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Railroad track and mine

scales
Hospital

14. Repairs machinery

Boilers and connections
Steam lines

Stationary steam engines
Steam hoisting engines
Electric hoisting engines
Air compressors
Electric generators



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ACCOUNTS FOR MINING COMPANIES § 37



40.



41.



42.



43.



Electric locomotives


15.


Superintendent and clerks


Miscellaneous electric mo-




Proportion general and mine


tors




superintendent's salaries


Outside pumps




Mine foreman


Undergroimd pumps




Mine clerks


Outside water-lines


16.


Engineering


Underground water-lines




Mine surveyors and assis-


Outside air lines




tants


Underground air lines




Office supplies


Outside electric power lines




Outsicje expenses


Underground electric power


17.


General expenses


lines




Janitor service


Fans and fan engines




Sundry supplies


Proportion crushers, eleva-




Office fixtures


tors, etc.




Firing office heater


Tipples and screens


18.


Incidentals


Renewal wire ropes




Miscellaneous teaming


Mining machines




Pay-day expenses


Machinery inspection




Free coal


Telephone lines .




Watchman


Wagons




Guard and special service


Proportion salary general




expenses


master mechanic




Rescue apparatus


Coke Expense Accounts


Coal used




Running larry cars


Tons (ab,




Repairing larry cars and


Superintendents and clerks




tracks


Proportion general and coke




Repairing motor and power


superintendent's salary




lines


and expenses -




Repairing scales


Coke-oven foremen




Levelers


Proportion office clerks


44.


Burning and drawing


Proportion office supplies




Coke pullers


Timekeeper
Engineering




Plastering oven doors
Proportion power-house ex-


Mine surveyors and assis-




pense


tants




Proportion pumping expense


Office supplies




Repairs oven water-line


Outside expenses




Repairs, tools


Charging ovens




Charging hole covers


Proportion power-house ex-


45.


Loading coke


pense




Loading railroad cars by


HandUng coal at bins




contract


Cleaning at bins and scales




Loading railroad cars by day


Weighing charges




labor



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§ 37 ACCOUNTS FOR MINING COMPANIES



Car handlers 48.

Cleaning railroad tracks
Damage to railroad cars and

tracks
Expense and repair tools
Railroad weighman
Cost dummy doors 49.

Repairs railroad-track

scales

46. Loading cinders

LoacHng and unloading rail-
road cars
Hauling away in wagons 50.

. . Cleaning docks

Expense and repair tools
Proportion stable expense
Depreciation of animals

47. Firing cold ovens 51.

Wood used

Coal used

Charging, burning, and

drawing
Disposing of cinders



Repairs to coke ovens

Brick and fireday

Stone, lime, etc.

Cast-iron door frames

Repacking ovens

Repairs dock walls
Repairs to buildings

Slack bins

Store and tool house

Scale house

Trestles and bridges

Superintendent's office
Coke experiments

Preparing and coking coal

Transportation on samples

Cost of analysis

Laboratory equipment
Incidentals

Pay-day expenses

Watchman

Janitor service

Free coal

Telephone service and re
pairs



7. Monthly Statements. — ^From information contained
in the general ledger, supplied by monthly reports from the
mines and through adjustments of inventories, accrued items,

INCOME ACCOUNT
Blank Coal Company
191—



Exhibit.

For month of.



_191-_



Gross earnings from sale of coal and coke
Operating expenses

Net earnings from operating of mines
Add
Receipts from miners* houses, etc.
Interest, discount, and exchange
Supply-store company, dividend No.

Total income
Charges to income
Taxes
Insurance
Interest on bonds
Sinking-fund instalment
Depreciation of general plants
Personal-injury claims

Net income month of 191



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8 ACCOUNTS FOR MINING COMPANIES § 37

etc., regtdar monthly statements are made of income and
expenses. These statements are in two parts. One part shows
the income and expenses for the current month; the other part
shows the results for all the months of the fiscal year up to
the end of the month shown in the first part.

INCOME ACCOUNT
Blank Coal Company

Jan. 1, 191 to 191

Gross earnings from sale of coal and coke $

Operating expenses

Net earnings from operating oi mines $—

Add

Receipts from miners' houses, etc. $

Interest, discount, and exchange

Dividend No. on Company stock

Supp>ly-store company dividends Nos. and

Subsidiary coal company dividend No.

