transactions.

Our aim has been to show not only that as great a degree of accuracy can be attained in factory book-keeping as in commercial accounts, but that the books of a manufacturing business can scarcely be said to be complete and reliable unless they are supplemented by, and to a large extent based upon, the accounts special to a factory.

The principles of Factory Accounts do not differ in the main from those general rules on which all sound book-keeping is based, and we have but applied fundamental axioms to the practice of an important and extending* branch of industrial accounts ; and with the view of rendering the book of special utility to Accountants we have not dealt with the principles and practice of accounts in so far as they apply merely to elementary and commercial book-keeping, as to do so would, in

102227

VI PREFACE.

large measure, be a work of supererogation. Moreover, we hope that the diagrams showing the relation between Factory and Commercial books will, with the numerous specimens the book contains, render the information we have to present of service to those who, while concerned in manufacture, and therefore interested in our subject, have not occasion to inquire closely into the practice of accounts.

The various Appendices dealing with the legal, financial, and other questions connected with factory administration are submitted in the belief that they will be regarded as indicative of matters calling for the careful consideration of those engaged in industrial pursuits.

October, 1 887.

NOTE TO THE FOURTH EDITION.

In preparing this edition for the press we have thought it well to refer to some matters of factory routine and registration which have not been dealt with in former editions. The Appendices have also been brought as closely as possible up to date, Appendix E now containing a summary of the provisions of the Factory Acts of 1889 and 1 89 1, as well as the earlier Acts.

We take the opportunity of again remarking (as on the occasion of the Third edition) how gratified we have been to observe the increased amount of attention which has been given, by Accountants and others interested in the routine of manufacturing establishments, to the subject treated of in this work, since the First edition was published in 1887.

Bedford Park, London, \V.

August, 1893.

Chapter I. Introductory

The Development of the Modern Factory System. — The Advantage of Combination and Specialization of Labour. — Legislation. — The History of the Factory System. — Extension of Routine and Registration. — The Need for Factory Books of Account. — Fundamental Principles of Book-keeping Applicable, but Special Methods Required.— Requirements of a Manufacturing Business. — The Need of Analysis of Expenditure — of ascertaining Profit or Loss on Individual Transactions — on Branches of Business. — Stock ascertainable without Survey. — Its Comparison with Cash. — Cost in Relation to Indirect Charges and Depreciation. — The Utility of Systematised Factory Books — and Accurate Accounts — their Moral Effect on Employes. — Inadequacy of ordinary Commercial Books — Assimilation of Factory Books with them. — Consistency of Specialization with Concentration in Accounts. — Merging of Departmental Books in General Ledger. — The Utility of Adequate Office Organization — its Economy. — The Specialization of Labour. — The Scope of this Work — its Relation to Treatises on General Book-keeping. — Specimen

Vlll CONTENTS.

Page

Rulings. — Exterior of Books. — Principles applicable to Liquid, Mixing, and other Trades. — Diagrams showing Assimilation of Accounts. — The Differentiation of Records. — The Requisites of a Wages System. — The Purchase and Consumption of Material. — The Production of Commodities. — Definition of Prime Cost. — The Sale of Commodities. — Distinction between Stores and Stock. — Depreciation. — Surveys and Stock-taking. — A Symbolic Nomenclature. — The Factory and Workshop Acts. — The Income Tax Acts. — The Rating of Machinery. — The Law of Insurance . . . i — 13

Chapter II. Labour

Initial Step in the Organization of a Factory. — The Utility of a proper Wages System — it Minimises Error — Prevents Fraud. — " Dummy Men." — Piece-work. — Sick and other Funds. — Factory Acts. — Receipts from Employes.— Systematic Allocation of Wages. — Registration of Time. — Time Office. — Workmen's Checks. — Mess Room. — Time Book. — Absentee Book. — Overtime Book. — Analysis of Time. — Time Boards or Records. — Time Allocation Book. — Verification of Time. — Out- Works Time Records. — Check on Excessive Overtime Work. — Returns and Analysis of Overtime — Solidarity of Labour. — Premiums for Punctuality. — Fines for Unpunctuality. — Piece-work. — Forms to be used — Settlement of Balances — Non-continuous Working — Log Book — an Analysis Book — its Advantages. — Advice of Men Engaged, Dismissed, or Fined. — A Wages Rate Book. — Records of Service of Employes. — Supplemental Wages Advice. — The Wages Book — its Compilation and Analysis. — Stoppages and Deductions. — The Truck Act. — Receipts for Wages. — Amounts not

CONTENTS. IX

Page

Claimed. — Payments to Deputies. — The Method of Payment. — The Allocation of Wages — Agreement with Wages Book. — Allocations of Fines and other Deductions.— Adhesion to Factory Rules. — Character Book. — Address Book. — Registers and Certificates under Factory Acts. — Appropriations of Fines. — Rent as Wages 14 — 42

Diagram I. — The Assimilation of Wages and Commercial

Books.

