Horace Lucian Arnold.

The complete cost-keeper; some original systems of shop cost-keeping or factory accounting, together with an exposition of the advantages of account keeping by means of cards instead of books, and a d online

. (page 1 of 28)
Online LibraryHorace Lucian ArnoldThe complete cost-keeper; some original systems of shop cost-keeping or factory accounting, together with an exposition of the advantages of account keeping by means of cards instead of books, and a d → online text (page 1 of 28)
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Some Original Systems of










Now compiled for the first time by

NEW YOW r AND- fe ewI)ON

The Engineering Magazine Press


Copyright, 1899,




I. — Preface v

Showing the present conditions which make this book

II. — The Necessity for the Factory i

An abstract of the succeeding section, which is entitled

III. — Manufacture^ and Commerce 2

Showing that employment as wage-earners in the ser-
vice of others is the inevitable form of existence for
the larger portion of mankind, and deducing the con-
clusion that advanced Factory Management is one of
the principal factors in the advancement of humanity
at large.

IV. — A Collective Production Order System 16

A simple cost-finding system, using only a single card,
and found entirely satisfactory in the small establish-
ment where it is employed.

V. — A Simple System for Duplicate Work 37

Using only five forms, and adapted for a small esta-
blishment in which a standard product in a limited
number of sizes is made.

VI. — A General System for a Medium-size Works. . . 52
Applied to the accounting for a special product, in-
cluding repairs as well as original work, and giving
very accurate results.



VII. — A Complete System for a General Iron Works. . 83
Used with great success in a works employing 300
men in general machine construction, including ma-
chine and pattern shops, foundry, smithy, and boiler

VIII. — An Elaborate System for a Highly Organized Es-


Including in-and-outdoor accounting for every depart-
ment of construction, erection, and operation. This is
exclusively a card system, and the costs are obtained
in minute detail and with much accuracy, and is fully
detailed by the originator for this work, including re-
productions of all forms. »

IX. — A Special Card System for an Electrical Works'. 292
The work of a professional expert in factory organi-
zation, and a model of simplicity and effectiveness.
This system is fully detailed by its originator and is
applicable to many situations.

X. — The Card System of Accounting 345

A general consideration of the economies and advan-
tages arising from the use of cards instead of books.


XL — General Expense Accounts 353

Including the important subjects of Inventory, Depre-
ciation, and the distribution of General Expense.

XII. — Mechanical Aids to Accounting 363

A brief description of such mechanical appliances as
have been found useful and acceptable in connection
with factory-accounting and cost-keeping.


Am I obtaining my true costs? Am I obtaining my costs
in the best form? Am I exactly informed as to all separate ex-
pense items? Do I pay too much for cost-keeping, or shall I
pay more and obtain my costs more in detail? Are there known
cost-keeping systems so much better than mine that I should
change my present methods ?

These are questions which many shop managers ask them-
selves, because they are informed as to the operation and capa-
bilities of their individual cost-keeping systems only.

Until very lately all, or nearly all, the cost-keeping systems
in use in American shops were original creations, produced by
the establishments using them.

In almost all cases the methods employed were kept secret,
hence comparisons have been, until now, impossible.

Precisely as the man who knows but one language may be
truly said to know none, so a manager who knows only his own
cost-keeping system, is incapable of fully understanding even that
one system.

Values can be fixed only by comparison. To know any one
thing fully and entirely, many other similar and related things
must be known.

This book is designed to give such an exhibition of widely
differing systems of cost-keeping now in satisfactory use, as will
afford any manager, although not himself an accountant, the
knowledge needful to an intelligent comparison between his own
methods, and cost-keeping methods in general.

Little can be gained from a mere theoretical presentation of
the essentials of a good cost-keeping system, but there is much
to be gained by an acquaintance with various different cost-keep-
ing systems which are practical successes, inasmuch as they are in
regular use by successful manufacturing establishments.


Hence this book presents first, different original cost-keeping
systems, varying in complexity from one so simple that the. entire
history of each production order is recorded on a single printed
form, up to some of the most elaborate methods known, by which
any desired degree of minuteness in subdivision of accounting
can be obtained.

These various systems of Shop Cost-Keeping, or Factory
Accounting, are so fully and completely described and illustrated
as to enable any manager, if he pleases, to install and operate them
in his own works, even though he may not be an accountant, with
entire success. In all cases every blank form is given in full and
has its actual sizes specified, together with a full exposition of
its own individual office and its relation to and influence upon
the operation of the other forms used, if such there be.

