I In ii!!i ; ; Practical Bookkeeping and Accounting A System of Modern Bookkeeping and Accounting Logically Developed, with Forms and Statements Amply Illustrated Accounting is Introduced and Developed in its Natural Place and Order CONTAINS A SYSTEM OF ACCOUNTS FOR RETAIL MERCHANTS Especially Adapted to the Work in all Schools that Teach Bookkeeping and Accounting, in that both the -Bookkeeping and the Accounting are Presented by Easy and Natural Steps BY WILLIAM L. MUSICK Assisted by Commercial Teachers and Public Accountants SCRIPT BY BA1TZER UNIVERSAL TEXT BOOK COMPANY CHICAGO, ILLINOIS H Ft. - Practical Bookkeeping and Accounting CHAPTEE I. Principles of Debit and Credit Affecting Accounts. A Study of the Journal Entry and Ledger Ac- I s. I llustrated 1 CHAPTEB It. Business of W. .1. Good- now, Sole Proprietor. Journal, Ledger, Trial Balance, Balance Sheet, Profit and Loss Statement; and Closing En- tries. Amply Illustrated 13 CHAPTEB III. Business of W. J. Em- erson, Sole Proprietor. Similar to Chapter [I, but not Illustrated. Notes Receivable and Notes Payable Book Added. Incoming and Outgoing Busi- ness Papers May Be Used 45 TRIAL BALANCE, Working Sheet, Ad justing Journal Entries, and Profit and Less Statement, Showing Nee Operating Income and Non Operating Expenses. Problem Solved 52 CHAPTEB IV. Business of D. L. Mor risen & Co. A Partnership. Books of Original Entry. Purchases Book, Sales Book, Cash Book and .Journal Am- \'*,-,\. All Aie Amply Illustrated. 55 BAI. \NC'K SIIF.KT: Arrangement of Assets and Liabilities. Different \i rangement as to Available Assets Compared B8 CHAPTEB V. Business of W. .1. Emer sen & Co. Wholesale. A Partnership. A Continuation of the Business of W. .1. Emerson, Chapter III. A Partner Being Admitted. Books of Original Entry, the same as in Chapter IV. Incoming and Outgoing Business Paper Ma'. Be I'sed 01 PARTNFlisIIlP ACCOUNTING: Open ing Entries, and Closing Entries. Division of Profits: Equallyj Accord- ing to Investments: Averagi [l meiit; Interest en Investments; Calcu- lation of Interest . Gt Will mi TBIAL BALANCE, Working Sheet, Balance Sheet and Profit and Loss statement I'm a Corporation. Problem Sol ed 113 CHAPTEB VI. Business of the Empire Grocer Co. A Corporation. Book Original Entry: Purchases Book, Sales Book, Special Column Cash Book, Special Column Journal, and Petty Cash Beek. Controlling Ac counts. Amply Illustrated 119 CORPORATION ACCOUNTING: Open- ing Entries and Closing Entries. Sub scriptions; Capital stock: Common Stock; Preferred Stock; Treasury ste.k; Unsubscribed stock: Install- ment Scrip; stock at Premium; stock at Discount; stock Menus; Underwrit- ing Expense; Changing to Corpi tion; Consolidation; Good Will Mil i II \PTKi; VII. Special Column Jour nal. Cash Journal. Forms Ainph Illustrated. Adapted for a Trading Bus - May Be Adapted for a Non- t rading Business 158 CHAPTEB VIII. A System of A, ants for Retail Merchants. Turnover. i ontrolling Accounts, ami Petty Cash Book. Tickets: Charge Tickets; Cash Tickets; Credit Tickets; Collcc tion Tit kets. All Amply Illustrated, .lfi-: BOOKKEEPING AND ACCOUNTING r IGES CHAPTER IX. Business of Central Foundry Co. A Manufacturing Busi- ness. Special Column Purchases Book; Special Column Sales Book; Special Column Cash Book with Bank Columns; Petty Cash Book. Forms Arc Amply Illustrated 192 SINGLE ENTRY BOOKKEEPING: Single Entry Journal; Statement of the Business; Proprietor's Profit Cred- ited; Entry Changing Books to Double Entry 205 PACKS CHAPTER X. Cost Accounting, Part I. A Method of Ascertaining the Unit Cost of an Article from the Trial Bal- ance, Where a System of Cost Ac- counting Is Not Being Used. A Prob- lem Solved 2( i;i COST ACCOUNTING, PART II. Cost Accounting Forms Illustrated, with Propositions, Solutions and Explana- tions. An Introduction to Cost Ac- counting. Contains a Short Manufac- turing Set, Showing the Manufactur- ing Accounts as Controlling Accounts of the Factory Operations 214 Copyright 1921 By Universal Text Book Company : ■ PREFACE The simplest way to teach or to learn any subjecl is to commence at the be- ginning, and take each step in Logical order. In bookkeeping, start with the transaction. The next step is t lie journal entry to record the transaction. The journal entry is the basis of every entry in any hook of original entry. The tirst reei i'd nf every transaction is a journal entry or its equivalent. The Ledger A icounl is the record of final entries, the end of the transactions so far as bookkeeping is concerned. Hence, the logical development must begin with the journal entry and develop toward the Ledger account as the final record in the routine of bookkeeping, terminating in the Trial Balance. Accounting is the auditing of the bookkeeping to determine the correctness of it. the preparation of the Balance Sheet and Profil and Loss Statement, the closing of the hooks to correspond with these statements, the preparing id' analysis sheets or detailed statements, schedules and comparative statements I'm- the in In i-ii Kit ion nf the management of the business. There are two sides to every question, and, if only one side is considered and the other side ignored, the idea i> hazy and incomplete. This is notable in every argument of a question. There are two sides to every business transac- tion, and if both sides are i sidered at the same time, the idea i-- clear ami complete. The journal entry of a transaction considers both sides, and the idea is complete in the mind and the record is complete in the books. Carrying out this plan of logical development by easy steps, and securing the complete idea for each step before the next step is taken, not only the routine of bookkeeping is made easy to learn, but the elements of accounting are introduced in the natural place anil order, and are made as easy to learn ami to teach as the routine of bookkeeping. TI1K AUTHOR. CHAPTER I PRINCIPLES OF DEBIT AND CREDIT AFFECTING ACCOUNTS 1. It is a fundamental principle of bookkeeping to "Debit what is received ur bought," and to "Credit what is sold or given out." Any kind of goods a merchant buys and sells for profit is called "Merchandise." Debit "Merchandise" when received, and credit "Merchandise" when sold. Debit "Cash" when received, and credit "Cash" when paid out. Jan. 1. Bought 25 brls. H. Apples @ $5.25, for cash. In this transaction, "Merchandise" is received, and "Cash" is paid out. The entry to record this transaction is as follows: ILLUSTRATION NO. 1. A JOURNAL ENTRY Debit "Merchandise" by placing the amount $131.25 in the left hand or debit column, and writing the word "Merchandise" well to the left. Credit "Cash" by placing the amount paid out, $131.25, in the right-hand or credit column, and writing the word "Cash" slightly to the right of Merchandise. The above entry is a journal entry, and the book in which such entries are recorded is called a Journal. The heading of each column shows for what each column is used. Jan. 5. Sold 15 brls. H. Apples (5 $5.75, for cash. "Cash" is received, and "Merchandise" is sold. Just the opposite of the preceding transaction. Debit "Cash" because cash is received. Credit "Mer- chandise" because it is sold. Debit Credit (■ ■'rtjdi./ //Cs^r~rJ-!~. Uf^f^ r^! s/Srj' •X, ■-■ . : i\l.u: ILLUSTRATION NO, -' Debit Cash by placing the amount received, $86.25, in the debit column, and writing the word "Cash" well to the left. Credit "Merchandise" by plac- ing the amount sold. $S6.25, in the credit column, and writing the word "Mer- chandise" slightly to the right of the word "Cash." The purpose of a journal entry for each transaction is to arrange the debits and credits in a convenient form to be transferred later to the Ledger ac- counts. After the first journal entry, the date of each entry following is placed in the middle of the page as shown in this last entry. 1 2 BOOKKEEPING AND ACCOUNTING As a proper method of study, the studenl should use journal ruled paper and prepare these journal entries in the order they are given. The ael of writing them while studying them is a great help in learning the principles. 2. It is a fundamental principle of bookkeeping to "Credil persons or firms when we owe them." and to "Debil them when we pay them." If we owe a person or firm, we credil the name of thai person or firm for the amount. Jan. H». Bought of Davis Bros. 25 brls. G. Flour (§ $8.75, on account "On account" moans the goods were not paid for at the time of purchase, therefore, we owe Davis Bros. $218.75. Debil "Merchandise" $218.75, be- cause it is received. Credil Davis Bros. $218.75, because we owe them this amount. 1 1 /0 IVl.it Credit //l/sT-r^i^rt^rn^Ts ,/ />y /3*-J-z.rJr& J/ 3/*-,^ 1±2L . ; ^ Tsz^i*-~r^> /JIt—ix-/ (^f/' i£: mS «^c^rv^> I; ILLUSTRATION NO. 3 '■->. Another genera] principle of bookkeeping is to "Debit persons or firms when they owe us," and to "Credit them when they pay." If a person or Brm owes us. wo debit the uame of thai person or firm for the amount. Jan. 15. Sold to W. II. Mas, .1 brls. <;. Flour (« $ll._->, on account. W. II. .Mason owes us $168.75, because he did nol pay for the goods at the time. Merchandise of the value of $168.75 is sold. Debit W. II Mason $liis.7.">. because he owos us this amount. Credil "Merchandise"' $168.75, because it is sold. Debil Credit 4£- ff-yaa.^ /77f^r^ 6^r^^£<^ k&fahr/rrA ..../:. - 0-rz/ >?; &yrs Lli.^£A ILLUSTRATION NO. D Observe that the total of the credit column is equal to the amount in the debit column. This must be true of every journal entry. There may be any number of debits and any number of credits, but the total of each column must be the same. Jan. 25. Sold to W. H. Mason 25 cs. M. & J. Coffee @ $5.70. Received cash, $75. Balance on account. Debit Cash $75, because cash is received. Debit W. II. Mason $67.50, be- cause he owes us this amount. Credit "Merchandise" $142.50 because it is sold. Two debits and one credit. Debit Credit -**= . ] ^-^+- L z. #-#2% T-.rr^t. . J^ ' lJUL .fO ., ,- t i ILLUSTRATION NO. In each transaction, decide what is the debit (or debits), and what is the credit (or credits), and prove that the total debits are equal to the total of the credits, before recording the entry. Use one line between each journal entry for the date, which is written in the middle of the page. 5. "Debit persons or firms when they owe us," and "Credit them when they pay." Persons and firms to whom we sell goods are "Customers." If we debit a person for all he owes us, and credit him for what he pays, the difference between the total debits and the total credits is the balance that he owes. Jan. 27. Received $115 from W. II. Mason to apply on account. Debit Cash $115, because cash is received. Credit W. II. Mason $115. because he has paid part of what he owes on his account. Debit Credit ILLUSTRATION NO. 7 4 BOOKKEEPING AND Al I OUNTING ii. "Credil persons or linns when we owe them," and "Debil them when we pay them." Persons or linns from whom we buy g Is are "Creditors." Ii we credil a person for all we owe him. ami debil him for whal we pay him. the difference between the total of the debits ami the total <>t' the credits is the balance thai we owe him. Jan. 28. Paid Davis Bros. $172.50, on account. Debit Davis Bros. $172.50, because we have paid them pari of what we owe them mi our account. Credil Cash $172.50, because cash is paid out. Debil Credil , L - / Jrt ^,>-r st /^^-r-irrts LfU^^if fZfr . J-J?