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You may copy it, give it away or re-use it under the terms of the Project Gutenberg License included with this eBook or online at www.gutenberg.org Title: Cyclopedia of Commerce, Accountancy, Business Administration, v. 1 Author: Various Release Date: July 26, 2014 [EBook #46424] Language: English *** START OF THIS PROJECT GUTENBERG EBOOK CYCLOPEDIA OF COMMERCE *** Produced by Giovanni Fini, Juliet Sutherland and the Online Distributed Proofreading Team at http://www.pgdp.net Cyclopedia of Commerce, Accountancy, Business Administration V OLUME 1 A General Reference Work on ACCOUNTING, AUDITING, BOOKKEEPING, COMMERCIAL LAW, BUSINESS MANAGEMENT, ADMINISTRATIVE AND INDUSTRIAL ORGANIZATION, BANKING, ADVERTISING, SELLING, OFFICE AND FACTORY RECORDS, COST KEEPING, SYSTEMATIZING, ETC. Prepared by a Corps of AUDITORS, ACCOUNTANTS, ATTORNEYS, AND SPECIALISTS IN BUSINESS METHODS AND MANAGEMENT Illustrated with Over Two Thousand Engravings TEN VOLUMES CHICAGO AMERICAN TECHNICAL SOCIETY 1910 C OP YRIGHT , 1909 BY AMERICAN SCHOOL OF CORRESPONDENCE C OP YRIGHT , 1909 BY AMERICAN TECHNICAL SOCIETY Entered at Stationers' Hall, London All Rights Reserved MAILING DEPARTMENT IN THE NEW YORK OFFICES OF THE WESTERN ELECTRIC COMPANY Authors and Collaborators JAMES BRAY GRIFFITH, Managing Editor Head, Dept. of Commerce, Accountancy, and Business Administration, American School of Correspondence. ROBERT H. MONTGOMERY Of the Firm of Lybrand, Ross Bros. & Montgomery, Certified Public Accountants. Editor of the American Edition of Dicksee's Auditing Formerly Lecturer on Auditing at the Evening School of Accounts and Finance of the University of Pennsylvania, and the School of Commerce, Accounts, and Finance of the New York University. ARTHUR LOWES DICKINSON, F. C. A., C. P. A. Of the Firms of Jones, Caesar, Dickinson, Wilmot & Company, Certified Public Accountants, and Price, Waterhouse & Company, Chartered Accountants. WILLIAM M. LYBRAND, C. P. A. Of the Firm of Lybrand, Ross Bros. & Montgomery, Certified Public Accountants. F. H. MACPHERSON, C. A., C. P. A. Of the Firm of F. H. Macpherson & Co., Certified Public Accountants. CHAS. A. SWEETLAND Consulting Public Accountant. Author of "Loose-Leaf Bookkeeping," and "Anti-Confusion Business Methods." E. C. LANDIS Of the System Department, Burroughs Adding Machine Company. HARRIS C. TROW, S. B. Editor-in-Chief , Textbook Department, American School of Correspondence. CECIL B. SMEETON, F. I. A. Public Accountant and Auditor. President, Incorporated Accountants' Society of Illinois. Fellow, Institute of Accounts, New York. JOHN A. CHAMBERLAIN, A. B., LL. B. Of the Cleveland Bar. Lecturer on Suretyship, Western Reserve Law School. Author of "Principles of Business Law." HUGH WRIGHT Auditor, Westlake Construction Company. GLENN M. HOBBS, Ph. D. Secretary, American School of Correspondence. JESSIE M. SHEPHERD, A. B. Associate Editor, Textbook Department, American School of Correspondence. GEORGE C. RUSSELL Systematizer. Formerly Manager, System Department, Elliott-Fisher Company. OSCAR E. PERRIGO, M. E. Specialist in Industrial Organization. Author of "Machine-Shop Economics and Systems," etc. DARWIN S. HATCH, B. S. Assistant Editor, Textbook Department, American School of Correspondence. CHAS. E. HATHAWAY Cost Expert. Chief Accountant, Fore River Shipbuilding Co. CHAS. WILBUR LEIGH, B. S. Associate Professor of Mathematics, Armour Institute of Technology. L. W. LEWIS Advertising Manager, The McCaskey Register Co. MARTIN W. RUSSELL Registrar and Treasurer, American School of Correspondence. HALBERT P. GILLETTE, C. E. Managing Editor, Engineering-Contracting Author of "Handbook of Cost Data for Contractors and Engineers." R. T. MILLER, JR., A. M., LL. B. President, American School of Correspondence. WILLIAM SCHUTTE Manager of Advertising, National Cash Register Co. E. ST. ELMO LEWIS Advertising Manager, Burroughs Adding Machine Company. Author of "The Credit Man and His Work" and "Financial Advertising." RICHARD T. DANA Consulting Engineer. Chief Engineer, Construction Service Co. P. H. BOGARDUS Publicity Manager, American School of Correspondence. WILLIAM G. NICHOLS General Manufacturing Agent for the China Mfg. Co., The Webster Mfg. Co., and the Pembroke Mills. Author of "Cost Finding" and "Cotton Mills." C. H. HUNTER Advertising Manager, Elliott-Fisher Co. FRANK C. MORSE Filing Expert. Secretary, Browne-Morse Co. H. E. K'BERG Expert on Loose-Leaf Systems. Formerly Manager, Business Systems Department, Burroughs Adding Machine Co. EDWARD B. WAITE Head, Instruction Department, American School of Correspondence. Authorities Consulted The editors have freely consulted the standard technical and business literature of America and Europe in the preparation of these volumes. They desire to express their indebtedness, particularly, to the following eminent authorities, whose well-known treatises should be in the library of everyone interested in modern business methods. Grateful acknowledgment is made also of the valuable service rendered by the many manufacturers and specialists in office and factory methods, whose coöperation has made it possible to include in these volumes suitable illustrations of the latest equipment