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cutting slips for the lots of shoes for which orders have been placed in the factory. The cutting slips are posted to the credit of the accounts in the storeroom ledger, and they are summarized for credit to the controlling account in the general ledger, and postings can be made direct from the cutting slips to the cost accounts.

There is of course here a great variation from the routine and the form of the records in machine shop storehouses, but I believe it is merely a variation in practice to conform to operations following a different course, and not a departure from the principle which governs the organization and records of machine shop storehouses. To illustrate this we may suppose that a machine shop storehouse might have in it the machinery necessary for cutting bar iron and steel. If it were convenient to do this there could be no objection upon principle to its being done. Even in this slight operation we have something essentially similar to the sorting of upper leathers in the upper leather storeroom of a shoe factory. I want to make it plain that in different industries cost accounts rest upon the same principles, and, in spite of great apparent differences, have still the same methods fundamentally.

In the case of the sole leather storeroom, a step is taken that goes further than the sorting process in the upper leather storeroom, that is to say, the sides of leather are cut up and outer soles, and inner soles, and heel pieces, are obtained. As far as the records are concerned, the procedure is the same. Instead of a sorting report, we have the cutting report. On the debit side of the cutting report is entered at its cost price the leather that is taken to cut up, and the cutting labor is entered, and a percentage upon the cutting labor to take up the general expenses of the room; and on the credit side of the cutting report are entered the products, outer soles, and inner soles, and heel pieces, and scrap leather. These products are priced in a manner that is parallel to the pricing of the products of the sorting of the upper leathers, that is to say, relatively fair prices are established for the different products, and these are adjusted to a level at which they are calculated to take up the actual costs; and then there is, just as in the other case, a percentage of surplus or deficiency. As a storeroom operation, the outer and inner soles are merely cut out in their first shape. The further operations upon the soles are sometimes actually done in the same room, but constructively they are done subsequent to their issue from the storeroom. The heels on the other hand are actually manufactured for stock, and these manufacturing operations may be treated as storeroom operations, in which case the heel making report belongs for bookkeeping purposes exclusively to the sole leather storeroom. In the general ledger the controlling account for the sole leather storeroom will be in four divisions, for materials purchased, and labor, and general expenses, and issues of leather, just as in the case of the upper leather storeroom controlling account. And in the sole leather storeroom the cutting reports and heel making reports, with their surpluses and deficiencies, will be posted to the sole leather storeroom ledger in exactly the same manner as in the case of the upper leather storeroom. The issues from the sole leather storeroom are also made at the standard prices in use.

The amount of net surplus or net deficiency in the upper leather storeroom should be stated week by week, and the standard of prices raised or lowered at any time that it is seen to be necessary in order to keep the prices placed on the products of the sorting, and used in issuing the sorted leathers, in substantial agreement with actual costs. They should be kept so adjusted as to leave a little surplus, which is very likely to be needed at the end of the fiscal period to take care of some depreciation which may take place in some stocks. The surpluses and deficiencies in the sole leather storeroom should be watched week by week in exactly the same manner, and the standard prices on the products there should be kept adjusted in just the same way for the same purpose of keeping a surplus, but not an excessive one, to provide for needs which develop in one shape or another. The small surplus to be kept in each of these two cases is merely a proper margin of safety.

You will remember that I said that in machine shop operations, the individual operations are of sufficient length so that the time taken by each can be easily recorded, and the individual labor charge for each operation, and the individual machine charge for each operation, can be posted to the cost account for the job. It would be exceedingly laborious to do this in shoe factory cost accounts. As far as the labor charges go, it is possible to do it in shoe factories of moderate size, and it is done. Presumably, the labor of doing it in large shoe factories would be merely proportionate to their volume of operations, but it would for many reasons be not merely expensive, but difficult to maintain at the requisite standard of accuracy. It would seem therefore that as a general proposition there has got to be some variation or adaptation of the procedure in machine shop cost accounts in order to satisfactorily effect the labor and machine charges in shoe factory cost accounts. In regard to the labor I have used what I have called " Labor Cost Sheets,” that is, for each kind of shoe made, a series of cost sheets corresponding to the different departments through which the shoe goes. For a single kind of shoe, there would be labor cost sheets for the sole leather department covering all operations subsequent to the original storeroom operation of cutting the soles out, for the upper leather cutting, for the stitching room, the assembling room, and the finishing room. On each of these cost sheets is specified the series of operations performed in the particular room on the particular kind of shoe, and on each there are two columns for the prices, the first being for piece prices which are fixed, and the second being for day work pieces, which are calculated upon the day wage and the average day's work for the respective operations. These labor cost sheets can be prepared according to what is called the sample shoe. In actual ordering, customers frequently vary the sample shoe. Where these variations involve changed labor expense, it is very necessary in order to protect profits, that they be very carefully watched, and the difference in the cost that is created clearly seen. Where these differences occur, the standard labor cost sheets have to be modified accordingly, for the purpose of the cost accounts for such shoes.

