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For general purposes it is not considered necessary to make any distinction, and it might be advisable to write off the total expenditure for field equipment over the term of the lease, for, as the lease terminates, so also the right to drill further wells terminates. There is, however, no objection to depreciating storage tanks, pipe lines, engines, boilers and other equipment, which can be used after the termination of the lease, on the basis of useful life, provided, as is usually the case, the operator has a perpetual pumping privilege. The latter treatment should not be applied to drilling tools and equipment carried on the books, as this class of asset has practically only a scrap value at the time when the right to drill terminates.

Upkeep of field equipment should be absorbed in the operating costs for the period, excepting in the case where such upkeep is incurred in the development of wells and property. In that event a proportion applicable thereto should be capitalized.

The third item under operating and production is operating costs. These costs consist principally of wages of pumper and helper, fuel, superintendence and similar items not specified, expended in producing and caring for oil produced.

GENERAL INFORMATION There should be available at all times certain data which are principally informative, consisting generally of the following: 1. Record of leases : a. Name of property ; district or field; and legal de

scription. b. Number of acres. c. Name of assignor or vendor. d. Royalty rate and to whom payable. e. Rental to be paid, when and to whom. f. Date lease or title acquired. g. Date lease commenced and terminates. h. Date lease renewed and terminates. i. Date lease recorded. j. Date lease approved by department of Indian affairs

(as applied to Oklahoma). k. Consideration paid; nature of consideration, whether

cash, notes, property, bonds or capital stock, and amount of each.

1. Special notes or provisions.

m. Date divisional orders filed and with whom. 2. Record of wells:

a. Date of commencement of drilling.
b. Sands encountered, depth of each and feet from

surface.
c. Date drilling completed.
d. Producer or dry.
e. If producer, date when put on pump or commencement

of flow. f. Quantity produced first 24 hours. g. Quantity produced each month for first 12 months. h. If well is abandoned, give date and cause. i. Estimated total reserve for each well, together with re

vision of computation and date of revision. Basis of

estimate should be given. j. Total cost of completing each well. k. Number of feet of casing and tubing in each well and

of each size used. 3. Record of oil produced, giving quantity produced by each well and aggregate total.

This information is compiled from daily reports from the field. The gauges of all storage tanks are taken each morning at seven o'clock and the number of inches of oil in each tank is reported to the office. The office usually has in its possession a chart showing the quantity of oil for each quarter inch of each tank, from which the contents of a tank can be determined at any given time. By taking the difference in measurements from day to day, the daily production is determined, allowance being made, of course, for daily runs.

4. Any other information the state and federal governments require should also be kept in such a manner as to be readily available when required.

ACCOUNTING AND RECORDING The remaining part of this article will deal with the recording of the transactions discussed in the preceding paragraphs.

Generally the organization accounts and entries follow the ordinary custom and comment thereon is unnecessary.

Among the general ledger accounts will be controlling accounts for the following:

1. Leases.
2. Field development and equipment.
3. Well development and equipment.

4. Production expense. A subsidiary ledger should contain detail of the four accounts above, sufficiently classified to give all the desired information as to expenditures. This subsidiary ledger should contain, (a), a sheet for each lease, showing all charges for cost of lease, filing, recording, etc., fees and rentals; (b), another sheet for each lease with columns headed buildings; engines and boilers; portable drilling equipment; sundry drilling tools; pumps, gauges, etc.; tanks and pipe lines; roads, sump holes, etc.; dry and water holes; (c), a sheet for each well drilled, with a column each for grading; derrick and rigging; labor and board; tools and supplies used; tools, etc., rented; depreciation of equipment; repairs to equipment; casing, tubing, rods, valves, pumps and fittings; sundries.

The voucher register and journal would have columns provided for each controlling account indicated in the foregoing paragraph and columns for selling, office and general expenses and any other controlling account found necessary. A columnar ledger sheet is suggested, in order that a sufficient classification may be made for the more important items entering into the latter class of expenses mentioned.

The regular voucher system should be put into operation, each voucher providing for classification and sub-classification of expenditures under the principal heads. Vouchers will be entered in the voucher register in the usual manner, after which they will be posted direct to the subsidiary records, number of voucher and amount of charge being entered in the appropriate columns. Cashbook and journal items affecting the controlling accounts will be posted to the subsidiary records in a similar manner.

As a general rule oil is sold as soon as a sufficient quantity has been accumulated in the storage tanks. A record should be kept to show the shipments to purchasers. This record should provide for the total shipped, the quantity representing royalty and the net shipment for which payment is to be received.

When a company commences production it usually enters into a contract with a refiner for the sale of its oil. The refiner then 1

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constructs, if one is not already constructed, a pipe line to the producer's tanks. When the producer has a sufficient quantity of oil on hand to make a shipment or a run, as it is called, it requests the purchaser to send a man to make the run. The quantity run is determined by measurements made at the tanks by the producer's and the purchaser's men, each checking the other's figures. The man making the run gives the shipper a run ticket, which shows the tank number, measurements before and after run, temperature, gravity and total inches of oil run. A copy of this ticket goes to the purchaser, who, after making deductions for water and sand, remits monthly to the shipper a cheque for payment of his share. He also remits direct to the owner of the royalty a cheque for his share. Invariably the producer has to issue what is known as a divisional order—which is a statement of the divisional interests in the production, which, of course, include royalties. All divisional interests are liquidated direct by the purchaser of the oil, and the producer only receives payment after all royalties and other interests are deducted from the gross amount of oil sales. The company's accounts, therefore, show no entries for royalties.

By DUNCAN E. PEDIGO

The success of the average branch of the large packing industries throughout the country depends to a great extent upon the individual effort of the local branch manager.

He must be a man who is thoroughly familiar with the packing industry and must be in position at all times to furnish his customers with particular brands of the various kinds of products handled by them. Competition is keen in this industry, and the manager must use good judgment in the selection of his products.

Prompt deliveries of perishable goods are absolutely essential. Failure on the part of the market-keeper to accept late delivery of perishable goods such as beef, pork, mutton, poultry, etc., always results in a loss of from one to five cents per pound. Especially is this true during the summer season on account of the rapid decomposition of this class of products, hauled for several hours in the summer heat and then returned to the cooler. The tainted parts must be cut away, causing a shrinkage in weight, and the balance will have to be sold at a reduced price.

The manager should make special efforts at the end of the week, if necessary, to dispose of all fresh meat on hand. Usually, new consignments are received on Monday of each week and the average buyer will insist on having either the fresh stock or a reduction in price on that carried over from the previous week. This rule does not apply so strictly to beef, which often hangs in the cooler from one to two weeks.

PURCHASES

Most purchases are made from one of the company's packing plants, usually the one to which the branch house is nearest. These shipments are made in the company's refrigerator cars. The invoice for contents of the car is prepared in quadruplicate—the original being retained by the plant making the shipment; the second copy sent to the home office; the third copy mailed to the branch to which the shipment is made, and the fourth copy placed in the car, to be used at the place of destination in checking the quantities.

* A thesis presented at the November, 1920, examinations of the American Institute of Accountants.

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