/ UC ;s - "- v J S7 -*--■- -o-r ' -""V-^ I _'■■'■: U.±£* f ILLUSTRATION NO. 8 7. Having learned the reasons for the debits and credits in the foregoing journal entries for the transactions, the next step is to transfer these debits and credits to the Ledger accounts, which is called "Posting." Before posl ini; these debits and credits to the Ledger Accounts, we will study the "Proprietor's" account, called "Capital" account. The proprietor is the owner of the business. II' there are two or more owners or proprietors, the business is a partnership, and each partner should have a "Capital" account. The 'Capital" account is kept to show the "Proprietor's" or each partner's invest nient iii the business. CAPITAL ACCOUNTS 8. Proprietor's Capital Account: When the proprietor or owner of a busi- ness invests Cash, debil cash because it is received into the business. Credit the (Proprietor's name), Capital, because he paid the cash into the business For instance, if A. I'». Levering began business ami invested cash. $3,000, debit Cash $3,000, and credil "A. I'.. Levering, Capital," $3, If property, such as merchandise, is also turned over to the business as part of the investment. Debit merchandise for the value of it. For instance, if A. Ii. Levering began business and invested Cash $3,000, and Merchandise, $1,500, debit Cash $3,000, debil Merchandise, $1,500, and credit A. B. Lever- ing, < lapital, $4,500. • Ian. 1. A. B. Levering began the Grocery Business and invested cash, $3,000, and Merchandise. *l,r>n account. 28. Paid Davis Bros. $172.50, on account. Lr -t^- (2»^ • rZ^^r* J t S / 5 . : ■. / fyf/./^C/'yt^^-f^?^, ( *1 ■^y/^r// y-IAr?*>-fsiJs*-r!S*>*^- 4i . . ( •'™Kj^ f> 7 . \ ■ . ? //Ze^r-rJ?sr7sn-rJC4^f <( y /3^*rJ~J; 9^7A/>/ fJ . ?/ y-r > ( ^r7*Ss&S (iDSfl- T ^£r-rSr^T sJ,/ '■'V* r - ■ As JL/J, rv^/v 7//2ju/,J . ■ .i /W^-r^/^^Vy^/'. £L+.rJU, /f#/~.^ 2- / r 7-r 4 (Zl)ft/7f *-~>-lS /7^-^-^r-rs^rlsi- / 2- / A ?r / 3 <.?7J- //(/^f-r^7^1^y7^/.f.i/ / e.f[?s\ /) ////^rrJ?^?^?^/. . -t c / /3a-.*»„ TftvflSly-. (Df>.<~/-! C/^7^^f/2^r /Jj-nSs A — r?/ stsfrS / 3 i.fO I S Usj,<.,9?hfl(lff,.. 7? 00 .5" /^ //■ //l-n ^l^r-^ / p£<-y„ (2,^J /7.r / A-£yi// /r-nSsisfrS ' - * 2- TO 2 | .. • {^^/■sfs^hS J ^^A*'^>~if*r>'6 t W&?//^^, ir-r>^> SJ -/■ ,< o-» -r .-»» 4^ / / 3 '00 z x . . ■ . . |> ILLUSTRATION NO. 1". A JOURNAL 10. Posting: To post the Journal, post each item in the debit column to the left-hand or debil side of the accounl written on the same line with it. Post each item in the credil column to the right-hand or credit side of the ac- BOOKKEEPING AND ACCOUNTING 7 count written on the same line with it. Use Ledger ruled paper and open these accounts. Assume that the Journal is page 1. Write "J 1" in the "page column" of the Ledger account, to show the item was posted from page 1 of the Journal. Assume that each Ledger account is a page, and the figures above at the right. 1, 2. 3. 4, and 5, are the pages of the Ledger accounts. Notice how the pages of the Ledger accounts are entered at the left in the L. F. (Ledger Folio) column in the Journal. The following are the Ledger ac- counts, posted from the Journal. C<-,-SJ r-f . /^-i'^rY.s?^ r ^X^?/ f/) /fZ- '. fi'tft.CLfjfrl' &ua / /!/) C _*? j. r 1 J.) 'f> / f > CL^s \ ,\ o j .? n /into ! (MsnJ / / z.„ y / a j 7-0 g / / 7 ■ f oo g / 7S~fln a-f 9 ' / 7 2-VfO I? / */)/) / * ^ 13) /*> / '; f (7 / ' / f\/j A/JO i^r . Q / t ' d^ f } o / Z 3 AzJ- r /.■r a / / <, f /r //> Q ;■ / f?jr ? ■- i? / . / - 7-0 * / ... 2-, >r 7J- Jc*™ ? 6? ;/■> Q / / 7JyJ-0> s \ /f > . il •.. /< (71/1 Z. Qa^J P ' / / <> J/1 If * ■ Of . ■ ■ ■ Y s y " ^\ ILLUSTRATION NO. 11. LEDGER ACCOUNTS 11. The attention of the student has been called to the fact that in each journal entry the amount or amounts in the debit column must equal the amount or amounts in the credit column. Tn other words, each journal entry must balance. Therefore, if all the items in the debit column of the Journal s BOOKKEEPING AND ACCOUNTING are properly posted to the "debit side" ■ >!' the Ledger accounts, and all the items in the credit column of the Journal are properly posted to the "credit side" "I' the Ledger accounts, then the Ledger must !»• in balance, thai is, tlir total of tlic debit side of all Ledger accounts must equal tin' total of thr credil side of all Ledger a' ants. The following will prove this state- ment : LF .-v-'— ■- - - L - f i i/ ' - j L- . t .'-? l ;l .-/ ! - :/ 2 1 1 a. t ££ 2 r v 7fi ILLUSTRATION N<> 18 TRIAL BALANCE BIT DIFFERENCES 13. Comments: As a further study, the student is asked to refer to the "Cash" account. The total cash received by the business is $3,276.25. (The total of the debit side.) The total cash paid oul is $428 75. (The total of the credil side, i The balai »f cash on hand is $2,847.50. I $3,276.25 less $ 128 75 The difference between the cash received and the cash paid oul must be the balance of cash on hand. Refer to I 'axis Bros, account. Mr. Levering owed Davis Bros. $352.25. Thr total of the credil side. He paid them $172.50. 'The total of the debit side.) .Mr. Levering owes Davis Bros. $179.75 $352.25 less $172.50.) BOOKKEEPING AND ACCOUNTING Refer to W. II. Mason's account. W. II. Mason owed Mr. Levering $236.25. (The total of the debit side.) lie has paid $115. (The total of the credit side.) Mr. Mason owes Mr. Levering $121.2 ($236.25 less $115.) W. II. Mason is a customer (one to whom we sell goods), a creditor (from whom we buy goods to be sold for profit). and Davis Bros. NOTES, DRAFTS AND ACCEPTANCES 14. A note is a written, unconditional promise to pay the amount stated in figures and in writing, at a specified time, and signed by the person or firm who agrees to pay it. ILLUSTRATION NO. 14. MOTE WITH INTEREST FROM DATE The "Maker" of a note is the party who signs it. The "Payee" is the party in whose favor the note is made. The ''Maturity" is the date when due. The "Maturity Value" is the amount of the note and interest at the due date. The "Face Value" is the amount staled in the face of the note, ill figures ami in writing. 15. A Sight Draft is a written order by a person or firm directing another person or firm to pay the amount stated to a third party. The one who signs the draft is the drawer; the one who is asked to pay is the drawee; the one to whom the amount is paid is the payee. tie- (nc clad ( ^--C^^i^j^-iJa- t^s^ fi^Tsvi^e^-^-rt-r^. ILLUSTRATION NO. 15. A STGHT DKU'T 10 IJOOKKKKIMN'li AND At < < M XT1XG 16. Acceptance: A time draft "accepted" is called an accepts A time drafi is accepted by writing across the face of the draft, usually in red ink, the word "Accepted," and the date and signature of the acceptor. It then becomes a "promise to pay" and is treated the same as a note in the keeping, thai is, it is called "Notes Receivable" or "Notes Payable," as the case maj be. SLs?s ?fc^- ' ^Z^yfe ^Ss3fl/ <1L **z±i^j/hu tc /at merit b acoeMin / >./ IT.USTRATIOX NO. 10 A TIMK DRAFT ACCEPTED. AX ACCEPTANCE 17. A Trade Acceptance is a time drafi accepted, and is treated in the books the same as a note. It is virtually the same form as the ordinary accept- ance, luit its purpose is different. The ordinary time draft is usually used to make collections, and the very fad that a time draft has been drawn and accepted is evidence of an extension of time on the lunik accounl for some reason, with whatever that may mean, while the purpose of the Trade Accepl I K O ■ i ; : ; \\ l TRADE.. ACCEPTANCE 2\£o._ Z J± J Ssr/-f ^iu $/** ?* ler ifyfr pay to the order of tyURSELVES >^-^?^?^/ //>/< ^Dollars. jiOOD* r«OM mi o*«vtf« tmi «ccti glO »T**C1 WHICH »r *»«* D(*ION«1f ! L^L^&^&^c g Klrr^tS 2sl jfa ..,jz£*> 7 i t. and each liability is a credit. The difference between assets and liabilities is W. J. Goodnow's Capital or net investment. (Paragraph 19.) illust ration No. 18 follow ing. 2a. Dec 1. Boughl for cash of Acme Office Supplj Co. 3 Desks (§ $42.25, 1(1 ('lairs (,/ $7.90, 2 Typewriters (., *inii. •_> ofiiee liu-s (a $35, 1 Piling Case $75. Debit Office Equipment $550.75, but itemize in the Ledger account when posting in order to show the original cost of each article in case of less by lire or otherwise. Credit Cash for the amount paid. 3a. Doe. 1. Boughl Eor cash of Ames Truck Co. 1 Two-ton Truck for $500, and 1 One-ton Truck Eor $350. Debit Delivery Equipment and itemize when posting. Credit Cash for the amount paid. 4a. Dee. 2. I'aid (;. II. I'.rown Stationery Cb. Eor blank books, $85.70, and office supplies. $18.60. Debit Administrative Expense and ere, lit Cash. Postage, office supplies, office help. rent and any expense for the general conduct of the business is charged to Admin- istrative Expense, unless separate accounts are kept for some general expei wta. 5a. Dee. 2. Paid Auto Repair Co., Eor repairs on Trucks, $85.45, and for oil and gasoline, $27.95. Debit Delivery Expense and ere, lit Cash. All expenses of trucks and drivers are charged to Delivery Expense. Ga. Dee. i'. Purchased of Glass >.V Bryant, Kansas City, Mo., Merchandise as per Invoice No. 1. 3 10, a 60, $1,804.12. Purchased of W. II. Martin & Co., Chicago, 111.. Merchandise as per Invoice No. 2, 3 10, n 60, $1,617.53. (Mnter in two separate journal entries. Debil "Purchases" in each ease, because merchandise is bought. Credil Glass & Bryant, $1,804.12, and credit W. II. Martin «S; Co., $1,617.53, because we owe them. Note: •"•/10> n/60 are the terms of sale on the ir discount will be allowed if the invoice is paid within 10 days from the date oi' invoice, n means the in\oi,e is net and due i" 60 days. No discount is allowed it' payment is made time aftei 10 days. l< is not necessai archase in the books, as the itemize,! an, I is filed for reference. Oi ; L0, n 60 means the goods are purchased on account. 7a. Dee. 3. Sold to C. P, Dalton & Son. 509 Ash St.. City, 2 10, n 30, 2500 His. t; Sugar (a li" -e. 125 cs. Extra Pepper (§ $4.75. Sold to W. II. Marsh & Co., Toledo. Ohio, 2 1". rj 30, 125 bx. Evaporated Apples $4.75, 7.". brls. Family Flour ut $7.75. Enter in two journal entries. Debit C. P. Dalton -^ Son for the amount ofi their bill and credit "Sales" for the same -. ant, and a similar entry for \V. 11. Man>h t«. & Co BOOKKEEPING AND ACCOUNTING 15 Sa. Dec. 3. Received cash for sundry cash sales, $427.50. Debit Casli $427.50, because cash is received; credit "Sales" $427.50, because mer- chandise is sold. Any purchase of merchandise is called "Purchases," and any sale of merchandise is called "Sales." 