nished with an invoice for each shipment tabulated. It also makes certain that all shipment serial numbers have been accounted for, beginning with the number next succeeding the one last shown on the previous report.

The accounting department should regularly check and examine the records in the shipping department for the purpose of seeing that the shipping clerk has on file receipts proving delivery of all material for which the accounting department has put through invoices.

BILLING AND ENTERING SHIPMENTS. The accounting department obtains the unit prices of the materials shipped by referring to the inventory stock sheet and prices all items. at actual cost, unless there has been a decided drop in market prices between the date of purchase and the date of delivery, or the owner's contract provides otherwise. Such prices represent the actual purchase price of material as represented by payments to supply dealers, but they may not be the actual cost of the material to the contractor, delivered to the job site.

There may be handling and delivery charges from stock room to job for which the contractor is entitled to reimbursement under a cost-plus contract. These handling and delivery charges, however, should be taken care of by an overhead percentage agreed upon in advance with the owner and not by increasing the unit prices of material.

After the unit prices have been placed on the invoices, the extensions are made and the amount of the bill ascertained. This amount is entered in the blank column, on the statement prepared by the shipping clerk.

For the purpose of control and to make certain that the value of all shipments will be properly entered on the books, the statement prepared by the shipping clerk is journalized, after the accounting department has indicated thereon the

value of each shipment. This journal entry credits the account which represents the stock of materials carried and charges the value of all the shipments to the Deliveries Controlling account.

The individual invoices are entered on the purchase register (Form 19) as charges to the job to which the material is delivered and as credits to the Deliveries Controlling account, the latter being substituted for the vendor's name as in Entry 1, Form 19. The amount is extended in a

Deliveries Control column and then posted to the general ledger. (See method of summarizing registers in Chapter X.)

In Form 17 is shown a shipping list and invoice combined, that is often used. It is printed in sets of three and is serially numbered before issue to the shipper. After delivery has been acknowledged on the original, it is priced and extended by the accounting department and is thereafter treated as an invoice.

Contractor's Equipment-Relation to Work

The exact relation of equipment owned by a contractor to work in progress should be carefully studied and kept in mind.

The construction of a job creates two different conditions. The contractor's expenditures for labor, materials, etc., constitute his cost. The sum paid him by the owner is his selling price.

Charges made for contractor's equipment rented or furnished to an operation are part of the cost of construction. The basis for charging plant rental to an owner under a costplus contract is simply the method of establishing the selling price.

The provisions controlling the billing to an owner are stated in the contract with him. The contract may state that the sum to be charged as plant rental is to be a flat percentage of the final actual cost of construction. The contract may provide that some equipment is to be charged at weekly rental rates for the time when it is actually in use, and other equipment billed at agreed-upon prices. A further provision may cover the basis on which credit is to be given for equipment returned to the contractor's yard in good condition.

Whatever the contract with the owners may outline as the basis of billing them for the use of equipment, the charges made by the contractor's equipment yard should be uniform against each job. The price at which equipment service is billed to the owner should have no greater bearing on the yard's charge for its services than the price of brick to the owner should affect the sum paid a brick dealer.

Equipment Charge as an Element of Cost

In figuring the cost of prospective work, contractors very often reason: "The equipment is in the store yard, fully paid for and can be used on this job. No money has to be expended for equipment, so why include any allowance in the estimate and bid for equipment?" They may figure a certain. cost to cover operating expenses, such as coal for the locomo

tive and wages of the engineer, but nothing for the use of their own equipment or for repairs.

This policy ignores two elements of actual cost―depreciation and maintenance and repairs. The result is that the cost of these is taken out of the general profits of the business instead of out of the profits of individual contracts. This policy also causes an actual cash loss whenever an operation is conducted under a cost-plus contract, which contains no special provisions covering charges for plant rental. The owner pays for items entering into the actual cost of construction. If no charge for equipment is included in the cost, the owner pays nothing for the use of the contractor's equipment.

DETERMINING CHARGE FOR EQUIPMENT. If a charge for use, maintenance, and upkeep of equipment should be included in the cost of construction, upon what basis should it be made? Would a flat percentage of the value of the equipment be fair? Assume the use of a flat percentage of 20%. The charge for the use of a hoisting engine costing $3,000 would be $600, and $1.20 for a wheelbarrow purchased for $6. The hoisting engine might be in actual use on an operation only one month and the wheelbarrow three or four months. A charge of $600 for one month's use of an engine is out of all proportion to the charge (about $35 per week) made by equipment-renting agencies. If the flat rate of 20% be lowered to arrive at a more reasonable charge for the use of an engine, the reduced rate will make the rental for the wheelbarrow considerably less than the value of the service it renders.

It is apparent that some plan should be adopted which is based on classifying the equipment and taking into consideration not only the element of time during which the equipment