for office use; as well as those financial, mercantile, and manufacturing concerns who have supplied illustrations of offices, factories, shops, and buildings, typical of the commercial and industrial life of America. JOSEPH HARDCASTLE, C. P. A. Formerly Professor of Principles and Practice of Accounts, School of Commerce, Accounts, and Finance, New York University. Author of "Accounts of Executors and Testamentary Trustees." HORACE LUCIAN ARNOLD Specialist in Factory Organization and Accounting. Author of "The Complete Cost Keeper," and "Factory Manager and Accountant." JOHN F. J. MULHALL, P. A. Specialist in Corporation Accounts. Author of "Quasi Public Corporation Accounting and Management." SHERWIN CODY Advertising and Sales Specialist. Author of "How to Do Business by Letter," and "Art of Writing and Speaking the English Language." FREDERICK TIPSON, C. P. A. Author of "Theory of Accounts." CHARLES BUXTON GOING Managing Editor of The Engineering Magazine Associate in Mechanical Engineering, Columbia University. Corresponding Member, Canadian Mining Institute. F. E. WEBNER Public Accountant. Specialist in Factory Accounting. Contributor to The Engineering Press. AMOS K. FISKE Associate Editor of the New York Journal of Commerce Author of "The Modern Bank." JOSEPH FRENCH JOHNSON Dean of the New York University School of Commerce, Accounts, and Finance. Editor, The Journal of Accountancy Author of "Money, Exchange, and Banking." M. U. OVERLAND Of the New York Bar. Author of "Classified Corporation Laws of All the States." THOMAS CONYNGTON Of the New York Bar. Author of "Corporate Management," "Corporate Organization," "The Modern Corporation," and "Partnership Relations." THEOPHILUS PARSONS, LL. D. Author of "The Laws of Business." E. ST. ELMO LEWIS Advertising Manager, Burroughs Adding Machine Company. Formerly Manager of Publicity, National Cash Register Co. Author of "The Credit Man and His Work," and "Financial Advertising." T. E. YOUNG, B. A., F. R. A. S. Ex-President of the Institute of Actuaries. Member of the Actuary Society of America. Author of "Insurance." LAWRENCE R. DICKSEE, F. C. A. Professor of Accounting at the University of Birmingham. Author of "Advanced Accounting," "Auditing," "Bookkeeping for Company Secretary," etc. FRANCIS W. PIXLEY Author of "Auditors, Their Duties and Responsibilities," and "Accountancy." CHARLES U. CARPENTER General Manager, The Herring-Hall-Marvin Safe Co. Formerly General Manager, National Cash Register Co. Author of "Profit Making Management." C. E. KNOEPPEL Specialist in Cost Analysis and Factory Betterment. Author of "Systematic Foundry Operation and Foundry Costing," "Maximum Production through Organization and Supervision," and other papers. HARRINGTON EMERSON, M. A. Consulting Engineer. Director of Organization and Betterment Work on the Santa Fe System. Originator of the Emerson Efficiency System. Author of "Efficiency as a Basis for Operation and Wages." ELMER H. BEACH Specialist in Accounting Methods. Editor, Beach's Magazine of Business Founder of The Bookkeeper. Editor of The American Business and Accounting Encyclopedia J. J. RAHILL, C. P. A. Member, California Society of Public Accountants. Author of "Corporation Accounting and Corporation Law." FRANK BROOKER, C. P. A. Ex-New York State Examiner of Certified Public Accountants. Ex-President, American Association of Public Accountants. Author of "American Accountants' Manual." CLINTON E. WOODS, M. E. Specialist in Industrial Organization. Formerly Comptroller, Sears, Roebuck & Co. Author of "Organizing a Factory," and "Woods' Reports." CHARLES E. SPRAGUE, C. P. A. President of the Union Dime Savings Bank, New York. Author of "The Accountancy of Investment," "Extended Bond Tables," and "Problems and Studies in the Accountancy of Investment." CHARLES WALDO HASKINS, C. P. A., L. H. M. Author of "Business Education and Accountancy." JOHN J. CRAWFORD Author of "Bank Directors, Their Powers, Duties, and Liabilities." DR. F. A. CLEVELAND Of the Wharton School of Finance, University of Pennsylvania. Author of "Funds and Their Uses." THE ADVERTISING DEPARTMENT WHERE ARE ORIGINATED THE PUBLICITY CAMPAIGNS OF THE SHERWIN-WILLIAMS CO., CLEVELAND, OHIO Foreword With the unprecedented increase in our commercial activities has come a demand for better business methods. Methods which were adequate for the business of a less active commercial era, have given way to systems and labor-saving ideas in keeping with the financial and industrial progress of the world. Out of this progress has risen a new literature—the literature of business. But with the rapid advancement in the science of business, its literature can scarcely be said to have kept pace, at least, not to the same extent as in other sciences and professions. Much excellent material dealing with special phases of business activity has been prepared, but this is so scattered that the student desiring to acquire a comprehensive business library has found himself confronted by serious difficulties. He has been obliged, to a great extent, to make his selections blindly, resulting in many duplications of material without securing needed information on important phases of the subject. In the belief that a demand exists for a library which shall