Chapter III. Stores

The Purchase of Material for Plant, Manufacturing, or Retailing — Initiatory Stage. — Stores Requisition Book. — The Advantage of Orders for Stores emanating from one Centre. — Stores Requisition Form. — The Sanction to Purchase. — Orders to Vendors — their Conditions. — Registration of Invoices. — Stores Received Book. — Invoice Register. — Stores Ledgers — Accounts in. — Endorsement of Invoices — their Allocation. — Agreement of Commercial and Factory Books as to Material Purchased and Periodical Survey. — The Consumption of Material — Initiatory Stage. — Instruction to Manufacture.— Estimates to precede Expenditure. — Limitation of Issue of Material. — Stores Warrants. — Stores Issued Book. — The Registration and Analysis of Stores Warrants. — Material Returned to Vendors. — Stores Rejected Book. — Credit Notes — their Registration. — Surplus Material — Advantage of Returning it to Store. — Stores Debit Note. — Shop Returns Book. — Transfers between Store and Warehouse .... 43 — 58

Diagram II.— Assimilation of Stores and Commercial

Books.

X CONTENTS.

Page

Chapter IV. Prime Cost

The Distinction between Stock and Stores — Utility of the Distinction. — Uniformity in Registration of Cost. — Authority to Manufacture. — Cost of Parts and Processes.— The Advantage of Correct and Complete Analysis of Cost. — " The Economy of Machinery and Manufactures." — " The Economics of Industry." — The Utility of a Symbolic Nomenclature. — Channels of Expenditure.— Fixed Capital. — The Localization of Maintenance Expenses — the Wages of Supervision — of Distribution — of Registration. — Factory General Charges — their Registration. — Prime Cost Ledger — how Compiled — its Agreement with the Commercial Books. — Stock Debit Note. — Stock Received Book. — Stock Ledger. — Goods in course of Manufacture. — Actual and Estimated Costs. — The Methods of Apportioning Factory General Charges. — The Utility of the Prime Cost Ledger extended to Plant and other Accounts. — Cost in Relation to Standing Charges. — Depreciation and Profit. — System in which Wages and Material constitute Prime Cost. — Method of Charging Indirect Expenses in proportion to Wages Paid — and to Wages and Materials. — Skilled and Unskilled Labour. — Depreciation in Relation to Cost. — Interest and Profit in Relation to Cost .... 59 — 74

Diagram III. — The Assimilation of Prime Cost and Commercial Books.

Chapter V. Stock

Realization or Distribution of Manufactured Commodities — involves Four Classes of Transactions being brought

CONTENTS. xi

Page

into Account by corresponding but independent Processes of Book-keeping. — The Agreement of the Commercial and Factory Books. — Transfer from Factory to Warehouse. — Stock Debit Note. — The Stock Received Book. — Transfer from Warehouse to Factory — the Rejected Stock. — Transfer Notes — Transfer Books — their Agreement. — Transfer Analysis Book. — The Sale of Commodities. — Orders from Customers, how dealt with. — Orders Received Book. — Advice to Warehouseman.— Stock Requisition. — Stock Issued Book. — Warehouseman's Daily Return of Stock Issued. — Sales Analysis Book. — Stock Returned by Customers — its Registration — and Analysis. — Stock Returned Debit Note. — Stock Returned by Customers Book. — The Concentration of Books. — The Pricing of Loaned Articles — its Relation to the Profit and Loss Account. — The Agreement of the Commercial and Factory Books exemplified. — Wholesale and Retail Transactions— their Distinction— their Combination — their Registration. — The Manufacture of Complete or Subsidiary Parts — the Localization of their Cost . 75 — 92

Diagram IV. — The Assimilation of Stock and Commercial

Books.

