= ~ Ce y1 © 4 me ets # ; ES a ee. , — i i ne.” se (i 4 Rinidard Accounting and Cost System _ FOR THE Electrical Manufacturing Industry . FOURTH EDITION October 1, 1922 Mee Issued by the Electrical Manufacturers’ Council SSR REECE ONS Prt ae 4. Ee oS = - = < ‘ + oe on ag rye ae thik q angie } , i { “ey WAAC PM ky oe Ue ya So ey i as eal Mie enn a nt tA STANDARD ACCOUNTING AND COST SYSTEM FOR THE ELECTRICAL MANUFACTURING INDUSTRY APPROVED BY THE ELECTRICAL MANUFACTURERS’ COUNCIL APRIL 12, 1917 APPROVED BY THE FEDERAL TRADE COMMISSION JANUARY 27, 1917 FOURTH EDITION Revised October 1, 1922 Issued by the Electrical Manufacturers’ Council Bee) yt age rit y Oi tite, Bis wth i inte at) hk en Test \ ae a / an wx Ki 2 Ay i worry dear: sf rian! e Panel d Heb ayaa re | Standard Accounting and Cost System—Electrical Manufacturing Industry Table of 24 TA 27 FOURTH EDITION Contents LS EQ Ast. e . Aun “TABLE OF CONTENTS 5 Introduction OOM > History of the movement Reports of the Committee Copy of Federal Trade Commission’s certificate of approval Section 1: General accounting system Balance sheet accounts, arrangement and titles Summary of financial operations, arrangement and titles of accounts Other controlling and intermediate accounts, explanations Section 2: General cost system Diagram of the elements of cost General suggestions as to applying this system Elements of cost Suggestions as to preparing cost estimates Determination and application of rates for depreciating manufacturing plant Section 3: Classification and definitions of controlling and intermediate accounts Index Section 4: Suggested method of applying this system Section 5: Suggested scrap accounting system Section 6: Suggested foundry accounting system bal , { 7 ce aa i eA iy. ¥ { PE OR can ae F q PAP TR ao ae ae MS 4 ei! 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Ven : y 8: r hy ; i cpptpeiberd peeup psp deena shpsennlnray mentnayns aes ‘ iy The wl Laie £4 } a Standard Accounting and Cost System—Electrical Manufacturing Industry Introduction | FOURTH EDITION Page 1 A BRIEF HISTORY OF THE MOVEMENT FOR THE STANDARDIZATION OF ACCOUNTING AND COST METHODS For many years it has been evident that an agreement in theory and practice as to the fundamental principles of accounting and costs would be extremely beneficial to the companies engaged in the manufacture of electrical products. A number of previous attempts in this direc- tion had failed for various reasons, but in 1916 a new impetus toward uniformity was derived from the action of the Electrical Manufacturers’ Club in providing, in the programme of its spring meeting, for the discussion of the subject, and its request that the Electrical Manufacturers’ ~ Council, representing the three organizations into which the members of the industry are grouped, appoint a Committee to develop a standard system of accounting and costs. Contemporaneously, the Federal Trade Commission through its Chairman, the Hon. Edward N. Hurley, engaged in an educational campaign among the manufacturers of the country, pointing out the startling inadequacy of existing cost systems in nearly all branches of industry and urging that trade associations representing separate industries should endeavor to obtain uniform practice for the benefit of all. The three organizations, embracing 275 member companies, represented by the Electrical Manufacturers’ Council, are: The Electrical Manufacturers’ Club, The Electric Power Club, The Associated Manufacturers of Electrical Supplies. The Committee on the Standardization of Accounting and Costs, appointed by the Council, is chosen with reference to an adequate representation of all classes of manufacturers, large and _ small, simple and complex, eastern and western, etc. The companies represented are as follows: Allis-Chalmers Manufacturing Company, Milwaukee, Wis. (W. A. Thompson) American Wiremold Company, Hartford, Conn. (D. H. Murphy) Belden Manufacturing Company, Chicago, Ill. (J. C. Belden) Cutler-Hammer Manufacturing Company, Milwaukee, Wis. (H. F. Vogt) Electric Controller & Manufacturing Company, Cleveland, O. (H. F. Stratton) . General Electric Company, Schenectady, N. Y. (C. E. Patterson) Holtzer-Cabot Company, Boston, Mass. (W. S. Kemp) Johns-Pratt Company, Hartford, Conn. (A. W. Fox) Ohio Brass Company, Mansfield, O. (C. C. Beck) Robbins and Myers Company, Springfield, O. (H. E. Freeman) - Introduction Standard Accounting and Cost System—Electrical Manufacturing Industry Page 2 FOURTH EDITION Safety tnsitated Wire & Cable Company, New York, N. Y. (LeRoy Clark) Sangamo Electric Company, Springfield, Ill. (G. W. Good) Wagner Electric Manufacturing Company, St. Louis, Mo. (W. A. Layman) Western Electric Company, New York, N. Y. (R. H. Gregory) Westinghouse Electric & Manufacturing Company, Pittsburgh, Pa. (J. C. Bennett) This Committee has met as occasion required during the past five years. Its members have studied not only the general literature on the subject of accounting and cost methods, but the conditions and hazards peculiar to the highly technical and complex business in which they are engaged. In their efforts they have kept in touch with many companies not immediately repre- sented on the Committee and have also had the benefit of the constant counsel and co-operation of authorities in other industries and in the profession of higher accountancy. As a result of their efforts, the system which is printed in this pamphlet, has been developed. On January 27, 1917, the system was formally approved by the Federal Trade Commission, as shown in the letter from the Chairman, the Hon. Edward N. Hurley, printed on page 5. Since the first edition was issued, the Committee has made many improvements in detail, all of which are embodied in the fourth edition, which is now submitted, with increased confidence in its value. The Electrical Manufacturers’ Council, heartily recommends its general adoption not only by members of the Electrical Manufacturers’ Club, Electric Power Club, and Associated Manu-. facturers of Electrical Supplies, but by the entire electrical manufacturing industry. Copies may be secured by electrical manufacturers upon application to Frederic Nicholas, Executive Secretary of the Council, 30 East 42nd Street, New York, at the price fixed by the Council. The Council has also voted to continue the present Committee, as a standing Committee on uniform accounting and cost methods. All questions and suggestions regarding this system may be addressed to C. E. Patterson, 120 Broadway, New York. S. L. NicHoitson, Chairman, Electrical Manufacturers’ Council. | Standard Accounting and Cost System—Elecirical Manufacturing Industry Introduction FOURTH EDITION Page 3 FIRST REPORT OF COMMITTEE (Submitted with preliminary issue) New York, April 5, 1917. Tue ELectricaL MANUFACTURERS’ COUNCIL. Gentlemen: Your Committee on the standardization of accounting and cost methods for the electrical manufacturing industry, submits the following report: For the convenience of Executives, your Committee has condensed in Sections 1 and 2, the general outlines of the accounting and cost systems. Obviously, however, the account head- ings must be defined and certain features of the routine elaborated, in order that there may be uniform interpretation on the part of accounting officers whose duty it is to carry out the system. These details will be found beginning with Section 3. The accounting and cost system, which is recommended for adoption by electrical manu- facturers, has been so planned that it not only conforms to the requirements of scientific account- ing and an adequate cost system, but is sufficiently flexible so that it may be used to advantage by both large and smal! manufacturers: (a) Small companies may use the condensed or group titles. (b) Moderate sized companies may use the intermediate headings as far as they consider them desirable; so, of course, may the smaller companies, if they choose to do so. (c) Large manufacturers may use the further subdivisions to the extent they may individ- ually regard as necessary. (d) The essential principles are, however, that: 1. If the full detail be adopted, the items shall finally be condensible into the main group headings used by the smaller manufacturers. 2. In any scheme of financial reports, either to the Federal Trade Commission, the United States Internal Revenue Department or to any electrical manufacturing or trade association, the information shali conform to this standardized plan, and the figures, when consolidated, shall be representative of the whole electrical manufac- turing industry. Throughout its work, your Committee has kept in touch with the Chairman of the Federal Trade Commission and his assistants. On January 23rd, it submitted its report to the Commission for examination. This report was referred, as we were informed by the Chairman, the Hon. Edward N. Hurley, to the consulting committee of certified public accountants which has aided the commission in its work, and, on January 27th, the system which we now present _ to the Electrical Manufacturers’ Council received formal approval by the Commission. Yours very truly, . C. E. Parrerson, Chairman. Introduction Standard Accounting and Cost System—Electrical Manufacturing Industry Page 4 FOURTH EDITION REPORT OF COMMITTEE ’ (Submitted with fourth edition) New York, October 1, 1922 THe ELEcTRICAL MANUFACTURERS’ COUNCIL. Gentlemen: Three editions of the Standard Accounting and Cost Manual have been published, with increasingly wide use among the electrical manufacturers of the country. This work has also been in demand in other countries. Copies have been filed in libraries and official repositories in London, Paris, Tokyo and other foreign cities and your committee has conducted considerable correspondence with similar organizations in England and elsewhere abroad. . We now submit, through the Council, the fourth edition of this manual, confident that it will prove to be the best which we have issued. At a fully attended meeting of the committee in July, at which we were aided by represent- atives of electrical manufacturing companies not included in the membership of the committee itself, the whole manual was most carefully reviewed. Although the changes involve no important principles, there are, nevertheless, modifications which we deemed to be well worth while. They consist of the following: 1. Improvements in titles and definitions tending to make the Me sheet and Statement of financial operations clearer. 2. Improvements in the methods of accounting for expenditures for development, special tools, etc., in order to make their absorption in costs of different lines of product more accurate. 3. Suggestions in connection with use of normal overhead percentages or rates for absorbing factory indirect expenses into costs when the volume of production is either abnormal or subnormal. Inclusion of a section in the manual for accounting for the important item of scrap. Further refinements in the classification of general expenses between administration and distribution expenses, the latter representing the expense of marketing product after it leaves the factory. 6. Revision and amplification of the supplementary manual (detailed methods of applying the system) which will be embodied as a section of the fourth edition. 7. Inclusion in the manual of a section covering foundry routine, applicable to either iron, steel, malleable or brass foundries. The committee appreciates the valuable support which the Council has given its efforts to induce all manufacturers of electrical apparatus, devices and material to adopt standard practice in this exceedingly important matter of sound accounting and accurate costs. Yours very truly, C. E. Patrerson, Chairman. \ Standard Accounting and Cost System—Electrical Manufacturing Industry Introduction FOURTH EDITION Page 5 Copy of Federal Trade Commission’s certificate of approval Edward N. Hurley Chairman FEDERAL TRADE COMMISSION William J. Harris Vice-Chairman eee Pees WASHINGTON George Rublee } January 27, 1917. Leonidas L. Bracken Secretary Mr. C. E. PATTERSON, c/o General Electric Company, Schenectady, N.Y. Dear Mr. Patterson: I have your letter of recent date and report of the cost accounting committee of the Electrical Manufacturers’ Club, the Electric Power Club and the Associated Manufacturers of Electrical Supplies, with the request that the system of accounts as devised by the Committee be examined and, if seen fit, endorsed by the Commission. I am glad to inform the Committee that we have carefully examined the cost accounting plan and classification of accounts as recommended by it, and consider that the methods of ascertaining costs in a uniform manner covering both large and small concerns in the electrical manufacturing industry have been very satisfactorily treated, and that the work of the Com- mittee throughout is in accordance with good accounting practice. The plan of the Committee, therefore, is approved. With best wishes for the success of the good work you have started, I am, Very truly yours, (Signed) Epwarp N. Hurvey, Chairman. ts ees * y bs “ii a anon 3 ant | i edits “ft % : ri neat) ae! gif! ‘ ae 44 Perper tern estonia vcd) Risk stage © gig oe + he ehradoog WD ayn pci oe “orate mete tial, es (By ed aria ho henaal aecth (uieyinTt curing! it Pies ela Ee re arriesie pt at USS hy aeourcaned vane > eet , We hin ub oo : VALS ye vont remaererem annie it (FOURTH EDITION) STANDARD ACCOUNTING AND COST SYSTEM FOR THE ELECTRICAL MANUFACTURING INDUSTRY Section 1 GENERAL ACCOUNTING SYSTEM i, i} Wee ay ‘ Bel ee Mery in tae iy Bure ices Nh A, eb ate EL Ba tas ae ¥ : t i ay i / mh et oa ty 6 ie MAT eYE, T20D. OVA DIT VOD” ) ie i ; feet an Oh) DOW eam (A oligo cate yikes te Sa) BE I efor Gd QnA Po AAU tah ait bd ' (twa m) , i ; SO Ny i eis i / ; oka | : ott vt ) 1 i i A, e iy i snatks id i} : 3 es a ee j Ra i$ ‘a nate ee ‘gy wt & ‘tga. ye is Ae a a WaTere OINTHYOOSA TAREE ou it cyt Jy ve ih i iy at 0 Standard Accounting and Cost System—Electrical Manufacturing Industry FOURTH EDITION Section 1 Page 1 GENERAL ACCOUNTING SYSTEM Balance sheet accounts: Arrangement and titles. Assets: FIXED ASSETS Manufacturing plant (carried at first cost) Less, plant depreciation entered in costs Property other than manufacturing plant.......................... Less, depreciation on property other than manufacturing plant INVESTMENT SECURITIES CURRENT ASSETS Materials: raw, finished and in process Notes receivable Sic Suits, '9)s(@! cet a) 6) e17eig.e ©) le’ 5 Hansell ee ehrelna) Yale ole chute. We) 56) Sloe) fe! ce; lal Be Sule) ec Lewiet © ele: le) 9. ewe) ey eumike Wie. 'd\Ge) oh ml (eis) ai) =) (ess!) (6) Xe) Veh le: mh a) ehite (eo) cetis, sae) wok eet) is Chgis wh ajcs: le, eo ele) a 6 lef teale Bee. seve ce) 4) a. lel le of el) e)cfexvau oil aise) a hele’) @ue)-6) 6) i 43) 0) @hidiier ec (ste isl iw-lb) 160 Si lief 6) (e).6',.eieh-el 0 fe) 10)’ Spiny ley ol 4. \'ei ie, A) SE re Interest paid and accrued (Section 3, Page 20)... ........ 0... 0 ccc eee eee be EA os a REPO ri nce PAN cE RRO ste, HACK CO ee, aE Ae pee Sit ke hs Se ¥ederal income tax (Section 3, Page 20).................. Gaotoriss hare Dividends (Section 3, Page 20)....................0...005- » Sathana anced i Waswate 4) Beermasts SOF the Period 2.326 Pacers hs ee ieh ss Weems b Ob ogy BER ge vis Ul aaah eral 5 FRET oe: Contingency reserves (Section 3, Page 18) . (ec tiwenty tay MBG, due paeaioas $ Balance carried te “Surplus” account..................0..0 0.0000 e eee aee Sete ee be acs Standard Accounting and Cost System—Electrical Manufacturing Industry Section 1 FOURTH EDITION Page 3 IMPORTANCE OF DIVIDING INCOME FROM OPERATIONS BY DIFFERENT LINES OF PRODUCT Companies manufacturing more than one class of material should subdivide their sales, cost of sales and general expenses by the various classes of material manufactured or sold by them. It is important to know not only that a satisfactory net profit has been made on the business as a whole, but that each line of product has contributed its proper share. Inasmuch as general expenses are not incurred in equal proportion as between several different classes of sales they should, if possible, be allocated or assessed accordingly, and summaries of sales, cost of sales and general expenses should be prepared at stated periods, to show whether the business done in each class contributes its proper share to the total net profit. Other controlling and intermediate accounts The bookkeeping term of the principal headings of the ledgers of the Company is “‘con- trolling accounts.”’ Those which are intermediate in character are termed ‘“‘sub-accounts.”’ The sub-accounts and definitions of the major headings exhibited in the balance sheet and the summary of financial operations, will be found in Section 3. In addition to these, there will be found in Section 3, the classification and definitions of other controlling and intermediate accounts which may be necessary for the recording of expendi- tures, receipts and accruals, in order to obtain a comprehensive exhibit of all the functions and activities of the business. wt Mae he 4 6 a ieesboribilnaee ‘sles ae ; marie Prehde Cerigaty | f ar aa hey Li ie ‘ tie ray th) Deny CEN, pede) keel | Veh bb MF mar’ A s snociaayel 2! % ive Suet ,o fod ie Be : ; at. asi ah eal tes Hae ett ib veh Baca ante dei igen Hoe ‘al. prem und put : A pr ? ~ Typ te fret Re 73) hy ' ts, azn oe y ' ay fe 1 ; ‘ ; nda’ Ke . ns hah ph } pi 4 a ye = Ne ie Vid ew othe peer Wr te yee emg (FOURTH EDITION) STANDARD ACCOUNTING AND COST SYSTEM FOR THE ELECTRICAL MANUFACTURING INDUSTRY Section 2 GENERAL COST SYSTEM Marra, ¥ Bey) tus ovarian” dA . tae H a (Ny ms ger yon ah ate | oe : a , enreudl arin roRanTAD i Tao re et, ieee | S$ naltze® | i ig la a ’ ) ” s a MATEY? 