CHARTING SALARY AND WAGE DISTRIBUTION
22. We have seen how authorities, responsibilities and even routine duties are most graphically represented by means of charts—the working plans of the recording divisions of the business. For purposes of record, the distribution of the expenditures for salaries and wages of those who make up our organization is of equal importance to the definition of the authorities and duties.
If the accounts are to be of value they must be correct, and they cannot be correct unless every item is charged to the proper account. The value of correct accounts is recognized. They do more than show what we have received or the expenditures for a specific purpose during a stated period; they show when and why an expense is increased or decreased. With such information to point the way to economies in the future, instead of records that show us merely the amount of an expense already incurred, accounting takes its rightful place as one of the most important functions of a business enterprise.
Probably more businesses have failed owing to the lack of proper accounting methods than from any one other cause. Many a business has been rejuvenated—turned from failure to success—by the introduction of a system of accounts that truthfully portrays its activities. Few business failures are the result of a failure to buy goods at right prices, or to establish selling prices that show a profit. The more usual cause is found in leaks in the expense account. Any method that locates the leaks places us in position to stop them.
The chief value of accounting records lies in the opportunity afforded for comparison. The fact that a certain expense amounted to $900.00 last month furnishes no information of special value; but when compared with the amount expended for the same purpose two, three and four months ago (if these expenses are analyzed and compared with production or sales or whatever factor would affect the amount) the figures assume an important significance. But if expenditures are erroneously applied, if an amount has crept into an expense account that does not belong there, the comparison had better not have been made. Thus is seen the necessity of an absolutely accurate distribution.
Here the chart—the working plan—is again applied to excellent advantage. The chart, Fig. 7, applied to salary and wage distribution, shows to which of the two principal divisions each item should be charged. This is the important question—to properly apply expenses to the commercial and manufacturing branches. Subdivisions of such a chart segregating expenses of each division are easily made.
The application of the items from which lines lead only to the commercial or manufacturing branch is readily understood. Between the two are several items from which lines lead to both branches, indicating that the expense is to be divided. This division should be given close study. Care must be used that too large a part of any item is not applied to either branch. The salary of the general manager, and usually the comptroller, will be equally divided. The duties of the chief accountant, chief stenographer and stenographers being chiefly in connection with the commercial branch, only a small portion of their salaries is charged to manufacturing. Shipping clerk and packers' salaries are charged to either one or the other branch, depending upon the nature of the enterprise. In a manufacturing enterprise where all goods are delivered to stock rooms ready for shipment, packing and shipping is a sales expense and is charged to the commercial branch; in a plant building heavy machinery that must be shipped from the assembling floor, this expense is usually charged to manufacturing.