To use labor cost sheets in the manner described is of course an immense saving of labor as compared with the individual posting to cost sheets of a charge for each separate operation. Where every operation that is credited to a workman is posted to a cost sheet, the complete distribution of the pay-roll is assured in a manner that is not accomplished in the first place by the use of labor cost sheets. The check upon the pay-roll, and upon its distribution in the cost accounts, has however to be obtained in some way, and the way adopted is this: The pay-rolls are analyzed, as they should be in any case and even regardless of cost accounts, first as between departments, and next as between piece labor, and productive day labor; and ledger accounts for these divisions of the pay-roll are set up either in the general ledger, or in a subsidiary manufacturing ledger, according to the volume of the operations and the way the bookkeeping is arranged. This gives us one side of the figures that we want to compare. In the next place, an analytical summary is made of all the cost sheets for the product, that is to say, the sheet upon which the cost sheets are summarized has a considerable number of columns, including columns for the piece work and the productive day work in each of the departments. The cost sheets, which are summarized weekly or monthly, are further summarized on a similar form for the season; and so it will be seen that the totals of, for instance, the stitching room piece labor, and the stitching room productive day labor, as taken up in the cost accounts by means of the labor cost sheets, are arrived at, and are available for comparison with the corresponding figures accumulated in the ledger accounts from the analysis of the succeeding weekly pay-rolls throughout the season,

Now while I have not as yet done it in any case, I am satisfied that something parallel to this can be accomplished in relation to the machinery charges. If in the first place, the annual cost of each machine is determined, as in the case of machine tools in a machine shop, the annual expense can be reduced to a daily expense, and a fair daily output for each machine can be calculated, and a price can be put upon each operation, that is, a machine rate for each operation exactly as there is a labor price for each operation. The labor cost sheet could then be made into a labor and machine expense cost sheet, and against each operation would be put not only the piece price, or the calculated day-labor cost, but in an additional column the calculated machine rate for the operation; and these machinery charges would be summarized in the same way that labor taken up in the cost accounts is summarized, and would be credited against the actual machinery expenses in the various departments, exactly as is done with the machine rates taken up in machine shop cost accounts.

In a single hour it is of course not possible to talk very fully or very descriptively concerning the cost accounts of an important industry. I have tried to outline the cost accounts of the shoe manufacturing industry, and to show where the methods of cost accounting in this industry must vary from the methods that I have described in the machinery manufacturing industry, and at the same time to show that there is throughout a distinct and intelligible relationship between the two.

The Adjustment of Partnership Accounts.

BY LEO GREENDLINGER, B. C. S. The English Partnership Act of 1890 defines a partnership as " the relation which subsists between persons carrying on a business with a view of profit.”

The New York Statute provides: “A partnership as between the members thereof is the association, not incorporated, of two or more persons who have agreed to combine their labor, property and skill, or some of them, for the purpose of engaging in any lawful trade or business and sharing the profits and losses as well between them."

While the two definitions are synonymous, the latter for accounting purposes is clearer; and in treating the subject of “Adjustment of the Accounts of Partnership” it is of greater importance, inasmuch as the language of the latter assists in the solution of problems.

In no branch of accounting (Executors' Accounts excepted) is a knowledge of law so essential, as in the adjustment of partnership accounts. It is to be regretted that, in some instances, the law is so framed that modern principles of accounting cannot be applied—unless upon agreement by the partners—without a violation of the law. From the formation to the dissolution one must necessarily be guided by the Statutes, and it is right at the formation of the partnership that proper care must be taken to obey the law and at the same time not to defeat the objects of the partnership, or, what is more important, to carry out the exact intentions of the partners. This phrase, “to carry out the exact intentions of the partners," suggests the necessity of a written rather than an oral agreement. The Statute of Frauds requires the agreement to be in writing only when the partnership is to continue for more than one year, but business men now recognize the necessity for such an agreement to be in writing, regardless of the time that the partnership is to last.

To frame such an agreement, to protect the interests of all

* Submitted to the Faculty of New York University School of Commerce, Accounts and Finance in fulfillment of the requirements for the degree of Master of Commercia Science.

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