embrace the best practice in all branches of business—from buying to selling, from simple bookkeeping to the administration of the financial affairs of a great corporation—these volumes have been prepared. Prepared primarily for use as instruction books for the American School of Correspondence, the material from which the Cyclopedia has been compiled embraces the latest ideas with explanations of the most approved methods of modern business. Editors and writers have been selected because of their familiarity with, and experience in handling various subjects pertaining to Commerce, Accountancy, and Business Administration. Writers with practical business experience have received preference over those with theoretical training; practicability has been considered of greater importance than literary excellence. In addition to covering the entire general field of business, this Cyclopedia contains much specialized information not heretofore published in any form. This specialization is particularly apparent in those sections which treat of accounting and methods of management for Department Stores, Contractors, Publishers and Printers, Insurance, and Real Estate. The value of this information will be recognized by every student of business. The principal value which is claimed for this Cyclopedia is as a reference work, but, comprising as it does the material used by the School in its correspondence courses, it is offered with the confident expectation that it will prove of great value to the trained man who desires to become conversant with phases of business practice with which he is unfamiliar, and to those holding advanced clerical and managerial positions. In conclusion, grateful acknowledgment is made to authors and collaborators, to whose hearty coöperation the excellence of this work is due. Table of Contents (For professional standing of authors, see list of Authors and Collaborators at front of volume.) VOLUME I A DMINISTRATIVE AND I NDUSTRIAL O RGANIZATION By James B. Griffith Page 11 The Business Engineer—Preliminary Investigation—Charting the Organization—Organization of Business—Organization of Mercantile Business—Universal Application of Organization Principles— Departmental Authorities—The General Manager—Comptroller—Sales Division—Superintendent— Purchasing Agent—Employment Department—Charting Salary and Wage Distribution—Expense Distribution Chart—Arrangement of Plant—Factory Plans—Office Plans—The Committee System— The Suggestion Plan—Order Blanks A DVERTISING AND S ALES O RGANIZATION By James B. Griffith Page 61 Systems and Records—Designs and Cuts—Cut Indexes and Tracers—Records of Printing— Periodical, Street Car, and Outdoor Advertising—Rate Cards—Advertising Contracts—Checking Returns—The Sales Department—Branches—The Mail-Order Branch—Follow-up Systems— Personal Salesmanship Division—Routing Salesmen—Sales Records T HE C REDIT O RGANIZATION By James B. Griffith Page 127 The Credit Man—Information Required—Financial Statements—Analysis of Statements—Sources of Information—Local Correspondents—Credit Agencies—Recording Credit Information—Collections —Monthly Statements—Installment Collections—Collections by Attorneys T HE S HIPPING D EPARTMENT By James B. Griffith Page 183 The Shipping Clerk—Class Rates—Commodity Rates—Freight Tariffs—Condensed Rate File— Routing Shipments—Filling Orders—Checking Shipments—Export Shipping—Freight Claims— Express Shipments—Retail Delivery System C ORRESPONDENCE AND F ILING By James B. Griffith Page 231 Opening and Distributing Mail—Correspondence Short Cuts—Talking Machines for Dictation— Copying Correspondence—Stenographic Division—Records of Work—Filing Division—Filing Systems—Methods of Indexing—Guiding, Transferring, and Sorting—Selecting Filing Equipment— Styles of Construction B USINESS S TATISTICS By James B. Griffith Page 287 Sales Costs—Records of Shipments—Returned Goods—Salesmen's Records—Expense Distribution —Department Sales—Trading Statements—Profit Figuring—Administrative Costs—Profit and Loss Statements—Mailing-Room Machinery R EVIEW Q UESTIONS Page 333 I NDEX Page 347 AN EXECUTIVE OFFICE AT THE PLANT OF CORBIN CABINET LOCK COMPANY, NEW BRITAIN, CONN. ADMINISTRATIVE AND INDUSTRIAL ORGANIZATION 1. With little fear of contradiction, it may be stated that every commercial enterprise is conducted with the one purpose in view of making money for its owners. Naturally, the owners desire the largest possible returns from their investment of money or time, or both. Every person connected with the enterprise, in any capacity whatsoever, is indirectly working for the same purpose—to make as much money as possible for the owners of the business. The largest possible volume of profitable business must be transacted; the business must be conducted with economy; the returns from each dollar expended must be as large as possible. This very condition is one of the beneficial results of modern business methods. The demand for a greater volume, lower cost of production, and more economical methods, has brought with it an incentive to greater effort on the part of the individual, with corresponding rewards. That the efforts of the individual may be productive of best results, he must have the coöperation of other individuals engaged in the same enterprise. The enterprise must be properly organized. Realizing the absolute necessity of harmoniously working organizations, keen students of business affairs have given much study to the question of how to organize a business. They have studied the plans of operation of the most successful enterprises, for the purpose of discovering those factors which have contributed most largely to their success. They have investigated and improved old plans and methods and invented new methods. 