Auguste Lutaud.

The Business Educator (Volume 20) online

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distributed thirty or forty diplomas
to as many bright and capable look-
ing young folks who came forward as

their names were called, each receiv-
ing a "hand" after the enthusiastic
western fashion. Mr. Scovill pre-
ceded this presentation with a quiet
and forceful talk on the aims and
purposes of the school, announcing
interesting features for the future.
A young local minister served as
toastmaster, and his frequent sallies
of real wit were well accounted for by
an evident Hibernian accent. Three
silver loving cups were presented to
as many prize winners of the school.
These I think were respectively, for
results in shorthand and typewriting
efficiency, and one for all-round
school accomplishment.

By ten o'clock the gathering broke
up, and you could read in each happy
face that the occasion had paid for
itself on every count.

I have believed that the details of
this occasion would be interesting to
other school men who are looking for
good means of promoting loyalty and
enthusiasm among their students. I
do not know what the function cost
Mr. Scovill, but I am mighty sure
that whatever it was, it is a good in-
vestment. I believe too, there are
several advantages in having this
kind of gathering at the beginning of
the school year, rather than at the
end, but I do not know of anybody
besides Bro. Scovill who has thought
of this. I have been impressed also,
by several other novel ideas that this
serious faced, j'oung Illinois commer-
cial school man is putting into ac-
tion. For instance, last year he or-
ganized a course in Farm Account-
ancy, and had more than thirty to
matriculate. He has discovered that
there is a demand among the farm-
ers, for a business training that is
available onthe farm, and that not all
of these young men want to attend a
business college merely as a means
of getting city jobs. It is beginning
to percolate into the heads of a lot of
farmers, that running a farm suc-
cessfully is a business proposition,
and that adequate bookkeeping on
the farm is as necessary as it is in a
factory or a store.

This idea of adpating education to
the needs of young farmers, who ex-
pect to continue farmers, is taking a
strong hold out in these rich western
communities, and in further recogni-
tion of it, Mr. Scovill will install this
year in each of his three schools, a
course in general agriculture, as well
as farm accounting. This course has
been put under the direction of a
bright university man, who is also a
graduate of one of the best western
colleges of agriculture, and who was
himself "raised on the farm." This
young man will divide his time
among the three schools, and will in-
stall working laboratories for the
study of seeds and soils, and other
matters of practical value to young
men from the farm.

The expense of installing this new
course is not large, and there is every
indication of its success.

But this is not the only thing in
Bro. Scovill's bag of tricks. He has
engaged Mrs. Worthington, of Ster-
ling, a lady of rare ability as a writer
and speaker, and well-known
throughout the West, to conduct a
course in public speaking, debating,
etc , for trie benefit of such young
men (and women too, for Illinois is
now an equal suffrage state), who
want to learn the ways of forceful cit-
izenship. Of course, Bro. Scovill's
progressive activities are warmly
seconded by the solid men of his
community, and the local press
boosts him at every opportunity. It
is already evident that his program
is going to be a paying one in every
way. His schools are going to be a
force in his community, and he is al-
ready demonstrating what brains and
originality and persistent effort can
do in making a business college
something more than a job-getting
clerk factory. Here's wishing
strength to his elbow.

The Practical vs. It would be a

The Ideal. sorrv old world to

live in, had things been left to those
short-sighted shallow egotists, who
take pleasure in boasting that they
are "practical," and in sneering at
"idealists and theorists." We have
all listened to a lot of cock-sure talk
about the "practical", in politics,
business, statesmanship morals and
even religion. A generation ago,
your "practical politicians," like Cal
Brice and Matt Quay, and their host
of followers in both political parties,
sneered at civil service, representa-
tive primaries, and all other devices
proposed by "idealists" like Geo.
William Curtiss, Theodore Roosevelt,
and other reformers, as a means of
restraining the greed and graft of the
boss politicians. Such reforms were
denounced as the vaporings of vision-
aries. One political cynic of the old
school boldly proclaimed in the sanc-
tity of the United States Senate that
"purity in politics is an iridescent
dream." Where is this tribe of prac-
tical politicians today? Mostly in
the discard. Idealism has won.

