that day and fastens to it all invoices, retained copies of orders
(accomplished as previously described) and requisitions that are entered
on said Form 17. These papers are really vouchers to this report and
should remain with it until they have been checked against it. The whole
bunch of papers is handed in to the Steward and Form 17 is checked as
soon as possible. After this is completed, the invoices and the retained
copies of our original orders which pertain to them are handled as
described under Purchase Records; their function as a part of the system
of stock records having ceased.
Consolidating Stock Transactions.
The stock record is composed of two parts—one relating to _cost_ prices
and the other to _selling_ prices. In all other respects, these two parts
are identical and are handled in the same way. Each “selling” Form 17 is
entered on a single line of the “selling” stock record, and each “cost”
Form 17 is abstracted to a single line of the “cost” stock record. One
page of the stock record (Form 27) is shown in Fig. 22. Only the left
hand page is shown; the other departments are supposed to be on a right
hand page, confronting the one shown in the cut. In cases of departments
where credit transfers do not exist, the CR column can be omitted, with a
resulting saving in space.
Checking Stock and Sales.
At the end of the month, or whenever our books are closed, we total each
column on the adding machine and enter these totals on the next blank
line, as shown, and then, when our inventory is taken, the value thereof
at selling price is computed and entered just below these totals in
the appropriate columns, and subtracted from them. The remainders, it
is evident, should equal the total sales for the period considered. In
order to compare these amounts, we now enter the total sales for each
department in its proper column and find the difference between these
figures and those immediately over them, and enter the discrepancies
at the foot of the columns. These operations are shown in the figure.
Theoretically, the amounts in the CR columns should just balance the
discrepancies in the DR columns, but in actual practice, this state of
affairs will rarely occur. The resulting net discrepancies, if small,
are due, primarily, to wastage, failure to sell exact weights, etc. If
these discrepancies are large, the cause thereof should be promptly
investigated.
It is easily seen that this scheme permits us to make a check on any
department at any time by simply taking an inventory of that department.
All other data that we need for such a check are already available, and,
as it would not take long to take an inventory of a single department,
these checks should afford us a most efficient means of keeping track
of our departments. It should be unnecessary to state that these check
inventories should be taken without warning, and, preferably, by the
Exchange officer himself.
If this system of handling stock is faithfully carried out, one of the
greatest chances for “leakage” in the Post Exchange will be absolutely
prohibited. It requires work, but no more so than any other efficient
stock record, and the results are superior to those obtained from any
other system known to the writer. If any exchange employee objects to the
system on the ground that it entails too much work, it might be safely
assumed that his real objection lies in the system’s efficiency.
[Illustration: Figure 22, (Reduced in size)]
PURCHASE RECORDS.
In most Exchanges, the custom obtains of keeping in the ledger a separate
account for each creditor, i. e., each person or firm from whom goods are
purchased. This entails an enormous amount of work, and as this work can
be done by none but an efficient employee, it also entails a considerable
unnecessary expense. In the system to be described, this work is reduced
to a minimum, and while each of our creditors has his ledger account,
this account is kept in such form as to require no duplication of our
records, and, at the same time, to tell us at any time exactly how we
stand with each of our creditors.
Purchase Orders.
Let us start with the process of ordering our merchandise. This is done
on Form 15, shown in Fig. 23. By means of carbon paper, a duplicate of
our order is entered on Form 28, shown in Fig. 24. The original goes
to our creditor as an order; these orders are numbered consecutively
throughout the year, or even over a longer space of time, should it be
found desirable. Form 28 goes to the Receiving Clerk and is held by
him on a Shannon file until the goods arrive. He then checks the goods
against this form and issues them as described under “Stock Records”.
A variation of this method, known as the “blind tally”, is worked by
making out a triplicate copy on Form 28, this copy to have the “quantity”
column blank, which is easily effected by slipping a piece of paper
above it to receive the carbon record which would otherwise be printed
in that column. The receiving clerk then has no idea of the quantities
ordered and fills in the “quantity” column himself. A comparison of
this with the duplicate (kept locked up in the office) quickly shows us
whether we received all of our goods. This system has broken up some very
obscure practices. In either system, it should be noted that we need not
await the arrival of the invoice, unless it is desired to do so, before
issuing goods to departments. The columns at the right of Form 28 are for
convenience in calculating selling prices, etc.
