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NATIONAL COAL ASSOCIATION 
 
 Annual Meeting □ Chicago □ May 21, 22, 23, 1919 
 
 Report and Suggestions of Committee 
 
 on 
 
 Standard System of Accounting 
 
 and 
 
 Analysis of Cost of Production 
 
 LIBRARY 
 OF THE 
 
 UNIVERSITY OF ILLINOIS 
 
 C. E. BOCKUS 
 THOS. T. BREWSTER 
 W. M. HENDERSON 
 J. C. OSGOOD 
 ERSKINE RAMSEY 
 
 W. B. REED, Secretary 
 
 Committee 
 
Report and Suggestions of Committee 
 on Standard System of Accounting 
 and Analysis of Cost of 
 Production 
 
 To the Members of the National Coal Association: 
 
 The object of the Committee’s work is to propose a standard system of accounting under 
 which all coal operators, so far as the particular circumstances of each case will permit, will classify 
 their operating expenses for labor and material in the same way, to the end that true, detailed 
 and comparable statements of cost of production may be readily obtained; and also that all operators 
 shall make the same distinctions between capital and operating expenditures; so that the vital 
 matters of depreciation and depletion and obsolescence may be treated with uniform consistency 
 in accordance with law. Therefore, hoping to be successful in their efforts, the Committee has 
 endeavored to carry out its instructions to work out such a system of accounting as will be accept¬ 
 able to you, to the Treasury Department and to the Federal Trade Co mm ission. 
 
 Progress of the report has been dependent upon the enactment of the 1918 Revenue Law and 
 the issue of Treasury Regulations thereunder, and with regard to the announced intention of the 
 Federal Trade Commission to issue revised report blanks and a manual of instructions relative 
 thereto. 
 
 The Revenue Department has not, up to the present time, prescribed exact methods of account¬ 
 ing. Section 212 of the Law of 1918 provides that the taxpayer’s net taxable income shall be com¬ 
 puted upon the basis of the taxpayer’s annual accounting period (fiscal year or calendar year, 
 as the case may be), in accordance with the method of accounting regularly employed in keeping 
 the books of such taxpayer; provided, of course, that such accounting method clearly reflects the 
 income. Article 24 of the Regulations states, “It is recognized that no uniform method of accounting 
 can be presented for all taxpayers, and the law contemplates that each taxpayer shall adopt such 
 forms and systems of accounting as are in his judgement best suited to his purpose. Each taxpayer 
 is required by law to make a return of his true income. He must, therefore, maintain such account¬ 
 ing records as will enable him to do so. 
 
 Among the essential provisions of Article 24 with which the coal industry is concerned are, 
 that expenditures made during the year should be properly classified as between capital and income; 
 and that the charges for depreciation, depletion and obsolescense shall be consistent with the facts 
 presented by the peculiarities of each case. 
 
 If the members of the National Coal Association will endorse and adopt in practice a uniform 
 system of accounting, sound in principle, complying with the provisions of the law and the regu¬ 
 lations pursuant thereto, we have every confidence that such system will be acceptable to the Gov¬ 
 ernment, and that the Treasury Department will probably be willing to accept Annual Reports and 
 other statements of any coal corporation complying with such methods, as an Income Tax Return. 
 Every corporation’s Annual Report should show substantially the same facts now required in the 
 Income Tax Returns, anyway, and if such reports be accepted by the Revenue Department as tax 
 
2 
 
 If $ i 
 
 N 
 
 2- 
 
 returns, the great saving of time, expense and effort now involved in rendering Income Tax Returns 
 and other Government reports would be saved to the operators, and it is obvious that that saving 
 alone would amply justify and compensate any operator for the work and temporary inconvenience 
 imposed by reason of his changing his present accounting methods to conform to a new and 
 approved plan, no matter how satisfactory his present methods may now seem to him. 
 
 Preliminary Considerations. 
 
 Before discussing the details of an accounting system, it is useful to emphasize the fundamental 
 truth that every coal mine consists of: owned or leased coal deposits, plant, equipment and de¬ 
 velopment. 
 
 In the case of some mines, the greater cost will be the coal; in another, the equipment; and the 
 cost of development will be, more or less, according to the physical conditions of each operation, 
 but all these elements make a coal mine, and when the operating stage is reached their combined 
 value as a mine is greater than the sum of their separate costs. 
 
 They all depreciate together as the coal is exhausted, for when the coal is gone, or the right to 
 the coal has elapsed, the plant and equipment have little or no value and the development is lost. 
 
 Capital investment in a coal mine is not a permanent asset; it is only an outlay preliminary 
 to the extraction of the coal; it is merely an advanced or deferred charge upon future income, which 
 capital, if recovered, must be recovered with the current expenses of operation out of the proceeds 
 of coal sold. 
 
 By dividing the cost of the mine by the total number of tons practically recoverable through 
 present shafts and openings, the rate per ton necessary to redeem such cost will be found. 
 
 In Coal Mining the exact unit for the measurement of work done is the ton of coal mined. 
 It is also the exact unit for measuring depletion of mineral, wear and tear from use of equipment, 
 and exhaustion of development. Development is a mere easement, the value of which disappears 
 when the coal is gone. 
 
 A coal mine being, as emphasized, made up of several elements, all depreciating as the coal 
 is mined, such depreciation is composite, accruing at a rate concurrent with the rate of extraction. 
 The necessary rate per ton being determined, the aggregate depreciation for any accounting period 
 should, of course, as far as practical, be distributed among the various elements in proportion to 
 their respective costs or value. 
 
 The doctrine that measures depreciation of coal mine plant and equipment in terms of time 
 (excepting, of course, some leasehold propositions) is fallacious, as tested by the further assertion 
 that a completely equipped mine could be maintained indefinitely without depletion or wear and tear 
 if no coal were mined, by minor repairs. 
 
 Therefore, we insist, as a general rule—excepting some leaseholds—that the correct measure 
 of the depletion and depreciation experienced in mining coal is the ton of coal mined. 
 
 After a coal mine has been developed and equipped to its planned output capacity, charges 
 to its Capital Account should cease, and thereafter there will be few if any permissible charges to 
 that account. 
 
 Usually after one-third or one-half the life of the mine has elapsed, and from time to time 
 thereafter additions to power plant and major items of equipment will be necessary, and the Cost 
 thereof should be set up in appropriate Additions and Betterment Accounts, and for these will 
 
 9397i9 
 
 t 
 
3 
 
 have to be established an additional and separate depreciation rate based on the remaining coal 
 or life of the mine. 
 
 At the end of each month, Operating Account should be charged, and Depreciation 
 credited with an amount equivalent to the depreciation rate multiplied by the number of tons 
 mined during the month. At the end of the year Depreciation should be charged with the year’s 
 accumulation and the respective elements of the mine written off in proper proportions. If, however, 
 the operator prefers to allow total Depreciation to stand as a credit'on the ledger, it should in the 
 Balance Sheet be exhibited as a deduction from the cost of property. Irrespective of which way it 
 is handled on the General Ledger, the proper reducing entries should be made against each element 
 of the property in the Plant Ledger. 
 
 In the case of mines operated under lease, if the leasehold rights run longer than the probable 
 period required to exhaust the estimated available coal, the same factor of Depreciation applies; 
 but if the life of the lease is shorter than the probable period required to get all the coal, the monthly 
 charge to Operating Account and corresponding credit to Depreciation should be such propor¬ 
 tion of the cost of the mine as one month is of the remaining term of the lease. 
 
 Funds representing Depreciation accumulations, if not periodically applied to the retirement 
 of outstanding securities or obligations, should be kept liquid for that purpose or invested in assets 
 distinct from the depreciating property. 
 
 Before any profit or net income can be realized, current expenses for labor and for material 
 consumed, current repairs, replacements and depreciation must be made good out of gross income. 
 
 Hence, sound consideration of the nature of investment in coal mining or any other wasting 
 industry dictates that all outlay must be classified and dealt with as follows: 
 
 (a) The initial cost of the mine in its entirety, chargeable to Capital Account—and which 
 must be redeemed by periodically setting aside, from current gross income, sufficient amounts to 
 replace such investment within the life of the mine. It is obvious that the fund thus derived must 
 be held inviolate for ultimate capital redemption, and if not applied immediately to the retirement 
 of outstanding securities, invested in assets separate from the depreciating property or kept liquid 
 in the business. 
 
 (b) The cost of Additions and Betterments, so large that such costs should be capitalized, 
 must likewise be redeemed by setting aside from gross income adequate provision for reimbursing 
 such cost during the life of the mine. 
 
 (c) To ordinary Operating Expense should be charged the cost of repairs and replacements 
 of plant and equipment, and also cost of additional equipment necessary because of the extension 
 of workings to maintain the normal output. 
 
 That the propositions above stated are acceptable to the Treasury Department is shown by 
 various articles embodied in Treasury Regulations No. 45, recently issued, which might be well 
 covered by reference to the articles, but for your convenience and to add authoritative emphasis 
 to our claims, the complete text of the articles referred to, so far as seems necessary, is reproduced 
 in full as follows: 
 
 DEDUCTIONS ALLOWED: DEPLETION, 
 
 [Sec. 214. (a) That in computing net income there shall be allowed as deductions:] 
 (10) In the case of mines, oil and gas wells, other natural deposits, and timber, 
 a reasonable allowance for depletion and for depreciation of improvements, according to 
 the peculiar conditions in each case, based upon cost including cost of development not 
 
4 . 
 
 otherwise deducted: Provided, That in the case of such properties acquired prior to March 
 1, 1913, the fair market value of the property (or the taxpayer’s interest therein) on that 
 date shall be taken in lieu of cost up to that date; such reasonable allowance in all the above 
 cases to be made under rules and regulations to be prescribed by the Commissioner with 
 the approval of the Secretary. In the case of leases the deductions allowed by this para¬ 
 graph shall be equitably apportioned between the lessor and lessee; * * * 
 
 Art. 201. Depletion of mines. —The essence of this provision is that the owner of 
 such property, whether it be a leasehold or freehold, shall secure through an aggregate 
 of annual depletion and depreciation deductions a return of the amount of capital invested 
 by him in the property, or in lieu thereof an amount equal to the fair market value as of 
 March 1, 1913, of the properties owned prior to that date, plus in any case the subsequent 
 cost of plant and equipment (less salvage value) and underground and overground devel¬ 
 opment, which is not chargeable to current operating espense, but not including land 
 values for purposes other than the extraction of minerals. Operating owners, lessors and 
 lessees are entitled to deduct an allowance for depletion. 
 
 Art. 202. Capital recoverable through depletion allowance in the case of owner.— 
 
 In the case of an operating owner in fee or a lessor the capital remaining in any year re¬ 
 coverable through depletion allowances is the sum of (a) the cost of the property, or its 
 fair market value as of March 1, 1913, plus (b) the cost of subsequent improvements and 
 development not charged to current operating expenses, but minus (c) deductions for 
 depletion which has or should have been taken to date, and (d) the portion of the capital 
 account, if any, as to which depreciation has been and is being deducted instead of deple¬ 
 tion. The value of the surface of the land should be taken into consideration. In no case, 
 however, may a lessor include in his capital recoverable through such an allowance any 
 part of development costs not borne by the lessor. 
 
 Art. 203. Capital recoverable through depletion allowance in the case of lessee.— 
 
 In the case of a lessee the capital remaining in any year recoverable through depletion 
 allowances is the sum of (a) the cost of the leasehold, or its fair market value as of March 
 1, 1913, plus (b) the cost of subsequent improvements and development not charged to 
 current operating expenses, but minus (c) deductions for depletion which has or 
 should have been taken to date, and (d) the portion of the capital account, 
 if any, as to which depreciation has been and is being deducted instead of depletion. 
 Any annual or periodical rents or royalties supplementing the bonus or other amount 
 paid for the lease may be charged to current operating expenses or, until the property 
 reaches the operating stage, to capital account, and in the latter event will form part of 
 the capital returnable through deductions for depletion. 
 