Chapter VI. Fixed Capital

Mill's Definition of Fixed Capital. — Depreciation of Buildings and Plant — varying Views. — Depreciation in Relation to Maintenance.— Factors in Determination of Depreciation Rate — Adherence to Depreciation Rate for Period of Time. — The Rough-and-ready Method. — Depreciation in Relation to Capital — to Current Expenditure — to Railway and Water Companies — to Reserve Funds — to Obsolescence — to the Life of the

Xll CONTENTS.

Page

Object — to the Cost of Maintenance. — Varying Methods in vogue. — The Ascertainment and Allocation of Cost of Deterioration — direct Metnod. — Method of Periodical Valuation — its Advantages — its Disadvantages — its Results when Fallacious — its Bearing on Capital and Revenue Accounts. — Loss on Capital and Loss on Revenue Accounts. — Mr. Buckley and the Case of the Neuchatel Asphalte Company — a Practical View of the matter. — The Revenue Account in Relation to Market Value of Fixed Assets in a going Concern. — The Establishment of Sinking and Reserve Funds. — Losses on Capital Account. — The Need of Insurance. — The Income Tax Acts in Relation to Fixed Capital. — The Life of an Object the best Basis for Depreciation Rate — the Difficulties of this Method — the Advantages. — Leases — an Amortization Table — a Hypothetical Ledger Account. — Dilapidations.— Classification of Assets. — Fixed and Loose Plant — Patterns — Tools — the Appropriation of their Cost. — The Numbering of Distinctive Objects. — The Expenditure on Plant — its Registration. — Plant Ledger.— Plant Debit Note. — The Ratio between the Life and Cost of a Machine. — Plant Journal. — The Appropriation of Residual Values. — Plant Debit Summary. — The Cost of Fuel — its Apportionment. — The Apportionment of Standing Charges in Relation to Profit and Loss — to Cost of Production. — The Valuation of Patents and Good-will ..... 93 — 114

Chapter VII. Surveys

The Utility of Stores and Stock Ledgers in Relation to Stock-taking and the General Accounts. — The Balance

CONTENTS. XI 11

Page

Sheet independent of a Stock-taking. — Factory Accounts in Relation to Book-keeping by Single Entry. — Surveys in Relation to Commercial Ledgers. — The Utility of Verifying the Details of Inventories — the Comparative Advantages of Partial and General Surveys.— The Need of a Standard of Efficiency in Stocktakings.— Summarising Survey Results. — The Agreement of the Inventories with the Factory and Commercial Ledgers. — Surveys in Relation to Stores, Stock, and Plant. — Mechanical Divisions and Aids in Surveys.— The Essentials of a Stores and Stock System. — The Efficiency of Control over Commodities. — Departmental Transfers. — Excessive Supplies in Stores or Stock. — The Valuation of Commodities in Relation to Cost of Production and Market Prices. — Survey Prices in Relation to Establishment Expenses and Standing Charges. — The Realization of Profit. — The Valuation of Raw Material and Exceptional Commodities.— Valuation in Relation to Obsolescence. — Valuation of Old Material. — Reduction in the Valuation of Stocks ....... i 15 — 125

Chapter VIII. - Conclusion

Subsidiary Books. — Summary of Chapter. — The Registration of Plant or Machinery acquired on the Purchase Hire System. — The Accounts of Government, Railway, and similar Factories and Workshops. — Registration of Costs by Means of Cards and Symbols — its Disadvantages.— Cartage Accounts. — Horses and Vehicles. — Freight Books. — The Railway and Canal Traffic Act, 1888 — Rates and Charges Confirmation Acts, 1891-2. — Railway Sidings. — Wagon and Van Books. — Lighter and Barge Books. — Craft Register. — Packing Cases —

XIV CONTENTS.

Method of Registering Cost of Empties. — Coal Accounts. — Gas and Water Meter Books. — Brigade and Fire Hose Books. — Casualty Book. — Patterns Accounts. — Log Book. — Accounts relating to Sick, Provident, Superannuation, and similar Funds. — Books and Forms required under Factory Acts. — Scope and Conditions of Factory and Workshop Acts. — Economic Aspects of Overtime, Piece-work, and Double Shifts in Relation to Fixed Capital. — Views of Mr. Sedley Taylor. — Relative Pecuniary Value of Task and Time Work.— Conflict of Capital and Labour. — The Opinion of the late Professor Fawcett on the Labour Question. — Views of other Authorities on the possible Development of the Factory System. — Opinion of Lord Brassey. — Joint Stock Enterprise. — Opinion of the late Professor Jevons on Industrial Partnerships. — Co-operative Production in England. — Success of Industrial Associations on the Continent. — Economic Basis of Industrial Partnerships.— Evidence afforded by Official Records. — Views of Representative Working Men on Profit Sharing. — Industrial Remuneration Conference. — Boards of Arbitration.— Influence of Proper System of Accounts 126 — 149

APPENDICES.