[Illustration: Figure 23
Natural size of sheet about 8 × 10 inches]
[Illustration: Figure 24]
As previously noted, the receiving clerk (or stock clerk, whoever handles
this work) hands in at the close of business each day, two copies of Form
17, one covering the selling price of all stock which has arrived or
been transferred during the day, and the other covering the cost price
of same. Attached to these forms are all requisitions and receiving
records (Form 28) covered by these Forms 17. The Steward sees that each
receiving record is correctly calculated and properly entered on _both_
copies of Form 17. (He, also, at this time, sees that the requisitions
are properly entered on both forms.) The receiving records are then filed
in a Shannon drawer to await the arrival of invoices or for comparison
with them if they have already arrived. For convenience, they are filed
behind alphabetical guides according to the names of our creditors. When
the invoices arrive, they are filed in the same manner and in the same
drawer. They would, therefore, naturally tend to find each other.
Before the receiving record is sent from the office to the receiving
clerk in the first place, the order is entered in our Purchase Record,
which, as its name indicates, is a chronological record of all our
purchases of merchandise of whatever sort. Hire of services, of course,
is not entered in this record.
[Illustration: Figure 25, (Reduced in size)]
There are various forms in use for Purchase Records, invoice Records,
etc., and a study of several of them leads us to advocate the use of Form
29, shown in Fig. 25 as being the best suited to the work in hand. This
is specially ruled and printed and like most of the other forms described
is as well suited to the needs of a small exchange as a large one. They
will cost about $12.00 per thousand and a good substantial binder for
them will cost from $2.75 to $11.00, depending upon the quality of the
binding. One and a quarter inch back is large enough for our purpose; the
sheets are 10¼ × 10½ inches, the former being the binding side.
When our order is first made out, we enter in the proper column of the
purchase record, the name of the firm on whom the order is drawn. This
is the only entry made at this time, and the retained copy of the order
(the receiving record) is then sent to the receiving clerk. When the
invoices arrive, they are stamped as shown in Fig. 26, the 1st and 2d
lines of this stamp are filled in, their date is entered in the left hand
columns of the purchase record and the invoices are then filed as before
described. In this way, the office keeps track of how fast the stock
is arriving, because the number of firm names entered on the purchase
record will show us the number of outstanding orders, and the number of
dated entries will show us the number of invoices that have arrived which
have not yet been checked up by the Steward (usually because the goods
have not arrived). When the goods arrive, whether they follow or precede
their invoices, and the receiving clerk has checked them into stock and
returned Form 28 to the office, the purchase price is entered in the
Purchase-Credit column shown. This purchase price disregards our cash
discount, which is cared for in the cash book. However, if there is any
allowance due us for returning all or a part of the goods on any invoice,
the amount of such rebate is entered in the Debit-Purchase column. This
is the only use to which this column is put.
[Illustration: Figure 26]
Let us suppose that we are now ready to pay a bunch of invoices. Proceed
as follows:—
1. Take the invoice file, and, starting with the letter “A”, go through
the file, taking the accomplished invoices as you come to them. All those
relating to any one firm should be found together, as before mentioned,
thus saving much time at this stage.
2. Having your invoices, make out a voucher (Form 14, Fig. 27) for each
firm or creditor concerned, entering thereon all invoices relating to
that firm. If the buying is done properly, there should be plenty of room
on the voucher for these invoices. (In case of a firm from whom we make
almost daily purchases, we hold the invoices and make one payment at the
end of the month.)
3. As you go along, have a dating stamp handy and stamp the date on
each invoice as you make out the corresponding voucher. If the invoice
is discounted, stamp the date in the “Discounted” space; if there is no
discount, stamp the date opposite the word PAID (see Fig. 26). At the
same time, enter the voucher number (which may, and probably will differ
from the invoice number) in blue pencil on the proper space of this same
stamped impression.
