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A01_WEET6590_07_SE_FM.indd 25 22/09/15 9:12 PM
 Seventh Edition

Financial and
Management Accounting

Pauline Weetman
Professor of Accounting
University of Edinburgh

A01_WEET6590_07_SE_FM.indd 1 04/09/15 10:52 pm

 PEARSON EDUCATION LIMITED
Edinburgh Gate
Harlow CM20 2JE
United Kingdom
Tel: +44 (0)1279 623623
Fax: +44 (0)1279 431059
Web: www.pearson.com/uk

First published under the Financial Times Pitman Publishing imprint 1996 (print)
Second edition published 1999 (print)
Third edition 2003 (print)
Fourth edition 2006 (print)
Fifth edition 2011 (print)
Sixth edition 2013 (print and electronic)
Seventh edition 2016 (print and electronic)

© Pearson Education Limited 1996, 1999, 2003, 2006, 2011 (print)

© Pearson Education Limited 2013, 2016 (print and electronic)

The right of Pauline Weetman to be identified as author of this work has been asserted by her in accordance with the Copyright,
Designs and Patents Act 1988.

The print publication is protected by copyright. Prior to any prohibited reproduction, storage in a retrieval system, distribution or
transmission in any form or by any means, electronic, mechanical, recording or otherwise, permission should be obtained from
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Contains public sector information licensed under the Open Government Licence (OGL) v3.0. www.nationalarchives.gov.uk/doc/
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Pearson Education is not responsible for the content of third-party internet sites.

The Financial Times. With a worldwide network of highly respected journalists, The Financial Times provides global business news,
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visit www.ft.com/pearsonoffer.

ISBN: 978-1-292-08659-0 (print)

978-1-292-08666-8 (PDF)
978-1-292-08660-6 (eText)

British Library Cataloguing-in-Publication Data

A catalogue record for the print edition is available from the British Library

Library of Congress Cataloging-in-Publication Data

A catalog record for the print edition is available from the Library of Congress

10 9 8 7 6 5 4 3 2
19 18 17 16 15

Front cover image © Getty Images

Print edition typeset in 9.5/12pt Palatino by 71
Printed and bound by L.E.G.O S.p.A., Italy

NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION

A01_WEET6590_07_SE_FM.indd 2 04/09/15 10:52 pm

 Contents in brief

Preface to the seventh edition xvii

Publisher’s acknowledgements xxiii

FINANCIAL ACCOUNTING
Part 1 A conceptual framework: setting the scene 3
1 Who needs accounting? 4
2 A systematic approach to financial reporting:
the accounting equation 27
3 Financial statements from the accounting equation 54
4 Ensuring the quality of financial statements 77

Part 2 Reporting the transactions of a business 111

5 Accounting information for service businesses 112
6 Accounting information for trading businesses 142

Part 3 Recognition in financial statements 169

7 Published financial statements 170
8 Non-current (fixed) assets 211
9 Current assets 250
10 Current liabilities 281
11 Provisions and non-current (long-term) liabilities 301
12 Ownership interest 323

Part 4 Analysis and issues in reporting 353

13 Ratio analysis 354
14 Reporting corporate performance 385
15 Reporting cash flows 421

MANAGEMENT ACCOUNTING
Part 5 Setting the scene and defining the basic tools of
management accounting 449
16 Functions of management accounting 450
17 Classification of costs 475
18 Product costs: materials, labour and overheads 498

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 iv Contents in brief

Part 6 Job costs and stock valuation 533

19 Job costing 534

Part 7 Decision making 557

20 Break-even analysis and short-term decision making 558

Part 8 Planning and control 587

21 Preparing a budget 588
22 Standard costs 626
23 Performance evaluation and feedback reporting 656

Part 9 Capital investment appraisal and business strategy 681

24 Capital investment appraisal 682
25 Business strategy and management accounting 713

Financial accounting terms defined G1

Management accounting terms defined G11

Appendices
I Information extracted from annual report of Safe and Sure
Group plc, used throughout Financial Accounting A1
II Solutions to numerical and technical questions in Financial
Accounting A16
III Solutions to numerical and technical questions in Management
Accounting A42

Index I1

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 Contents

Preface to the seventh edition xvii

Publisher’s acknowledgements xxiii

Financial accounting

Part 1 A conceptual framework: setting the scene

Chapter 1 Who needs accounting?4

Real World Case 4
Learning outcomes 6
1.1 Introduction6
1.2 The development of a conceptual framework7
1.3 The conceptual framework for financial reporting8
1.4 Types of business entity9
1.5 Users and their information needs13
1.6 General purpose or specific purpose financial statements?18
1.7 Stewards and agents18
1.8 Who needs financial statements?19
1.9 Summary20
Further reading 21
Questions21
A Test your understanding 21
B Application 22
C Problem solving and evaluation 22
Activities for study groups 23
Notes and references 24
Supplement: introduction to the terminology of business transactions 25
Test your understanding 26

Chapter 2 A systematic approach to financial reporting:

the accounting equation27
Real World Case 27
Learning outcomes 29
2.1 Introduction30
2.2 The accounting equation30
2.3 Defining assets32

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 vi Contents

2.4 Examples of assets33

2.5 Recognition of assets36
2.6 Measurement of assets37
2.7 Defining liabilities38
2.8 Examples of liabilities39
2.9 Recognition of liabilities41
2.10 Measurement of liabilities42
2.11 Defining the ownership interest42
2.12 Recognition of the ownership interest43
2.13 Changes in the ownership interest43
2.14 Assurance for users of financial statements45
2.15 Summary46
Further reading 48
Questions48
A Test your understanding 48
B Application 49
C Problem solving and evaluation 49
Activities for study groups 50
Notes and references 50
Supplement: debit and credit bookkeeping 51
Test your understanding 53

Chapter 3 Financial statements from the accounting equation54

Real World Case 54
Learning outcomes 55
3.1 Introduction55
3.2 Who is in charge of the accounting system?56
3.3 The accounting period56
3.4 The statement of financial position (balance sheet)57
3.5 The income statement (profit and loss account)61
3.6 The statement of cash flows63
3.7 Usefulness of financial statements66
3.8 Summary67
Questions67
A Test your understanding 67
B Application 68
Activities for study groups 69
Supplement: using the accounting equation to analyse transactions 70
Test your understanding 76

Chapter 4 Ensuring the quality of financial statements77

Real World Case 77
Learning outcomes 79
4.1 Introduction79
4.2 Qualitative characteristics of financial statements80
4.3 Accounting principles84

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 Contents vii

4.4 Applying prudence87

4.5 Regulation of financial reporting89
4.6 Reviewing published financial statements101
4.7 Summary106
Further reading 107
Questions107
A Test your understanding 107
B Application 108
C Problem solving and evaluation 108
Activities for study groups 109
Notes and references 109

Part 2 Reporting the transactions of a business

Chapter 5 Accounting information for service businesses112

Real World Case 112
Learning outcomes 114
5.1 Introduction114
5.2 Analysing transactions using the accounting equation115
5.3 Illustration of accounting for a service business118
5.4 A process for summarising the transactions: a spreadsheet122
5.5 Financial statements as a means of communication124
5.6 Summary127
Questions127
A Test your understanding 127
B Application 128
Supplement: recording transactions in ledger accounts:
a service business 129
Test your understanding 141

Chapter 6 Accounting information for trading businesses142

Real World Case 142
Learning outcomes 144
6.1 Introduction144
6.2 Goods purchased for resale144
6.3 Manufacturing goods for resale147
6.4 Illustration of accounting for a trading business150
6.5 A process for summarising the transactions: a spreadsheet154
6.6 Financial statements of M. Carter, wholesaler156
6.7 Summary158
Questions159
A Test your understanding 159
B Application 160
Supplement: Recording transactions in ledger accounts: a trading business161
Test your understanding 168

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 viii Contents

Part 3 Recognition in financial statements

Chapter 7 Published financial statements170

Real World Case 170
Learning outcomes 173
7.1 Introduction173
7.2 International influences174
7.3 Accounting framework176
7.4 Statement of financial position (balance sheet)179
7.5 Income statement (profit and loss account)184
7.6 Statement of cash flows186
7.7 Group structure of companies191
7.8 Group financial statements193
7.9 Small and medium-sized entities (SMEs)197
7.10 Beyond the annual report198
7.11 Summary202
Further reading 202
Useful websites 203
Questions203
A Test your understanding 203
B Application 204
C Problem solving and evaluation 205
Activities for study groups 205
Notes and references 205
Supplement 7.1: information to be presented on the face of the
statement of financial position, as required by IAS 1206
Supplement 7.2: balance sheet format 1, as prescribed by the
Companies Act 2006207
Supplement 7.3: information to be presented on the face of the
income statement, as required by IAS 1209
Supplement 7.4: UK Companies Act profit and loss account
format1 – list of contents210

Chapter 8 Non-current (fixed) assets211

Real World Case 211
Learning outcomes 213
8.1 Introduction214
8.2 Definitions214
8.3 Recognition and measurement217
8.4 Users’ needs for information219
8.5 Information provided in the financial statements219
8.6 Usefulness of published information221
8.7 Depreciation: an explanation of its nature223
8.8 Reporting non-current (fixed) assets and depreciation in financial
statements228
8.9 Summary236
Further reading 236

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 Contents ix

Questions236
A Test your understanding 237
B Application 237
C Problem solving and evaluation 238
Activities for study groups 239
Notes and references 239
Supplement: recording non-current (fixed) assets and depreciation240
Test your understanding 249

Chapter 9 Current assets250

Real World Case 250
Learning outcomes 252
9.1 Introduction252
9.2 Definitions253
9.3 The working capital cycle253
9.4 Recognition and measurement255
9.5 Users’ needs for information257
9.6 Information provided in the financial statements258
9.7 Measurement and recording262
9.8 Inventories (stocks) of raw materials and finished goods262
9.9 Receivables (debtors)266
9.10 Prepayments268
9.11 Revenue recognition269
9.12 Summary271
Questions272
A Test your understanding 272
B Application 273
C Problem solving and evaluation 274
Activities for study groups 275
Notes and references 275
Supplement: bookkeeping entries for (a) bad and doubtful debts;
and (b) prepayments276
Test your understanding 280

Chapter 10 Current liabilities281

Real World Case 281
Learning outcomes 283
10.1 Introduction283
10.2 Definitions284
10.3 Recognition and measurement285
10.4 Users’ needs for information286
10.5 Information provided in the financial statements287
10.6 Measurement and recording288
10.7 Accruals and the matching concept290
10.8 Liabilities for taxation293
10.9 Summary295
Questions295
A Test your understanding 296

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 x Contents

B Application 296
C Problem solving and evaluation 297
Activities for study groups 297
Notes and references 297
Supplement: bookkeeping entries for accruals298
Test your understanding 300