9a. Dec. 3. W. J. Goodnow took from the stare for private use, 10 cs. Ideal Tomatoes @ $3.25, and 11 cs. Red Raspberries @ $3.40. Debit W. J. Goodnow, Personal, because he owes the business. Credit "Sales," because merchandise is sold. The purpose of the proprietor's personal account is to keep such transactions as this out of liis Capital or investment account, as they arc not intended to affect the investment. 10a. Dec. 3. Paid Regan Printing Co. $185.30 for printing sales form letters and advertising- booklets. Debit "Selling Expense" and credit Cash. Any expense for the cost of selling goods is debited to "Selling Expense" unless separate accounts are kept for advertising, sa li'smen 's salaries, etc. 11a. Dec. 3. Received a credit memorandum for $124.75 from Class & Bryant, allowance for damaged goods on invoice of December 2. Debit Glass & Bryant and credit "Purchases." Credit "Purchases" account for all goods returned by us from purchases, and for any allowance we receive for shortage or damaged goods, and at the same time, debit the person or firm who makes the allow- ance to us. 12a. Dec. 4. Allowed C. P. Dalton & Son $92.50 for damaged goods on bill of December 3. Debit "Sales" $92.50, and credit C. P. Dalton & Son. Debit "Sales" account for any goods returned from Sales, and for any allowance for shortage or damaged goods, and, at the same time, credit the person or firm to whom we make the allowance. If a separate "Sales Returns and Allowance" account is kept the above allowance would be debited to this account. It depends upon the nature anil volume of the busi- ness as to whether this separate account should be kept. 13a. Dec. 4. Accepted Class & Bryant's 10 day trade acceptance for $1,628.99, dated December 2, and received 3'i discount on balance of Invoice No. 1, $1,679.*37. Debit Glass & Bryant $l,o79.37. Credit Notes Payable $1,(528.99 (face value), and credit "Purchases Discount," $50.38. When the decimal is less than half a cent, drop the decimal; but when a half-cent or more, add one cent. Usually a trade acceptance is not given for so short a period as 10 days, but is used where the discount period is 30 or (ill days or more. It is used here for this short period to show how it is entered in the books. When an acceptance given on account falls due within the discount period, the giver is entitled to the discount the same as if a cash payment were made. The purpose of the trade acceptance is to keep the money in action, as the holder can discount it at the bank and use the money in the business. 14a. Dee. .">. Received a 10 day trade acceptance for $1,151.50, dated Decem- ber 3. from W. II. Marsh & Co. on account, and allowed 2% discount on bill of December 3. i Debit Notes Receivable $1,151.50. Debit "Sales Discount" $23.50. Credit W. II. Marsh & <'". $1,175. The explanation under 13a applies here.) 15a. Dec. 5. Paid J. M. Brown $350 for rent of store building for our month from December 1. to D ruber 31. (Debit Administrative Expense See 4a.) 16a. Dec. 5. Sold to W. II. Draper & Co.. Utica, X. V . 2 15, n 30, 85 brls. G. Flour @ $8.50, 125 doz. bx. Ideal Tomatoes (a $3.50. (See 7a.) l(j lUtoKKKKIMNC AND ACCOUNTING 17a. Dec. (i. Paid bookkeeper and office help for the week, $172.50. Paid salesmen and clerks in the sales department for the week, $275.80. Debit Administrative Expense $172.50, because office help is a general expi Debii Selling Expense $275.80, because any cost of Bales is a selling expen Eor the amount paid out. 18a. Dec. 6. Paid W. II. Markham Insurance Agency $270, premium on Insur- ance policy on stock of goods, to cover from December 1. I 1 >i-l > i t "Insur- ance" $270, because it cosl value (Rule 5 . Credit Cash For the amount paid. 19a. Dec. 8. Pos1 the books to date. Open the accounts on your Ledger paper in tlu> following order: W. J. Goodnow, Capital. W. .I. Goodnow, Per- sonal, ('ash. Notes Receivable, Notes Payable, Office Equipment, Delivery Equip) lent. Weal Estate, house and lot, insurance, Merchandise tnventorj Purchases, Purchases Discount, Freight In. Sales, Sales Discount, Admin- istrative Expense, Selling Expense, Delivery Expense, Real Estate Expense and Income, Lnteresl and Miscount. C. P. Dalton & Son, 509 Ash St.. City, W. II. Marsh & Co., Toledo. Ohio, W. II. Draper & Co., Utica, N. Y.. Warner Bros., Detroit, .Mich.. Class iV Bryant. Kansas City, Mo.. \Y. II. Martin & Co.. Chicago, HI. Give I 'ash 28 lines. Purchases 12 lines. Sales 20 lines. Administrative Expense 1 I lines, and each of the other accounts 10 lines. Page the Jour- nal and Ledger beginning with 1, placing the number at the right-hand upper corner. In posting, enter the page of the Journal in the folio page column of the Ledger account and the page of the Ledger accounl in the L. !•'. col umn in the Journal, Eor quich reference. In posting to the debit side of customers' accounts (those to whom we sell . enter the terms 2 15, n 30, or whatever the terms are. in the explanation column. Do the sane w hen posting to the credit of creditors' accounts those from whom we buy). This is for convenience in watching the discounts and the date when due. Be careful to gel the address id' persons and firms in the Ledger accounts. What is the cash balance .' 20a. Dee. 8. Received a check for $675 from ('. I'. Dalton & Sou mi account, and allowed 1" , discount. Debit Cash $675. Debit "Sales Discount" $13.78. ■•■•. of the total credit.) Credit c. I'. Dalton & Sen $688.78 ($675 divided by 989! . because they have paid iliis amount, including the discount. 21a. Dee 8. Received cash for sundry retail sales. $598.75. 'See 8a. 22a. Dec. 9. Paid B. ,v. o. R, R. Co. $218.25 for freight on goods purchased. Pel' i in'' ac "t. and credit cash. This freight adds t<> thi ' mer- chandise and could !"■ debited to "Purcl ccount, but it is better to have n separate Freight account for convenience in the adjustment of freight claims. "Freight Out.'' that is. freight prepaid en goods sold, should be kept in :i separate account, because if ore sell at a delivered price and i have to stand this fn illy a selling expense. BOOKKEEPING AND ACCOUNTING 17 « 23a. Dec. 10. Borrowed .+5,000 at the Central National Bank ur 15 day note at 6%. In other words. "Discounted" our own $5,000 note at the bank at 6 ( /i for 15 days. Debit Cash $4,987.50j the proceeds of the note, which is the cash actually received. Debit Interest and Discount $12.50 (Rule 5). Credit Notes 1'ayal.le $5,000, because our note is given out. The Bank collects interest in advance on a loan, that is, the bank discounts youi note and gives you the proceeds. This is bank discount, the simple interest on the face of the note, hence the account ''Interest and Discount." If there are many notes and accept- ances with creditors and also loans at the bank, it is better to separate them and use the accounts "Notes Payable — Trade" and "Notes Payabli — Hank.'' Separate interest accounts may also be kept. 24a. Dee. 10. Received a 60 day note for +1,000 at ti', from W. II. Draper ec Co. on account. Gave \Y. II. Martin & Co. our 60 day note lor $2,097.50 at G' < . on account. Gave Warner Bros, our 60 day note for $1,500 at ti' . on account. (Enter separately. See journal entries in Illustration No. 18.) 25a. Dee. 10. Returned goods to the value of $169.10 to AY. II. Martin & Co. for credit. (See 11a. i 26a. Dec. 11. Purchased of Glass iv. Bryant merchandise as per Invoice No. 3, 3/15, n, 90, $2,785.20. Purchased of \Y. II. Martin & Co.. merchandise as per Invoice Xo. 4. :! 15. n/90, $2,135.80. (Enter separately. Sec 6a.) 27a. Dec. 12. Sold to < '. P. Dalton & Son. 2 15. n/30, 125 brls. Early Potatoes @ $6.25. 85 brls. P. B. Flour @ +8.25. Sold to AY. II. .Marsh & Co., 2/15, n/30, 95 cs. No. 1 Raisins @ +5.25, 125 doz. bx. O'Meal Crackers @ +4.75. (7a.) 28a. Dec. 12. Paid AY. H. Martin & Co. $1,404.98, on account, and received '■'>' , discount on balance of invoice of Dee. 2, +1,448.43. Debit W. H. Martin & Co. $1,448.43, in full for balance of invoice ($1,617.53 less $169.10 allowance). Credit Cash, $1,-104. US and ere. lit Purchases Discount $43.45 (3% of balance). 29a. Dec. 12. Received +122.47 from C. P. Dalton & Son. which pays balance of bill of Dec. 3. $124.97, allowing 2« , discount. Debit cash $122.47. Debit "Sales Discount" $2.50, because the discount cost us this amount which we allow for payment within 10 days. Credit C. P. Dalton & Son $124.97, the balance on this bill. The check and allowance for discount pays it. 30a. Dec. 13. Paid office help for the week +172.50. Paid sales force f<>r the week. +275.80. Paid delivery drivers for two weeks, $110. (See 17a. Debit Delivery Expense for the waves of the drivers. 31a. Dec. 15. Received +1.151.50 from AY. II. Marsh & Co. to pay their 10. day acceptance, due today. Gave Glass & Bryant a check for $1,628.99 to pay our acceptance of December 4. (Enter separately. See Illus- tration No. 18. Why is Notes Receivable credited and Notes Payable debited ?) 32a. Dec. 15. Received an allowance of +184.75 for damaged goods on Invoice of Dee. 11, from Class & Bryant. (See 11a.) 33a. Dec. 16. Received check for $2,000 from AY. J. Goodnow as an addi- tional investment. (See paragraph 8.) 18 BOOKKEEPING AND ACCOUNTING 34a. Dec. 17. W. II. Marsh & Co. returned L5 cs. No. 1 Raisins (§ $5.25 and in d(i/. hx. O'Meal Crackers <« $4.75, for credit. Allowed C. 1". Dalton & Son $112.50 for damaged goods on bill of Dec. 12. (Sec l Uii . 3.3a. Dee. 18. Received $12.75 from Regan Printing Co. as a refund for over- charge on bill for printing advertising matter, of December 3. Keen..! $8.75 from G. II. Brown Stationery Co as a refund on bill of December 2, for office stationery. Selling Expense was charged for the bill of December 3, and thi (12.75 is credited to this account, because it reduces thai charge. For the same reason, Admin- istrative Expense is credited for the $8.75. .'s6a. Do-. 18, Paid C. & A. R. R. Co. $314.75 for frcitrhl on a Is purchased. (See 22a. 37a. Dec 18. Received $11.35 refund from B. & 0. R. R. Co. for overcharge ■ m freight bill of December L0. Credit Freight-In account, because the freight was charged to this account.) 38a. Dec. 18. Paid G. II. Owen $38.75 for decorating house at 168 Park Ave. (Debit Real Estate Expense and Income account. 39a. Dec. 19. Received $125 from -I. M. Leverich for rent of house at 168 Park Ave. for one month from December 15 to January 15. (Debit cash and credit Real Estate Expense and Income, because the real estate pro- duced this amount. Rule 5.) 40a. Dec. 20. Paid office help for the week, $172.50. Paid sales force for the week, $275.80. 41a. Dec. 20. Purchased of Warner Bros, merchandise as per [nvoice No. 5, 3 L5, n 90, $3,485.75 Purchased of Glass & Bryant merchandise as per Invoice Xo. ti. :: 15, n 90, $2,389.65. 6a. 42a. Dec, 20. Post the hooks to date. In posting to customer's and creditor's accounts, ami also to Notes Receivable and Notes Payable, if the last item posted balances an item or items on the opposite side, rule a red ink line under the items that balance on each side. The purpose is to rule these items out and save addition later. What ; s the cash balance! 