payable eight dollars in cash and the balance by installments on the first of each month. As an inducement to customers it gives with each contract an article costing three dollars, and it allows the agent securing the contract to retain out of the cash payment a commission of $2.50. Experience shows that the cost of collecting the monthly installments averages ten per cent. of the amount collected.

(a) What entries would you make on the books when the contract is secured?

(b) How would the accounts opened be disposed of by the time the contract is closed?

(c) You are asked to change the bookkeeping system and open an entirely new set of books at a date when the records show, among other assets and liabilities, 1,000 contracts in force with an average of twentyfive weeks service to be rendered on each and installments amounting to $7,500 outstanding. What assets, liabilities and reserves would you set up in the new books respecting these matters? It is not necessary to consider the question of cancellation or breaches of contract.

To contrast and compare these papers with those presented by other boards the following typical problems and questions are given:

PRACTICAL ACCOUNTING, PART I.

(NEW YORK, February 4, 1908, 1.15 to 4.15 P. M.)

1. On July 9, 1907, Smash, Slump & Company, bankers, buy from the Atlantic Ocean Bridge Company its first 5 per cent. 50-year gold bonds, dated July 1, 1907, interest payable semi-annually, amounting to $10,000,000, at 90 per cent. and interest, with a bonus of 50 per cent. in common stock of the Atlantic Ocean Bridge Company. On the same date the bankers form a syndicate for one year to take the bonds at 922 per cent. and interest with the common stock as a bonus. They make no charge for expenses. The syndicate is formed as follows:

On the same date the bankers pay the Atlantic Ocean Bridge Company the total amount due it for the $10,000,000 of bonds, and carry the syndicate, the members of which make no payments to the bankers.

On February 1, 1908, $6,000,000 of bonds are sold on the stock exchange at an average price of 95 per cent. less one-eighth per cent. commission. On April 1, 1908, $1,000,000 of bonds are sold on the stock exchange at an average price of 94 per cent. less one-eighth per cent. commission.

Prepare statements, as follows, showing the bankers' and participants' accounts as they should appear on the bankers' books at the close of the syndicate:

(a) Statement showing the bankers' account for the purchase of the securities, including transfers to syndicate account and profit thereon.

(b) Statement of each of the syndicate members' accounts as they should appear on the books of the bankers, July 9, 1908.

(c) Statements showing the transactions and profit and loss on the bankers' own participation account, assuming that the bonds are selling at 922 per cent.

In making up these statements, no account need be taken of the coupons paid by the Atlantic Ocean Bridge Company, nor of any interest charges by the bankers to the participants' accounts or to its own participation account, as it may be assumed that the cash received for the coupons by the bankers will be sufficient to reimburse them for their advances to July 9, 1908.

2. The bookkeeper of a manufacturing concern could produce only the following statement from its records on January 1, 1907:

On January 1, 1907, the management changes, and you are later retained as a public accountant to conduct an examination and prepare a balance sheet as of January 1, 1908.

You find that during the preceding year the directors have subscribed in cash to $7,500 additional capital stock and have retired all the notes and old accounts payable, and that no interest was paid on these accounts for the year. You also find that the plant and equipment was revalued at $15,000 and 5 per cent. of this amount was charged off to provide for depreciation, while an additional 22 per cent. was ordered placed in Reserve Account to cover repairs and renewals, the entire 71⁄2 per cent. being charged direct to Profit and Loss. The bond outstanding fell due on December 31, 1907, and was paid, principal and interest, in cash.

An inventory of materials and supplies places their value at $2,328.19, the practice being to charge all purchases direct to Manufacturing Expenses and to credit back the amount of the inventory.

The accounts payable (all for material and non-interest bearing) amount to $546.28.

Of the accounts receivable January 1, 1907, $4,968.18 was collected and the balance charged off as uncollectible.

In addition to the material used from stock during the year, and the amount still due for material purchased, the manufacturing expenses were $3,720.52, all paid in cash, the total manufacturing expenses being 31 per cent. of the gross sales for the year ending January 1, 1908.

Of these 91.3 per cent. were collected in cash and the balance, all of which is considered good, remains on the books in accounts receivable. Produce a comparative balance sheet of January 1, 1908-1907, and state the amount of gross sales for the year.

THEORY OF ACCOUNTS.

(February 5, 1908, 9.15 A. M. to 12.15 P. M., only. Ten questions.) A company issues annually over 10,000 checks on three separate banks, recording each one on the check stub and then transcribing each check in detail on the general cash book. Suggest a change in method that would facilitate the work and point out advantages gained.

What do you consider the best way of entering on the books of a manufacturing company the amount written off to profit and loss for depreciation on (a) buildings, (b) large or fixed tools, (c) small or expense tools?

What primary books of account are necessary for the proper and intelligent conduct of a small business? Describe the general form and uses of each book mentioned.