Chapter 11 Provisions and non-current (long-term) liabilities301

Real World Case 301
Learning outcomes 303
11.1 Introduction303
11.2 Users’ needs for information304
11.3 Information provided in the financial statements305
11.4 Provisions308
11.5 Deferred income310
11.6 Non-current (long-term) liabilities312
11.7 Summary318
Questions318
A Test your understanding 318
B Application 319
C Problem solving and evaluation 319
Activities for study groups 320
Notes and references 320
Supplement: bookkeeping entries for provisions and deferred income321
Test your understanding 322

Chapter 12 Ownership interest323

Real World Case 323
Learning outcomes 325
12.1 Introduction325
12.2 Definition and recognition326
12.3 Presentation of ownership interest326
12.4 Statement of changes in equity334
12.5 Users’ needs for information335
12.6 Information provided in the financial statements336
12.7 Dividends340
12.8 Issue of further shares on the Stock Exchange341
12.9 Summary344
Questions344
A Test your understanding 344
B Application 345
C Problem solving and evaluation 346
Activities for study groups 347
Notes and references 347
Supplement: A spreadsheet for adjustment to a trial balance at
the end of the accounting period348
Test your understanding 352

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 Contents xi

Part 4 Analysis and issues in reporting

Chapter 13 Ratio analysis354

Real World Case 354
Learning outcomes 356
13.1 Introduction356
13.2 A note on terminology357
13.3 Systematic approach to ratio analysis357
13.4 Investors’ views on risk and return365
13.5 Pyramid of ratios366
13.6 Use and limitations of ratio analysis368
13.7 Worked example of ratio analysis369
13.8 Linking ratios to the statement of cash flows375
13.9 Combining ratios for interpretation378
13.10 Summary381
Questions381
A Test your understanding 381
B Application 382
C Problem solving and evaluation 384
Notes and references 384

Chapter 14 Reporting corporate performance385

Real World Case 385
Learning outcomes 387
14.1 Introduction387
14.2 Strategy and performance388
14.3 Other guidance in analysis394
14.4 Segmental information397
14.5 Off-balance sheet finance402
14.6 Corporate social responsibility404
14.7 Corporate governance406
14.8 Meaning of ‘fair presentation’ and ‘true and fair view’409
14.9 Measurement of value411
14.10 Risk reporting414
14.11 Developing issues: how valid is the stakeholder model?415
14.12 Summary416
Further reading 417
Questions418
A Test your understanding 418
B Application 419
C Problem solving and evaluation 419
Activities for study groups 419
Notes and references 420

Chapter 15 Reporting cash flows421

Real World Case 421
Learning outcomes 422

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 xii Contents

15.1 Introduction422
15.2 Cash and cash equivalents423
15.3 The direct method and the indirect method423
15.4 Preparing a statement of cash flows: the indirect method427
15.5 Preparing a statement of cash flows: the direct method435
15.6 Interpretation of cash flow information436
15.7 Illustration437
15.8 Summary441
Further reading 441
Questions441
A Test your understanding 442
B Application 442
C Problem solving and evaluation 443
Notes and references 445

MANAGEMENT ACCOUNTING

Part 5 Setting the scene and defining the basic tools of

management accounting

Chapter 16 Functions of management accounting450

Real World Case 450
Learning outcomes 452
16.1 Introduction452
16.2 Meeting the needs of internal users454
16.3 Management functions455
16.4 Role of management accounting460
16.5 Judgements and decisions: case study illustrations463
16.6 The language of management accounting468
16.7 Summary469
Further reading 469
Questions470
A Test your understanding 470
B Application 470
C Problem solving and evaluation 471
Activities for study groups 474
Notes and references 474

Chapter 17 Classification of costs475

Real World Case 475
Learning outcomes 477
17.1 Definition of a cost477
17.2 The need for cost classification478
17.3 The meaning of ‘activity’ and ‘output’478
17.4 Variable costs and fixed costs479
17.5 Direct costs and indirect costs483

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 Contents xiii

17.6 Product costs and period costs485

17.7 Cost classification for planning, decision making and control487
17.8 Cost coding490
17.9 Cost selection and reporting491
17.10 Summary492
Further reading 493
Questions493
A Test your understanding 493
B Application 494
C Problem solving and evaluation 496
Activities for study groups 496

Chapter 18 Product costs: materials, labour and overheads498

Real World Case 498
Learning outcomes 500
18.1 Introduction500
18.2 Accounting for materials costs502
18.3 Accounting for labour costs505
18.4 Production overheads: traditional approach507
18.5 Activity-based costing (ABC) for production overheads517
18.6 Comparing the traditional approach and ABC526
18.7 Summary527
Further reading 528
Questions528
A Test your understanding 529
B Application 530
C Problem solving and evaluation 531
Activities for study groups 532
Notes and references 532

Part 6 Job costs and stock valuation

Chapter 19 Job costing534

Real World Case 534
Learning outcomes 536
19.1 Introduction536
19.2 Job-cost records: an illustration537
19.3 Job costing: applying the accounting equation to transactions541
19.4 Absorption costing and marginal costing546
19.5 Moving forward550
19.6 Summary551
Questions552
A Test your understanding 552
B Application 553
C Problem solving and evaluation 555
Activities for study groups 556

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 xiv Contents

Part 7 Decision making

Chapter 20 Break-even analysis and short-term decision making558

Real World Case 558
Learning outcomes 560
20.1 Introduction560
20.2 Cost behaviour: fixed and variable costs561
20.3 Break-even analysis565
20.4 Using break-even analysis569
20.5 Limitations of break-even analysis571
20.6 Applications of cost–volume–profit analysis572
20.7 Cases in short-term decision making573
20.8 Pricing decisions578
20.9 Summary581
Questions581
A Test your understanding 582
B Application 582
C Problem solving and evaluation 584
Activities for study groups 585

Part 8 Planning and control

Chapter 21 Preparing a budget588

Real World Case 588
Learning outcomes 590
21.1 Introduction590
21.2 Purpose and nature of a budget system591
21.3 Administration of the budgetary process594
21.4 The benefits of budgeting598
21.5 Behavioural aspects of budgeting601
21.6 Approaches to budgeting604
21.7 Practical example – development of a budget606
21.8 Shorter budget periods615
21.9 Summary618
Questions619
A Test your understanding 619
B Application 620
C Problem solving and evaluation 622
Activities for study groups 625

Chapter 22 Standard costs626

Real World Case 626
Learning outcomes 627
22.1 Introduction628
22.2 Purpose of using standard costs628
22.3 The level of output to be used in setting standards629

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 Contents xv

22.4 The control process630

22.5 Direct materials cost variance631
22.6 Direct labour cost variance633
22.7 Variable overhead cost variance634
22.8 Fixed overhead expenditure variance635
22.9 Case study: Allerdale Ltd636
22.10 Investigating variances641
22.11 Flexible budgets and variance analysis642
22.12 Case study: Brackendale Ltd642
22.13 Is variance analysis, based on standard costs, a useful exercise?646
22.14 A broader view of applications of variance analysis647
22.15 Summary648
Questions649
A Test your understanding 649
B Application 650
C Problem solving and evaluation 652
Activities for study groups 655
Notes and references 655

Chapter 23 Performance evaluation and feedback reporting656

Real World Case 656
Learning outcomes 659
23.1 Introduction659
23.2 Preparing performance reports660
23.3 Performance evaluation662
23.4 Benchmarking667
23.5 Non-financial performance measures668
23.6 The Balanced Scorecard669
23.7 Management use of performance measurement672
23.8 Summary674
Further reading 675
Questions675
A Test your understanding 675
B Application 676
C Problem solving and evaluation 676
Activities for study groups 678

Part 9 Capital investment appraisal and business strategy

Chapter 24 Capital investment appraisal682

Real World Case 682
Learning outcomes 684
24.1 Purpose of capital investment appraisal685
24.2 Payback method687
24.3 Accounting rate of return689
24.4 Net present value method691

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 xvi Contents

24.5 Internal rate of return696

24.6 Mutually exclusive projects699
24.7 Which methods are used in practice?701
24.8 Control of investment projects: authorisation and review702
24.9 Advanced manufacturing technologies703
24.10 Summary704
Further reading 705
Questions705
A Test your understanding 705
B Application 706
C Problem solving and evaluation 707
Activities for study groups 710
Supplement: Table of discount factors711

Chapter 25 Business strategy and management accounting713

Real World Case 713
Learning outcomes 714
25.1 Introduction715
25.2 Strategic management accounting715
25.3 The just-in-time approach716
25.4 Value chain analysis717
25.5 Total quality management and cost of quality718
25.6 Business process re-engineering719
25.7 E-business and e-commerce720
25.8 Summary723
Further reading 724
Questions724
A Test your understanding 724
B Application 725
C Problem solving and evaluation 725
Activities for study groups 725
Note and reference 726

Financial accounting terms defined G1

Management accounting terms defined G11

Appendices
I Information extracted from annual report of Safe and
Sure Group plc, used throughout Financial Accounting A1
II Solutions to numerical and technical questions in Financial
Accounting A16
III Solutions to numerical and technical questions in Management
Accounting A42

Index I1

A01_WEET6590_07_SE_FM.indd 16 04/09/15 10:52 pm

 Preface to the seventh edition

Introduction
This book uses the international Conceptual Framework and International Financial
Reporting Standards (IFRS) as its primary focus. It enables students in their early
stages of study to understand and analyse the published annual reports and financial
statements of our largest businesses and public sector institutions. IFRS are now
applied in many aspects of government, local authority and other public sector
accounting. Where relevant it also refers to the approach used in small and medium-
sized businesses where the traditions of UK GAAP continue to be applied.
The book is written for the first level of undergraduate degree study in accounting and
business studies, or equivalent introductory accounting courses for any professional
training where an understanding of accounting is a basic requirement. While UK
listed companies apply IFRS in their published financial statements, the remainder of
the annual report is governed by UK-based regulations and codes. All UK companies
operate under the Companies Act 2006. Their annual reports are influenced by the
regulatory process applied to listed companies in the UK. This seventh edition is
thoroughly revised to reflect these regulatory changes, particularly the restructuring
of the Financial Reporting Council to take responsibility for the standards previously
issued by the UK Accounting Standards Board, and the introduction of the strategic
report.
All ‘Real World’ case studies at the start of each chapter have been updated to
reflect current conditions, especially the changes that have resulted from the banking
and credit crisis of 2008–09. The underlying pedagogy of previous editions has been
retained in response to encouraging comments from reviewers and from users of the
book.
As institutions come under increasing scrutiny for the quality of the teaching and
learning experience offered, a textbook must do more than present the knowledge
and skills of the chosen subject. It must make explicit to the students what targets are
to be achieved and it must help them to assess realistically their own achievements
of those targets. It must help the class lecturer prepare, deliver, explain and assess
the knowledge and skills expected for the relevant level of study. This is achieved by
stating learning outcomes at the start of each chapter and by ensuring that the chapter
headings and the end-of-chapter questions address the stated outcomes.
The management accounting chapters continue the approach of previous editions
in taking some of the newer costing techniques into mainstream discussion, reflecting
their increasing acceptance in management accounting practice. Business strategy and
competitive position are recurring themes.
An accompanying website at www.pearsoned.co.uk/weetman provides the
lecturer with a complete resource pack for each chapter. Student handouts containing
a skeleton outline of each chapter, leaving slots for students to complete; overhead-
projector masters that match the lecture handouts; additional multiple-choice
questions and further graded questions in application of knowledge and in problem
solving; all are features for this seventh edition.