Total income $

Charges to income

Taxes $

Insurance

Interest on bonds

Sinking-fund instalment

Depreciation of general plants

Personal-injury claims

Net income from Jan. 1 to $



8. Balance Sheets. — ^Additional accounts are shown in
the balance sheets, one form of which is here shown.

BALANCE SHEET

Blank Coal Company and Subsidiaries

Statement of Assets and Liabilities as of_- 191

Current assets

Material and supplies, etc. $ $

Saw-mill account, Mine No. 1

Saw-mill account, Mine No. 2

Storage coke. Mine No. 2

Storage slack. Mine No. 1

Fire insurance (proportions not charged out)

Taxes, New Jersey (proportion not charged out)
United States excise tax on corporations (propor-
tions not charged out)

Cash in treasury. New York City

Cash in treasury, Home Office

Cash in hands of Trust Company of

Trustee, to pay coupcois of Coal Company

Trustee to pay coupons of (subsidiary) Coal
Company

Due from individuals and company's coal sales



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§37 ACCOUNTS FOR MINING COMPANIES

Due from individuals and company's bills colleo

tible $ $

Blank Coal Company first mortgage 6-per-cent.
bonds in treasury and owned as under;
Blank Coal Company
Subsidiary Coal Company
Current liabilities
Vouchers
Pay roUs
Unclaimed wages
Blank medical department fund
Blank Company coupons due and unpaid includ-
ing 191 coupons
Blaidc Coal Company coupons accrued due

191
Subsidiarjr Coal Company coupons due and

unpaid including 191 coupons

Subsidiary Coal Company coupons accrued

due 191

Accrued sinking fund, Blank Coal Company
Accrued sinking fund, Subsidiary Coal Company
Accrued taxes '

Net proceeds from mines, Blank payable Novem-
ber Est.
Property and improvements, Blank payable

November Est.

Property and improvements, payable Est.

United States excise tax on corporation, payable
Est.
Taxes, New Jersey, payable
Property accounts
Less charged to
Sinking fund
Depreciation of property
Securities deposited with Blank Trust Com-
pany of Trustee
Subsidiary Coal Company capital stock,

shares par value
Supply Store Company capital stock,

shares par value
Another Coal Company capital stock,
shares par value
Subsidiary Coal Company's mortgage, etc.
Additions to plants, improvements, etc.
Blank Coal Company
Subsidiary Coal Company
Securities owned, in treasury

Capital stock and first-mortgage 6-per-cent.
bonds of The Coal and Coke Company

( shares of capital stock par value $100
each)

( first-mortgage 6-per-cent. bonds denomi-
nation $1,000 each)
Capital stock of the Coal Company

shares par value
Preferred capital stock Company shares

par value



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10 ACCOUNTS FOR MINING COMPANIES § 37

Other assets

Trust Company of New York, Trustee, for $ $

Sinking-fund 5-per-cent. bonds, Blank Coal

Company-
Sinking-fund 5-per-cent. bonds. Subsidiary Coal
Company
Trust Company of New York, Trustee
Insurance account. Blank Coal Company
Insurance account, Subsidiary Coal Company
Engineering property
Boarding- and bunk-house fixtures
Improvements, home yards

Less depreciation
Improvements, Western coal yard
Capital stock
First-mortgage 5-per-cent. bonds

Blank Coal Company, less canceled by sinking

fund
Subsidiary Coal Company, less canceled by sink-
ing fund
Deferred accounts

Sinking fund. Blank Coal Company
Sinking fund, Subsidiary Coal Company
Personal-injury and other funds
Depreciation account, general plants
Property destroyed by fire
Profit and loss, balance to credit
Date, 191 Correct,

Auditor

9. -Illustrative Example. — In order to illustrate the
method of preparing statements for a mining company, the
following question from the New York C.P.A. Examination
is given. It is a brief question but it will illustrate how the
statements should be prepared, and that they are no different
from the statements of other corporations:

Prepare income and profit-and-loss accounts and balance
sheet, showing gross earnings and net earnings, also the SLverage
cost per ton. The trial balance of the XYZ Coal Mining
Company, as of December 31, is as follows:

The total output for the year was 132,300 tons. An examina-
tion of the books and accounts shows that the following charges
had not been entered: Horses and mules, $2,200; car ^nd
mine-rail account, $1,450; claims for injuries, $1,000. During
the year, the bookkeeper, through error, charged to inside
construction $3,415, instead of to inside pay roll. The coal is
mined on a lease that averages 20 cents per ton. The inventory
is as follows: Timber and props, $1,500; powder, $555; oil,



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i37 ACCOUNTS FOR MINING COMPANIES



11



etc., $175. In preparing this statement, allowance for depreda-
tion on breaker and machinery, blacksmith shop and construc-
tion, cars and rails, may be considered at the rate of 5 per cent.