 Art. 205. Determination of cost of deposits. —In any case in which a depletion or 
 depreciation deduction is computed on the basis of the cost or price at which any mine, 
 mineral deposit, mineral right or leasehold was acquired, the owner or lessee will be required 
 upon request of the Commissioner to show that the cost or price at which the property 
 was bought was fixed for the purpose of a bona fide purchase and sale, by which the property 
 passed to an owner in fact as well as in form different from the vendor. No fictitious or 
 inflated cost or price will be permitted to form the basis of any calculation of a depletion 
 or depreciation deduction, and in determining whether or not the price or cost at which 
 any purchase or sale was made represented the actual market value of the property sold, 
 due weight will be given to the relationship or connection existing between the person 
 selling the property and the buyer thereof. 
 
5 
 
 Art. 206. Determination of fair market value of deposits. —Where the fair market 
 value of the property at a specified date in lieu of the cost thereof is the basis for depletion 
 and depreciation deductions, such value must be determined, subject to approval or 
 revision by the Commissioner, by the owner of the property in the light of the conditions 
 and circumstances known at that date, regardless of later discoveries or developments 
 in the property or in methods of mining or extraction. The value sought should be that 
 established assuming a transfer between a willing seller and a willing buyer as of that 
 particular date. No rule or method of determining the fair market value of mineral 
 property is prescribed, but the Commissioner will lend due weight and consideration to 
 any and all factors and evidence having a bearing on the market value, such as cost, 
 actual sales and transfers of similar properties, market value of stock or shares, royalties 
 and rentals, value fixed by the owner for purposes of the capital stock tax, valuation for 
 local or State taxation, partnership accountings, records of litigation in which the value of 
 the property was in question, the amount at which the property may have been inventoried 
 in probate court, disinterested appraisals by approved methods, and other factors. 
 
 Art. 207. Revaluation of deposits not allowed. —The cost of the property or its fair 
 market value at a specified date, as the case may be, plus subsequent charges to capital 
 account not deductible as current expense, will be the basis for determining the depletion 
 and depreciation deductions for each year during the continuance of the ownership 
 under which the fair market value or cost was fixed, and during such ownership there can 
 be no revaluation for the purpose of this deduction. This rule will not forbid the redistribu¬ 
 tion of the capital account over the estimated number of units remaining in the property 
 in accordance with either of the next two articles. 
 
 Art. 208. Determination of quantity of ore and mineral in mine. —Every taxpayer 
 claiming a deduction for depletion will be required to estimate with respect to each separate 
 property the total units (tons, pounds, ounces or other units) of ores and minerals reason¬ 
 ably known or on good evidence believed to have existed in the ground on March 1, 1913, 
 or on the date of acquisition of the property, as the case may be. In estimating the total 
 units of ores and minerals for purposes of depletion, the property must be considered in 
 the condition in which it was on March 1, 1913, or the date of acquisition, but if subse¬ 
 quently during the ownership of the taxpayer making the return additional recoverable 
 mineral deposits have been discovered or developed which were not taken into account in 
 estimating the number of units for purposes of depletion, or if it shall be discovered by 
 working, development or exploration that ground previously estimated to contain com¬ 
 mercially recoverable mineral is barren or contains only commercially unworkable mineral, 
 a new estimate of the recoverable units of ores or minerals (but not of the cost or fair 
 market value at a specified date) shall be made, and when made shall thereafter constitute 
 a basis for depletion. In the selection of the unit of estimate the custom or practice 
 applicable to the type of mineral deposit and the character of the operations thereon 
 should be considered. The estimate of the recoverable units of ores or minerals for the 
 purpose of depletion shall include (a) the ores and minerals “in sight,” “blocked out,” 
 “developed,” or “assured,” in the usual or conventional meaning of these terms in respect 
 to the type of deposit, and may also include (b) “prospective” or “probable” ores and 
 minerals (in the same sense); that is, ores and minerals that are believed to exist on the 
 basis of good evidence, although not actually known to occur on the basis of existing 
 development; but “probable” or “prospective” ores and minerals may be computed for 
 purposes of depletion only as extensions of known deposits into undeveloped ground. 
 
 Art. 210. Computation of allowance for depletion of mines. —When the cost or 
 value as of March 1, 1913, of the property shall have been determined, and the number of 
 
6 
 
 mineral units in the property as of the date of acquisition or valuation shall have been 
 estimated, the division of the former amount by the latter figure will give the unit value 
 for purposes of depletion, and the depletion allowance for the taxable year may be com¬ 
 puted by multiplying such unit value by the number of units of mineral extracted during 
 the year. If, however, proper additions are made to the capital account represented by 
 the original cost or value of the property, or unforeseen circumstances necessitate a revised 
 estimate of the number of mineral units in the ground, a new unit value for purposes of 
 depletion may be found by dividing the capital account at the end of the year, less deduc¬ 
 tions for depletion to the beginning of the taxable year, which have or should have been 
 taken, by the number of units in the ground at the beginning of the taxable year. This 
 number, unless a revision of the original estimate has been necessary, will equal the number 
 of units in the ground at the date of original acquisition or valuation less the number 
 extracted prior to the taxable year. If, however, a recalculation is needed, the number 
 of units at the beginning of the year will be the sum of the gross production of the year and 
 the estimated mineral reserves in the property at the end of the year. 
 
 Art. 215. Depletion of mine based on advance royalties. —Where the owner has 
 leased a mining property for a term of years with a requirement in the lease that the 
 lessee shall mine and pay for annually a specified number of tons or other agreed units of 
 measurement of such mineral, or shall pay annually a specified sum of money which shall 
 be applied in payment of the purchase price or agreed royalty per unit of such mineral 
 whenever the same shall thereafter be mined and removed from the leased premises, the 
 value in the ground to the lessor for purposes of depletion of the number of units so paid 
 for in advance of mining will constitute an allowable deduction from the gross income 
 of the year in which such payment or payments shall be made; but no deduction for deple¬ 
 tion by the lessor shall be claimed or allowed in any subsequent year on account of the 
 mining or removal in such year of any ore or mineral so paid for in advance and for which 
 deduction has been once made. If for any reason any such mining lease shall be terminated 
 before the ore or mineral therein which has been paid for in advance has been mined and 
 removed, and the lessor repossesses the leased property, an amount equal to the aggregate 
 deductions for depletion allowed in respect of ore or mineral not mined and removed by 
 the lessee, but still in the ground, will be deemed income to the lessor and will be returned 
 as such for the year in which the property is repossessed. 
 
 Art. 216. Depletion and depreciation accounts on books. —Every taxpayer claiming 
 and making a deduction for depletion and depreciation of mineral property shall keep 
 accurate ledger accounts in which shall be charged the fair market value as of March 1, 
 1913, or the cost, as the case may be, (a) of the property, and (b) of the plant and equip¬ 
 ment together with such amounts expended for development of the property or additions 
 to plant and equipment since that date as have not been deducted as expense in his returns. 
 These accounts shall be credited with the amount of the depreciation and depletion de¬ 
 ductions claimed and allowed each year, or the amount of the depreciation and depletion 
 shall be credited to depletion and depreciation reserve accounts, to the end that when 
 the sum of the credits for depletion and depreciation equals the value or cost of the prop¬ 
 erty, plus the amount added thereto for development or additional plant and equipment, 
 less salvage value of the physical property, no further deduction for depletion and de¬ 
 preciation with respect to the property will be allowed. If dividends are paid out of a 
 depletion or depreciation reserve, the stockholders must be expressly notified that the 
 dividend is a return of capital and not an ordinary dividend out of profits. 
 
 Art. 217. Statement to be attached to return where depletion of min e claimed.— 
 
 To the return of the taxpayer claiming a deduction for depletion or depreciation or both 
 
7 
 
 there should be attached a statement setting out: (a) whether the owner is a fee owner 
 or lessee or both; (b) a description of the property owned in fee, if any, and a description 
 of the leasehold property, if any, including the date of acquisition and the date of expira¬ 
 tion of the lease; (c) the fair market value as of March 1, 1913, or the cost, as the case 
 may be, of the property owned in fee and the leasehold property, together with a statement 
 of the precise method by which the value or the cost of freehold and leasehold property 
 was determined; (d) the estimated number of units of mineral or ore at the date of acquisi¬ 
 tion or of valuation in the property owned in fee and in the leasehold property separately, 
 together with an explanation of the method used in estimating in each case the number of 
 units of mineral or ore for purposes of depletion; (e) the amount of capital applicable to 
 each unit; (f) the number of units removed and sold during the year for which the return 
 was made; (g) the total amount deducted on account of depletion and on account of 
 depreciation stated separately up to the taxable year during the ownership of the tax¬ 
 payer, and (h) any other data which would be helpful in determining the reasonableness 
 of the depletion and depreciation deductions claimed in the return. 
 
 Art. 224. Depreciation of improvements in the case of mine. —It shall be optional 
 with the taxpayer, subject to the approval of the Commissioner, (a) whether the cost 
 or value of the mining property, including ores and minerals, plant and equipment, and 
 charges and additions to capital account not charged to expense and deducted as expense 
 on the returns of the taxpayer, shall be recovered at a rate established by current exhaus¬ 
 tion of mineral, or (b) whether the cost or value of the mineral and charges to capital 
 account of expenditures other than for physical property shall be recovered by appro¬ 
 priate charges based on depletion and the cost or value of plant and equipment shall be 
 recovered by reasonable charges for depreciation calculated by the usual rules for deprecia¬ 
 tion or according to the peculiar conditions of the taxpayer’s case by a method satisfactory 
 to the Commissioner. Nothing in these regulations shall be interpreted to mean that 
 the value of a mining plant and equipment may be reduced by depreciation or depletion 
 deductions to a sum below the value of the salvage when the peoperty shall have become 
 obsolete or shall have been abandoned for the purpose of mining, or that any part of the 
 value of land for purposes other than mining may be recoverable through depletion or 
 depreciation. 
 
 Obsolesence. 
 
 In addition to the provisions for depreciation and depletion to replace the capital sum invested 
 in depreciable property and charges for ordinary working expenses, operating account should be 
 charged with the residual value of property (after deducting depreciation, which has been or should 
 have been charged, and insurance) that may be destroyed by catastrophe; also operating account 
 should be charged with the residual value over accrued depreciation and salvage of any property 
 discarded or that has become useless or obsolete before the end of the natural period of its usefulness. 
 This is authoritatively emphasized by Articles 141, 142 and 143 in Treasury Regulations No. 45. 
 
 Art. 141. Losses. —Losses sustained during the taxable year and not compensated 
 for by insurance or otherwise are fully deductible (except by non-resident aliens) if (a) 
 incurred in the taxpayer’s trade or business, or (b) incurred in any transaction entered 
 into for profit, or (c) arising from fires, storms, shipwreck or other casualty, or from theft. 
 They must usually be evidenced by closed and completed transactions. In the case of 
 the sale of assets the loss will be the difference between the cost thereof, less depreciation 
 sustained since acquisition, or the fair market value as of March 1, 1913, if acquired before 
 that date, less depreciation since sustained, and the price at which they were disposed of. 
 
8 
 
 When the loss is claimed through the destruction of property by fire, flood or other casualty, 
 the amount deductible will be the difference between the cost of the property or its fair 
 market value as of March 1, 1913, and the salvage value thereof, after deducting from the 
 cost or value as of March 1, 1913, the amount, if any, which has been or should have been 
 set aside and deducted in the current year and previous years from gross income on account 
 of depreciation and which has not been paid out in making good the depreciation sustained. 
 But the loss should be reduced by the amount of any insurance or other compensation 
 received. A loss in the sale of an individual’s residence is not deductible. Losses in 
 illegal transactions are not deductible. 
 