A01_WEET6590_07_SE_FM.indd 17 04/09/15 10:52 pm

 xviii Preface to the seventh edition

End-of-chapter questions are graded according to the skills being assessed. There
are tests of retained knowledge, tests of application of knowledge in straightforward
situations and tests of problem solving and evaluation using the acquired knowledge
in less familiar situations.
Overall the aim of the seventh edition is to provide an introduction to financial
accounting and management accounting which engages the interest of students and
encourages a desire for further study. It also contributes to developing the generic
skills of application, problem solving, evaluation and communication, all emphasised
by employers.

Subject coverage
Financial reporting is an essential component in the process of communication
between a business and its stakeholders. The importance of communication increases
as organisations become larger and more complex. Reporting financial information
to external stakeholders not involved in the day-to-day management of the business
requires a carefully balanced process of extracting the key features while preserving
the essential core of information. The participants in the communication process
cover a wide range of expertise and educational background, so far as accounting is
concerned. The range begins with those who prepare financial statements, who may
have a special training in accounting techniques, but it ends with those who may be
professional investors, private investors, investment advisers, bankers, employee
representatives, customers, suppliers and journalists.
One very significant group of stakeholders in any business is the internal management
of the organisation. Managers have access to a wealth of detailed financial information
and a responsibility for the careful management of the assets and operations of
the organisation. The way in which the managers of an organisation use financial
information is very much contingent on the purpose for which the information is
intended. Management accounting is a specialist area of study within accounting more
generally. Ideally, management accounting and financial accounting would coalesce
if the external users could be given access to all internal information, but that might
damage the competitive position of the business and would probably swamp the
external users in detail.
First-level degree courses in accounting are increasingly addressed to this broad
base of potential interest and this book seeks to provide such a broad base of
understanding while also supplying a sound technical base for those intending to
pursue specialised study of the subject further. In particular it makes use of the
Conceptual Framework which is used by the International Accounting Standards Board
in developing and reviewing accounting standards. That Conceptual Framework is
intended to help preparers, users and auditors of financial statements to understand
better the general nature and function of information reported in financial statements.
Fair value accounting principles are introduced.

Aim of the book

The seventh edition has been updated throughout. It aims to provide a full understanding
of the key aspects of the annual report, concentrating in particular on companies in the
private sector but presenting principles of wider application which are relevant also to
organisations operating in the public sector.
In the management accounting section, the book aims to establish a firm understanding
of the basic techniques, while recognising that more recent developments in manage­
ment accounting are becoming widespread. A contingency approach is adopted which

A01_WEET6590_07_SE_FM.indd 18 04/09/15 10:52 pm

 Preface to the seventh edition xix

emphasises that the selection of management accounting techniques is conditional on

management’s purpose. To meet this purpose, the management accountant performs
the roles of directing attention, keeping the score and solving problems. Strategic
management accounting is emphasised from the outset so that students are aware
that management accounting must take an outward-looking approach. These themes
are reiterated throughout, concluding with an explanation of the role of management
accounting in business strategy, particularly e-business in the new economy. A student
who has completed this first-level study of management accounting will be aware
of many of the day-to-day practices of management accounting in business and the
relevance of those practices. It also provides a self-contained, broad introduction to
management accounting for business students who do not need to develop specialist
knowledge.

In particular
An international perspective reflects the convergence in accounting standards across the
European Union for listed companies. Features specific to the UK are retained where
these continue to be relevant to other enterprises.
Concepts of financial accounting are identified by applying the principles
enunciated by the International Accounting Standards Board in its Conceptual
Framework. The Conceptual Framework emphasises the desirability of meeting the
needs of users of financial statements and it takes a balance sheet-oriented approach.
That approach is applied consistently throughout the book, with some indication of
the problems which may arise when it is clear that the established emphasis on the
matching of revenues and costs may give a more rational explanation of existing
practice.
User needs are explained in every chapter and illustrated by including first-person
commentary from a professional fund manager, holding a conversation with an
audit manager. The conversations are based on the author’s research in the area of
communication through the annual report.
The accounting equation is used throughout the financial accounting section for
analysis and processing of transactions. It is possible for students who do not seek
a technical specialism to complete the text without any reference to debit and credit
bookkeeping. It is, however, recognised that particular groups of students may wish
to understand the basic aspects of debit and credit bookkeeping and for this purpose
the end-of-chapter supplements revisit, on a debit and credit recording basis, material
already explored in the chapter. Debit and credit aspects of management accounting
are not covered since these are regarded as best reserved for later specialist courses if
the student so chooses.
Practical illustration is achieved by drawing on the financial information of a
fictitious major listed company, taking an overview in early chapters and then
developing the detailed disclosures as more specific matters are explored.
Interpretation of financial statements is a feature of all financial reporting chapters,
formally brought together in Chapters 13 and 14. The importance of the wider range
of corporate communication is reinforced in Chapter 14. This chapter also includes
a discussion of some current developments that are under debate in the context of
international convergence.
A running case study example of the fictitious company Safe and Sure plc provides
illustration and interpretation throughout the chapters. Safe and Sure plc is in the
service sector. The Instructor’s Manual contains a parallel example, Craigielaw plc, in
the manufacturing sector. In the Instructor’s Manual there are questions on Craigielaw
to accompany most of the chapters.

A01_WEET6590_07_SE_FM.indd 19 04/09/15 10:52 pm

 xx Preface to the seventh edition

Self-evaluation is encouraged by setting learning outcomes at the start of each

chapter and reviewing these in the chapter summaries. Activity questions are placed
at various stages throughout each chapter. Self-testing questions at the end of the
chapter may be answered by referring again to the text. Further end-of-chapter
questions provide a range of practical applications. Group activities are suggested
at the end of each chapter with the particular aim of encouraging participation and
interaction. Answers are available to all computational questions, either at the end of
the book or in the Instructor’s Manual.
A sense of achievement is engendered in the reader of the financial accounting section
by providing a general understanding of the entire annual report by the end of
Chapter 7. Thereafter specific aspects of the annual report are explored in Chapters 8–12.
Lecturers who wish to truncate a first-level course or leave specific aspects to a later
level will find Chapters 8–12 may be used on a selective basis.
A spreadsheet approach to financial accounting transactions is used in the body of the
relevant chapters to show processing of transactions using the accounting equation. The
author is firmly convinced, after years of trying every conceivable approach, that the
spreadsheet encourages students to apply the accounting equation analytically, rather
than trying to memorise T-account entries. Furthermore students now use spreadsheets
as a tool of analysis on a regular basis and will have little difficulty in applying suitable
software in preparing spreadsheets. In the bookkeeping supplementary sections, the
three-column ledger account has been adopted in the knowledge that school teaching is
moving increasingly to adopt this approach which cuts out much of the bewilderment
of balancing T-accounts. Computerised accounting systems also favour the three-
column presentation with continuous updating of the balance.

Flexible course design

There was once a time when the academic year comprised three terms and we all knew
the length of a typical course unit over those three terms. Now there are semesters,
trimesters, modules and half-modules so that planning a course of study becomes an
exercise in critical path analysis. This text is written for one academic year comprising
two semesters of 12 weeks each but may need selective guidance to students for a
module of lesser duration.
In financial accounting, Chapters 1–4 provide an essential conceptual framework
which sets the scene. For a general appreciation course, Chapters 5 and 6 are practical
so that one or both could be omitted, leading directly to Chapter 7 as a guide to
published accounts. Chapters 8–12 are structured so that the explanation of principles
is contained early in each chapter, but the practical implementation is later in each
chapter. For a general appreciation course, it would be particularly important to
refer to the section of each chapter which analyses users’ needs for information and
discusses information provided in the financial statements. However, the practical
sections of these chapters could be omitted or used on a selective basis rather than
attempting full coverage. Chapters 13 and 14 are important to all readers for a sense
of interpretation and awareness of the range of material within corporate reports.
Chapter 15 takes the reader through a cash flow statement item-by-item with the
emphasis on understanding and interpretation.
In teaching and learning management accounting various combinations are
possible, depending on course design and aims. Chapters 16, 17 and 18 provide an
essential set of basic tools of analysis but thereafter some flexibility is feasible. For
applications in job costing, Chapter 19 provides further material. For concentrating
on decision making and awareness of business strategy, Chapters 20, 24 and 25 are
recommended. For concentrating on planning and control, Chapters 21, 22 and 23 give
students experience of the variety of techniques in use.

A01_WEET6590_07_SE_FM.indd 20 04/09/15 10:52 pm

 Preface to the seventh edition xxi

Approaches to teaching and learning

Learning outcomes
Targets for student achievement in relation to knowledge and understanding of
the subject are specified in learning outcomes at the head of each chapter. The
achievements represented by these learning outcomes are confirmed against graded
questions at the end of each chapter. The achievement of some learning outcomes may
be confirmed by Activities set out at the appropriate stage within the chapter.

Skills outcomes
The end-of-chapter questions test not only subject-specific knowledge and technical
skills but also the broader general skills that are transferable to subsequent employment
or further training.

Graded questions
End-of-chapter questions are graded and each is matched to one or more learning
outcomes. Where a solution is provided to a question this is shown by an [S] after the
question number.

A series questions: test your understanding

The A series questions confirm the application of technical skills. These are skills
specific to the subject of accounting which add to the specialist expertise of the
student. More generally they show the student’s capacity to acquire and apply a
technical skill of this type.
The answers to these questions can be found in relevant sections of the chapter, as
indicated at the end of each question.

B series questions: application

The B series questions apply the knowledge gained from reading and practising
the material of the chapter. They resemble closely in style and content the technical
material of the chapter. Confidence is gained in applying knowledge in a situation
that is very similar to that illustrated. Answers are given in Appendix II or in the
Instructor’s Manual. These questions test skills of problem solving and evaluation
that are relevant to many subjects and many activities in life, especially in subsequent
employment. Some initiative is required in deciding how to apply relevant knowledge
and in solving problems.

C series questions: problem solving and evaluation

The C series questions apply the knowledge gained from reading the chapter, but in a
varied style of question. Problem-solving skills are required in selecting relevant data
or in using knowledge to work out what further effort is needed to solve the problem.
Evaluation means giving an opinion or explanation of the results of the problem-solving
exercise. Some answers are given in Appendix II but others are in the Instructor’s
Manual so that they can be used in tutorial preparation or class work.

Group and individual cases

Cases apply knowledge gained from the chapter but they also test communication
skills. Communication may involve writing or speaking, or both. It may require, for
example, explanation of a technical matter to a non-technical person, or discussion
with other students to explore a controversial issue, or presentation of a report to a
business audience.

A01_WEET6590_07_SE_FM.indd 21 04/09/15 10:52 pm

 xxii Preface to the seventh edition

S series questions in supplementary sections

The S series questions test knowledge of the accounting records system (bookkeeping
entries) to confirm understanding by those who have chosen to study the supplementary
bookkeeping sections.

