INSTITUTION ACCOUNTING.

R. R. Bovey, Accountant, Board of Control of State Institutions, Des Moines, Iowa.

Accounting, or the keeping of records, like taxation, is doubtless as old as civilization itself. Wherever organized government existed and trade and credit were introduced, some method of keeping a record must have been employed and some form of taxation practiced.

It is highly probable that the same protests against taxation and the same criticisms of improper accounting of public funds and property was made by the people many centuries ago that are heard today.

Little record has been left by ancient peoples, but some data has been discovered to prove the existence of a highly organized trade and to point out some of the means by which that trade was conducted.

We have made considerable progress in accounting during the last century but many of our present business and legal forms were known and used three or four thousand years before our era.

In the Chaldean Babylonian Empire which was said to have been the first organized government in the world, one of the rulers, Hammurabi, 2285 B. C. to 2242 B. C. promulgated a code which shows that checks, drafts, bonds, receipts, inventories, sales and accounts of all kinds were known and used. Highway tolls, customs and ferry dues were imposed and collected.

Sun-baked tablets or slabs, written on the front, back and edges have been found showing the records of two banking and money lending firms, one firm of Babylon and one of Nippur. Also carefully prepared registers for the state, made ownership of property as the basis of taxation.

In current discussion there has been some confusion about the use of the term accounting. By many the word is made synonymous with the word bookkeeping as if the two were identical. Some use the term accounting as a "high flown" expression for bookkeeping, others have the idea that accounting is merely advanced bookkeeping.

The term is properly used only when applied to the principles, system or theory by which business facts are recorded.

Bookkeeping is the recording of the transactions in accordance with a previously determined system or plan.

The accountant provides a system upon which the facts of a business may best be recorded. The bookkeeper records the facts from day to day following out the methods of analysis and combination which the accountant has indicated.

The importance of a good accounting system cannot be overestimated.

This, we believe, is demonstrated in the system in use by our state institutions under the jurisdiction of the board of control. Like the entire law of which the basis of the accounting system is a part, it has been a source of just pride, and a credit to the state, and has been copied almost in detail by a number of our neighboring states.

A good accounting system to begin with should be comprehensive and simple, yet detailed enough to provide all necessary information.

The laws creating the board of control wisely prescribes the fundamentals necessary for the accounting methods to be employed, leaving the minor details to be supplied. This detail must of necessity be changed occasionally, as the institutions grow and the number of transactions increase.

The amount of detail necessary depends entirely on the nature, and volume of business transactions and the information and results to be obtained.

A newsboy selling a paper on a street corner needs very few records but he usually knows to a certainty just how he stands financially.

His records are doubtless a single memorandum book with two accounts, one of which is the number of papers he receives and sells, the other showing the amount he pays out or owes for papers.

These records are necessary if he is to know at the end of six months or a year how much business he had done or the amount of money he had earned. Other records to him would be unnecessary detail, but if he were to sell several kinds of papers and journals he would need to add more records, and if he finally became a large publisher, he would need a very detailed and complicated system of accounts.

If we have dairy herds, farms and industrial departments at our institutions, we must of necessity add to our records enough detail to make a proper and intelligent accounting of these departments.

We occasonally hear the criticism that too many reports are required. How else can the members of the board of control be informed concerning the progress of the institutions and other facts in which they are interested, and should know, in order that they may intelligently administer the duties of their office.

Institution accounting because of the nature of the work differs in many respects from commercial accounting.

The effort of every individual engaged in industry is to increase wealth.

The first problem of accountancy is the determination of how much wealth is invested in a given enterprise and what ownership or proprietorship exists at given periods of time so that by comparison the increases and decreases may be known.

Proprietorship and its changing values are the basic problems of accountancy.

Our charitable and correctional institutions have not been established to increase the wealth or holdings of the state. The profits and losses are not to be measured in dollars and cents alone but by the boys and girls who by proper care, training and education become good and useful citizens, and also the recompense that should come to a people in the satisfaction of knowing that their money had been used to the best possible advantage in retrieving suffering humanity as they come into the institutions for care and treatment.