 Art. 142. Voluntary removal of buildings. —Loss due to the voluntary removal or 
 demolishing of old buildings, the scrapping of old machinery, equipment, etc., incident- to 
 renewals and replacements will be deductible from gross income in a sum representing the 
 difference between the cost of such property demolished or scrapped and the amount of a 
 reasonable allowance for the depreciation which the property had undergone prior to its 
 demolition or scrapping; that is to say, the deductible loss is only so much of the original 
 cost of the property, less salvage, as would have remained unextinguished had a reasonable 
 allowance been charged off for depreciation during each year prior to its destruction. 
 When a taxpayer buys real estate upon which is located a building which he proceeds to 
 raze with a view to erecting thereon another building, it will be considered that the tax¬ 
 payer has sustained no deductible loss by reason of the demolition of the old building, and 
 no deductible expense on account of the cost of such removal, the value of the real estate, 
 exclusive of old improvements, being presumably equal to the purchase price of the land 
 and building plus the cost of removing the useless building. 
 
 Art. 143. Loss of useful value. —When through some change in business conditions 
 the usefulness in the business of some or all of the capital assets is suddenly terminated, 
 so that the taxpayer discontinues the business or discards such assets permanently from 
 use in the business, he may claim as a loss for the year in which he takes such action the 
 difference between the cost or fair market value as of March 1, 1913, of any asset so dis¬ 
 carded (less any depreciation allowances) and its salvage value remaining. This exception 
 to the rule requiring a sale or other disposition of property in order to establish a loss 
 requires proof of some unforeseen cause by reason of which the property must be prema¬ 
 turely discarded, as, for example, where machinery or other property must be replaced 
 by a new invention, or where an increase in the cost or other change in the manufacture 
 of any product makes it necessary to abandon such manufacture, to which special ma¬ 
 chinery is exclusively devoted, or where new legislation directly or indirectly makes the 
 continued profitable use of the property impossible. This exception does not extend to a 
 case where the useful life of property terminates solely as a result of those gradual processes 
 for which depreciation allowances are authorized. It does not apply to inventories other 
 than capital assets. The exception applies to buildings only when they are permanently 
 abandoned or permanently devoted to a radically different use, and to machinery only 
 when its use as such is permanently abandoned. Any loss to be deductible under this 
 exception must be charged off on the books and fully explained in returns of income. 
 
 Distinction Between Capital and Operating Expenditure. 
 
 The drawing of distinctions between capital and operating expenditures, in the accounting 
 involved in permanent enterprises, is a favorite field for discussion among accountants, but in the 
 case of coal mining or other wasting enterprises, experience teaches that the field for discussion, 
 if indeed there be any, is extremely limited. 
 
9 
 
 After a coal mine has been developed and equipped to its contemplated or possible capacity, 
 it is a constant consumer of material and supplies and equipment, which, though nominally of a 
 durable nature, are subject to destructive wear and tear, by reason of the uses to which they are 
 put, and all these appliances must be kept in repair to do their work or the output can not be main¬ 
 tained. 
 
 Mules and pit cars are constantly worn out, and have to be replaced, and as the working 
 faces advance with the exhaustion of the coal, the length of haul, and consequent time of circulation 
 of pit cars between the working face and dump increases, more motors, mules and pit cars have to 
 be supplied to maintain the output, and the more motors, mules and pit cars in the mine, the 
 greater expense for replacements and repairs. 
 
 Also, with the advance of workings, more rails have to be laid and more copper wire or other 
 conductors put up to carry power to the working faces to maintain the output. They remain in 
 place until the mine is exhausted, and when they are recovered have but little net scrap value. 
 In fact, any net salvage is relatively very small. 
 
 The fact that these expenses are continually recurrent and practically a fixed factor in the cost 
 of production per ton from year to year, proves that they constitute an operating rather than a 
 capitalizable expense. 
 
 This being so, it makes no difference to taxable income whether they are charged immediately 
 to operating expense or written off by deductions representing depreciation allowances which would 
 have to be readjusted and compounded from year to year. As a practical matter, it is better to 
 dispose of such expense by direct charge to operating expense rather than taken care of by vexatious 
 refinements of accounting, that would be necessary if these items be capitalized and “depreciated.” 
 
 That this proposition is now acceptable to the Department is substantiated by: 
 
 Art. 222. Charges to capital and to expense in the case of mine.—In the case of 
 mining operations all expenditures for plant, equipment, development, rent and royalty 
 prior to production, and thereafter all major items of plant and equipment, shall be charged 
 to capital account for purposes of depletion and depreciation. After a mine has been 
 developed and equipped to its normal and regular output capacity, however, the cost of 
 additional minor items of equipment and plant, including mules, motors, mine cars, 
 trackage, cables, trolley wire, fans, small tools, etc., necessary to maintain the normal 
 output because of increased length of haul or depth of working consequent on the extrac¬ 
 tion of mineral, and the cost of replacements of these and similar minor items of worn-out 
 and discarded plant and equipment, may be charged to current expense of operations, 
 unless the taxpayer elects to write off such expenditures through charges for depreciation. 
 
 Necessity of Detailed Analysis. 
 
 If the only objects of an Operator’s periodical statements were to exhibit the financial results 
 of the period covered, or to contribute to general statistics, a short form with a few sub-totals and 
 their extensions would be all required; but the successful solution of the problems facing the industry 
 demands intensive management and economy, and as intensive management means careful and 
 intelligent attention to detail, analytical accounting is necessary. 
 
 The operating executive should have a report from each mine, which, read in the light of his 
 knowledge of the property, will be a comprehensive narrative of what has been done, and reflect 
 the physical conditions met with during the period covered by the report, and exhibit a clear state¬ 
 ment of the cost of labor and material expended, classified in accordance with the natural subdi- 
 
10 
 
 visions of the work that has to be done in and about a mine, so that the economy and efficiency 
 with which each thing has been done can be critically studied. 
 
 In the majority of cases the natural subdivisions of the work in and around a coal mine are as 
 
 follows: 
 
 1 . 
 
 Mine Office. 
 
 2. 
 
 Superintendence. 
 
 3. 
 
 Engineering. 
 
 4. 
 
 Mining. 
 
 5. 
 
 Timbering. 
 
 6. 
 
 Deadwork. 
 
 7. 
 
 Tracklaying. 
 
 8. 
 
 Drainage. 
 
 9. 
 
 Ventilation. 
 
 10. 
 
 Haulage and Hoisting. 
 
 11. 
 
 Dumping and Tallying. 
 
 12. 
 
 Preparation. 
 
 13. 
 
 Railroad Car Loading and Yard Expense. 
 
 14. 
 
 Power. 
 
 15. 
 
 Repairs to Buildings and Permanent Structures. 
 
 16. 
 
 Sundries. 
 
 To these subdivisions should be distributed the items below: 
 
 1. MINE OFFICE EXPENSE. 
 
 Clerks, Bookkeepers, Janitor, Books of Account, Stationery, Office Furniture and Supplies, 
 Telephone, Light and Heat, etc., etc. 
 
 2. SUPERINTENDENCE. 
 
 Wages of Superintendents, Bosses, Mine Examiners, Watchmen, and all other direction and 
 caring for the property in a supervisory capacity. Safety Lamps, Mine Telephones, etc., etc. 
 
 3. ENGINEERING. 
 
 Mining Engineer, Helper, Engineering Instruments and Supplies, Maps, Blueprints, etc., etc. 
 
 4. MINING. 
 
 (a) Hand Mining. 
 
 Miners, Helpers, Shot Firers, etc. 
 
 (b) Machine Mining. 
 
 In machine mines this item should be subdivided into Undercutting and Pit Car 
 Loading. 
 
 Undercutting should be charged with— 
 
 (a) Generation and Transmission of Power, i. e., the proportionate share of Cost of 
 power generated and its transmission to machines (see Note on Power below). 
 
 (b) Maintenance of Machines, i. e., repair parts, machine picks, cable for electric machine, 
 and air hose for air machines. Shop and repair men employed on machines and labor of 
 blacksmiths sharpening or making bits and such part of the time of head electrician spent 
 in maintenance of machines. 
 
 (c) Operating Machines: To this subdivision should be charged the wages of Machine 
 Runners and Helpers, Bit Carriers, oil, grease and waste, oil cans, hand picks, pick handles, 
 jacks, machine shovels, etc., etc. If machines are not equipped with self-propelling 
 
11 
 
 trucks and the machines are moved about their territory by mule haulage, such haulage 
 should be charged to operating machines. 
 
 Pit Car Loading needs no comment. 
 
 5. TIMBERING. 
 
 Though Timbering is imposed by physical conditions and is closely incident to work at the 
 face, it is a significant item, and should stand by itself. To this subdivision should be distributed 
 wages of timbermen and helpers, the cost of props, cap pieces, cross bars and other timber used 
 in advancing work, such cost including freight and the cost of unloading and handling at the mine, 
 with the expense of preparing and delivering to the working face. 
 
 6. DEADWORK. 
 
 As every mine presents physical conditions peculiar to itself, no two mines being alike, and as 
 the physical conditions fluctuate as the work progresses, in order to work out comparable statements 
 and records, Deadwork should be classified in accordance with its nature, such as yardage, premium 
 for narrow work, shooting rock, lifting bottom, taking down top, stowing and dumping gob, cleaning 
 up falls and retimbering after them, handling squeezes, mine fires, or any other work imposed 
 by adverse physical conditions. 
 
 7. TRACKLAYING. 
 
 While track is immediately connected with and necessary for the transportation of coal to the 
 shaft bottom, and hence a necessary item incident to Haulage, it has long been regarded as a signifi¬ 
 cant item in the cost sheet, and should stand by itself. 
 
 To this account should be charged rails, ties, spikes and fastenings, and the labor of grading 
 roads and tracklaying in advancing work. Repairs to track should be charged to Haulage and 
 Hoisting under Maintenance of Way. 
 
 Purchases of track material should be charged to Track Material Account, and as the material 
 is taken into the mine it should be credited and charged Tracklaying. 
 
 8. DRAINAGE. 
 
 To this subdivision should be charged the cost of labor employed in connection with the 
 ordinary removal of water from the workings of the mine, with the expense of repairs and mainte¬ 
 nance of pumps, pipe lines, drains; also the proper proportion of power used. In some regions and 
 in deep mines the tonnage of water handled and consequent consumption of power is very heavy. 
 
 In the event of a flood or extraordinary inflow of water, the expense of recovering the mine or 
 flooded workings should be shown as a special and separate charge to Operating Account. 
 
 9. VENTILATION. 
 
 To ventilation should be charged proper proportion of Power Expense to represent power 
 used in driving fans. If cross-cuts are driven narrow because of physical conditions, the yardage 
 should be charged under Deadwork. 
 
 Labor and material used in closing cross-cuts, constructing overcasts, mine doors, curtains 
 and brattice, should be charged to Ventilation; also expense of cleaning and repairing air courses. 
 Repairs and lubrication of fan and fan engine, pressure gauges, etc., etc., should be charged to 
 Ventilation. 
 
 While trappers are rendered necessary in connection with ventilation doors, their work is 
 incident to haulage of coal, and their wages should be charged to Hauling and Hoisting under 
 Conducting Transportation. 
 
12 
 
 10. HAULAGE AND HOISTING should be separated into— 
 
 1. Generation and Transmission of Power. 
 
 The proportion of expense of generating power (as set forth in note) and the construction 
 and keeping up of transmission lines and haulage circuits. 
 
 2. Care and Maintenance of Equipment. 
 
 (a) Hoisting and haulage engine repair parts, lubricants, packing and waste, and wages 
 of hoisting engineer and mechanics employed in care and repair. Hoisting and haulage 
 ropes, cage repairs, and replacements; safety devices, guides and sheaves. 
 
 (b) Care and maintenance of motors. 
 
 When motor haulage is used, repair parts and labor of care and repair. 
 
 (c) Care and maintenance of pit cars. 
 
 Labor and material used in keeping pit cars in repair. New cars replacing wrecked 
 or worn-out cars, also additional cars necessary to maintain output by reason of increasing 
 length of haul after mine has reached its contemplated output capacity. 
 
 (d) Care and maintenance of live stock. 
 