Instructor’s Manual
A website is available at www.pearsoned.co.uk/weetman by password access to
lecturers adopting this book. The Instructor’s Manual contains additional problem
questions for each chapter, with full solutions to these additional questions as well as
any solutions not provided in the book. The Instructor’s Manual also includes basic
tutorial instructions and overhead-projector masters to support each chapter.

Target readership
This book is targeted at a broad-ranging business studies type of first-level degree
course. It is intended to support the equivalent of one semester of 12 teaching
weeks. There is sufficient basic bookkeeping (ledger accounts) in the end-of-chapter
supplements to make the book suitable for those intending to pursue a specialised
study of accounting beyond the first level but the bookkeeping material is optional
for those who do not have such special intentions. The book has been written
with undergraduate students particularly in mind, but may also be suitable for
professional and postgraduate business courses where financial reporting is taught at
an introductory level.

Acknowledgements
I am grateful to academic colleagues and to reviewers of the text for helpful comments
and suggestions. I am also grateful to undergraduate students of five universities who
have taken my courses and thereby helped in developing an approach to teaching
and learning the subject. Professor Graham Peirson and Mr Alan Ramsay of Monash
University provided a first draft of their text based on the conceptual framework
in Australia which gave valuable assistance in designing the structure of this book,
which was also guided from the publishing side by Pat Bond and Ron Harper.
Professor Ken Shackleton of the University of Glasgow helped plan the structure
of the management accounting chapters. The Institute of Chartered Accountants of
Scotland gave permission for use of some of the end-of-chapter questions.
Subsequently I have received valuable support in successive editions from the
editorial staff at Pearson Education. For this latest edition I am grateful to colleagues
and students who have used the book in their teaching and learning. I have also been
helped by constructive comments from reviewers and by guidance from Rebecca
Pedley, Acquisitions Editor, and Natasha Whelan, Senior Project Editor.

A01_WEET6590_07_SE_FM.indd 22 04/09/15 10:52 pm

 Publisher’s acknowledgements

We are grateful to the following for permission to reproduce copyright material:

Figures
Figure 4.1 from https://www.frc.org.uk/About-the-FRC/FRC-structure.aspx, © Financial
Reporting Council (FRC). All rights reserved. For further information, please visit www.frc
.org.uk or call +44 (0)20 7492 2300. Figure on page 354 from Annual Report and Accounts 2014
(National Express plc 2014) p. 15, http://nexgroup.blob.core.windows.net/media/2293/
ar2014-full.pdf, Reproduced with permission from National Express Group.

Tables
Table on page 27 from Annual Report and Accounts 2013/14 (BBC 2014) p. 125, http://
downloads.bbc.co.uk/annualreport/pdf/2013-14/bbc_annualreport_201314.pdf; Table on page
354 from Annual Report and Financial Statements 2014 (Stagecoach Group plc 2014) p. 14,
http://www.stagecoach.com/investors/financial-analysis/reports/2014.aspx; Table on page
355 from Annual Report and Accounts January 2014 (Next plc 2014) p. 19, http://www.nextplc
.co.uk/~/media/Files/N/Next-PLC/pdfs/reports-and-results/2014/Next%20AR2014%20web
.pdf; Table on page 476 from HGCA, http://www.hgca.com/markets/survey-results.aspx, 2014

Text
Case Study on pages 4–5 from Annual Report and Accounts 2013/14 (Oxfam 2014) pp. front
cover, 6, 8, 38, reproduced with the permission of Oxfam GB, Oxfam House, John Smith Drive,
Cowley, Oxford OX4 2JY, UK www.oxfam.org.uk. Oxfam GB does not necessarily endorse
any text or activities that accompany the materials.; Extract on page 28 from Annual Report and
Accounts 2013/14 (BBC 2014) p. 2, http://downloads.bbc.co.uk/annualreport/pdf/2013-14/
bbc_annualreport_201314.pdf; Case Study on page 54 from Annual Report and Form 20-F, 2014
(AstraZeneca 2014) pp. 11, 74, http://www.astrazeneca.com/Investors/Annual-reports; Case
Study extract on page 77 from The FRC and its regulatory approach, January (2014) p. 1, https://
www.frc.org.uk/Our-Work/Publications/FRC-Board/The-FRC-and-its-Regulatory-Approach.
pdf; Case Study extract on page 78 from Corporate Reporting Review - Annual Reports 2013, October
2013 (Financial Reporting Council 2014) p. 5, https://frc.org.uk/Our-Work/Publications/
Corporate-Reporting-Review/Coporate-Reporting-Review-Annual-Report-2013.pdf; Case Study
extract on pages 77–8 from Amendments to the Financial Reporting Standard for Small Enterprises
(effective January 2015), FRC, April 2014, revision to section 2.40. , https://www.frc.org.uk/
Our-Work/Publications/Accounting-and-Reporting-Policy/Amendments-to-the-FRSSE-Micro-
entities.pdf, all Case Study extracts on pages 77–8 © Financial Reporting Council (FRC). All
rights reserved. For further information, please visit www.frc.org.uk or call +44 (0)20 7492 2300;
Case Study on pages 112–13 from Annual Report and Accounts January 2014 (Next plc) pp. 20 and
22, http://www.nextplc.co.uk/~/media/Files/N/Next-PLC/pdfs/reports-and-results/2014/
Next%20AR2014%20web.pdf; Case Study on page 142 from Annual Report and Accounts
2014 (National Express plc 2014) p. 36, http://nexgroup.blob.core.windows.net/media/2293/
ar2014-full.pdf, Reproduced with permission from National Express Group; Case Study on
pages 142–3 from Annual Report and Financial Statements (Stagecoach 2014) p. 15, http://www
.stagecoach.com/investors/financial-analysis/reports/2014.aspx; Case Study on page 170–1
from Annual Report 2013/14, (Morrisons plc 2014) pp. 5–6, 44 http://www.morrisons-corporate
.com/Documents/Corporate2014/Morrisons_AnnualReport13-14_Complete.pdf; Comment
from Financial Times on page 171 from Strategy not shame should determine scaled of BarCap,

A01_WEET6590_07_SE_FM.indd 23 04/09/15 10:52 pm

 xxiv Publisher’s acknowledgements

Financial Times, 13/03/2014 (Smith, Al and Guthrie, J.); Case Study on pages 211–12 from Annual
Report and Financial Statements 2014–15 (Royal Mail plc 2015) pp. 2, 28, 135, 121–2, http://www
.royalmailgroup.com/sites/default/files/Annual%20Report%20and%20Accounts%202014–15
.pdf; Case Study on pages 250–51 from Annual Report and Accounts 2014 (Associated British Foods
plc. 2014) pp. ii, 2, 38, 94, 113, http://www.abf.co.uk/documents/pdfs/2014/2014_abf_annual_
report_and_accounts.pdf; Case Study on pages 281–2 from Annual Report and Accounts 2014 (W H
Smith plc 2014) pp. 1, 18, 20, 74, http://www.whsmithplc.co.uk/investors/company_reports/;
Case Study on pages 301–2 from Annual Report 2013 (Rio Tinto 2013) pp 1, 129–30, 154, http://
www.riotinto.com/annualreport2013/_pdfs/rio-tinto-2013-annual-report.pdf; Case Study on
pages 323–4 from Mothercare launches £100m rights issue, Financial Times, 23/09/2014 (Barrett,
C.), © The Financial Times Limited. All Rights Reserved; Extract on page 355 from Annual
Report and Financial Statements 2013/14 (Wm Morrisons Supermarkets plc 2014) p. 5, http://
www.morrisons-corporate.com/Documents/Corporate2014/Morrisons_AnnualReport13-14_
Complete.pdf; Case Study on pages 379–80 from Financial Times, http://www.ft.com/cms/
s/0/8588d422-b6ca-11e1-8c96-00144feabdc0.html#ixzz21tpdndrN, © The Financial Times
Limited. All Rights Reserved; Case Study on pages 385–6 from Annual Report and Accounts 2014
(Associated British Foods 2014) p. 9, http://www.abf.co.uk/documents/pdfs/2014/2014_abf_
annual_report_and_accounts.pdf; Case Study on page 421 from ITV: no news, good news?,
Financial Times, 08/10/2014 (Lex Team), http://www.ft.com/cms/s/3/64144f84-4e2a-11e4-bfda-
00144feab7de.html#axzz3G6ZBpeuK, © The Financial Times Limited. All Rights Reserved; Case
Study on pages 450–1 from Chartered Institute of Management Accountants (CIMA), http://
www.cimaglobal.com/About-us/What-is-management-accounting/ CIMA Global website,
October 2014; Case Study on pages 475–6 from HGCA, http://www.hgca.com/press/2014/
may/09/grain-haulage-survey.aspx; Case Study on pages 534–5 from http://www.cakeboss
.com/Cake-Stuff/Articles/How-Much-Should-I-Charge; Case Study on page 558 from Gemfields
eyes Colombian emerald venture, Financial Times, 22/09/2014 (Wilson, J.), http://www.ft.com/
cms/s/0/6977e036-4249-11e4-a9f4-00144feabdc0.html#ixzz3GCVPUa8X, © The Financial Times
Limited. All Rights Reserved; Case Study on pages 588–9 from Budget Booklet 2014/15 (Lancashire
Fire and Rescue Service 2015) http://www.lancsfirerescue.org.uk/financial-summary/; Case
Study on p. 626 ‘Summary of Industry Standards’, information provided by RestaurantOwner
.com. For more information, go to www.RestaurantOwner.com; Case Study on pages 656–8 from
Annual Report and Accounts 2013–14 (Natural England 2014) pp. 4, 67–70, 80, https://www.gov
.uk/government/uploads/system/uploads/attachment_data/file/326495/ne-annual-report-
accounts-2013-2014-print-ready.pdf, Contains public sector information licensed under the Open
Government Licence (OGL) v3.0.http://www.nationalarchives.gov.uk/doc/open-government-
licence.; Case Study on page 683 from Drax biomass conversion a first for Osborne infrastructure
scheme, Financial Times, 24/04/2013 (Pickard, J.), http://www.ft.com/cms/s/0/26526d1c-acf4-
11e2-b27f-00144feabdc0.html?siteedition=uk#axzz3G82tUShy, © The Financial Times Limited.
All Rights Reserved; Case Study on pages 682–3 from Annual Report 2013 (Drax Group plc 2013)
p. 42, http://www.drax.com/media/32649/drax_ar13_final.pdf; Case Study on pages 713–14
from The Evolution of Mobility: Bombardier Transportation Presents Solutions for the Future of Public
Transportation at InnoTrans 2014 (Bombardier) Berlin Transportation, Press Release, http://
uk.bombardier.com/en/media/newsList/details.bombardier-transportation20140917theevoluti
onofmobilitybombardie.bombardiercom.html?

