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Harvard. Principles of Accounting. Exam questions. W. M. Cole, 1901-1902

Harvard. Life of accounting professor William Morse Cole, A.M. 1896

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Course Description
ECONOMICS 181
1901-1902

For upperclass undergraduates and graduates to prepare for a business career

The Principles of Accounting. Half-course (first half-year). Mon., Wed., and (at the pleasure of the instructor) Fri., at 3.30. Mr. W. M. Cole.

This course is designed primarily for students who expect to enter a business career, and wish to understand the processes by which the earnings and values of industrial properties are computed. It is not intended to afford practice in book-keeping, but to give students a grasp of principles which shall enable them to comprehend the significance of accounts.

In order that students may become familiar with book-keeping terms and methods, a few exercises will be devoted to a brief study of the common systems of recording simple mercantile transactions. The chief work of the course, however, will be a study of the methods of determining profit, loss, and valuation. This will include an analysis of receipts, disbursements, assets, and liabilities, in various kinds of industry, and a consideration of cost of manufacture; cost of service, depreciation and appreciation of stock and of equipment, interest, sinking funds, dividends, and the like. Published accounts of corporations will be studied, and practice in interpretation will be afforded. Attention will also be given to the functions and methods of auditors.

The instruction will be given by lectures, discussions, reading, and written work.

Course 18 is open to Seniors and Graduates who have taken Economics 1.

Source: Harvard University Archives. Official Register of Harvard University 1901-1902. Box 1. Faculty of Arts and Sciences, Division of History and Political Science (June 21, 1901), University Publications, New Series, No. 16, pp. 46-47.

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Course Enrollment
ECONOMICS 181
1901-02

Economics 181hf. Mr. W. M. Cole. — The Principles of Accounting.

Total 36: 1 Graduate, 24 Seniors, 5 Juniors, 2 Sophomores, 4 Others.

Source: Harvard University. Report of the President of Harvard College, 1901-1902, p. 78.

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Semester Final Examination
ECONOMICS 18
First Half-year 1901-1902

  1. What is the profit and loss account?
    Are charges or credits made direct to this account? If so, under what circumstances?
    How is this account closed?
  2. Formulate journal entries to express each of the following transactions :—
    1. a sale of goods for a note bearing interest;
    2. discounting the above note at a bank;
    3. annulling a personal account as uncollectible;
    4. interest charged, but not paid, on a long-standing account.
  3. What is indicated by each of the following ledger accounts when
    1. the account shows a debit balance, and
    2. the account shows a credit balance: loss and gain, merchandise, rent, commission, purchase ledger, stores?
  4. Illustrate roughly a columnar cash book and a columnar journal. Comment on the columnar system.
  5. Which of the following should be charged to capital account and which to revenue account: The purchase of a patent right; legal fees for organizing a corporation; the purchase of a lease; repairs of machinery; replacement of machinery; the purchase of additional machinery; the loss by fire of uninsured property?
    Explain in each case why you decide as you do.
  6. You contemplate purchasing an interest in a business that has run five years, and agree to pay one third the valuation of its net assets. The following statement is given you by the partners:—

Dr.
Buildings, machinery, etc., at cost $50,000
Expended for repairs and renewals $8,000
Patent rights purchased $14,000
Balance of sales ledger $26,000
Inventory, as per stores and stock books $19,000
$117,000

Cr.
Bills payable $48,000
Balance of purchase ledger $47,000
Partners’ capital $22,000
$117,000
    1. Assuming that this statement gives all that you need to know, how much must you pay for your interest in the business?
    2. Does this statement give all necessary information about the assets? If not, what is lacking?

7.  The chief items on the balance sheet of a firm may be summarized as follows :—

Assets.
Cash, stock, and accts. receivable $48,000
Buildings and machinery $37,000
$85,000
Liabilities.
Notes and accts. payable $33,000
Capital of the partners $62,000
$95,000

Is the firm solvent or insolvent? Why do you think so?

  1. The books of a firm have been kept by the ordinary methods and all transactions prior to the close of business on December 31 have been carried through the books. You are asked to determine profit or loss for the year just closed. Describe carefully the steps that you would take.

Source: Harvard University Archives. Harvard University Mid-Year Examination Papers, 1852-1943. Box 6, Bound volume, Mid-year Examination Papers, 1901-02. Sub-volume Papers Set for Final Examinations in History, Government, Economics, … in Harvard College (January 1902). Also included in Harvard University Examination Papers, 1873-1915. Box 6, Bound volume, Examination Papers, 1902-03. Sub-volume Papers Set for Final Examinations in History, Government, Economics, … in Harvard College (June 1902).

Image Source: Harvard Alumni Bulletin, Vol. XIX, No. 16, p. 308. Portrait of William Morse Cole colorized by Economics in the Rear-view Mirror.