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ing for the third paper the discussion of keeping track of the partly finished products both in quantity and value.

Fundamentally the perpetual inventory rests on the principle of keeping accurate constant record of all additions to and subtractions from stock of any kind. This is made possible by the employment of bins for receiving and distributing and the use of daily balancing records. A good illustration of the proper employment of the inventory is presented in a large plant of an internationally known corporation.

As soon as material comes into the plant it is received and stored in bins. The receiving clerk in the store room checks off the invoices as they arrive, thus assuring the correctness of the receipts. The clerk is held responsible for the quantity and quality of all material which he signs as having received. The invoice, thus properly countersigned, is turned over to the accounting department and a record is made in the Stores Ledger, The Stores Ledger is a specially ruled book, which in a convenient form keeps exact record of both quantity and value of all material. (See Fig. 1).

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It might seem an arduous task to keep up this daily balance, but as a matter of fact it is not difficult to keep in actual practice. A large establishment has, daily, something added to or taken away from every variety of raw material in stock. It is necessary to keep record of these transactions in order to give the purchasing department data, for without adequate information stock is not replenished with accuracy. The writer was once employed as a workman in a large internationally known plant where no such record was kept. As a consequence, not only were the conditions of the raw stock of the plant not known, but much time was lost through the lack of material with which to do work. Frequently the men killed time on a job in order not to be absolutely idle until something turned up. This was in a firm that had outstanding contracts and work to be done, but where the ignorance of the status of the raw material hindered and hampered its activities. As a matter of fact, aside from being applicative for insurance, a perpetual inventory record is an imperative necessity for any well organized firm.

The original record for the material received is the invoice sheet. The original entries for the material given out are taken from the requisitions, made out by responsible employees within the plant.

Two methods of requisitions might be employed in order to get material from the store room.

(1) A number of men in each department have authority to obtain goods from the storehouse on their own signature when presented on a properly printed form. Where the manufacturing process is of such a character that there is no great variety in the raw materials and where each order will call for a considerable quantity the scheme is successful. In those cases after the order is honored it is sent to the accounting department where the record is transferred to the inventory ledger under proper heading

Contract No. 49




Please deliver to bearer the following:

Two Cylinder Oil Cups.



Gang Boss.

FIG. 2

and the daily balance taken off. The following figure is a form of one of these orders and by referring to Fig. 1 it can be seen how the transaction may be carried through.

The above method of procedure is usually designated as the voucher scheme and a large number of businesses permit such a course of action.

In some industries the output is composed of a great number cf assembled parts, each one of which is carefully fitted and joined to another. Machinery of all kinds come under this category.

In a large machine shop or engine building establishment the work of the foremen is so great that much of their authority must be delegated to other men called gang bosses, who are given charge of special groups of work. These gang bosses have five to thirty and more men under their direction and each one of these workmen are, at any time, likely to make requests for materials from the gang boss if the voucher system is in use. Frequently there is so much to be obtained, the variety of materials wanted is so great and the men who come to the gang boss for orders are so numerous that the gang boss gets into the habit of making out orders without questioning the uses to which the materials will be put. The writer was once employed in a firm of the above character where the order voucher system was in use. By it men obtained candles, electric light bulbs, brass work, oil cups, and a great variety of other valuable material which they either wasted, used at home or sold.

It might be suggested that the store room clerks would be expected to visé these orders before honoring them. This was done in the case above cited, but there were so many calls on the clerks that it was simply impossible to hold them responsible for duplicating orders that were properly signed. In a single day over five hundred vouchers for small and great quantities of materials would come in, to investigate which, in however a cursory manner, would cause a waste of time so that a line of men would soon string before the windows.

In the accounting department the vouchers required an excessive amount of clerical work because they had to be sorted and assembled before they could be copied into the ledger under their proper divisions.

As a result of these limitations to the voucher system there has arisen another method of obtaining material from the store room.

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(2) The drawing room, manned by engineers and draughtsmen, designs a complete plan of all the things which go into the structure. A clerk then makes out from the drawing a set of sheets (Fig. 3), in which are shown the things which each department in the shop needs to properly carry out their part of the work on the structure. These sheets are made out in quadriplicate, one is retained by the draughting department, two are given to the store clerk and the third is handed to the gang boss who has charge of that particular section of work. When the gang boss wants any material indicated on his sheet he checks off the articles he wants, takes the paper to the store room and receives those articles. The stores clerk will take his two sheets, check off the same articles and then at the end of the day will send one to the accounting department where the amounts taken out of the store room will be properly entered on the Inventory Ledger as already shown in the other case.

In ordinary enterprises the shipping department receives all its finished goods from its own factory. Some businesses are of such a nature that the product is shipped as soon as it is completed, but where stock is kept on hand the keeping of an inventory does not need to entail any great expense. The following formula suggests an efficient method of keeping such an inventory:

(Receipts from factory (both quantity and value) + amount already on hand (quantity and value) + returns (quantity and value)] - [Sales (quantity and value) + amounts given out not sales (quantity and value)] = balance on hand (quantity and value).

To make any inventory thoroughly reliable an adequate system of original records should be provided in addition to a proper summary record in the ledger. A very good plan is to have the shipping department give a receipt for every consignment of goods received from the factory. The receipt should be made out in triplicate, one being retained by the foreman who turned the goods over, the other by the shipping department, and the third should be sent to the accounting department in order to be used as the basis for the ledger entries and filed away for reference. A form of the receipt is shown below (Fig. 4).

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When the shipping department receives returned goods from dissatisfied customers, or for any other reasons, another form of a receipt should be made out in triplicate, one to be sent to cus

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