[Illustration: Figure 27, (Reduced in size)]
4. When all the invoices are finished, take the vouchers, and, starting
with the top one, find where each invoice is entered in the purchase
record and stamp the date in the PAID column opposite each entry. These
places are easily found by reading the invoice numbers entered on the
vouchers.
5. While you are stamping these dates, _compare, as you go along, the
amount of the invoices as entered on the vouchers, with the amounts
entered in the purchase record_.
6. Now take the vouchers and enter them in the Cash Book on the right or
credit side. In the “net cash” and “creditors” columns should be entered
the exact amounts actually paid, in the Discount column should be entered
the amount of discount allowed. Discount is always shown in the cash book
and on the vouchers in red ink, to avoid confusion with credits, which
should be shown in black.
7. After the cash book has been posted, the proper checks are made out,
ready for the signature of the Exchange Officer. They and the vouchers
are then mailed to the various creditors.
8. The paid invoices are then placed in a Shannon file drawer by
themselves where they can be consulted easily. They form a complete file
of sub-vouchers to the cash account for the month. They should never be
mailed to our creditors for the purpose of having them receipted; it
takes too much energy and time to get them back. In case our creditor
fails to return our voucher, we can still prove payment, beyond a
_reasonable_ doubt, by producing the canceled check (which he must
release sooner or later) and the original invoice exactly corresponding
to it in value. One authority goes so far as to say,—“If a check bears
no evidence as to its purpose but can readily be identified with a
particular bill or invoice, it still is a better voucher than a receipted
bill, ... a mere receipt for so much money, which can readily be forged,
is poor evidence of a legitimate payment, but a paid check, properly
endorsed and otherwise identified as representing a definite liability,
is pretty fair proof that the money has reached the creditors.” (P. 49,
Vol. 6, Enc. Commerce and Accounting.)
As a matter of fact, we sometimes experience considerable difficulty
in getting even the vouchers back from our creditors. Lieut. Schudt,
at the Fort Levett Exchange, hit upon a scheme which tends to lessen
this difficulty. This is, simply to have the vouchers printed on a card
of suitable weight; the reverse of each card being printed in the form
of a self-addressed penalty post card. Our creditor, after dating and
receipting the voucher, simply drops it into the mail box without the
additional trouble of mailing it in an envelope.
The Voucher Check System.
A much more efficient system than that just described, one which we
hope will some day be prescribed by regulations, is the “voucher check”
system. This system is rapidly forcing its way to the front through the
merits of its sheer efficiency, and is now in force in the business
administration of many large concerns, the Pennsylvania Railroad, for
example. The system is founded on the indisputable proof of payment that
is afforded by an endorsed and paid check. As one eminent authority on
auditing, has said,—“If a check bears on its face or back any indication
of its purpose, it is the best receipt for money paid that can be
secured”.
The voucher check system does away with separate “vouchers”, as we in
the Army are accustomed to think of them; the checks themselves are our
vouchers. The checks are somewhat different from the usual type, as they
bear on their face a statement of the invoices they pay. In fact, they
contain substantially the same matter as is shown on our regular voucher.
Form 30, Fig. 28, shows a voucher check that would be entirely suited
to our use. It may be unnecessary to explain, the dates, numbers and
amounts of the invoices are entered at the right in the proper spaces,
the amounts are totaled, rebates, allowances, etc., are deducted, the
discount applied to the remainder and the check proper (left hand part)
made out accordingly. Form 30a, shown in the same figure, is the carbon
copy, the original being made out in indelible pencil. The right hand or
coupon part of this duplicate is torn off, pinned to and mailed with the
original check. It gives our creditor a memo of the payment, rendering it
unnecessary for him to hold the check until he can make a special note
of the payment, thus helping him out and at the same time expediting the
process of cashing in our check. The left hand part of Form 30a remains
in the check book and performs the same function as the regulation check
stub. It will be noted that we thus save the labor usually expended in
filling out our stubs and in addition, we are not liable to accidentally
forget to fill out the stubs altogether, as sometimes happens with the
regular style of check book.