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The Committee would also point out that there are many excellent books and a constant succes- sion of more or less illuminating magazine articles and pamphlets dealing with the questions of scientific accounting and complete costs, all of which are accessible to the student of these problems. Attention is particularly called to the excellent outlines contained in the Federal Trade Commission’s pamphlet issued July, 1916, and entitled “Fundamentals of a cost system for manufacturers.” Nevertheless the Committee desires to be of the utmost service to the electrical manufacturers in whose interest it was appointed and has, therefore, prepared a section of this manual, Section 4, in which will be found a brief outline of a method (not by any means the only method) by which the ‘‘standard accounting and cost system’’ may be carried out and the accounting results properly transferred to a series of cost records. Acting upon the suggestion in the second edition of the ‘‘Manual,’’ certain sections of the electrical industry, interested 1n a specific commodity, have already found it advantageous to form separate committees among themselves in co-operation with the standing Committee to decide upon detatls of methods best fitted to meet their peculiar conditions, at the same time adhering to the general methods of accounting. and cost outlined in “Section 4.” The standing Committee urges that such co-operative steps be taken. Section 2 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 4 FOURTH EDITION THE ELEMENTS OF COST All elements of cost should earn some percentage of profit. The money thus employed is neces- sarily part of the capital invested and the success of the business requires that all of the capital should yield an income. On the first page of this section there appears a diagram of the elements of costs which may be defined briefly, as follows: A. DEVELOPMENT AND COMPLAINTS 1. Development: Research and engineering expenditures preliminary and incident to the regular manufacture of products, such as time of engineers and draftsmen, indirect expenses of engineering and drafting departments, also experimental labor, material and expense incurred in the manufacturing depart- ments, in making, testing and correcting initial product while in process of development; (see account No. 13, Section 3, page 16) and all expenditures incurred for initial patterns, molds, jigs, punches, dies and special tools as defined on page 10, section 3; also patents purchased (as liquidated annually), payments in satisfaction of judgments for infringement of patent rights, royalties paid when traceable to a specific product. 2. Special Tools: Duplicate and replacement (not :mitial) patterns, molds, jigs, punches, dies and special tools as defined on page 10, section 3. 3. Complaints: Expenditures incurred, after delivery of product, to remedy customers’ complaints when due to defects in design, manufacture or installation. 4. Liquidation: The expenditures described in the foregoing should be assembled by individual job numbers and liquidated into manufacturing costs in accordance with Section 4, page 11. B. SHOP COST The full cost of work performed in factory departments, as distinguished from engineering and drafting departments. It differs from manufacturing cost, in that the latter includes develop- ment and complaints, cost of erection and installation of product, etc. Shop cost includes direct labor, productive material and indirect expense, as hereinafter defined. 1. Direct labor: Labor which is performed specifically on account of production orders or directly upon any class or type of product. It is recognized, as-a sound, fundamental principle of cost accounting, that all labor which it is practicable to allocate as direct labor, should be so treated. (Bonuses are naturally an addition to the account to which the wages are charged.) 2. Productive material: Material (plus incoming freight) which can be specifically allocated to production orders and which forms a part of the finished product, also boxes and containers made specifically and exclusively for such product. Note 1. Incoming transportation charges should be added to the invoice cost of material and the cost increased accordingly. When this is not feasible the incoming transportation should be charged to indirect expense account No. 250. Note 2. Unit cost of material, parts and devices manufactured by a contributing department of the establishment for which it is possible to determine complete cost per unit should be con- sidered as part of productive material and be shown as such on the summary cost sheets. (See Section 4, page 3.) OT a ail 1 4 Standard Accounting and Cost System—Electrical Manufacturing Industry Section 2 FOURTH EDITION Page 5 3. Indirect expense: All expenditures necessary to the operation, maintenance and administration of the manu- facturing departments, except those chargeable to cost of development, productive material, direct labor or ‘manufacturing plant’? account. For classification and definitions of indirect expense accounts, see Section 3, page 28. 4, Depreciation of plant: For the purpose of emphasizing the importance of including normal depreciation in costs, this item, although a part of indirect expense, is shown separately on the diagram. The Committee recommends the adoption of the rates in Appendix A, page 11, of this section. ‘Depreciation is one of the most important of all overhead expenses, because it is generally the largest. There has probably been more written on this subject than any other item of overhead, but there are so many different ways of handling depreciation, some of which are best adapted for one line and some for another, that there is really no recognized standard method. It is universally admitted, however, that depreciation does exist, that it is an element of cost just as much as labor or material and that any system which does not provide for including it, is faulty and one that will not give true costs. '’* 5. Depreciation of merchandise at factories: In all factories there is an element of loss in quantities of material, raw as well as partly finished, due to shrinkage. A small percentage should, therefore, be added to the purchase (or unit) cost of such material (or parts) to arrive at shop costs. In addition to this provision it may be desirable to establish a reserve to cover possible shortages which, it is expected, may develop when physical inventories are taken. 6. Boxing: Labor, material and expenses preparing the product for shipment. In so far as possible unit costs should be determined to cover the boxing of ‘‘standard”’ product, while the cost of boxing “‘special”’ product will be estimated and added to the other items making up ‘‘manufacturing cost.” The aggregate of the items so added to “manufacturing cost’’ should be credited to this account. C. INSTALLATION AND CONSTRUCTION Cost of material, labor and expense involved in the erection and installation of products after their delivery out of the factory. D. GENERAL EXPENSES Expenses incurred in selling the company’s product (salaries, rentals, traveling, etc., losses on notes receivable, customers’ accounts, warehouse and consigned stocks, etc.) and in administering the business (salaries, rentals, depreciation of general office equipment, corporate taxes and other charges, pension, and other welfare payments, etc.). For details see Section 3, page 21. * Quoted from bulletin issued by the Federal Trade Commission Section 2 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 6 FOURTH EDITION ABSORPTION OF INDIRECT EXPENSES Each production center or department should be charged with all expense which can be definitely traced toit. In addition it must be charged with its proper share of any expense incurred jointly with other centers or departments. ‘‘These expenses, while part of the cost of a job, are general, so can not reach the job direct; hence a method must be devised for them to reach the cost sheet in an indirect manner, the method at the same time being so planned that each job will receive its fair proportion of the total.’’* There are several methods of absorbing these expenses into costs. Those most commonly used are: a. ‘“‘Percentage on direct labor” method: Basis: Percentage relation of the normal total indirect manufacturing expense to the normal total direct labor of a production center or department. This method is sufficiently accurate, when employees doing the same class of work earn nearly uniform wages per hour and use equipment of substantially the same size and character. It fails to take into account, however, the great variations, when they exist, in such items as the value of equipment employed, the expense of supervision over different classes of employees (those earning low rates of pay often requiring the more costly supervision), the quantity of power required to operate equipment, etc. b. ‘Productive man-hour rate’ method: Basis: Normal total indirect manufacturing expense allocated pro-rata the normal total pro- ductive man-hours of a production center or department. This method avoids the variations due to the different earning capacities of employees, which is an inherent weakness of the ‘‘percentage on direct labor’ method, but does not take into con- sideration the variations in value of equipment, expense of supervision, quantity of power required, etc. c. “Machine hour-rate’”’ method: Basis: Normal indirect manufacturing expense allocated to individual machine tools, or groups of them, divided by the normal total number of hours the machine tool or tools operate during a year. This method produces more accurate results for certain classes of product, but requires somewhat greater refinement in the distribution of expenses to production centers and incurs somewhat larger clerical expense. d. “Application on material’ method: Expenses which relate primarily to material, are as a rule, subordinate and of secondary impor- tance to those relating to manufacturing operations as a whole. Moreover, the fluctuations in the prices of material are, over a cycle of years, so much greater and more frequent than those in the rates of labor, that material furnishes a less stable and, therefore, a less dependable basis upon which to allocate indirect expense. or these reasons it is considered undesirable, as a general rule, to use material as a basis for absorbing indirect manufacturing expense. However, in certain branches of the industry or in certain departments, conditions exist which are exceptional to the premises above stated, such as: (1) material bought for resale on which * Quoted from bulletin issued by Federal Trade Commission. Stamdard Accounting and Cost System—Electrical Manufacturing Industry Section 2 FOURTH EDITION Page 7 little or no labor is performed, and (2) material for manufacturing where the labor performed is so small or inconsistently variable that if used as a basis for burden it would give incorrect results. In these cases, expense may be applied as overhead directly to the material, especially such expense as purchasing, transportation, demurrage, receiving, storing and handling. In such cases the expense should be absorbed on the basis of volume, units, weights or value of material, whichever is found to be the more equitable. Value should not be used when many different kinds of material, widely different in cost per unit, are purchased. There are cases where the direct labor involved is so small in relation to the material that it is obvious that the expense of handling the material alone would exceed the total overhead expense absorbed by the plan of applying overhead to productive labor as a base. In these cases it may be advisable to apply part of the overhead burden against the direct labor on the job and the bal- ance based on some unit of the material as suggested above. When burden is applied both on direct labor and on units of material, the amount absorbed on the basis of material of course should be credited to the expense accounts from which derived in order to avoid over-absorption by duplication of amounts included in costs. The conditions of production in the electrical industry vary so greatly that no one method of applying indirect manufacturing expense can be consistently recommended for universal use. The “percentage on direct labor’? method appears to give the most satisfactory results over the widest field, with minimum clerical labor. Under some conditions, however, and for some classes of product, either the ‘‘machine-hour rate’’ method, the “productive man-hour rate’’ method or the “‘application on material’’ method insures somewhat greater accuracy. Since it is to the interest of all manufacturers to make their costs as accurate and complete as practicable, a care- ful study of the various methods is advocated, so that the method which will give accuracy for a particular class of product, under existing local conditions, will be used in determining the cost of that product. USE OF NORMAL OR AVERAGE RATES OF INDIRECT MANUFACTURING EXPENSES IN COSTS Indirect manufacturing expenses do not fluctuate in parallel with the volume of production. Therefore, costs obtained by using a temporarily high or low percentage or machine hour rate (because production for the periods upon which they are based is subnormal or abnormal) are not true costs, as applied to most lines of production. The fiscal year is largely an arbitrary period and may not represent average conditions. Conse- quently, the attempt to absorb the indirect expenses in the costs of the fiscal period in which they are incurred may work injustice or entail loss. It is, therefore, sound accounting and good financial policy to recognize, in determining the cost of production, the principle of the con- tinuity of time. To avoid violent cost fluctuations, normal or mean average rates based upon a cycle of years should be used in cost estimates and in costing production and shipments. It will take study and care to determine such rates and to keep them normal. Section 2 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 8 FOURTH EDITION It is recommended, therefore, that: (1) Normal or average rates (based on direct labor, direct labor hours, or machine rates) be es- tablished for separate departments or classes of product and used for cost estimates and in costing production and shipments. (2) A separate ‘“‘Reserve for indirect manufacturing expenses” be set up for each department or class of product, created primarily from amounts over-liquidated, i.e., amounts charged costs of production in excess of actual indirect manufacturing expenses, during periods of abnormal production, when the rates used in costing are higher than the actual. If the reserves established in this manner are insufficient, they may, if the Board of Directors approves, be supplemented by appropriations from surplus. (3) Under-liquidations of indirect manufacturing expenses, during periods of subnormal produc- tion, in any department or class of product, be charged against its reserve. (4) Constant study and comparisons of the production and expense factors be made by means of charts and statements, so that the established normal or average rates may be periodically corrected or revised as experience or conditions may require. (5) Inventories at the close of the fiscal year should be valued, for balance sheet purposes, upon the basis of normal rates of overhead. Note: When, as a policy of conservatism, an adjustment of inventory is made to the basis of current overhead cost, in those years when current rates are lower than normal rates, this adjustment should be a temporary entry to be reversed at the beginning of the succeeding fiscal period, and this practice should be interpreted as the exercise of executive conservatism rather than cost accounting procedure. SPOILED WORK The hazards connected with the production of electrical apparatus and material and the problems of new and useful applications of electricity to commerce and industry, which every manu- facturer must face as part of his every day experience, involve losses arising out of the unsuit- ability of initial production to perform the service for which it is intended, incorrect or incomplete interpretation of specifications and drawings, unsuitable or defective material, careless workman- ship or accidental damage. Whether these losses are due to the highly technical nature of the business or the factor of human fallibility, they constitute a risk which is inevitable and which must be covered in manufacturing costs. | When such losses occur in the production of special apparatus on specific customers’ orders, they may be charged as part of the cost of such orders. When they occur in connection with standard production, they may be charged to labor or material cost, if they can thus be allocated, or to indirect manufacturing expense account No. 280, if they cannot. Standard Accounting and Cost System—Electrical Manufacturing Industry Section 2 FOURTH EDITION Page 9 ESTIMATES OF COST Among the many requests made by electrical manufacturers, was one urging the standing com- mittee to outline, as a suggestion, the proper basis for preparing cost estimates for purposes of commercial quotations. The Committee recognizes fully the difficulties associated with any attempt to amplify a course of procedure which would apply adequately or equitably to the many and varied lines of electrical product. It has therefore prepared only the barest outlines of what it considers the underlying principles, but -will be glad to make further study of this important subject if it receives from electrical manufacturers a general request that it do so. In the preparation of the following suggestions, the Committee had the benefit of the counsel and co-operation of a number of cost experts who have been long and prominently identified, in the electrical manufacturing industry, with this important and essential work. The primary steps to be taken in preparing estimates are: 1. Obtain from the selling and engineering organizations complete information as to the character of the apparatus, device or material upon which the estimate is to be made. This information should include details as to quantity, delivery date, rate of production, dimensions, type, capacity (kw. or h.p. rating, etc.); also weight, construction details, and kinds and grades of material of each component part. As one of the most fruitful causes of underestimating is the failure to include the cost of all the parts in process, great care should be taken that the bill of materials and the list of labor and other details are complete in every respect and are constantly reviewed by the engineer- ing and manufacturing organizations. 2. Ascertain cost of apparatus, device or material previously built and similar to that for which estimate is to be made. Revise such cost to conform to the probable prices at which materials can be purchased at the approximate time at which the apparatus will be produced; also the probable cost of labor at that time; add indirect. expense for manufacturing at correct and established rates; add distribution and administration expense at current and duly verified rate. To make sure that apparatus, device or material upon which estimate is to be made will bear its proper burden of indirect expense for manufacturing and for distribution and administration, these should be carefully departmentalized, as outlined on page 6, Section 2. 