43a. Dec. 22. W. -T. Goodnow drew $135 for his private use. Debit W, J. 1 lOOdnOW, Personal. Sec 9a, 44a. Dec. 23. Sold to W. II. Draper & Co. 2 15, n 30, 125 cs. 1:Mh. Choco late (5 $7.25, 95 bx. I). Peaches u, $6.25. Sold to W. 11. Marsh & l o 2 L5. n 30, 15 cs. Putter Prints. 228] lbs. (5 50c, 75 brls, Evap. Apples (5 $4.85. Sold to C. P. Dalton & Son. 2 15, n 30, 85 brls. G. Flour @ $8.75, L25 bx. Silver Prunes ui $5.15. (Enter separately. loa. Dec. 24. Received $160 from W. II. Draper & Co. on account. No dis- count. Received $946.92 from \V. II. .Marsh & Co. on account and allowed l", discount on balance of bill of Dec 12, $966.25, Received $1,342.60 from < '. P. Dalton & Sons an account and allowed :" . discounl on bal- ance of bill of Dec. 12, $1,370. 19a 46a. Dec. 24. Received a 60 daj note for $1,562.50 at ii\ from C. P. Dalton & Son on account. I 24a.) BOOKKEEPING AND ACCOUNTING It) 47a. Dec. 24. Paid our $5,000 note ;it Central National Bank by giving a new note tor $3,500 at 6% for 60 days and a cheek for $1,535 for the dif- ference including the interest on the new note. Debit Notes Payable $5,000 because we received our note. Debit Interest ami Dis- count $oo for the interest paid in advance on the new note (Rule 5). Credit cash $1,535, and Notes Payable $3,500 for the new note. 48a. Dec. 26. W. J. Goodnow returned $50.75 of the money drawn on Decem- ber '22, for private use. (Debit cash and credit W. J. Goodnow Personal.. See Proprietor's Personal Account, paragraph 8.) 49a. Dec. 27. Paid W. II. Martin & Go. $2,071.7:! on account, and received 3'/, discount on invoice of December 11. Paid Glass & Bryant $2,522.44 on account and received 3'/ discount on balance of invoice of December 11, $2,600.45. (28a. Refer to your Ledger accounts to determine what tlie balance is, on which to calculate the •'!', discount.) 50a. Dec. 27. Paid office help for the week, $172.50. Paid sales force for the week, $275.80. Paid delivery drivers for two weeks, $110. 51a. Dec. 28. Received $872.50 for sundry cash sales. 52a. Dec. 28. W. J. Goodnow withdrew $1,000 from his investment. (Debit W. J. Goodnow, Capital. See paragraph 8.) 53a. Dec. 29. Paid Warner Bros. $950.75 on account. No discount. 54a. Dec. 29. Sold to C. P. Dalton & Ron, 2/15, n/30, 125 cs. D. Peaches (5) $6.35, 75 cs. No. 1 Raisins @ $5.75. Sold to W. H. Draper & Co., 2-15, n/30, 115cs. R. Raspberries @ $5.95, 65 brls. P. B. Flour @ $9.85. 55a. Dec. 30. Allowed W. II. Draper & Co. $47.85 for damaged goods on bill of December 23. (12a.) 56a. Dec. 31. Purchased of W. II. Martin & Co. merchandise as per Invoice No. 7, 3/15. n 90, $1,135.75. 57a. Dee. 31. Post the books to date: Before beginning to post, look over all the journal entries to see that they are each in balance. After posting, take a Trial Balance. Before beginning the Trial Balance, go over all the Ledger accounts, and total each side of each account, of more than one item, in very small pencil footings, close under the last entry so these figures will be out of the way of any entry that may be made on the next line. These small figures are not erased, as they will save addi- tion later. Find the difference between the two sides of each account that has both debits and credits, and place this difference on the larger side, close under the line in the explanation column. Now, preparing the Trial Balance is a simple matter of writing the accounts and placing these debit balances in the debit column, and the credit balances in the credit column. Exception: Enter both sides of Purchases account and Sales account in the Trial Balance, but use the differences in all the other accounts. The credit side of Purchases shows the "Returns and Allowances" from purchases. The debit side of Sales account shows the "Returns and Allowances" from sales. As these are used in preparing the Profit and Loss Statement, it is convenient to show both sides of Purchases and Sales accounts in the Trial Balance. Where the volume is large, separate accounts may be kept for "Purchases Returns and Allowances'' and for "Sales Returns and Allowances." 20 BOOKKEEPING AND ACCOUNTING The following illustrations show aboul one-half of the journal entrie this set, which arc most all of the various kinds, and will enable the student to prepare the remainder without further aid. The Ledger accounts show the posting as it should be when the complete Journal is posted. The Capital accounts and Cash account are shown closed, as a guide in closing these ac counts when instructed to do so. [f the Cash accounl were to be transferred to a new page, the balance would be carried to the debit side of the new ac- count instead of bringing it down beloTK the rule, I lines. By following the instructions and illustrations in paragraphs 27 to 10 inclusive, the student can easily record the adjusting journal entries in the Journal and post them and take the Final Trial Balance, and record the closing entries and post them, closing and ruling the Nomina] Accounts. Every step is made easy. The Journal is a book of original entry. Arranging the transaction in the form of a journal entry is called "Journalizing." Journalizing is a mental process of analyzing transactions to determine the debits and credits. This mental analysis, to decide what are the debits and what are the credits, must take place before recording transactions in any other booh of original entry, as well as the Journal. Hence, the journal entry of any transaction must be visualized before it can be recorded intelligently in a Cash Book, Purchases Book, or Sales Book. The application of the principles of debit and credit, as illustrated by the journal entry in this and the preceding chapter, to other 1 ks of original entry is illustrated in Chapter IV and chapters following thereafter. BOOKKEEPING AND ACCOUNTING 21 rO^t-^-t^- C~*-c^L<^t- Jk m (&s^zfe£ \*1 si-i,-'( ,J?^^^,j.-* yfc£- «-W/ ao £^L •/ L /yr^^^T-Tr-A^l^r^Cfy-^j./^?// \-{l- ^r+J'^£w s^rrJ^ -L1X 6 J -A. J— C^rZ. ^-AS XOa^^J^fri/i^'^' Is/firfcif / tZtJlt^n^t? L^p^r*/ **ek£± ■££iy^>^YX fS.Vjf J.'&L- I ^-rsrJis /r^^^^^T^JY-Ct^^^ 1 17. fi ? 4-0 ■ I J^Zis^-r^/j^tsftsfS /3r^/??^,;JL^?7^ 4 »6. ¥/2- 2 .f J^ ^sJJ^ 7jU~^ ^s^ / \s}^rl^<,^ (-*^£y f //Z+rr' i sUlz. // Cdrs^-r^, M. ■o^y/ /3u9?m„;+jL^7z~. ^ Tt-T/Tfa^,^ ^L lU^r-m^fS ^ l \zi £1 Wtfk//~*JL, af?* Mt(l/~ JU&™/JJL --•« -LJ/^t //jr^-^ r/^a/zy/r-^Tj. 3^//<-J .'- .' .-'< & i _. ' *fc ,-.:,.< --- c „-^'. .- ^ /-' £% j/$^ Js. 3 **ftL.l,+) -LlfJi- '/ ..- ; yu //,*,^ (f i*J,s, A^a^LJ(Jr£* (^r-' i 'i i -/« ^ L . 1 (2 i ■-eu ttl+S ■ _i£ .'. ,*C#L ^^¥-4J-+y*?^>,J' U^^.Jr ( /3 //^ztfJ it-rJ^ l-f,.<^r^7^r ^fS-siS ■£mfc'- J ■;^'- :i^!/.: v£ V: 4t . (7/Z^^A^/r, :"'■■■■ '-rj.j/ . eJ J*Cl/^ V^-f^r^3 ^ritt^e^^ry^t^- .-/ i^ ,/V -'j ,/ £ ; / ■f _>^%7 7> .y ^< U^r^r^^iU- ^ %^3fc>,»« £r& : .-..' sr^*TL^-fr-f^J>-T^/^^£*Cls>>?*7 J £L Via. //.!/ 7", 7 %» 6JX ??UMjfs/J,#2A ft 4X4 :(. - '. "'..•. ...-. .■-. C. 2 */* -*>J-t' t^bL^/sJ* 'JOZL :.: ;'.' -ii"£'/' -*-•_ ( ^7^A/ . t¥ A,jT<7 'i^ - * fj^c ™>iJ/>-r7SjA*&-r^tf ::. C £.— : / -^ /yyj l^ttA/jfrJ/rnSjfirsA/ . .-?_: /_ /rJit^r^f-n/a^t.^t. , f . ■ - ■ ■ e a a ■ ■ - ^21^^ &V i<-c^t^.Tj -^ p > y* BOOKKEEPING AND ACCOUNTING 23 (.b^J^l*,^,^, ^«-»x^_ J2X^-. /,. c 3 ^^.-^ -L2- ^2£^aA±JsAz ^_ te^/?*omjri/!~ :. > . i -i^f-?^ /- j,r £2.. _• Xv-i .<;.'_ ^/l< /■? /t^i^a^r^-^t-t^yi^- -2aL f 7^~fi J.Q. -24- :;. ■?7 ^r-nje^>-^/ '/S^^U ->&77sW~fSfi,fl t/*7SU : a :'.■ Ama. J tfs+ti. as£-£ "7a ff-7s?J/2^ <-^w^snJ~ -L£& 00 :C JZL. %%7?li«*i **& tf f T« If-Ysrsr^AsKr-sf^J U^grX ■ ^V-7-fv •^=£i£^Jz. *? i0- -LLfVO /X-^5*w e^r^sasriijUse/smy- j r? a. j ■<*;7t*i J/.*- *ff ■ Fjr^o // I^^rJ?^>^^>^> /^fgm^7yX^?^^/<^?// i-sza. ?srJ5sy?S¥-(Cf- -2.^. SLL-C -s;?;^ ~>U. */f- •J Sfa /-i=- JkL &%fri/*~svU~. )JU<{/1 r/rt&$%&3inutM +Lh£±. zM b &AdS'/'-r *&* •rJ*/. £?rt%/~ .~> ?J£ 'Jt '2-,ra &i Az^i. (?jrc; r /t#,^^ ^r^ ■sA -IH. V - 2-.3~0 ; -/■- , Wto^^vJ^ Lfal^-J-!f-r!l . ; . . .■•:, z. tfv.ll t sr?^/?S .X2. ££tsm/?s*s ."jAJ/jj-J' tf^nd^t-C^X^ . j % i£t^rs£- Jdi .££ -JAZ- ( ^7 ^^>y ./ M7?//SS*(. l7sLrjt- ,;^n^ , . £'C^**/r,6 *s-Jk/.fii-^iZ*f .S.r. .6-77 ./^7^y?^- tSirf^>frtSs(/f7SsrtJf, [ ' ^Ut ^^r^rJj ^L .- <1; ■<^- (L^US- .■':C('j.-r'f.-^ci/:. j2 . /:£ ■^fc y^»rt'A<^ s,rt-J :: - /7s0 : Crs.C/&*s*im/ Ltf-lLQ^ : /.:'■ ¥? ■ -.' .-. £?f- s~ /{TJ-J-0 ZV/jT .3 L-rt^Jij 1 vi Cfo^J^.r^-es-JrA/a-rs, .)'.-■ fc^ 2i o o o : \. .-.-.l.^trji.'. iC^l yQUs>i~rt-f^l£r>lS^yr^~ W . oo ■ )JizA /^ ^SzrSt^J ,. '.£■:.'. :-/'.. '.^ /Si-j r /L fysjUs» J ijr2 ~s-V' / <.?S~ y^/^^JjV^^ /Q-J jjV7ft,^l(l^ . I ^Z£ /*f?J5tr *S*T&f/jfsrt y ZJJ . 6UJ& lUt _ ]■<:■.: ■■,:: . l'..-.-:.:.' ■ •_'<: J^^cZt^jU^jJiAl, e^J tf* -'-' s£ ,'2*4&x _• iu.t/^r.. 1fe : C^a^Az -•.■-•■ , % < < ,/ £j^t-J@n .J" .3 ' ^^ ,^y/;™j£^JjJ/sdf/IZcJ* z^- J^^sS / /. /J^a^Jk/ OCv^J 1TRATION Ni I l- roi RNAL BOOKKEEPING AXD ACCOUNTING (// Jh. *?*= Q/cA JX wjl&t^ur^? & ,:>,■.,+. / _£l ■^4 / :j ,j ..' e. c'.< JJ- jU- ^£^-d~t>-n-<7 A. r-z) 'fa- r^i. P$£ Jk ■^L __. ^r.. -14. 7^ ?■?- , <£- /J if CO. J £J-±Z V f D T 1 4 fO _Oi_ >r- ^&^= oCT-e, ; J , i ._.<., ^dftLZf _J. -P* .>••■■' j j ~£ - 5LUL 2^ 5LiO_ .L. A £.?.£}£. 2-. -# ./JLi^ _/£_ ^ , ^£ 17^ :i^:ja ;■ _4£ . ^z J '/.&d 00 !■ t I A ,_- ££j)A. -5L$£±1£ 17- o CO •j£. # 2^ • fl-S J -d- X £L7___ -4L- 4- /Jf /■ IA -9- -¥ff ,f S T3Q J- ■, 7- jrod x^ -£- \£?f- Au/- -P- £ - t)(L / 4\ .2. ^Z£ ■ ■r -9- £j-£ -2-L -t -■■■:. J-&0 2^_ JA*\ _^i X_2i> ,, 4- e ?f\ -fi- .ZiXM ML i. • 2-*S~Q ZiA. fif o0 — w\ -# V' /- 4L LUl .4.2 X -T7. 'f*- S-' l c ' ,-r //>J*--,S0SS/ U. t / ■ a^2^L /,f 9 , r v m {.ft s»^?lS V- ; ' 6 . . ' aT ft {.ft ' ' f£. i.f-o z -r i J j-o -W aDla JfsCJ /if. 2J£ <* 4- . _•■ , J .c. //ISsry^^j-S U /JC &L-B&. j a £ m- -& *: iJL. - -9- ; &«*/ < Sp* ~feL ..■- 1 ■ ; . a ±£4 4- ■: ojl *? £2 t£. iA JXL . l£. a J / 6 r.ov Jfrs^ ~i* ( ■- ?^-C^23-7 (7j / f >- " Sf1~ y5^y ' 5 ■A />o — — r- /UrLZAfa>tJfc-t^J's ? 14. 00 r ■ ■■ e * UK^eiX ' ti^CtrtJtes AAf-r^^ty feg>^ (?) 5= 5LZ-£ Q .3 ■ J- V? 2-7 g ■ f to ■/ ' / jT 7 f */ lT 2. j J- r ' (^C^-^t^^j^-r r-^y C/3) ff- t ? /fl~ JjZ^-s ^ ■**> 7\S~ 01) -*Z7- £0 J./L „<£ \}1 / s a- o '■-2SL ll7^£4- ■*■?■ SLOJL 28 BOOKKEEPING AND ACCOUNTING CA^ff^y^t^r^!^ ^ JZ-r? ,Zt^-t^ (r)^,S,^r *S t> ./ jUsL. '/* /fX- ^> -/ ^ s # _z-2_ ^ -£■ ^^"/^ ^£Z» ^ r/a -¥- /i'/j^. > Z.££IL « &A / fi- ,/-f-r~-!j/ J 1 ? < • - #4 LjLJ 'JO a 0Q /_* <>° ... aCti. i. -^ l&aJL - - .' ' ?^*-f.j.-r \. ... f/TjTscJ \ . ■ Of) L -,ia o\ 3J. BOOKKEEPING AND ACCOUNTING 29 r-?,/) r/Lr^J */.. »/j, -; *f- n £_ 33 •SO? MjL i'2 L£ ^ V..' -, ,1 j:^. ■/ .. '/- -■/. C ' .' sL ■ £<2_ ^ -i- ,£__ ^ • (A3.) 2£ --/* %> / /-2- ^A' %j? _ai £ '/ 4^- /^^ - a ^^g i^^ •' z^ -^ -# ' /ox- Z Z^.L lAA . - .&n (s..Ti zc&oa/.?? y. (*/** ■ ■r y,s- »/j.p djL Ak I^Z. 4 6. £ JLA. 13- y. "?7Zir; t/)^£*slL > j/, **. £ <^L ^^ > Z2-12. /.' ■>/>j- *?? ££Mt_ XC- '-. ^L J, -^ 42 £l U2- 4- ^ ^j: ^ ^9%*,^^.;*^ .(26) ^ £ . U->^/-/C7ffA? .^^rrS S^U- t-^f. ,,■/*,*-,*,---// ;,,-.',„£* ;/. /. •f±. un m \l!7,i n rJ . .' _ ■. ■' .-.-. ■: ; '%Q-J&-*^L.. -. ' fc £2 .' 