Small sawmill accounting


Material Information

Small sawmill accounting
Physical Description:
Mixed Material
Telford, C. J
Forest Products Laboratory (U.S.)
USDA, Forest Service, Forest Products Laboratory ( Madison, Wis )
Publication Date:

Record Information

Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
aleph - 29311075
oclc - 229913151
System ID:

Full Text

/ / "***. 7

4 1
Operators of small savrmills ignore completely or in ''rt th :-
evitable x!.-nditures for depreciation, maintenance, and rp:air o0 td ui.;.E2J ,
taxes, and interest on capital tied up in their business. Tnese costs r. n
from 9 to 22 percent of the total cost in five different types of small :'
operations studied by the Forest products Laboratory. F:'ilure to take k so
costs into consideration is one of the serious contri::tin:- factors to the
high business mortality amon,-- operators of small mills.

:}-1, followin.- accounting system in which the fore,:oin- costs are -ivc n
Frorer consideration is su-.-,.sted as a pattern to meet the requirement s of
small sawmills. The records called for under this system sl:o-r i.e 'ess.ial
details of expenditures, receipts, and inventories, reflect t,.0 status of
individual accounts, furnish facts for use in connection with the Fair Labor
Standards Act of 1938, and permit segregations of costs and returns for in-
come tax purposes.

The pattern su.y*'t-sted is reduced to the simplest form necessary -nd
requires but a single listing of all exp'-nditures and receipts. In tI: forms
presented, the labor account is segregated from other expenditures in ord-r
to have this information availableto meet the Federal wage-hour required. fr.s.
Individual operations may benefit from further separating special classes of
items in the purchases ledger, carrying as separate accounts such items as
timber and its products, interest, taxes, insurance, and rent.

Records of purchases and expenditures and of sales and receipts are en-
tered currently and balanced monthly. A year-end balance is made between
assets and liabilities, and the net profit or loss from the current year's
operation computed.

A balance sheet is ordinarily made yearly in small enterprises. The
procedure is to balance assets (cash, accounts receivable, timber, loss, lu7 -
ber, plant, and supplies) against liabilities (debts owned by the business).

1. Cash.--All cash, checks, and -. ,-i"otia' ..
the year. HU ME LIRAY

2. Accounts receivable.--All collect dbl i ncee c 1 t o0-
ers as shown on the December 31 record of sal *U:I l coun _,-
ceivable. Uncollectable accounts are written ff aLn. listcd as b-d t:
for income tax r:uroses.
.... : ..of or
3. :- i. r. lc-, ... r n-. .yo.::-- A y F" -. I ,
and a value ; otio .-A *h..:. -. v.'i. s':oul e ,- 1 :1r,-t

Maintained at Madison, Wisconsin in cooperation with the University of Wisconsin.
*See outline in Small Sawmill Improvement Working Plan, March 1930, for explanation of indexing system proposed.

whichever is lower. yard inventories are simplified if the date, item, foot-
a,-e, and species are marked on the pile when it is completed, for example,
1/12/40 4/4 No. 1 3650, Ash. Logs are inventoried by checking the font-
age and converting to cost or value after discounting expected transportation
costs for logs in the woods or in transit. Timber is inventoried by, estimat-
ing the footage and converting to cost or value.

4. Plant and supplies.--The plant consists of buildings and equipment
required for the operation. Its value should be based on material purchase
price plus installation cost apportioned over the remaining useful life to
the operation. Buildings in permanent operations are commonly discounted at
the rate of 5 percent yearly (original cost divided by 20); for temporary
operations discount yearly the original cost divided by expected life of opir-
ation at that site. Other equipment is discounted yearly, a sum equal to the
purchase cost divided by the expected life as shown on page g. If the item
outlasts the estimated life no value is given; if the useful life falls short
of the estimated life, the undiscounted balance is subtracted from the value
of all equipment. The total sum of these yearly discounts on equipment and
plant is the depreciation account required for income tax purposes.

Supplies as distinguished from equipment are short life items (less
than a year), such as stock feed, gas, oil, small tools, etc. For the bal-
ance sheet account those carried into the new year are Jiven a value as of
December 31.