It is then the part of those entrusted with the management of the institutions to see that the money appropriated is spent to the best possible advantage.

It is natural for us to feel a just pride if through individual effort we can show good and successful business management and desire to give the fact the widest possible publication. If we are successful we are quite willing to have it known to others. It is only the mistakes and failures we desire to cover up or hide.

An administrative officer may through daily observation and personal supervision be convinced that his institution had been well and successfully managed, that his herds or farms have made good profits but his statement of the fact must be proven by records and figures from his accounting department.

Uniformity is an essential quality in institution accounting, the necessity being obvious-where the main accounting work and auditing is done at a central office and the institution reports and statistics are consolidated into comparative tables for reference and publication. The economy in printing and ruling uniform records is also a large item to be considered.

The provision of the law requiring the most modern and complete system of accounts, we believe, is being fully complied with.

Vouchers are on file covering every institution expenditure, since the creation of the board of control and are accessible for reference.

The appropriation ledgers show at all times the credits, expenditures and balances. Each expenditure is carefully classified in a journal from which it is posted to the ledger, which is self balancing.

Careful and accurate records are kept of the dairy herds and the farms and other industrial departments.

Cost accounting and double entry bookkeeping are used for the larger industries.

Much depends on the class of help chosen for the offices. Those who have had practical business training and experience are preferable, but the chief executive sometimes finds it necessary to transfer a worthy employe from some other department to the office. Some of the most faithful and efficient employes of the state are holding these positions by transfer from other departments, and I would not minimize their efficient work, but quite often employes without a knowledge of bookkeeping or office work have no ability along that line and often make very serious blunders and hamper the accounting work.

One of the most difficult things for new employes to learn is the proper preparation of estimates for supplies and revenue statements and no new or inexperienced employe should be put on this work. It should be done by the most experienced and capable employes, preferably the steward with the assistance of the storekeeper and under the personal supervision of the chief executive officer.

Some have not as yet discovered the value of the store records as a guide in preparation of estimates, and sometimes when unreliable or inexperienced employes are placed at this work they have been known to have copied the amounts asked for from the estimate of a previous period, causing duplication and loss.

Estimates are simply requests for supplies and services for the institutions during a given period, supplemented by sufficient data to enable the board to properly revise the quantities and amounts as required by law, that they might cover as nearly as possible the actual needs for the period and not exceed the income.

For some it is difficult to classify properly the items of expenditures on the vouchers, and I might say that an addition of several new classifications might be an improvement since many new innovations have been added to the list since our classification was revised.

It has been somewhat puzzling to some of the accountants in the board's office as to where to classify automobiles, and accessories. Carriages were formerly called farm vehicles but since the advent of the automobile which has taken the place of the carriage, someone has suggested that possibly automobiles should be more properly classified under the heading of recreation and amusements.

Occasionally a storekeeper thinking to lesson the detail in his store accounts consolidates articles of various sizes and kinds

of the same name into one account, when an individual account should be made for each.

At one institution several years ago, hay forks or harpoon forks, costing five or six dollars and pitch forks costing one dollar were carried in the same account and the prices averaged when disbursed. Other similar instances were found which would make the store records of no value for reference in preparing estimates.

Such cases have been speedily rectified when discovered. Errors and blunders of course will be made occasionally, no accounting system has yet been devised that is perfect enough to prevent errors, and no employe so infallible that an occasional error might not be found in his work. Our aim should be to reduce them to a minimum.

In conclusion, I wish to say, that I believe at no time during the nine and one half years I have been employed by the board, have the accounts of the institutions been in better condition as a whole, or has a better spirit of cooperation been manifested by those in charge of the accounting work at the institutions, than at the present time.

Let us all cooperate in keeping our accounting system and our work up to the high standard by which it has always been known.