4 ,• , : a ' . // ' *££ ..•'..- .'. C&eLet A z {■ ■:.,-- z*L- _■;_ ??<*** «£_.. ~t. U. tZ. : y a-rssfjih ^-^-£ j^_ ■ - ■ ■ - -t 7- -' /f) /7le^-rJ ! ^7s>idtJ'^/y .'/_ : ; ^. .- r/.; =-h?s,t-f*- :"/-'' ML .JJl 4 MX. »4^y^///Z<^r. L >.* ■^Tf" //. k£/»- ■^ j^L J2^X-l- JZ. ./hA l - _v'-- ^srt-Ssf-ifCp^r/- /^!sf f y 3.3. Jm ,* ( f^/- C V^ ^ P .- /.,: . ■■^<- /t/n^rW 7" . *<3f}is£t**~(*ts£~rt '-Z- ? rjsn-'T*' J, ■r*rjf-rs. HL /s (: t CL, .T.-t. L ~ i -' - -■..!,£££ ILLUSTR \TIUN NO. tfl "J7. Saving the Trial Balance, the student is required to prepare and post journal entries to provide for the following inventories, and then take a Final Trial lialance het'ore closing tin- hooks. Merchandise Inventory . Dec. 31 sit'.. lie 1 . si Expired [nsurance 22.50 Depreciation, Reserves, Accruals and Deferred [terns. Accrued Assets: I nl crest paid in advance on loan at bank $30.92 [nteresl accrued on Notes Receivable 5.32 Accrued Liabilities: Renl for half-] itli on house and lol belonging to next period $62.50 [nteresl accrued on Notes Payable 12.59 Unpaid office help for half week 86.25 Unpaid sales force for half-week 137.90 Unpaid delivery drivers for half-week. 50 BOOKKEEPING AND ACCOUNTING 31 Deferred Charges to Operation: Office stationery on hand $37.50 Advertising matter on hand 72.50 Depreciation 10', l.V, 4% on on Office Equipment $ 55. (IS on Delivery Equipment 127.50 House, 16S Park Ave. 190.00 Reserve for Doubtful Acounts: 4',' of debit balance of Acounts Receivable .$213.24 28. The Trial Balance represents the results or facts of the bookkeeping, as shown by the Ledger acounts, but the above inventories are supplementary facts not found in the Ledger acounts, which materially affect the profits and losses of the business. They must be recorded in the books before the exact profit or loss can be determined. The following journal entries, when posted, will record these items in the books and adjust the Ledger acounts that are affected: ^sr- Ldmlnlstratlve Expense Insurance Accrued Assets Interest and Dlsoonnt To oharge this aooount with Insurance expired -31- For Interest accrued and Interest paid in advance. Real Estate Expense and Inoone Interest and Disoount Administrative Expense Selling Expense Delivery Expense Accrued Liabilities -31- Rent oollected for next period. Interest acorued on Notes Payable. Unpaid offioe help, sales foroe. and delivery drivers. for one-half week -31- Deferred Charges to Operation Administrative Expense Selling Expense Offioe stationery and Ad- vertising matter on hand. -31- Admlnlstratlve Expense )elivery Expense Heal EBtate Expense and Inoome Reserve for depredation on Office Equipment Reserve for depreciation on Delivery Equipment .Reserve for depreciation on House, 168 Park Ave To oharge Admin. Expense 10vS depreciation on Of- fioe Equipment, Delivery Expense 15% on Delivery Equipment, and Real Es- tate Expense and Income i% on House, and to set up Reserve Aooonnts. -31- Loss on Doubtful Acoounts Reserve for Doubtful Aoota for 4"S of Aocounts Re- ceivable, as estimated loss . 22 50 22 BO 36 24 36 24 62 50 12 59 86 25 137 90 27 50 326 74 110 DO 37 50 72 50 55 06 127 50 190 00 55 Ob 127 50 190 00 213 24 213 24 ILLUSTRATION NO. 20. ADJUSTMENT JOURNAL ENTRIES Enter the above journal entries in the Journal and post them to the Ledger accounts, then take a Final Trial Balance before closing. 29. Comments: Merchandise inventory Dec. 31. $16,462.81 is left until the Trading Accounts are closed. The Insurance expired, $22.50 ($270 divided by 12) is the part of the insurance used for one month. When recorded it leaves ;;•_- BOOKKEEPING AND ACCOUNTING - '17. 50 unexpired insurance as an asset. (See first entry in illustration No. 20.) 29a. [nteresl accrued on Notes Receivable, $3.32, belongs to this period, I, ut cannol be received until collected in the nexl period. Interesi paid in advance on loan at the bank was $35 for 60 days, bul only 7 days of it, $4 08, belongs to this period, leaving $30.92 belonging to the nexl period. These are accrued Assets. (See second entry in illustration No. . 29b. One-half the renl collected on bouse, 168 Park Ave., $62.50, belongs to the next period, hence, it is a liability of this period. The unpaid office help, sales force and delivery drivers for one-half week, are liabilities of tins period. These are Accrued Liabilities. (See third entry in illustration No. 20.) 29c. Office stationery on hand was charged to Administrative Expense, but $37.50 of it will be used in the next period, so it must be taken oul of Administrative Expense for this period. Advertising matter on hand, $72.50, has been charged to Selling Expense, but will be used in the next period, so it must be taken out of the Selling Expense for this period. See fourth entrj 29d. Depreciation is an expense, or loss from use and age, and each period must stand its pari of it. Depreciation on Office Equipmenl is an Adminis- trative Expense, so debit this account $55.08. Depreciation on Delivery Equip- ment is a Delivery Expense, so debit this account $127,50. Depreciation on House. 168 Park Ave., is a real estate expense, so debit Real Estate Expense and Income ; mint $190. Credil the "Reserve" accounl for each of these properties for the amount of depreciation on each. (See fifth entry. 29e. Loss on Doubtful Accounts: Experience has proved that it is un- usual to be abb' to collect in full from all customers. Some will not pay and some will not pay all they owe us. This causes a loss. It is not possible to know exactly what this loss will be. so it is a conservative practice to retain pari of the profits to cover 1 his probable loss, instead of letting it go into Profil and Loss accounl as a profil or be paid out in dividends, while, in fact, it is a loss. A "Reserve for Doubtful Accounts'" account is set up to provide for this estimated loss. The amount is decided by the management, based upon past experience. It may be -'. or 7>', of Accounts Receivable. Us- ually it is more than the actual loss on bad debts for the past year, in order to be sure to cover all loss probable on bad debts. To set up this "Reserve," debil "Loss on Doubtful Accounts" and credit "Reserve for Doubtful Ac- counts," without waiting to see what debts are going to be bad debts. This does nol disturb the Accounts Receivable, and yet it records the estimated loss in the period to which it belongs. 'See sixth entry.) 29f. If. al a later date, any customer utterly fails or his account is found to lie uncollectible, a journal entry is made to close his account. Debil "Re- serve for Doubtful Accounts" and credit the customer's account to close it. This makes it unnecessary to sro back into the bookkeeping and adjust the profits for the year or period. The purpose of these comments is to aid in the study id' the foregoing journal entries. 29g. When tin 1 foregoing journal entries have been recorded and posted, the Pinal Trial Balance should be as follows: BOOKKEEPING AND ACCOUNTING 33 Final Trial Balance before oloalng. W. J. Goodnow, December 31.192 1 W. J. Goodnow, Capital 16000 00 2 W. J. Goodnow. Personal 154 15 A 3 Cash 3061 50 A 4 Notes Receivable 2562 50 I 5 Notes Payable 7097 50 A 6 Office Equipment 550 75 A 7 Delivery Equipment 850 00 A 8 Real Estate. House and Lot 4750 00 A 9 Insuranoe unexpired 247 50 T 10 Merchandise Inventory 8972 50 T 1L Furohases 15353 80 478 60 T 12 Furohases Disoonnt 235 91 T 13 Freight In 521 65 T 14 Sales 379 10 14726 15 T 15 Sales Discount 86 51 p & L 16 Administrative Expense 1261 88 F & L 17 Selling Expense 1341 15 F & L 18 Delivery Expense 488 40 F & L 19 Real Estate Expense and Income 166 25 P Sc L 20 Interest and Discount 23 65 A S Aooounts Reoe-ivable 5330 90 L S Aooounts Payable 7011 15 P & L 21 Loss on Doubtful Aooounts 213 24 A 22 Acorned Assets 36 24 L 23 Accrued Liabilities 326 74 A 24 Deferred Charges to Operation 110 00 Al 25 Reserve for Dep. on Office Equipment 55 iC Al 26 Reserve for Dep. on Delivery Equipment 127 50 Al 27 Reserve for Dep. on Real Estate 190 00 Al 28 Reserve for Doubtful Accounts ILLUSTRATION* NO. 21. FINAL TRIAL BALANCE BEI 213 24 46461 87 46461 87 "ORE CL OSIN G Note: The numbers at the left may be the page of the Ledger accounts, or the num- bers of the Ledger accounts, if the Ledger is not paged, in case a loose leaf Ledger is used. 30. The accounts marked "A" are assets. The accounts marked "L" are liabilities. The accounts marked "T" are the "Trading accounts." Those marked "P & L" are the Profit and Loss Accounts, and those marked "Al" are Reserves, and are deductions from assets in the Balance Sheet. Marking the accounts in the Trial Balance in this way is a convenience iu preparing a Balance Sheet and a Profit and Loss Statement, which is the next step. Every debit in a Trial Balance (except the Capital accounts) is either an asset or a loss, and every credit is either a liability or a gain. Merchandise Inventory, at the end of a fiscal period, is both a"Trading Account" and an Asset. It is an asset for the next period, and must be used as a "Trading Account" in this period to ascertain the "cost of goods sold." From this '•Final Trial Balance." prepare a Balance Sheet and a Profit and Loss Statement. 31. The "Trading Accounts" and the "Profit and Loss" accounts are called the "Nominal Accounts," so called because they are not permanent. They are always closed at the end of a fiscal period in order to ascertain the 34 I'.ooKKKKl'IXfi AND At C01 NTING gain or loss. The other accounts are no1 closed ami are called "real" or "permanent" accounts (assets ami liabilities). The "Trading ami Profit ami Loss Statement" i-* prepared from the Trading ami Profil ami Loss accounts. The Balance Sheel is prepared from the real or permanenl accounts, the assets and Liabilities. Prepare a Balance ; ami Profil ami Loss Stafemenl from these two sets of accounts, as fol- lows : Exhibit Balanoe Sheet. W. J. Goodnow. December 31. 192 $5330.90 213.24 $560.75 55.08 650.00 127.50 4750.00 190.00 316000.00 154.15 Current and Aoorued Assets. Cash Rotes Receivable Accounts Receivable Lesa. Res. for Doubtful Accounts Aocrued Assets IZerohandlse Inventory. Dec. 31 rota! Current and Acorued Assets Deferred Assets Insuranoe ( unexpired i Office Stationer;,- on hand Advertising Matter on hand Total Deferred Assets Fixed Assets Office Equipment Less Reserve for Depreciation Delivery Equipment Less Reserve for Depreciation Real Estate, House and Lot Less Reserve for Depreciation Total Fixed Assets Total Assets Current and Accrued Liabilities. Notes Payable Aooounts Payable Accrued Liabilities Total Liabilities W. J. Goodnow's Present Capital Represented by w. J. Coodnows flet Investment Less his Personal Account Add Bet Profit for the Period ILLUSTRATION NO. 22. BALANCE SHEET STATEMENT OP 3061 50 2562 60 5117 66 36 24. 