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ther capital improvements or to erect buildings, and upon cer-
tification of the same to the comptroller, an entry is made as
follows :

Authorized Construction. $100,000.00

To *Capital Appropriations $100,000.00

The issue and sale of bonds or other loans to pay the cost of
construction is recorded by this entry :

Capital Cash $100,000.00

To *Capital Loans $100,000.00

If, upon the sale, the bonds bring a premium, the entry is:

Capital Cash $1,000.00

To Premium on Bonds $1,000.00

111. Upon letting contracts or issuing orders chargeable to
the construction, the transaction is recorded as follows :

♦Capital Appropriations $75,000.00

To *Reserv© for Capital Obligations $75,000.00

When claims are presented for audit, the reserve set up by
the preceding entry is cancelled, the appropriation restored and
reduced by the amount of the claim by the following entries :

Reserve for Capital Obligations $75,000.00

To *Capital Appropriations . $75,000.00

♦Capital Appropriations $80,000.00

To Capital Claims Audited $80,000.00

112. The payment of capital claims audited, by the issue
of capital warrants, is the same as in the case of current claims
audited and is recorded by the following entries :



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52 MUNICIPAL ACCOUNTING § 39

Capital Claims Audited $80,000.00

To Capital Warrants Payable $80,000.00

Capital Warrants Payable $80,000.00

To Capital Cash $80,000.00

113. The interest on the bonded debt and the maturing
instalments of the issue are paid from current cash and the
payments are recorded in the same manner as other current
payments. The interest is a current expense of the city and
upon payment leaves no tangible asset. Payments on account of
the debt decrease the debt of the city and increase the capital
surplus. Such payments being first entered in the current
group and charged against Current Appropriations, are trans-
ferred to the capital group by means of a collateral entry in
the following form :

Capital Loans $10,000.00

To Capital Surplus $10,000.00

114. Upon the completion of a capital project, or at the
end of the year, to the extent of the finished work evidenced by
the payments during the year, the cost is added to the value of
the city properties and Authorized Construction is diminished
to the same extent. Upon the assumption that projects remain
incomplete at the end of the fiscal year, the completed portion is
transferred to City Properties account by the following entry :

♦City Properties $80,000.00

To Authorized Construction ' $80,000.00

115. Coininent on the Forefiroing: Entries. — The

account Capital Cash is in all respects the same as the other
cash accounts ; it serves, however, to segregate funds applicable
only td the payment of the cost of capital improvements.

116. The account called City Properties is intended to pro-
vide a permanent record of the property of the city. When
this account is opened it is debited with the appraised or
assessed value of the property belonging to the city — ^that is,
lands, buildings, waterworks, etc. — and with the cost of all
new capital construction when completed. It is credited with



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§ 39 MUNICIPAL ACCOUNTING 53

the value of all such property sold or destroyed. The debit
balance shows the book value of property owned by the city.

117. The account called Authorized Construction is a
temporary account intended to withhold from City Properties
account the units of capital construction not completed.
Authorized Construction is debited with the amount of capital
construction work authorized and credited with the amount
completed.

118. ' The accounts called Capital Appropriations, Reserve
for Capital Obligations, Capital Claims Audited, and Capital
Warrants Payable are in all respects similar to the accounts in
the current group called .Current Appropriations, Reserve for
Current Obligations, Current Claims Audited, and Current
Warrants Payable, and are all developed along similar lines.



ENTRIES IN CAPITAL GROUP (SINKING FUND SB3CTION)

119. Upon opening the books or when a sinking fund is
established by setting aside an amount of cash or investments,
the fact is recorded as follows :

Sinking Fund Cash $10,000.00

Sinking Fund Investments 15,000.00

To Sinking Fund ' $25,000.00

If more than one sinking fund is in existence or is estab-
lished, each should be distinguished by further descriptive
words as "School Bonds," "Water Bonds," or as the case
may be.