 Harness and stable supplies. 
 
 Grain and hay, and wages of stablemen and veterinary, clipping and shoeing, etc. 
 New mules replacing killed or worn-out mules should be charged to maintenance of live 
 stock. 
 
 3. Conducting Transportation. 
 
 Drivers, Boss Drivers, Motormen, Trip Riders, Couplers, Cagers and Pushers, Oilers 
 (oil and grease) Trappers and Switch Throwers, Jackmen, and that part of Hoisting Engineer’s 
 wages not charged to Maintenance and Repairs. 
 
 4. Maintenance of Way. 
 
 Repairs to roads, cleaning roads, relaying track, new ties, rollers for rope haulage, etc., etc. 
 
 11. DUMPING AND TALLYING. 
 
 Top Cagers, Pushers and Dumpers, Weigh Boss, Check Puller and Track Weighman. 
 
 12. PREPARATION. 
 
 The proportion of power used in operating screens, crushers, elevators, conveyors, picking 
 tables, spiralizers, loading booms, etc., and the cost of the labor of attendants thereon, such as 
 Inspectors, Dock Bosses, Sulphur and Slate Pickers, and the labor of disposing of waste, all material 
 and labor involved in the maintenance of repairs and replacements of such apparatus as are used in 
 the preparation of coal. 
 
 If a Washer is operated, such investment and its operation should stand by itself. The Washer 
 should be charged with the expense of operation, repairs, maintenance, insurance and its proper 
 depreciation, with the value of the raw coal passed through it, either at cost of production, or, 
 preferably, at the market value obtainable for raw coal, and credited with the out-turn of washed 
 product. 
 
 If the result is a credit balance, it should be taken into operating income as net income from 
 Washer; if it results in a debit balance, it should be deducted from operating income as loss on 
 Washer operations. 
 
13 
 
 13. RAILROAD CAR LOADING AND YARD EXPENSE. 
 
 To this subdivision should be charged: Wages of Yard Boss, Car Cleaners, Trimmers, Car 
 Riders, Car Haulers, Brakemen, and all material and supplies used by them. 
 
 The expense of maintaining and operating mine tracks, if a switch engine is employed, or if 
 switching is done by the railroad for which a special charge is made, distinct from the freight rate, 
 the expense thereof should be charged to this subdivision. 
 
 14. POWER. 
 
 The generation and transmission of power is about the only expense about a coal mine that 
 is not in total directly chargeable to some one subdivision of operating work. To generation and 
 transmission of power should be charged the wages of Firemen, Fuel Men, Ash Haulers, Water Men, 
 Pump Men, Generator and Compressor Attendants, and such part of Hoisting Engineer’s and 
 Electrician’s time, or other labor and material, as may be employed in the care, repair and main¬ 
 tenance of boilers, pumps, engines, generators, air compressors or other power-generating ma¬ 
 chinery; wire and pipe used in transmission lines, cost of water supply and all coal consumed, 
 preferably at its market value. The cost of coal to the operator for his own consumption is what he 
 could get for it in the market. If an unmerchantable product is used under the boilers, it should 
 be charged at its cost of production. If cost of fuel is not included in cost of power, the accounts 
 do not exhibit true cost. The true cost should be before the operator to induce him to estimate the 
 possibilities of effecting savings by improving his plant or boiler room practice; also to estimate the 
 possibility of effecting economy by purchasing power of outside service companies, or through 
 establishing central power plants. The tonnage consumed per annum under own boilers by large 
 producers is very large, and the cost thereof should be clearly shown. 
 
 If outside power is purchased, it should be charged to Power. 
 
 The expense of power should then be distributed to the different subdivisions of Operating 
 Expense, in accordance with the proportion of power employed in each section of the work. 
 
 Mining, under the subdivision Undercutting, should be charged with the proportion of power 
 applied to machine operation. 
 
 Haulage and Hoisting should be charged under Generation and Transmission of Power, with 
 its proportion of power-house expense, as represents the power used by hoisting engines and haulage 
 engines and motors. 
 
 Under the subdivision Preparation should be charged the power used for shaker screens, 
 picking tables, etc., etc. 
 
 Ventilation should be charged with the share of expense of power house, in accordance with 
 the power used for driving fans. 
 
 Drainage, with the proper proportion of power used in pumping water from the mine. 
 
 The above suggestion that the expense of power should be distributed to the various subdivi¬ 
 sions of the work may appear difficult to the accountant, and in small operations such distribution 
 may be a needless refinement; and in such cases power may well be shown as an undistributed 
 item of operating expense. 
 
 However, in large operations, the cost of power is a large item, and the making up of a heat 
 and steam balance will not be difficult to the well-informed engineer or electrician. 
 
 The measurement of fuel and water and steam generation, compared with the useful work 
 being done, will prove fruitful in results. Such time and effort is well spent, as it leads up to the 
 detection of steam line leakages, engine cylinders and valves in bad condition, insufficient power 
 circuits, bad track bonding, etc., etc. The coal operator who wastes coal by overlooking prevent¬ 
 able losses is like the merchant who consumes his own stock. 
 
 David Moffat Myers, in his very lucid and valuable book entitled “Preventing Losses in 
 Factory Power Plants,” well says: “Just as the expert accountant is able to analyze the expenditure 
 of one hundred dollars in a business enterprise and to show where some of them are wasted or mis- 
 
14 
 
 spent, and finally to strike a true balance between income and expenditure, just as truly and with 
 as great a degree of accuracy a trained engineer may analyze and balance the expenditure of energy 
 from the original one hundred per cent income or input, to the final machine horsepower hours of 
 useful work, and in so doing he may point out where certain portions of this energy are misspent or 
 wasted, and how they may be saved and converted into useful work.” 
 
 “There does not exist a power problem that is not capable of solution by the intelligent applica¬ 
 tion of these principles of analysis.” 
 
 15. REPAIRS TO BUILDINGS AND STRUCTURES. 
 
 To this item should be charged labor and material used in repairs of permanent buildings and 
 structures of the surface mining plant. 
 
 16. SUNDRIES. 
 
 Small and unimportant items of expense not easily distributable to the above subdivisions of 
 Expense. 
 
 NECESSITY OF CONTINGENT RESERVE. 
 
 In the case of permanent enterprises, the funds derived from charges to operating cost to 
 cover depreciation and depletion are to replace plant and equipment becoming worn out or obsolete; 
 but in coal mining or other wasting enterprises, the purpose of such fund is to replace and redeem 
 the capital invested in the wasting assets, and such duty of redemption fully taxes the allowable 
 charges for depletion and depreciation. 
 
 As a general rule, the buildings and major items of plant and equipment placed at a coal mine 
 are calculated to last, and, with proper care and repair, do last the life of the mine, and therefore 
 obsolescence of coal mine plant and equipment results more often from accident than by installation 
 of new appliances. Depletion and depreciation are items of prime cost that can be measured with 
 reasonable exactness and properly provided for by charges to current expense of operation; but 
 coal mining is a hazardous business, and in some regions extra hazardous, and obsolescence being 
 a contingency, common prudence dictates, in order to avoid possible financial embarrassment, that 
 there should be periodically reserved and built up from net income sufficient provision to meet 
 any probable contingency. Such reserve is not an item of current cost, and therefore not deductible 
 in determining taxable income, but the cost upon the realization of the contingency is a proper 
 charge to current expense, and should then be so charged, and not charged to contingent reserve. 
 
 The increase in current expense, by reason of such happening, will reduce current net income, 
 and therefore a corresponding amount, or as much thereof as may be possible, should be transferred 
 from contingent reserve to Profit and Loss. 
 
 The general conditions existing, and the experience of any mine or mining region, will dictate 
 to the operator the necessary provision for contingencies. 
 
 Though maintenance expense is practically a constant factor of current expense in coal mining, 
 prudence also suggests in accordance with the peculiarities of each case the segregation from income 
 of a maintenance reserve. 
 
 BALANCE SHEET. 
 
 The balance sheet should show the exact details of the financial condition of the business and 
 be, at the same time, an historical narrative of the enterprise. 
 
 The value of the balance sheet will be in exact measure of the time spent on its production and 
 consideration. The more put into a balance sheet, the more can be gotten out of it. 
 
 A suggestion as to a pro forma balance sheet is submitted herewith, which each operator can 
 well build on in accordance with the peculiarities of his particular case. 
 
15 
 
 ASSETS 
 
 Coal Mining Property 
 
 An account with each mine showing surface lands, coal 
 owned in fee or leaseholds, plant buildings, power plant, 
 miscellaneous equipment.... 
 
 Less Depreciation.. 
 
 Material and Supplies Accounts 
 
 An account with each mine showing the various stocks, 
 such as mine timber, track material, machinery repair 
 parts, etc., etc___ 
 
 Other Mining Property 
 
 Lands, houses, store buildings, connected with above 
 property but not actually employed in mining coal_ 
 
 Less Depreciation_ 
 
 Other Real Estate 
 
 Real estate and improvements thereon, owned but not 
 connected with mining property, less Depreciation of 
 Improvements_ 
 
 Undeveloped Coal Lands 
 
 Coal owned, or leaseholds not practically workable 
 through existing development, to be developed by 
 future openings_ 
 
 Other Investments 
 
 Stocks, Bonds, etc- 
 
 Deferred Charges 
 
 Insurance premiums or other advances account of opera¬ 
 tion, properly extinguishable by ensuing charges to 
 operating expense; also discounts on bonds or securities 
 sold, properly extinguishable by periodical charges_ 
 
 Advances 
 
 Advances to subsidiaries and others of a temporary 
 nature pending disposition or settlement_ 
 
 Accounts and Bills Receivable—Slow 
 
 Due from trade customers, representing accounts or 
 notes under extension or for any other reason not im¬ 
 mediately available____ 
 
 Accounts and Bills Receivable—Current 
 
 Available in due course of maturity for customers’ and 
 other accounts.___ 
 
 Cash on Hand— 
 
 Balances in banks and in offices___ 
 
16 
 
 LIABILITIES 
 
 Bonds or Mortgages 
 
 Classified in accordance with terms of issue, whether 
 direct or assumed obligations... 
 
 Deferred Liabilities 
 
 Accrued interest, taxes, employers’ liability, etc., etc... 
 
 Depreciation and Depletion 
 
 In account for each mine, accumulated by periodical 
 charges to the operating account of each mine and 
 credited hereto, which will show as credits on trial bal¬ 
 ances, but show in final balance sheet deducted from 
 cost of property_ 
 
 Notes Payable 
 
 Classified as to holders: Banks, officers or stockholders, 
 or others, for borrowed money; or given to trade 
 creditors_ 
 
 Accounts Payable 
 
 Open Accounts classified as to their nature__ 
 
 Vouchers Payable 
 
 Audited vouchers payable on account of regular opera¬ 
 tions_ 
 
 Pay Rolls 
 
 Wages accrued and unpaid to date of balance sheet_ 
 
 Capital Stock 
 
 Classified........ 
 
 Surplus 
 
 Earned or paid in, carried to permanent surplus because 
 invested in permanent assets_ 
 
 Reserve Funds 
 
 Various voluntary reserves set aside from earnings not 
 allowable deductions from taxable income_ 
 
 Undivided Profits 
 
 The earnings available for distribution as dividends_ 
 
 (The total of the above accounts covering capital stock, 
 surplus, reserve funds and undivided profits will be the 
 basis for calculation of invested capital for the current 
 year.) 
 
 Income Account 
 
 Earnings for the current year.____ 
 
17 
 
 DETERMINING INVESTED CAPITAL. 
 
 The value of mining property, representing the capital sum recoverable through charges for 
 depreciation under the Income Tax sections of the law, seldom, if ever, coincides as an exact factor 
 in determining invested capital within the intent and meaning of the sections of the law covering 
 Excess Profit and War Taxes. 
 
 The langugage of the Statute of 1917 and the Regulations thereunder were confusing, but the 
 1918 Act and its Regulations do much to guide us to a starting point in determining invested capital. 
 