Picture Credits
123RF.com: 558, 588; Alamy Images: Arterra Picture Library 656, lee avison 211, Kevin Britland
170, Robert Convery 250, 281, Jeff Gilbert 28, R Heyes Design 421, Carolyn Jenkins 385, Justin
Kase z11z 142, Gary Moseley 354, Paul Robbins 112, studiomode 498, Urbanimages 323; picture
courtesy of Bombardier Transportation UK Ltd: 713; Corbis: 475; Imagestate Media: John Foxx
Collection 301; Oxfam: Pablo Tosco 4; Shutterstock.com: Konstantin Chagin 450, kentoh 534,
krsmanovic 626t, Nomad_Soul 54, Pressmaster 77, TTstudio 682

All other images © Pearson Education

Every effort has been made to trace the copyright holders and we apologise in advance for any
unintentional omissions. We would be pleased to insert the appropriate acknowledgement in
any subsequent edition of this publication.

A01_WEET6590_07_SE_FM.indd 24 09/09/15 12:05 pm

 Financial accounting

M01_WEET6590_07_SE_C01.indd 1 03/09/15 7:56 pm

M01_WEET6590_07_SE_C01.indd 2 03/09/15 7:56 pm
 Part 1

A conceptual framework:
setting the scene

1 Who needs accounting?

2 A systematic approach to financial reporting:
the accounting equation
3 Financial statements from the accounting equation
4 Ensuring the quality of financial statements

M01_WEET6590_07_SE_C01.indd 3 09/09/15 12:09 pm

 Chapter 1

Who needs accounting?

Real World Case

Oxfam: meeting users’ needs

Extracts from Annual Report
and Accounts
Purpose and charitable objects
Oxfam’s purpose is to help create
lasting solutions to the injustice of
poverty.
As stated in its Memorandum of

Oxfam/Pablo Tosco
Association, the objects for which
Oxfam is established for the public
benefit are:
● to prevent and relieve ­poverty
and to protect vulnerable
­people, including through
humanitarian intervention;
● to advance sustainable development;
● to promote human rights, equality and diversity, in particular where to do so contributes to the
prevention and relief of poverty; in all cases working anywhere in the world.

Highlights
11 million people reached directly in 52 countries, and millions more benefiting from changes in
governments’ policy and practice influenced by Oxfam
6.1 million people supported in 24 humanitarian emergencies
600,000 people globally who took online campaign actions
1,337 grants to 81 partner organisations
400,000 people in the UK made a regular donation

Being accountable for the impact of our work

Oxfam is committed to ensuring that, in all that we do, we are accountable to those with whom we
work, from our programme partners, communities and donors to other stakeholder groups such as
our staff, volunteers, or those who we campaign through and with. We use several tools to monitor,
­evaluate, assess and learn from our stakeholders. We:
● report data on the numbers of people and communities reached by our programmes

M01_WEET6590_07_SE_C01.indd 4 09/09/15 12:14 pm

Other documents randomly have
different content
 See (in this Volume)
UNITED STATES: A. D. 1901-1905.

MORTON, PAUL:
President of Equitable Life Assurance Society.

See (in this Volume)

INSURANCE, LIFE.

MOSCOW,
Risings and Disturbances in.

See (in this Volume)

RUSSIA.

MOSLEM LEAGUE.

See (in this Volume)

INDIA: A. D. 1907 (December); also, 1907-1909.

MOSQUITO TERRITORY, THE.

See (in this Volume)

CENTRAL AMERICA: A. D. 1905.

MOTIENLING.

See (in this Volume)

JAPAN: A. D. 1904 (JULY-SEPTEMBER).

MOVING PICTURE SHOWS.

See (in this Volume)

SCIENCE AND INVENTION.

MUIJTEHEDS:
 The higher Persian Priests.

See (in this Volume)

PERSIA: A. D. 1905-1907.

MUKDEN: A. D. 1903.
Opened to Foreign Trade.

See (in this Volume)

CHINA: A. D. 1903 (MAY-OCTOBER).

MUKDEN: Battle of.

See (in this Volume)

JAPAN: A. D. 1904-1905 (SEPTEMBER-MARCH).

MULAI AHMED BEN MOHAMMED, EL RAISULI.

See (in this Volume)

MOROCCO: A. D. 1904-1909.

MULAI HAFID:
Sultan of Morocco by Dethronement of his Brother.

See (in this Volume)

MOROCCO: A. D. 1907-1909, and 1909.

MULAI HASSAN, Late Sultan of Morocco.

See (in this Volume)

MOROCCO: A. D. 1903.

MULLAH, ABDULLA MUHAMMED.

See (in this Volume)

AFRICA: SOMALILAND.
MULLAS:
The common Persian Priests.

See (in this Volume)

PERSIA: A. D. 1905-1907.

MUNICIPAL COMMITTEES IN INDIA.

See (in this Volume)

INDIA: A. D. 1907-1909.

----------MUNICIPAL GOVERNMENT: Start--------

MUNICIPAL GOVERNMENT:
American Democracy’s most Serious Problem.
Present Interest in it.
Hopeful Movements.

Americans have long been forced to acknowledge that political

democracy in the United States makes its worst showing in the
government of municipalities; and those who give any searching
thought to the matter have little dispute over reasons for the
fact. It connects very plainly with another fact, namely, that
municipal politics, as a political interest distinct
and apart from the interests of government in Nation and
State, has had no growth in the country as yet. Up to the time
of the formation of the national union, the few cities of
America had a quite positive political life of their own,
which might have carried them into conditions very different
from what they have realized since, if it had not undergone
the absorption that it did in the politics of a national
government. The national political parties formed then on
exciting issues, sectional, constitutional, and economic,
caught all political feeling into their embrace, not
instantly, but gradually, and surely, and appropriated the
whole mechanism of political organization to themselves.
Cities are the natural centers of such mechanism, and the
 great parties of Federal politics were able easily to impose
on them a domination which left no free working of public
opinion on the immediate concerns of the cities themselves.
All political action was drawn into the mill which turns out
Presidents, Congresses, Tariffs, Bank Acts, etc., and the mere
by-product of Mayors, Aldermen, and City Ordinances which it
drops incidentally into the cities, receives almost no stamp
of quality or design from the local mind.

Until the wheels of local government are loosened in some way

from the clutch of the great party machines, and can work
independently, under motive forces of their own, to produce
the satisfaction of local needs, interests, and aims, there
will be little success in undertakings of municipal reform.
How to accomplish that political ungearing is one of the
greatest, if not the greatest, of the problems now occupying
the minds of the American people. Fortunately it is occupying
their minds. Within the last few years they have given more
thought to this subject than it ever received from them
before; and it has been bold thought, as well as profoundly
earnest. It has not been afraid of hospitality to new ideas
and new experiences, but is giving them fair hearings and fair
tests. The present attitude of the whole country in this
matter is of the happiest hopefulness, and every day brightens
the prospect of a better future for municipal government in
America.

MUNICIPAL GOVERNMENT: BOSTON: A. D. 1909.

A Plan of Government chosen by popular vote.

In connection with the election of November 2, 1909, the

citizens of Boston, Massachusetts, had two plans of City
Government submitted to their vote, and the charter under
which the City will be ruled and its business conducted after
the beginning of February, 1910, was determined by the choice
between these plans which a majority expressed at the polls.
One of the plans emanated from an official body, called the
 Finance Commission, which had been appointed to investigate
bad conditions in the City Government, and whose
investigations had given rise to the demand for a radical
reform. This plan had the approval, moreover, of a citizens
Committee of One Hundred, which had given much attention to
the subject; but it was exceedingly unsatisfactory to the
party politicians, whose personal interests were flagrantly
disregarded in its scheme. These drafted a form of charter
which fitted their own purposes, and the two plans were
submitted to the Legislature in the winter of 1909. That body
escaped the responsibility of a decision between them by
referring both to the voters of Boston. The charter wanted by
the party managers was designated as "Plan No. 1"; that of the
Finance Commission and the Committee of One Hundred as "Plan
No. 2."
{432}
A strenuous campaign of education was fought for some weeks
before election day by the supporters of Plan No. 2, who seem
to have included practically all single-minded seekers of good
government, and an equally active campaign of wire-pulling was
carried on by the champions of Plan No. 1. The education was
successful in convincing 39,175 voters that Plan 2 should be
preferred, while 35,306 were persuaded to the contrary, and
about 34,000 remained so indifferent or undecided that they
gave the question no vote. But public considerations prevailed
over party motives and influences by 3869 votes, which is a
highly important fact.

The charter thus adopted for Boston differs in many features

from what has acquired the name of "the Des Moines plan," but
is fundamentally akin to it in principle and aim. Its prime
purpose is to divorce local politics from national politics,
freeing municipal elections from the baneful control of
parties which have nothing rightly to do with the city’s
affairs. Its secondary object is to concentrate official
responsibility in a moderated way. It subjects the mayor of
Boston, at the middle of his term, to a reconsideration of the
vote which elected him (in the nature of the Swiss "recall"),
but it does not introduce the initiative and referendum. The
operation of the new charter under its provisions was outlined
as follows by the Boston Herald on the day following
its adoption:

"By the acceptance of plan 2, party and all other designations

will be eliminated from the ballots for the municipal
elections, which will be held on the first Tuesday after the
second Monday in January of each year. The coming city
election will be held on January 11.

"Candidates for mayor must be nominated by petition of not

less than 5000 registered Boston voters. The candidate who
receives the highest vote at the city election will hold
office for four years, unless recalled at the end of two
years. The salary will be $10,000 a year.

"At the state election in the second year of the mayor’s term
the ballots will contain the question: ‘Shall there be an
election for mayor at the next municipal election?’ And this
will be answered by ‘Yes,’ or ‘No.’ If a majority of the
registered voters vote ‘Yes’ an election for mayor will be
held at the following city election.

"Whether recalled or not, the mayor holding office will have

his name on the ballot at the city election unless in writing
he requests the election commissioners not to place his name
on the ballot. The mayor then elected will hold office for
four years, subject to recall at the end of his second year.

"The city council will consist of nine members, all elected at

large. The salary will be $1500 each. In the election on
January 11 the voters may vote for nine candidates, and the
nine receiving the highest votes will be declared elected. The
three highest will have three-year terms, the three next
highest will serve for two years and the next three for one
year each. Each year thereafter three candidates-at-large will
be elected, and the voters may vote for three. All members of
the city council will be elected at large, and there will be
no ward members of the body. By the abolition of party
designations no primary elections or caucuses for municipal
offices will be held.

"All candidates for mayor, city council and school board must
be nominated by papers of not less than 5000 registered
voters. No voter may sign more than one paper for mayor, not
more than nine for council for the first election and for
three candidates thereafter, and not more than two papers for
the school board when there are two members to be elected.

"If a candidate for any of the offices decides to withdraw

from the contest before the election, vacancies in nominations
for any cause may be filled by a committee of not less than
five persons authorized in the nomination papers to fill such
vacancies.

"Members of the street commission, formerly elected at large,

will be appointed by the mayor, subject to approval by the
civil service commission, but without restriction as to their
political affiliation. All department heads will be appointed
by the mayor, subject to approval by the civil service
commission.

"The new municipal year will begin on the first Monday in

February, when the mayor and city council will be inducted
into office."