3. If the apparatus, device or material upon which estimate is to be made is only partly similar to that for which a previous cost is available, revise such cost according to the procedure outlined in paragraph 2, and add estimated cost of new features, to be compiled in accord- -ance with paragraph 4 relating to new apparatus. s 4. If the apparatus, device or material is wholly new, secure complete and carefully verified (as to quantities, weights, etc.). bills of materials from engineering departments with estimates Section 2 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 10 FOURTH EDITION of developmental and special tool expense necessary to put it in successful production, including testing; compile material cost estimate with aid of Purchasing Department; obtain from foremen and rate setters probable direct labor costs; add indirect manufacturing expense at correct and established rates; add distribution and administration expense at current and duly verified rate. . 5. At the risk of repetition and because of their paramount importance, if complete cost estimates are to be secured, the necessity of including the following items in the preparation of estimates under paragraphs 2, 3 and 4 are emphasized: (a) Experimental engineering and shop development, including patterns and tools. When apparatus is so special that tools, patterns, molds, punches and dies cannot be used again, the entire cost of such tools, etc., should be liquidated in the cost of the order (see page 4, Section 2). -(b) Boxes, crates and other containers; be careful to make extra allowance when for foreign shipment. (c) Possible extra cost, during production and after shipment, when emergency conditions require the production of wholly new or partially new apparatus without sufficient time for normal development. (d) Installation and freight, when specifications or contract provide that these expenses be borne by the manufacturer. Standard Accounting and Cost System—Electrical Manufacturing Industry Section 2 FOURTH EDITION Page 11 Doe 6. oe] APPENDIX A Determination and application of rates for depreciating manufacturing plant account GENERAL All rates are to be applied to first cost. The rates recommended are those which are to be applied to first costs to obtain amount to to be included in costs and estimated costs, and are in addition to maintenance expenditures and renewals as provided for in indirect manufacturing expense accounts. All rates recommended are based on the tabulated experience as well as the general judg- ment of many manufacturing engineers and superintendents over a cycle of years, and are the average of abnormally high as well as subnormally low production. All rates recommended are therefore based on normal costs and operating conditions. In case of afactory working overtime and with night shifts for any appreciable length of time, or under other extraordinary conditions, or in the cases of facilities acquired at excessive costs, higher rates may, as an act of extra conservatism, be assessed so as to absorb in the costs during the period of extraordinary activity: 1. The abnormal physical exhaustion. 2. The abnormal primary cost of buildings and structures. 3. The cost of equipment estimated to be surplus in normal times. Conversely, under subnormal operating conditions the normal rates recommended below may be reduced, but not in the same rativ as the volume of subnormal business is below the normal volume, inasmuch as obsolescence obviously continues regardless of the volume of business. Rates recommended are to be applied to the items shown in the further subdivisions of i D) the manual, Section 3, page 2. Ananda ereaete LAND RECOMMENDED Pie USE) ERC ee Ae 0) 0c a tee eed ME ade ius 6 uid Felten s oe ke es 0% Lafidt= eradmoandiumprovenentsi() 1.5) Motwutisel We. Ga ieikeood.. 0% . BUILDINGS a. Buildings (total reserve 75%) NV OoCeM Deis s ai eOUS tea: cee s ye ae kes oe ck tee 10% oly ALP ERIS laf ay ataln ew CEG A tees Slee bie i be At ae 10% iC atide woor Ciilll CONSLEUCHION):. os ces st cere. he eee yas fete 5% Brick and steel (fireproof construction)... 2.2.6. ...00 200... e. 3% Reinforced concrete (fireproof construction)................... 3% Note.—In those cases where plant accounts include accessories, care should be taken to segregate such accessories, in order that the proper rates of depreciation may be applied. b. Structures (total reserve 90%) Se UG Teen 6 a MEME as iwites Ada Sates nat eds, Hebe shut WV) hy RISE Ie «ig dled och 124% - Water, drainage and sewer pipes (outside of buildings)......... 6% Piping and electrical conductors (outside of buildings).......... 6% Cua oprnkiersustem. (totalaeserve 90%) i iiveuwie oe Wad Pee cage eae 5% d. Heating and ventilating and other inside piping and wiring (total reserve 90%) ; RCA TALITY Viet CURSO uuu le Jyh NIRV aban dys ve manyeletd » ) dyslre d= ARG Be Fer eirl Ora ine anc WITine seul Willa AL alee cs «1,9 a2! Cie. bie 5% Section 2 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 12 FOURTH EDITION: ANNUAL RATE C. MACHINERY AND TOOLS RECOMMENDED a. Machinery (total reserve 90%) Special.machinery, pfia blige sv alvil eae lance og a Sold een dei gees 74% to 90% Rates on special machinery depend upon the estimated period of present use and their adaptability for other use. Standard machinery. suey oil tyicadeuts a cle eee AN ec oreees e 7% to 10% Electrical appara tiusy): oAlhis a! deans ke Ako ae) eee! 7% to 10% Ovens andjfurnacessMs Maui sctidiie Je. ae on leat 0 10% Power. plant.equipmenta. ti). 2 {raiginpo bao oa) has wildiees’ “e 3 BAYS pa ag PRADO, | eS ‘gnifsipqe: RM iste: si Ee 4 ed, OM whine ‘ Aah iN se: (Pt Vy ae i eae te) Secbat dh Breis fos ieameua age . / wh a vatican) wait ee hG? ne assur « oR isp at ei Tay, Ho oa ion mn tf heli 3 i MENGE AE Wg Sh aoiny a sn bet Pufies Ua | RU evs 0 hah’ WA! gin Hered + 0. ye wheal TaigUbN Sy aye (FOURTH EDITION) STANDARD ACCOUNTING AND COST SYSTEM FOR THE ELECTRICAL MANUFACTURING INDUSTRY Section 3 CLASSIFICATIONS AND DEFINITIONS OF THE CONTROLLING AND INTERMEDIATE ACCOUNTS OF THE GENERAL ACCOUNTING SYSTEM SS bi at | A 4 aoe re | ; F J mi F, 7 AE: Mi ees, TATCOREALD OAT TOE RAR LASTED) A ane as Ba i | CROPTIMTT OWA BNORPADTHERLES |. ¢ P * i in Sp eae EPNVODIA STACUM ASTM. CA: DALMORTHOD | | via 4 Rae Tee THT We | Wy a MATEY 2 QUEL MIO DA aan : hw ‘ ‘ ( 1 : 7 a sent =~ Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 FOURTH EDITION Page 1 Asset accounts INDEX Pies Nes MP VEAULAPUUEIN OD IATNOY 5 oss clg ccc ce cise on MOE EO ica oc tos aa 2 page oper eyaetherithan- manufacturing planter. 2)... 0a oye eed thoes Pe ee 13 REV eS orrCtrCCCUTILIES OMG fs BIRO Me as os Ue Soaias Bek ne ek er ek clea ae 14 Papiateriaiss raw) finished and ‘in process} aw OU es Ge. 0 i, ee 14 Dame Noves receivable: SRO OMe A A Oe) Se hema eel YN tte UN eg 14 SSR SCOUNEL SF ACCOULL UBS ete die at ee AURA MOO arti . ch. eee ay 14 OUNCE ACCOUNTS TECel VA DIG: aim ics eM er re eee Ui i, | 1 eae 15 SOM eTNICT SCOUT Les a a awn we Men ne aaa te ks AR cc aR AS oe 2s og eyes alan 15 OLD DU Me bee ee eM AE ee A Sr ROL Rg ORT! Ada i oe 15 107" Sinking and other furndsiarn.-) frost oe hae ay oc de Soloed boa ee 15 LEe Good. will vi een enn eee eS eel, eae Or eel ed 8 a aso od ea owls no 15 Da Patents siranchises Ghauicensce yi ih: ii Been ct ote es cs sep ole nue atiace «ae bo 13. Development and complaints...™~%........00....041 hastens Sia OE EEL ee 16 14 ounce deterred, Chatcesito OPEravions? | rt. eee. ee ca weds wae heels 16 Liability accounts LESS APL W Wea 1% LAGG os 0 ea vc en a lish hy Re neces pig Ms Rl ie, EMSA dal te a DN Be 17 DOME NOLOGET TU Aer COUl i CGaia.a DLE wren tl coca Miia ialihe weet wae dial. uit a wia'e wales gf's Mate 17 Pies COOUT LS ava CM armo ck ter gars air Jt lg RMR ee my ules 17 Dre chert Clae reste RUMMY OME R I Wa oe SW oh kos «ace a edhe abn anche idl» Md adie « abs 17 LO EG OEe OL CiT ese. eee maine, elie hs tay 5. LieSaartahes Wohin tebe Sites « WARRUMM Soe a Oe S 17 20) *Diwidendsdecinred' and anpdid ..).28 PC EMR eG eGo BBA PME m ee: 17 at STILE bc at ACCLUCU TT 1s a tees Fo eth Ris et ee RD ed, hak de 8 17 oan ommemice COLECTIONS On Shiesriia al seta. ele le Pd ape Ses Mealea a alah alte care datas 1 by 2oeur enimdenrectationentered If COSLS ho ash othe Boge ee eas sae sib volves mn eulee 17 24. Depreciation on property other than manufacturing plant.~.................... 18 ey MN CIT OM ECCT UCR AMAR iW RN Gednii nic. avi ale «a de fanal a, wo 01d ghel Mle eos + mle Bee ld Obie 187 ALE A ENG SCRIBES ated ) bic be ay et Mev Rieu se Gree Pama Re ok oT of AS A 18 Le WEIN PENEVITCSETIVES {SUAS wien one eae «oe SAN RS... CU 18 Zo epiopiuse including undiyidediprofits)..... . 21... eReben tl whet. eee 18 Summary of financial operations—accounts PPE CREE ors CMRI rep st MT ce ike cn sw) arel } toc P eeyhpeess in 2.4 fe ee «2 <9 + aye eh neta 19 By Se OS ERECT ECL tm, Se) ot crane a RR 8 ee Rs Sel a, seal vas, 19 MRTG RSE SA treo cade aid Pee SS she MR a ha Rew MOBO D ohn aig raed Mela ad ee 19 ee CLEAN Me fe cc Core eee ek de AN Gino) ci AY tims aal a P< <5 4S ae wig eae 19 SPM TAGE TO Cry tie AT 1 OC TRIOUL Sire = 6s. tiik ace poe, hc 6 clatag! TD Ae eRe chee Fw! 4, < welaleatgme a a ARS 20 ee AGT MTCC IRR MMM MEM: (EEN. icc cae sacs te onsale) sgencielins vain ioe Walaa: ale’ s, Glalehaeta ee ayaluie'e 20 USACE CCL << pene ey ee St 8 6 At S ARR ASIOD USAN Die PRE LAR RTS NEE 20 Rrenetamen Dc Ncoreu DeneCOUNLS MAT. yo. shunt aves 1). cei any eis ale da ohn viele ad = he oteedete 21 INOVeCrpalementall Gx Dense VACCOUNTS = a7 re bus COM Re sed sl li beg | a's ane hanae meine ae Pndirect, Mantiacturimy EXpense ACCOUNTRE. see, Lee, eens. @ Shs a careestoy obo chia tale gee 28 Definitions of indirect manufacturing expense accounts .............+.0005 ae 2 POWere ea and glit ACCOUNTS. ARE . tld LOREEN, oa cele oie viene ee wt eee 44 CLASSIFICATIONS AND DEFINITIONS OF ACCOUNTS Maintenance-accouUuntSnsr err OER hee OE OE EE EERE ET ERT TEE OS EE PETS ETT PS 48 Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 2 FOURTH EDITION 1. MANUFACTURING PLANT Condensed accounts Sub-accounts Further subdivisions A Land. sos cas ete a {Lands ee: sae ee ee { Sis thane aie eh NR 2. Land—grading and improvements 1. Buildings 2. Buildings—grading and filling as Buildings ff oa 1. Structures Do Stractutes s 6. ee 2. Water, drainage and sewer pipes (outside) 3. Piping and electrical conductors (outside) B. Buildings........ c. Sprinkler system........ d. Heating and ventilating and folic Aas 1. Heating and ventilating other inside piping and 2. Other inside piping and wiring 1. Machinery 2. Electrical apparatus 3. Ovens and furnaces 4. Power plant equipment a:. Machinery 20). i.e | L C. Machinery and b. Machinery—foundations f 1. Foundations for machinery and apparatus tools. cuits and installation........ | 2. Installation of machinery 1. Semi-durable tools c. Semi-durable tools and in- | 2. Electrical equipment struments.............. 3. Molds, jigs, punches, dies and special tools 4 Metal flasks D. Patterns and ‘Se Paterna ssi Suen ano drawings...... |.b.. Drawings.............(edile E. Furniture, MENG eee ee fixturesand 4 b. Furniture and appliances in appliances... factory offices.......... Le Fire protective apparatus. . 1, Railway tracks and overhead equipment F. Otherequipment . a. Otherequipment........ 2. Rolling stock 3. Automobiles and other conveyances (ay Buildings o¢\ . 4...) ae b. Machinery and tools..... c. Furniture, fixtures and appliances. 3.3... G. Unfinished plant . Standard Accounting and Cost System-—Electrical Manufacturing Industry Section 3 FOURTH EDITION Page 3 A. LAND (1) (2) B. BUILDINGS Definitions of se ei plant accounts ‘ ‘ Purchase price of land for manufacturing purposes ( (including buildings located thereon which will not be used for manufacturing purposes) together with costs of damages, fees, surveying, services of experts and any assessments \due at the time of purchase. (If subsequently the buildings referred to are sold, the priceeds should be credited to this account.) " ai P Cost of grading and filling not done specifically for the rection of new buildings; al cost of all roads, driveways and sidewalks, including engineering. Further subdivisions: in LAY ae ee f 1. LAND—PURCHASE PRICE ‘ f 2. LAND—-GRADING AND IMPROWEMENTS | f First cost of all buildings and structures and permanent additions thereto, including cost of excavations, foundations and grading, and all piping, yess and fixtures which form an integral part of the buildings or structures. This account will include, in addition to the cost of main phates the cost of the following: Canopies ~ Rough of u.,,sheds Storage tanks (above Bins Me, Reta‘ walls and below ground) Cisterns Water tanks ( Crane runways (inside Wells Stand pipes and outside of buildings) Fences Trestles and tunnels’ Reservoirs Draw and other bridges Water, sewer and drain pipes (outside) Steam, gas, air, fuel oil and hydraulic pipes (outside) Electrical conductors (outside) Subways and conduits (outside) Sprinkler systems Heating and ventilating systems Other piping, plumbing and electric wiring (inside) Sub-accounts: a. Buildings (1) First cost of all buildings and permanent additions thereto, such as shop buildings, foundries, storehouses, power plant buildings, factory office buildings, and all other buildings occupied by productive or non-productive departments. Costs of buildings include cost of excavations and foundations, sectional metal partitions, fire escapes and iron ladders attached permanently to buildings, steel floor plates which serve as part of the floor, crane runways installed at the time of the erection of buildings, also bridges connecting two wings of the same building or two adjacent buildings. Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 4 FOURTH EDITION (2) First cost of grading and filling, when done specifically for new buildings. Further subdivisions: 1. BumILpIncs 2. BUILDINGS—GRADING AND FILLING b. Structures / (1) First cost, pe cost of excavations, foundations and grading, of all permanent structures andy ™4rmanent additions thereto, located outside of buildings, which are either roofed and without sides or with sides and without roofs, such as canopies, rough open sheds, bins, yard racks, etc.; also storage tanks, reservoirs, cisterns, wells, and staid pipes, whether located above or below the ground; fences, draw and other bridges, trestles, crane runway, retaining walls and tunnels. Note 1. Does not include cost of bridges connecting two wings of the same building or two adjacent buildings. (Seeaccount No. 1-B-a-1.) Note 2. Includescost of ground tracks for gantry cranes, outsiderunwaysand brackets when attached to buildings, also outside runways and their supports when not attached to buildings. (2) First cost of all permanent water, drainage and sewer pipes and their fittings located outside of buildings. (3) First cost of all other permanent piping, electrical conductors and subways, located outside of buildings, as follows: (a) Steam, gas, air, fuel oil and hydraulic pipes and fittings. (b) Electrical conductors fcr power and lighting current, from the main distributing switchboard, through yards, up to (but not inside of) buildings. (c) Subways for underground pipes and conductors, also poles and fittings for over- head conductors. Note 1. Does not include cost of outside wiring for telephone, fire alarm and watch- men’s systems. (See account No. 1-E-a. and 1-E-c.) Note 2. Doesnotincludecost of railway overhead conductors. (See acct. No. 1-F-a-1.) Further subdivisions: 1. STRUCTURES 2. WATER, DRAINAGE AND SEWER PIPES (OUTSIDE OF BUILDINGS) 3. PIPING AND ELECTRICAL CONDUCTORS (OUTSIDE OF BUILDINGS) c. Sprinkler system First cost of all sprinkler pipes and fittings. d. Heating and ventilating and other inside piping and wiring (1) First cost, including cost of foundations and installation, of permanent heating and ventilating systems and permanent additions thereto; embracing steam heating mains, pipes, coils, radiators and fittings, ducts for heating mains inside of buildings, smoke Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 FOURTH EDITION x Page 5 exhaust ducts, hoods, oven blocks with fires, stoves and stove pipes, etc., used for warming and ventilating buildings; also hoods placed over grinders and other tools, and necessary piping, etc., for carrying off emery, brass and other deleterious dust. Note 1. Does not include cost of steam vacuum pumps, blowers, fans or exhausters. (See account No. 1-C-a-1.) Note 2. Does not include cost of motors used to drive any of the equipment, the cost of installing such motors or of electrical controlling devices for them. (See accounts Nos. 1-C-a-2 and 1-C-c-2.) Note 3. Does not include cost of piping, etc., connected with ovens and furnaces used for manufacturing purposes. (Seeaccount No. 1-C-a-3.) i (2) First cost, including cost of installation, of all permanent piping, plumbing and electric wiring inside of buildings; including drainage, sewer, water, gas, ? r, oil and hydraulic pipes and their fittings; plumbing and toilet fixtures; hose connections from pipes to automatic tools; cable and wires for power and lighting circuits, also wiring devices, such as sockets, receptacles, switches, cutouts, insulators, conduit and moulding for wires. Note 1. Does not include cost of inside overhead wiring for railway equipment. (See account No. 1-F-a-1.) Note 2. Does not include cost of inside wiring for fire alarm, watchmen’s clock or shop telephone systems. (See accounts Nos. 1-E-a and 1-E-c.) Note 3. Does not include cost of wiring in connection with the installation of electri- cal apparatus. (See account of No. 1-C-c-2.) Note 4. Does not include cost of pipes and fittings for ee system. (See account No. 1-B-c.) Further subdivisions: 1. HEATING AND VENTILATING 2. OTHER INSIDE PIPING AND WIRING C. MACHINERY AND TOOLS First cost, including cost of transportation, foundations and installation, of machinery, semi- durable tools and electrical apparatus and equipment; also appraisal value of a working supply of molds, jigs, punches, dies, special tools, metal and snap flasks and metal arbors and cores, except equipment chargeable to the following accounts: Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 6 FOURTH EDITION Sub-accounts: a. Machinery (1) First cost, including transportation, of machinery, such as planers, slotters, mills, lathes, drill presses, punch presses, drop hammers, atitomatic tools, elevators, cranes, hoists and conveyors; testing, japanning, winding and taping machines; pumps, compressors, accumulators, blowers, engines, boilers and stokers; also track, stationary and portable platform scales; except machinery chargeable to the following accounts: “Power plant equipment’? (No. 1-C-a-4.) ‘“‘Semi-durable tools’’ (No. 1-C-c-1.) “Electrical equipment” (No. 1-C-c-2.) “Shop fixtures and equipment’’ (No. 1-E-a.) “Rolling stock’’ (No. 1-F-a-2.) ‘“‘Automobiles and other conveyances’”’ (No. 1-F-a-3.) Note 1. a... not include cost of motors attached to machinery, except those insepa- rably attached (as to electric hoists), or small auxiliary devices used with such machinery. Note 2. Includes cost of countershafting which is usually bought as part of machines. Note 3. The cost of small cutting tools is chargeable to indirect manufacturing expense, account No. 244. Note 4. Does not include cost of foundations for, and installation of, new machinery. (See accounts Nos. 1-C-b-1 and 1-C-b-2.) Note 5. Does not include cost of that class of special tools referred to in account No. 1-C-c-3. (2) First cost, including transportation, of electrical apparatus, such as motors having a capacity of 14 h.p. or greater, which are direct connected, geared or belted to machine tools or other equipment, and all motors of similar capacity connected to line shafts; also all motors, rotary converters, motor-generator sets, turbo-generator sets, marine engine generator sets, transformers, and induction regulators of 20 kw. capacity or greater, etc., used for testing or for general purposes; also switchboard panels (marble or slate) costing $200 or more each; except that chargeable to the following accounts: ‘Power plant equipment”’ (No. 1-C-a-4.) “Semi-durable tools’’ (No. 1-C-c-1.) “Electrical equipment’’ (No. 1-C-c-2.) “Shop fixtures and equipment”’ (No. 1-E-a.) © “Rolling stock’’ (No. 1-F-a-2.) “Automobiles and other conveyances” (No. 1-F-a-3.) Note 1. Does not include cost of motors which are inseparably attached to electric hoists or to electrically driven portable tools. (See accounts Nos. 1-C-a-1 and 1-C-c-1.) Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 FOURTH EDITION Page 7 Note 2. Does not include cost of foundations for electrical apparatus. (See account No. 1-C-b-1.) Note 3. Does not include cost of installing electrical apparatus or of its controlling equipment. (See account No. 1-C-c-2.) (3) First cost, including cost of transportation, foundations and installation, of ovens and heating and melting furnaces (except those chargeable to the power plant); such as foundry furnaces and cupolas, geared foundry ladles, baking and drying ovens, core ovens, porcelain kilns, smith forges, rivet forges, annealing furnaces, gluepots, solder melting pots, boiling tanks, gas stoves and heaters, etc., (exclusive of small bench devices); also of their equipment, consisting of pipes, flues, stacks, etc., heating coils, grates and oil and gas burners. of Note 1. Does not include cost of masonry flues, ducts and stacks which form aiv integral part of buildings, as their cost will be included in the cost of buildings. Note 2. Does not include cost of motors incidental to ovens and furnaces, the cost of installing such motors or of electrical controlling devices for them. (See accounts Nos. 1-C-a-2 and 1-C-c-2.) Note 3. Does not include cost of blowers, fans or exhausters for forced draft and cir- ' culation of air, or pumps for fuel oil. (See account No. 1-C-a-1.) (4) First cost, including cost of transportation, foundations and installation, of all equip- ment located within power plant buildings; such as engines, turbines, boilers, stokers, generators, compressors, pumps, condensers, transformers, switchboards, piping, cable; also of all accessories forming a part of the power plant equipment. A separate shop order is to be issued to cover the cost of fundations for, and installation of, this equipment, so that the aggregate of such cost may be easily obtainable at any time. Further subdivisions: MACHINERY ELECTRICAL APPARATUS OVENS AND FURNACES POWER PLANT EQUIPMENT ae ten Note 1. The last subdivision is for companies who wish to combine under one head the entire investment in power plant equtp- ment. b. Machinery—foundations and installation (1) First cost of foundations for all machinery and apparatus not embraced under the following accounts: ‘““Ovens and furnaces’”’ (No. 1-C-a-3.) “Heating and ventilating” (No. 1-B-d-1.) ‘Power plant equipment”’ (No. 1-C-a-4.) “Railway tracks and overhead equipment” (No. 1-F-a-1.) Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 8 FOURTH EDITION Note 1. Does not include cost of steel floor plates which form a part of building floors, but do not serve as foundations for any specific machines. (See account No. 1-B-a-1.) Note 2. The cost of removing old foundations preparatory to the installation of new ones; also the cost of new foundations, when the location of machinery, tools or equipment is changed, and the cost of repairing foundations are chargeable to indirect manufacturing expenses, account No. 461. (2) First cost of installation, including engineering, labor and material, of all machinery as defined under account No. 1-C-a-1. Note 1. Cost of installing electrical apparatus is chargeable to account No. 1-C-c-2. Nove 2. As far as practicable the cost of old foundations and installation shall be removed from this account in accordance with the method prescribed for the dismantling and removal of other equipment. (See Section 4.) Further subdivisions: 1. FOUNDATIONS FOR MACHINERY AND APPARATUS 2. INSTALLATION OF MACHINERY c. Semi-durable tools and instruments (1) First cost, including cost of installation, of the smaller and less itnportant tools and equipment of a portable character (other than those for power plants), which have a comparatively long term of effective life, such as small portable power tools, comprising pneumatic hammers, drills, chippers, riveters, etc., electric drills, grinders, etc., and motors inseparably connected to such tools; also of small hand power bench tools, such as card and paper cutters, and tinsmiths’ tools, including crimpers and folders, etc. The following list indicates the class of tools, etc., that come under this definition: Anvils Gauges, all kinds Barrows, 3-wheel Grinders, portable electric Blocks, chain Grinding machines for Blocks, iron snatch commutators Blueprint machines Hammers, chippers, portable Boring bars pneumatic Box tools Hoists, chain Cameras (large) . Hoists, differential Carts, hand Hoists, pneumatic Chippers, pneumatic Jacks, screw and hydraulic Chucks Keyseating machines, parts of: Cooling plates for hydraulic presses cutters and cutter bars, Die heads, automatic bushings and keyways Drills, breast, portable electric Ladles, foundry, not geared Drills, breast, portable pneumatic Magnets, lifting Drills, ratchet Meters, steam, gas and water Dynamometers, mechanical Micrometers Electric tools, portable Pinion pullers Face plates Pyrometers Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 FOURTH EDITION Page 9 Pneumatic tools, portable Rammers, portable pneumatic Revolution counters Riveters, portable pneumatic Rolls, hand bending Scales, counter Screw drivers, bench, power Slide rests Soldering coppers, electric Speed recording devices Stands, winding Steam flow meters Stop watches Surface blocks Surveyor’s instruments Tachometers Tackles, chain and rope Tapping heads Tapping machines Templates Tension devices for machine tools, etc. Tripods for armatures Trucks, hand, 2, 3, 4, 6, wheel (not for track use) Vises, bench Vises, drill press Watches, stop Wheelbarrows, 3-wheel Winches, hand Winding forms (standard) Winding stands Windlasses for turning armatures Wood trimmers,bench (2) First cost, including cost of installation, of all electrical equipment not embraced under account No. 1-C-a-2—“‘Electrical apparatus” (other than that for power plants), such as motors of less than 4 h.p. capacity; transformers, induction regulators, etc., of less than 20 kw. capacity; meters, instruments, rheostats, starting boxes, arc lamps, etc.; testing room equipment, such as testing tables, switchboards, etc., also equipment for motor drives. The cost of installing all electrical apparatus should be charged to this account. The following list indicates the class of equipment that comes under this definition: Accumulators (storage battery) Ammeters . Arc lamps Batteries, storage Boxes, resistance - Boxes, plug Boxes, shunt Bridges, resistance Circuit breakers Coils, induction Coils, reactance Coils, testing Compensators Current indicators and meters Dynamometers, electro Galvanometers Generators below 14 kw. capacity Indicators, current, potential, etc. Instruments, electrical, all kinds Lanterns or projectors, electric Lightning arresters Measuring sets, resistance, capacity, etc. Meggers Meters, electrical, all kinds Motors, below 14 h.p. capacity Multipliers Ohmmeters Oscillographs Panels, switchboard (costing less than $200 each) . Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 10 FOURTH EDITION Panels, starting Starting boxes and panels Potentiometers Switchboards Rectifiers Switches, lever, oil, etc. Regulators, induction, Testing room equipment below 20 kw. capacity and installation Relays Transformers below 20 kw. capacity Rheostats, field, motor Voltmeters starting, etc. Wattmeters Shunts Water boxes or rheostats Sounders, telegraph (3) Estimated or appraised value of a working supply of molds, jigs, punches, dies and special tools. Expenditures for renewals are chargeable to Development and complaints. (See paragraph A, Section 2, page 4.) Note 1. ‘“‘Special’”’ tools referred to in preceding paragraph are those designed especially for specific types of standard product, and the use of which is dependent upon a continuation of the practices under which they are employed. (4) First cost of all metal and snap flasks, also metal arbors and cores. Note 1. Replacements are chargeable to indirect manufacturing expenses, account No. 460. Further subdivisions: 1. SEMI-DURABLE TOOLS 2. ELECTRICAL EQUIPMENT 3. MOLDs, JIGS, PUNCHES, DIES AND SPECIAL TOOLS 4. METAL FLASKS D. PATTERNS AND DRAWINGS Sub-accounts: a. Patterns Estimated or appraised value of a working supply of patterns. Expenditures for renewals are chargeable to Development and complaints. (See paragraph A, Section 2, page 4.) b. Drawings Estimated or appraisal value of drawings. Expenditures are chargeable to Develop- ment and complaints. Blueprints chargeable to account No. 240. (See Section 2, page 12.) Note 1. Do not include the cost of patterns and drawings for machinery or other equipment to be used for manufacturing purposes. The cost of these patterns and drawings is chargeable to the specific account to which the, machinery, etc., is chargeable. E. FURNITURE, FIXTURES AND APPLIANCES First cost, including cost of installation, of permanent shop fixtures, including shafting; also of factory office furniture and substantial office appliances. Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 FOURTH EDITION Page 11 a. Shop fixtures and equipment Sub-accounts: First cost, including cost of installation, of permanent shop fixtures and equipment, such as: Stock room fixtures Additions to crane runways after Tanks completion of buildings Vats Intercommunicating telephone Shop boxes systems for shop use Sawdust ducts Electric time recording systems Work benches Firearms Racks Wooden partitions and enclosures Bins in shop buildings Cupboards Shafting (main line and counter- Platforms shafting), hangers, pulleys, line Lockers shaft couplings, clutches Oil feeds for tools (when not attached to machines) Water feeds for tools collars, drip cups, drip pans, Portable iron ladders oil cups, etc., also belting and Protection against dangerous places belt lacing Note 1. Does not include cost of countershafting which is usually bought as part of machines. (Seeaccount No. 1-C-a-1.) Note 2. Includes cost of wiring, inside and outside of buildings, for telephone. b. Furniture and appliances in factory offices First cost, including cost of installation, of furniture and expensive and substantial office appliances placed in factory offices, such as: Furniture Awnings Clothes trees Filing cases Shades, window Benches Cupboards Floor coverings Shelves Bookcases Desks Lamps, desk Stools Chairs Fans, electric, desk Lockers Tables Clocks and ceiling Racks for books Water coolers Siices Appiianses Safes Window poles Adding machines Clock dating stamps - Phonographs Addressographs Drawing-boards and tables Punches (for electrical Calculating machines Duplicators (expensive ones only) tabulating machines) Copy presses Numbering machines Typewriters Pneumatic tube systems, including tubes, whether above or below ground, station fixtures for receiving and sending, tube supports and excavations for underground tubes, but not compressors which are chargeable to account No. 1-C-a-1. c. Fire protective apparatus First cost, including cost of installation, of all fire protective apparatus, such as: Fire alarm systems Watchmen’s clock systems All fire protective apparatus (including hook and ladder trucks, hose wagons, hose lines, nozzles, play pipes and chemical extinguishers). Note 1. Includes cost of wiring, inside and outside of buildings, for fire alarm and watchmen’s systems. Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 12 FOURTH EDITION F. OTHER EQUIPMENT (1) First cost, including cost of foundations and installation, of all permanent railway tracks in shops (other than power plants) and yards, whether standard or narrow gauge; of turntables and tracks on and under them; also of the overhead equipment of factory electric railways, such as poles, trolley wires, guy wires, insulators, crossovers, brackets, suspensions, etc.; also first cost of all permanent additions to such equipment. Note 1. Does not include cost of tracks and runways for cranes. (See accounts Nos. 1-B-a-1, 1-B-b-1 and 1-E-a.) Note 2. Includes cost of tracks on trestles, but does not include the cost of trestles. (See account No. 1-B-b-1.) (2) First cost of steam and electric locomotives, steam shovels and locomotive cranes; flat, box, dump and push cars, trucks and trailers, operated on yard and shop (except power plant) standard and narrow gauge tracks; also of all motors and accessories attached to them. (3) First cost of all conveyances and their equipment not otherwise provided for (except those chargeable to power plants); such as automobiles of all kinds, carts, trucks, wagons and stone boats; also cost of horses. Note 1. Does not include cost of hook and ladder trucks or hose wagons. (See account No. 1-E-c.) Further subdivisions: 1. RAILWAY TRACKS AND OVERHEAD EQUIPMENT 2. ROLLING STOCK 3. AUTOMOBILES AND OTHER CONVEYANCES G. UNFINISHED PLANT The cost of new buildings and their fixed equipment, such as inside piping and wiring, heating and ventilating, water, sewer and drain pipes; also catalogued equipment for such new buildings, temporarily carried in this account until such time as new build- ing is completed and occupied when the charges should be classified and transferred to the proper manufacturing plant accounts. Further subdivisions: 1. BuUuILDINGS 2. MACHINERY AND TOOLS 3. FURNITURE, FIXTURES AND APPLIANCES Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 FOURTH EDITION Page 13 e. 2. PROPERTY OTHER THAN MANUFACTURING PLANT Sub-accounts: Land Purchase price of land not used for manufacturing purposes, together with all costs and expenses incurred in acquiring it. Buildings First cost of all buildings and permanent additions thereto used for administrative or commercial purposes, including cost of excavations, foundations and grading and all permanent piping, wiring and fixtures which form an integral part of such buildings. Tools and instruments First cost of new tools, instruments and other implements used by employees of general administrative and commercial offices, district and local offices and ware- houses and branches other than factortes and repair shops. Office furniture and appliances First cost of all new furniture, appliances, fixtures, partitions, etc., (such as are listed below), for general administrative and commercial offices, district and local offices and warehouses and branches other than factories and repatr shops. Awnings Floor coverings Adding machines Hat racks Addressographs Lockers Bookcases Numbering machines Benches Phonographs Cabinets (portable) Punches (for electrical Calculating machines tabulating machines) Chairs Racks for books Clock dating stamps Safes Clocks Shades Clothes trees Stools Copy presses Tables Cupboards Telephones—‘‘interior”’ Desks systems (if owned) Drawing-board stands Typewriters Duplicators (expensive ones only) Water coolers @ Fans, electric Window poles Filing cases Vehicles First cost of all automobiles, wagons and other vehicles, also of horses, used by employees of general administrative and commercial offices, district and local offices and warehouses and branches other than factories and repatr shops. Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 14 FOURTH EDITION f. Repair shop equipment First cost of new machinery, tools, instruments and other implements, also of furniture, appliances, automobiles, wagons and other equipment, used by repair shops which are not located at factories. 3. INVESTMENT SECURITIES Cost, or book value, of stocks and bonds of controlled or associated and other companies, also of mortgages and long term notes held or acquired as investments; but not including United States and other domestic Government securities for which there is a ready market. The latter should be carried as current assets. Optional sub-accounts: a. Securities of controlled or associated companies 1. Stocks and bonds 2. Mortgages 3. Long term notes b. Other securities 1. Stocks and bonds 2. Mortgages 3. Long term notes 4. MATERIALS: RAW, FINISHED AND IN PROCESS Book value of raw, partly finished and finished materials located in factories and branch ware- houses, on consignment and in transit between factories and warehouses. Also, the cost of apparatus and material, labor and expense incurred in its installation on the premises of cutomers, prior to the completion and billing of such work. It is desirable that at least the following sub-accounts shall be kept. Sub-accounts: Factory raw materials and supplies Factory work in process Factory finished stocks Warehouse stocks Goods in transit Consignment stocks Installation work in progress RImoBooD 5. NOTES RECEIVABLE Face amount of short term notes and trade acceptances owned by the company and not dis- counted. 6. CUSTOMERS’ ACCOUNTS Unpaid balances in open accounts against customers only. Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 FOURTH EDITION Page 15 7. OTHER ACCOUNTS RECEIVABLE a. Advances to subsidiary companies Unpaid balances on notes of subsidiary companies. Note 1. Open account balances for regular product of the parent company should be carried in account No. 6, ‘‘Customers’ accounts.”’ b. Guarantee deposits Certified checks deposited with bids, etc. c. Cash advances All temporary and standing cash advances to employees account of traveling and other expenses, when such advances are to be accounted for at a later date. d. Accrued interest and dividends on securities owned Interest receivable on bonds of other companies, accrued in monthly proportions. Note 1. Dividends on stocks of other companies should not be accrued, unless declared. e. Sundry debtors Debit balances against other than customers, when representing other than charges for material sold. 8. GOVERNMENT SECURITIES Cost, or book value of United States and other domestic government securities, for which a ready market 1s avatlable. Note 1. There may be other domestic securities owned by the Company for which there is a ready market, but it is regarded as more conservative to confine this account to government securities which can be immediately converted into cash. 9. CASH Aggregate of cash on deposit with banks, also petty cash funds in the hands of the Treasurer, paymasters and cashiers of branch offices. 10. SINKING AND OTHER FUNDS Moneys invested for specific purposes, such as the redemption of bonds or notes. The account may be subdivided, if necessary. 11. GOOD WILL Amounts paid, either in cash or securities, in acquisition of the good will of the business. 12. PATENTS, FRANCHISES AND LICENSES Cost of patents, rights, franchises and other privileges. (See ‘‘Development and complaints.’’) Note 1. This account should be liquidated over the life of the patents, franchises and other privileges. Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 16 FOURTH EDITION 13. DEVELOPMENT AND COMPLAINTS Includes expenditures as defined under this head in Section 2, page 4, less amounts written off or liquidated into manufacturing cost as per Section 4, page 14. 14. SUNDRY DEFERRED CHARGES TO OPERATIONS All other disbursements of an expense nature, which apply to periods subsequent to the month in which they are made; such as the cost of improving leased property; insurance, taxes and rent paid in advance; discount and expenses on note issues; etc. Note 1. Disbursements charged to this account shall be liquidated by monthly trans- fers to the respective accounts during the proper period. Note 2. Sub-accounts may be kept if desired. Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 FOURTH EDITION Page 17 Liability accounts 15. FUNDED DEBT Face value of bonds or mortgages outstanding; also notes drawn for more than one year. (It would be well to describe and give due date of each issue). 16. NOTES AND ACCEPTANCES PAYABLE Face value of all outstanding current notes and acceptances of the Company, drawn for one year or less. 17. ACCOUNTS PAYABLE Unpaid audited invoices covering purchases of materials, payrolls and expense items. 18. ACCRUED TAXES Accrued taxes not payable until some subsequent date. 19. ACCRUED CHARGES Accrued expenses not payable until some subsequent date, such as commissions, royalties, etc. 20. DIVIDENDS DECLARED AND UNPAID Dividends declared upon the Company’s outstanding stock, remaining unpaid. Note. 1. This account will be credited as of the date of declaration, with the amounts of dividends declared, and will be charged with the actual dividend disbursements, when made. 21. INTEREST ACCRUED Interest accrued upon bonds, notes and other indebtedness of the Company. Note 1. This account will be credited monthly with one-twelfth of the annual interest payable on bonds, etc., and will be charged with disbursements for such interest. 22. ADVANCE COLLECTIONS ON SALES Cash, notes or other settlements received account of contracts and sales, prior to the entry of the billing against the customers. 23. PLANT DEPRECIATION ENTERED IN COSTS Amount of estimated depreciation charged monthly to indirect manufacturing expenses, accounts Nos. 324 and 384. Note 1. The amounts credited to this account will not be transferred to ‘‘Manufacturitig plant’’ account but will appear on the balance sheet as a deduction from that account. Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 18 FOURTH EDITION 24. DEPRECIATION ON PROPERTY OTHER THAN MANUFACTURING PLANT Amounts set aside to cover depreciation on property other than manufacturing plant. Note 1. The amounts credited to this account will not be transferred to ‘Property other than manufacturing plant’’ account but will appear on the balance sheet as a deduction from that account. 25. WORKING RESERVES Amounts set aside to cover reserves for anticipated expenses and losses, before such expenses and losses can be determined. a. Reserve for factory inventories This account will be credited with amounts entered into costs to cover possible short- ages which, it is expected, may develop when the physical inventories are taken; also amounts which may be considered necessary to offset possible errors and over-valua- tions in such physical inventories (see Section 2, page 5). b. Reserve for warehouse and consigned stocks This account will be credited with estimated shortage which may be expected to develop from physical inventories of warehouse stocks other than at factories (see account ‘‘Accrual against possible losses’’ in Section 3, page 27). This account will be charged with the amount of adjustment necessary in account No. 4-d asa result of physical inventories. c. Reserve for development and complaints This account will be credited periodically with an amount sufficient to cover those items of development, tools and complaint expenditures open in account No. 13 the liquidation of which is doubtful either because of the curtailed production of the specific device or because of possible discontinuance of such production. d. Reserve for loss on notes and accounts receivable This account will be credited with the estimated loss on doubtful notes, bills, accep- tances, and accounts receivable as charged to ‘‘Accrual against possible losses,’’ Section 3, page 27. e. Reserve for miscellaneous losses This account will be credited with the estimated anticipated losses of a miscellaneous character, when chargeable to ‘‘Accrual against possible losses,’’ Section 3, page 27. 26. CAPITAL STOCK Par value of shares of capital stock outstanding per stock transfer books. Separate accounts are to be kept for common and preferred stocks. 27. CONTINGENCY RESERVES For amount set aside out of surplus to provide extraordinary reserves for contingencies. a. On manufacturing plant b. On patents and franchises c. For other purposes 28. SURPLUS The undivided profits (or the loss) to date. Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 FOURTH EDITION Page 19 Summary of financial operations — accounts 30. NET SALES BILLED This is not a ledger account, but an item in the summary of financial operations. It is obtained by deducting from ‘‘Gross sales billed”’ the total of the charges in the four sub-accounts. Gross sales billed Sub-accounts: Total sales billed, including corrections. Returned goods This account will be charged with allowances made to customers for goods returned. Quantity discounts Discounts earned by customers by reason of quantity purchases. Cash discounts allowed customers All allowances made to customers for prompt payment of accounts. 31. COST OF SALES BILLED Manufacturing cost or purchase cost of ‘‘Gross sales billed,’’ less credits to cost of sales for goods returned. It is contemplated that the manufacturing cost of individual shipments will be determined in accordance with the procedure outlined in Section 4 and that account No. 4, ‘Materials: raw, finished and in process,”’ will be credited and this account debited with the manufacturing cost for each shipment as billed. When bills are rendered either in advance of shipment or prior to the determination of manufacturing cost for such shipment, this account is to be debited and ““Merchandise”’ credited with the estimated cost pending shipment or determination of actual cost, at which time adjusting entry is to be made for the difference between the estimated and actual cost. 32. GENERAL EXPENSES Salaries and all other expenses of administrative and sales departments, in accordance with titles and definitions of sub-accounts, as given in Section 3, pages 21, 22, 23, 24, 25 and 26. 33. OTHER INCOME All income from sources other than the sale of the Company’s products. : Sub-accounts: a. Income from investments Interest accrued and received and dividends received on securities of other companies. b. Interest on notes and accounts receivable Interest accrued or received on short term notes, acceptances and accounts. c. Other income All income other than sales, which is not provided for above, such as profit from sales of securities, royalties received, commissions received, also rentals received from property not used for manufacturing purposes, less taxes, depreciation and other expenses paid account of such property, etc. Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 20 FOURTH EDITION 34. INTEREST PAID AND ACCRUED Interest paid or accrued on outstanding bonds, mortgages, notes, trade acceptances and other accounts payable. a. Interest on funded debt b. Interest on other obligations 35. FEDERAL INCOME TAX All amounts accrued for Federal income tax. 39. DIVIDENDS Dividends declared upon the outstanding capital stock of the Company (see account No. 20.) Standard Accounting and Cost System—Electrical Manufacturing Industry ~ FOURTH EDITION Section 3 Page 21 32. GENERAL EXPENSES (Expenditures chargeable to this account should be traced to individual departments, as far as possible.) The classification is divided into three sections, viz.: “distribution expenses,’’ ‘‘administration expenses ’’ and “‘non-departmental expenses,”’ the purpose being to collect in the group of “dis- tribution expenses”’ the cost of distribution of the product of the company as distinguished from the producing and administrative functions. In general, it may be considered that ‘‘distribution expense”’ begins when the product is turned over by the factory to a warehouse or to the transportation company for delivery either to a warehouse or for direct shipment to a customer. ‘‘ Distribution expenses,’’ therefore, include all expenses incidental to the placing of the requisition or authorization of manufacture; warehous- ing, advertising, selling, shipping, billing and collecting of customers’ accounts. “Administration expenses” include the expenses of departments, whose responsibilities are not restricted to either the manufacturing or selling operations, but are of an administrative character relating to the business as a whole. ‘‘Non-departmental expenses’’ are described on page 27 of this section. Similar accounts for distribution and administration expense bear the same number. “‘ Distribu- tion expense’’ account numbers are prefixed by the letter ‘‘D’”’ and ‘“‘administration expense’”’ account numbers are prefixed by the letter ‘“‘A.”’ Read both the ‘“‘D” and ‘‘A”’ description before determining allocation. For the purposes of control, it may be advisable to charge all expenses of a similar nature to the same account with a subdivision to ‘“distribution”’ and ‘“‘administration.”’ SALARIES Smaller companies may find it inexpedient to maintain these several salary accounts. Where desirable, all the salaries may be distributed to one account with subdivisions to “‘distribution”’ and ‘‘administration.”’ D-1 Distribution expenses Salaries—officers and department heads Compensation for services of sales man- ager and his assistants, managers of sales divisions and sales offices, adver- tising manager and his assistants, man- ager of finished stock control depart- ment, managers of warehouses, general credit manager, manager of collection department and accounting executives in charge of customers’ accounts and other accounting of ‘‘distribution”’ de- partments. Administration expenses Salaries—officers and department heads Compensation for services of corporate and general executive officers and heads of regularly organized departments or divisions, except those included under “distribution” or those included in factory overhead. Section 3 Page 22 Standard Accounting and Cost System—Electrical Manufacturing Industry FOURTH EDITION Note: D-2 D-3 D-4 Distribution expenses Administration expenses Compensation for services of officers and department heads whose duties are partly ‘‘administration”’ and partly ‘‘distribution”’ will be divided in accordance with the facts. In instances where the administration duties are only incidental, the entire compensation is chargeable to ‘‘distribution.”’ Salaries—advertising department Compensation of all employees of ad- vertising department. Salaries—selling force Compensation including commissions paid in lieu of salaries for services of salesmen, inside salesmen, specialists, solicitors and demonstrators; also all fees and commissions, allowed agents and others, even if specifically included in the selling price. Note 1: Specialists are those spe- cially trained from a technical stand- point or in connection with certain- lines of product, and who direct and assist regular salesmen and solicitors © and consult with and advise cus- tomers. Note 2: Salesmen, or solicitors are those who promote the sale and use of the Company’s product through personal solicitation with buyers, orders being placed direct or through contractors, jobbers or dealers. Note 3: Demonstrators are those regularly engaged in demonstrating the Company’s product in promotion of sales. Salaries—finished stock control depart- ment D-5 Note 1: Note 2: Compensation of employees of this department. Salaries—clerical employees Compensation of service clerks, and other clerks, stenographers, typists, phonograph operators, and telephone switchboard and telegraph operators, etc., employed in departments having distribution functions. Salaries—clerical employees Compensation of services of all clerks, stenographers, typists, phonograph operators, and telephone switchboard and telegraph operators, etc., employed in departments having administration functions. Compensation of telephone switchboard and telegraph operators will be divided between ‘‘distribution”’ and ‘‘administration”’ expense in the same proportion as telephone and telegraph expense (D-15 and A-15) respectively. If an employee devotes part time to ‘‘distribution’”’ and part time to ‘‘administration”’ duties, compensation will be divided in accordance with the facts, but no division need be made where the duties are merely incidental. Standard Accounting and Cost System—Electrical Manufacturing Industry FOURTH EDITION Section 3 Page 23 D-6 D-7 Distribution expenses Salaries—warehousing Compensation of employees of ware- houses. Salaries—credit and collection em- ployees D-8 Compensation of employees of credit and collectiondepartment. (Whencredit and collection work is part of the func- tions of the general treasury or general accounting department, thus making correct segregation of salary expense for these employees difficult or impos- sible, this class of expense may be included under A-7 or A-8 respectively.) Salaries—billing and distribution ac- counting department Note: D-11 Compensation of employees engaged exclusively in accounting connected with the merchandising and distribution activities of the Company, such as ac- counting for the sale and distribution of the Company’s product, as well a: the purchase and sale of material ob- tained from other vendors; also for the expense incident to such activities as incurred by the respective sales and distribution departments. Administration expenses A-7 Salaries—general treasury department Compensation of all employees of the general treasury department. A-8 Salaries—general accounting depart- ment Compensation of employees in the gen- eral accounting department. This does not include compensation of those com- ing under D-8 classification or those engaged in manufacturing accounting. These expenditures may be included under A-8 when this class of accounting is per- formed in the general accounting department and when, therefore, a correct segregation of salary expense is difficult or impossible. Salaries—engineers Compensation for services of engineers in general and local offices, not con- nected with the design of apparatus for manufacture, nor inspection of such apparatus, nor the studying of technical questions to be embodied in future manufacture, nor the supervising of installation and construction. It does include the examination of contracts and the adjustment of complaints by engineers, work of engineers on specific sales propositions which cannot be charged to costs. All engineering not charged to D-9 will be included in the cost of sales. Salaries—other employees Compensation for services of office boys, messengers, office equipment repairmen, janitors, cleaners, elevator operators, watchmen, laborers, etc., employed in the distribution depart- ment. A-10 Salaries—general legal department A-11 Compensation for services of all em- ployees of general legal department. Salaries—other employees Compensation for services of office boys, messengers, office equipment re- pairmen, janitors, cleaners, elevator operators, watchmen, laborers, etc., employed in the administration de- partment. ES SS a Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 24 FOURTH EDITION OTHER EXPENSES Smaller companies may find it inexpedient or inadvisable to maintain all of these account divisions, in which case the following combinations may be made, always, however, maintaining the sub- divisions ‘‘distribution’’ and ‘‘administration.” Distribution expenses Administration expenses Combine D-13 with D-22. Combine A-13 with A-22. Combine A-16 with A-17. Combine A-21 with A-22. D-12 Rent, light, heat and power A-12 Rent, light, heat and power Rental for space occupied by sales, Rental for space occupied by corporate advertising, finished stock control, and general executive officers and their warehouse, credit, collection, billing departments and regularly organized and distribution accounting depart- departments or divisions except those ments; taxes and insurance on such included under “‘distribution”’ or those rented property; expenses of light, heat included in factory overhead; taxes and power