 The popular opinion held at the passage of the 1917 Act—that invested capital meant net 
 worth—was natural; because if all accounting were strictly correct, net worth, or the total of capital 
 stock, surplus and undivided profits, would coincide with invested capital. 
 
 The Revenue Laws of 1913 and 1916, and Regulations thereunder, set up the rule that the fair 
 market value of mineral deposits should be the salable value thereof en bloc as of March 1, 1913, 
 or at the date of acquisition subsequent thereto, without regard to the equipment and development 
 connected therewith—obviously an unworkable and impossible rule. 
 
 It has been pointed out that a developed and equipped mine composed of various elements has, 
 if the enterprise be well-advised, a value greater than the sum of the costs of its elements. Though 
 this value is positive, it is impossible to define its nature in words. 
 
 It is not probable that many operators followed the Regulations as to setting up new book 
 values for mining property. The tax rate was low, and the Government well knew that very few, 
 if any, were claiming full depreciation as a deduction in tax returns, and therefore there was no 
 loss to the revenue. 
 
 With the enactment of the 1917 Law, however, it became necessary to define invested capital, 
 and the omission in the past to rectify book values became an immediate and definite source of 
 embarrassment and confusion to both taxpayer and the Department; and many tax cases are now 
 pending adjustment, and definite and final returns under the 1918 Law, in such cases, can not be 
 made until these adjustments are closed. 
 
 In the Regulations so far issued under the 1918 Law, there are eight articles, numbered 811 
 to 818, relative to Section 325 of the Act; and forty-one, numbered from 831 to 871, with regard to 
 Section 326, dealing from various angles with the matter of establishing rules for determining 
 invested capital, and these articles contain many cross-references. Hence, it will be appreciated 
 that it is quite impossible to deal with so complex a matter within the scope of this report, but from 
 accounting and economic viewpoints, the determining of actual invested capital in the coal industry 
 is a matter of great importance, and its extended treatment should be made the subject-matter of 
 a subsequent report. 
 
 It may be stated off-hand that the general rule is to start with the total of capital stock, surplus 
 and undivided profits and reserves that are not allowable deductions in arriving at taxable income, 
 and then proceed to test this result by scrutiny of the integrity of the book values of the assets, 
 and in testing the integrity of the book values of depreciating assets, the rule is to take the value of 
 such property at the time acquired by the present owner, to make such additions thereto as are 
 permitted by the Statute* and to deduct therefrom proper depletion, depreciation and obsolescence; 
 thus a study of the Regulations makes it plain that adequate deduction for depreciation is now 
 compulsory in determining invested capital. 
 
 BOOKKEEPING. 
 
 In the foregoing, the principles of accounting have been touched upon, and it is unnecessary to 
 write a treatise on bookkeeping, but it may be useful to refer to the main books required and to com¬ 
 ment upon the action of the various operating accounts. 
 
 The principal books of account are: 
 
 General Ledger, Cash Book, Journal, Voucher Register, Sales Register, Coal Customers’ Ledger. 
 
 The Ledger, Cash Book and Journal need no comment. 
 
 VOUCHER REGISTER 
 
 To avoid a multiplicity of ledger accounts with miscellaneous creditors from whom material 
 and supplies are purchased, the adoption of the voucher system is recommended. The Voucher 
 
18 
 
 Register appropriately ruled, both horizontally and perpendicularly to allow the entry of number, 
 name of payee, what for, date paid, and the distribution under the different headings of the amount 
 thereof to the account or accounts to which the items covered by the voucher are chargeable. At 
 the end of each month the total footing should be credited to Vouchers Payable, and the footings 
 of the various distribution columns charged to the respective accounts. Some accountants post 
 to the General Ledger direct from the Voucher Register, but we recommend a journal entry and 
 posting from the journal. 
 
 Every cash disbursement should be represented by a voucher and charged on the Cash Book 
 to Vouchers Payable, with entry of the number of the voucher and name of the payee. 
 
 Payments should be checked from the Cash Book into the When Paid column of the Voucher 
 Register; thus the controlling account in the General Ledger covering miscellaneous creditors 
 will be Vouchers Payable, and the General Ledger balance of this account will agree with the 
 total of an abstract of unpaid vouchers drawn from the Voucher Register. 
 
 SALES REGISTER 
 
 In cases where coal is consigned through from the mine, a convenient form of Sales Register 
 page is a manifest of billing with columns on the right-hand side, for the entry at General Office of 
 price and extension of amount, these pages to be carried in a loose-leaf binder until the end of the 
 year, when they should be permanently bound. 
 
 The amount of each invoice should be posted from the sales sheet to the debit of the customer’s 
 account in the Coal Customers’ Ledger. At the end of the month the total should be taken up in 
 a journal entry, Charging Coal Customers and crediting the coal sales account of the mine from 
 which the coal is shipped. 
 
 As payments are received from coal customers, they should be credited to Coal Customers in the 
 Cash Book. Names with the amounts paid by each customer entered in “Short.” From the Cash 
 Book should be posted the “Shorts” to the individual accounts in the coal customers Ledger; 
 thus the controlling account in the General Ledger representing amounts due from coal customers 
 will be Coal Customers, and the total balance of individual accounts in the Coal Customers’ 
 Ledger will support the balance in the General Ledger. 
 
 REVENUE ACCOUNTS. 
 
 COAL SALES 
 
 A Coal Sales account with each mine to be credited with the invoice value of coal sales, as per 
 Sales Register. To this account should be charged any freights prepaid and included in the invoice 
 price, and any allowances and adjustments, and this account closed out monthly to the credit of 
 Operating Account of the mine from which the coal is shipped. 
 
 RENT OF DWELLINGS 
 
 Credited with rents received. 
 
 Charged with the care, painting and repairs, taxes, insurance and depreciation. 
 
 Closed out monthly to the credit of Operating Account for the mine to which the houses belong. 
 
 FARMING OPERATIONS 
 
 Credit with the value of crops, timber cut, rents, if rented, etc. 
 
 Charge with labor and supplies, repairs to machinery and buildings, small implements, fertilizer, 
 etc., etc., taxes, insurance and depreciation. 
 
 If the farm property is identified with a particular mine, close out to the credit of the Operating 
 Account of said mine; or if not identified with a particular mine, close out to income account. 
 
 WASHER OPERATING ACCOUNT 
 
 Credit with the proceeds of washed coal. 
 
 Charge with the value of raw coal sent to the washer, labor and supplies, repairs to buildings 
 and machinery, Small tools, water supply expense, taxes, insurance and depreciation. 
 
 If identified with a particular mine, close out each month to debit or credit of Operating 
 Account of said mine. If a Central Washer plant, close out to Income Account. 
 
19 
 
 COKE PLANT OPERATIONS 
 
 Credit with proceeds of coke sold. 
 
 Charge with value of raw coal sent to coke plant, labor in and about plant, repairs, material 
 and supplies, small tools, taxes, insurance on, and depreciation of buildings. 
 
 If identified with a particular mine, close out to Operating Account of said mine. If a central 
 plant, close out to Income Account. 
 
 MERCANTILE OPERATIONS 
 
 If the store is identified with a particular mine, results of the store business should be closed 
 out to the Income Account of such mine. If not identified with a particular mine, the results of the 
 store business should be carried to Income Account. 
 
 EXPENSE ACCOUNTS. 
 
 GENERAL EXPENSE 
 
 Charge with the salaries and expenses of officers; directors’ fees, legal expense, general office 
 rent, books, stationery, telephone and telegraph; all other expenses of administration and main¬ 
 taining corporate existence. 
 
 Close out by charging to the Operating Account of each mine with such mine’s just proportion. 
 This is generally prorated in accordance with the tonnage furnished by each mine. 
 
 SELLING EXPENSE 
 
 All expenses connected with the promotion and making of coal sales; advertising; salesmen’s 
 salaries and expenses; such proportion of general officers’ salaries as are dedicated to the selling 
 department; books; stationery; printing; postage; telephone and telegraph; office rent; billing 
 and collecting of coal customers’ accounts. 
 
 Close out by charging to the Operating Account of each mine its proper proportion, usually 
 based on tonnage derived from each mine. 
 
 MATERIAL AND SUPPLIES 
 
 Vouchers covering purchases of Material and Supplies immediately used may be distributed 
 direct to the debit of operating expense, but appropriate Material and Supplies Accounts should be 
 kept of such materials as are carried in stock. For example, in many localities the purchase of props, 
 cross bars and caps depends upon the season of the year and not in accordance with current con¬ 
 sumption, and in such cases a Mine Timber Account should be opened, to which should be charged 
 the cost of timber, including freight and the cost of unloading and handling at the mine. As the 
 timber is taken below it should be credited to Timber Account and charged to Operating Expense, 
 with the expense of preparing and delivering to the working face under the subdivision “Timbering.” 
 
 The purchase of rails, fastenings, spikes and ties for track laying is always in anticipation of 
 future requirements, and a Track Material Account should be opened, to which the cost of all such 
 material should be charged, and as such material is taken below it should be credited to Track 
 Material Account and charged to Operating Expense under the subdivision “Track Laying.” 
 
 The same may be suggested as to Mining Machine Repair Parts, but in operations where five 
 or more mining machines are used, it will be found that there is little variation in the expense per ton 
 for Machine Supplies from month to month, and so far as the general accounts are concerned, 
 unless large stocks are carried, it will be proper to charge such supplies direct to Operating Expense, 
 and adjust at the end of the year by comparison of the inventory at the beginning and end of the 
 year. 
 
 MINE OPERATING EXPENSE 
 
 An account with each mine to which will be charged all expenses for labor and material used in 
 and about the mine, classified in accordance with the different accounts of work done, as hereinbefore 
 recommended. 
 
 Close out by charging to Operating Account of the same mine. 
 
 OPERATING ACCOUNT 
 
 An account with each mine to which will be credited the net realization of coal at the mine; 
 other income belonging to such property. 
 
20 
 
 Charge proportion of general expense; proportion of selling expense; transfer of operating 
 expense; royalties; depreciation and depletion; general insurance, liability or compensation 
 insurance; taxes, excluding income and war taxes. 
 
 Close out by transferring to Income Account. 
 
 INCOME ACCOUNT 
 
 To be credited or charged with balance of Operating Account of each mine, results of coke 
 plant; results of washer operation; interest received or accrued; all other income received or 
 accrued. 
 
 Charged with contingent reserve; maintenance reserve; or other reserves; income and excess 
 profits taxes; interest paid or accrued. 
 
 Close out to Profit and Loss at end of the year. 
 
 PROFIT AND LOSS 
 
 Credited or charged at end of year with transfer of balance of Income Account. 
 
 Charged with dividends paid. 
 
 Balance of this account to rest as profits applicable to dividends. 
 
 Chargeable with the transfer of such amount as it is desired to transfer to permanent surplus. 
 
 SUGGESTIONS AS TO PRICE-MAKING. 
 
 The demand for fuel fluctuates with industrial activity and seasonal temperatures; such demand 
 whether large or small, is at all times imperative. Demand for coal is not decreased by high prices 
 nor increased by low prices. 
 
 It is a condition of the bituminous coal business that more coal is demanded in Fall and Winter 
 than during Spring and Summer; the Operator has to stand by during the dull season; he should 
 figure this expense a part of his cost of production to be recovered from the consumer as compensa¬ 
 tion for his readiness to serve. 
 
 During the active season, failure of car supply, accidents and breakdowns are additional cause 
 of idle time, yet these idle days are attended with expense which has to be absorbed by the revenue 
 of the days the mine works. 
 
 The expense of the probable number of idle days should be estimated and taken into considera¬ 
 tion in making a base price for coal to be produced. 
 
 Many Operators have gone broke trying to “kill” the idle days by cutting prices. 
 
 The failure to accomplish respectable results from the Bituminous Coal Industry is mainly 
 due to disregard of a few elementary propositions. 
 