The election, held at the appointed time, January 11, 1910,

was managed so badly as to divide the vote of the reforming
element between three candidates, against one, the former
Mayor, Fitzgerald, whose scandalous administration had
afforded the prime incentive to the reform movement, and thus
giving opportunity for his election by a small plurality. A
 committee of the reform leaders had chosen for their candidate
Mr. James J. Storrow, President of the Boston Chamber of
Commerce, and strove to concentrate the opposition to
Fitzgerald upon him; but the Mayor in office, who had secured
renomination, persisted in keeping the field, and won the
petty number of 1816 votes, which a little more than sufficed
to elect Fitzgerald. The vote given the latter was 47,142,
against 45,757 to Mr. Storrow, and 613 to the fourth
candidate, Taylor. A recount of the vote was secured, but made
no substantial change.

MUNICIPAL GOVERNMENT: California:

Charter-framing Power given to Cities.

"All cities in California except the very smallest are

permitted to frame their own charters, which become effective
upon ratification by the legislature. The cities are quick to
avail themselves of this privilege, with the result that
almost every possible experiment in municipal organization may
be found on trial somewhere in California. That the cities are
progressive is shown by the fact that within the past decade
every city of any size in the State has remodeled its
organization either by a new charter or by far-reaching
amendments. A high standard of efficient city organization has
been set by the recent charter of the city of Berkeley
[adopted 1909], which furnishes a very perfect example of the
‘commission’ plan. Elections are freed from the influence of
national parties, and the possibility of a final choice in the
direct primary is sufficient to bring out the entire vote of
the city.

"The popular initiative, the referendum, and the recall are

now generally established in all the larger cities of the
State, but outside of San Francisco and Los Angeles without
sufficient use to test their value for good government. In San
Francisco the popular initiative has been used more frequently
for bad measures than for good. In Los Angeles the spectacular
removal of the mayor in 1909 will doubtless be regarded as a
justification of the method of recall."
Frederick H. Clark,
Head of History Department, Lowell High School,
San Francisco, California.

{433}

MUNICIPAL GOVERNMENT: Chicago:

The Municipal Voters’ League.

In 1896 there was thought in Chicago of attempting to organize

a strictly Municipal Party for action in municipal politics
alone, and a conference of citizens appointed a committee to
deal with the scheme. The committee decided this project to be
impracticable, but its deliberations resulted in the creation
of a Municipal Voters’ League, acting through a non-partisan
committee of nine, whose function was to scrutinize all
candidacies and nominations for the City Common Council, and
afford information concerning them to voters of all parties
who desired the election of honest and capable men. A
permanent office force was employed, and thorough
investigations made as to the record and character of every
nominee for the Council. The results of these investigations
were published, with recommendations for or against the
respective candidates. The league brought pressure to bear, in
the first place, to prevent the nomination of objectionable
candidates, and then exerted its influence to defeat such
candidates at the polls.

This has been done with such effect in election after election
as to produce a remarkable change in the character of the
Council. Similar agencies have been brought into action in a
number of cities within the few last years, with equally good
results.

MUNICIPAL GOVERNMENT:
Chicago’s Struggles for a Better Charter.
A body known as the "Charter Convention," made up of delegates
appointed by or representing the Governor of the State, the
State Assembly, and the several branches and departments of
the City Government, was organized in December, 1905, and
labored at the framing of a new City Charter until the early
part of 1907, when the product of its labors was submitted to
the Legislature of Illinois. Some of the main features of the
charter were these:

Consolidation in the municipal government of Chicago of the

power vested in the board of education, township, park, and
other local governments within the city;

submission of propositions to popular vote;

aldermen to be elected once in four years;

the raising of adequate revenue by the issue of bonds and

by other means;

the power to own, maintain, and operate all public

utilities in the city, including intramural, railroads,
subways and tunnels, and telephone, telegraph, gas,
electric lighting, heating, refrigerating and power plants;

the parks to be under the management of a city department

of parks;

the public-school system to be a department of the city

government and under the control of a board of education of
fifteen members appointed by the mayor for terms of three
years;

the public library to be managed by a board of nine

directors appointed by the mayor for terms of six years.
 As it went to the Legislature this draft charter represented
much compromising of divergent opinions, and, probably, was
not really satisfactory to anybody. The Legislature made it
less so by amendments, and when it went to the people of
Chicago, in September, 1907, for their verdict on it at the
polls, they rejected it by 121,935 votes against 59,786.

Early in 1908 the Charter Convention was reassembled and

revised its former work, cutting the requisite legislation up
into seven distinct bills, with a view to securing better
chances of success for some reforms, if the whole could not be
won; but the entire lot was killed in the Legislature.

MUNICIPAL GOVERNMENT: The Galveston or Des Moines Plan.

Its Features.
Extent of its Present Trial.

Curiously enough, the present trend of opinion on the

question, "What structure of municipal government will lend
itself best to the reforms that it needs?" is in a direction
that was given to it by accident, about ten years ago. Perhaps
nothing short of a great catastrophe, like that of hurricane
and flood, which wrecked the city of Galveston, on the 8th of
September, 1900, could have broken the conventional pattern on
which our cities were constructed so long. At all events, it
was that catastrophe which started a crack in the antique
pattern first. In improvising for the needs of a desperate
emergency, the wrecked community had sense and energy enough
to follow the plain instincts of business, and put itself, as
a municipal corporation, under the kind of administration that
any other corporation would construct. All the folly of
localized interests in this and that part of the town,
requiring to be "represented" by ward aldermen, went out of
their heads. Their common calamity compelled them to
understand that particular interests within the narrow bounds
of a civic commonwealth are either included in or superseded
by the common interests of the whole. They acted accordingly;
 dismissed their locally representative aldermen, dropped their
old corps of administrative functionaries, and put the
undivided management of their affairs into the hands of five
commissioners, with a "mayor-president" at the head.

It would not seem to have needed much political wisdom to

predict the success of this experiment; but the quick effect
of its teaching was more than there could be reason to expect.
Houston, the near neighbor-city, was prompt to receive and
apply the lesson, but bettering it somewhat. For Houston
employed the whole time of its five business managers, paying
them fair salaries for the service; whereas Galveston
contented itself with less service and paid less.

The two examples then presented, of a municipal corporation

conducting its business in the plain mode and by the plain
methods of the commercial corporations, drew increasing
attention, in all parts of the country, west and east. Boston
was soon discussing the Galveston experiment with deep
interest, and at a meeting of the highly influential Economic
Club of that city, in January, 1907, President Eliot, of
Harvard University, declared that he saw in it the dawning of
a brighter day. "We have got down very low," he said, "in
regard to our municipal governments, and we have got dark days
here now, but we can see a light breaking, and one of the
lights broke in Galveston. I have personally been interested
in the enormous improvement in just one branch of municipal
business in our country within the last ten years—that is,
school boards and school administrations. There has been a
real wave of reform sweeping over the country, in the great
cities particularly, with regard to school boards, and every
bit of that experience goes the way I am describing it.
{434}
It is all in the direction of a few men not paid, originally
determining the general policy of the schools of the city and
trusting entirely to experts for executive action. Our whole
experience in Massachusetts with the commissions we have had,
tends the same way. If we ask what have been the best
performances of the governmental functions in Massachusetts
for the last twenty-five years, we have but one answer to
make, namely, the work of our commissions, water, sewage,
railroads, gas and electric lighting, public libraries where
owned by the city, hospitals where owned by the city. You can
think of numerous instances in Massachusetts where admirable
work has been done by commissions acting on the principles
which I have described. I say the day is dawning. What it
needs, that the light may grow and get to full noon, is that
the people, the great body of the people, should be convinced
that municipal government means nothing but good, intelligent
conduct of business."

Meantime, in the West, action was already following study of

the Galveston plan of city government, and the four states of
Iowa, Kansas, North Dakota, and South Dakota passed acts in
1907 to enable the adoption of it by any city so desiring. One
of the first to exercise the privilege was the city of Des
Moines, Iowa, certain of whose progressive young business men
had been studying the municipal problem of late, and who had
determined to bring some system of local government into
operation that would make their city what it ought to be. On
the basis of the Galveston plan they worked out the details of
a charter which has become the model of its species most
widely accepted, so that more has been heard latterly of "the
Des Moines Charter" than of "the Galveston Plan." What is
called the Des Moines charter, however, was no special
enactment for that city, but a legislative frame of municipal
government which any city in Iowa having not less than 25,000
inhabitants may fit itself into.

It confides the whole management of strictly local affairs in

the city to four councilmen and a mayor, all elected by the
voters of the city at large. It divides their administration
into five departments, namely:
The department of Public Affairs;
 The department of Accounts and Finances;
The department of Public Safety;
The department of Streets and Public Improvements;
The department of Parks and Public Property.

The mayor, by virtue of his office, is chairman of the

council. He is also superintendent of the department of public
affairs, and exercises a general supervision over the whole of
the city administration.

The council thus composed, with the mayor at its head, is

invested with all executive, legislative and judicial
authority, formerly exercised by perhaps twelve different
officers, and twelve different boards. It appoints the city
attorney, the city treasurer, the city auditor, the city
engineer; and, in fact, every other appointive official. It
makes every appropriation, and conducts the entire affairs of
the city. "At the first meeting of this council, immediately
following the election of its members, the work of the city is
assigned to its most appropriate department; to one of these
five departments. Each of the members of the council is also
named as superintendent of a particular department; the theory
of the law being that the man who is best qualified, by reason
of his experience and training, will be placed at the head of
that department where his training and experience will be of
most value. As superintendent of this department, he is held
strictly accountable for all matters which come within his
jurisdiction; he is also charged with responsibility for all
that is done or not done in his particular department." In the
nomination and election of this important council, no party
names are permitted to be connected with the candidates, in
any manner whatsoever. Each candidate for the office becomes
so by the filing of a petition with the city clerk, bearing
the signatures of not less than twenty-five citizens, who make
affidavit to the effect that the man is of good moral
character, of age, and qualified to fill the office. "Ten days
before the election is held, the city clerk takes the
petitions which have been filed and prepares the ballot. He
does this by arranging the names of candidates in alphabetical
order. The candidates for mayor are arranged under the heading
‘Mayor’; the candidates for councilmen are also arranged in
alphabetical order under the heading ‘Councilmen.’ There is no
party designation, and because of this alphabetical
arrangement there can be no favorite position on the ballot.
The result is, that the candidate comes before the whole
people of the city on his own merit, and on his own record."

As a citizen of Des Moines has described the proceeding,

"after the primary has been held the general election is
called, and in order to secure names for the ballot in the
general election, we take the two candidates who have received
the highest number of votes for mayor at the primary, and
place their names on the ballot. In order to secure the
councilmen, we take the eight candidates for councilmen who
have received the highest number of votes at the primary and
place their names on the regular election ballot. This gives
us two opportunities to weed out undesirable men. In the first
place, we have the choice among all candidates at the primary.
At the election, we have the choice of one of two men for
mayor, and the choice of four out of eight candidates for
councilmen."