A. — Nomenclature of Machine Details (Paper by Mr.

B. — The Income-Tax Acts in their Bearing ox Profits

of Manufacture 158 — 164

C. — The Rating of Factories containing Machinery

!65— 173

D. — Notes on the Law of Fire and Boiler Insurance

174—185

CONTENTS.

XV

Page

E. — Summary of the Factory and Workshop Acts 186 — 225

F. — Table for Determining Amortization of Leases,

GLOSSARY OF TERMS.

241 — 264

TABLE OF SPECIMEN RULINGS.

Time Book, No. 1 „ No. 2

No. 3 Overtime Book Time Record Sheet Time Allocation Book .

Out-Works Time Record Sheet Overtime Return .

Overtime Comparison Book Piece-work Return Piece-work Analysis Book Wages Advice Wages Rate Book .

Wages Book .

Summary of Wages Unclaimed Wages Book Pay Wages Note .

Wages Remittance Form Cash Sheet .

Money Tray .

Abstract of Wages Stores Requisition

Specimen No.

Page 18

*9

5 6

7 8

23 25

*5 16

34 36

17 18

*9

37 37 38

XVI CONTENTS.

Stores Requisition Book

Invoice Register Book ....

Stores Received Book ....

• • 25

Stores Ledger

Invoice Endorsement ....

Instruction to Foreman of Works .

Stores Warrant .....

Stores Issued Book ....

Stores Rejected Book ....

Stores Debit Note ....

55 56

Shop Returns Book ....

Prime Cost Ledger ....

Stock Debit Note ....

33 34 35

57 66

Stock Received Book ....

• 36

Stock Ledger

Transfer Note .....

37 • 38

69 81

Transfer Book .....

Orders Received Book ....

^3

Stock Requisition and Advice to Warehouse Stock Issued Book

83 84

Stock Requisition .....

Stock Returned Debit Note .

43 44

86 86

Stock Returned by Customers Book Amortization Table ....

45 . 46

87 108

Plant Ledger

Plant Debit Note

47 . 48

Plant Debit Summary ....

Stock Survey Sheet ....

Cartage Advice .....

Railway Rate Book ....

Wagon and Van Statement Form .

112 118 132

Wagon Journey Repairs Book

Time Sheet for Lighter, Barge, or Boat .

Craft Register

Fuel Summary Form ....

• 56

136 138

OF THE

UNIVERSITY

OF

/FORNIX

" FACTORY ACCOUNTS:

THEIR PRINCIPLES AND PRACTICE.

Chapter I. Introductory

With the rapid development of the modern Factory System has arisen the need for regulations which would _ _ not have had application at a time when

Th» modern rxr

ractory sys- production was carried on with little, if any, industrial organization. The extent to which by the aid of machinery the specialisation of labour is now carried, generally involves the passing of an article through as many hands or machines as there are processes in its production, and renders a further extension of routine and registration necessary. When artisans performed in their own dwellings and with their own hands, unassisted by steam or other motive power, all the operations necessary to the production of a complete article, the need for the regulation by statute of the periods and conditions of employment was not very obvious, whilst the most simple form of accountancy sufficed to ascertain the cost of an article thus produced.

B

The establishment of large factories, however, where numbers of persons of both sexes co-operate through the division of labour in the production of articles of consumption, has changed the industrial conditions of society.

Under these altered conditions employers find it economical to adopt methods of supervision and of registration which, prima facie, make production more costly. The advantages, however, of the combination of labour — of each workman confining himself to one process, and that always the one for which he is best fitted — are so great that the expenses of the necessary organization are insignificant in comparison. Experience has shown that wherever the magnitude of the operations renders it practicable, every further extension of this principle of specialisation results, in spite of the increased expense of administration, in an economic advantage.