The form and size of these voucher checks lend themselves very readily to
manufacture in the same “make-up” as certain kinds of sales books, but
the ordinary style of duplicating book is probably just as good as the
more elaborate kinds. The checks should be printed three to the page and
care should be taken that the duplicate forms are “in register” with the
originals, otherwise, the carbon copy data will not appear opposite the
proper notations.
[Illustration: Figure 28, (Reduced in size)]
When these voucher checks are returned to us by our banker, we file them
in a check filing drawer, equipped with sets of monthly tabbed guides,
according to the voucher numbers, thus forming the voucher record for our
cash disbursements.
It is hard to find a weak spot in the check voucher system, but some
inspectors seem to object to it, so, until it is specifically authorized
by the War Department, the inexperienced Exchange Officer would do well
to stick to the system previously described.
To revert to our purchase record sheets: there is no necessity for noting
thereon the amount paid on each invoice or the discount on same, as is
sometimes done. This information will be shown in the cash book, and
data should not be repeated unnecessarily. The remaining two columns
(Balances) are used only when closing the books. Whenever this is done,
the balance on each order is brought out to the proper column, the amount
we owe being entered in the credit side of this column, and the amount
due us being entered on the debit side. The total of the credit side of
the Purchase column is then posted as a lump sum to the credit side of
the “Bills Payable Merchandise” account on the general ledger, and the
total of the debit side is posted to the debit side of the same account.
Ordinarily, there will be no such debit entries. It will be seen that the
net balance of the Purchase Record and of the above account should equal
the difference between the total purchases and the sum of the totals
shown in the “Creditors” and the “Discounts” columns in the cash book.
CASH DISBURSEMENTS.
The right or credit side of the cash book is, in general, of the same
form as the debit side. See Fig. 11. As all distribution of merchandise
to the various departments is made through the stock records, there is
no necessity of trying to duplicate this information on the pages of the
cash book. We, therefore, lump all merchandise payments under the heading
“Creditors” and reserve a column for such payments only. In a similar
manner, all payments for services rendered in the various departments
could be entered under a heading, “Labor”, and the proper distribution
or pro-rata share of each department could be shown on the receipted pay
roll, as explained hereafter.
Other columns that will be needed are:—Maintenance, Fixtures, Interest
and Discount, Appropriations, and Expense. All disbursements which
can not be placed in one of the other columns should be entered under
Interest and Discount. Under Appropriations, enter all disbursements
voted by the Exchange Council for Athletics, Dividends, Sick in
Hospital, etc. Under Fixtures should go all expenditures for permanent
equipment (new) of the Exchange, and under Maintenance, all money spent
for repairs, replacing of old equipment by new, and the like. In the
Expense Column we carry such items as wastage, breakage, telephone and
telegraph bills, fuel, light, insurance, printing and stationery, and
such expendable supplies as twine, paper, etc., as are used in carrying
on the business. When the Exchange Officer or authorized agent makes a
purchasing trip on purely Exchange business, his authorized expenses
should be entered in this column. Exchange Councils differ in their
interpretations of what such expenses should be, and the Exchange Officer
should have it recorded in the proceedings of the Council that such
allowances of expenses are authorized.
To sum up:—the columns of the credit side of the cash book, reading from
left to right are as follows:—Date; Description of item entered, giving
name of creditor and a clue to the articles on the invoices; Voucher
No.; Check No.; Net Cash; Discount; Creditors (or Merchandise); Labor;
Appropriations; Fixtures; Interest and Discount; Expense; Sundries, and
perhaps, one or two spare columns.
At the end of the month or when the books are closed, the totals of the
various columns are posted to the debit side of the General Ledger as
follows:—
Creditors posted to Bills Payable, Mdse.
Interest and Discount to Interest and Discount.
Discount to Interest and Discount.
Fixtures to Fixtures (Exchange or Laundry, as the case may be).
The items entered in the Expense column must be distributed, such items
as cannot properly be posted to the account of any of the departments
must be posted to the “General Expense” account in the General Ledger.