120. From time to time as the bank balances earn interest
or as interest is collected on investments, record is made as
follows :

Sinking Fund Cash $750.00

To Sinking Fund Revenues $750.00

121. Payments from the sinking fund are entered as
follows :



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54 MUNICIPAL ACCOUNTING § 39

Sinking Fund Payments $10,000.00

. To Sinking Fund Cash * $10,000.00

If any part of the Sinking Fund Cash be invested in securi-
ties, the record is as follows :

Sinking Fund Investments $2,500.00

To Sinking Fund Cash ' $2,500.00

If any part of the investments are sold or liquidated, the last
preceding entry is reversed in this form :

Sinking Fund Cash $1,000.00

To Sinking Fund Investments $1,000.00

122. The status of the sinking fund will be shown at the
end of the year by debiting the Sinking Fund account with
Sinking Fund Payments and crediting the same account with
the amount of Sinking Fund Revenues. The following are the
entries :

Sinking Fund $10,000.00

To Sinking Fund Payments $10,000.00

Sinking Fund Revenues 750.00

To Sinking Fund 750.00

123. Statutes authorizing or requiring the setting aside of
a sinking fund usually contain a provision requiring the munic-
ipality to contribute annually to the sinking fund. The amount
of the contribution will appear in the budget as an appropria-
tion and will be charged out of current accounts by an entry
similar to those recording other current payments and is there-
upon recorded in the sinking fund section of the capital group
of accounts by the following entry :

Sinking Fund Cash $1,000.00

To Sinking Fund $1,000.00

A sinking fund is established to provide payment of bonds,
an appropriation therefor being made in the budget, which is
offset by a debit to an account in the current group called Sink-
ing Fund Contribution Required, as explained in Arts. 40 and
45. When the amount of the contribution is transferred to
the current accounts, the fact is recorded by a collateral entry



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§ 39 MUNICIPAL ACCOUNTING 55

in the current group debiting Current Cash and crediting Sink-
ing Fund.

124. Comments on tlie Foregoing Entries. — ^The
account called Sinking Fund Cash, in the same way as other
cash accounts, is debited with the amount of Sinking Fund Cash
received and credited with the amount paid out, the debit
balance representing the cash on hand.

125. The account called Sinking Fund Investments is
debited with the amount of investments acquired for the sink-
ing fund and credited with the amount of the same sold or
liquidated. The debit balance shows the amount of investments
owned by the sinking fund.

126. The account called Sinking Fund Revenues is cred-
ited with the amount of earnings on sinking fund investments,
interest on bank balances, and other revenues applicable to the
sinking fund. This account will show a credit balance, reflect-
ing the amount of revenues earned during the year, until the
end of the year, when it is closed into Sinking Fund account.

127. The account called Sinking Fund Payments is debited
with the amount of payments from the Sinking Fund for
redemption of bonds, and with the amount of contributions to
current accounts. This account will show a debit balance,
reflecting the payments made during the year, until the end of
the year, when it will be closed into Sinking Fund account.

128. The account called Sinking Fund is credited with the
amount of sinking fund cash and investments on hand when
the account is opened and with the amount of contributions
from the budget.

At the end of the fiscal year this account is debited with the
amount of the balance of the Sinking Fund Payments account
and is credited with the amount of the balance of the Sinking
Fund Revenues account, thus reflecting the status of the Sink-
ing Fund.

129. Trial Balance. — A trial balance of Capital and
Sinking Fund accounts is shown herewith.

. I L T 234—19 '



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56 MUNICIPAL ACCOUNTING § 39

Trial Balance — Capital and Sinking Fund Accounts





Total of Entrioi


Balances


Capital Section








Debits


Credits


Debits


Credits


Capital Cash..


$ 121,000.00


$ 80,000.00


$ 41,000.00




City Properties


480,00^.00




480,000.00




Authorized










Construction


115,000.00


80,000.00


35,000.00




Capital Appro-










priations. . .


155,000.00


190,000.00




$ 35,000.00


Capital Surplus




180,000.00




180,000.00


Capital Loans.


10,000.00


350,000.00




340,000.00


Premium on










Bonds




1,000.00




1,000.00


Reserve for










Capital Ap-










propriations.


75,000.00


75,000.00






Capital Claims










Audited


80,000.00


80,000.00






Capital War-








•


rants Pay-










able


80,000.00


80.000.00






Totals


$1,116,000.00


$1,116,000.00


$556,000.00


$556,000.00


Sinking Fund










Section:










Sinking Fund










Cash


$ 12,750.00


$ 12,500.00


$ 250.00




Sinking Fimd










Investments.


17,500.00


1,000.00


16,500.00




Sinking Fund. .


10,000.00


26,750.00




16,750.00


Sinking Fimd










Revenues . . .


750.00


750.00






Sinking Fimd










Payments. . .


