Category: Accounting

Over two hundred students took William M. Cole’s Principles of Accounting course at Harvard in 1910-11 giving it the second highest enrollment of all economics courses. First place, unsurprisingly went to Taussig’s Principles of Economics that had an enrollment of 531 students.

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Earlier Accounting Exams at Harvard

1900-01
1901-02
1902-03
1903-04
1904-05
1905-06
1906-07
1907-08
1908-09
1909-10

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William M. Cole
His Textbook

Accounts. Their Construction and Interpretation for Business Men and Students of Affairs. Boston: Houghton Mifflin Company, 1908.

“The first issue of this book was brought out at a time when no general, non-technical, non-professional treatise on accounting had been published . The author had then been giving for eight years a course of instruction to seniors in Harvard College on the principles of accounting, and believed that many business men and students of affairs would be interested to see briefly but comprehensively how accounts are constructed and interpreted.”
Revised and enlarged edition, 1915.

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Course Announcement and Description
1910-11

[Economics] 18. Principles of Accounting. Mon., Wed., and (at the pleasure of the instructor) Fri., at 11. Asst. Professor Cole and an assistant.

This course is designed to show the processes by which the earnings and values of business properties are computed. It is not intended primarily to afford practice in book-keeping; but since intelligent construction and interpretation of accounts is impossible without a knowledge of certain main types of book-keeping, practice sufficient to give the student familiarity with elementary technique will form an important part of the work of the course. The chief work, however, will be a study of the principles that underlie the determination of profit, cost, and valuation. These will be considered as they appear in several types of business enterprise. Published accounts of corporations will be examined, and practice in interpretation will be afforded. The instruction will be chiefly by assigned readings, discussions, and written work.

Course 18 is not open to students before their last year of undergraduate work. For men completing their work at the end of the first half-year, it will be counted as a half-course. It is regularly open only to Seniors and to Graduates who have had Economics 1. Students intending to enter the Graduate School of Business Administration are expected to take this course in preparation for the advanced courses in accounting.

Source: History and Political Science, Comprising the Departments of History and Government, and Economics, 1910-11. Published in the Official Register of Harvard University. Vol. VII No. 23 (June 21, 1910), pp. 61-62.

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Course Enrollment
1910-11

Economics 18. Asst. Professor W. M. Cole, assisted by Messrs. R. M. Johnson, and H. B. Platt. — Principles of Accounting. [For biographical information about the teaching assistants, see the post for the 1908-09 course Economics 18]

Total 223: 3 Graduates, 118 Seniors, 59 Juniors, 2 Sophomores, 5 Freshmen, 36 Others.

Source: Harvard University. Report of the President of Harvard College, 1910-1911, p. 50.

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ECONOMICS 18
Mid-year Examination, 1910-11

If possible, give your answers in tabular form.

1. The bookkeeper has decided to enter the following transactions as belonging to the accounts named in parenthesis in each case. Should the account so named be debited or credited?
   1. Allowing depreciation on buildings (Real Estate).
   2. Collecting interest on an overdue bill (Interest).
   3. Allowing a claim for damages on goods improperly packed (Mdse.).
   4. Setting aside net income as a reserve for possible, but not probable, depreciation (Profit and Loss).
   5. Declaring dividends (Dividends).
2. If in any cases in Question 1, above, any other account must also be debited or credited, name the account and tell whether the entry should give a debit or a credit to that account.
3. Under what circumstances would a complete entry (that is, with both sides showing the same amount
   1. debit a customer and credit Commission?
   2. debit Expense and credit a customer?
   3. debit Cash and credit Insurance?
   4. debit Bills Receivable and credit Bills Payable?
   5. debit Neglected Discounts and credit Merchandise?
4. Show the profit on Merchandise for each of the three following sets of figures:

(a)

Mdse. Dr. on ledger	$125,000
Mdse. Cr. on ledger	$137,500
Mdse. inventory	$15,000
Mdse. Discounts, Dr.	$5,500
Mdse. Discounts, Cr.	$6,000

(b)

Inventory a year ago	$25,000
Purchases, Dr.	$100,000
Sales, Cr.	$137,500
Discounts given, average	4%
Discounts taken, average	$6%
Inventory to-day	$15,000

(c)

Merchandise, Dr, balance	$27,000
Inventory	$42,000
Collected Discounts	$2,000

5. The following is a trial balance, for January 1, 1911, of a business which is about to discontinue operations, and has disposed of all its merchandise, exhausted its supplies, paid all its outstanding obligations except those shown on the trial balance, and collected all sums due it except those shown. Both the notes which it holds and those outstanding against it bear interest. Interest has been paid to date on all notes and bonds Show the balance sheet and the income sheet. If you need any information not given here, assume it, state what you have assumed, and use it.

Proprietor		$60,000
Bonds (bought at par)	$60,000
Bills Receivable	$15,000
Bills Payable		$10,000
Expense	$5,000
Interest		$300
Commission	$250
Insurance	$150
Taxes	$100
Rent	$2,500
Merchandise		$13,000
Cash	$300
	$83,300	$83,300

6. A manufacturing company purchases new machines as shown below. Should you in each case charge Machinery or Maintenance? Give your reasons clearly and concisely.
   The new machines are bought to take the place of old ones worn out. The new may cost initially more or less than the old, may do more or less work than the old, may cost more or less for labor and power in operation than the old. Four conditions are shown in the table below. Answer for each of them.

