| Debit Expense Dept. | A | ||
| " | B | ||
| " | C | ||
| " | D | ||
| " | E | ||
| " | Etc. | ||
| Credit | Labor. | ||
| Material. | |||
25. Results of Distribution. Having posted the journal, turn again to the Private Ledger and note what has taken place. It is found that the two items of labor posted have just balanced out the Labor Account, and every dollar of pay-roll has been accounted for somewhere, either into expense or into production. It it also found that all the debits in the shop-expense accounts have originated in Expense Ledger No. 1, and the credits have originated in the Production Ledger. The various subdivisions of general expense have been consolidated in one Distribution Account, which has also been disposed of through the Production Ledger. What once appeared as an expense cost has now been wiped out, absorbed by production and converted into an asset, just as Mr. Clinton E. Woods, previously quoted, states it should be. A glance at the trial balance reveals scarcely a trace of expense, the small undistributed balances only remaining.
26. Undistributed Balances. Under any method of distributing expense on a pro-rata basis, it is apparent there will be small balances left, representing either an over-distribution or an under-distribution, as already explained. These may be treated in either one of two ways. If the product manufactured has been practically completed during the year, and but little carried over into the next year to be finished, these balances can be charged off and become a part of the Loss and Gain account for the year in which they were created, and the new year begun with a "clean score."
If the product, however, consists of large contract work but partially finished when the year closes, the work on same continuing for some time into the new year, these balances may be also carried over to be worked out in succeeding monthly distributions as the work continues. When this latter method is chosen, of course it will be necessary that these balances be taken into consideration when preparing the Balance Sheet.
27. In Conclusion. While it is realized that the Percentage Method is not perfect in all its details, yet it is quite generally admitted to be the best means that has yet been devised for distributing expenses. A manufacturer using it may be assured that his costs thus figured are correctly shown, from the fact that this method is used and recommended by our highest technical authorities in accounting. From the practical side, it appeals to the manufacturer who is more interested in successful manufacturing than he is in the science of accounts, by the simplicity of the method and economy with which it is operated. The same amount of time spent in planning economies and devising means for cheapening the cost of production that is often spent in lengthy attempts at fine figuring, which, when finished, prove unsatisfactory, will be productive of far better results. Any method which eliminates the unnecessary and simplifies the essentials cannot help but prove attractive both to the successful manufacturer and the progressive accountant.
OPERATING EXPENSE STATEMENTS
28. To properly analyze detailed records, and to be able to extract therefrom the essentials and eliminate all items of minor importance, so that the exact situation and final conclusions can be expressed briefly and in an attractive manner, is an art in itself. A bookkeeper may be ever so well posted in up-to-date methods, and his books may show great care, and be models in appearance, yet when it comes to preparing an intelligent statement of any feature of the company's business, he may be sadly deficient. It does not necessarily follow that because he can do the one thing well, he can make a success of the other. Even as the pleasure naturally to be derived from a carefully prepared dinner may be completely wrecked by poor service, so can the intent of what would otherwise be an interesting tabulation of statistics be made meaningless by the presentation of a jumbled and carelessly arranged lot of figures.
It is as necessary to clearly show on paper the results of the factory operations as it is that they should be correctly recorded on the company's books. While the two operations are entirely distinct and separate, they are closely allied, and every progressive accountant should be interested in both.
The object of a statement is to convey to the reader certain information in an intelligent manner; if it does not do this, it might as well not have been written. This leads us at once to the question: "What constitutes a good statement?"
29. Lengthy Statements Undesirable. That we may have "too much of a good thing," and that even those things worthwhile may be overdone, is true in the matter of statements. The general tendency seems to be to elaborate rather than simplify, and to crowd into the tabulation a lot of figures representing details which are almost always passed over without examination, or are even hardly looked at. If the same amount of time is spent in studying such a statement that is spent in its preparation, it would not be altogether without value, but the fact remains that it seldom is thus considered.