10. The question imder review presents the feature of
operating a mine on a per ton royalty basis. The accotmts will



Cash


$ 5,674.50




Breaker and machinery


145,000.00




Office building


5,000.00




Blacksmith shop


4,000.00




Inside construction


15.675.00




Car and mine-rail account


7,534.50




Horses and mules


5,600iX)




Accounts receivable


35,112.25




Bills receivable


10,000.00


m


Capital stock, common




9 50,000.00


Capital stock, preferred




100,000.00


Coal sales




257,890.00


Accounts payable




12.500.00


Surplus




17,709.35


Depreciation on buildings and






machinery




12.000.00


Supplies


8,240.00




Pay roll, outside .


24,701.50




Pay roll, inside


110.434.25




Salaries, superintendents, etc.


6,000.00




Salaries, office clerks


4,500.00




Office expenses


1,147.35




General expense


750.00




Claims for injuries


4.000.00




Insurance (expires July 1 next)


5.500.00




Repairs to buildings


4.075.00




Repairs to construction


3,445.00




Bam expense


1.500.00




Selling expense


4,500.00




Royalty account


30,500.00


fc


Water


800.00




Fuel


935.00




Timber and props


5,475.00





$450,099.35 $450,099.35

differ slightly from those of a company owning the mine but in
other respects records of operations are kept in a similar manner.
The royalty payments are considered part of the cost of



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12 ACCOUNTS FOR MINING COMPANIES § 37

operation in much the same respect that the depreciation is
part of the operating cost for a company owning the mine; in
consequence, the mooted question of mine depreciation need
not be discussed, though thevarious properties belonging to the
operating company must be considered as having depreciated.

Mines are usually leased for a definite number of years,
therefore all costs of construction and buildings shotdd be
written off over the life of the lease. Since 5-per-cent. deprecia-
tion is mentioned in the question, it has, for working piuposes,
been assumed that the lease had a currency of 20 years.

11. Insurance accotmt is assumed to have been for 1 year
and that one-half of it is tmexpired. This is purely an assump-
tion, and it might be even better to consider one-third unused.
Royalties to the extent of $4,040 have been prepaid, as will
be seen by a comparison of the royalty accoimt with the tons of
output. Interesting statistical features are shown in the cost
summary on the basis of 1 ton of coal. It must be presumed
that the entire output of coal mined has been disposed of, since
no mention of coal in stock has been made. Claims for injuries
might have been considered as an operating charge, although it
will not be so considered here ; insurance, too, might have been so
considered, at least in part. The adjusting entries called for
shotdd be made before the statements are completed; they are:

Pay roll, inside $3,415

To constniction $3,415

Car and mine-rail account 1,450 ^

To accounts payable 1,450

Horses and mules 2,200

To accounts payable 2,200

Claims for injuries 1,000

To accounts payable 1,000

12. The forms of statements used are not given as model
forms for mining corporations but simply as one of many forms
that might be shown. Some of the items in the three divisions
might be differently arranged, but this wotdd not affect the
genuineness of the solution. In the income-and-operating state-
ment here shown the gross earnings are given as a final item.



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(37 ACCOUNTS FOR MINING COMPANIES 13



INCOME AND OPERATING ACCOUNT




XYZ Coal Mining Company for Year Ended December 31, 191


Income






Sales of coal




$257,890.00


Operating Expenses






Inside costs






Supplies $ 8,240






Less inventory 730


$ 7,510.00




Pay roll, inside

Salaries, say 60 per cent, of $6,000


113,849.25




3,600.00




Repairs of construction


3,445.00




Bam expenses


1,500.00




Royalties paid $30,500






Less prepayment 4,040


26,460.00




Water


800.00




Fuel


935.00




Timber and props $ 5,475






Less inventory 1,500


3,975.00




Depreciation of construction, cars, rails,






5 per cent.


1,062.23




Total inside costs


$163,136.48




Outside costs






Pay roll, outside

Salaries, say 40 per cent, of $6,000

Repairs to buildings


$ 24,701.50




2,400.00




4,075.00




Depreciation of breaker and machinery and






blacksmith shop, 5 per cent.


