Arizona republican., 1916-02-06

accounts, advances to officers, etc. are enumerated as good accounts.
 Another factor is that no provision is made for depreciation or obsolescence. You have probably heard the story of the man who wore a suit six months,
 and when it was destroyed by fire he put in a claim to the insurance com
 pany for the original cost, $40, stating
 that 1t would cost that much to replace 1t. Some business men figure replace
 ments in the same manner-do not make any provision for wear until the
 article or unit it entirely gone.
 Devastating an inventory is very commonly indulged in by others pre-
 senting statement. Oftentimes the making up of the inventory, the pric- ing and extending are left with some one in the department where the inven-
 tory is taken. who is interested in mak- ing a good showing for his department and as the figures are not checked
 back, the inventory is entered on the books al the overstated amount This causes a temporary imitation of profits from the department in question for which the executive head is not direct ly responsible. There are a number of ways of course in which an inventory may be overstated. either willingly on the part of the executive or from ig of the employe who is given the re- sponsibility of the task.
 Understanding liabilities is another method used for initiating profits for any given period. Accounts for mer- chandise, which is included in the in- ventory, are not entered on the books until such time as they are paid for And still others will offset accounts payable by accounts receivable, there by showing their liabilities small when making application for loans or other credit extensions
 All these factors and others of like
 nature that tend to OVerstate the as sets or understate the liabilities, will cOrreSpOndingly OVerState the profits as shown by the books for the period. As dividends and withdrawals are based on the book profits of any con- cern. these conditions will lead to in evitable ruin. The stockholders or members of the firm will in these in stances be drawing out as profits the moneys that should have been set aside for reserve or bad accounts. reserve for depreciation of property. fixtures. or merchandise or in lieu of overstate- ments of liabilities
 The business man who is fooling himself in this manner is doing himself ol his concern q positive harm. Op- tlmism though a very desirable trait, is loften responsible for inflated valuations and estimates. Two and two will not add more than four, and still some Of
 the most cratic optimists insist on
 putting down eight for an answer There are a large number of business men who are honest and would not
 wrong any one; but their imagination
 IS dishonest. Arithmetic to them is a
 most wonderful volume of romance and
 they fail because they believe in fairy figures.
 The Story of the Pink Soap" illus trates this class of a business man.
 The superintendent of a soap factory,
 having himself invented pink medi-
 cated soap. and being desirous that the
 manufacture of this particular soap should show a profit instead of a loss
 as was the case at the time. distributed
 the excess cost over three other de- partments which were manufacturing