Accounting statements and the natural year;

              50 HASKINS & SELLS
Accounting Statements and the Natural Year
BY EDMUND CANBY GAUSE
(A paper read before the Ohio Society of Certified Public Accountants, June 17, 1922)
A FEW months ago a large proportion
of the business concerns in this
country were closing, or had just finished
closing, their books of account for the
calendar year 1921. For various reasons,
financial statements were prepared which,
if prepared properly and correctly, showed,
first, the financial condition of the business
at December 31, 1921, and second, the
details of the operations for the year ended
that date which led up to the financial
condition. The former statement is termed
a general balance sheet and the latter a
statement of income and profit and loss.
In the case of large corporations where
the capital stock is widely owned, financial
statements are included in a printed an­nual
report which is furnished to the stock­holders,
and there is also usually included
therein a certificate of public accountants
in respect of the correctness of the financial
statements. A frequent reason for pre­paring
financial statements is to furnish
information to banks and to credit agencies
such as Dun and Bradstreet. Such state­ments
may or may not be certified by
public accountants, although it is obvious
that, if they are, their value has been
materially increased. But, regardless of
the particular reason for preparing these
statements, it is a fact that they are pre­pared
in one form or another at the end of
the fiscal year of practically every business
concern—corporation, firm or individual.
The duty of preparing the statements is
usually delegated to the individual who has
charge of the accounting or bookkeeping.
In the case of large corporations this in­dividual
is the comptroller or auditor, or
perhaps the public accountants who audit
the books, while in the case of smaller
concerns the bookkeeper is usually required
to do this work.
While the two statements mentioned are
the ones which are prepared in practically
every case, there are variations in their
form. In one case they may represent a
small business where the stockholders are
all directly interested and it is therefore
unnecessary to show much detail. In
another case they may represent a larger
corporation where there are outside stock­holders
and it is necessary to furnish con­siderable
information. In still another
case they may represent a group of com­panies—
such as the United States Steel
Corporation—in which event consolidated
statements with elimination of inter-com­pany
items and accounts are included in
the annual report, together with supporting
schedules containing the detail of property,
inventories, funded debt, sales, cost of
sales, etc.
The form of a general balance sheet
which is more generally used is one which
shows property first under assets, and
capital stock first under liabilities. An­other
form, and one which bankers usually
prefer, shows current assets first under
assets, and current liabilities first under
liabilities. The particular form of a state­ment
is not as important as it is to be sure
that all the necessary information is shown
therein and that no items of any conse­quence
are hidden or covered up in such a
manner as not to be readily identified.
For example, if there was a small amount
of cash, it might be included with accounts
receivable and called "Cash and accounts
receivable," and in that way the reader of
July