7,450.00




Total outside expenses


$ 38,626.50




Total operating costs


$201,762.98




Add selling expenses


4,500.00




Cost of coal sales




206,262.98


Gross earnings of mine




$ 51,627.02



The accompanying profit-and-loss account brings out as the
final item the net earnings and gives in the form of a siunmary
important cost items per ton of coal handled. '

PROFIT-AND-LOSS ACCOUNT

XYZ Coal Mining Company. New York

For Year Ended December 31, 191

Credits
'Gross earnings from operating account $51,627.02

Debits



Qerks* salaries


$4,500.00




Ofl&ce expenses


1,147.35




General expenses


750.00




Qaims for injuries


5,000.00




Insurance used


2,750.00




Depreciation office building, 5 per cent.
Total general expenses


250.00






14.397.35




Net earnings of company




$37,229.67



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14 ACCOUNTS FOR MINING COMPANIES § 37

Cost- Summary

(Per Ton of Coal)

Coal output for year 132,300 tons

Inside operating costs $163,136.48 = $1,233

Outside operating costs 38,626.50 = .292

Total operatings costs $201,762.98= 1.525
Selling costs 4,500.00= .034

General charges 14,397.35 = .108

Aggregate cost $220,660.33= 1.667

Net earnings, 28 cents per ton

BALANCE SHEET

XYZ Coal Company

For Year Ended December 31, 191

Assets
Current assets



Cash on hand


$ 5,674.50




Bills receivable


10,000.00




Accounts receivable


35,112.25


$ 50,786.76


Prepaid charges






Insurance unexpired


2,750.00




Royalties prepaid


4,040.00


6,790.00


Inventories






Powder on hand


555.00




Oil on hand


175.00


730.00


Properties and equipment






Inside construction


12,260.00




Car and mine-rail account


8,984.50




Horses and mules


7,800.00




Timber and props


1,500.00




Blacksmith shop


4,000.00




Breaker and machinery


145,000.00




Office building


5.000.00


184,544.50


Total assets




$242,851.25


Liabilities


AND Capital




Current liabilities






Accounts payable


$ 17,150.00




Reserve for depreciation


20,762.23


$ 37,912.23


Capital and surplus
Surplus, December 31, last






$17,709.35




Net earnings for year


37,229.67 54,939.02




Capital stock, common


50,000.00


.


Capital stock, preferred


100.000.00




Net worth of company




204,939.02


' Audit CsnTiFiCA'nt




$242,851.25



Having audited the books and accounts of the XYZ Coa^
Company for the fiscal year ended December 31. 1912. w%
hereby certify that the accompanying Balance Sheet and
Profit-and-Loss Account are in accordance therewith and in



our judgment present a correct statement of the company's
Hal condition and the operations for the fiscal year.

R. J. Bennett & Company,



financial condition and the operations for the fiscal year.

1.. J. Bennett & CoMPi

Certified Public Accountants



Philadelphia, Jan. 20, 1913.



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§ 37 ACCOUNTS FOR MINING COMPANIES 15

The accompanjdng balance sheet also shows the certificate
of the auditor.

13. Bepreclatlon of Mines. — Mines become depleted
more through the exhaustion of the mineral than through any
other process of depreciation. It is therefore a wasting asset
that must necessarily decrease in value in proportion to the
amount of mineral extracted. The same appUcation can be
made to oil or gas wells, quarries, etc. If the engineer's estimate
of the niunber of tons of mineral in a mine are correct, then
the value of the unmined mineral would be the original value
placed on it less the mineral already taken out. On account
of the uncertainty as to the amoimt of mineral in a mine
and the added expense involved in mining, it is difficult to
decide on a rate of depreciation that will accurately repre-
sent the average depletion during the life of the mine or of
the terms of the lease, as the case may be. The entire
matter must be based on estimates, which manifestly may
be incorrect and misleading. In the case of a leased mine,
the propoftion that the total cost of the output at any time
bears to the estimated output during the tenure of the lease,
should be taken.

While in most states mining companies are not compelled
to write off any depreciation before declaring a dividend, it is
considered prudent to write off annually such proportion of the
total cost less residual value as the output of the mine bears to
the estimated contents of the mine. A reserve is usually set
up, called Reserve for Exhaustion of Mine, or Reserve for
Depreciation, as the case may be. Some companies set aside
such amounts from year to year as will be necessary to acctmiu-
late in cash during the estimated life of the mine the amounts
invested therein; this might be styled a Reserve for Repayment
of Capital Investment. The question naturally arises, however,
whether it would not be better for the stockholders to take
ample dividends from year to year rather than permit the
money to remain in unuse in the hands of the company. While
creating the reserve, the stockholders get their investment back
at the time of depletion; but in case the amounts are paid out



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16 ACCOUNTS FOR MINING COMPANIES § 37

in dividends, such dividends will contain a gradual return of the
investment. As dividends are usually considered as income
only, and not as part income and part return of capital,
investprs should be fully informed as to the plan being
followed in handling dividend payments. While it may seem
good policy to use all the earnings in the payment of divi-
dends, it is nevertheless wise and prudent to reserve a reason-
able amount to meet any future contingencies that might arise.



