Analysis, page 196, is entered in the Dr. column. The difference in each department represents the profit. Inasmuch as in this account each department receives credit for its work at the standard prices. accepted by those who carry on its special process as a distinct trade, it should, other things being equal, gain the usual rate of profit. sometimes happens, however, that a department is not fully employed, or is worked under other disadvantages, and any such special reason for non-success must be taken into consideration.

NOTES REFERRED TO ON PAGES 219-221.

(v) The specimen Trading Account is based on the figures of that on pages 186-7, but the relative capacities of the various manufacturing departments would, of course, be altogether different.

(w) There is a well-known trade price for almost every process of manufacture (ie. a price at which the goods can be put out to work). In Yorkshire the term country work prices will be understood."

(x) Outwork includes all processes put out to work, whether by reason of pressure of trade, or because the special process is not carried on in the mill, and the amount is treated as extra cost of material.

Where the articles manufactured by the firm are all of one class, passing through exactly the same processes, the cost of Outwork may be sub-divided and added to the work of the same character done in the several departments. The total cost of each process whether done in the mill or outside, may thus be compared with the whole production year by year.

Where, however, the goods manufactured are of many different kinds, this comparison, other than in detail, will be valueless, as the cost of the respective processes will vary with the nature of the goods. For instance a manufacturer, of plain black cloth might compare the total cost of dyeing with the total goods produced, but such a comparison would be useless to a manufacturer of fancy goods, as the prices for dyeing vary largely according to colours.

(y) Packing Material is usually invoiced with the goods and afterwards returned and allowed for. It may, in some instances, more conveniently appear in Section II. as a warehouse expense. Carriage may, or may not, be paid on goods purchased, and likewise on goods sold. That paid on goods purchased properly belongs to Section I., and that on goods sold may be treated as a warehouse expense under Section II. The arrangement of these items is determined by the custom of the particular business, but should be made to correspond with the cost calculations.

(2) The headings of departments in the illustration are simply typical, and the extent and nature of the sub-division must depend entirely upon the class of business, and its own peculiarities. It is sufficient that the principle is essentially

the same in all cases.

Many of the items of the Trading Account can be apportioned to the several processes without sub-division in detail, others are already dissected in the Purchases Day Book and Nominal Ledger.

The storekeeper who has charge of the materials and stores, such as CHEMICALS, SOAP, OIL, &c., which are often purchased in bulk for use in more than one department, must make periodical returns to the counting-house of the quantities supplied by him to each. Instead of the heading Chemicals, Soap, Oil, &c., it is often, but not always, convenient to adopt the following heads, viz.:-(i.) Scouring or Milling Requisites, (ii.) Finishing Requisites, (iii.) Size, which is chargeable to the Weaving Department, (iv.) Manufacturing Oil. The latter is used for mixing with the material, and may be extended into the Goods column of the Analysis, page 196. These headings, when adopted, shew the amount chargeable to each department without further analysis.

For the sub-division of WAGES (see Wages, pages 241-5).

Time sheets may be kept by the MECHANICS, JOINERS, AND PLUMBERS, and their wages may be apportioned according to the time occupied.

The cost of MOTIVE POWER may be charged according to the machinery turned in each department, or, if preferred, the Rent, Rates, and Taxes and the cost of Motive Power may be combined, and the whole sum apportioned according to the Room and Power occupied. There is a well-known standard price for Room and Power in manufacturing districts, reckoned at so much per machine. A separate account is sometimes kept to shew the profit or loss resulting to the firm as owners of the mill and providers of Room and Power.

The floor area of the mill may be sub-divided to form the basis for apportioning the RENT, RATES, AND TAXES when treated separately. The number of GAS lights in each department may be counted, or better still, separate meters may be used.

The FIRE INSURANCE is usually apportioned in the Policy.

MILL FURNISHINGS AND REPAIRS AND RENEWALS TO MACHINERY are dissected in the Purchases Day Book and Nominal Ledger (see pages 82-93 and 158-9), except those articles which are purchased in bulk for use in several departments, and which are extended into the column headed Store.

In small concerns the whole sum of the items in the Store column may be apportioned by estimate, but, where convenient, the storekeeper should record the quantities issued by him to each department (see Mill Furnishings, dc., Stock Book). MILL BUILDING REPAIRS may usually be apportioned from the accounts rendered by those who do the work.

The DEPRECIATION in departments has been already referred to on page 215. Where it is desired to institute a system of Departmental Accounts, it will be found convenient for many things previously purchased and invoiced in bulk to be separately invoiced, and little difficulty will be experienced in getting this done if proper directions are given to the vendors when the orders are placed.

Although estimates should be avoided where possible, it must be borne in mind that, while substantial accuracy is neccessary, account keeping of this character should never require the employment of superfluous clerical labour in recording minute details that do not materially affect the result. The ordinary staff of a well-organised mill, if properly directed, can do all that is essential for the preparation of Departmental Accounts on the principle here described.

(a) It will be observed that only the wages and expenses of Pattern Making are set out in this column, no separate account being taken of the yarn consumed.

To ascertain the total outlay, a record must be kept of the yarn used and the cost thereof added to the wages and expenses. From such total outlay the amount realised from patterns sold, as shewn in the Pattern Day Book, must be deducted-thus £ S. d. 1337 3 4 700 0 0

Wages and expenses, as per analysis, page 196.
Cost of yarn (say).

Where it is not convenient to record the exact quantities of yarn handed over to the Pattern Department, the cost may be roughly computed by weighing the patterns made and charging the yarn at so much per lb.

(b) In comparing the margin of profit shown by the manufacturing account with the average margin shown by the individual calculations, the loss on goods sold at job prices, or at prices under those fixed, must be taken into account. It is well to keep a record of the loss so arising.

