The substance of this article is presented as a test of the hypothesis that inadequate bookkeeping is causally related to business failure. Lest the word causal result in the raising of eyebrows, the author hastens to explain that this word is used merely in the sense of an investigation into whether there exists a concomitant variation between adequacy of records and survival or non-survival in business. No study of business failures within the past five years has been complete without statistics on the proportion of bankrupt firms keeping adequate records of account and no lists of causes of bankruptcy has been complete without inadequate records as one. This is partly because it seems somehow meaningful, in a field so chaotic and so theoretically undeveloped, to present all factors that come to mind and are countable. It is partly too, because the bankruptcy act sheds a legal significance upon the subject by asserting that the judge shall grant a discharge unless the bankrupt has failed to keep books of account, or records, from which his financial conditions and business transactions might be ascertained; unless the Court deems such failure or act to have been justified under all the circumstances of the case, an assertion which at present carries with it little more than formal legal consequences.

The article presents a study of the bookkeeping habits of a sample of every tenth enterpriser in a New England city of 150,000. It was found that only within certain groups did the customary records correspond with the minimum requirements of this standard of adequacy. The great majority of manufacturers and wholesalers were both possessed of records adapted to their needs. Contractors, though in lesser degree, were also apt to be equipped with suitable records while retailers, who comprised the great majority of enterprisers in the city, were predominately inadequate in their accounting equipment. Within all types of business, there has appeared the same tendency. And, inversely, the adequacy of records was comparatively low in the smaller businesses of all types. Unsystematized records or no records were frequent in businesses of $5,000 or less per year, at which point single entry systems expanded rapidly and a few double entry systems appeared. At $40,000 to $50,000 income a year double entry systems became and remained in the majority of types of records. A considerable variety was found, however, between different types of business.