 The cost of production has to be met, and is met, if not fully out of the price collected from 
 consumers, then the deficit is met out of the producer’s capital, or if his capital be exhausted, it 
 is imposed upon his creditors. Because this last contingency has been so often realized, the credit 
 of the industry is low and coal securities as a class have no standing. 
 
 Though from time to time unusual conditions supervene, permitting operators (who have 
 been able to survive since the last time of unusual conditions) to partially recover their operating 
 losses, such circumstance is purely fortuitous and not creditable to the men in the industry. 
 
 The coal business should be profitable at all times, and can be made so, if operators will base 
 their commercial policies upon the requirements of the industry, with due regard to the cost of 
 doing business. 
 
 Every operator to be successful must, in his selling policies, take into consideration his cost 
 of production under proper and conservative methods of mining, and the upkeep of mine workings, 
 building and machinery in safe and efficient condition—and with due regard to the safety of men 
 employed and to the wage scales and conditions provided in the contract with the miners, the 
 reserves necessary to provide for the payment of debts and to redeem the invested capital and to 
 pay a fair return thereon. 
 
 The reserves necessary for the payment of taxes, insurance and indemnity for killed and in¬ 
 jured employees and the other contingencies of the business. 
 
 Any coal operator can settle the question as to the necessary charge for capital redemption 
 in a practical and reasonable way by adding investment and liabilities together and deducting 
 therefrom quick and realizable assets. The remainder is the amount which must be recovered by 
 
21 
 
 the operation of the property. In some cases it may be more than authorized depletion and depre¬ 
 ciation. 
 
 It must be gotten out of the proceeds of coal sold—there is no other way to get it. 
 
 This amount, divided by the estimated number of tons available through the present shafts 
 or openings, will give the amount per ton necessary to include in the cost of coal to be recovered 
 in the selling price. 
 
 Indemnity for killed and injured workmen is an inevitable item of cost, and provision for this 
 must not be overlooked, either by those who carry insurance and pay a premium, or those who meet 
 this cost out of a fund set up for that purpose. 
 
 Society has always borne the burden, indirectly and inadequately, but statutes passed by 
 State and Federal Governments providing for workmen’s compensation are evidence that public 
 policy now sanctions the assumption of this indemnity in a businesslike and adequate manner. 
 
 These laws are not for the purpose of penalizing industry, but for the purpose of enabling the 
 recipient of indemnity to collect at the source. It is, of course, expected that the employer will so 
 arrange his affairs as to recover this with his other expenses in the price received for his coal. 
 
 It may be safely predicted that before long workmen’s compensation will, bylaw, be obligatory 
 upon all employers. At this time none of the laws nor their administration is satisfactory, either 
 to labor or capital—and amendments are constantly being sought. Before long the matter will 
 have to be taken up and settled definitely, and a careful study of the questions involved, based on 
 experience, is important, so that we may properly present our arguments and intelligently influence 
 legislation so as to get the laws just and equitable to all interests involved. Until then, and after¬ 
 wards, no Operator should fail to include a liberal provision for this cost in his selling price. 
 
 CONCLUSION. 
 
 In submitting the foregoing suggestions as to a Standard System of Accounting and Analysis 
 of Cost of Production, we fully appreciate that many operators have highly developed systems with 
 which they are fully justified in being well satisfied, but we are sure that the advantages of uniformity 
 of practice will appeal to them. 
 
 The many whose accounting methods leave much to be desired will derive the most benefit 
 from adopting a proper accounting system. They will know better how they stand, what they must 
 have to cover their requirements, and proper accounting will help them to exercise the tenacity 
 and perseverance requisite for the salvation of their capital and to win a proper return thereon. 
 
 An accounting system will not run itself, nor in itself reduce costs, nor increase efficiency; this 
 is up to the operator himself; he must study and compare, vitalize the figures, and act on the facts 
 they illuminate. 
 
 We realize that those who do not understand accounts or like accounting are apt to be dis¬ 
 dainful of accounts and statistics and to overestimate the expense and labor involved in proper 
 accounting; but the business that is run without a proper accounting system is subject to hap¬ 
 hazard financing and courting disaster. 
 
 Furthermore, the operator who conducts his selling campaigns without due regard to the 
 requirements of the industry as a whole, as reflected in the cost of doing business, is an unfair com¬ 
 petitor. 
 
 We respectfully submit this report with the hope that the suggestions therein contained will 
 be helpful in accomplishing that important work in which so much interest has been expressed. 
 
 Chicago, Illinois, 
 May 21, 1919. 
 
 C. E. Bockus 
 Thos. T. Brewster 
 W. M. Henderson Committee 
 J. C. Osgood 
 Erskine Ramsey 
 W. B. Reed, Secretary 
 
22 
 
 SHORT FORM 
 
 Coal Company 
 
 Income Statement, Month of, 1919. 
 
 Tons of Coal Produced, realizing net at mine _ __ _ 
 
 
 
 
 
 
 
 General Expense 
 
 Administration expense__ _ 
 
 
 
 
 
 
 
 Selling Expense 
 
 All exnenses of sales denartment- 
 
 
 
 
 Mine Operating Expense 
 
 
 
 
 
 (a) Wages and compensation of all 
 employees in and about the mine 
 
 (b) Material and supplies— 
 
 All material and supplies con¬ 
 sumed in and about the mine.. 
 
 
 
 
 
 
 
 Employer’s Liability 
 
 Premiums on policies if insurance is cf 
 vision as niav be made therefor, if no ir 
 
 irried, or such pro- 
 lsuranee is carried 
 
 
 
 
 Fire, Boiler and Tornado Insurance 
 
 Premiums on policies, or provision if self-ins 
 
 Depreciation and Depletion 
 
 A definite provision, preferably a fixed charg 
 redeem canit.al 
 
 ured. 
 
 
 
 
 e per ton to 
 
 
 
 
 Taxes 
 
 Proper provision for Federal, State and Local Ta: 
 
 Interest 
 
 Interest accrued on outstanding interest-bearing o 
 tions or other interest paid during the period cover 
 the cost sheet _ 
 
 KCS 
 
 
 
 
 bliga- 
 ed by 
 
 
 
 
 Total _ . 
 
 
 
 
 Margin on Coal_ ... 
 
 
 
 
 
 
 
 Other Income 
 
 
 
 
 
 
 
 Total Income for Month 
 
 Contingent Reserve 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Net Income for Month 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23 
 
 COST 
 
 
 
 LABOR 
 
 SUPPLIES 
 
 TOTAL 
 
 Amount 
 
 Per Ton 
 
 I. 
 
 1 
 
 Mine . _ - ... _ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Operating Expenses 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 2 
 
 3 
 
 4 
 
 5 
 
 6 
 
 7 
 
 8 
 9 
 
 10 
 
 11 
 
 12 
 
 13 
 
 14 
 
 15 
 
 16 
 
 17 
 
 18 
 
 19 
 
 20 
 
 Mine Office_ - 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Superintendence ... 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Engineering_ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Mining. . _ _ _ 
 
 
 
 _ 
 
 
 
 
 
 
 
 
 
 
 
 Timbering_ .. .. _ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Deadwork_ _ _ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Track Laying.... 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Drainage_ _ . 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Ventilation_ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Haulage and Hoisting._ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Dumping and Tallying.. __ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Preparation_ _ — 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Railroad Car Loading and Yard 
 Expense____ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Power_ _ .. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Repairs to Buildings and Per¬ 
 manent Structures. ___ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Sundries .. . . ____ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 21 
 
 Total Mine Operating Expense 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 22 
 
 23 
 
 24 
 
 25 
 
 26 
 
 27 
 
 28 
 29 
 
 General Expense__ . _ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Officers’ Salaries and Expense. . 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Other Salaries.. .. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Rent and Miscellaneous Office 
 Expense_____ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Legal Expense .. ... 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 30 
 
 Total General Expense 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 31 
 
 Total Operating and General 
 Expense (add lines 21 and 30) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 32 
 
 33 
 
 34 
 
 35 
 
 36 
 
 37 
 
 38 
 
 39 
 
 40 
 
 41 
 
 42 
 
 Selling Expense _ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Officers’ Salaries and Expenses _ 
 Salesmen’s Salaries and Expenses 
 Other Office Salaries . . _ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Rent and Other Office Expense 
 Advertising__... .. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Commissions_ . . 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Miscellaneous__ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 , 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 43 
 
 Total Selling Expense 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 44 
 
 Total Operating, General, and 
 Selling Expense (add 31 and 43) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 45 
 
 46 
 
 47 
 
 48 
 
 49 
 
 50 
 
 51 
 
 52 
 
 53 
 
 Other Operating Charges_ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Royalty.. .. . . _ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Depletion Reserve_ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Depreciation Reserve._ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Insurance—General _ __ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Insurance—Liability or Compen¬ 
 sation____ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Taxes (exclude Income and War 
 Profits)_ .. _ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 54 
 
 Total Other Operating Charges 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 55 
 
 Total Operating Charges (add 
 lines 44 and 54)... 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24 
 
 INCOME 
 
 — 
 
 
 Amount 
 
 Per Ton 
 
 
 
 
 
 
 
 56 
 
 57 
 
 58 
 
 59 
 
 60 
 61 
 62 
 
 63 
 
 64 
 
 Coal Sales - _ _ _. .. - _ - 
 
 TONS 
 
 
 
 
 
 
 
 
 
 Local _ _ - -- _ - 
 
 
 
 
 
 
 
 
 
 Shipped _ _ _ -- 
 
 
 
 
 
 
 
 
 
 Railroad - - - __ _ -_ 
 
 
 
 
 
 
 
 
 
 To Boat _ _ _ 
 
 
 
 
 
 
 
 
 
 To Coke Plant __ _ 
 
 
 
 
 
 
 
 
 
 To Washer _ . -- _-__- 
 
 
 
 
 
 
 
 
 
 To Power Plant_____ -_- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 65 
 
 Gross Sales ____ - 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 66 
 
 67 
 
 68 
 
 69 
 
 70 
 
 Deductions __ -- - _ 
 
 
 
 
 
 
 Less Freight Prepaid - - - _ _ . ._ 
 
 
 
 
 
 
 Less Allowances and Adjustments _ - - __ _ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 71 
 
 72 
 
 73 
 
 Total Deductions _ _ _ __ 
 
 
 
 
 
 
 
 
 
 
 
 
 Net for Coal at Mine __ _ 
 
 
 
 
 
 
 Less Total Operating Charges (Line 55) - _ ... .. 
 
 
 
 
 
 
 
 
 
 
 
 
 74 
 
 Margin on Coal __ _ _ _ 
 
 
 
 
 
 
 
 
 
 
 
 
 75 
 
 76 
 
 77 
 
 78 
 
 79 
 
 80 
 81 
 82 
 
 83 
 
 84 
 
 85 
 
 86 
 87 
 
 Other Income _ _ _ . ... 
 
 
 
 
 
 
 Profit or Loss, Explosives . __ _ _ . _ 
 
 
 
 
 
 
 Smithing __ . ___ .. _... 
 
 
 
 
 
 
 Heat, Light, and Power _ __ __ 
 
 
 
 
 
 
 Dwellings and Farms . _ _____ .. _ 
 
 
 
 
 
 
 Stores _ _ .. . .. .. . . __ . _ _ 
 
 
 
 
 
 
 Profit or Loss, Washer Operations ___ _ _ . __ 
 
 
 
 
 
 
 Profit or Loss, Coke Plant. . .. . . __ . . _ . 
 
 
 
 
 
 
 Floating Equipment . __ _ 
 
 
 
 
 
 
 Railroad Equipment .. __ _ _ _ .. . . . _ .. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 88 
 
 Total Miscellaneous Income_ _ _ .. _ 
 
 
 
 
 
 
 
 
 
 
 
 
 89 
 
 Gross Income (Add lines 74 and 88)__ __ _ _ 
 
 
 
 
 
 
 
 
 
 
 
 
 90 
 
 91 
 
 92 
 
 93 
 
 94 
 
 95 
 
 96 
 
 Charges to Income__ _ .. . _ _ 
 
 
 
 
 
 
 Interest. . __ _ _ . . __ 
 
 
 
 
 
 
 Income and War Tax.. __ . ... ... . 
 