What do you understand by "depreciation," and how should it be provided for on the books of a manufacturing company owning its plant and equipment? Wherein does depreciation differ from renewals and repairs, and can it be avoided through any system of bookkeeping?

What is a reserve account? How may it be properly established and for what purpose? What, if any, contra account should be maintained? Under what circumstances should these accounts be maintained? Why? AUDITING.

(February 5, 1908, 1.15 to 4.15 P. M., only. Ten questions.)

In making an audit would you consider it necessary to check in detail the postings of subsidiary ledgers? Explain fully.

In examining the books of a railroad company for the purpose of determining the profits for a given period only, what class of expenditures should be carefully examined? State how you would verify such expenditures.

Explain fully how you would proceed in inspecting and verifying the bonds and stocks (not valuation) owned by a company whose books you are auditing, stating the principal points you would investigate in connection with the coupons and the names appearing on the stock certificates.

Explain briefly what method you would employ to audit the accounts of a firm whose books had been kept by single entry.

What is the difference between a reserve and a reserve fund? Give examples of each.

Papers set by the Scottish Chartered Accountants' General Examining Board, June, 1907.

GENERAL BUSINESS OF AN ACCOUNTANT.

(The Theory and Practice of Bookkeeping, including the Preparation of Balance-Sheets, Profit and Loss Accounts, and Partners' Accounts; the Principles of Cost Accounts; Joint Adventure and Consignment Accounts.)

(Time allowed, for seven questions three hours.)

Job Trader, merchant, Greenock, has the following, representing the capital in his business at 1 January, 1906, viz.:

At this date he assumes as a partner James Dealer, who pays into the firm in cash £860, and transfers a stock of 2,000 bolls of maize taken at 22s. per boll.

The partners are each to draw a salary of £25 monthly, to be allowed interest on their capital at 5 per cent. per annum, and to share the profits and losses equally.

On 31st December, 1906, the trial balance of the firm's General Ledger is as follows:

The partners' accounts, stock account, and ship shares account are kept in the private ledger, and during the year this account has been debited with the salaries paid to partners, and with the sum of £1,200 paid for the purchase of 2-64ths in the SS. Alma.

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Goods sent on consignment are debited to the respective consignment accounts at pro forma invoice value, and Consignment Sales Account" credited therewith. Each particular consignment account is closed on receipt of final account sales, "Consignment Sales Account being credited or debited with the balance of profit or loss on the consignment.

Prepare a profit and loss account and balance sheet of the firm's affairs on the 31st of December, 1906, the stock on hand at that date being valued at £3,718-there being due for rent and taxes £24, a loss estimated on unclosed consignments of £200, and before profit or loss is ascertained, depreciation to be written off the ship shares at 72 per cent. and off the office furniture at 5 per cent.

State the distinguishing points of difference between the forms of published accounts (a) usually adopted by a limited company for trading purposes, (b) of a railway company, and (c) of a county council.

In preparing cost accounts for a shipbuilding business, how would you treat payments made for (a) Ships' plates; (b) Office and management salaries; (c) Wages of foreman carpenter; (d) Smithy coal; (e) Rivets; (f) Paint; (g) Riveters' wages?

The head office of the Thames Soap Company is in London, and the Company has a branch in Liverpool, from which all sales in the Lancashire district are controlled. All goods sold in this district are invoiced from this Liverpool office, and all payments in respect of these are received there, the amounts falling due to be lodged daily in bank to credit of an account operated upon from the head office. The principal books kept at Liverpool are a day-book, credit book, cash book, and ledger. It having been ascertained that the Liverpool agent had been dealing improperly with certain of the moneys collected, and had failed to pay them into the bank account in the regular course, it is resolved to transfer to London the control of all receipts, but to continue to invoice the goods from Liverpool.

Write a short memorandum of suggestions for an alteration of the bookkeeping system to meet the altered circumstances.

THE PROCEDURE AND REQUISITES IN THE AUDIT
OF ACCOUNTS AND BOOKS.

Including those of Public Bodies, Companies, Firms, and Trust Estates. (Time allowed, three hours for eight questions.)

You are appointed auditor of an engineering company formed to take over an existing business. The following is the first balance sheet of the company, made up at the 31st of December, 1906, as submitted to you for audit:

The ground on which the buildings are erected is held on a twenty years' lease. The additions to buildings have been done by contractors, and those to plant and machinery by the company's own employees. The preliminary audit work having been completed, how would you satisfy yourself that the various items in the balance sheet, excluding the profit and loss account, are correctly stated?

Assuming that you have found the entries in the balance sheet given in the first question to correspond with the books, mention three points to which you would, before certifying the balance sheet, devote special attention, giving your reasons for doing so.

In auditing the accounts of a charitable institution, what safeguards would you suggest to insure that all receipts for subscriptions and donations were duly credited?

State in detail what steps you would take to check the amount of assessment for Poor Law and Education Rate imposed and collected by a parish council collector.