In this way we are able to establish a practicable plan for imposing the loadings, while it is an easy matter to resolve the resulting credits into their original factors when the time arrives for setting up the individual reserve accounts.

In conclusion, let me emphasize the increasing importance of recognizing machine labor as a basic element of cost. The tendency of the age is undoubtedly to supersede manual labor in every possible way by introducing machinery to do the work; so that while the direct pay roll becomes gradually less and less in proportion to the factory output, the expenditure on machinery keeps on growing more and more. The custom is to entirely ignore machine work as an element of direct cost, arbitrarily fixing the latter as composed only of material and manual labor and loading all machinery and power expense, including repairs and depreciation, as a percentage on the amount of manual labor only. As an evident consequence of this method, the more hand work we put on a job the more will be the loading for machinery expense, and the more actual machine work we introduce, the less will it bear of the loading; or to carry the anomaly to its legitimate limit, a job done entirely by hand would bear a full share of the machinery cost, whereas a job done exclusively on the machines would bear none.

As a concrete example, take the case of an automatic screw machine turning out small completed parts by the score every hour. Six such machines will barely occupy the time of one man, and on an ordinary cost system the product would be charged with a sixth part of his wages and loaded in proportion, whereas if the operations were entirely done by hand not only would the direct cost be more, but the loading for machinery expense would be proportionately greater, although, as a matter of fact, no machine work had been done at all.

Surely nothing more need be said to prove that the old method is incorrect and liable to produce misleading results, and to establish the principle that the work done by a machine must be measured and figured as one of the basic elements of prime cost, on the accuracy of which the whole superstructure depends.

BY F. W. LAFRENTZ, C. P. A.

The accountant who wants to do hotel work must get into the thick of it and learn the hotel business from the ground up. When you come to put in a system for a large establishment, if the men who are assigned to the duties of heads of departments are in the least fractious, and for one cause or another do not want your plan to succeed, you may be under the necessity of doing the work yourself. So, I say, a person in order to make a success of this and, I presume, of any accounting work, really must first of all study the conditions. It stands to reason that you cannot lay down a system that will fit every case. For instance, for the purpose of checking out the sales of food through the kitchen, you must know the physical lay-out of that kitchen in order to know what to do to get a line on all the things that are passing out of it.

There are two kinds of hotels now in this country, those conducted on the European plan and those on the American plan. The American plan house is, of course, a comparatively simple matter, because whoever is in charge of the restaurant end of it knows how many guests there are in the house and knows how many he must provide for, and can buy accordingly. The European plan house, that in which you pay just for what you get and nothing more, must keep in stock everything a guest may call for. So you see the two are entirely different in character. Very often houses run both plans, the American and the European, and, of course, you must fit a system to that condition. It is very difficult at times for a hotel to keep track of its guests when run on the two plans. I have seen places, where they make the division by having colored waiters for the American plan and white for the European plan guests. And there lay the distinction as far as the two kitchens were concerned.

Recollect that the hotel business is one of infinite detail. If a check signed by a guest is lost you have trouble. It is a good deal like a bank check. You can only get the money when you produce the article. On the other hand, waiters in big hotels very often manage to obtain checks on the outside, checks that do not belong and are not dealt out by the comptroller of the hotel,

An address delivered before the students of the New York University School of Commerce, Accounts and Finance.

and if they do that they may swindle the hotel out of a lot of money before they are found out.

The main difficulty, of course, is in the sales end, the purchase end being more readily taken care of. If you are not careful the receiving clerk will be placed under the charge of the steward, which is wrong. The receiving clerk should be directly responsible to the main office. If your order system is a proper one, and any order system will do so long as you have a record, you will have very little trouble if you insist that no goods shall be received by the receiving clerk without the bill accompanying the goods. I do not mean that you should make that rule hard and fast, because there may be times when you want the goods, bill or no bill.

The receiving clerk keeps a book called the "Receiving Clerk's Book," in which he puts down the name of the firm or corporation from whom the purchase has been made, and the amount of the invoice. When there is no bill with the goods he enters the goods in detail, so that when the bill does come in he may check it with his receiving book. Where the plant is very large, there are separate receiving clerks for the merchandise which is used in the kitchen and for the cigars and wines, because one man is unable to attend to both. At the end of the day the receiving clerk foots up his receiving book and makes a statement of the goods received, so far as totals are concerned. He attaches to that statement all of the invoices with his stamp on each, which means that the goods have been received and put into the storeroom, and gets the purchasing agent's initials as to price. All these goods are treated as though they had been put into a store, so that when the statement goes up to the head office, to the purchase journal clerk, he makes his entries from the bills and produces a statement of totals which is handed to the head bookkeeper.