5. Liabilities.--All unpaid bills as of O.ccib.r 31 P, shown in the
December record of purchases and rayments.

The accounts carried to this point serve as records of individual
transactions between the business, its creditors, and debtors, and provide
in the balance sheet a yearly statement contrasting assets with liabilities.
A further analysis is necessary to determine the net profit or loss over the
year. The items and method of computing for Federal income tax purposes
consist of the following:

1..Total receipts (accounts paid and receivable)
2. Labor
3. Materials and supplies
4. Merchandise bought for sale
5. Other costs
6. Plus inventory at beginning of year
7. Total 2 to 6
9. Less inventory at end of year
(cost or market)
9. Net cost

_. .'.-12

10. Salaries
11. Interest on business
12. Taxes' and insurance
13. Ldss-es
14. Bad debts
15. Depreciation
16. Rent, repairs, etc.
17. Total(lines 10 to 16)
1. Total deduction
(line 9 plus line 17)
19. Net profit (or loss)
(line 1 minus line 18)


1. Total receipts.--Accounts paid and payable for ml s of current
year as shown in the total value of all sales over tho year taken from; month-
ly totals afterdeducting total claims and discounts. Accounts )ayable car-
ried from the previous year (shown on the Jirnuary record of sales-receints-
accounts receivable for current year) are not included. Accounts r.-' ,able at
end of current year for items sold within the year are included.

2. Labor.-All wages paid and. payable for wore rerformn.< 'ithi:i tne
current year taken from the payroll form as total earnings sur:.mtion. .
paid wa-'s carried from the previous year are excluded. T-- yid "a :os *t t::
end of the current :,-ar are included.

3. Lr'terials n...I sunpili's.--Purchases norm-'lly u 1ed uo in a ynr or
less. Equipment normally used for more than a, year is excluded and accounted
for under item 15 (derr:ciation). Turchases of timber, loi-s, nnd lu2nber ar.
accounted for under item 4 (merchandise toua-ht for sale). Materials a: su'ap-
p]ies thus include feed, veterinary service, shoein of, oil, as,
files, bits for saws, belt lacings, etc. The total cost i taken from t
record of purchases and p1v.'-:nts.

4. Merchandise bour-ht for sale.--All purchases of ti:ber, lo::s, and
timber products made during; the year and shown in the record of purchases
and payments.

5. Other costs.--.xchan-e. charges on checks, abstract and attorney
fees, surveyin.- e x'.:- nses, etc.

10. Salaries.-All wafe c nyments for regular employees not recorded
in the labor account as shown in the record of purchases and suoolies.

11. Interest on business indebtedness.--Interest payments made ,.rin/,
the current year on money borrowed for conducting the business. --'.:in from
records of purchases and payments.

12. Taxes and insurance.--F.deral, State, and local taxes, soci-al
benefit ass current year as shown on the Record of Purchases an1, Payment ;. Any a...Sss-
ments included in the '-'-roll form are not repeated h,-re.

13. Losses.--Losses within the current year not reimbursed b insr-
ance to the property or stock from fire, flood, theft, etc. Thuse los s
are given a value in line with book values carried in th,: balance sheet in-
ventory of assets.

14. Ba1 debts.--Credits which are .incollctable and eliminated from
the assets in the balance sheet inventor. of as.tts.

15. Depreciation.--The total su.. of the; yearly: discount s on eq ui -Ant
and plant as determined in subdivision 4 of the balance si.'t, '- .

1.G Rent, re: -.irs, etc.--Rents, pa;ym nts for options, le;sts, o tc.,
rs,,airs on equipment not recorded under item 3 (materials an! supli.s), n.:-
shown in the Record of Purchases and Payments.



The method Used on income tax statements to determine the not profit
or loss is as follows: To the sum of the costs of items 2, 3, 4, 5, 10, 11,
12, 13, 14, 15, and 16 add the value of the inventory taken at the beginning
of the year and then subtract the value of the inventory taken at the end of
the year. This represents the total costs of doing business for the year.
Subtract from the total receipts (1) in order to determine the total net
profit or loss for the year.

Total net profit or loss per M board feet is found by dividing this
net profit or loss by the number of thousand board feet sold during the year
as given in the totals on the record of sales-receipts-accounts receivable.

