Abstract The article presents a heuristic approach to effective rates of interest being charged on loans repaid in equal installments. For instance, a situation is considered in which a one-year loan to be repaid in 12 equal monthly installments and a 6% interest rate quoted on the original unpaid balance is calculated. Figuring the average amount of outstanding principal for the year and dividing that amount into the interest charge to compute the effective rate would compute the effective rate of interest charged. A short-cut computation is available to convert from a quoted rate to an effective rate but noting that it is only necessary to multiply the quoted rate by the ratio of the original principal to the average principal outstanding. Still, a further shortcut is to note that the average principal outstanding is equal to the average of the sum of first schedule balance and last schedule balance. Assuming a 36-month loan to be repaid in equal monthly installments and a 6% annual interest rate quoted on the original unpaid balance effective rate is calculated. The result suggests that the effective rate could approach but not exceed twice the quoted rate.

Abstract A physical flow analogy might be of considerable benefit in aiding the student in reasoning through the adjusting process of expenses topic in principles instruction. The purpose of this paper is to present such an analogy. When a business entity disburses money for any relatively short lived item to be used in the operation of the business it may elect to classify this disbursement as an asset or as an expense. The choice at this time may be compared to storage tanks intended for items awaiting final disposition. Point A represents a closed valve that is opened only at adjustment time. The direction of flow when A is opened may be assumed from the underlying purpose of the adjusting process, that is, to charge the Profit and Loss Summary with the amounts used in the current period that pass through the expense storage tank and to leave in asset storage the amounts not yet used that will benefit future accounting periods. An equilibrium position will be achieved when the amounts in the respective tanks correspond to this underlying purpose. Point B represents a closed valve that will open at closing time and only after the equilibrium position has been attained.

Abstract In recent random reading, the author encountered a reference to a Rhode Island firm with copies of business records dating to the early 1700's. The firm is The John Stevens Shop of Newport, Rhode Island. Upon inquiry, a photo-offset copy of the original account book was obtained from the present proprietor, and an interesting investigation was underway. One of the first obvious accounting facts to present itself is the debit and credit notation. This particular individual used the present style of debits as left-side entries, and credits as right-side entries, as indicated by a number of pages in which individuals are charged on the left pages of the book and credited on the right pages. With the customary English practice of presenting balance sheets with the items reversed from American practice, there is some uncertainty regarding this method of presentation. Regardless of the reason, the record keeper consistently maintained this separation. There is some evidence to support the contention that this must have been one of the earliest uses of the double entry book-keeping method in America.

Abstract The article presents an algebraic model for working capital. The balance sheet equation in slightly expanded form can be utilized algebraically to demonstrate all the potential increases or decreases in working capital. There are four mathematical equations to demonstrate these changes in balance sheet. The first mathematical equation is asset is equal to the sum of liability and owner's equity. The second equation is that sum of the values of current assets and fixed assets is equal to sum of current liabilities, fixed liabilities and owner's equity. The third equation is that difference in current assets and current liabilities is equal to the difference of the sum of fixed liabilities and owner's equity with fixed assets. The fourth equation is the working capital is equal to the difference in sum of fixed liabilities and owner's equity with fixed assets. Fourth equation defines working capital in terms of three general classifications of accounts and actually equates working capital to their algebraic sum.

Abstract In cost accounting many of the biggest problems occur in the overhead element. One of the frequently posed overhead problems rise in consolidating substantial error in the absorption rate due to a volume change in operations. The usual text treatment leaves past operations uncorrected, simply alters the absorption rate to a new incorrect figure. This lets the error in the months of operation prior to the recognition of a need for some adjustment. A type of graphical analysis might be utilized as a simple but effective tool to clearly demonstrate the respective alternatives of either making an adjustment in the accounts and using a corrected rate or allowing the old figures to stand and simply routing your overhead application rate to a new basis designed to offset the past error by a counterbalancing error over the remaining financial period. However, graphical analysis vividly demonstrates the difference in the effect of the alternatives on absorbed cost during the planned production period.

Abstract The article discusses the investigation of accounting records. During an investigation of business records preserved in the manuscript section of the Baker Library at Harvard University Graduate School of Business, an early 19th century accounting primer was discovered. Various bookkeeping records and accounting procedures of mercantile companies operating during that period are outlined in the text. The book proved intrinsically interesting and also afforded the writer a useful guide to record keeping methods of early merchants. The purposes of this article are to describe the contents of the primer, to comment upon certain recording procedures of the early 1800's and to gain some insight into accounting methodology in the United States during this period. The value of the primer described in this paper is two-fold. First, the book is a valuable example of accounting instruction in the United States during the early 1800's. As such, it deserves recognition and preservation as an example of the evolution of accounting education and practice in the U.S. Second; students of business history would find the primer a useful preliminary study prior to examination of records of 19th century American businesses.

Abstract This article focuses on completed contract methods used for solving accounting problems. The present status of construction in progress seem relatively stable. Most textbooks in accounting treat this topic at the intermediate level using two acceptable methods "completed-contract" or "percentage-of-completion.'' The costs incurred to date on any project are stored in a debit balance account labeled "Construction in Progress." An analogous situation can be found in the areas of depreciation accounting, overhead accounting, and depletion accounting in which, when an earlier discrepancy is found, people are offered the options of correcting and using a new rate (or amount) or letting the error stand and absorbing it by an error in the opposite direction over the remaining time.