On this statement you will find the headings of the purchase journal. In other words, he makes a distribution of his bills on his purchase journal, which is a columnar journal, ruled according to what you want to show. There must be agreement between the storeroom and purchase journal statements. At the end of the month we get a total from the receiving clerk that must agree with the purchase journal clerk's record, so far as the purchase of stores is concerned.

By a similar process to that which we employ in getting the goods into the storeroom, we get them out, that is, by means of a statement. At the end of the day we know the receipts from every department. We also know the cost of production, because everything that has been used in the kitchen or elsewhere has been reported from their various sources. All these records are gathered up and sent daily to the head bookkeeper, who has the means of entering upon his books what is necessary to produce the profit and loss and assets and liabilities statements.

We have also a system of checks by means of the bills of purchases by guests. The bills are usually made by a bank note company, so that they cannot be duplicated without great difficulty, and are numerically arranged. They bear the waiter's number and are handed out to the waiters and to those who are in charge of sales of all kinds, just as money is handed out. For that purpose we have a comptroller, meaning, in this case, merely a man to control the sales. He sees to it that all the checks that are received by him are safely stored until wanted, that they are given out to those entitled to them, and that record of the numbers is made, so that if a check is missing, he can put his finger on the man who should account for it. In addition we have checkers sitting at the entrance to the various places out of which these sales are made. As a waiter passes with a tray full of articles, he must first of all present himself to one of these checkers and show what his check calls for. The checker puts under that waiter's number the amount of the article he is taking out and also stamps the same amount opposite that item on the waiter's check. The large checkers' sheets are taken by the comptroller the next day and every check is compared with that sheet to see that they correspond, one with the other. If there are any missing items or checks, the waiter has to pay that amount or produce the check.

Each department has a cashier. If a guest pays for his purchase the cashier takes the amount and enters it in a counter book. If it is cash it is entered on the one side and a division made of the sale as to what it covers, food, wine, cigars, and so on. If it is a charge sale, it is entered on the other side and the purchaser's name put along side of it. Two of these books are used alternately, one one day and another the next. Every other day the comptroller gets this book, foots it up and balances with

the checks which are independently controlled by adding machines and otherwise. Then the business by departments, all of which is reported immediately on the morning following, is segregated on the basis of the kind of goods that have been sold; so that here you have an uncontrolled report in the first instance of the total amounts received by the departments and the charges by departments. That report goes to the treasurer or head cashier and each department cashier, having a balance at the beginning of the day, must turn in the amount of money taken in through the day. The treasurer knows how much has been received by each cashier according to the comptroller's report and should enter on his books the amounts called for by the comptroller, not the actual amounts turned in by the cashiers. This is contrary, to be sure, to the general rule of accounting that the actual cash received rather than the comptroller's statement should be entered. In this case, however, it would throw everything upside down, if we followed the usual rule, because the comptroller analyzes the sales and it would be necessary to make a deduction here or there in order to square the cash, if it were over or short. What we do is to create an over and short account" upon the ledger, in which we put down each day, item for item, the amount over or short by the several people in charge of cash. If a person is always over or always short, he is not wanted. However, you must insist upon having the truth if you can get it. I do not mean to say that you always can get it.

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The front office cashiers are treated in like manner. They have to report overs and shorts. There used to be a time when the proprietor said, if you are over I want the money and if you are short I want the money. We maintain that such a rule produces dishonesty. If he is over, let him turn it over. If he is short and it is an honest shortage, let it offset the "over " account. It stands to reason that a man working on a salary cannot make up large losses, if honestly made, and he will find a way of getting them back again. If he cannot get it out of the house he will get it out of the customer by making short change in changing bills.

The comptroller keeps a very large sheet, though it is not larger than it needs to be if you have a number of departments, in which he enters daily, first of all the amount of departments and then the segregated accounts of sales. On each side of the sheet are the days numbered from 1 to 31; at the top is simply