Every step in the use of these several systems is minutely de-
tailed, and when the factory production is separated from the
purely commercial operation of disposing of the factory product,
the ^commercial books are also described, and in all cases the num-
ber of men at work and the number and class of book-keepers,
clerks, messengers, time takers and so on, employed in cost-
accounting is given, so that any manager can tell about what he
may expect the use of a similar system to cost in his own estab-

The final cost-keeping system here presented is supplied by
Mr. James Newton Gunn, of Boston, wha is constantly engaged
in the installation of improved systems of cost-keeping in the
foremost American establishments, and although given as a sup-
posititious system, is practically a late installation of Mr. Gunn's
in one of the the larger American electrical shops, differing, how-
ever, in some points which are deemed of importance by its

Book-keeping can be practiced without books, and account-
ing can be performed, and is performed, in some large establish-
ments, without accountants, after a suitable accounting system has
been fully established.

Inscribed cards can be made to take the place of book entries,
and these cards have the vast advantage of serving different
offices as they pass through the works, thus saving many tran-


The use of cards is fully explained in the article on the topic,
which is furnished expressly for this book by one of the highest
authorities on the subject.

Many mechanical aids to factory accounting are in use, some
known to the public, and some unknown outside of the establish-
ments where they originated. All such devices known to the
compiler of this volume are herein fully described and illustrated,
including different forms of mechanical time recorders, dating
clock stamps, program clocks, and other mechanical aids in de-
termining shop chronology.

Various forms of computing machines are also illustrated
and described, some of them being great labor savers, although as
yet these ingenious and highly efficient devices are not very much

In brief, it is intended that this book shall furnish to the fac-
tory manager a full exhibit of the latest and most advanced
methods and appliances used in shop cost-keeping, and thus aid,
in some degree at least, in the advance of America toward its
ultimate position among the leading manufacturing nations of the


While this book is made up almost wholly of cost-keeping
systems which are in successful use in prosperous manufactur-
ing establishments, and is hence exclusively practical in its char-
acter, offering no theories or speculations whatever, but giving
only what experience has fully proved to be valuable, the author
has thought it proper to show, under the heading "Manufactures
and Commerce," why and how it comes that the factory must
exist, and the factory workman or shop hand must unavoidably
form so large and numerically important a part of the population
of all civilized countries.

At first sight, the factory or workshop employing a large
number of workmen under one management, does not seem to
be an absolute necessity. Every man is free to choose his own
line of work, and many persons, seeing a great number of work-
men giving their whole lives to the enrichment of successful fac-
tory owners, while the workmen themselves work hard and fare
but poorly, and are seldom able to save any considerable part of
their wages, and often end an industrious life in poverty, are led
to believe that the factory is not a necessity, and is not a benefit
to mankind at large. These persons, seeing all of the hardships
of the life of factory workers, often form and express the opinion
that the highest welfare of the human race demands a return to
the more simple lives of former days, when a much larger pro-
portion of the population lived on farms, and plowed and sowed
and reaped, and spun and wove wool and flax, and were compara-
tively independent of employers, the factory having hardly begun
to exist.

Because many persons entertain these erroneous convictions
concerning the best disposition which workers can make of their
labor, "Manufactures and Commerce," which is a brief but com-
prehensive exposition of industrial economics, is given here, al-
though it forms no part of actual factory accounting, and need
not be read by those who do not care for those underlying and
often not plainly perceptible motives and influences, which are


nevertheless all powerful in their action, and being all powerful
must forever direct general conduct of human affairs.

Such readers can pass directly to the first of the detailed
systems given, although the author is confident that many, very
many, factory managers are deeply interested in all that concerns
the fullest understanding of the factory, considered in its broad
relations to human effort, and are earnest in their endeavors to
add to the lives of their workmen, and hence will read with atten-
tion the few pages here devoted to industrial economics.


In the broad view, man is a microscopic parasite, possibly an
accidental product of thermal conditions, inhabiting the surface
of one of the smaller planets of a minor solar system of the uni-
verse. This wide view is not of commercial interest.

In a commercial sense, each individual man is to himself
the most important of created things, and the central figure of
existence. This narrow view is of great commercial interest, be-
cause it makes every individual of the human race a manufacturer,
producer, buyer and consumer.

Every man is conscious of certain needs and desires, and
devotes his existence to supplying those needs and gratifying
those desires, in proportion to their urgency and his own ability.
Each individual soon discovers that he is expected to give some-
thing in exchange for what he wishes to use for his own satisfac-
tion or pleasure ,and such unavoidable exchanges form the basis
which supports all trade, manufacture and commerce, as well as
all social and political structures.

The individual who can produce nothing desired by other
individuals of our race soon finds himself without the means of
supporting his own existence, and in general terms, it is true that
whatever cannot pay its owji way must presently perish.

This brings all the multifarious procedures incidental to ex-
change of values into view.

Values must exist before they can be exchanged. Hence
there must be makers before there can be users, manufacturers


before there can be traders, and articles of commercial value be-
fore commerce can send its white winged fleets across the oceans.

What, then, is value?