A year ago when Woodrow Wilson
was trying idealistic means to save
us from a wasting war with Mexico,
he was patronized and sneered at by
the mouth pieces of European diplo-
macy, as a "theorist" and an "im-
practical dreamer" who would fail
because, in the scholastic seclusion
of Princeton, he had had no chance
to get practical knowledge of the
great art of diplomacy.

But Wilson, the dreamer and ideal-
ist, has scored a great victory for
peace in his dealings with Mexico,
and his, "amateur diplomacy" has

(Continued on page 28.)

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Kansas City, Mo.

Director €»f Business Course Manual Training High School.



Every Person is Entitled to Have His

Day in Court- Legal Maxim,

Various Interpretations of Law.

Having- sketched briefly some of the
different phases of Courts, in a pre-
vious article, let us next consider in
a very general way some of the va-
rious interpretations of the law in-
voked by one whoendeavors "to have
his day in court."

And first, what is law ? According
to Richard Hooker : "Of law there
can be no less acknowledged than
that her seat is in the bosom of God,
her voice the harmony of the world.
All things in heaven and earth do her
homage; the very least as feeling her
care, and the greatest as not exempt
from her power." This is a beautiful
word-picture of the ideal of law; but
so far as it can be applied to every-
day process by which human justice
is obtained, is full of sound and fury,
signifying nothing.

In contrast with the foregoing is a
description of law and its attributes
by a member of the eighteenth cen-
tury bar: "Law is law, and as-in-
such, and-so-forth, and hereby, and
aforesaid, provided always, never-
theless, and notwithstanding, Law is
like a country dance ; people are led
up and down in it till they are tired.
Law is like a book of surgery ; there
there are a great many desperate
cases in it. It is like physic; they
that take least of it are bestoff. Law
is like a homely gentle-woman: very
well to follow; very bad when it fol-
lows us. Law is like a new fashion;
people are bewitched to get into it.
It is also like bad weather; people are
glad when they get out of it."

Let us take for our definition and
consideration the statement that
"law is the sum of rules administer-
ed by courts of justice."


The term law has in English two
main senses : first, that which is of
God; and second, that which is of
man. We are particularly interested
in the second phase of the topic, and
more especially in the rules and prec-
edents that have been crystallized
through various processes for the
guidance of courts in the administra-

tion of justice and the settlement of
disputes and controversies. This
law either may be in the form of leg-
islative enactments, or it may be
what is generally known as the "com-
mon law," sometimes in a figurative
sense called the "unwritten law,"
to distinguish it from that which is
known as "statutory law." It may
be interesting to note that laws form-
ulated by legislative bodies are of re-
cent origin, so far as the history of
mankind is concerned, while the
common or unwritten law is proba-
bly common to all people from the
time they first united together in
bands, tribes, and communities for
their mutual protection and advance-

Judge McLean of the Supreme
Court of Mississippi has wittily said
"the common law as contradistin-
guished from statutory law, is noth-
ing more or less than common sense,
honestly applied to the practical af-
fairs of life."


The earliest notion of law, express-
ing the thought of an eminent au-
thority, was a judgment in a particu-
lar case. It was pronounced by a
king and was assumed to be the re-
sult of a divine inspiration. A repe-
tition of these decisions gave rise to
more or less definite customs which a
judgment affirmed, or whose breach
it punished. In the outset the only
authoritative statement of right and
wrong was a judicial sentence render-
ed after the fact had occurred. And
today a supreme court will not give
an opinion on the validity of a legis-
lative act before its enactment.

Then there is another conception of
its early promulgation, In the be-
ginning of every nation some historic
individual stands forth as the chief
lawgiver of that particular people or
time. The name of Moses leads all
the others; then there was Solon at
Athens Lycurgus at Sparta. Numa,
the legendary king of Rome, Alfred
of England, and similar lawgivers of
other countries, of more or less his-
toricity. These men gave ex-
pression to that which was probably
a part of the public conscience, and
is evidence of ther progress in civili-


Reverting again to the beginning of
law, it appears that in its develop-

ment, the common law has moved in
a slow but definite manner. Where it
originated, is largely conjecture and
tradition. That it is customary law
agreed to by all who came under its
authority and reaching back so far
into antiquity that its source cannot
be traced, is undoubtedly true. That
it is the product of evolution and not
legislation is well settled, but the
first vestige of society or as far back
as there are records of judicial deci-
sions, it is found that those who pre-
sided as judges assumed there was a
law not made by legislatures and that
it was a part of the life of the people.