16462 81 27240 24 7 50 37 60 72 50 i'jb 67 7; 1 ;' 5C 456C00 15845 3095 16940 Tin; business 357 71 50 6776 r. 33376 ?b' 7097 $C 7011 15 326 74 1443639 TPT540 95 99 18940 99 Note: This Balance Sheet should prove with the Profit and Loss Statement. in 00 10 I. CO a S T O a CI o u co to a> o a a) -H a) pq as -ft 3 In o o a CJ On as o co i-» -»h rH -r-» rH 03 XI r-i ~* ai a) -h a % •h p>xi a) o X) as as hh C P>» »J o a) 91 rH o a* xj t) aJ o C 0> *-» BS50 (d u f < »-^ <-> O O 000 a < < & O if o-- oif o O 4-» -rH £> p "i -tH V. 4-> »h <4H CO T1 a a co p- CO T3 CO Ph u 4-» E P. CO R OU B XI a ^ u •■» O CO 0. »-t CO T) I-) CO • -d CB e J -< o -iO- C- CD o "3- m to a 10 c- c- c- to If to OO if) ho" <- IO If} 'D .M '3 000 m in in HCV1 C- vO CM O IO <~* CO '-O O in >-< rj« idol in '-o rH e- t> cm ■* to t> CM 0*r 0> CM OcO to ^ tO CM IT. CO rH co -M CO to CO o a. in a e- c Oif to if in 6 10 Oc- m cm co <-H CD IS CO < 3 %• O O •a! Co 3 rH Vh XI 4-» • as x> I t» 3 I HH O 0) O to «! o CO co 3 O rH o - o >>< rH O TO" i-> a a c« co > *-» to a c 4J r-» CD CO . •O -H CO ■ co o> u C co tr. co to co 3 a O CO < -rH C-> co co cr. tj *-» 03 4-> tj a rH B C CO CD OS 03 01 co 3 co 3 x: j-» >H x: CD O CO b O rH !7J *-» O rJ O U F-l 3 ol OCJ O CD CJ e < , CD 1 i-» 13 CD J C OS rH a o a >-. & TH CO — -*-> CO Vi as □ co OliHQ O CO CO C T-* rH as co *-> W l< O iHr* P -rH CD O CO E-. c r-H O < 00 00 men O rH •*-» o +-» as >J 0) 0, ■rH p CO cr CD u ce co to o co T> CO O rCj o> a rH oS 0, *-> co co a a co co 3 B -h o a, o M hH CO ^ OH rH J 3 CO CO a « '0 o CD 4-* rH tO CO Q.4J CO CO CO CO Q to < to l~ ■'•■'< o a) 1-1 -d 4J CO o CO -H CO Pu< re CO OS CO 4-» CO o rJ El H H.S -4-i CJ rH 2 -I 03 f-i ^S ft CI - "J3 a> £ c S * r2 a eg 5-1 H m=g W ^_, r. w H .a O r-4 O 'A s s < A feEH < B cu - PI = ts CtJ . CQ CO 00 o 'r--1 d CtS p 13 H •rn r— 03 0) CJ rd d - tJ cS o o hP 03 03 03 03 HH tH ■S3 CO.rH «d +2 36 nooKKEEPlXCi AND ACCOUNTING Exhibit B. Profit and Lose Statement. V. J Goodnov, December 31 , 192 Sales Less Sales Returns and Allowanoes Sales Disoount 14726 15 |379 10 66.51 465 61 14260 54 Ket Sales Cost of Sales Merchandise inventory. Deo 1 Purchases Less Purchases Returns and Allowanoos Purohases Discount |476.60 235.91 *15353.8f, 714.51 89 72 50 m 39TZS Add Freight In net Cost of all Merchandise Less lldse. Invt Deo 31 Cost of Goods Sold Gross Profit on Sales (85 91fo of Cost. 46.21?, of Sales) Operating Expenses Administrative Expense (16.44?? of Cost 8.85$ of Sales) 521.65 15160 94 24133 44 16462 61 Tt.?.: 6589 Selling Expense (17.46;? of Cost Delivery Expense (6.3715 of Cost. 9 41# of Sales l 1261 86 1341 15 488 40 63 n 3.42/, of Sales) Total Operating Expenso (21.68/, of Sales) Gross Income Deductions from Income Interest and Disoount Real Estate Expense and Inoome Loss on Doubtful Aocounts Bet Profit or Inoome (Exhibit A) (21.7% of Sales. 19.34?, of Investment) PROOF W. J. Coodnows Present Capital (Exhibit A) W J. Goodnows investment §16000.00 Less his Personal Aooount 154.15 15845 85 Add Het Profit 3095 14 23 65 166 25 213 24 3091 43 349R 48 403 34 309E 14 18940 99 18940 99 18940 99 ILLUSTRATION NO. 24. COMBINES TRADING AND PROFIT AND LOSS STATEMENT Note: Tin' iii-t pari "i thi P tement, which shows the "G Profit mi Sales" is the Trading Section of the Statement »itli which tin. Trading Sec- tion i'f iln' I'nilit and Loss account conforms. See separate Trading State at, QIub- tration No. 30. 32. Deductions from Income: Such items as Interest paid, Real Estate Expense, Collection and Exchange, the estimated Loss on Doubtful accounts, etc. are considered non-operating expenses, thai is, they are no1 expenses in- curred in tin- actual trading ami conducting of the business, hence, they are qo1 included with the operating expenses, bul deducted from the "Net Busi- ness Profil '* or "Gross Income." 32a. It is very interesting in note thai the Balance sheet is prepared from ■ ■He v,.j of a units mIh' asset accounts ami Liability accounts) of the Pinal Trial Balance, ami the Profil ami Loss Statement i-* prepared Erom an en- BOOKKEEPING AND ACCOUNTING 37 tirely different set of accounts (the Nominal Accounts) and yet the two statements agree, and show the same final result. 32b. The foregoing statements, the Balance Sheet and Profit and Loss Statement, are standard forms approved by the Federal Trade Commission and the American Institute of Accounts. These forms can be adapted to the varying conditions of a business without change in form. They contain all the information required to make up an Income Tax Report. After the In- come Tax Report is prepared, detailed statements may be prepared to recon- cile any expense account that could not be itemized on the report, and schedules of any other amount that may be called for. These analysis sheets or schedules are numbered to identify them, and are attached to the report at the proper place. Exhibits, Schedules, and Detailed Statements or Analysis Sheets. 33. An Exhibit is a statement of the facts or conditions of the business, as a result of the bookkeeping. The Balance Sheet is designated as Exhibit A, and the Profit and Loss Statement as Exhibit B. Compare the Profit and Loss Statement with the Balance Sheet, and ob- serve that the one proves against the other. The percentages shown in the Profit and Loss Statement are information for the management, in making the selling price for the future and in watching the operating expenses. Further information should be furnished. The total of Administrative Expense, $1,261.88, and Selling Expense, $1,341.15, are shown in Exhibit B in one amount in each case. The management would like to know of what these expenses consist. The following detailed statement or analysis is sub- mitted. Details supporting Admlnist ratlve Expense and Selling Expense of Exhibit B. Dec. 31. 192 Detail 1 ; Administrative Expense. Blank Books and Stationery Less refund $8.75 " balance on hand 37.50 $104.30 46.25 Offioe help for four weeks Rent of Store Building Unpaid office help, half week Insnranoe Depreciation on Offioe Equipment As shown by Exhibit B 58 690 350 86 22 55 05 00 00 25 50 06 Detail 2: Selling Expense: Printing advertising matter Less refund J12.75 " Adv. matter on hand 72.50 Payroll, sales force four weeks Unpaid payroll, half week As shown by Exhibit B ILLUSTRATION 1 NO. 25. DETAILED STATEMENT OR ANALYSIS SHEET 1186.30 85.25 100 05 1103 20 1261 137 90 1341 88 15 38 BOOKKEEPING AND At COUNTING 34. Schedules are usually designated by numbers, as Schedule 1, Sched- ule 2, ami so on for whatever number are ssary. A Schedule is a list to reconcile 1 1 1 « - amount shown by an ai inl in tin- Balance sheet, as Mei chandise [nventory, Notes Receivable, Notes Payable, Accounts Receivable, Accounts Payable. The following Schedules will reconcile or prove A unts K'eeeivalile. .*.">. 1 1 7. tin", and Accounts Payable, $7,011.15, in Exhibit A. Schedule 1. Accounts Receivable : C. I'. Dalton a Son $l,05i \v. II. Draper ,v Co l'.77i',.i;:, W. II. Marsh & Co 1,504.25 5,3 i Eti sei i e for Doubtful accts. 213.24 Schedule 2. Accounts Payable : \V. II. Martin & Co $1,135.75 Warner Bros :;,|s:,.7:, i & Bryant 2,38 As shown by Kxliil.it A $7,011.15 As shown in Exhibit A $5,117.66 ILLUSTRATION NO. 2ft RECONCILIATIONS OP ACCOUNTS RECEIVABLE AM' ACCOUNTS r \ i una-: Note: Such papers as shown in Illustrations Nos. 22 or 23, 24, 25 ami 26 should he submitted to the managemenl at the end of each fiscal period. Such papers as Illustrations Nos. 25 and 26, should be submitted each month, to- gether with any information that the nature of the business will permit of be iiifr prepared. The amount deposited and the cash balance should be sub- mitted every morning. In submitting the Schedules of Notes Receivable, Notes Payable. Accounts Receivable and Accounts Payable, the due date of each item should be shown in the schedule. This information will enable the management to think intelligently of the affairs of the business. 35. Close the Ledger: The Ledger is closed at the end of each "Fiscal Period" (Paragraph 24>. "Closing the Ledger" or "Closing the Hooks" means to close the "Nominal Accounts" (Trading accounts and the Profit and Loss Accounts) into a "Profil ami Loss account which is opened in the Ledger. The purpose is thai the Ledger may show the condition of the business as exhibited by the Balance Sheet and the Profit and Loss State- ment. Another object is to eliminate the "Nominal Accounts" at the end of the period, because they have served their purpo-e. 35a. Only the "Nominal Accounts" are closed, leaving the Assel i l>e- SOUrce) accounts. Inability accounts and the Capital accounts open which must agree with the accounts shown in the Balance sheet. 35b. Journal Entry Method: There are two methods of closing the Ledger: the "direct transfer method" and the "journal entry method." The results would be the same in either ease, but the "journal entry method" is preferred, because it is better lo have a journal entry record of every trans- fer made in the Ledger accounts. :!.">(•. To close an account il is necessary to place an amount on the smaller side sufficient to balance the account. This closes the account. A separate journal entry maj be made to close each account, but it is just ;is simple to close the accounts thai have a credit balance with one journal entry, ami to close tlie accounts that have a debit balance with one journal entry. The latter method is used especially if it is desired to show the "Trading See- lion" and tin' "Profil and Loss Section" in the "Profit and Loss" account. Both methods are shown in this hook. The following journal entries and in- BOOKKEEPING AND ACCOUNTING 39 structions will close the books so as to show the "Trading Section" and the "Profit and Loss Section." Close the Trading accounts first. The student will record the following closing journal entries in the Journal and posl them. 35d. Close the Trading- Accounts by Journal Entries: To close the ac- counts that have credit balances, debit each account for a sufficient amount to make both sides equal. The credit of "Sales" account is $14,347.05. The credit balance of "Purchases Discount" account is $235.91. Debit each of these ac- counts for these amounts respectively, and when the journal entry is posted. these accounts will be closed. Debit •'.Merchandise Inventory" $16,402.81 to set up the present inventory. Sales $14,347.05 Purchases Discount 235.91 Merchandise Inventory, Dei-. 31 16,462.81 Profit and Loss . .' $31,01-"".. 77 To close the first three accounts into the Profit and Loss account, and set up the present Merchandise Inventory. Iii posting this journal entry, instead of posting the $31,045.77 in one amount to the credit of Profit and Loss account, itemize this amount on the credit side : Sales $14,347.05, Purchases Discount, $235.91, Merchandise Inventory, Dec. 31, $16,462.81, as shown in Illustration No. 27. The purpose is to have the Trading Section or first part of the Profit and Loss account conform to the first part or Trading Section of the Profit and Loss Statement. 