not included in rental and insurance on such rented prop- charges. erty; expenses of light, heat and power not included in rental charges. Note: Where “distribution” and ‘‘administration’’ offices occupy the same building or suite, distribution will be made on the basis of floor space with a differential where desirable, for rental value of different floors. D-13 Office equipment alterations, repairs A-13 Office equipment alterations, repairs and replacements and replacements Cost of repairing and partially renew- Cost of repairing and partially renew- ing furniture and appliances, and alter- ing furniture and appliances, and alter- ing or removing partitions, railings, ing or removing partitions, railings, shelving and other permanent building shelving and other permanent building fixtures devoted to the use of sales, fixtures devoted to the use of cor- advertising, finished stock control, porate and general executive officers warehouse, credit, collection and bill- and their departments and other de- ing and distribution accounting de- partments or divisions except those partments. Also pro-rata share of included under “‘distribution”’ or those cost of repairing or partially renewing included in factory overhead. Also any buildings occupied by members of pro-rata share of cost of repairing or these departments. partially renewing any buildings oc- cupied by members of these depart- ments. Note: When large unusual expenditures are incurred in altering, remodeling or re-equipping offices such expenditures should be charged to ‘‘deferred charges to operations’’ and liquidated in monthly installments against this account during a period not to exceed twelve months. D-14 Traveling and entertainment A-14 Traveling and entertainment Payments for transportation, hotel Payments for transportation, hotel and other necessary expenses of travel and other necessary expenses of travel and expenses of entertaining customers and expenses of entertaining cus- or others, incurred by employees whose tomers or others, incurred by em- salaries are charged to distribution ployees whose salaries are charged to expense. administration expense. Standard Accounting and Cost Sysiem—Electrical Manufacturing Industry FOURTH EDITION Section 3 Page 25 Note: D-15 Note 1: Note 2: Note 3: D-16 Distribution expenses Administration expenses Traveling expenses incurred by departments and sales office managers or others whose duties are divided between distribution and administration will, when possible, be divided between ‘‘distribution’’ and ‘‘administration”’ expenses in accordance with the nature of each trip otherwise on the same basis as salaries. Telephone and telegraph Cost of local and long distance tele- phone and telegraph service for de- partments whose salaries are charged to distribution expense. A-15 Telephone and telegraph © Cost of local and long distance tele- phone and telegraph service for de- partments whose salaries are charged to administration expense. Long distance telephone calls and telegraph messages are readily identified and will be charged direct; local telephone service, switchboard rentals, etc., will be divided on the basis of the number of telephone instruments in use; rentals paid for leased wires will be divided on an arbitrary basis to. be checked by occasional tests. Small companies, where subdivisions as outlined in Note 1 are impracticable, may charge all local service and switchboard rentals, etc., to A-15. D-5 or A-5. Postage Cost of all postage used by depart- ments whose salaries are charged to distribution expense except parcels post on shipments of goods to cus- tomers. Note: Where desirable this account can be subdivided to show sepa- rately, advertising postage and other postage. Stationery and office supplies Cost of stationery and minor supplies and conveniences for the use of de- partments whose salaries are charged to distribution expense. Publicity expense (a) Space advertising Cost (except salaries and postage) of space advertising in newspapers, pe- riodicals, trade publications, ete. (b) Other publicity Cost of catalogs and publications (in- cluding postage and other forwarding charges thereon), novelties of an ad- vertising character, signs, exhibits, etc. Note: Cost of catalogs may be charged to this account in total or on a monthly accrual basis. Compensation to telephone switchboard and telegraph operators will be charged to A-16 Postage A-17 Cost of all postage used by depart- ments whose salaries are charged to administration expense. Stationery and office supplies Cost of stationery and minor supplies and conveniences for the use of de- partments whose salaries are charged to administration expense. Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 26 FOURTH EDITION Distribution expenses Administration expenses D-19 Taxes A-19 Taxes Payments or monthly accruals of Payments or monthly accruals of taxes on real or personal property or taxes on real or personal property or other state, county or municipal taxes, other state, county or municipal taxes, except those paid on account of rented except those paid on account of rented property (D-12) in so far as such property (A-12) in so far as such taxes taxes are properly apportioned to the are properly apportioned to the admin- distribution department. istration department. D-20 Insurance A-20 Insurance Premiums paid or monthly accrual for Premiums paid or monthly accrual for insurance of offices and warehouses insurance of offices and their contents, and their contents, except those paid except those paid on account of rented on account of rented property (D-12) property (A-12) in so far as such pre- in so far as such premiums are prop- miums are not properly apportioned to erly apportioned to the distribution either the distribution department or department. manufacturing cost. A-21 Contributions (not deductable from income for federal tax purposes) Contributions or gifts for charitable, welfare, educational, religious, etc., pur- poses, not specifically for the benefit of the donor or its employees. Note: Contributions made by a cor- poration for purposes connected with the operation of its business, when limited to charitable institutions, hospitals, or educational institu- tions conducted for the benefit of ats, employees or their dependents, will be charged to A-22. D-22 All other expenses A-22_ All other expenses Incidental or special expenses which are chargeable against “distribution expenses’’ and are not otherwise pro- vided for in this classification, such as street car fares, losses due to errors of the selling force, collection fees, EtG Incidental or special expenses which are chargeable against ‘‘administra- tion expenses’’ and are not otherwise provided for in this classification, such as street car fares, advertising for help, premiums on surety bonds, losses due to errors of administrative force, directors’ fees, etc. Also contributions deductable from income for federal tax purposes, as outlined in Note “under A-21. Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 FOURTH EDITION Page 27 Non-departmental expense accounts This group of general expense accounts is chargeable with expenditures which, by reason of their character, cannot be assigned to specific departments. a. Corporate taxes . All state and municipal taxes on income, capital invested and personal property other than manufacturing plant; also federal taxes except those on income. Note 1. Taxes levied on income, in lieu of personal property taxes, are chargeable to sub-account No. 32-A-19. Note 2. Federal income tax is chargeable to surplus. b. Patent litigation Expenditures in connection with prosecutions of patent suits, also payments in. sat- isfaction of judgments for infringements on patent rights (when traceable to the specific lines to which such judgments relate, the payments are chargeable to develop- ment and complaints). (See Section 2, page 4, sub-division A.) c. Royalties All payments for royalties, when not traceable to a specific product. d. Pension and retirement payments All payments to employees under pension plans. e. Discount and other expense of bond and note issues Expenditures incurred and deductions allowed from face of bonds or notes in con- nection with their issue. f. Accrual against possible losses Amounts set aside monthly to provide reserves for losses on branch office stocks, consignments, accounts, notes receivable, bills, acceptances, etc. (Actual losses, when ascertained, are chargeable against the reserves thus created.) cana g. Concessions to customers All allowances to customers for claims, the justice of which is not admitted by the Company, which are conceded as a matter of business policy. When however depart- ment responsibility can be clearly established the allowance should be charged to the department involved. h. Unabsorbed transportation Transportation charges on shipments to branch warehouses and to customers when not collectable from customers or chargeable to specific accounts. Section 3 Page 28 Standard Accounting and Cost System-——Electrical Manufacturing Indusiry FOURTH EDITION Indirect manufacturing expense accounts The expenses of all productive and non-productive manufacturing departments are to be seg- regated according to the following classifications and definitions. Attention is directed to the fact that all expenses of certain departments, such as Purchasing, Receiving, Storekeeping, Shipping, etc., are to be accumulated in single accounts, and that a separate group of accounts is provided for all power plant expenses. Condensed accounts Sub-accounts 201. | 200. Supervision. ... 203. stenographers and boys a A. Miscellaneous 213. 210. Clerical labor, including oa shel salaries and 221. 222. 223. | 224. 225. | 226. Were 220. Other labor............. oo} 241. 242. 243. 244. 245. B. Shop supplies... 240. Shop supplies.......... 246. C. Unassignable freight express \ and cartage . 250. Unassignable freight, ex-~ press and cartage..... 202. Further subdivisions Factory supervision Foremen and assistants Inspectors Clerks in factory offices Material lists Employment bureau Elevator men and cranemen Watchmen, gatemen and ushers Cleaners, oilers and porters Railway crews Employees taking inventories Laborers Supplementary compensation Fuel consumed Water Lubricants Non-durable small tools Office supplies, stationery and printed forms Miscellaneous shop supplies Stendard Accounting and Cost System—~Electrical Manufacturing Industry FOURTH EDITION Sub-accounts 261. 262. 260. Employees’ welfare...... Condensed accounts mR an s 270. Accident compensation... 280. Shop losses............. D. Sundry manufac- turing expenses 290. Purchasing, receiving, fae storekeeping and ship- l ko} =o i=3 ge 300. Miscellaneous manu- facturing expenses...... w So a E. Fixed charges.... 320. Fixed charges........... Section 3 Page 29 Further subdivisions Sick relief Hospital service Employees’ death benefit Gratuities Restaurant Shop vacation allowances Other welfare expenses Defective workmanship Defective purchased material Other losses due to errors Purchasing department Receiving department Storekeeping department Shipping department Rearrangement of equipment Telegraph and telephone expenses Traveling expenses Fire department Garage and stables Shop electric plant Instruction of apprentices Unassignable testing expense Other manufacturing expenses Insurance Taxes Rentals Depreciation General office assessed charge Section 3 Page 30 Condensed accounts 340, 350. 360. F. Power, heat and light generating and distributing 370. 380. G. Power, heat and (ee light purchased Standard Accounting and Cost System—Electrical Manufacturing Industry FOURTH EDITION Sub-accounts Operating labor......... SUppHGS es Gece Incidental operating expenses.............. Maintenance............ Fixed charges........... Power, heat and purchased............. Further subdivisions Supervision Clerical Other labor Fuel Water Lubricants Other supplies Small tools Stationery Other incidental expense Building Steam plant Engines and turbines Electrical plant Other maintenance Insurance Taxes Rentals Depreciation General office assessed charge Standard Accounting and Cost System—Electrical Manufacturing Industry FOURTH EDITION Section 3 Page 31 Condensed accounts Sub-accounts 411. 410, Land......0 0%, 4 { pete yop f 421. 420. Buildings............. | 422. H. Maintenance of 431. ild- 432. and ang steld 430. Structures........... Ps ed wie ree 434, 440. Heating and ventilating and other piping and WINE: Wo 5. a. 441. | 442, (451. 452. 453. 454, 455. I. Maintenance of 450. Machinery, electrical yea machinery, tools apparatus, furniture ; and fixtures.... | and fixtures......... 458. 459, 460. 461. | 462 Mos tok SM ECCS {470. Patterng tv sb het ca patterns....... ‘480. Automobiles and other KM aittenaits. ot conveyances......... miscellaneous equipment..... oak | 492. Further subdivisions Roadways and grounds Gardens and lawns Office buildings Other buildings Structures Water, drainage and sewer pipes (main trunk lines) Piping (main trunk lines) Electrical conductors (main trunk lines) Heating and ventilating Other piping and wiring Machine tools Semi-durable tools Elevators, cranes and conveyors Electrical apparatus and equipment Boilers, ovens and furnaces Shop fixtures and equipment Furniture and appliances in factory offices Fire protective apparatus Molds, jigs, punches, dies and special tools Metal flasks Foundations Shafting, belting and pulleys Railway tracks and overhead construction Rolling stock Section 3 Standard Accounting ond. Cost System—Elecirical Manufacturing Indusiry Page. 32 FOURTH EDITION Definitions of Indirect manufacturing expense accounts A. MISCELLANEOUS SALARIES AND WAGES Sub-accounts: 200. Supervision (1) Salaries of managers and general superintendents, superintendents having supervision of more than one department, also production managers and head accountants of factories. (2) All payments for services of general foremen, general night foremen and foremen and assistant foremen in productive or non-productive departments. Note 1. This account is intended to include payments to supervising foremen only, i.e., those foremen whose time cannot be regularly distributed (not arbi- trarily pro-rated) entirely or partially to specific accounts or shop orders. Note 2. Wages of working gang bosses and leading hands who look after small groups of men whose wages are charged to one account, should not be charged to this account; charge them to same account to which the wages of the gang are charged. Note 3. Only men who are regarded competent to assume all the duties of foremen during the latters’ absence, should be classed as assistant foremen. (3) Wages of inspectors actually engaged in general inspection work. Note 1.. Do not include in this account wages of employees whose time is devoted exclusively to the examination of one class of product in the regular routine of its production, which are, therefore, chargeable, as productive labor, against that product. Further subdivisions: 201. FacTORY SUPERVISION 202. FOREMEN AND ASSISTANTS 203. INSPECTORS 210. Clerical labor (including stenographers and office boys) (1) Salaries or wages of factory office clerks engaged in general clerical service, such as executive, production, cost, accounting, piece rate, timekeeping and payroll clerks, etc., wherever located; also wages of that class of labor whose duties are partly manual and partly clerical, such as tallying lumber and other bulk material and supplies in yards and sub-storerooms, when they are not chargeable to receiving or storekeeping departments. Note 1. Does not include wages of employees in sub-storerooms, who receive and disburse material, tools, etc. (Seeaccount No. 226.) Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 FOURTH EDITION Page 33 LLL LLL LL LALA L LLL LLL ALLL LOL CLEC TLL LC ON ETE TTL LECCE COAT CENT TO ESATA LTTE (2) Wages paid draftsmen or clerks who prepare material lists. Note 1. When lists are prepared in the drawing room, the cost, including wages and indirect expense, should be transferred monthly to this account. (3) Wages of persons in charge of the employment bureau, or the proportion of their wages, representing time thus occupied; expense of advertising for help; time and expenses of men, while looking for workmen; allowances for expenses to men visiting factories, on invitation, to see about employment; and any other expense distinctly relating to the engagement of employees. Further subdivisions: 211. CLERKS IN FACTORY OFFICES 212. MATERIAL LISTS | 213. EMPLOYMENT BUREAU 220. Other labor (1) (2) (3) (4) (5) Wages paid for operating elevators, locomotive cranes and other cranes. Note 1. Wages paid chainmen who follow cranes, should be charged to account No. 226. Wages paid watchmen, gatemen and ushers at office entrances. Wages paid for cleaning windows, closet porters in shops, sweeping and otherwise cleaning shops and departments; collecting and removing turnings, borings, punchings, trimmings, etc.; trucking and wheeling ashes, cinders and refuse from shops; also for oiling machinery, shafting, elevators, cranes, etc. Note 1. No portion of the wages of machinists, cranemen, etc., who oil the equipment incidental to their occupations, is chargeable to this account. Wages paid men engaged in operating electric locomotives, electric tramcars and steam locomotives used for transportation purposes within the factory. Extra wages paid clerks and others, while taking annual inventories or any special inventories of material, tools or supplies, as follows: Wages representing extra time allowed permanent force (clerical or manual) outside of regular hours. Wages paid extra help engaged for the purpose. Includes wages paid for listing, counting, etc., also for the subsequent computation of values. “ Note 1. Doesnotincludecost of printed forms, stationery, etc. (Seeaccount No. 245.) Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 34 FOURTH EDITION (6) Wages paid all miscellaneous and unskilled labor not otherwise provided for in this classification. Note 1. Includes wages of employees in sub-storerooms, who receive and disburse material, tools, etc. (7) Supplementary compensation paid employees. Note 1. Does not include wages paid for overtime. Further subdivisions: 221. ELEVATORMEN AND CRANEMEN 222. WATCHMEN, GATEMEN AND USHERS 223. CLEANERS, OILERS AND PORTERS 224. RAILWAY CREWS 225. EMPLOYEES TAKING INVENTORIES 226. LABORERS 227. SUPPLEMENTARY COMPENSATION B. SHOP SUPPLIES 240. Shop supplies (1) Cost of all fuel actually consumed in factory departments, such as foundries, smith shops and yard engines, subdivided as follows: (a) Coaland coke consumed (b) Gas consumed (c) Oil consumed (2) All payments for water supply for drinking purposes and other miscellaneous uses. (3) Cost of lubricating oils, greases and cutting compounds used in connection with the factory equipment. Note 1. Cost of lubricating oils, greases, etc., used in connection with service auto- mobiles or wagons, is chargeable to account No. 305. Note 2. Cost of lubricating oils, etc., used in testing turbines and other apparatus, is chargeable to account No. 308. (4) Cost of renewing and repairing all tools and equipment not enumerated under account No. 246, ‘‘Miscellaneous shop supplies,” or account No. 1-C-c-1, ““Semi-durable tools;”’ also total cost of making and repairing all wooden flasks and templets used in foundries or other departments. Note 1. This account is intended to cover the cost of those portable tools which are short lived and comparatively inexpensive. Note 2. All current expenditures for non-durable tools should be charged to this account, whether or not such expenditures represent initial cost of additions to, or replacements of, the non-durable small tool equipment. Standard Accounting and Cost System—Electrical Manufacturing Indusiry Section 3 FOURTH EDITION Page 35 Note 3. Some of the items of tools in this class are: Adzes Arbors, except foundry Armature saddles Augers, all kinds Awls, all kinds Axes, all kinds Bars, carrying (armature saddles) Bars, claw Bars, commutator draw off Bars, crow Bars, splicing Bars, spot facing Bellows, hand Bits, all kinds Bit braces Blades, hack saw Boxes, mitre Braces, ratchet Broaches Burrs, emery wheel dressers Burr, holders Calipers, all kinds Caulking tools Chains Chalk lines _Chasers, outside and inside Chisels, all kinds Clamps, hauling Clamps, malleable iron Clamps, splicing _ Clamps, steel Clamps, wood Clamps, wrought iron Climbers Collars, iron Collets Compasses Coppers, soldering Countersinks, wood Counterbores Cutters, all kinds Dies, threading Dividers Dogs, lathe Dolly bars Draw knives and scrapers Dressers, emery wheel, all kinds Drills, all kinds, except pneumatic, electric or ratchet Emery wheels Expanders, tube Files File brushes Flatters Forks, coke Frames, hack saw Fullers Flasks, wooden Grindstones, all kinds Groovers, all kinds Hammers, all kinds, except sledge, pneumatic and steam Hatchets Hoes Hollow mills Hooks for making fires Knives, all kinds Ladles, for melting solder and babbitt Lamps, blow, alcohol and gasolene Levels, all kinds Mallets, all kinds Mandrels, all kinds Nail pullers Picks Pins, drift Planes, all kinds Pliers, all kinds Plumb bobs Protractors Punches, belt Punches, hand and screw Punches, prick Rammers, hand Standard Accounting and Cost System——Electrical Manufacturing Industry FOURTH EDITION Reamers, all kinds Rules, all kinds Saddles, for armatures Saws, all kinds, except cold saws used in foundry Saw tooth blades Scrapers for bearings Screw drivers, all kinds Shears, paper Shears, snip Shovels, all kinds Slings, rope and chain Sockets, drill and tap Soldering irons Spoke shaves Spot facers, for facing off studs and nuts Spring balances Squares Steel stamps, letters and figures Stocks, pipe Straight edges Stones, oil Straps Swedges, all kinds Tape lines, 50-ft. and 75-ft. Taps, hand Taps, pipe Teeth, for cold saw blades Tools, boring mill Tools, lathe Tools, planer Tools, slotting Tongs, all kinds Trammels Wheelbarrows, canal only Wheels, grinding and polishing Wooden flasks and templets Wrenches, all kinds, except ratchet Cost, plus freight and express charges, of minor office supplies and conveniences, printed books, reports, forms and stationery, such as: Arm rests Clips (fasteners) Ice Baskets, desk Computing tables (book) Indices Baskets, waste Copy books Ink Binders Crayons Ink eradicator Blank books Cups Ink pads Blank cards Cuspidors Ink stands Blank pads Disinfectants Keys Blank paper Duplicator supplies Laundering Blotters Dusters Legal cap paper Boxes Electric pens Letter heads Bristol board Envelopes, all Mail bags Brooms Erasers Manifold papers Brushes, cleaning Eyelets Matches Brushes, typewriter Fasteners Memorandum books Cash tills Filing boxes Mucilage Carbon paper Folders, blank Mucilage bottles Cardboard Glasses, drinking Note books Cash boxes Hampers Oil paper Chamois Hektographs Pads Standard Accounting and Cost System—Elecirical Manufacturing Industry Section 3 FOURTH EDITION Page 37 Paper, blank Punches Sponges Paper boxes Revolvers Stamps, impression Paper clips Rubber bands Staple fastening machines Paper cutters Rubber type Staples Paper fasteners Rubber stamps Tablets Paper files Rulers Tape Paper weights Ruling pens Tissue paper, blank Parchment Scales, small Towels Paste Scrap books Tracing cloth Pencils Scrubbing brushes Tracing paper Pencil sharpeners Sealing wax Twine Pen holders Seals Typewriter ribbons Pens Shears Wash basins Pen racks Soap Whisk brooms Pins Soap dishes Wrapping paper Pouches Sponge cups Wringers Books, specially ruled and printed for record or statistical purposes: Catalogues Forms Orders Cards Handbooks Price lists Circulars Inventory books Receipts Classifications and forms Requisitions Folders Labels ; Tags Notices Note 1. Does not include advertising literature; charge it to ‘‘General expenses,”’ account No. 32-D-18. (6) Cost, plus freight and express charges, of all miscellaneous supplies consumed in current operations of shop departments, which are not otherwise provided for in this classification. Note 1. Some of the items are: Acids, except for laboratory use Boiler compound Alcohol Bolting cloth Ammonia Boots, rubber, except for Basins, small wash fire department Baskets Bone, case hardening Barrels Borax Belt, cement and dressing Boxes, tote Beeswax Bricks, rubbing crocus Benzine Brooms Blow hole cement Brushes, dusting, file, Blueprints paint, rubbing, wire, etc. Boards, molding Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 38 FOURTH EDITION Buckets Burnishers, if not metal Candle wicks Cans, oil, sprinkling Carborundum, grain Case hardening boxes Case hardening bone Cement, belt Cement, blow hole, etc. Chalk Chamois Charcoal Chaplets Cheet handles Chloride of lime Chemicals and drugs for shop use, except those for laboratory and testing purposes or first aid to the injured Clay, fire Cleaning compound Cloth, cotton, emery Compound, welding and boiler Cord Core compound Core making sand Core oil Core rods Core wash Cotton cloth Cotton wicking Crayon Crocks Crocus brick Crucibles Cups, tin Dippers Disinfectants Drugs and chemicals for shop use, except those for laboratory and testing purposes or first aid to the injured Dusters Dust pans Drilling soap Emery Emery boxes Emery cloth Emery flour Emery paper Facing, foundry Faucets, other than water system Fire clay File brushes Flour, emery Flour, foundry Flux, soldering Foundry sieves, hand Foundry brushes Garnet paper Gaskets Gasolene Gate hooks Globes, lantern Gloves, rubber Glue Gluepots Graphite Hand lamps Hinges and hasps Hooks and eyes Ice Ladders, wooden Lamps, hand Lantern globes Lanterns Lead, red Lead, white Liquid measures Locks, drawer Markers Marking pots and brushes Matches Metal polish Molasses Mops Standard Accounting and Cost System—Electrical Manufacturing Industry FOURTH EDITION Molding boards Molding sand Naphtha Oil, except lubricating and fuel Oil cans Oil soap Oxygen Oil gates Pails Paint brushes Paper bags and boxes Paraffin wax Paste, mineral Plaster pans Plumbago Polish, metal Polishing putty Pomade Potash Pulls, drawer Pumice stone Putty Red lead Resin Retort cement Riddles Rope, hemp Rubbing bricks Rubbing brushes Rubber gloves Rubber boots, except for fire department Sal-ammoniac Sal-soda Sand, molding and core making Sand paper Further subdivisions: 241. FUEL CONSUMED 242. WATER 243. LuBRICANTS 244. NoON-DURABLE SMALL TOOLS Section 3 Page 39 Sand, used in sandblast Sash cord Savagram Saw dust Sieves, foundry Soap Solarine Spigots Sprayers Sprinkling cans Steam and water packing Stencil paint Stone, pumice and soap Tacks Tallow Tin cups Tool boxes Tote boxes Toilet paper Twine Vaseline Vitriol Wash basins Washolene Waste Waste cans Wax, paraffin Whetstones White lead Whisk brooms Whiting Wicking Window cleaners Wire brushes Wood, kindling 245. OFFICE SUPPLIES, STATIONERY AND PRINTED FORMS 246. MISCELLANEOUS SHOP SUPPLIES Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 40 FOURTH EDITION C. UNASSIGNABLE FREIGHT, EXPRESS AND CARTAGE 250. Unassignable freight, express and cartage Unassignable freight and express charges, including switching charges, on materials and supplies; both incoming and outgoing transportation charges on materials sent by vendors for trial; all payments for miscellaneous and unassignable cartage of materials and supplies, both incoming and outgoing; also cost of transferring waste material about the plant, truckage to and from departments, etc. D. SUNDRY MANUFACTURING EXPENSES Sub-accounts: 260. Employees’ welfare (1) Wages paid to employees, while absent on account of illness. (2) All expenses of operation and maintenance of the Company’s hospitals, also all medi- cines and supplies for first aid to the injured throughout the factory. (3) Payments to the estates of deceased employees or the beneficiaries, either direct or through the medium of mutual benefit associations. (4) Subscriptions to hospitals and other local organizations, also allowances to disabled or veteran employees or their families. Note 1. Does not include allowances for lost time, funeral expenses, etc., of injured employees, in cases when there is a possible liability on the part of the Com- pany. (See account No. 270.) (5) Net result of operating the Company’s restaurants. (6) Vacation allowances to wage earners in factory shops and yards. Note 1. Vacation allowances to salaried employees should be charged to the account to which such employees’ salaries are regularly charged. (7) Other expenses of every kind in connection with employees’ welfare, such as conducting clubs, club rooms, reading rooms, rest rooms, etc., for the use of employees, less any revenue secured from such enterprises. Further subdivisions: 261. SICK RELIEF 262. HOSPITAL SERVICE 263. EMPLOYEES’ DEATH BENEFIT 264. GRATUITIES 265. RESTAURANTS 266. SHOP VACATION ALLOWANCES 267. . OTHER WELFARE EXPENSES Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 FOURTH EDITION Page 41 270. Accident compensation All payments as indemnity, allowances for wages, doctors’ bills, carriage hire, public hospital service, legal expenses, etc., in connection with injuries to employees and others, for which the Company is held responsible, when such payments, etc., are not covered by liability insurance; also premiums on employers’ liability insurance policies. 280. Shop losses 290. (1) Losses due to errors of factory workmen, such as breakage, misplacement or careless (2) (3) shop work of any kind. Labor expended on defective castings produced in the Com- pany’s foundries, is chargeable to this account. Cost of remedying defects in material purchased from outside manufacturers, when such cost cannot be collected; also the direct labor expended, before defects are de- tected, on defective castings purchased outside. All other shop losses due to errors of clerical employees, replacement of lost material, ordering in excess of requirements, etc. . Further subdivisions: 281. DEFECTIVE WORKMANSHIP 282. DEFECTIVE PURCHASED MATERIAL 283. OTHER LOSSES DUE TO ERRORS Purchasing, receiving, storekeeping and shipping (1) (2) (3) (4) Salaries and wages, cost of supplies, power, heat, light and repairs to equipment and all other expenses of the Purchasing department, including the factory’s proportion of the expense of the General purchasing department. Salaries and wages, cost of supplies, power, heat, light and repairs to equipment and all other expenses of the Receiving department. Salaries and wages, cost of supplies, power, heat, light and repairs to equipment and all other expenses of the Storekeeping department, including general storerooms. Salaries, wages and cost of supplies, including excelsior, twine, laths, burlap, wrap- ping paper, etc., but not boxes or containers, which are charged to productive material, consumed in packing material; also cost of power, heat and light and all other expenses of the Shipping department. Note 1. Does not include labor, material or expense in making boxes or otherwise preparing special apparatus for shipment which expense is chargeable to “‘Boxing.’”’ (See Section 2, page 5.) Further subdivisions: 291. PURCHASING DEPARTMENT 292. RECEIVING DEPARTMENT 293. STOREKEEPING DEPARTMENT 294. SHIPPING DEPARTMENT Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 42 FOURTH EDITION 300. Miscellaneous manufacturing expenses (1) All expense in connection with the transfer of a department from one building to another, or from one part of a building to another part of the same building, or from one city to another, including personal traveling and moving expenses of employees transferred; expense of re-arranging equipment within the departments or buildings affected by such transfer. (2) Expense of telegraph service, including salaries of operators, and all local and long distance public telephone service incurred at the factory as a whole; rentals of interior or “‘private wire’ service and cost of supplies in connection therewith; also the wages of switchboard operators. Note 1. The cost of repairing any interior telephone system owned by the Company should be charged to account No. 456. (3) Payments for transportation, hotel and other necessary expenses of travel of employees connected with factories; expenses in connection with conducting or attending formally called conferences and meetings of Company employees, such as traveling expenses, rentals of rooms for meetings and entertaining employees; also traveling and enter- taining expenses of the Company’s employees, attending conventions and meetings of outside commercial or technical organizations. Note l. Traveling expenses in connection with law suits affecting, exclusively, factory operations are chargeable to account No. 309. (4) Wages of chiefs of the Company’s fire departments and their assistants, payments to members for attending fire drills and answering fire alarm calls, and any other ex- penses, such as cost of caps, boots, uniforms, parades, etc. (5) Wages of garage men, chauffeurs, stablemen, hostlers and drivers; rentals (if garages, stables, etc., are leased or horses are boarded), insurance, etc.; cost of supplies, such as renewals of batteries, gasolene, oil, robes, tires, small tools, shoeing, fodder, medicines, blankets, harness, etc.; also liability insurance account of automobiles. (6) Cost of labor and miscellaneous supplies used in connection with lighting systems and shop motors, such as carbon brushes, lamp globes, carbons, bulbs and other electrical gas and oil fittings, and all other running expenses of illumination. Note 1. Does not include cost of repairing arc lamps and lighting fixtures, etc. (See maintenance accounts.) (7) Payments for services of men engaged in the instruction of apprentices during school time, also payments to apprentices for school time and as bonuses. Note 1. Does not include wages of foremen, assistant foremen or of those men whose work in the shops is primarily productive and whose instruction to others is merely incidental thereto. Note 2. By “school time” is meant class room time, not time while engaged in shops on productive work. Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 FOURTH EDITION Page 43 (8) Wages, material and other expenses incurred in connection with the testing of com- mercial product, unless such expenses are clearly traceable to a specific order. (9) All indirect manufacturing expenses which are not otherwise provided for in this classi- fication, such as uncollectable damage or loss in transportation, wages of men while on military duty, cost of reclaiming stolen property, minor charges for packing and boxing account of purchased materials, premiums on employees’ bonds, entertainment, carriage hire, street car fares, membership fees in trade and manufacturers’ associations, wages paid and material and supplies used in the operation of pneumatic tube systems (except cost of maintenance which is chargeable to account No. 456); cost of atlases, dictionaries, directories and standard reference works on technical, financial, and accounting subjects; subscriptions to newspapers, magazines, technical journals, railroad guides, etc.; payments to local attorneys as retainers, for services, settlements, etc., also court fees, traveling expenses and wages of witnesses, etc., when they relate solely to manufacturing depart- ments; also postage, net results of operating farms, and demurrage for detention of cars belonging to railroad companies (less refunds); also royalties relating to manufacturing processes when not chargeable to Development and complaints, or to direct cost. Further subdivisions: 301. RE-ARRANGEMENT OF EQUIPMENT 302. TELEGRAPH AND TELEPHONE EXPENSES 303. TRAVELING EXPENSE 304. FIRE DEPARTMENT 305. GARAGE AND STABLES 306. SHOP ELECTRIC PLANT 307. INSTRUCTION OF APPRENTICES 308. UNASSIGNABLE TESTING EXPENSES 309. OTHER MANUFACTURING EXPENSES F. FIXED CHARGES 320. Fixed charges (1) Premiums for fire and elevator insurance. Note 1. Does not include premiums for employers’ liability insurance; they should be charged to account No. 270. Note 2. Does not include premiums for employees’ bonds; they should be charged to account No. 309. Note 3. Does not include premiums account of property not used for manufacturing purposes; they should be charged to account No. 33, “‘Other income.” Note 4. Does not include premiums for fire or liability insurance on automobiles or other conveyances; they should be charged to account No. 305. Pes Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 44 FOURTH EDITION (2) All taxes and assessments, except water taxes, on real estate and personal property carried in ‘‘Manufacturing plant accounts.” Note 1. Does not include taxes on property not used for manufacturing purposes; they should be charged to account No. 33, “Other income.” Note 2. Does not include federal, state or municipal taxes on income, capital invested or personal property other than manufacturing plants; they should be charged to account No. 32-D-19, 32-A-19 or to Non-departmental expense. (3) Rentals for property used for manufacturing purposes. Rentals received from prop- erty which is a part of a factory plant, should be credited to this account. Note 1. Does not include rentals paid or received account of property not used for manufacturing purposes. (4) Normal depreciation of buildings and equipment, machinery and electrical apparatus, durable tools and instruments, patterns, furniture and fixtures and other manufactur- ing plant equipment. (See Section 2, page 11.) (5) Factory’s proportion of the expenses of general manufacturing departments. Note 1. Does not include the factory’s proportion of the expense of the General pur- chasing department. (See account No. 291.) Further subdivisions: 321. INSURANCE S220 LASHES 323. RENTALS 324. DEPRECIATION 325. GENERAL OFFICE ASSESSED CHARGE Power, heat and light accounts F. POWER, HEAT AND LIGHT—GENERATING AND DISTRIBUTING Sub-accounts: 340. Operating labor (1) Salaries of superintendents and foremen and their assistants. (2) Salaries and wages of employees engaged in general clerical service, including ste- nographers and office boys. Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 FOURTH EDITION Page 45 (3) Wages paid air compressor, accumulator, conveyor and switchboard operators, dynamo tenders, engineers, firemen, cleaners, oilers, ashmen and shovelers, also for cleaning boilers, redistributing fuel from stock piles to points of consumption, handling coal at crushers, and all other miscellaneous and unskilled labor incidental to the operation of the power plant, which are not otherwise provided for in this classification. Note 1. Includes wages of yard laborers and drivers and employees on the Company’s wagons and trucks, when engaged in redistributing fuel from stock piles to points of consumption, also the expense of hiring outside teams and of leasing railroad cars for this purpose. Note 2. Does not include wages paid for repairing arc lamps and lighting fixtures, etc.; they should be charged to account No. 374. Further subdivisions: 341. SUPERVISION 342. CLERICAL 343. OTHER LABOR 350. Supplies (1) Cost of all fuel actually consumed, subdivided as follows: (a) Coal consumed (b) Gas consumed (c) Oil consumed (2) Cost of water for power purposes. (3) Cost of alllubricating oilsand greases used in power plant. (4) Cost of all supplies, such as waste, etc., used in the power plant, which are not other- . wise provided for in this classification. Further subdivisions: 351. FuEL 352. WaTER 353. LUBRICANTS 354. OTHER SUPPLIES 360. Incidental operating expenses (1) Cost of renewing and repairing non-durable small tools used in the power plant. (See account No. 244 for partial list of such tools.) Note 1. All current expenditures for non-durable tools should be charged to this account, whether or not such expenditures represent initial cost of additions to, or replacements of, the non-durable small tool equipment. Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 46 FOURTH EDITION (2) Cost, plus freight and express charges, of minor office supplies and conveniences, printed books, reports, forms and stationery used in the power plant. (See account No. 245 for partial list of stationery, etc.) (3) Labor, material and supplies incidental to the operation of destructor plants, when such plants are used for the generation of power, heat or light; also all minor and incidental expenses of the power plant, which are not otherwise provided for in this classification. Further subdivisions: 361. SMALL TOOLS 362. STATIONERY 363. OTHER INCIDENTAL EXPENSES 370. Maintenance (1) Cost of repairing and partially renewing power plant buildings and structures. Note 1. Includes maintenance of heating and ventilating systems and fire protective equipment in the power stations. (2) Cost of repairing and partially renewing: Stationary boilers and attachments, such as feed water heaters and injectors; also blowers and blast pipes used exclusively in connection with boilers; Automatic stokers and their accessories; Auxiliary apparatus in boiler room; Ash and coal conveyors and their equipment; All pipes and fittings in the boiler room. Note 1. Does not include repairs to boilers used exclusively with heating and ventilat- ingsystems. (Seeaccount No. 371.) (3) Cost of repairing and partially renewing: Stationary engines, air compressors, turbines, condensers and cranes; Auxiliary apparatus and pumps in engine room; All pipes and fittings in engine room. (4) Cost of repairing and partially renewing dynamos, transformers, converters, turbo- generators, switchboards and all other electrical apparatus, including wiring, also arc lamps, etc., contained in the power plant. (5) Cost of repairing and partially renewing power plant equipment not provided for elsewhere in this classification, such as: Pumps and connections located at pumping stations; Buildings, boilers and other equipment constituting destructor plants, when such plants are used to generate power, heat or light; Transformers and other apparatus used in connection with receiving high voltage current purchased outside. Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 FOURTH EDITION Page 47 Further subdivisions: 371. BUILDINGS 372. STEAM PLANT 373. ENGINES AND TURBINES 374. ELECTRICAL PLANT 375. OTHER MAINTENANCE 380. Fixed charges (1) Premiums for fire, boiler and elevator insurance incidental to the operation of the power plant. (2) Taxes and assessments on real estate, personal property, etc., incidental to the opera- tion of the power plant, except water taxes which should be charged to account No. 352. (3) Rentals of property used for power purposes. (4) Normal depreciation of buildings and equipment, machinery and electrical apparatus, instruments, furniture and fixtures and other equipment in the power plants. (See Section 2, page 11.) (5) Power plant’s proportion of the expenses of the general manufacturing departments. Further subdivisions: 38]. INSURANCE 382. TAxXEs 383. RENTALS 384. DEPRECIATION 385. GENERAL OFFICE ASSESSED CHARGE G. POWER, HEAT AND LIGHT—PURCHASED 390. Power, heat and light—purchased * Cost of all power, heat and light purchased from outside companies. Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 48 FOURTH EDITION Maintenance accounts The following accounts are not to include cost of repairing or partially renewing the build- ings and equipment of those departments, such as Power, Purchasing, Receiving, Storekeeping, Shipping, etc., the entire expense of which is to be accumulated in single accounts. H. MAINTENANCE OF LAND AND BUILDINGS Sub-accounts: 410. Land (1) Cost of repairing and partially renewing all dykes, roadways, sidewalks and paths throughout the plant; and of regrading and repaving yards. (2) Cost of laying out and maintaining gardens, lawns and recreation grounds, and of green houses and other'structures, benches, fixtures, tools and implements used exclusively in connection therewith. Further subdivisions: 411. RoaApWAYS AND GROUNDS 412. GARDENS AND LAWNS 420. Buildings (1) Cost of repairing and partially renewing factory office buildings. (2) Cost of repairing and partially renewing other factory buildings such as shop build- ings, foundries, etc. Further subdivisions: 421. OFFICE BUILDINGS 422. OTHER BUILDINGS 430. Structures (1) Cost of repairing and partially renewing all permanent structures and their founda- tions as defined under account No. 1-B-b-1. (2) Cost of repairing and partially renewing all water, drainage and sewer pipes and their fittings which form a part of the matin trunk lines located outside and inside of buildings. (3) Cost of repairing and partially renewing all steam, gas, air, fuel oil and hydraulic pipes and fittings which form a part of the main trunk lines located outside and inside of buildings. (4) Cost of repairing and partially renewing all electrical conductors for power and lighting current, which form a part of the main trunk lines from the main distributing switch- board, through yards, and znside of buildings, including subways for underground pipes and conductors and poles and fittings for overhead conductors. Note 1. Does not include cost of repairing wiring for telephone, fire alarm and watch- men’s systems, which should be charged to accounts Nos. 456 and 458. Note 2. Does not include cost of repairing railway overhead construction, which should be charged to account No. 491. Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 FOURTH EDITION Page 49 440. 450. Further subdivisions: 431. STRUCTURES 432. WATER, DRAINAGE AND SEWER PIPES (MAIN TRUNK LINES) 433. PIPING (MAIN TRUNK LINES) 434. ELECTRICAL CONDUCTORS (MAIN TRUNK LINES) Heating and ventilating and other piping and wiring (1) Cost of repairing and partially renewing heating and ventilating systems as defined (2) under account No. 1-B-d-1; also cost of repairing and partially renewing steam vacuum pumps, blowers and fans and motors which drive them, used in connection with heat- ing and ventilating systems. Cost of repairing and partially renewing all piping, plumbing and electric wiring inside of buildings, as defined under account No. 1-B-d-2, except that which forms part of main trunk lines; also cost of repairing and partially renewing sprinkler systems. ~ Further subdivisions: 441. HEATING AND VENTILATING 442. OTHER PIPING AND, WIRING Machinery, electrical apparatus, furniture and fixtures (1) (2) (3) (4) Cost of repairing and partially renewing all machinery as defined under account No. 1-C-a-1, and motors for it, except the cost of repairing conveying machinery, which is chargeable to account No. 453. Cost of.repairing and partially renewing all semi-durable tools as defined under account No. 1-C-c-1, and motors for them. Cost of repairing and partially renewing all cranes, elevators, transfer-tables, con- veyors, etc., and motors for them. Cost of repairing and partially renewing all electrical apparatus and equipment as defined under accounts Nos. 1-C-a-2 and 1-C-c-2. Note 1. Doesnotinclude cost of repairing motors used in connection with the heating and ventilating systems. (See account No. 441.) Note 2. Does not include cost of repairing motors used in connection with machine tools. (See account No. 451.) Note 3. Does not include cost of repairing motors used in connection with elevators, cranesand conveyors. (Seeaccount No. 453.) Note 4. Does not include cost of repairing motors used in connection with boilers, ovens and furnaces. ._ (See account No. 455.) Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 50 FOURTH EDITION (5) Cost of repairing and partially renewing all boilers, heating and melting furnaces and ovens as defined under account No. 1-C-a-3, also their equipment consisting of blowers and exhausters for forced draft and circulation of air and motors which drive this equipment. Notel. Does not include cost of repairing electrical controlling equipment for motors. (See account No. 454.) Note 2. Material cost of re-lining ladles should be charged to account No. 246; the labor cost is direct labor of the foundry melting department. (6) Cost of repairing and partially renewing all permanent shop fixtures and equipment as defined under account No. 1-E-a, except shafting, hangers, etc.; also cost of repairing inside crane runways. (7) Cost of repairing and partially renewing all factory office furniture and appliances as defined under account No. 1-E-b. (8) Cost of repairing and partially renewing all fire protective apparatus as defined under account No. 1-E-c. (9) Cost of repairing all molds, jigs, punches, dies and special tools. (10) Cost of repairing and replacing all metal and snap flasks and metal arbors and cores. (11) Cost of repairing and partially renewing foundations as defined under account No. 1-C-b-1; the cost of new foundations, when the location of machine tools or equip- ment is changed; also the cost of removing old machines preparatory to the installa- tion of new ones. (12) Cost of repairing and partially renewing all shafting (main line and countershafting), hangers, pulleys, line shaft couplings, clutches (when not attached to machines), collars, drip cups, drip pans, oil cups, etc., also belting and belt lacing. Note 1. Does not include cost of repairing countershafting which is usually bought as a part of machines. (See account No. 451.) Further subdivisions: 451. MACHINE TOOLS 452. SEMI-DURABLE TOOLS 453. ELEVATORS, CRANES AND CONVEYORS 454. ELECTRICAL APPARATUS AND EQUIPMENT 455. BOILERS, OVENS AND FURNACES 456. SHOP FIXTURES AND EQUIPMENT 457. FURNITURE AND APPLIANCES IN FACTORY OFFICES 458. FIRE PROTECTIVE APPARATUS 459. MOLDS, JIGS, PUNCHES, DIES AND SPECIAL TOOLS 460. METAL FLASKS 461. FouNDATIONS 462. SHAFTING, BELTING AND PULLEYS Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 FOURTH EDITION Page 51 470. Maintenance of patterns Cost of repairing and altering standard patterns. Renewals to be charged to Development and complaints. 480. Automobiles and other conveyances Cost of repairing and partially renewing all conveyances and equipment, such as auto- mobiles of all kinds, carts, trucks, wagons and stone boats. Note 1. Does not include cost of repairing hook and ladder trucks and hose wagons. (See account No. 458.) 490. Other equipment (1) Cost of repairing and partially renewing all railway tracks and overhead construction as defined under account No. 1-F-a-1. (2) Cost of repairing and partially renewing all rolling stock as defined under account No. 1-F-a-2. Further subdivisions: 491. RAILWAY TRACKS AND OVERHEAD CONSTRUCTION 492. 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Wy AD rT ee | Nis sy torah ie 1p Ge ad i . : , ‘ igre & ¥ if us | "i ae tt ‘ nayct aes ene 4h es : Bai y" ‘ tis ayer Loeb thee, Sete evr , we iy j aL tee 3 ; ; i 10s sift ate chew to Ape 1 | . % vi 7 ty 4 ‘ : . ee oe Bb ’ { y Mey £, b + ys ‘ #) ie ‘ é r rt as ‘ TY) i da yt a oa! ‘ A wld ‘ d ue 5 1 } ms s = ’ ‘ \ om \ on! ho.) a F Ae er Je Gs 1 : iW at i v ve xe, 1a : cs an Abe vy Q ean . 4 ow ad iy aoe “ a ths apie ft a a eae 1 MO Per: rome, § of AK tat ieee isha Noles | siti wae vse shetty (FOURTH EDITION) STANDARD ACCOUNTING AND COST SYSTEM FOR THE ELECTRICAL MANUFACTURING INDUSTRY Section 4 SUGGESTED METHOD FOR APPLYING THIS SYSTEM Se es ii) Corea € , * v J A hs ¥, ay ea ) > ‘he { : WA 4 1.4 Ay t, af The | CaTedooue ‘ a f Standard Accounting and Cost System—Electrical Manufacturing Industry Section 4 FOURTH EDITION Page 1 SUGGESTED METHOD FOR APPLYING STANDARD ACCOUNTING AND COST SYSTEM The outlines of the suggested system are presented in the following order: 1. Theelements of costs. Method of designating accounts and departments. 3. Theshop order system. 4. Bookkeeping and other records which materially aid in the compilation of accu- rate costs. 5. Method of recording details in sub-ledgers and upon individual ‘‘job cost sheets.”’ 6. Absorption of indirect manufacturing expenses. 7. Sources of entry for manufacturing cost. 8. Absorption of general expenses. 9. Proper accounting for disposition of plant scrapped or sold. ro 1. THE ELEMENTS OF COST Definitions of the elements of cost will be found on pages 4 and 5 of Section 2. 2. METHOD OF DESIGNATING ACCOUNTS AND DEPARTMENTS For convenience in recording operations and collecting results, it is desirable to establish a system of numbers, one series for designation of accounts; and, for those concerns which, by reason of the variety of their product, have a departmental organization, another series for designation of departments.' Departments may be designated instead by symbols. However, asstiming that preference is given to numbering and that a manufacturer, having four departments, designates them as Nos. 1, 2, 3 and 4, also that he assigns a block of numbers, beginning with 500, for “‘Manufacturing plant’’ accounts (see Section 3, page 2, on which these accounts are designated by letters) and a block, beginning with 600, for development orders; further that for ‘Indirect manufacturing expense’’ accounts, the numbers as given in Section 3, pages 28 to 51 will be used; the following examples will serve to illustrate the procedure for identifying operating charges for individual orders and departments: a. A lathe is purchased at a cost of $1000 for Department No. 2, and, the account in the ‘“‘Manu- facturing plant” sub-ledger for ‘‘Machinery and tools’’ having been assigned No. 503, the distribution of this charge will be to account No. 2-503. b. Department No. 4 undertakes development of a certain new device involving time of engineers and work in the shops. It has obtained development order No. 634, therefore, all time, material and expense in connection with this work, will be charged to account or order No. 4-634 in the “Engineering or development”’ sub-ledger. c. Wages of inspectors engaged in Department No. 1 will be charged account No. 1-203 in the “Indirect expense’”’ sub-ledger. Manufacturers, having a great many departments, will find it convenient to have a key to the designations assigned to departments. This may be combined with a key to the account numbers, by preparing blue prints showing the department numbers vertically and the account numbers horizontally, or vice versa. Copies of these blue prints should be in the hands of every employee who is in any way interested in the distribution of disbursements. } 1 5 Section 4 Standard Accounting and Cost System—Electrical Manufacturing Industry Page 2 FOURTH! EDITION 3. THE SHOP ORDER SYSTEM A. PRODUCTION ORDERS Production orders are those issued to the factory authorizing the manufacture of material or apparatus to be shipped to customers. The following is quoted from the bulletin issued by the Federal Trade Commission under date of July 1st, 1916: “‘There are, generally speaking, but two distinct methods of manufacture. Each requires a cost system a little different in detail but identical in fundamental principles. The first of these is used in a business where every order is a separate article of manufacture, very often made to order, and the selling price fixed before work is started; and the second is used in a business where the output consists of one or more articles which are being continually produced. For convenience we will designate the cost systems appli- cable to each as the ‘Job cost system’ and the ‘Continuous production system.’ ”’ 1. The job cost system “The first step is to provide for giving the factory instructions as to what work is to be done, and a form should be provided which must give the following information; job number, date, name and address of customer for whom work is to be done, a description of the work to be done, giving sufficient details, specifications as to what material will be needed, and shipping instructions. This form should also have space for the entry of shipments, so that when the work is done, the order form will be a complete record.