To start this accounting make a balance sheet of the business. The
assets consist of (1) cash, checks, negotiable paper on hand, (2) accounts
receivable, (3) the value of timber, logs, and lumber in stock, (4) the value
of plant and sioplies. The liabilities are all unpaid bills and obligations
(see instructions on makin- a balance sheet, page i).

Allow eno--i-'r. space in the purchases-payment and in the sales-receipts
ledgers for entering uader an individual account all probable purchases dur-
ing the month. At the end of the month balance coach individual account on
both ledgers, and enter unpaid balances as first item of these accounts for
the succeeding: month. Reserve a sheet for monthly summaries going to maIke
up year end balance sheet and profit or loss statement, and fill in the to-
tals for the month for the headings suggested on the lower part of the record
of purchases and payments form and on the record of sales-receipts-accounts-
receivable form.


vr COXD OF &.-.L.3, :: CZI7-S, ACC'c-TS -..'C', LE FOR .;.C:::'H _____.:0
Tot ai

Date.::*."* ni.d address of : :'mibcr: Price: vnlue :Amount Dath-:rari : '. '
soli: party to whom sold : Item : of : :)er : of : pid :- dis-
S:units unit: sale : -.-ric crur.t:
2/6 :A. T. Staples, ': :7.
Columbia, Va. 9/4 : 4^C:20.-. /C4OO 1)..00: C300: .0- U): 730. :
: : R~~~.L. : : :::

l,-:onthly '-;.'ry 1 C '0 S O~rl O .. ^,5 ..

Mo0te.-Allow enough space under ach individuaal acco-urilt for -*11 roa'l
sal s durin- the month. A the of t!e mon'i-h,:
cou,2nt and c~nT(..r u o idbal inc(, as --he first it": .fn --I*; i. c *^ r
nth. At the end of the month alo : of
tal quantity sold, tot:l ,)aid, : ai.c
discount s. Tetotal v~leof' ali rals fter deut lr- or ca~~
discounts is ite. 1, asfsd in t.-: ro or : :-,-,
p : : : :
: : .p : :

: otxyc~~-y : :15 I: ::O~ ; ~ : : }: 9

cc ter.,le .ne b:ec es :efrtj : :
te .,iy :l, oe ~e a:o :r~ aid :i :~

licuit sitr ,~,.adi m: i :. :-r rof o
pi: ::i: :: :

RC- '-12


Se :F-le r,.-;oll iornrr 0o t:- .-- and Hour Diviaion of the U. -. ppart.ent of Labor pia minor addi-
tions i .... ted for t.e labor ledger. See "L. ,',. ov.r' Dicest of t-e Fair Labor Standards Act o 193." for
inter. :"L-ioL f proviO cenor:& by tIe letters in rentliees:-

lJj r *j--:.le r.. (-: .tic>i r ,-. L req-uired)

workweek r i,. ___ ___ ___ ____

: : H:o iru 'v:orked :

Date oi,.;.m:.nt (f)--______

fSocial :
: e- :
AC- : : ~I T: 7:

:d co(d (,d (
.: O : .

T: : S:To-
S: :tal

(d): (d) (d

*ege-lar rate
of 'ai


S Earnings : Z'ductions : 3

:At re-: : :
:ular :Extra: :Feder-: Iotal:Un-
:rate of: for :otal al ..:e:. ., Ad-
:1"i;/ for:over- earn-: age irn-: (itemr.: paid:bal- :vancee
total :time : ings :ur- :ized): :ance:
hours :nce
worke :taxes z
: : (i) : : ::

I. GeorC. ,::.ry 12)-9-:-
harper 42531

2. .-rrtia Ja.e 15-99- -
11 --Ison 2176c

5. Henry M~iller: ',-p3-:- :
H{a kis 5f

4. ,,..;.Atrice ,Jb -'J'--
..'. r ro:ter 724i
T- Janet Barter.27C-;----

tTo tal n
liote.---I;.& total earninit-:

~: ~': ~:

~': ~:


48:62 per hr. (b0;: 2- .76

455C:5 per rr. ($21:
Super week of 42:
47:444 per xr. ( .:0
Super mo.on a
Swk. of 42 hrv.
53C/: per Lir. ($15:
: per week)
+6: 314 per hir.(P.W
: plus bonus)


20.6 '


14. 26

given in
for t.-e month are/itei4 2, :,-;c 3, and are u:



1. 20:

1 2"



14. 2-'C:

.23 ----- 3-02

.2? 1t5:
.15 .- 21.4 :

.1i6 :- 16.oC4

.15 :14.73:

- *~ -

- .7.7- _______ i' Yr____o

:cd in tne yearly ::"ofit or io."s a:j.at1c t^.

in i .