Passing over a long period of time,
we come to Mediaeval England where
there existed at an early date organ-
ized Courts, administering justice.
The decisions of these courts in turn
became what we now call precedents,
and were followed by other courts;
their decisions expressed the concep-
tions and interpretations of what the
law was. There were many sources
whose influence in declaring the law
were effective besides the decisions
of other judges. Such were the opin-
ions of legal writers ; the teachings
of books upon religion and morality ;
and the customs ordinarily followed
in the community. Again, decisions
were based upon grounds of reason,
and public policy, and upon the prin-
ciples of right and wrong, or of jus-
tice and injustice between man and

The judges were not, technically
speaking, the source of the law, but
the means by which it was expressed.
They declared its existence. Their
opinion carried weight. They spoke
as those having authority.


Beginning in the reign of Edward
1, of England (thirteenth century and
extending to the close of the reign of
Henry VIII, the decisions of the su-
perior courts were published annual-
ly at the expense of the crown in vol-
umes called "Year Books." They
are the oldest reports of the English
law. They were written in "law
French" and the decisions of the
courts printed in these books became
the definite authority for their suc-
cessors. In the United States, deci
sions of this character are published
in volumes, called "Reports." These
reports contain an abstract of the
brief and cited authorities filed by
the lawyers on both sides of the con-
troversy; there is also a statement of
the facts and the judge's opinion and
decisions. These cases as thus re-
ported are of value as legal authority
only in their own jurisdiction, and
are thus perpetuated.

Each Stale being a jurisdiction un-
to itself, the opinions are as various
as there are superior courts render-
ing judicial decisions, and in addi-
( Continued on page 26.)


<3fo&utine&&ia4foatilZ>r %

— II II—

ii ii ii ii ii



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it .1

Irvington, N. J., High School.

ii ii — ii ii ii


Capital Stock.

The initial capital account stands
for the net investment of the proprie-
tor. It is the excess of all the assets
over the liabilities invested by the
proprietor and which are given in de-
tail in the various Goods Accounts.
This statement refers to a business
with but a single proprietor. If a
partnership, separate and distinct ac-
counts are established, showing the
net investments or contributions of
each partner.

The establishing and keeping of the
Capital Account of single proprietors
or partnerships is quite easy. Usu-
ally there is no doubt as to the exact
value of each partner's contribution.
This amount is credited to his ac-
count and any value which he may
withdraw during the accounting
period is debited to his account be-
cause it lessens the assets and conse-
quently the original contribution is
likewise decreased. Instead of a di-
rect debit to his account a Drawing
Account is sometimes established to
which withdrawals by the proprietor
are debited. The net profit as shown
by the Profit and Loss Account is
closed at the end of the accounting
period into the Drawing Account
which account is in turn closed into
the Capital Account of the proprietor.
Thus it is at the end of the account-
ing period that the proprietor's Cap-
ital Account shows the net wealth of
the proprietor in the same manner as
it did at the beginning. This ac-
count will show then the actual net
wealth, but it makes no discrimina-
tion between the original investment,
the increase or decrease due to busi-
ness operation, or anyjchanges due to
withdrawals or subsequent invest-
ments by the proprietor or partners.

