Accounting Principles And Practice volume 2

Cover Accounting Principles And Practice volume 2
Accounting Principles And Practice volume 2
George E George Edward Bennett
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Before attempting to solve a problem, it is necessary to make sure that all the factors SELLING AGENCY AND BRANCH ACCOUNTS 331 therein contained are thoroughly understood, or at least that a definite understanding has been reached as to how they will be handled in the solution. In the above problem, two items demand consideration before a solu- tion should be attempted; namely, repairs and renewals and depreciation. We are told that the item of repairs and renewals is to be charged to plant and... buildings. By so doing, with no explanation to the contrary, we would be capitalizing a revenue expenditure; this, nat- urally, is entirely wrong. Again, depreciation is an operating expense and, as such, ought not to appear in connection with the other items given which have to do with the financial and the appropriation sections of the Profit and Loss account. Therefore, let us work by to- tals from the given profit item of $90, 000, $50, 000 New York and $40, 000 Chicago, to see what result may be secured.

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