A most important provision of this Iowa charter for cities has

to do with the civil service. "At the first meeting of the
city council, after the election of these five commissioners
or five councilmen--they are not commissioners—they appoint a
civil service board composed of three members, and this civil
service board, in whose charge is placed the work of preparing
a civil service examination, is appointed for a period of six
years. Thus they are removed from any influence that might be
exerted by the councilmen, who are only elected for two years.
This civil service commission prepares once a year an
examination for all employees of the city, with the exception
of unskilled labor and the heads of the departments, such as
 city attorney, city treasurer, city assessor, etc. (all of
whom are appointed by a majority vote of the council). Having
passed the examination successfully, the applicant is placed
in a position, and so long as his work is satisfactory and he
remains competent, he cannot be removed. He may be suspended,
but he cannot be removed, and he is entitled to a hearing
before the civil service board. This provision at once takes
away all chance of a machine being built up through
patronage."

{435}

This is a sufficient description of the official frame of

government that has been instituted at Des Moines and other
cities of Iowa under a general law of that State. The law goes
farther, and connects with this frame or system a
supplementary provision of methods for giving the whole body
of the people an immediate agency in municipal legislation and
a power to recall their election of any elected official
during his term. By the use of the Swiss process of
"initiative," a sufficient number of voters (25 per cent. of
the whole) can propose measures which the Council must either
adopt or else submit to the general vote, and can suspend
measures adopted by the council until the general body of
citizens has voted for or against them. These features, of the
initiative, the referendum and the recall, are no more
essential attachments to the Des Moines or Iowa form of
municipal organization than to any other. To what extent the
States and cities making trial of the general features of the
Galveston scheme of municipal organization have followed Iowa
in making the Swiss additions to it, information at present is
wanting. Apparently the Des Moines pattern is having wide
acceptance.

In the fall of 1909 the towns in the United States which had
adopted the so-called Des Moines plan of government were
reported to number 12 in Texas, 7 in Kansas, 6 in Iowa, 3 in
 Massachusetts, 3 in California, 2 in Colorado, 2 in Missouri,
2 in Tennessee, 1 in West Virginia, 1 in Mississippi, 1 in
North Dakota, 1 in South Dakota, being 42 in all. Movements
looking to the introduction of the same system were on foot in
other cities. At the November election a draft of charter on
the lines of the Des Moines plan was submitted to popular vote
in the city of Buffalo, New York, and approved by 8848
electors, out of a total of 11,346 who expressed themselves on
the subject. The total vote, however, was only about one-sixth
of that cast for candidates at the election. On the strength
of the opinion expressed, the Legislature is now being asked
to enact the charter. Should it do so, the form of government
will have trial in the largest city that has yet introduced
it.

MUNICIPAL GOVERNMENT: London, England:

Defeat of the Progressives in the County and Borough Elections.

See (in this Volume)

LONDON: A. D. 1907-1909.

MUNICIPAL GOVERNMENT: Los Angeles, California:

Experiments and Experiences.

Since 1900, Los Angeles, California, has been going through

some interesting experiences, due to a series of charter
amendments. The former charter of the city had been of the
common pattern, organizing the municipal government under a
mayor and a board of aldermen elected by wards. The amendments
of recent years have created a Board of Public Works, with large
powers in the management of municipal work; have changed the
Board of Education from a body of nine members elected by
wards to a membership of seven chosen from the city at large;
have provided an elaborate system of municipal civil service
regulation; and finally have provided for a complete system of
popular initiative and referendum in municipal legislation,
and for recall of elective officers. Popular initiative in
 legislation is made possible upon the demand by petition of 15
per cent of the voters, estimated upon the total vote for
mayor at the preceding municipal election; referendum in
ordinary legislation is required upon a petition of 7 per cent
of the voters; a recall election must be ordered upon the
demand of 25 per cent of the voters concerned in the filling
of the office. The official whom the petition seeks to remove
is made a candidate for reflection without other nomination,
unless in writing he notifies the city clerk that he is not a
candidate.

The recall methods, provided for in charter amendments of

1903, have been put into actual service; first, in 1906, when
a councilman was replaced by vote of the Ward, and again in
February, 1909, when a recall election was ordered for the
office of mayor. The proceedings in this case attracted
widespread attention and interest throughout the country. They
failed, however, to afford a perfect test of recall methods
for the reason that after the election had been ordered but
before the date had arrived the mayor in office resigned, thus
surrendering without a struggle to the opponents who had
sought his removal.

MUNICIPAL GOVERNMENT: Michigan:

Home Rule for Cities.

The lately revised Constitution of Michigan authorizes cities

and villages to frame, adopt and amend their charters, and to
pass laws and ordinances in regard to their municipal
concerns. Under this improved Constitution, the Michigan
Legislature of 1909 adopted the necessary legislation for the
formulation of action and for the limitation of taxes and
debts. The following, from the New York Evening Post,
is a summary of the more important provisions of the Act:
"Charters of new cities will be framed by a commission of nine
electors chosen by popular vote. Revised charters of existing
cities will be framed, after a vote of the electors in favor
 of revision (submitted by a two-thirds vote of the local
legislative body or on an initiatory petition of twenty per
cent. of the total vote cast for Mayor), by an elected
commission of one member from each ward and three electors at
large. Candidates for charter commissioners are to be placed
on the ballot without party affiliations designated. Charter
amendments may be proposed by a two-thirds vote of the local
legislative body, or by an initiatory petition of twenty per
cent. of the vote for Mayor.

"Every charter and charter amendment, before submission to the

electors, must be submitted to the Governor of the State, but
if disapproved by him, and passed on reconsideration by a
two-thirds vote of the Charter Commission or local legislative
body, shall be submitted to the electors. Copies of charters
and charter amendments approved by the electors of the city
shall be certified to the secretary of state, and shall
thereupon become a law.

"The law names certain things which each city charter shall
provide, and imposes certain restrictions on the powers of
cities. There must be an elected Mayor and a body vested with
legislative power; the clerk, treasurer, and assessors, and
other officers may be elected or appointed. This permits the
establishment of a commission system, or of a Mayor and
council with distinct powers. Provision must be made for the
levy, collection, and return of State, county, and school
taxes, for annual appropriations for municipal purposes, and
for a system of accounts.

{436}

"Provision may be made for municipal taxes and for borrowing

money up to prescribed limits, for the regulation of trades,
occupations, and amusements, for the purchase of franchises,
for a plan of streets within three miles beyond the city
limits, 'for a system of civil service,' for the referendum,
 and the following omnibus clause: for the exercise of all
municipal powers in the management and control of municipal
property and in the administration of the municipal
government, whether such powers be expressly enumerated or
not; for any act to advance the interests of the city, the
good government and prosperity of the municipality and its
inhabitants, and through its regularly constituted authority,
to pass all laws and ordinances relating to its municipal
concerns, subject to the Constitution and general laws of the
State.

"Limitations include the following: Existing limits to the tax

rate and borrowing powers to remain until a change is
authorized by vote of the electors, with a maximum limit of 2
per cent. of the assessed valuation for the tax rate and 8 per
cent. for loans; but, as authorized by the Constitution, bonds
may be issued beyond this limit for public utilities, when
secured only upon the property and revenues of the utility. A
sinking fund must be provided for bonds. A charter or charter
amendment may not be submitted oftener than once in two years.
The salary of public officials may not be changed after
election or appointment. Certain municipal property may only
be sold or vacated when approved by three-fifths of the
electors voting thereon.

"A separate act was passed for villages. This follows the main
features of the law for cities, but is briefer."

MUNICIPAL GOVERNMENT: New York City: A. D. 1901-1909.

The Municipal Elections of 1901, 1903, 1905, and 1909.

See (in this Volume)

NEW YORK CITY.

MUNICIPAL GOVERNMENT: New York City: A. D. 1905-1909.

The Working of the Bureau of Municipal Research.
The Bureau of Municipal Research, instituted in New York City
by an organization of citizens in 1905, has proved to be as
effective an agency as has ever been employed for the
straightening of crookedness and the correcting of negligence
in the conduct of municipal affairs. Its working is described
fully in an article which appeared in the Atlantic
Monthly of October, 1908, by the head of the Bureau, Dr.
William H. Allen, under the title, "A National Fund for
Efficient Democracy." What the writer aims to do, and does
most effectively, is, first, to show how inefficient our
democracy is in its practical working, how demoralizing that
inefficiency is, how feebly education and religion are
struggling against its demoralizations, so long as they do not
work to make government efficient; and then he unfolds the
remedy indicated in results obtained already from the public
enlightenment—the citizen education—which the Bureau of
Municipal Research is developing in New York. His final
purpose is to plead for the great national fund that would
establish a central foundation for the extending and
organizing of similar educational work throughout the country
at large.

The simple object of the New York Bureau of Municipal Research

has been to make and to keep the public acquainted with the
working of things in its government; to make and keep it
attentive to the facts of efficiency or inefficiency in that
working, which proves to be the kind of political education
that bears the most practical fruits. The aim of the bureau,
says Dr. Allen, has been "educative, not detective. Infinitely
more interested in pointing out what is needed than what is
wrong, it realizes that the great problem of democracy is not
the control of the officer, but the education of the citizen.
It began, not by laying down principles of government or
discussing men, but by studying the needs of the community and
its official acts. It would educate democracy in facts about
democracy’s acts and methods, democracy’s need, and
democracy’s opportunity." Something of the results achieved is
 set forth in the following passage:

"Three years, $150,000, and scientific method, have

accomplished results surpassing all dreams of those who
outlined its programme. So convincing are these results that
onlookers who said three years ago, ‘The tiger will never
change its stripes,’ are now saying, ‘You could hardly do this
in cities where the tiger marks are less obvious.’ Although
many phases of municipal administration have not yet been
studied, there is hardly an obstacle to efficiency and honesty
that has not been encountered and overcome by light. The
real-estate bureau that eluded all graft charges is being
reorganized to prevent either graft or one hundred per cent.
profits for land sold the city at private sale. While its own
staff, consisting of three investigators in 1907 and 40 in the
summer of 1908, can of itself do no inconsiderable educational
work, the bureau gauges its effectiveness, not by what its own
staff accomplishes, but by what the city’s staff of 70,000,
and through them the city’s population of 4,000,000, are
enabled to accomplish because of its educational effort.

"Methods that manufacture corruption and inefficiency, and

that for 50 years defied political reform, are giving way to
methods by which 70,000 employees must tell the truth about
what they do when they do it, about what they spend when they
spend it, in clear, legible form. … Tammany officials, when
interested, make excellent collaborators. The commissioners of
accounts, for 30 years, through reform and Tammany
administrations alike, a whitewashing body that condoned and
glossed over wasteful and corrupt acts, have become, as a
direct result of the bureau’s work, a great educational
agency."

MUNICIPAL GOVERNMENT: New York City: A. D. 1909.

Proposed New Charter, not acted on in the Legislature.