Digitized by the Internet Archive
in 2013

.,COD OF OF'.?L-SS3 A:T ?AY:.: S --_ :Oi OF 194

I.'"lieG S- Servics Tib.ber : Fersonn
------ -- ..-.---...-.-.---.. .... ...-... ..... : account :
Date: : : T id a on' u "i t' :j;t :
bo' t: '.n and address of : Item :Price:A.nount:Dote: bel- : dra'nm I'ro;::
p- rt.' from vrhom bought: : paid :naid: anc : b-_si,'s:

6/1 :Anderson .i1lint Sta. :3rt.fw7d: : :.00
2rtea, Vt. 100 (al:
f" "1 : gas. :15.00:1.00: /1 .00:CC

ote.-Carry a separate record for each account, balinc,1 it o,'
onth, and brin forward the unpaid balnc t firs- or

ensuing -end balance and proft t
simplified if a different colored i :.-o -""d for :rc.i"-
nt subject to dTreciation accontin for r .

logs, anc3 lumbe~r.
7roE. above records make monthly summarjie ..s flos:
Tt o foli ,-.

1. Se footnote to --cor of S-les, tc.

2. See footnote to Saple
3' aeiasan spnis (See(i ra-ge 3for it/rrnsirclde.
4. *erchandize bouit for sale. ( for it(. inCLu--,I.)
5. Other costs (epa- 5 for ite":s r---'' ;
10. Salaries It It
11. Interest on bonde. indbtednss.

12. It .st 1!
16. rs tc. It t i t

-ote.--arry a separate recor for each count, b c t o
month, an-I brin.< forv, rI the unpaid b&alance :,; tb, i'irs; r t ore
ensuing month. Year-endI balance an. orofit, ;uA., loss. o', 't >,,nt: 'Iil
Ne sim~ lified if a diffe rent colored iflL or s3:X io! i: d. for :--
merit subject to de r reciation acco nting< ,, fr~~c~s o iTr
logs, anr9 1umbe r.

From above recordIs :nake monthly sui..marie, s is fo1iov:s:

1. Se footnote to 7cor I of S. !es, w tc.
2. See. footnote to Saumple F" rroll 'or.:
3. :,:aterijls an sup i r1Ks. (S e a-c' 3 for it~L~ i>.clu~de1.)
4. D~erchandize hou -ht for saie. (Se.e .- 3 for it s.;..r..... incuc If
5. Other costs (Se,.' 3 i'or" it -s Ixci't .
10. Salaries ft i ,, ,
11. Interest on borde in L ht d3rv'.t; t ,, ,,

16. Rent, re airs, ftc. 'I T ft t

.-', )y-1 7-

Useful Life as a Basis for Estimatin;- Depreciation

Item Expected life Yearly .',rci.''. Ion
years p 'rc,.t

!" Orses . . . . . . . . 5 j0
orsles.......................... 5 20
ul5 2C

Sledso ... ..................... 5 20

Log ..'i' *ons. . . .

F,- ii; tools .................. 1 1 0

Truck (lo--in ) .............. 4

Cats.. ......................... 4 2.

Tractors ............. ....... 4 2

Sh-icks and buildings........... Life of operation

s 3 335

Mill building ................. Life of operation or 5 crcnt

Steam en.-ines ............... 20

Gas unit s ...................... 10 10

Diesels ........................ 15 7

d ers............. ......... 10 12 10

Mill machinery................. 10 12 10

Trim saws ...................... 10 12 10

Sao ls. ...... ........................ .. 10- 12

L.zber trucks .................. 5 ;-,0

Lumber wagon ss .................. 5 20

Contributed b,;. C. J. TlIford,
For 'st Fro 'uctc- _-'....
OctobIr _'r .

II I III 11111 I il II I I III I I I l I 8I84
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