Page 163 - Plant design and economics for chemical engineers

CHAPTER
5

COSTAND
ASSET
ACCOUNTING

The design engineer, by analyses of costs and profits, attempts to predict
whether capital should be invested in a particular project. After the investment
is made, records must be maintained to check on the actual financial results.
These records are kept and interpreted by accountants. The design engineer, of
course, hopes that the original predictions will agree with the facts reported by
the accountant. There is little chance for agreement, however, if both parties do
not consider the same cost factors, and comparison of the results is simplified if
the same terminology is used by the engineer and the accountant.
The purpose of accounting is to record and analyze any financial transac-
tions that have an influence on the utility of capital. Accounts of expenses,
income, assets, liabilities, and similar item are maintained. These records can be
of considerable value to the engineer, since they indicate where errors were
made in past estimates and give information that can be used in future
evaluations. Thus, the reason why the design engineer should be acquainted
with accounting procedures is obvious. Although it is not necessary to know all
the details involved in accounting, a knowledge of the basic principles as applied
in economic evaluations is an invaluable aid to the engineer.
This chapter presents a survey of the accounting procedures usually
encountered in industrial operations. Its purpose is to give an understanding of
the terminology, basic methods, and manner of recording and presenting
information as employed by industrial accountants.

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