ACTUAL REPORT OF A MINING COMPANY

14. In order to illustrate, briefly, the style and manner of
preparing an annual report and statement, the following pages
from the Annual Report of the Tonopah Belmont Development
Company are used, by permission:

ELEVENTH ANNUAL REPORT

Tonopah Belmont Development Company

Philadelphia, April 15, 1914

To THE Stockholders of the Tonopah Belmont Development
Company:

The details and results of operations on your properties for the fiscal
year ended February 28, 1914, are set forth in the financial and statistical
statements herein submitted, as follows:

1. Income account

2. Combined balance sheet, February 28, 1914

3. Comparative balance sheet

4. Operating expenses of mine

5. Operating expenses of new Belmont mill

6. Total development work

The combined net earnings of your properties during the fiscal year
were $2,015,588.48, as compared with $1,773,226.70 for the previous year.

The average value of the ore produced during the year, as compared
with the previous 4 years, is as toUows:



Tons shipped to mill
Average gross value per ton
Tons shipped to smelters
Average gross value per ton
Total production (diy tons)
Average gross value per ton

The sales of ore, bullion, concentrates, etc., for the year, as compared
with the previous years, were divided as follows:



1914


1913


1912


1911


1910


172.646


128,975


87,952


59,159


29,898


$21.07


$24.21


$20.84


$27.58


$14.40




562


27,611


21,907


7,032




$70.71


$61.35


$54.76


$34.89


72,646


129,537


115,563


81,066


36,930


$21.07


$24.34


$30.51


$34.93


$17.99



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§ 37 ACCOUNTS FOR MINING COMPANIES 17

Gold 1914 1913 1912

Number of ounces 56,067 38,371 45,069

Sold for $1,158,980.08 $ 793,191.59 $ 886,971.47

Average per ounce $20,671 $20,672 $19,680

Silver

Number of ounces 5,142,083 3,826,399 4,535,762

Sold for $3,040,135.47 $2,367,559.59 $2,381,542.54

Average per ounce $.591 $.618 $.525

Total $4,199,133.55 $3,160,751.18 $3,268,514.01

Less treatment charges,
assaying, freight and ex-
press 118,117.25 100,537.52 387,337.26

Total receipts $4,081,016.30 $3,060,213.66 $2,881,176.75

The operating expenses of the mine for the fiscal year, compared with
the previous 3 years, are as fpllows:

1914 1913 1912 1911

Mining expenses $468,213.78 $399,208.47 $377,585.25 $322,766.41

Depreciation of
minings equip-
ment 15,028.44 15,028.44 15,028.44 15,028.44

Development
work 257,709.21 150,485.06 167,832.37 160,369.60



Totals $740,951.43 $564,721.97 $560,446.06 $498,164.45

Dry tons of ore

mined 172,646 129,637 115,563 81,066

Cost per ton, in-
cluding depreda-
tion and devel-
. opment . $4.35 $4.35 $4.85 $6.14i

The operating expenses of the new roill, including indirect expenses
and depreciation, as compared with the period during which it was operated
in the previous year, are as follows:

(7 Mo.)
1914 1913

Operating expenses $525,620.16 $292,372.29

Tons treated , 172,398 84,886

Direct cost per ton $2,560 $2,909

Indirect cost per ton .489 .535

Total cost per ton $3,049 $3,444

Average extraction, per cent 94.45 94.43

Average number of stamps dropped 54.8 51.9

The new mill has already saved in increased extraction and lessened
costs, approximately $25,000 more than its total cost.

The net realization from the operation of the old mill as a custom mill
during the fiscal year was $38,546.78, as compared with $9,802.19 for the
6 months' period of the previous year. While the net results of operation of
the old mill are relatively unimportant, it is considered good policy to
continue its operation, without profit if necessary, in, order to insure
its upkeep and readiness to treat Belmont ores exclusively in cases of
emergency.

I L T 234—14



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§ 37 ACCOUNTS FOR MINING COMPANIES 19

The examination of other mining properties, with a view to purchase,
has been continued throughout the year. Preliminary examinations
were made of fifty-seven properties of the one hundred and forty sub-
mitted, but in nearly all cases the prices and terms were prohibitive.
Several were carefully considered after final examination, and negotiations
are being conducted for one which seems to meet all requirements.

There has been no change in the extent of your property since the last
annual report.

Extracts from the annual report of the General Superintendent, and a



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