The legislation of recent years with regard to factories and workshops, regulating the employment of children and women and their hours of labour, as well as providing for their health, education, and safety, affords but one of the many indications of the universality and complexity of the methods of organized production which now obtain. Although this change in our industrial arrangements has already been fraught with many far-reaching consequences both material and moral, it has been of comparatively recent growth. "In the course of little more than a century the industrial _, _ framework of the whole civilised world has

The Factory

system: its been radically reconstructed, and more history. changes have occurred in consequence, even more obvious and tangible changes — changes con-

DEFINITION OF FACTORY ACCOUNTS. 3

spicuous upon the very face and features of the country itself — than for certainly the whole of a previous thirteen hundred years/' But it is only quite recently that any endeavour has been made to trace the continuity of v "the various impulses, historical and economical, that have been concerned in the evolution of this particular method of production."*

Under these circumstances it is not perhaps surprising that systems of regulating the intricate affairs pertaining to a factory have hitherto been determined entirely by empirical methods.

Although the term Factory Accounts may be familiar, and its meaning sufficiently evident to persons ac- Misconcep- quainted with manufacturing business, or tion as to experienced in any operations requiring books. records to be kept of materials, plant, and

stock, yet it is not infrequently assumed, even by accountants, that the ordinary commercial method of book-keeping by double entry, supplemented by the special subsidiary books which every trade demands, General suffices for every kind of business. f The v principles of fundamental principles applicable to accounts and particu- necessarily hold good throughout all the iar trades, branches of book-keeping ; but many businesses involve, in addition to the mercantile transactions familiar to every one acquainted with the routine of an office or counting-house, multifarious and often extensive operations, of which the employment of labour

* " Introduction to a History of the Factory System," by R. Whately Cooke Taylor. London : Bentley. 1886.

f Thus, The Accountant, in reviewing an earlier edition of this work, said : "It is rather concerned with the wages and time books, stock books, and matters of a similar nature, which as a rule do not come within the scope of an accountant's duties."

and payment of wages, the purchase of raw materials and their conversion into manufactured commodities, are but some of the outward manifestations ; and for \ their proper registration special methods of book- Require- keeping have to be devised. In the case of manuf^ctur- manufacturing firms, the operations referred mg business, to call for careful analyses of expenditure, and sometimes necessitate the storage of large quantities of various kinds of raw material, and the warehousing of goods to a considerable extent, as well as the manufacture, purchase, or erection, and gradual wearing out, of valuable plant and tools. All this implies accurate adjustments of accounts. When large sums are paid in wages, it is essential, if the business J is to be economically conducted, that the time during which the workpeople are employed and the work upon which they are engaged, should be accurately and v- * sufficiently recorded. It is equally important that the/ " material should be systematically charged to the work profit or loss on which it is used. It is only by these on individual means that employers can know the cost in

transac- r J

tions. wages and material of any article of their

manufacture, and be able to determine accurately and scientifically, not merely approximately and by haphazard, the actual profit they make or loss they sustain, not only on the aggregate transactions during a given period, but also upon each individual transaction. In a business, the operations of which vary widely in character, this special knowledge as to the pecuniary result of a particular piece of work is of paramount importance, for it is not only conceivable but very probable that the \ presence or absence of this information may determine the policy to be pursued in accepting or rejecting large

IP-

REQUIREMENTS OF A MANUFACTURING BUSINESS. 5 Profitable contracts. There is always a danger, when

and un- J &

profitable only the general result of a business is branches. known, of departments or processes which are relatively unremunerative being unduly fostered, and of those which yield more than the average profit not being adequately attended to. Employers should not, as is too frequently the case, be entirely dependent upon the periodical profit and loss accounts for their knowledge as to the financial result of their transactions, but should at any time, and at any stage of manufacture, be able to ascertain, pro tanto, rapidly and / reliably, the actual, and not merely the estimated, cost of production of any given article of their manufacture. stock should They should also be able to determine, with-

w!thou7able out t*ie delay consequent on a survey or ■urvey. inventory, the quantity of stock and of raw

material on hand, or of any particular item or part thereof. It would be discreditable to any cashier if his principal could not ascertain by a glance at the books the amount of cash in hand, but found it necessary to have the money counted ; and there can be no reason why the same punctilious book-keeping should not be adopted in the case of goods. It is not too much to say that for a manufacturing or trading concern to be well organized, the storekeeper or warehouseman should be able to state, by referring to his Stores or Stock Ledgers, the actual quantities of any kind of material, or stock, on hand with the same facility and precision as the accountant can ascertain from the books the balance of cash at the bankers, or the amount of securities in the safe.