The manner of handling capital in
a corporation is quite different and
not so simple. The initial entry to
the Capital Stock Account would not
necessarily represent the wealth con-
tributed by stockholders. (See ex-
ample of King& Howard given later. )
Neither are the increments to the net
wealth added each year to the initial
sum. This initial sum does not
change but remains at par value.
The Capital Stock Account repre-
sents, in corporations, the par value
at which the company was incorpor-
ated. In order to ascertain the act-
ual present worth you would have to
combine with the par value of the

Capital Stock various other accounts
which are established in the ledger.
It is these accounts which show the
changes of net wealth due to business
operation and certain other changes.
With the establishing of a new cor-
poration, subscriptions must be se-
cured for the Capital Stock as author-
ized by the charter. Subscriptions
having been obtained for the full
amount the Balance Sheet of the cor-
poration at this initial period would
be as follows:

Under some laws Form one is in
favor. The idea is that $200,000 is all
that the company has received and is
all that is of any value or guarantee
to the creditors of the corporation.
The balance is looked upon as if it
were not in existence. However, if
carefully studied, it will be seen that
Form one will not altogether fill the
bill. The argument that unissued
and unsubscribed stock ought not to
appear on the books of the company
is not altogether sound. If this stock
is non-existent what can be said of
accounts with depreciation on ma-
chinery, etc. ? Stock that is not is-
sued ought to have more value at-
tached to its reality than a deprecia-
tion account for it represents value
which can easily be secured by the
corporation if it has any period of
prosperity at all. If a corporation is
at all prosperous the sale of its un-
issued stock could easily be acquired



$300,000 Capital Stock.


The Capital Stock here has been
fully subscribed and while the total
assets of the corporation consists
simply of promises the considering
of these promises as assets is abso-
lutely correct. They are as much of
an asset as accounts receivable or
notes receivable since a legal obliga-
tion to pay for the stock has been es-
tablished by the signing of the sub-
scription list. When the subscrip-
tions have all been paid for, the Sub-
scription account will cancel and a
new asset in the form of Cash appears
upon the books of the corporation.

Let us assume that the company
desires to begin business before the
total amount of subscriptions has
been paid. Taking the case of the
above company let us suppose that
$200,000 has been received in cash for
the subscription and that $100,000
worth remains still unpaid. The
Balance Sheet in this case may ap-
pear in the following four different
ways :

during this period. While deprecia-
tion on the other hand represents a
quantity which is in every sense of
the word non-existent. Yet there is
no question as regards the appear-
ance of a depreciation account on the
booksof the company.

While unissued stock is of perhaps
no direct value to the creditors, its
appearance ought to be made mani-
fest some place on the Balance Sheet.
Forms 2, 3 and 4 give the various
methods by which it may be shown.
Form 2 is perhaps the most popular
among American accountants. This
exhibits as an asset all of the stock
still unissued. Sometimes the term,
"Treasury stock," has been used to
describe unissued stock. Some criti-
cism has been offered to this on the
ground that this term should only be
applied to stock previously issued
and subsequently reacquired. In this
form of statement the objection might
be raised that a misleading and dis-
torted statement of the exact capital

form l


Cash S200.000 Capital paid in -8200,000


Cash _ .-.$300,000 Capital Stock... 8300.000


Stock - 8100,000



Cash 8200,000 Capital Stock outstanding $200,000

Unissued Stock 8100,000 In Treasury ._ 8100 000




Cash - 8200,000

Capital authorized 8300,000

Less held in treasury 8100,000 $200,000

fSfe&ud/n^A&c/sua&r* %


of the company is shown. The mod-
ification in Form 3 however, remedies
this. Here the total authorized capi-
tal stock is shown as an important
item, and attention is also called to
the important fact that all of the
stock has not been subscribed (which
latterjitem appears among the assets.)
Form 4 is however, perhaps the clear-
est of all, in the fact that the unissued
stock appears as a subtraction from
the total authorized stock and on the
right-hand side of the Balance Sheet.

If a comparison is made between
Forms 1 and 4, very little difference
is found to exist. This does not im-
ply, however, that the ledger ac-
counts would not show a difference.
In fact, considerable difference exists,
for, in Form 1 there would be no ac-
count for Unissued Stock while in all
others, that is Forms 2, 3 and 4, an
account for Unissued Stock will be
found with a debit balance of $100,-
000, and Capital Stock will show a
credit balance for the total amount
of authorized stock, namely, $300,000.
In the ledger according to Form 1,
the Capital Account will only show a
credit balance of $20,000.