35e. To close the Trading Accounts that have a debit balance, credit each account for a sufficient amount to make both sides equal. The debit balance of Purchases account is $14,875.20. The debit balance of Sales Discount is $86.51. The debit balance of Freight In is $521.65. Credit each of these ac- counts for these respective amounts. Credit "Merchandise Inventory" $8,972.50 to close the old inventory. Debit Profit and Loss for the total of these amounts. Profit and Loss $24,455.86 Purchases $14,875.20 Sales Discount 86.51 Freight In 521.65 Merchandise Inventory, Dec. 1 8,972.50 To close these accounts into Profit and Loss account, thus closing out the old Mer- chandise Inventory at the beginning of the period. Instead of posting the $24,455.86 in one amount to the debit of Profit and Loss account, itemize it on the debit side: Purchases $14,875.20, Sales Dis- count $86.51, Freight In $521.65, Merchandise Inventory Dec. 1, $8,972.50. The purpose is to have the Trading Section of the Profit and Loss account (Il- lustration No. 27) show the items as they appear in the Trading Section of the Profit and Loss Statement. Observe that when the two foregoing entries are posted, the Trading Section of the Profit and Loss account is completed ami shows the same results as the Trading Section of the Profit and Loss State- ment. Illustration No. 24, or the separate Trading Statement, Illustration No. 30. 35f. Close this "Trading Section" of the Profil and Loss account b\ en tering in red ink on the debit side •'({ross Profit, $6,589.91," and rule and foot Hi BOOKKEEPING AND A.I COUNTING the Trading Section, then transfer this amount to the credil side below tnc ruled lines to tlic Profil and Loss Section as Bhown in Illustration No. 27. 35g. To close the Profil and Losa accounts into the Profit and Loss count, debil Profil and Loss and credil each account for the amount re- quired tn balance and close it. It' some of these accounts had debit balances and some credil balances, two journal entries would be used. Profil Li - $3,494.77 Administrative Expense • 1,261.88 Selling Expense 1,341.15 Delivery Expense 4S> [nti n -t and I discount Real E I ense and Income 16fi. 25 Loss on Doubtful aV< nuts 213.24 To close the Profil and Loss acci and Loss account. Instead of posting the $3,494.77 i le amount to the debit of Profil and Loss account, itemize il on the debit side. Administrative Expense $1,261 88, Sell- ing Expense $1,341.15, Delivery Expense $488 K), and so on. Sec Illustration No. 27. The purpose is to bave the Profil and Loss Section (the second part of the Profil and Loss accounl show the items as they appear in the Profit and Loss Statement, Illustration No. 24. 36. \Y. .1. (Joodnow instructs you to dose bis Personal accounl into his Capita] account, and to credit his Capital account with the nel profil or sur- plus as shown by the Profil and Loss Statement. 'Phis requires a journal entry. W. J. Goodnow, Capital $ 154.15 Profit and Loss 3,095.14 \V. .1. Goodnow, Personal $ 154.15 W. .1. G Inow, Capital 3,095.14 To close the Personal accounl into the ' apital account, and to credit W. J. G inow for the net profil for the period. When this entry is posted, the Profit and Loss account will be closed, the W. J. Goodnow, Personal account will be closed, and the ne1 profil for the period will he credited to W. J. Goodnow, Capital 37. Close W. .1. Goodnow, Capital, in red ink and bring the "Presenl • apital" down below the double ruled lines on the credit as shown in the illustration of this account. Close Cash accounl in red ink and bring the balance of cash down below the double ruled lines on the debit side. Date Mies, • entries below the double ruled lines "Jan. 1." as the accounts stand ready to receive the new business for January. 38 The books are now closed, thai is. the "Nominal" accounts are closed. but the real, personal and Capital accounts are left open. All the accounts stand ready to receive the new business for the next period. The student will take a "Proof Trial Balance" to prove the closing, and compare this balance with the Balance Sheet. 39. When the foregoing closing journal entries are posted and the instruc- tions in paragraph 37 are carried out, W. J. G Inow. Capital and Cash ac- counts will appear as shown m the illustration of these accounts. The fol- lowing illustrations show how the .Merchandise Inventory. Purchases and BOOKKEEPING AND ACCOUNTING 41 Profit and Loss accounts should appear after the closing journal entries arc posted and the accounts are properly ruled and footed. All the other Nominal Accounts arc closed, ruled and footed the same as these accounts. //lt-?--t>&^r2^^£^~ey*-p-?^A^rrJZ- 2Z U^y. L ' ■ £i aLlL >e-es ■ )/ - M+ m — £l ^u -\ '• UA •/. j. &—J.. -77 \* Ssf /— '? i- '?*- »/}s*J > / '■ ' i / t\ _-._'' • * c Z- J_ . "' 7'" 2- c / / (. / 7.ST) /A f? , 1 / - •• / / / ' ■ r,< M J^UirpJ^-^fn^i V /-/ £.7 3' X 6 f-0 */ 3 ■• 1 f ^ / f-0 " 9- V 7- 5 1 S 6,1 .1/ 9 •- / J - ipi & /.5 •' ■■ \l(> *r • ? ^f? 1 ■pi F JJ -Z+^^r^^^fS^ SsTt 77^-r^ .? . |?*f I 7 ,T ' ; « ^2. / *7 ,r 7 &'/)/ U» J '4V / fi 2. '■ <"■?/ j=i h=i of* J,* ' cK J^/^f^r ^tsO >< - i I <-/? Jjs-rS .}/ CLJ^^^u Q rf / , -f/ r — —r i / i 7^ I ■'- * Vi Q i 7- 7 LOSS SECTION. THE FIRST PART IS THE TRADING SECTION AND THE LAST PART IS THE PROFIT AND LOSS SECTH 40. (lose Accrued Assets, Accrued Liabilities and Deferred Charges to Op- eration accounts. The next step after "Closing the Ledger" is to transfer the items posted under these accounts back to the operating accounts that arc af- fected. This requires a journal entry for each account, which is just the op- posite of the adjustment journal entries under Paragraph 28. As these items belong in the next period, date these journal entries January 1. January 1 . 192 Interest and Disoount Aoomed Assets Aocrued Liabilities Interest and Disoount Administrative Expense Selling Expense Delivery Expense Heal Estate Expense and Income To olo3e Aoorued Assets aooount and transfer this Item To olose Aoorued Liabil- ities and transfer these items to the accounts af- feoted Administrative Expense Selling Expense Deferred Charges to Operation -1- To olose Deferred Charges to Operation and transfer these items. 36 24 36 24 326 74 12 59 86 25 137 JO 27 BO 62 50 37 50 72 50 110 1 )0 rRATION NO. 28. JOURNAL ENTRIES To TRANSFER ACCRUALS AND mi MS PO ini: OPERATING ACCOUNTS EFFECTED Record the above journal entries in the Journal and posl them. Instead nf posting $326.74 in one amount to the debit of Accrued Liabilities, itemize it mi the debit, writing the names of the items in the explanation column. In- terest and Discount, $12.59, Administrative Expense, $86.25, and so on. Do the same with Deferred Charges to Operation. Rule and fool these three ac counts thai are closed. BOOKKEEPING AND ACCOUNTING 43 41. Take a proof Trial Balance: If tin- foregoing instructions have been prop- erly carried out, the Proof Trial Balance should appear as follows: W. J. Goodnow, Capital $18,940.99 Cash * 3,061.50 Notes Receivable 2,562.50 Accounts Receivable 5,330.90 Notes Payable 7,097.5(1 Accounts Payable 7,011.15 Insurance 217.50 ( Iffice Equipment 550.75 Delivery Equipment 850.00 Real Estate, House ami Lot 4,750.00 Merchandise Inventory 16,462.81 Administrative Expense 48.75 Selling Expense 65.40 Delivery Expense 27.50 Interest and Discount 23.65 Real Estate Expense and Income 62.50 Reserve for Dep. on Office Equipment . . 55.08 Reserve for Dep. on Delivery Equipment 127.50 Reserve for Dep. on House 190.00 Beserve for Doubtful Accounts 213.24 $:33,839.61 $33,839.61 ILLUSTRATION NO. _"l Prepare this Proof Trial Balance from the Ledger accounts as they now stand in the Ledger, on journal paper. Submit all work for approval. 42. Procedure in closing a Set of Books : The steps to be taken in closing the books are as follows: 1. Take a Trial Balance. 2. Collect the supplementary facts, such as: merchandise inventory, accruals, and deferred charges to operation. 3. Ascertain the depreciation on all depreciable assets, and the reserve to be set aside for doubtful accounts. 4. Record the above (except merchandise Inventory at the end of the period) in the books by journal entries. 5. Prepare a Final Trial Balance before closing. fi. Prepare a Balance Sheet ami a. Profit and Loss Statement, from the Final Trial Balance. 7. Close the "Nominal" accounts into Profit and Loss accounts. 8. Close the Proprietor's or Partner's Personal account into the Capital account (or accounts), if required to do so. 9. Close Profit and Loss account into the Proprietor's (or Partners) Capital account. 10. Rule and foot all accounts closed, and bring the Proprietor's (or partner's) Present Capital down below the ruling on the credit side. 11. Take a proof Trial Balance, which proves with the Balance Sheet. Some accountants let this last proof Trial Balance be the Balanee Sheet, but it appears that the student is proceeding with more certainty if the Balanee Sheet is prepared first and the Profit and Loss Statement proved witli it, before beginning the process of closing. (See another method of closing. Problem S. Paragraph 63.) 11 liOOKKKKIMXti AND ACCOUNTING PROBLEM 3. TRADING STATEMENT 4:; A Trading and Profit and Loss Statement are usally combined in one statemenl as shown in Illustration 24. If desired a Trading Statement may be prepared separately. The followii ement is prepared from the same Trading Accounts as in the Final Trial Balance, Illustration No. 21. Trading Statement . W J. Goodrow, Decenber 31. 