 
 
 
 
 
 Contingent Reserve__ . . ___ _ . _ . 
 
 
 
 
 
 
 Maintenance Reserve . _ . . . . .. . . _. _ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 97 
 
 Total Charges to Income_____ _ 
 
 
 
 
 
 
 
 
 
 
 
 
 98 
 
 Net Income (subtract 97 from 89)_ __ . __ __ . 
 
 
 
 
 
 
 
 
 
 
 
 
25 
 
 COMPARATIVE AND TOTAL INCOME STATEMENT—All Mines 
 
 National Association Coal Company Month of , 19 
 
 
 Mine No. 1 
 
 Mine No. 2 
 
 Mine No. 3 
 
 Mine No. 4 
 
 Total—All Mines 
 
 Amount | Per Ton 
 
 Amount | Per Ton 
 
 Amount | Per Ton 
 
 Amount | Per Ton 
 
 Amount | Per Ton 
 
 Tons Produced. 
 
 
 
 
 
 
 
 
 
 
 
 1 Net at Mines_ 
 
 
 
 
 
 
 
 
 
 
 
 Mine Operating Expense 
 
 2 Mine Office_ . ... 
 
 
 
 
 
 
 
 
 
 
 
 3 Superintendence.__ 
 
 
 
 
 
 
 
 
 
 
 
 4 Engineering ... 
 
 
 
 
 
 
 
 
 
 
 
 5 Mining _. 
 
 
 
 
 
 
 
 
 
 
 
 6 Timbering ... _ 
 
 
 
 
 
 
 
 
 
 
 
 7 Deadwork.. ... 
 
 
 
 
 
 
 
 
 
 
 
 8 Track Laying. .... _ _ 
 
 
 
 
 
 
 
 
 
 
 
 9 Drainage. ... 
 
 
 
 
 
 
 
 
 
 
 
 10 Ventilation _ _ . 
 
 
 
 
 
 
 
 
 
 
 
 11 Hauling and Hoisting 
 
 
 
 
 
 
 
 
 
 
 
 12 Dumping and Tallying . . 
 
 
 
 
 
 
 
 
 
 
 
 13 Preparation_ 
 
 
 
 
 
 
 
 
 
 
 
 14 Railroad Car Loading and Yard Expense 
 
 15 Power_ 
 
 
 
 
 
 
 
 
 
 
 
 16 Repairs to Buildings and Permanent 
 Structures_ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 17 Sundries_ 
 
 
 
 
 
 
 
 
 
 
 
 18 _ 
 
 
 
 
 
 
 
 
 
 
 
 19 
 
 
 
 
 
 
 
 
 
 
 
 20 Total Mine Operating Expense Add 2 to 19 
 
 
 
 
 
 
 
 
 
 
 
 21 General Expense .. 
 
 
 
 
 
 
 
 
 
 
 
 22 Selling Expense... . 
 
 
 
 
 
 
 
 
 
 
 
 23 Total Mine Operating, Gen’l and 
 Selling (Add 20, 21, 22) 
 
 
 
 
 
 
 
 
 
 
 
 Other Operating Charges 
 
 24 Royalty_ 
 
 
 
 
 
 
 
 
 
 
 
 25 Depletion Reserve_ 
 
 
 
 
 
 
 
 
 
 
 
 26 Depreciation Reserve ..... 
 
 
 
 
 
 
 
 
 
 
 
 27 Insurance—General_ _ 
 
 
 
 
 
 
 
 
 
 
 
 28 Insurance—Liability or Compensation 
 
 
 
 
 
 
 
 
 
 
 
 29 Taxes (exclude Income and War Profits) 
 
 30 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 31 Total Other Operating Charges 
 (Add 24 to 30) 
 
 
 
 
 
 
 
 
 
 
 
 32 Total Operating Charges (Add 23 and 31) 
 
 
 
 
 
 
 
 
 
 
 
 33 Margin on Coal (Deduct 32 from 1 _ 
 
 
 
 
 
 
 
 
 
 
 
 34 Other Income 
 
 35 Gross Income (Add 33 and 34 
 
 
 
 
 
 
 
 
 
 
 
 Charges to Income 
 
 36 Interest_ 
 
 
 
 
 
 
 
 
 
 
 
 37 Income and War Tax__ 
 
 
 
 
 
 
 
 
 
 
 
 38 Contingent Reserve_ 
 
 
 
 
 
 
 
 
 
 
 
 39 Maintenance Reserve_ 
 
 
 
 
 
 
 
 
 
 
 
 40 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 41 Total Charges to Income (Add 
 
 36 to 40) 
 
 
 
 
 
 
 
 
 
 
 
 42 Net Income (Deduct 41 from 35)_ 
 
 
 
 
 
 
 
 
 
 
 

SUGGESTED FORM FOR DISTRIBUTION OF MINE LABOR IN CONFORMITY WITH REJ?ORT OF COST ACCOUNTING COMMITTEE OF THE NATIONAL COAL ASSOCIATION. 
 
 Notb.—N umbers in first column correspond with those on cost sheet page 23 of report as revised. 
 
 Account 
 
 No. 
 
 Class of Labor 
 
 Miners . 
 
 Helpers . 
 
 Shot firers 
 
 .tons at_ 
 
 I a Hand mining (Sub-total). 
 
 Undercutting .tons at. 
 
 Moving machines for cutters. 
 
 b Undercutting (Sub-total). 
 
 Machine boss. 
 
 Electricians and helpers. . 
 Blacksmith and helper... 
 Sharpening picks. 
 
 c Mining machine repairs and maintenance..... 
 
 d Pit car loading.tons at. 
 
 II e Machine mining (Sub-total), b, cand d.. 
 
 Company coal, tons only.... 
 
 1 Mining, Total a and e,-pay roll ion* produced 
 
 Pit posts and caps. 
 
 Teamster hauling same... 
 
 Unloading from railroad cars. 
 
 Sending timber into mine. is..... 
 
 3 Timbering. 
 
 Entry yardage. 
 
 Air courses.. 
 
 Cross cuts_:_ 
 
 Break throughs... . 
 Room necks... 
 
 a Narrow work (sub-total). 
 
 Clay veins... 
 
 Spars... . ’' 
 
 Horsebacks. ...'.. !.!.'!!!! 
 
 Bone.. 
 
 Shooting rock.). 
 
 Lifting bottom... 
 
 Taking down top.. . 
 
 Stowing and dumping gob. .. 
 
 Cleaning up falls and retiinbering. 
 
 Handling squeezes. 
 
 Mine fires.. 
 
 b (Sub-total)... 
 Dead Work, Total a and b. 
 
 Trackmen or roadmen (advance work). .. 
 Helpers (advance work). 
 
 5 Tracklaying 
 
 Pumpers... 
 
 Pipemen.. ) „ 
 
 Water bailers. 
 
 Water haulers. 
 
 Digging drains and sumps.... 
 
 Electricians.’ 
 
 Blacksmiths. 
 
 Other labor. 
 
 6 Drainage. 
 
 Item 
 
 Sub- 
 
 Total 
 
 * • • 
 • » • 
 • * • 
 
 * • • 
 • * • 
 
 * • * 
 • * • 
 • • » 
 • • • 
 
 * • • 
 • • • 
 • • * 
 • • • 
 • • • 
 
 • • • 
 • • • 
 
 • * » 
 • • • 
 0 0 0 
 • • • 
 * * * 
 • • * 
 0 0 0 
 • • O 
 
 Amount 
 
 Account 
 
 No. 
 
 Class of Labor 
 
 Attending fan . 
 
 Brattice man . 
 
 Masons and helpers . 
 
 Sprinkling ... 
 
 Fire bosses ... 
 
 Cleaning air courses . 
 
 Safety lamp attendant. .:. 
 
 Repairs to fan . 
 
 Repairs to other ventilating equipment. .. 
 
 Repairs to safety lamps . 
 
 Item 
 
 Sub- 
 
 Total 
 
 7 Ventilation. 
 
 # * 
 • • 
 
 Hoisting or haulage engines (repairs). 
 Labor of other mechanics. 
 
 a Repairs to haulage engines (sub-total). 
 
 Electrician. 
 
 Motorman. 
 
 Blacksmith. 
 
 Labor of other mechanics. 
 
 b Repairs and maintenance of motors. 
 
 Carpenters. 
 
 Blacksmiths. ; 
 
 Other labor. 
 
 C Repairs and maintenance of mine cars. 
 
 Stable boss. 
 
 Helpers... 
 
 Harness repairs. 
 
 Shoeing.* 
 
 d Care and maintenance of live stock . 
 
 I Care and maintenanceofequipment,fotala,b,c& d 
 
 Boss driver. . 
 
 Drivers. 
 
 Brakemen.'' 
 
 Mortormen. 
 
 Hoisting engineer (shaft). 
 
 Haulage engineer (drift or slope). 
 
 Trip riders. 
 
 Couplers trappers.. 
 
 Greasers. 
 
 Spraggers. *...!!!!!!!!”, 
 
 Switchmen. 
 
 Drying sand for locomotives. 
 
 Bottom cagers. 
 
 II Conducting transportation. . 
 
 Roadmen—Repamng and cleaning. , 
 Helpers. 
 
 Ill Maintenance-of way (Sub-total). 
 
 8 Haulage and Hoisting, total. 
 
 Weigh master. 
 
 Dumpers... 
 
 Pushers... 
 
 Top cagers. 
 
 * Dumping and Tallying. 
 
 * • » 
 • • • 
 • • • 
 * • • 
 • • • 
 9*1 
 * • * 
 
 * • t 
 
 • • • 
 0 0 0 
 
 0 0 0 
 0 0 0 
 
 0 0 0 
 0 0 0 
 0 0 0 
 0 0 0 
 
 0 0 0 
 0 0 0 
 
 0 0 0 
 0 0 0 
 • . * • 
 0 0 0 
 
 0 0 0 
 0 0 0 
 0 0 0 
 0 0 0 
 0 0 0 
 0 0 0 
 0 0 0 
 0 0 0 
 0 0 0 
 0 0 0 
 
 0 0 0 
 0 0 0 
 
 0 0 0 
 0 0 0 
 0 0 0 
 0 0 0 
 
 Amount 
 
 0 0 
 0 0 
 0 0 
 0 0 
 
 Account 
 No. 
 
 Class of Labor 
 
 Picking table labor. 
 
 Loading boom labor. 
 
 Other preparation labor. 
 
 10 Preparation. 
 
 Yard boss. ...». 
 
 Trimmers.... .!!!!! 
 
 Checkers. 
 
 Car Cleaners.. 
 
 Brakemen.■. ..!!!!!!! 
 
 Maintaining and operating mine tracks. 
 
 11 Railroad Car Loading and Yard Expense. 
 
 Firemen. 
 
 Engineers. 
 
 Cleaning boilers. 
 
 Handling ashes. 
 
 a Generating power (Sub-total). 
 
 Bricklayers and helpers. 
 
 Masons and helpers. 
 
 Carpentere. 
 
 Electricians. 
 
 Boilermaker. 
 
 Other labor... 
 
 b Equipment repairs (Sub-total). 
 
 Sub-station attendants. 
 
 Electricians. 
 
 c Purchased power... 
 
 12 Power, total a, b and c. 
 
 Carpenters. . 
 
 Painters... 
 
 Other labor.. 
 
 13 Repairs to Buildings and Strcutures. 
 
 Item 
 
 Clerks. 
 
 Janitor. 
 
 M 
 
 Mine Office. 
 
 Superintendent. 
 
 Assistant superintendent. 
 
 Mine foreman. 
 
 Assistant mine foreman. . 
 
 Superintendence 
 Engineering. 
 
 Sending supplies to mine. 
 
 Warehouse. 
 
 Teamsters.. 
 
 Unloading supplies...... 
 
 a General outside labor. 
 
 b Welfare work at mine. 
 
