The sun., 1919-09-14

passed on record OF financial TRANSACT
lions. A few instances OF the need for
accounts on the part of men who
would ordinarily keep no bookkeeping
records may be Of interest.
A professional man bought a farm
two or three years ago which he has
operated as business venture, at the
same time making substantial inn
provements by altering and charging
the buildings, by building a dam and
installing waterpower equipment and
by setting out an apple orchard. A
proper set Of accounts would have
segregated expenditures Of operation,
which are an offset to income, from
expenditures made to improve the
property. No such segregation and
record has been made. The farm will
probably be sold shortly at a consid-
cradle advance over the original pur-
chase price and the profit will be tax
able. The present owner will find 1t
difficult indeed to show the actual cost
OF his property and may therefore be
unable to take full advantage of his
improvement expenditures. The same
situation Is likely to develop with any
out proper accounts a farm, @ business
property or a residence property, either
in the conduct of his business or as
an incident to his regular occupation.
The merchant by failure to distin-
guish and record expenditures for FIX
lures and equipment by the lack of
proper provision for depreciation, by
incorrect inventory methods, by fail
ure to record and wipe out losses, in
fact. by any one OF a large number OF
bookkeeping delinquencies,. may over
state and overpay his taxes, or on the
other hand he may incur serious pen
alties by emitting to disclose his full
tax accountability.
Specific instances can be cited by the
score in which taxpayers have inno-
Gently understated or overstated their
tax accountability. One concern had
failed to record the purchase price of
securities which had been sold at a
loss: another failed to take into its
invested capital valuable assets ac-
quired in reorganization; still another
failed to accrue expenses that had been
incurred but not paid, and SO on. These
errors are especially likely to occur
when accounts are kept on a hap
hazard or imperfect basis.
The successful man may have vari-
Gus income odds and ends, such as
special fees or profits, rents or interest,
which may escape his memory; In
versely, he may overlook deductible
expenditures such as interest on mort
cages, insurance loans, or local taxes.
He may even speculate a bit in stocks
or merchandise. In any event, 1t IS
vitality necessary for a citizens pro-
lection In tax matters that he record
all financial transactions no matter
what their character may be.
Any we'll informed merchant, ply
sician, dentist, stock raiser, garage
proprietor. or other successful man.
will readily admit the desirability of
understanding and keeping accounts
he has plenty of business reasons for
his view aside from tax matters. He
Is Just as sure, however. that account
ing, OF bookkeeping az he Is more
likely to term it, Is an unfathomable
mystery; that a half hour day on
records would weigh heavier than all
the hard work required by his business
or practice. He cheers up bit II you
suggest that his wife or daughter may
be able to turn the trick, as she often
does. Even the practicising lawyer,
who must dissect financial matters
and cross -examine witnesses, In pro-
verbally short Of accounting knowl-
edge.
This attitude of mind must be
changed or greatly modified IL we are
to levy taxes-Federal and State-on
an accounting basis The business and
professional men of the country should
be willing. for business as well as FOR
taxation purposes, TO devote some
thought to the matter OF making
permanent accounting record OF their
financial transactions. Accounting is
largely a matter OF applied arithmetic,
depending in It's practical phases upon
the processes of addition and subtrac-
ton. A number of business classih-
cations are set up in accounts, and IN
creases and decreases ore shown In
respect to each classification. Thus,
cash is an accounting classincanon-
Receipts of cash are set down on the
left side of the cash account ana casn
nayments are set down on, the right
side. The excess of the receipts over
the payments at any time should dis
close the amount of cash on hand ana
In bank. Certainly there is no IN
trtcacy here which the ordinary man
may not hope to master.
Again, In accounting the merchant
Is taught that he should at some nour
Of each day make a clean deposit OF
his entire cash receipts for the pre-
cedIng business day. His bank ac-
count, when this plan Is carried out.
provides in itself complete record OF
cash receipts. He is taught further
that all payments should be made by
check, except small payments which
can be made from a fund which Is
provided originally by a check drawn
for that purpose and later rerlen-
ished by checks as the need arises.
Here again we have simple pro-
cedure easily learned that is sure 10
provide many business benefits aside
from aiding in the preparation Of the
tax return.
One OF the most fundamental ac-
counting principles which the bust
ness man must learn is the distinc-
ton between a revenue or expense
expenditure incurred to secure income
and an expenditure made to provide
a permaneat~or capital asset, Thus
wages paid to salesman are an ex-
pense, chargeable against gross sales
or other returns. An expenditure