The essential characteristic of commercial value is the pos-
sibility of exchange, or of facilitating exchange.

There is also a value of individual use, easement and delight
inhering in some things not exchangeable, but this value belongs
to the domestic side of life or else looks toward hermitage, and
so need not be considered here where the profits expected to arise
from manufactures and commerce, and value ownership, are the
essential incentives to exertion and achievement.

Two conditions go before the possibility of exchange. First,
the articles to be exchanged must exist, and, second, those arti-
cles must be within the power, control, and handling, of those
willing to make the exchange.

Gold, still concealed in the rocky recesses of the mine, the
mahogany tree yet standing in a South American forest, iron ore
lying in the hills of Lake Superior, the unpastured verdure of a
Texas cattle range — these are possibilities of values, but they are
not actual values, because they are not yet in form for actual ex-
change. The gold must be mined, smelted and assayed, the tree
must fall before the woodman's axe, the miner's shovel must move
the ore, and the herdsman miist drive his cattle to the grassy
plains, before the possible values become actual values, ready of
exchange because they have been fitted through the agency of
human labor for human use.

This leads directly to a consideration of human labor, the
duration of which is, in general terms, the universal measure of

Industrially speaking, human labor may be defined as human
muscular eflfort, directed to the production of some article or
thing, which thing is expected to possess exchangeable value when

It is impossible, so far as is commonly known, to produce
motion without time in which to make that motion. All muscular
labor consists, broadly, of motion continued through a certain
duration of time.

Hence the possibility of labor performance depends wholly


upon time duration in the future. The labor which might have
been performed in the minute just passed in idleness, is forever
lost to the individual and to the world. The labor which may be
performed in the coming minute must begin when the minute be-
gins and continue while the minute pasess, if the minute's possi-
bilities of value gain by labor are to be realized.

Day dawns ; the laborer arises, fitted by sleep to begin his
task anew ; the possibilities of individual gain by his own labor
are befo*re him, but these possibilities of gain for the day are
abbreviated by every tick of the clock as it marks the changeless
flight of time from the unborn future to the dead past.

Mental labor cannot be measured and valued by the time
occupied in its performance. The conception of a fortunate
thought may occupy but an instant of time, yet this thought car-
ried into practice may earn money for generations to come.
Hence, although mental labor must always precede and accom-
pany the value gaining exertion of muscular labor, it is evident
that mental labor need not be taken into account here, where in-
dustrial problems wholly dependent on the flight of time form the
only subjects of consideration.

Defining human labor as human muscular effort, exerted
through a certain time duration towards the production of things
expected to have exchange value when completed, acceptance of
labor duration as the one standard for the measurement of ex-
change values of labor product becomes unavoidable.

In fewer words, labor duration measures commercial
exchange values.

Thus, roughly speaking, an ounce of gold is worth at the
gold mine ten times as much as a ton of iron ore ready for Lake
Superior shipment, because it takes ten times as much human
labor, measured in time duration, to obtain the ounce of gold as
is needed to procure the ton of iron ore.

The possibility of value is everywhere present ; the earth may
be made to bring forth its fruits, the sea holds fish, the running
river may be made to drive the factory wheels, and the winds,
so idly blowing, may be made to toil in turning the millstone or
the dynamo, but none of this possible value becomes actual value
until after it has passed into human possession, and assumed an


exchangable form through the expenditure of human labor, or
labor directed by the oversight of man. Hence while possible
values are everywhere existent, actual values are wholly depen-
dent on labor, which not only conquers all, but actually creates
all, so far as use and value to the human race are concerned, and
so makes itself the foundation of wealth, society, the state, and
continued human existence.

Admitting that exchange of values is the prime requisite of
felicitous human existence, it becomes pertinent to inquire what
exchangable values inhere in the average individual.

A new born babe is helpless, and is without present com-
mercial value ; it has a possibility of future commercial value, and
a present non-commercial individual value to its parents. At the
age of fourteen or fifteen the youth has cost a certain investment,
and in ordinary cases may be held as ready to begin fitting him-
self to take an active part in manufactures or commerce. At the
age of twenty or twenty-one the young man reaches the period of
individual effort and should be able to earn $500 yearly, of
which say $400 go to maintenance and repairs of the individual,
leaving $100 net gain, which, with money at 2^ per cent, inter-
est value, gives this young manufacturer or merchant an in-
dividual cash value of $4,000, thus making him a capitalist with
ample means to begin what may become a successful career as
a maker or seller of things, that is to say, in maunfactures or in

It thus appears that the average man has a certain value in
the form of his own labor possibilities which he can exchange
for the things needful to his continued existence.

This labor may be expended in tilling the soil, in manufac-
turing operations, or in buying and selling.

