Accounting for Liberty Bonds;

              8 HASKINS & SELLS March
The Accounting for Liberty Bonds.
UNDER date of February 15 the Amer-ican
Institute of Accountants sent out a
letter suggesting to members and associates
of the Institute a way of showing in a bal­ance
sheet the subscriptions to and liabilities
in connection with Liberty Bonds. This
step was taken by the Institute, presumably,
as a conscious attempt at standardization,
for which there is ample opportunity. The
letter met the fate of most attempts at
standardization, namely, to provoke discus­sion.
Suggestions for improvement usually
result in discussion and criticism. It is per­haps
one of the most hopeful signs for the
future of the accountancy profession that a
suggestion of any kind brings forth exten­sive
discussion.
The substance of the material for discus­sion
might be summed up in a statement of
facts, as follows:
The Warburton Company subscribed for
United States Liberty Bonds in the amount
of $50,000.00. Of this amount, $20,000.00
was for account of employes, who are to
pay therefor by installments. The company
borrowed $10,000.00 from a bank on an
open, unsecured note. Employes paid to the
company $10,000.00 as the first install­ment
on their subscription. The Warburton
Company paid to the Government, $30,-
000.00 on account of the subscription of
$50,000.00.
Suppose you were called upon to set up
in a balance sheet the condition resulting
from these transactions, how would you
show it?
The Institute recommends setting it up
net, as follows:
U. S. Liberty Bonds
(including $20,-
000.00 subscribed
by employes)..... .$50,000.00
Deduct — Unpaid in­stalments
not due.. 20,000.00
$30,000.00
Deduct—Amount bor­rowed
to invest in
bonds 10,000.00
$20,000.00
Deduct—Payments by
employes 10,000.00
$10,000.00
With this everyone does not agree. The
letter of the Institute does not make clear
whether the bank loan is, or is not, secured