A Commission appointed for the purpose by Governor Hughes,

 after long and careful study of the subject of a new charter
for Greater New York, reported in March, 1909, submitting a
recommended draft, which was submitted to the Legislature then
in session, but obtained no action from that body before its
adjournment. The ruling principle in the work of the
Commission had been that of reducing the number of elected
administrative officers, of putting into separate hands the
power to appropriate and the power to spend money, and of
concentrating power and responsibility in a few.
{437}
As originally organized, the "Greater New York" City is
divided into five boroughs. At the head of each borough is a
Borough President, who has charge of the streets and the
public buildings within the borough. There is also a Board of
Estimate and Apportionment, consisting of the Mayor,
Comptroller, the President of the Board of Aldermen, and the
Borough Presidents. There is also a Board of Aldermen. The
Commissioners proposed that the Borough Presidents shall cease
to have administrative functions and shall devote their
attention exclusively to the great financial work of the Board
of Estimate and Apportionment; that the administrative work be
given to heads of departments responsible to the Mayor, and to
bureaus, some of them under the Board of Estimate and
Apportionment and some under the various departments; and that
the Board of Aldermen be supplanted by a Council of
thirty-nine members to serve without pay; to have enlarged
legislative powers, but none connected with the grant
franchises, which the Board of Estimate and Apportionment
should control. A new Department of Street Control was
proposed, to take over all street work, abolishing the
Street-Cleaning Department.

MUNICIPAL GOVERNMENT: Philadelphia: A. D. 1905.

A Temporary House Cleaning of the Municipality.
Mayor Weaver’s Conversion.

"Philadelphia has reformed. It is the swiftest and most

thorough municipal revolution known in American civic annals.
Without an election and without primaries, without warning and
without preparation, the great deep of small
householders,—which is Philadelphia,—moved from below. When
the work was over, Mayor Weaver, who led the revolution, had
not only changed the heads of the two executive departments,
with ten thousand employees, but he was in full control of
City Councils; he was recognized as the head of the city
Republican party organization; he had forced the city
Republican committee to withdraw the local ticket already
nominated and await the choice of another ticket by the reform
leaders; he had begun criminal prosecution, stopped work on
contracts for filtration plants, boulevards, and highways
amounting to some twelve million dollars, beginning a
searching investigation by a board of expert engineers, and
had defeated two grabs, one a contract for seventy-five years
in gas and the other a street-car grab of one hundred and ten
miles of streets, sought by the two local public-service
corporations, the United Gas Improvement Company and the
Philadelphia Rapid Transit Company. Both had been successfully
passed before this revolution broke, and both were recalled,
on the demand of the mayor, by the same councils that had
passed them.

"The coherent homogeneous vote of the myriads of small homes

which make up Philadelphia has made this sweeping victory
possible against great odds. The party majority in
Pennsylvania and Philadelphia is the strongest in the country.
The city machine is as well organized as Tammany Hall. It
holds city, State, and federal patronage. For ten years it has
without challenge chosen the executive officers at Harrisburg
and Philadelphia and held the Legislature and Councils. The
city ring, in a decade of unchecked rule, has issued
$40,000,000 of city bonds; let on the filtration plant alone
$13,660,000 of contracts; as much more on various public
improvements, and had pending work authorized, but not let,
costing about $30,000,000. The criminal investigation already
made indicates that on the filtration-plant contracts alone
the margin of loose profit is from 28 to 30 per cent. In this
period the city gas works have been leased for a term ending
in 1927, on provisions which yield $2,000,000 a year, twice
the expected profit to the lessee, the United Gas Improvement
Company. The other public-service corporation, the
Philadelphia Rapid Transit Company, has had a free gift of a
subway and over two hundred miles of street without payment
and without limitation. The combination, under an antiquated
law which threw no safeguards about the ballot of a venal vote
controlled by machine office-holders of the great
corporations, railroad and public-service, and of a corrupt
combination of contractors and politicians, seemed omnipotent.
By the adroit use of State and city appropriations for private
charities and educational institutions, the respectable were
placated. The leaders of this organization were also wise
enough to meet reforms non-political halfway. The last State
legislature passed excellent sanitary legislation, reorganized
on sound lines the city schools of Philadelphia, passed
efficient child-labor laws, and at many points improved State
legislation. Carefully separating political management and
elected officers, the leaders of the machine chose judicial
candidates usually unexceptionable, and elected as governor of
the State and mayor of Philadelphia men honest, dull, highly
respected, without stain but pliant.

"In April, so far as Philadelphia was concerned,

self-government seemed to have disappeared. Its charter was
amended, in the teeth of universal protest, so as to rob
future mayors of all powers. Senator Boies Penrose and
Insurance Commissioner Israel W. Durham made all nominations,
State and city. The former awaits investigation. Durham has
been shown to be a silent and secret partner in a contracting
firm holding $13,660,000 of contracts, under city ordinances
he passed, led by officers he chose, and yielding some 30 per
cent. profit. In Pennsylvania and Philadelphia, the
corporation pays the machine and the machine aids the
 corporation. It is like this in other States, but preeminently
in that founded by Penn. After a long series of like gifts and
franchises, councils voted the Rapid Transit Company one
hundred and ten miles of streets, passed a costly boulevard
system, and in return for $25,000,000 intended for more
contracts proposed to lease the city gas works for
seventy-five years, postponing reduction in the price of gas
for three-quarters of a century.

"This ran the pliant fingers of the machine into the pockets
of every householder who had a gas bill to pay, some two
hundred and eighty thousand in number. Suddenly this great
mass moved from within. The pulpit of small churches knew it
before the press, the little division leaders before the ward
managers, and they before the chiefs of the organization. In a
week, the city seethed. Children of councilmen came crying
from the public schools. No one would play with them. Callous,
thick-skinned politicians found their mail, their telephones,
and their daily tours one hot rain of protest from their old
neighbors. Division leaders reported defection by the
avalanche.
{438}
The small householder, the narrow burgher, comfortable,
contented, owning his house, careless over ideals, education,
corruption, and venal voter, was aflame over a bigger gas
bill. It is the old story of ship money and stamp taxes. No
vote was necessary. No primary was needed. The leaders of a
political machine are ignorant of much, but they know the
voice of the voter in the land. John Weaver, the mayor, chosen
by the machine, and its lifelong friend and supporter, had
been a fair case lawyer and district attorney. Honest, narrow,
clean-lived, of a legal mind, restive at the way he was
treated as a mere figurehead, he recognized the civic
revolution because he was himself of the class that had risen.
He had, moreover, in his day won his division and was a ward
leader."
 American Review of Reviews,
July, 1905.

The Israel W. Durham referred to above, who was the absolute

"boss" of Philadelphia from 1896 to 1905, died on the 28th of
June, 1909.

See, also,
PENNSYLVANIA: A. D. 1906.

MUNICIPAL GOVERNMENT: A. D. 1909.

The old Evil Conditions revived.
Defeat of Revolt against them.

The old mastery of the City Government by an all-powerful and

shameless political "machine" was recovered at the end of the
term of Mayor Weaver, and conditions were soon as rotten as
before the momentary and partial cleansing had been performed.
In 1909 a hopeful revolt against them was undertaken, under
the lead of D. Clarence Gibboney a young lawyer who as
secretary of an active "Law and Order Society," had shown
inspiring powers of leadership and high qualities of sincerity
and resolution. Gibboney had been put forward for District
Attorney in 1906 on Democratic and Independent tickets, and
had suffered defeat. Now he was brought again to the front,
for that office, from which the plunderers of the city could
be most advantageously attacked. A William Penn Party had been
organized in the interest of reform, and his nomination by
this was endorsed by the Democratic organization. A great
effort was made to rouse the conscience and the self-respect
of the city, to throw off the thraldom of blind partisanship
under which it submits to be corrupted and robbed. But the
effort failed. Gibboney was rejected by a majority of about
40,000 voters.

MUNICIPAL GOVERNMENT: Pittsburg:

Achievements of a Reforming Mayor.
George W. Guthrie became Mayor of Pittsburg in 1906. "When
Mayor Guthrie went into office there was no merit system in
Pittsburg; but he soon established an effective one of his
own, and at the 1907 session of the Pennsylvania Legislature
effectively co-operated with the Pennsylvania Civil Service
Reform Association and similar bodies, with Mayor Dimmick, of
Scranton, and the business bodies of second-class cities, to
secure a law which would permanently establish the merit
system in them. He and his colleagues succeeded. A short time
ago some one asked the Mayor how many Democrats he had
appointed to office. His immediate reply was, 'I haven’t the
least idea. The question of party has never entered into the
matter.’ …

"The tax levied in February, 1906, before Mayor Guthrie

assumed office, was 15 mills. That levied in February, 1907,
the first under his administration, was 12½ mills. This year,
had it not been for the annexation of Allegheny, the city
would have required only 10 or 10½ mills. The Mayor’s first
estimate was 11 mills; but the final figures, as made up by
the Finance Committee, showed that the lower figure would have
been sufficient. When the Mayor entered office, there was a
cash deficit of $400,000, caused by the payment of bills left
over from the previous administration. He closed his first
year with a small surplus, and the second (1907) with a large
one. The total tax valuation of the old city of Pittsburg is
$599,852,923. Its total bonded indebtedness is $24,956,001,
and its net indebtedness (arrived at by deducting bonds in the
saving fund) is $16,532,425, or .0275 per cent of the
valuation. This highly desirable financial result, however,
has not been reached by any false economy. Inadequate salaries
have been raised. All the street repairing for 1907 was paid
for out of the tax levy, and the work on the filtration plant
has been pushed unceasingly. Enough of the filter beds are
finished to provide for present needs, and as soon as they are
‘ripened’ and the pumping machinery rearranged the city will
have filtered water. …

"For many years, under the old regime, Pittsburg had been free
from many of the evils of an open city; but a syndicate of
Councilmen and politicians had made immense sums out of the
business. They controlled the leases of the houses, which they
sublet at exorbitant sums. They also controlled the supplies
which were furnished to them. The Mayor issued but one order
for the regulation of this district. He made no attempt to
solve the entire problem. As the law was plain about the sale
of liquor, he declared that that must stop absolutely; and
that no house could be run on streets on which there were
surface cars. This order proved to be the death-blow of the
combination that had previously existed. The politicians, when
they heard the order, laughed. They had fooled every other
Mayor, and they thought they could fool Guthrie. He would need
Councils and must necessarily ‘deal’ with them. But he needed
no one, and he ‘dealt’ with no one. He waited six weeks for
his warning to be taken, and then he acted. One Saturday night
the police drew a net around the district, and over one
thousand arrests were made. Then came the final blow that
stopped political interference. Under the old system police
magistrates had been in the habit of holding fines or delaying
sentences, which, under the pressure of political influence,
were remitted or suspended. Such money as was paid in was held
for a month before being turned over to the city treasury. …
Mr. Guthrie established the rule that all fines and jail
sentences, once imposed, would have to stand unless revoked by
the county courts. Not only have the revenues of the city
largely increased by this policy, as we have already seen, but
one of the greatest sources of political evil has been
removed. Since this policy was inaugurated there has been no
political or machine interference in the administration of the
law. Incidentally, I may mention that one Councilman went to
jail for his complicity with the protection of the social
evil.
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