13. The accounting records.—The scope of this text does not call for a detailed discussion of the accounts to be kept in an export department. It will usually prove best to keep the records relating to the export business separate, and to carry controlling accounts for them on the general books of the firm.
Accounts with customers, agents or branch-houses are frequently in foreign currency. Several ways of handling them are in use. One way is to charge the accounts in which foreign money is involved by enter ing in parallel columns the actual amount of the for eign currency and the corresponding amount in Amer ican money on the basis of the par of exchange. The off-setting entries on the accounts kept in American money are all made on the basis of the par of ex change.
WThen a payment is made, the difference between the actual equivalent in American money and the amount on the basis of the par of exchange is debited or credited as the case may be, to an account, "Ex change." When closing the books at the end of a fiscal period, a similar entry is made to this account to cover the rise or fall in exchange. Some accountants prefer to ignore this last entry in their balance sheet, since it represents a purely speculative loss or gain which should be ignored until actually liquidated. This method has the advantage of simplicity.
Another method generally used in English export houses is to charge accounts with the equivalent in • English money on the basis of the rate of exchange current at the time the entry is made. WThen the books are closed the balance in foreign coin is then converted into English coin on the basis of the rate of exchange of the day. The difference between this balance and the balance actually found in the columns containing the English equivalents is then debited or credited to the exchange account. By the use of this method, the exchange account is not a mere book keeping device, but its balance shows the actual gain or loss on account of exchange during the period.
14. Additional records.—If business is carried on account" it is customary to pay and to draw interest on all items. The European export houses usually apply a different rate of interest to the credit side of the account from the one applicable to the debit side. This necessitates the keeping of elaborate "ac counts current" with each customer; the principle is similar to that which governs the keeping of call loan accounts in the American banks.
The accounting department should keep a "record of orders" in which the history of every order received is kept. This record must include the date when the order was received, when acknowledged, when work was started, when the order was placed with outside firms, when delivery was promised, when actually made, when shipping permit was actually received, when the shipment should have been delivered, when it was delivered at the dock, the sailing date of the vessel, and the date of the shipment advice sent to the foreign consignee.
A record of this kind will prove valuable for fixing responsibilities for delay, as well as a guide in making binding promises in future contracts as to delivery.
15. The need for accuracy.—The American busi ness man has, on the whole, little patience with minute calculations and hairsplitting. This has earned for him the reputation abroad of being careless and inac curate. The European business man, on the other hand, has an almost superstitious respect for accuracy in details. It cannot be urged too strongly that ac curacy in filling orders, in following instructions, in making statements and in rendering bills is a vital ele ment of success in dealing with foreign customers.