10,000.00


10,000.00






Totals


$ 51,000.00


$ 51,000.00


$ 16,750.00


$ 16,750.00



TRUST ACCOUNTS

130. Cities are sometimes entrusted with the custody of
funds or investments in which they have no proprietary inter-
est and the accounts recording the receipt and disbursement of
such funds are known as trust accounts.



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§ 39 MUNICIPAL ACCOUNTING 57

The following is a list of the accounts in the Trust Group :

Debits Credits

Trust Cash Pension Fund Revenues

Pension Fund Investments Trust Claims Audited

Pension Fund Payments Trust Warrants Payable

Pension Fund

Trust Account (properly denomi-
nated)



ENTRIBS IN TRUST GROUP

131. Upon receipt of cash to be held in trust, Trust Cash
is debited and an account naming the character of the trust —
for example, Police Pension Fund, Teachers' Retirement Fund,
Contractors* Retainers, etc. — is credited. The following illus-
trative entries are based on the assumption that a Police
Pension Fund is established with certain investments of the
value of $20,000.00 and cash to the amount of $5,000.00. The
opemng entry is as follows :

Trust Cash $ 5,000.00

Pension Fund Investments • 20,000.00

To Police Pension Fund $25,000.00

Upon receipt of cash other than revenues to be applied to
the same purpose, record is made as follows :

Trust Cash . $500.00

To Police Pension Fund $500.00

Upon receipt of interest earned on investments or of other
revenues pledged to the fund by law, an entry like the following
is made :

Trust Cash $500.00

To Police Pension Fund Revenues $500.00

Upon the sale or liquidation of investments owned by the
fund the entry is :

Trust Cash $2,500.00

To Police Pension Fund Investments $2,500.00

Upon the purchase of additional investments the entry is :



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58



MUNICIPAL ACCOUNTING

$1,000.00



§39



Police Pension Fund Investments '
To Trust Claims Audited



Police Pension Fund Payments
To Trust Claims Audited



$1,000.00

Upon the payment of pensions to persons entitled thereto the
entry is :

$500.00

$500.00

Upon issuing warrants in payment of trust claims the
entry is :

Trust Claims Audited $1,500.00

To Trust Warrants Payable $1,500.00

Upon payment of trust warrants the entry is :

$1,500.00

$1,500.00

Closing entries are :

$500.00

$500.00

{h) Police Pension Fund $500.00

To Pension Fund Payments $500.00



Trust Warrants Payable
To Trust Cash



(a) Pension Fund Revenues
To Police Pension Fund



132. Trial Balance. — The following is a trial balance of
this group of accounts after making the foregoing entries :

Trial Balance — ^Trust Accounts





Total of Entries


Balances




Debits


Credits


Debits


Credits


Trust Cash...


$ 8,500.00

21,000.00

600.00

500.00
1,500.00
1,500.00

500.00


$ 1,500.00

2,500.00

500.00

500.00

1,500.00

1,500.00

26,000.00


$ 7,000.00
18,500.00




Police Pension Fund In-
vestments


•


Police Pension Fund Pay-
ments




Police Pension Fund Rev-
enues




Trus!; Claims Audited. . . .
Trust Warrants Payable . .
Police Pension Fund


$25,500.00


Totals


$34,000.00


$34,000.00


$25,500.00


$25,500.00





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§ 39 MUNICIPAL ACCOUNTING 59



APPENDIX
133. In the following pages are illustrations of the state-
ments that form parts of the Annual Report required in con-
nection with a system of accounts such as has been described
in the preceding pages.



SUMMARY OF CURRENT REVENUES AND EXPENSES*

Revenues
Surplus of prior year $. . . ,

Taxes of current year :

Amount of levy $

â–  Less : Levy for state and county purposes . . . .

Tax revenues, city .purposes $

Miscellaneous revenues :



Total $.

Public Utilities — Commercial :
Municipal water department

Surplus of prior year $

Water department revenues

Total . $.

Municipal lighting department:

Surplus of prior year $

Lighting department revenues

Total $.

Total current revenues ^

Proceeds of deficiency bonds $

Current deficit:

General tax revenues $

Municipal water department



Municipal lighting department $.

Total $.



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60 MUNICIPAL ACCOUNTING § 39



Expenses
General government $.

Protection of persons and property
Conservation of health
Sanitation and promotion of cleanliness
Highways

Charities and corrections
Education '
Recreation

PuoRf^utilities, non-commercial
Miscellaneous

Municipal indebtedness $

Less : • Contributions from sinking funds

Construction and permanent improvements



Total $.