(c) An undue proportion of waste of material in the process of manufacture would, of course, diminish the margin of profit, but, except in cases of gross negligence, the excess of waste would not materially affect the result. A rigid check should, however, always be imposed upon the relative yield of material from the different workpeople.

RECAPITULATION.

It may be well here to recapitulate the uses and advantages of the information obtained from both the Trading Account and the Departmental Accounts.

(i.) Section I. of the Trading Account, pages 186-7, shews the surplus earned from goods sold, over and above the cost of raw material and productive wages. This surplus, when compared as a percentage of the sales with accounts of previous periods, indicates any change in the rate of profit upon goods sold, and is particularly useful when departmental accounts are not kept.

(ii.) Section II. of the Trading Account shews the standing expenses of the business classified under the most important heads, so that any increase or decrease may be detected by comparing the expenditure of each class with that of previous periods.

(iii.) From the information given in both Sections I. and II. of the Trading Account may be calculated the probable advantages that will accrue from any possible increase of the sales. The surplus of Section I. will increase or decrease in proportion with the sales, while the standing expenditure of Section II. may or may not vary, according to the circumstances of the case.

(iv.) The Manufacturing Account, Section I., pages 194-5, shews the gross selling profit, or, in other words, the aggregate margin of profit obtained after deducting the cost of manufacture (d) from the sale price.

(v.) The Manufacturing Account, Section II., shews whether the individual processes or departments of manufacture are being carried on economically, in other words, shews the Machinery profit or loss. These accounts also furnish full information as to the cost of Warehousing, Distribution, and Finance.

The experience of an Accountant, who has extensive practice amongst manufacturers, enables him to determine the precise rates of percentage and margins of profit, in respect of the foregoing accounts, that prevail in the various classes of trade for the time being.

When it is remembered that a very small miscalculation or omission in fixing prices, or careless and incompetent supervision in one or more departments, will often change a handsome profit into a serious loss, the importance of the information which may be derived from skilled manipulation of these accounts is obvious. In disclosing with certainty the exact cause of every fluctuation of profit or loss, they may be said to answer every object for which account keeping of this character is designed.

(d) The calculation of the cost of making the goods being based on what other concerns of a like nature are charging for the processes, all doubt is removed as to the sufficiency of the sale prices. The actual cost of manufacture may, and often does, exceed the standard charges, but such increased cost will appear as a loss in the departments; it does not add to the selling value of the goods.

In cases where a business has paid well in the past, but the profits of which have declined for causes not entirely perceptible, the application of these accounts has often rendered great assistance in diagnosing the ailments of the concern. The secret of declining profits has been revealed and in several instances this discovery has had the effect of restoring prosperity to a failing business. It is, however, essential that the person who is called upon for advice of this character should thoroughly understand the organisation and working of the business, practically as well as financially. Others will stumble at almost every step over obstacles which are easily surmounted by those who know the nature of the ground that they have to traverse.

In leaving this subject it may be stated that the plan above described, modified to suit particular requirements, has for many years. been in successful operation in almost every class of Textile Manufacturing, and that it is carried out with perfect ease, even in concerns of the most intricate character. Therefore, if the general outline of the plan be properly understood, it may be taken for granted there will be no insuperable difficulty in the details of its application.

Before closing this chapter it may be well to offer a few remarks

as to

VOLUME AND VALUE OF PRODUCTION,
AND DECIMAL CALCULATIONS.

In nearly all manufacturing concerns it is desirable to take account of the volume, as well as of the value of the goods produced, and to compare the one with the other. Prices often fluctuate considerably, and more expensive goods may be manufactured in one period than in another. Therefore, if values alone are regarded, misleading conclusions may be arrived at.

It is generally inexpedient to introduce quantities into the financial books, although it may be done with advantage in simple cases. Perhaps the simplest manufacturing accounts are those of a Cotton Spinner who produces one class of yarn, and there is no objection to placing the weights of raw cotton bought in the Purchases Day Book and carrying forward the total weights into the Cotton Purchases Account in the Nominal Ledger. The weights sold may also be cast up in the Sales Day Book and entered in the Sales Account. By adjusting the weights in stock at the commencement and at the end of the given period, the total consumption of raw material, and the total production of yarn may thus be shewn both in volume and value.

Where varieties of yarn are produced it is necessary to classify the quantities of each, and this cannot be conveniently done in the financial books.

The cost of the various items of expenditure, per piece or per lb. of the production, is much more readily compared with the corresponding figures of other periods when reduced to decimals.

Thus, the weight of yarn produced may be (say) 1,001,272 lbs., value £36,504 14s. 2d., or 8.750d. per lb.; the cost of raw material £21,381 6s. 7d., or 5'125d. per lb. of yarn produced; the cost of wages £6779 8s. 11d., or 1625d. per lb. of yarn produced; and so on with the other expenditure.

These decimal figures may be placed alongside of the several items of the Trading Account, either of the whole concern or of its several departments. Where the expenses cannot be calculated on the basis of the quantity they may be reckoned as percentages of the value of goods produced.

It must be remembered that the comparison of expenditure with either the volume or value of the production as a whole is more or less unreliable, according to the variety of the production. This applies equally to the Spinner and the Manufacturer. If more than one department is carried on the expenses of each should be considered separately, as the work of the given period may require more expense in one and less in another, although the quantity or value of the whole production may remain about the same.

It may here be repeated that the only method of testing the economy of manufacturing departments that the author has found to be altogether satisfactory and reliable is that already described; viz., Credit each department with standard prices for its work done, and Debit it with its proportion of the expenditure.