William Morse Cole offered his principles of accounting course as a vocational non-credit course for seniors in the Harvard economics department from 1900-1905, after which time the subject received for-credit status. In 1908 Cole was appointed assistant professor of accounting in Harvard’s newly established business school.
Exam questions for 1900-01, 1901-02 and 1902-03 have been posted earlier.
___________________________
ECONOMICS 18
Course enrollment. 1903-04
Economics 18 1hf. Mr. W.M. Cole. — The Principles of Accounting.
Total 51: 2 Graduates, 33 Seniors, 12 Juniors, 1 Sophomore, 3 Others.
Source: Harvard University. Report of the President of Harvard College, 1903-1904, p. 67.
___________________________
ECONOMICS 18
Mid-Year Examination. 1903-04
I.
Do not devote more than half your time to this part of the paper.
- (a) On which side of a balance sheet is the balance of the following accounts likely to be?
(b) What, in each case, does the amount of such a balance indicate?
Bills Receivable.
Accounts Payable.
Plant.
Profit and Loss.
Wages.
Merchandise.
- If December 31 is the end of the fiscal year, and after office hours on that day the books are closed for the year, in what respects would a trial balance, taken at the opening of business on January 1, differ from one taken at the close of business December 31? Illustrate by means of specific accounts.
- Why, in any logical system of accounting, must there be a debit for every credit?
- (a) What is the function of a ledger? (b) How do items usually get into a ledger? (c) Can items in the ledger have any other origin than that referred to in (b)? If so, what?
II.
- Suppose you are the executor of the estate of one of two partners. Suppose you are given a trial balance of the books as they stood at the time of the death of the partner whose estate you represent, and that the surviving partner swears to the correctness of that trial balance. In order to be sure of doing justice to the heirs of the deceased partner, how far do you need, in arranging settlement, to go beyond or behind the trial balance?
- You organize a corporation, and on January 1, 1904, the following facts are shown by the books:—
The corporation has taken over from an individual owner a business of which the assets, determined by conservative valuation of the property, are $100,000 (Bills Receivable and Accounts Receivable, $20,000; Supplies, $5,000; Real Estate and Plant, $75,000). Capital stock to the amount of $500,000 has been issued, of which $200,000 has been given the original owner for his title, $300,000 has been sold for cash at par. The corporation has bought a neighboring plant for $100,000, paying for it by Bill Payable to that amount.
Show a brief balance sheet under these conditions.
Now, you are absent from the corporation’s affairs for two years. On your return you are told that 6 per cent. dividend has been paid in each year, and you are shown the balance sheets below.
Write a brief history of the business for each of the two years of your absence.
|
Jan. 1, 1905. |
||||
| Real Estate and Plant, | $420,000 | Capital Stock | $500,000 | |
| Bills Rec.& Accts.Rec. | 70,000 | Funded Debt | 100,000 | |
| Supplies | 5,000 | Profit and Loss | 20,000 | |
| Merchandise | 105,000 | |||
| Cash | 20,000 | |||
| $620,000 | $620,000 | |||
|
Jan. 1, 1906. |
||||
| Real Estate and Plant | $400,000 | Capital Stock | $600,000 | |
| Deprec’n Fund Bonds | 20,000 | Reserve Fund | 20,000 | |
| Reserve Fund Bonds | 20,000 | Profit and Loss | 20,000 | |
| Bills Rec.& Accts.Rec. | 70,000 | |||
| Supplies | 5,000 | |||
| Merchandise | 105,000 | |||
| Cash | 20,000 | |||
| $640,000 | $640,000 | |||
- (a) What is the difference between a revenue and a capital account?
(b) If time shows that items originally charged to revenue account should have been charged to capital account, what treatment can be given such items at the end of the year, without changing their ledger classification, so that the profit or the loss shall be correctly determined?
(c) Reverse the conditions of (b), — i.e., assume error to have been made in charging to capital instead of to revenue, — and designate the required treatment. - Conceive the balance sheet of a railroad to be exactly the same for 1904 as for 1903. Conceive the true net income to be $11,000,000, the fixed charges $3,000,000, the “other income” $2,000,000, and the road to be operated for 66 2/3 per cent.
Construct as much as you can of the income sheet.
Source: Harvard University Archives. Harvard University, Mid-year examinations 1852-1943. Box 7, Bound volume: Examination Papers, Mid-Years, 1903-04.