The same rule applies to Labor and to Sundries. The items in the
Appropriations column must also be distributed among the proper ledger
accounts, such as Athletics, Dividends, Sick in Hospital, etc., as the
case may be.
THE LEDGER.
General.
The ledger is the book which shows us the status of every part of our
business. It is the most important book that we keep, and, consequently,
it should be kept with great care. Every transaction, no matter how
small, sooner or later finds its way to the ledger, although it will not
be given the dignity of a line to itself. The ledger is, of course, kept
on the double entry system.
Make-up.
There are several stock forms for ledger sheets, that shown as Form 30,
in Fig. 30, being one of the best, as the center balance column saves
much space. Perhaps the most convenient size is 11¼ × 11⅞ inches, which
gives about the right amount of room in all columns. These sheets,
printed and ruled as shown, cost $12.00 per thousand, retail. Leather
tabbed indices cost $1.65 per set and a high grade ledger binder costs
$12.00, although a cheaper type, known as a “transfer” can be obtained
for a price as low as $2.75, but it would not give the service and
satisfaction of the regular type of ledger. In our system, a ledger with
a 1¼ inch back should prove of ample size.
[Illustration: Figure 30, (Reduced in size)]
Live accounts only should be kept in the ledger; as soon as an account
has been closed out, the pages containing same should be taken out and
placed in a ledger transfer binder. The same procedure should be followed
with the filled pages of live accounts just as soon as there becomes
little chance of their being consulted frequently.
Ledger Accounts.
As has been previously described, our method of handling our charge
accounts has rendered it unnecessary for us to keep a private ledger
account with each of our charge customers. To do so would be merely to
repeat information which we already possess. Also, our Purchase Record
has obviated the necessity of a separate ledger account with each of our
creditors, for the same reason.
Having no _private_ ledger accounts, it follows that this book then
becomes a “General Ledger”, holding only general accounts, such as Bills
Payable, etc.
Some of our general accounts should be sub-divided in order to give us a
better idea of what the business is doing. Take the Expense account, for
example. It is usually desirable to classify our expenses as nearly as
possible under the following headings:—
Wages,
Fuel and Lights,
Insurance,
Freight and Express on out-going goods,
Printing and Stationery,
Telephone and Telegraph,
Office, including expendable supplies used and not distributed
to departments.
Another example is Bills Payable, which is divided into Charge Accounts,
Credit Coupons, Enlisted Men’s Laundry, etc., as circumstances dictate.
A complete list of the accounts in our ledger should run about as
follows:—
1. Post Exchange (Synonyms:—Present Worth, Surplus, Net Worth, etc.).
2. Bills Receivable, Notes. (Entrance fees of incoming organizations.)
3. Bills Receivable, Charge Accounts.
4. Bills Receivable, Credit Coupons.
5. Bills Receivable, Enlisted Men’s Laundry.
6. Check Account. (Outstanding Coupons.)
7. Bills Payable, Mdse. (Or Creditors.)
8. Exchange Building. (If not a Government building.)
9. Laundry Building. (If owned by the Exchange.)
10. Exchange Fixtures.
11. Laundry Fixtures. (Including all machinery, tools, etc.)
12. Laundry. (A departmental account.)
13. Store. (Same. There should be an account for each department.)
14. Interest and Discount.
15. Insurance.
16. Fuel and Lights.
17. Freight and Express.
18. Printing and Stationery.
19. Telephone and Telegraph.
20. General Expense.
21. Depreciation. (If taken frequently.)
22. Lost Accounts.
23. Athletics.
24. Dividends.
25. Sick in Hospital.
26. Regimental Fund.
27. Wages.
28. Profit and Loss. (Or Loss and Gain.)
29. Maintenance.
Posting the Ledger.
It has been noticed that our Ledger is used but once a month or whenever
our books are closed. At this time, each account in the ledger is brought
down to date by entering the results obtained by summarizing the accounts
contained in the subsidiary books. This operation is called “posting” and
will be discussed with reference to each of the foregoing accounts. It
will be assumed, in each case, that the balance from the previous month
has been brought down correctly.