 Sundries, total a, b, etc. 
 
 Total Mine Operating Expense. 
 
 Sub- 
 
 Total 
 
 Amount 
 
 • «0 
 
 0 0 0 
 
 0 0 0 
 0 0 0 
 0 0 0 
 
 0 0 
 0 0 
 0 0 
 0 0 0 
 0 0 
 0 0 
 
 0 0 
 
 0 0 
 
 0 % 
 
 0 0 0 
 0 0 0 
 0 0 0 
 0 0 0 
 
 0 0 
 0 0 
 0 0 
 
 0 0 
 4 0 
 
 0 0 
 0 0 
 0 0 
 0 0 
 
 0 0 0 
 0 0 0 
 0 0 0 
 0 0 0 
 
 0 0 
 0 0 
 • 0 
 0 0 
 
Sheet l 
 
 For Name of Compan; 
 
 19 
 
 Report of Cost, Income and Tonnage 
 
 For Month of 
 
 COST 
 
 line 
 
 No. 
 
 ACCOUNT 
 
 CURRENT MONTH 
 
 YEAR TO DATE 
 
 LABOR 
 
 SUPPLIES 
 
 TOTAL 
 
 LABOR 
 
 SUPPLIES 
 
 TOTAL 
 
 Amount Per Ton 
 
 Amount 
 
 Per Ton 
 
 Amount | Per Ton 
 
 Amount 
 
 Per Ton 
 
 Amount 
 
 Per Ton 
 
 Amount 
 
 Per Ton 
 
 1 
 
 1 
 
 2 
 
 8 
 
 4 
 
 5 
 
 (! 
 
 7 
 
 8 
 
 9 
 
 10 
 
 11 
 
 11 
 
 13 
 
 14 
 
 15 
 
 10 
 
 17 
 
 18 
 
 Mine . 
 
 Operating Expenses. 
 
 Mining . 
 
 Timbering . 
 
 Dcadwork . 
 
 Track Laying.. 
 
 Drainage . 
 
 Ventilation . 
 
 Haulage and Hoisting. 
 
 Dumping and Tallying. 
 
 Preparation . 
 
 Kallronri Car Loading and Yard ICx 
 
 porno . 
 
 Power . 
 
 Ucpnlra to Fundings and Forma 
 nont Structures. 
 
 Mine Office. 
 
 Superintendence . 
 
 Engineering. 
 
 Sundries . 
 
 
 
 
 
 
 
 
 
 
 
 
 
 10 
 
 20 
 
 Total. 
 
 Additions or deductions account of 
 sale of explosives, etc. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 •J1 
 
 Total Mine Operating Expense 
 
 
 
 
 
 
 
 
 
 
 
 
 
 21 
 
 13 
 
 21 
 
 25 
 
 28 
 
 '.7 
 
 23 
 
 29 
 
 30 
 
 81 
 
 82 
 
 Other Operating Charges. 
 
 Royalty . 
 
 Depletion . 
 
 Depreciation . 
 
 Insurance—General. 
 
 Insurance*—Liability or Compensn 
 
 tlon . 
 
 Taxes (exclude Income and War 
 Profits) . 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Total Other Operating Charge? 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Total Opel sting (add lines 21 
 and 31). 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sheet 2 
 
 For Name of Company 
 
 Report of Cost, Income and Tonnage 
 
 For Month of_ 
 
 COST 
 
 Line 
 
 Ko. 
 
 ACCOUNT 
 
 CURRENT MONTH 
 
 YEAR1TO DATE 
 
 LABOR 
 
 SUPPLIES 
 
 TOTAL 
 
 TOTAL 
 
 Amount 
 
 Amount 
 
 Amount 
 
 Per Ton 
 
 Amount 
 
 Per Ton 
 
 33 
 
 34 
 
 35 
 
 36 
 
 37 
 
 38 
 
 39 
 
 40 
 
 41 
 
 42 
 
 General Expense. 
 
 Officers’ Salaries and Expenses.. 
 
 Other Salaries. 
 
 Rent and Miscellaneous Office Ex¬ 
 pense . 
 
 Legal Expense. 
 
 
 
 
 
 
 
 Total General Expense. 
 
 
 
 
 
 
 
 Total Operating and General^ 
 Expense (add lines 32 and 41 ) 
 
 
 
 
 
 
 
 43 
 
 44 
 
 45 
 
 46 
 
 47 
 
 48 
 
 49 
 
 50 
 
 El 
 
 52 
 
 53 
 
 64 
 
 Selling Expense. 
 
 Officers’ Salaries and Expenses.. 
 Salesmen’s Salaries and Expenses 
 
 Other Office Salaries. 
 
 Rent and 0;her Office Expense.. 
 Advertising . 
 
 Commissions . 
 
 Miscellaneous. 
 
 
 
 
 
 
 
 Total Selling Expense. 
 
 
 
 
 
 
 
 55 
 
 Total Operating, General and 
 Selling Expense (add 42 & 53 ) 
 
 
 
 
 
 
 
 
 • 
 
 
 
 
 
 
 

Sheet 3 
 
 For Name of Company 
 
 Report of Cost, Income and Tonnage 
 
 For Month of_ 
 
 INCOME 
 
 Line 
 
 No. 
 
 
 TONS 
 
 CURRENT MONTH 
 
 YEAR TO DATE 
 
 Current Mo. 
 
 Year to Date 
 
 Amount 
 
 Per Ton 
 
 Amount 
 
 Per Ton 
 
 66 
 
 67 
 
 68 
 
 69 
 
 eo 
 
 61 
 
 62 
 
 63 
 
 64 
 
 Coal Sales. 
 
 Sales Per Railroad Weights. 
 
 Delivered to Locomotives. 
 
 Local Sales at Mines. 
 
 Coal Coked. 
 
 Raw Coal to Washery. 
 
 To Power Plant. 
 
 To Dwellings. 
 
 Adjustment of Inventories. 
 
 (Plus or minus) 
 
 
 
 
 
 
 
 65 
 
 Gross Sales (produced coal).... 
 
 
 
 
 
 
 
 66 
 
 67 
 
 68 
 
 69 
 
 70 
 
 
 
 
 
 
 
 71 
 
 Total Deductions. 
 
 
 
 
 
 72 
 
 73 
 
 74 
 
 75 
 
 76 
 
 77 
 
 78 
 
 79 
 
 80 
 
 81 
 
 82 
 
 83 
 
 84 
 
 85 
 
 86 
 
 87 
 
 88 
 
 Net for Coal at Mine. 
 
 Less Total Operating Charges (Line 55 ). 
 
 
 
 
 
 Margin on Coal. 
 
 
 
 
 
 
 i 
 
 j 
 
 
 
 
 Profit or Loss, Explosives ( g ee optional deduction from / . 
 
 Smithing . j operating expenses line 20 f 
 
 Heat, Light and Power. 
 
 Dwellings and Farms. 
 
 Stores . 
 
 Profit or Loss, Washer Operations. 
 
 Profit or Loss, Coke Plant. 
 
 Floating Equipment. 
 
 Railroad Euipment. 
 
 Purchased Coal. 
 
 
 
 Total Miscellaneous Income. 
 
 
 
 > 
 
 
 89 
 
 90 
 
 91 
 
 92 
 
 93 
 
 94 
 
 95 
 
 96 
 
 97 
 
 98 
 
 99 
 
 Gross Income. (Add lines 74 and 88 ).. 
 
 
 
 
 
 Charges to Income Deductible for Federal Taxes. 
 
 Interest (Paid or accrued). 
 
 
 
 
 
 Charges to Income Not Deductible for Federal Taxes . 
 
 Income and Excess Profits Taxes. 
 
 Contingent Reserve (Mining hazard). 
 
 Maintenance Reserve. 
 
 
 
 
 
 
 Total Charges to Income. 
 
 
 
 
 
 Net Income (Subtract 98 from 89). 
 
 
 
 
 
 100 
 
 Taxable Net Income (Subtract 91 from 89). 
 
 
 
 
 

 
Sheet 4 
 
 For Name of Company 
 
 Report of Cost, Income and Tonnage For Month of 
 
 Tonnage Statement—Net Tons of 2000 Pounds 
 
 (Report part tons as decimals) 
 
 CURRENT MONTH 
 
 Line No. 
 
 Disposition Made of Coal 
 
 Prepared 
 
 Mine Run 
 
 Screenings 
 
 Total 
 
 101 
 
 102 
 
 103 
 
 104 
 
 105 
 
 106 
 
 107 
 
 108 
 
 109 
 
 Invoiced to Customers— 
 
 Sales per Railroad Weights. 
 
 Delivered to Locomotives. 
 
 Local Sales at Mines. 
 
 Departmental Transfers— 
 
 Coal Coked. 
 
 Raw Coal to Washery. 
 
 To Power Plant. 
 
 To Dwellings . 
 
 
 
 
 
 110 
 
 Sub-total. 
 
 
 
 
 
 111 
 
 Add Estimated Inventory—Coal on Hand 
 and Rolling Last of this Month. 
 
 
 
 
 t 
 
 113 
 
 Total. 
 
 
 
 
 
 114 
 
 Deduct Estimated Inventory — Coal on 
 Hand and Rolling First of Month.... 
 
 
 
 
 
 116 
 
 Total Production (Divisor for Cost).. 
 
 
 
 
 
 THIS YEAR TO DATE 
 
 Line No. 
 
 Disposition Made of Coal 
 
 Prepared 
 
 Mine Run 
 
 Screenings 
 
 Total 
 
 101 
 
 1C2 
 
 103 
 
 104 
 
 105 
 
 106 
 
 107 
 
 108 
 
 109 
 
 110 
 
 Invoiced to Customers— 
 
 Sales per Railroad Weights. 
 
 Delivered to Locomotives. 
 
 Local Sales at Mines. 
 
 Departmental Transfers— 
 
 Coal Coked. 
 
 Raw Coal to Washery. 
 
 To Power Plant. 
 
 To Dwellings . 
 
 
 
 
 
 Sub-total. 
 
 
 
 
 
 111 
 
 Add Estimated Inventory—Coal on Hand 
 and Rolling Last of this Month. 
 
 
 
 
 
 113 
 
 Total. 
 
 
 
 
 
 114 
 
 Deduct Estimated Inventory — Coal on 
 Hand and Rolling First of Month.... 
 
 
 
 
 
 1 116 
 
 Total Production (Divisor for Cost).. 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 * 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 - 
 
 
 
 
 
 
 
 
 
 
 . 
 
 
 
 
 
 
26 
 
 Dr. 
 
 MINE OPERATING EXPENSE (Each Mine). 
 
 Cr. 
 
 Pay Rolls 
 
 Close out to Operating Account 
 
 Material and Supplies Used 
 
 
 Dr. 
 
 OPERATING ACCOUNT (Each Mine). 
 
 Cr. 
 
 Loss, if any, Departments connected with this 
 Mine 
 
 Proportion General Expense 
 Proportion Selling Expense 
 Mine Operating Expense 
 Royalties 
 
 Employer’s Liability paid, or Insurance 
 Fire, Boiler or other Insurance on Plant 
 Taxes (not Income) 
 
 Depreciation 
 
 Depletion 
 
 Close out to Income Account 
 
 Net for Coal at Mine 
 
 Profit on Departments connected this Mine 
 
 Dr. 
 
 INCOME ACCOUNT. 
 
 Cr. 
 
 Operating Deficits, if any 
 
 Operating Accounts 
 
 Interest paid or accrued 
 
 Interest received or accrued 
 
 Income and Excess Profit Taxes 
 
 Other Income (not Operating) 
 
 Other Federal Taxes 
 
 
 Contingent Reserve 
 
 
 Other Voluntary Reserves 
 
 
 Close out to Profit and Loss 
 
 
 Dr. 
 
 PROFIT AND LOSS (Profits applicable to Dividends). Cr. 
 
 Dividends 
 
 Transfers from Income 
 
 Transfers to Surplus