2A. 



HARDWOOD RECORD 



must not only have the clear oak specifica- 

 tions, but there are no lower grades to ease 

 down on — the grade must stand alone, and 

 your stock is either clear or cull. 



Not with a view to discouraging the man- 

 ufacture of small dimension stock is this 

 phase of the business discussed, but to stimu- 

 late effort toward putting the market for 

 this stock on a more satisfactory basis and 

 to point out that, while it is essential to 

 have side lines to make a closer clean-up in 

 the woods, it' is but little short of rank 

 foolishness to fail in attaching proper value 

 to this work — and timber is getting too 

 scarce for such foolishness. The idea that 

 if a cheap price is not made the. stock can- 

 not be sold is ridiculous, for it is more 

 imperative that the consumer of this stock 

 should have it than that the manufacturer 

 cut small sizes only as a saving of waste 

 material. If consumers cannot get small 

 sizes ready cut, they must buy regular lum- 

 ber and work it up, which means, as stated 

 above, a very heavy cost. Looking at the 

 matter in this light, it is quite evident that 

 mUlmen have been throwing away money, 



although deceiving themselves with the idea 

 that they were saving something from waste 

 and turning it to good account. 



The trouble has been diagnosed; what 

 shall be the lemedy? The first and most 

 important thing to do is to cease being so 

 anxious to book orders, and try boosting 

 prices for a time. An instance was noted 

 recently where the price was boosted $5 

 per thousand, by just a little individual ef- 

 fort of this kind. Instead of accepting the 

 price offered, the millman quoted a price 

 $10 higher, and a compromise on an ad- 

 vance of $5 was finally agreed upon. If 

 one man can accomplish that much alone, 

 what could not be done if practically all the 

 manufacturers of this class of stock would 

 get together, talk things over and act in 

 concert .' The medicine needed is a getting 

 together for concerted action, and the time 

 for this action is this fall before contracts 

 are made for next year. The time is ripe 

 when manufacturers of hardwood dimension 

 stock should combine their efforts to control 

 the price of this stock, which is at present 

 a veritable commercial scandal. 



Correct Accounting Principles. 



Past experience has shown that many 

 business failures were due to lack of system 

 in the keeping of accounts, and it is well 

 known that in the majority of cases the 

 keeping of correct accounts has been sub- 

 ordinated to what seemed more important 

 things. 



The mere fact that a business firm has a 

 fine office and discounts its bills regularly 

 may not always indicate the exact condi- 

 tions of such business, nor that it will al- 

 ways be in a position to continue in its 

 present apparently prosperous course. "With 

 the constantly changing conditions of com- 

 merce, capital seeking fields for profitable 

 investment, and a closer scrutiny of credits, 

 it seems fitting that the attention of mem- 

 bers of the hardwood trade should be called 

 to the necessity of keeping accounts in such 

 a manner as to permit of their ascertaining 

 at brief notice all the facts relating to their 

 business. Too often in the past bookkeep- 

 ing has been "tolerated" rather than en- 

 couraged, making the bookkeeper's life 

 more or less of a drudgery, he being looked 

 upon in something of the light of a "general 

 utility man." But things have changed, 

 and today we have the professional account- 

 ant who has been a prime factor in making 

 possible the undertaking of large enterprises, 

 and carrying them to successful completion. 

 In most businesses there are problems in- 

 volving a thorough knowledge of the prin- 

 ciples of commerce, finance and law, and the 

 application of these principles to a given 

 series of transactions requires the services 

 of those trained in making such investiga- 

 tions. To the average lumberman, with his 

 practical knowledge, these questions may 

 not appeal directly, yet it is an undoubted 



fact that a great proportion of the books of 

 account do not show the correct transactions 

 of the business, duo largely to the lack of 

 knowledge of the principles of accounting 

 mi the part of those to whom the work is 

 enl rusted. 