Public utilities — commercial :

Municipal water department $.

^ Municipal lighting department

Total current expenses $.

Reserve for uncollected taxes provided in current levy $.

Deficiencies of prior year:

General . $

Municipal water department

Municipal lighting department . Llllll

Total $.

Current surplus :

General $

Municipal water department

Municipal lighting department

Total $.



$.



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1 39 ^ MUNICIPAL ACCOUNTING Gi



Balance Sheet — Current Accounts
Assets



Cash:

Current cash
Tax arrears cash
Water cash


$....


'.'. $


Taxes receivable:
Current city taxes
County taxes
Arrears of taxes


$....
• • • •


• •

.. $


Water rents receivable
Accounts receivable
Due from other accounts
Materials and supplies


• • • •
• • • • •


4


Total
Current deficit :
General

Municipal water department
Municipal lighting department


$


Total




$

$


Liabilities
Current warrants payable
Current claims audited
Current loans
Due to other accounts
Due to county treasurer
Reserve for current obligations
Reserve for arrears of taxes
Inventory surplus
Total


$....


$


Current surplus:
General

Municipal water department
Municipal lighting department


$....


••


Total




$



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62 MUNICIPAL ACCOUNTING § 39



Balance Sheet— Assessment Accounts




Assets




Assessment cash $. . . .




Assessments receivable . . . .




Assessments against city ....




Local improvements authorized ....




Local improvements assessable




Due from other accounts . . . .




Total


$


Assessment deficit




Liabilities


$


Assessment warrants payable $. . . .




Assessment claims audited . . . .




Assessment loans . . . .




Assessment appropriations . . . .




Accounts payable . . . .




Due to other accounts . , . .




Reserve for assessment obligations . . . .





Total


$


Assessment surplus . . . .


, ,




$



Balance Sheet — Capital and Sinking Fund Accounts
Assets
Capital accounts :

Capital cash $

Due from other accounts

Authorized construction

City properties

Total $.

Sinking fund accounts:

Sinking fund cash $. . ^. . .

Sinking fund investments

Taxes receivable — Arrears pledged to sinking funds

Total $.



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§ 39 MUNICIPAL ACCOUNTING 63





Liabilities






Capital accounts :








Capital warrants payable




'$....




Capital claims audited








Due to other accounts








Capital appropriations








Reserve for capital obligations






Capital loans








Total




$


Sinking fund accounts :








Due to other accoimts




$....




Total






$


Surplus :








Capital surplus




$....


, ,


Sinking funds






, ,


Total






$

$



Balance Sheet — Trust Accounts
Assets

Trust cash $

Police pension fund investments ,

Firemen's pension fund investments

School teachers* pension fund investments

Total • $^
Liabilities and Reserves

Trust warrants payable $

Trust claims audited

— trust account

— ^trust account

— ^trust account

Police pension fund

Firemen's pension fund ^.

School teachers' pension fund

Total $.



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GRAPHS



USE AND PREPARATION OF GRAPHS



PRELIMINARY REMARKS

1. According to the Standard Dictionary, graphs describe
with pictorial effect and illustrate ideas by drawings, pictures,
or diagrams. By their use, bookkeepers and accoiuitants can
more strikingly present an analysis of all or pstrts of business
statements and reports than can be done in figures, and for
this purpose there is almost no limit to the features of the busi-
ness which may be so expressed. Of the many forms in use,
the most common are the straight-line, the broken-line, and
the circle graphs.

2. The voltmie of sales, for example, daily, weekly, monthly,
gr yearly or for longer periods may be so strikingly shown by a
line graph as to bring out the high and low points and average,
and whether or not the trend is continuously upward or other-
wise. Other lines may be added to the graphs to show features
more or less related to sales.

Special features such as the percentage division or total
expenses, whether for a factory or store or department, are
presented more clearly for study by circle graphs than perhaps
any other way; also, such features as an analysis of sales either
.with dollars, the ntmiber of sales, or the ntmiber of customers,
as a basis, for example; what percentage of ledger accotmts
take a discotmt, pay in 30 days, take more than the allowed
time, give notes, pr finally become worthless. In another form,

COPYmCHTBO BY INTKKNATIONAI. TKXTBOOK COMPANY ALL lll«HTS RKSKRVKO

§41



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2 GRAPHS §41

they may show what percentage of accounts represents 1, 2, 3,
4, or more years continuous business, or new business; what
proportion of the total sales are charge, cash, C. O. D.'s, and
approval, etc.

