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PROBLEMS OF THE HAULIER AND CARRIER

5th January 1926, Page 23
5th January 1926
Page 23
Page 24
Page 23, 5th January 1926 — PROBLEMS OF THE HAULIER AND CARRIER
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Which of the following most accurately describes the problem?

Keeping Accounts for a Small Transport Business Which is Not a Limited Company—Approximate Monthly Summary of Affairs.

BEFORE dealing with the value of monthly summaries and the method of their preparation, let me state that the matter in hand has no reference to those concerns, being limited companies, which are bound by law to keep properly audited accounts ; these remarks are addressed to those members of the hauling and carrying trade who keep only those accounts which they need for their own information.

In last week's issue we considered the necessity of keeping proper records of costs and expenses and the service which a bank can render to the man whose knowledge is more mechanical than financial. The use of the various bank books was referred to, but there still remains the use of the pass book as a basis for making up periodical summaries.

For the sake of refreshing our memories let us hark back to the past hook.. This little volume is a complete record of all the debits and credits of a client in relation to his bank. The book should be handed in monthly, so that the bank stair can make all the entries necessary to 13ring it right up to date. When it comes hack from the bank, it is time to work out the rough monthly balance sheet.

I can picture the amazement of some hauliers and carriers when they consider a monthly balance Sheet. " Why all this fuss and work?" they exclaim. The reason that it is desirable to work out an approximate state of affairs every month is because one ought to satisfy oneself periodically whether the business is paying, and if so, by how much it is paying. On the other hand, if a loss be taking place, the longer it goes on the worse will matters become, and it is best to nip trouble in the bud by finding it out in time. Many a man smiles when told' that he is not aware

whether he is making a profit or loss unless he actually resorts to pen and ink. He says he can glance at his pass book and say whether his credit this month is more than it was last month. That is all very well, but a slight increase on the credit side may be more than offset by such items as wear and tear on vehicle and tyres, which do not appear in the pass book.

A large number of owners are in the habit of imagining that all is well because they are able to pocket certain amount of money every week-end. This may continue until the vehicle has to be replaced and they find that they are then faced with a comparatively empty bank and a demand for the price of a new machine.

Striking a Monthly Balance Sheet.

Accordingly, a monthly summary is required, and the job is quickly and easily done by means of the pass book and a small twopenny notebook which can be bought at any stationer's. When the pass book is returned, there is usually a balance figure pencilled in by the bank staff ; if this has not been done, subtract the total of the smaller side from that of the larger and the difference is the credit or debit balance. Let us presume that it is a credit balance, for the bank will soon advise you if it is not! You should not regard it as all ready cash. Being optimistic, let us imagine that the sum of 1100 is in the bank and.that this is the first occasion on which a rough balance sheet has been prepared.

What proportion of the £100 credit should be put on one side for future requirements, Such as buying new lorries, replacing the tyres when they wear out and so forth? For the sake of simplicity, we will

assume that it is a one-lorry business. First of all, an estimate must be prepared as to the useful life of the vehicle in miles, and then a simple sum should be worked to find out how much it depreciates per mile. To do this, the total cost of the machine when purchased should• be divided by the number of miles which are expected to be obtained from it in everyday business life_ Multiply the cost per Mile for depreciation by the mileage done since the date of purchase; the result is the amount which must be put on one side for buying a new vehicle when the time comes round.

• In a similar manner, the life of the tyres must be gauged, the cost found out and the cost per mile worked as before. This amount should be reserved for future renewals. Provision is also necessary for overhauls and repairs; every mile a vehicle runs is one nearer to its next overhaul, which is an expensive item, and allowance will have to be made to meet the cost of the work as and when it is required.

Recording Amounts Put to Reserve.

Having discovered the three amounts to be put aside for future expenses, a record should be made of them. This is where the small twopenny notebook comes in handy. Not only does it serve as a record of reserves, but also as a history of the prosperity of the business. First put down the date to which the pass book is balanced, that-is, the date of the last entry either on the debit or credit side, and note the gross credit or balance as shown in the pass book, on the first -page of our summary book. An example is given below which will serve to make the matter clear. From this gross credit must be deducted the total of the three Items mentioned in the previous paragraph; the result Is the net credit or the amount which is in hand and available for general business purposes.

Details of the three items, depreciation, tyres and maintenance should be entered in the book for reference; that is to say, depreciation at so much per mile and so forth. The figures given in the following example are used for demonstration purposes only.

On the first page of our notebook we have what may be termed the basic balance. Now we turn our attention to subsequent monthly balances. These are more simple than the first one, although the principle is the same.

Taking the pass book as before, enter the gross credit shown at the end of the month in the summary book as shown in the second example. Not only have we to deal with the total of each of the three allowances, but we have to remember the amount previously allocated for three purposes and the sums due in respect of the use of the vehicle for the last month. Enter up the three amounts from last month'ssheet

at the head of. the column with the item "Forward" (short for brought forward) and then the totals for the three sections for the past month in the. column entitled " Current." Add up each " forward " and " current " amount and enter the results in the "'Total" column.. Next add up the three totals. This Completes the work on the " reserve" side of the page.

Now enter the total reserve figure below the gross credit, and the difference shown on the bottom line is the net credit, or amount available for general business purposes at the end of the month.

This is surely not a difficult task to do once a month, and it does show you Vere you are. The little book tells you at a glance how much money is allocated to each of the three sections. If the total of the three be put in a deposit account in the bank, the deposit book acts as a cheque on the total, but not on the relative proportions of the three reserve funds.. It is a wise plan to transfer the right amount to cover the allowances each month from the current to the deposit account. This automatically keeps the money in safety,. and a small amount' of interest is given upon it, which generally would not be the case if it were in the current account.

In these circumstances say a new pair of tyres are wanted, the money is withdrawn from the deposit account to pay for them, and the ordinary business cash is not suddenly depleted, as it would be if there were no such reserve fund. Any surplus in reserve which is not wanted can be returned to the current account. Just a word of warning. The provision is for a set of tyres, so, when buying two, do not be tempted to overlookthe fact that the unused money is

• for the other tyres of the set. A shortage in the • reserve fund must be made up from the current account.

By means of the summary scheme outlinld the proprietor of a business can keep himself reasonably well informed as to the progress of affairs and see that sufficient money is being put by for contingencies.

Annual summaries are, of course, most important, but 12 months is a long time to wait to know exactly how one's financial affairs are progressing. The personal trouble involved in working out 12 balance sheets, of the approximate type described in the foregoing paragraphs, is not very great in the course of a year, but the wisdom of the " little-and-often " policy is rarely more demonstrated to advantage.

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