To illustrate: we can cite an instance of 

 i business in the heart of the city of Chi- 

 cago, involving the investment of some 

 $750,000 where for years the annual profit 

 and loss statement had been based upon the 



I r< Lpts and expenditures for certain 



periods, instead of upon the actual amount 

 of business done and expenses incurred. To 

 the individual operator this may seem of 

 small consequence, but he at least should be 

 just to himself. There may come a time 

 when he may be asked for a statement of 

 his affairs as a basis for credit, and he will 

 be unable to show what the ratio of expenses 

 has been to his capital investment, the vol- 

 ume of his business, or his net profits for 

 any given time. The value of any busi- 

 ness depends on whether it is "profitable," 

 of "doubtful existence," or a "certain 

 failure." There should be no uncertainty 

 about the financial conditions of any busi- 

 ness. We cannot afford to do as has been 

 done in some instances — divide profits, when, 

 were the accounts properly adjusted, the 

 books would show a deficit, instead of a 

 surplus. 



since all business is more or less a matter 

 of faith in the future, past experience 

 should be a factor in deciding whether such 

 faith is justified. How then can we decide 

 intelligently? Only by keeping a correct 

 record of all departments of expenditure, in 

 as concise a form as experience will suggest. 



In all branches of the lumber trade we 



have, as in other lines of business, the manu- 

 facturer, wholesaler and retailer. It there- 

 fore follows that any system of accounts for 

 the one will not suit the other; neither are 

 all doing business under like conditions. 

 The question of cost does not enter largely 

 into the accounts of either the wholesaler or 

 retailer. They are chiefly concerned in buy- 

 ing what best suits their trade, at the most 

 favorable prices, although there are in- 

 stances where the one sells to few and buys 

 of many, while the other buys of few and 

 sells to many, each requiring a different 

 system of accounts. Again conditions un- 

 der which business is conducted vary, and 

 require a different treatment of details. 



Before going into the details of manufac- 

 ture and the bearing which correct prin- 

 ciples of accounting have upon the profit or 

 loss account in this branch of industry, the 

 question of including speculative accounts 

 in the regular trading account books should 

 not be overlooked, neither should the matter 

 of personal accounts be allowed to be en- 

 tered therein. A looseness in this direction 

 lias not infrequently been the cause of the 

 downfall of both employer and employees. 

 There should at all times be a definite 

 amount drawn from the business for such 

 purposes, and particularly should speculative 

 accounts be' divorced from the regular busi- 

 ness accounts. 



To return to manufacturers' accounts: 

 theoretically, there is no difficulty in keep- 

 ing a correct cost of any manufactured ar- 

 ticle, but practically, in all lines, it is found 

 that the correct tabulating of time spent 

 upon the various operations is more difficult 

 than to keep a correct account of other ex- 

 penses. From the nature of the work and 

 the class of labor employed, the cost of lum- 

 bering cannot be reduced to an exact 

 science, although the experienced accountant 

 may devise forms for closely ascertaining 

 the costs of the different elements entering 

 into the production of the finished article. 



The principal operations entering into the 

 cost of manufactured lumber are logging, 

 milling and drying. In ascertaining the 

 cost of logs at the mill it is not infre- 

 quently overlooked that there has been an 

 investment of capital in the purchase of the 

 standing timber, which capital has been 

 lying dormant for several years, interest on 

 which should be taken into account. Again 

 the standing timber may have been pur- 

 chased at a decided advantage over prevail- 

 ing prices at the time of logging, hence it 

 would appear desirable that special ac- 

 counts should be kept with standing timber 

 showing the original investment, accrued in- 

 terest and amount of lumber produced. 

 There is another important element entering 

 into this portion of the business which may 

 largely affect future profits; i. e., the ques- 

 tion of taking the average quantity of lum- 

 ber per acre on any given tract. Assuming 

 that a tract of timber contains 1,000 acres 

 on which the average is 10,000 feet per acre, 

 the first timber cut may possibly yield the 