It is impossible to give here anything like the number of uses
to which all or any kind of graph is adapted, or the combina-
tions in which they may be useful, or how much or how far
all or each may be used. The extent to which graphs may be
vahiable in any line of business depends on the ingenuity of
the user.

STRAIGHT-LINE GRAPHS



SIMPLEST FOBM8

3. To prepare a straight-line graph, a unit of measurement
must first be decided on and then this unit must be multiplied
or divided to make up the comparative lines that form the graph.

These lines can be run either horizontally or vertically, but
all must have the same direction and be of the same comparative



1850 1

1.000

I860 warn

9.223

33.092


•


45350


♦


75.215




102.026


129,867


I4l.35t
Fig. 1





length. Such a graph may be used to show the earnings of a
company year by year, month by month, or any other com-
parative period, or to show the growth of a business by periods;
in fact, the relation of any set of figures to any other set can be
shown by these straight lines.



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§41 GRAPHS 3

For example, Fig. 1 shows the growth of a city. The first
year of which there is a record the population was 1,000. Using
this as a basis and adopting a scale of some convenient size,
say, iV i^ch to 1,000 poptdation, the first line may be drawn this
length. The second Une to show a poptdation of 9,223 will then
have to be 9.223 XtV = .922t^, which is .92 inch long. The
third line, to show a poptdation of 33,093, must be33.092X-iV,
or 3.3 inches long. By the same method, it will be found that
the other lines will be 4.58, 7.5, 10.2, 12.9, and 14.1 inches long;
the last line shows the poptdation of the city at the beginning
of the year 1914. This graph shows the total poptdation at

1850 Hi
.1,000



I860



8,223
1870 â– â– â– â– â– â– â– 



23,869



1880 I



12,758

1890 mammmmtrnmaM



29,365



1900 I

1910

1914



26.811



11.484



27,841



Fig. 2



any of the given periods; to determine the growth during any
period, subtract the figtires of the preceding period from those
of the required period.

4. To make a chart. Fig. 2, to show the growth by periods,
find the figures showing the growth for each period as just
described, then determine upon a tmit of meastirement, say
I inch = 1,000. Then, for the first year the line will be i inch
long. To find the length of the second line, subtract 1,000
from 9,223, which was the total production; this leaves 8,223
as the increase in population for the period. Drawn to the
adopted scale this will give a line 2.5 inches long. For the third
period, subtract 9,223 from 33,092, which gives 23,869 as the
growth; drawn to scale this will give a line 5.95 inches long.



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4 GRAPHS § 41

By the same method, the other lines will be 3.19, 7.35, 6.7,
6.95, and 2.87 inches long. •

A study of Fig. 1 will show that the city had a good healthy
growth during the whole term given, as each period shows a good
increase in population. However, a study of the second chart
will show that while the city increased every period, during the
period 1870 to 1880 the increase was only about 50 per cent,
that of the preceding period. The period between 1880 and
1890 shows an imusual increase of 230 per cent, over the pre-
ceding 10 years. The two following periods show normal
increases.

The last line shows an increase for only a portion of a period.
To compare this with the other periods it will be necessary
to reduce the figures to one-tenth of a period or 1 year. To do
this the figures 11,484 must be divided by 4, which gives 2,871.
This shows that this period compares very favorably with the
best of the preceding periods, for if this same growth is con-
tinued for the remainder of the 10 years it will give an increase
for the period of 28,710.

6. Variations in Arrangement. — ^While the charts given
in Figs. 1 and 2 have the figures and dates printed over each
line, figures may be placed at the top and sides of the chart
and light vertical lines spaced at uniform distances repre-
senting fixed sums dropped from the top figures. For
example, lines may be spaced at uniform distances repre-
senting increases of 500 and these spaces could be subdivided
by four lines representing 100. The lines of the graph could
then be laid out across these vertical lines and extend past the
nearest 500 subdivision to the number required; if the graph
line should represent a fraction of 100 the space between the
100 subdivisions may be divided by the eye.



BLOCKS AS GRAPHS



6. Straight lines can be changed into blocks by simply
widening the lines. The blocks may then be used to repre-
sent the same things as the plain lines, but the blocks will have



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§41



GRAPHS



the advantage that each block may be divided into sections
by coloring or cross-sectioning. A chart made of blocks is
shown in Fig. 3; this chart gives the resources of banks in the
reserve districts. The total resources of each district are