These are only a few of the questions which present themselves in a cursory consideration of the nature of

Prime < >st Factory Accounts. The subject of Prime and depreci- Cost admits of very varied treatment. When the indirect charges and depreciation are of a more or less fixed character, it is probably sufficient to know the cost of an article in wages and materials only, but if the indirect expenses and wear and tear of\/ plant form a more direct element in the cost of production, it would be highly desirable to apportion such items among the various operations or departments. indirect The allocation of indirect charges thus precnarges. sents many interesting problems, whilst the numerous methods of " writing off," and of determining the proper incidence of items such as deterioration of plant, tools, buildings, deserve the serious attention of owners of property, and tax to no mean degree the abilities of accountants, and their power of obtaining an absolutely accurate statement of affairs.

For the above-mentioned purposes, among others, , systematised factory books are essential. The advan-/ tage of such books, clearly representing the actual state of affairs, is particularly evident when a business is for sale of busi- disposal; or is being converted from a private ness, &c. nrm jnt0 a joint stock company ; or when the whole or some part of the factory has been destroyed by fire and it is necessary to prepare a claim on insurance companies. Then it is that the figures in the commercial books require to be substantiated in detail. There is little doubt also that under a well-organized Moral effect system of Factory Accounts, each employe of proper ac- feeis that ^e js contributing- to the attainment

counts upon °

employes, of accurate records of costs ; and that it is necessary that his account of the time he spends, and the material he uses, should be adequate and precise.

ASSIMILATION OF ACCOUNTS. 7

This begets general confidence in the manner in which the accounts are kept, and on occasion of strikes or reduction of wages, or resort to the sliding scale, employes have less hesitation in accepting the results shown by the books as correct and as based on fair principles.

It will be seen, even from this superficial summary, that it is not feasible to record accurately, and with ordinary requisite detail, in the ordinary commercial bookslnade- k°°ks, all the numerous entries necessary for . quate. the proper registration of the operations of

a large manufacturing establishment. It is moreover essential that factory books should have columns for j the weight or measurement of materials and the number of articles, in addition to cash columns for values ; and this, which is an indispensable condition in factory ^/ books, would not serve any useful or practical purpose in commercial books, but would on the contrary mar their utility. The insufficiency of the commercial books alone to represent the transactions is conspicuously evident in the case of undertakings of the magnitude of railway, gas, and water companies.

Factory books must not, however, be considered, as is generally the case, to be merely memoranda books, which are not necessarily required to balance. They Assimilation should so assimilate to the books of the of au books, counting-house that the obvious advantage^, of having a balance-sheet made up from the General Ledger, embracing the balances of the ledgers and books kept in the stores and warehouses, is not sacrificed. No matter how far the subdivision of departments of an establishment be carried, or to whatever extent the principle of localising the book-keeping be applied, the concentration of the accounts — the merging speciaiua- °f tne departmental books in the General tionconsis- Ledger — should be kept constantly in view.

tent with ° . r J

concentra- There is not any special theoretical or praction" ticai difficulty in establishing a separate set of

books for each and any of the departments, if it be not attempted to make the proper working of all dependent upon the proper working of each, or if no regard be had to the necessity of attaining the highest degree of efficiency and despatch with the minimum expense. On the other hand to devise upon sound principles, and to carry out efficiently and economically, a system of accounts which necessitates the whole of the departmental book-keeping in a large establishment being subsidiary to one centre,

Econom *s a science as well as an art. That a system is of clerical not economical which is inefficient is but a truism, and although we appreciate the importance, and indeed the necessity, of minimising clerical labour, we feel there is no occasion to lay particular stress upon this consideration, as -the tendency is to dispense with services which an adequate recognition of the value of sound book-keeping would probably show to be indispensable. Book-keepers and clerks being, unlike factory workpeople, only indirectly engaged in the production of wealth, are often regarded in comparison with them as " unproductive " workers — using the expression not invidiously, but in the sense in which economists employ it. Too generally the routine of the office is limited by the number of clerks from time to time engaged, instead of the system of accounts and routine best adapted for the business being determined on, and a staff employed proportionate to the work to be done. The wisdom of initiating by

ORDINARY COMMERCIAL BOOK-KEEPING. 9

the dismissal of one or more clerks the retrenchment which in times of depression may be called for, is not always apparent. The maintenance of a perfect organization may enable economies to be practised, in comparison with which the whole cost of the office staff is insignificant. It is well, therefore, to weigh carefully the pro et con before relaxing vigilance over expenditure and the salutary checks upon wastefulness and extravagance in manufacture which a good system of accounts Division of affords. One of the disadvantages of insuffiwork. cient records being kept is that book-keepers