The treatment of Capital Stock
which has been issued and then re-
acquired by the company hinges on
the purpose for which the stock is
reacquired. First, if the reacquiring
of the Capital Stock is simply to re-
duce the Capital Stock Account there
is no question but that such stock
should be cancelled and deducted
from the outstanding stock. How-
ever, if such stock reacquired is not
with this intention it must be shown
among the assets.

It is often the custom that sub-
scriptions to Capital Stock are made
at premium. In the case of banks
this is quite common, and for the
good reason that such an institution
prefers to start with an excess of as-
sets over the nominal capital. In
corporations Capital Stock must al-
ways be shown at par and thus the
extra contributions to capital in the
form of premiums must necessarily
be shown in some other account.
Among National Banks the name
common to such an account is "Sur-
plus." If the premiums are not cred-
ited to Surplus or some account that
is similar, such as Reserve, the only
alternative would be to credit Profit
and Loss account, which procedure
can be seen at a glance to be unsafe,
for premiums thus acquired are cer-
tainly not genuine profits of the bus-
iness. They should undoubtedly be
kept in some account which by its
nature and caption would, on the face
of it, indicate that they were not for
the purpose of distribution as divi-

I. t-t us take the example of a part-
nership wherein the partners desire
to incorporate. We will suppose the

Balance Sheet of the partners, Mr. J.
C. King and L. M. Howard, at the
end of the fiscal year is somewhat as
follows :


Assets $12,000

Accounts rec

Bills rec 3,467-48

Merchandise 311,124

Cash lo.ood


The present worth of the partner-
ship amounts to $71,591.48. They de-
sire to incorporate and they figure
that it would be about right to capi-
talize at $h'0, 000, issuing six hundred
shares at the par value of $100 per
share. However, they possess value
to the amount (in excess of this) of

In order to show both amounts this
excess must be shown in some other
account than the capital. The most
favorable account in this case would
be Surplus Account which should be
credited for the $11,591.48. The Bal-
ance Sheet of the corporation would
then appear as follows :

ficiency account they would establish
some unmeasurable asset to meet the
contingency such as (loodwill, Pat-
ents, etc.


Mortgage $ 3,000

Accounts payable 8,000

Kills payahle

J.C.King. Prop 86,795-74

L. M. Ilnwward, Prop .36.796-74


There are times when the account-
ant encounters difficulty in ascertain-
ing whether a premium has really-
been paid. Thus an apparent sur-
plus is shown to exist when perhaps
there is none. Let us take for exam-
ple a company whose authorized cap-
ital stock is $100,000. An agreement
is made in which the possessor of a
plant consents to exchange property
valued at $90,000 and $9,000 in cash
for which he is to receive but
$90,000 in stock. On the face of
things it would seem that the
cash ought to be considered as a pre-
mium. Another way of looking at it
would be to consider that the real


Assets Liabilities

Real Estate - 812,000

Accounts Rec 18,000

Bills Rec 2,467-48

Merchandise - 39,124

Cash 10,000


Each partner has 300 of the 600
shares. This does not mean that
each has but half of $60,000, but it
means that each still owns half of the
entire net value of the business as
shown by the Capital and Surplus
Accounts. In other words each ones
share is still $35,795.74, as it was in
the partnership. The par value on
each share is $100 but the book value
of each share is about $119.31. And
this book value would of course fluct-
uate depending upon the prosperity
or adversity of the business. It can
be seen that the true valuation of the
business has been split into two ac-
counts. Various reasons for this are
as follows : First, to keep in view
the nominal capitalization and, sec-
ond, the nominal value of the share
is about the most convenient basis
for the stating of dividends by per-

Now let us suppose that these two
partners had capitalized at $75,000.
The $3,408.52 which indicates the
amount that capitalization exceeds
the true valuation must be shown as
an offset against the Capital Account.
This could be accomplished by carry-
ing two accounts on deficiency deb-
ited with the $3,408.52 and Capital
Stock credited with $75,000. In act-
ual business however, no confession

Online LibraryAuguste LutaudThe Business Educator (Volume 20) → online text (page 24 of 97)