If the individual elects manufacture as his method of ex-
changing his labor for what he desires, he may conduct an indi-
vidual business, as a blacksmith, a wheelwright, a shoemaker and
so on, the limiting condition of such individually directed labor
being the value of plant demanded for successful operation.

Obviously, the individual whose only capital is his own labor,
cannot enter at once upon large operations, requiring great
expenditures of accumulated labor in form for ready exchange,
which is termed capital, or wealth.


Hence, in a vast majority of instances, the labor exchange
is effected by a sale of the labor of the individual to a second
person, v^ho directs the labor so purchased in the production of
some form of value. This method of effecting the exchange of
labor for things desired by the laborer, brings the manufacturer
and the manufactory into view.

The average individual has nothing whatever except his own
labor as a dependance for the continuance of his existence, and
for such pleasures as existence may hold for him. From this
point of view labor is clearly seen to be all, the very sum and total
of man's life on earth.

• If labor is all, the importance of the factory and the manu-
facturer, indispensible precedents to the best results of labor, be-
come second to no other potentiality. Labor is all ; it is church,
state and existence, and that nation which manages labor best,
and so obtains the greatest good for an hour of labor expended,
must inevitably rule the earth. Where labor is best managed,
there must come the most wealth, the most comfort, the best food
and the most human happiness ; the best labor management means
the highest labor hour production, and hence includes the possi-
bility of the highest labor hour recompense, and the least inter-
rupted labor employment.

Considering the factory and the factory manager as produ-
cers of exchangable values, it is at once seen that they are every-
where present. The sheared fleece of wool is the finished product
of the sheep farm and the shepherd ; this fleece becomes the raw
material of the cloth weaver and dyer, who sell their finished
product to the cloth merchant; this cloth next becomes raw ma-
terial for the clothing manufacturer who sells his finished product
of garments ready to wear to the clothing merchant ; after the
clothing has been cast off by the wearer, it may again become raw
material for the shoddy mill, and so on, to the extreme limit of
value, which is defined by the possibility of exchange, as pre-
viously shown.

Considering the manufacturer and the merchant, it is seen
that the manufacturer changes the form or constitution of the
values which he manipulates, while the purely commercial agent
does not change the form or nature of the values which he han-



dies, but changes their location and ownership, adding to the
values he handles by his own labor and foresight.

The maufacturer in most cases acts first as maker in chang-
ing the form of the values which enter his factory, and afterward
as a merchant in disposing of his finished product. In some sys-
tems of factory accounting these two functions of the maufac-
turer are separated, and two sets of accounts are kept, the one
relating to changes of value form, and the other relating to
changes of finished value location and ownership. In other cases
the factory accounts are made to include the purely commercial
transactions incident to the disposition of finished production

In some cases the manufacturer sells his entire product in
bulk to a single merchant, and so becomes a maker only, pure
and simple.

In both cases the factory accounting is the same.

Having thus briefly considered the inevitable relations of
mankind to manufactures and commerce, and defined value, the
accumulation and distribution of which is the motive of all human
effort, a limited consideration of factory practice is next in order.

Broadly, factory practice consists in adding to raw material
an increment of labor value, this union of the two values con-
stituting the finished product.

Obviously the factory must exist before the workman can
perform his duties therein, hence the first cost of the factory,
ground, buildings, and plant, forms the first element of manufac-
turing cost of expense, and the maintenance of the buildings and
plant forms the second item of expense. It is proper to say here,
that competition and improvement force frequent changes in plant
value, which includes all tools and appliances used in factory
production, because if the general average of the plant effective-
ness of a certain factory is exceeded by that of any other fac-
tory engaged in the same line of production, a condition of infe-
riority is established which, if not removed by improvement of
plant, leads to certain extinction.

Proof of this proposition is had in the continual decay of once
prosperous and renowned manufactories, which simply ceased to
advance when success came to them, forgetting that every day


sees all things of human interest bettered and improved, and that
to let well enough alone is to certainly fall behind competitors.
This assurance of future improvement gives even the most recent
manufacturing plant an uncertain value, and in the present era of
great mechanical changes, necessitates a large depreciation per-
centage in plant value in factory accounting, if present value is
to be correctly represented. Besides this depreciation by com-
parison or competition, there is a depreciation of plant due to use,
which may, where up-keep is efficient, be very small, or very
great, according to the nature of the service performed by the
plant. Whatever the plant depreciation by comparison and use
may be, the total depreciation must be fully recognized in the
factory accounting if the balances are to be regarded as true rep-
resentations of present values. This point is of the broadest sig-
nificance, and cannot be too vividly present in the. mind of the
factory accountant who desires to produce an accurate exhibit of

Online LibraryHorace Lucian ArnoldThe complete cost-keeper; some original systems of shop cost-keeping or factory accounting, together with an exposition of the advantages of account keeping by means of cards instead of books, and a d → online text (page 1 of 28)