Unique method of arriving at undivided profits;

              94 HASKINS & SELLS December
Unique Method of Arriving at Undivided Profits
By H. BROOKS DAVIES, Dallas Office
SEVERAL years ago, upon being as­signed
to a new engagement, I called
at the office of the client and was intro­duced
to the bookkeeper, a woman about
fifty years of age. This woman immedi­ately
informed me in great detail of her
accounting experience and accomplish­ments.
The reason given by her for this
information was that she wanted me to
understand that she was no ordinary book­keeper
and further that she had been an
auditor for several years. After much con­versation,
which was distinctly one-sided,
I managed to procure the trial balance
recently prepared by the woman in ques­tion.
The trial balance contained the
following irregularities:
Accounts receivable had a large credit
balance, accounts payable had a consider­able
debit balance, and there was an item
of approximately $900 which was ar­rived
at by subtracting the liabilities from
the assets and called "undivided profits."
I might mention at this time that the
books under audit were those of a partner­ship.
Upon comparing the trial balance
with the general ledger, I discovered that
the accounts receivable control had a
debit balance which had been shown in
the trial balance as a credit. The accounts
payable likewise had been reversed and I
could not tie up the trial balance item of
approximately $900 called "Undivided
Profits." I called these matters to the
attention of the experienced and voluble
bookkeeper who replied as follows:
"If I put the accounts receivable balance
on the asset side of the trial balance and
the accounts payable on the liabilities side,
then the difference between the two sides
amounts to about $3,000, which is
much too large, as I know that the firm
did not make that much money. So I
switched these items in preparing my trial
balance, resulting in undivided profits of
about $900, which I think is about what
they should be."
I was told later that this bookkeeper was
considered to be a trifle unbalanced. She
probably got that way from trying to
arrange the trial balance so that the result­ing
"Undivided Profits" would approxi­mate
her mental conception of what they
should be.