2. The Business Engineer. The investigations of these men have brought into being a new profession—that of the business organizer or business engineer—a profession that has quickly gained recognition. Business men, especially those at the head of large enterprises have not been slow to avail themselves of the services of men who have mastered the science of business organization. For the same reason that he has long employed an architect to plan his building the modern business man calls in a business engineer or systematizer, to perfect his business organization. As in every other profession, some incompetent men are found posing as business engineers, but an increasing number of trained men are entering the field. It is the work of these men that is placing the profession on a high plane. The successful business engineer must have the ability to quickly grasp the plan of operation of any business with which his work may bring him in contact; he must be able to analyze conditions and to determine the factors which make for the success or failure of a business. His work is to organize and systematize every step of the work in every department. 3. The Preliminary Investigation. The first step in the organization or systematizing of a business is to determine its natural divisions. What is the nature of the business, and what are its distinguishing characteristics? Be it a manufacturing, jobbing, wholesale, retail, or professional concern, there is some one head on whom rests the final responsibility for the success or failure of the business. He must be surrounded with subordinates, each having certain duties to perform, who will be responsible for the performance of those duties, thereby coöperating to carry out the purposes of the enterprise. The highest type of organization is found among the great industrial enterprises. These enterprises with their many activities most readily lend themselves to the application of scientific principles of organization. Here, organization can be carried to its final conclusion; in a smaller enterprise the same principles apply, but modification of details is necessary. If we study the organization of a large enterprise, regarding it as a type, we can more readily grasp the requirements of a smaller business. But it must be remembered that in any event, the individual business must be studied and the organization made to fit the business. A tailor does not cut all coats from the same pattern. In certain respects a great industrial organization may be likened to the army. At the head of the army is the commanding general, on whom rests the responsibility for the success of any campaign. He is surrounded by his staff, with whom he consults on questions of importance. When any important move is decided upon, the members of the staff—themselves in command of divisions of the army—issue orders to their subordinate officers. They, in turn, pass the orders along, and at a predetermined moment, an entire army is set in motion. Another important feature of the army organization which should be applied to the organization of a business is the disregard of the individual. Military authorities long since discovered that a high standard of efficiency could be maintained only through the organization of the army along certain lines. The question was not one of creating offices the duties of which would conform to the capabilities of certain men; the offices were first created, and then competent men were selected to fill them. 4. Individuals Disregarded. In creating responsibilities in a business organization, the individual should be disregarded, just as he is in the army. Unfortunately, the importance of this question is not always recognized. Too frequently the best interests of the organization as a whole are subserved to the interests of individuals. Business enterprises are organized and offices divided among the principal owners without seriously considering their respective abilities. This is wrong in principle, and works to the detriment of the business. It is one of the important problems to be solved in organization. Jones, who is a natural born financier, prefers to manage the selling end of the business, while Brown, a salesman of ability, is made treasurer. Neither is in the right place; change them about, and an efficient team would result. Before we can perfect an organization, we must know what the business is. We must ascertain for what it is organized; what class of business is carried on; manufacturing, mining, jobbing, wholesale, retail, or a combination of two or more classes; whether conducted entirely in one plant or through branches; the method of marketing the goods; by traveling salesmen, agencies, or mail; the facilities for obtaining supplies, raw