NEW MACHINES IN COMPARISON WITH THE OLD

(a)	Same	Same	Less
(b)	Same	More	Same
(c)	More	More	Same
(d)	More	Same	Same

 Source: Harvard University Archives. Harvard University, Mid-year Examinations, 1852-1943. Box 8, Bound vol. Examination Papers, Mid-Years, 1910-11.

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ECONOMICS 18
Year-end Examination, 1910-11

Distribute your time so as to answer
at least eight questions.

1. Show the trial balance that will result from the following transactions: —
   A invests $50,000 cash and real estate at $30,000.
   He (as proprietor of the business) buys real estate for $20,000 in cash.
   He borrows $30,000 on his note.
   He buys merchandise for $40,000 cash.
   He buys fixtures for $5,000 on credit from B.
   He spends $500 for wages and $100 for advertising.
2. Certain accounts on a trial balance are as follows: —

Interest	$500
Commission		$1,300
Wages	$13,500
Insurance	$300
Rent		$600
Stationery	$400
Taxes	$200
Sales		$140,000
Purchases	$100,000
Depreciation	$6,000
Advertising	$1,000

The inventory of merchandise at the beginning of the year was $20,000 (not included in the purchases above), and it is now $25,000. When the books were last closed the proprietors had a credit of $50,000, and nothing has been invested or withdrawn by them since that time. If the books were now to be closed, assuming that the correct figures for all nominal accounts have been given above, what would be the proprietors’ credit?
Show all you can of the balance sheet.

3. Should the following be charged to capital or to revenue? Give your reason in each case.
   The payment of paid-up premium on a five-year fire-insurance policy.
   The purchase of accrued interest on a bond between interest dates.
   The cost of painted bill-board advertising.
   The cost ($5,000) of store fixtures to replace old fixtures that originally cost less ($2,000) and, though not worn out, are old-fashioned.
   The cost of a new boat landing for a summer hotel when an increase in the draught of lake steamers renders the old landing useless for its original purpose and the new landing costs the same as the old.
4. In a certain establishment the expense accounts are classified according to the buildings in which the cost is incurred. The buildings and their uses are as follows: —

Building —— Used for…

A. ———— storage of supplies, varnishing shop, and show room.

B. ———— mill, assembling room, and accounting department.

C. ———— sales department, and drafting department.

For each building an account is kept for wages, for supplies, and for overhead expense, and the annual statement shows these nine costs (three kinds of cost for each of three buildings). Without entering into details, or attempting to substitute another plan of accounting, comment on the plan above outlined.

5. The stock-market quotation for bonds of a certain industrial corporation shows a decline. The reports of earnings by the corporation show a practically steady net income, and 20% increase of business. Does the following comparative balance sheet warrant the decline?

BALANCE SHEET
(Figures are for millions)

	1909	1910			1909	1910
Real Estate	$25.0	$20.0		Capital Stock	$100.0	$100.0
Machinery, etc.	90.0	85.0		Bonds	$75.0	$75.0
Stores	$2.0	$1.5		Bills Payable	$0.5	$0.5
Goods in Process	$6.0	$5.5		Accounts Payable	$3.0	$2.0
Finished Goods	$9.0	$8.0		Accrued Items	$0.7	$0.6
Accounts Receivable	$30.0	$35.0		Depreciation	$10.0	…
Stocks and Bonds	$20.0	$20.0		Allowance for Bad Debts	…	$1.0
Cash	$16.7	$13.5		Reserve	10.0	10.0
Prepaid items	$0.5	$0.6
	$199.2	$189.1			$199.2	$189.1

6. Does the distinction on a bank balance sheet between the two items in each of the following pairs serve an accounting purpose, or is it merely traditional? If it is serviceable, explain why.
   1. Par value of government bonds held to secure circulation, and premium on such bonds.
   2. National bank notes held, and treasury notes held.
   3. Sums due to banks, and sums due to other depositors.
   4. Surplus, and undivided profits.
7. Has a life insurance company any accounting liability for expected death claims in connection with persons still living? If so, on what principle is the amount determined? If not, state what disposition is made, in the accounts, of the face of policies written?
8. A manufacturing corporation issues bonds, payable in twenty years, at a premium. The interest is paid semi-annually.
   What entry should be made on the corporation’s books at the time the bonds are issued?
   What entry should be made on the corporation’s books at the time the first interest is paid?
   What entry should be made on the books of a holder of the bonds when he collects his half-yearly interest?
   Supposing the difference between the market rate and the bond rate to be for the bonds held by one man $25 for a half year, how should you go to work to learn the amortisation for any particular half-year — the first or the last, for instance? Can you find it for the last half-year if you know the market rate to be 4½%?
9. What have you to say of a method of distributing overhead charges, or expense burden, to the various articles of product in a factory
   1. in the ratio of labor time on each article?
   2. in the ratio of wages in the cost of each article?
   3. in the ratio of machine hours multiplied by the cost of the machines used?

What should enter into a scientific machine-rate for a factory employing all its equipment full time?

Source: Papers set for Final Examinations in History, Government, Economics, …, Landscape Architecture, Music in Harvard College. June 1911, pp. 54-56. In Harvard University Archives, Examination papers, 1873-1915 (HUC 7000.25). Box 9. Examination Papers, 1910-11.