19 Sales Lees Returns and Allowances " Sales Dlsoount Dot Sales Cost of Sales: Merchandise, Invt. Deo. 1 Purohases Less Returns and Allowances $478.60 " Puichases Discount 235.91 $379.10 66.51 $15353.60 714 51 14726 15 465 61 14260 54 Add Freight In Ket cost of Merchandise Deduot Mdse. Invt. Dec. 31 Cost of Goods sold Gross Profit in Trading (46.21$ of Sales) 6972 50 14639 29 521 65 24133 44 16462 81 7670 63 6589~9T ILLUSTRATION NO. 30. TRADING STATEMENT Note- Bj comparison, the student will observe that the Trading Statemenl is aim ilar to the first part of the Profit and Loss statement (combined Profit and Less State- ment) in Illustration No. 24. Problem 4. From the following data, taken from the Ledger of Morton Bros on December 31, 192—, at the end of a three month fiscal period, pre ..are a Trading Statement similar to the Foregoing Total Sales. $15,002.60. Returns from Sales and Allowances to customers. *Mh.!!.i. Sales } )l --" 1 ' 1 i "- $69.35. Merchandise Inventory, Oct. 1, $4,647.50. Purchases. *14. - te- tania from Purchases and Allowances, $379.24. Purchases Discount, ^9.76. Freight In $513.96. The Merchandise Inventory December 31 is $8,954.75. CHAPTER III W. J. EMERSON, SOLE PROPRIETOR 44. The books to be used are Journal. Ledger, Notes Receivable and Notes Payable Book. The work is designed for the business papers to be used, which are received from the Incoming Papers Tab. The Cheek Book, Bank Pass Book and the stationery for the outgoing papers are used also. The results will be the same whether the business papers are used or not. The entries to be recorded would be exactly the same in either case. 45. Preliminary: Write your name on the outside cover of the books to be used. Page the Journal and Ledger, beginning with page 1. If the busi- ness papers are to be used, turn to "■Incoming Papers Tab" and receive the papers for Transaction No. 1, prepare the opening entry in the Journal. The references la, 2a, 3a, in the following work refer to similar transactions in the preceding set. For the forms of Outgoing Business Papers, the keeping of the Bank Account, and other information useful in the work of this set, refer to Paragraphs 63A to 63M, Pages 77 to 85. BUSINESS TRANSACTIONS. No. 1. Jan. 1. W." J. Emerson began business on January 1, 192 — , with an investment represented by the following assets and liabilities : Cash, $9,500: Merchandise Inventory, $4,647.50; and a 10 day note for $975 at 6%, dated Jan. 1, against R. II. Payton. lie owes a 15 day note for $675 at 6',' interest dated Jan. 1, in favor of N. M. Brown & Co. and owes See-Moon & Co.. Chicago, 111., $647.50 on account. Each asset is a debit and each liability is a credit. Credit W. J. Emerson, Capital, for tlie difference between the assets and liabilities. (See la.) Enter the Notes in the Notes Receivable and Notes Payable Book. No. 2. Jan. 2. Bought for cash of the Acme Office Supply Co.. 4 Desks @ $45: 12 Chairs @ $8.50; 1 Filing Case. $65; 4 Underwood Type- writers @ $100; 1 Mimeograph, $65. (See 2a.) No. 3. Jan. 2. Bought for cash of Brown Stationery Co., Blank Books, $37.50; Office Stationery, $79.75. (See 4a.) No. 4. Jan. 2. Bought for cash of the Empire Fixture Co., 9 Show Cases (a) $75; 12 Tables @ $8.45; 12 Chairs @ $7.25. (Debit Store Fixtures account. Itemize when posting to the Ledger. See 2a. No. 5. Jan. 2. Bought for cash of Dorris Motor Co., 1 Two-ton Truck, $850; 2 One-ton Trucks @ $350. (See 3a.) No. 6. Jan. 3. Received cash for sundry cash sales, $485.70. (See 8a.) No. 7. Jan. 3. Paid Rush Printing Co. for printing advertising circulars, $127.50; Form Sales Letters, $28.75. (See 10a.) No. S. Jan. 3. Sold to D. M. Noe & Co.. Columbus. O., 2/15, n/30, 35 brls. P. B. Flour @ $8.75; 50 bx. I). Peaches @ $4.25. Sold to Davis Bros., 309 Park Ave., City, 2/15. n/30. 25 cs. M & J Coffee U, $8.75; 20 brls. G. Flour @ $9.25. (Enter separately. See 7a 45 16 BOOKKEEPING AND ACl OUNTING No. 9. Jan. 4. Purchased of R. K. Miller & Co., Cleveland, 0., merchandise as per Invoice No. I, 3/15 $750.25. Purchased of See-Moon & Co., Chicago, 111., merchandise as per Invoice No. 2, 3 15, o 60, No. 10. Jan. 5. Received a check for $395.67 from Davis Bros., which pays their I > 1 1 1 of January 3, allowing i" , discount. (29a. Received a 1") day acceptance i ; 7 from D. M. Noe & Co., dated .Ian- nary 3, and allowed -'. discounl on bill of $518.75 of January 3. (See 1 la. (Enter acceptance in Notes Receivable Book.) No. 11. Jan. 5. Received cash for sundry cash sales $514.25. (8a.) No. 12. Jan.5. Sold to Dwight Bros., Toledo, 0., 2 15, n 30, 125 cs. R. Sweet corn u, $3.83; 15 lirls. <;. Flour x- Co., Chicago, III., merchandise as per Invoice No. 1. 3 15; n 60, $635.40. (6a. No. 14. dan. 6. Sold Davis Eros.. 2 15, n 30, 75 bx. silver Prunes (2 $4.95, 40 brls. II. Apples (§ $5.15. Sold to Smith & Jones, Qtica, N. V.. 2 1">. ii 30, 15 brls. Karh Potatoes (g $10.50; W cs. Cantaloupe („ $5.25. 7a.) No. 15. dan. 6. Received cash for sundry cash sales $498.60. (8a.) No. 16. dan. 6. Paid office help for the week $180. Paid payroll of sales force for the week $219.60. Paid drivers of delivery trucks for the week $45. (17a.) Total payroll check, $444.60. No. 17. dan. ii. Post the books to date, and ascertain the cash balance. Give Cash account a full page. Give Purchases, Purchases Discount. Sales. sales Discount, Administrative Expense, Selling Expense and Deliv- ery Expense one-half page each. Give other accounts one-fourth of a page. See 19a and I2a. No. 18. dan. 8. Gave R. K. Miller & < o. a 15 daj trade acceptance for $727. 71. date, I Januarj 1. on account, and r lived •'!', discount on Invoice No. 1. (13a.) Enter all notes and acceptances in the Notes Receivable and Notes Payable Book. No. 19. dan. 8. Paid W. II. Whitaker $150 for rent of store building for the mont h of Januarj . See 15a.) No. 20. dan. 8. Paid Sinclair Oil Co. $38.75 for Oil and Gasoline for delivery trucks. (5a No. 21. dan. 8. Allowed Davis Bros. $31 85 for damaged goods on bill of January ii. Smitli & Jones returned 10 cs. Cantaloupes (5 $5.25 from hill of January 6. Enter separately. (See 12a. No. '2'2. dan. S. Received an allowance of $41.35 from the Atlas T radii for shortage on Invoice No. 3, of January 5. Returned goods of the value of $39.85, to Logan, Bryan i- < !o., from Invoice No. I. for credit. (See lla.) BOOKKEEPING AND ACCOUNTING 47 No. 23. Jan. 9. W. J. Emerson took from the store Eor private use, 2 brls. G. Flour @ $7.50; 10 bu. W. Potatoes @ $3.75. (9a. i No. 24. Jan. 9. Paid B. & 0. R. R. Co. $219.86 for freight on goods pur- chased. (See 22a.) No. 2">. Jan. 9. Received cash for sundry cash sales $421.50. (Sa.) No. 2G. Jan. 10. Received a click for $976.63 from R. II. Payton lo pay his note and interest, due today. Debit cash $976.63. Credit Notes Receivable $975 (face value) because the note is given out. Credit Interest and Discount for the interest, $1.6.".. No. 27. Jan. 10. Borrowed $5,000 of the Central National Bank and gave a 15 day note at 6%. (Sec 23a.) No. 28. Jan. 10. Paid See-Moon & Co. $047.50 on account. No discount. No. 29. Jan. 11. Paid J. B. Owen $42.85 for repairing- office furniture. (Debit Office Equipment Expense.) No. 30. Jan. 11. Bought House and Lot, 508 Cherry St., from McGuire & Orr for $7,500 subject to a mortgage of $4,500. 3 years from January 1 at 6% interest. Interest accrued to date is $7.50. which they agree to pay. Gave check for the equity less the accrued interest. Debit Real Estate, House and Lot, $7,500. Credit Mortgage Payable $4,500, because we assume it. Credit Cash $2,992.50. Credit Interest and Discount $7.50. No. 31. Jan. 11. Received cash for sundry cash sales $612.80. (Sa.) No. 32. Jan. 11. Sold 1 Mimeograph from Office Equipment to Jones Bros, for $40. Original cost was $65. Loss $25. Received a check for the $40. Debit Cash $40. Debit Administrative Expense $25. Credit Office Equip- ment $65, the original cost. When property that was charged to a fixed asset account is sold or exchanged at a loss or entirely lost or destroyed, the loss is usually charged to "Reserve for Depreciation," and the original cost is credited "to the fixed asset account. If this "Reserve" account is not set up in the books, then debit the operating account affected. In this case it is Administrative Expense. No. 33. Jan. 11. Sold to Spencer Bros. 1 Two-ton Truck for $850, the original cost, and bought a Ford One-ton Truck of them for $350. Received the difference, $500, in cash. Debit Cash $500. Debit Delivery Equipment $.150, for the Truck bought. Credit Delivery Equipment $850 for the Truck sold. No. 34. Jan. 11. Sold to A. R. Parsons 1 Show Case For $60 cash. Original cost was $75. Loss $15. (See No. 32.) Received check for $60. No. 35. Jan. 12. Paid Watts Decorating Co. $32.50 for decorating and repairs on House, 508 Cherry St. (Debit Real Estate Expense and Income.) No. 36. Jan. 12. W. J. Emerson drew $150 for private use. (9a.) No. 37. Jan. 13. Paid office help for the week $180. Paid the payroll of sales force for the week $219.60. Paid drivers of delivery trucks $45. (See No. 16. 48 BOOKKEEPING AND ACCOUNTING No. 38. -Tan. 13. Paid Markham [nsurance Co. $180 Eor policy on stock of a is. to cover Erom January 1. for one year, and sen For policy on House and Lot, 508 Cherry St., to cover Erom January 15 for one year. L8a. Mo. 39. Jan. 13. Purchased of Seaman Grocer Co., St. Louis, Mo., mer- chandise as per Invoice No. 5, : ! 15, n 60, $1,847.50. Purchased of R. K Miller & Co. merchandise as per Invoice Xu. ii. 3 15, n 60, $1,685.74. 6a. Post the luniks to date and ascertain the cash balance. (See 19a and L2a and observe these suggestion No. I". Jan. 15. Received a check Eor ^11.2.") Erom Rush Printing Co. as a refund on printing advertising matter, bill of January 3. (35a.) No 11 Jan 15. Paid Brown Stationery Co. $123.45 for office stationery. La No. 4'_'. Jan. 1~>. Allowed I). M. Noe & Co. $49.85 Eor damaged g Is on bill of January •">. (l'-'a. Dwiirht Bros, returned to us 1"> es. I.'. Sweel Corn (a $3.75 Erom bill of January 5, Eor credit. (12a.) No. 43. Jan. 16. Received $534.49 Erom Davis Bros, which pays their bal- ance of $545.40 on bill of January 6, allowing 1% discount. Received 617 10 Erom smith & .lours to pay balance oi $630 on bill of January (i, allowing -" . discbunt. (29a.) No. 44. Jan. in. Gave X. M. Brown & Co. a check Eor $676.69 to pay our 15 day note of $675 and interest a1 6%, due today. Mark paid in .Notes Payable Book.) (See No. 26.) NO. 45, Jan. in. W. J. Emerson gave Ids personal check for $2,000 as an additional investment. (33a.) No. 4fi. Jan. 17. Received $75 from A. L. Hawkins for one month's renl on House and lot. .Mis Cherry St.. from January 15 to February 15. (Credit Real Estate Expense and Income. j No. 47. Jan. 17. Sold to D. M. Noe & Co., 2 15, n 30, 150 doz. O'Meal Crackers (5 S4.7.~>; 245 bx. I). Peaches (§ $4.25 Sold to Smith & Jones 2 lo. n 30, 75 brls. Early Potatoes (§ $4.75; 60 brls. G. Flour {a $8.75. Sold to W. II. Mason & Sons, l' 1.".. n 30, 75 es. Butter Prints, 2750 lbs. (.<■■ L3c; LOO es. Condor Coffee (a $7.50. No. 48. Jan. 18. W. J. Emerson relurned S'_'7.."i0 of the money drawn for private use on January L2. No. 4f>. Jan. IS. Paid Auto Repair Co. .|-S7.o0 for repairs on delivery truck. Received $13.75 from Brown Stationery Co. as a refund on their bill of January 15, on account of error. (35a.) No. 50. -Tan. 10. Purchased of R. T\. Miller & Co. merchandise as per Invoice No. 7. :i r>, n 60, $1,538.70. Purchased of See-Moon iV Co. merchandise as per Invoice No. 8, 3 15, □ 60, $1,973.20. Purchased of Atlas Trading Co. merchandise as per Invoice No. 0. :! 15, a 60, $1,496.85. No. 51. Jan. 19. Raid C. M. & St. Raul R. R. Co. $312.85 for freight on goods purchased. (22a.) No. 52. Jan. 1!'. Received allowance of s:;.,.74 from TJ. K. Miller & Co. for damaged goods on [nvoice No. 6. Received allowan* f - 1 i .50 from Seaman (irocer Co. for shortage on Invoice No. 5 of January 13. (11a.) No. .A'!. Jan. 10. Allowed W. TT. Mason & Sons $32.50 for damaged g Is on lull of January 17. Received $541.60 from D. M. Noe & Co. to BOOKKEEPING AND ACCOUNTING 49 pay their balance of $552.65 on bill of Jan. 5, allowing 2' , dis- count. (12a.) No. 54. Jan. 19. Received a 30 day note of $1,750 a1 6' , from l>. M. Noe & Co. on account. Received a 30 day note id' $1,900 at tl', Prom \V. 11. Mason & Sons, on account. (Enter in Notes Receivable Book. See 24a.) No. 55. Jan. 10. Gave R. K. Miller & Co. a 30 day note for +1.650 at 6% on account. Gave Seaman Grocer Co. a 30 day note for +1,800 al 0',, on account. (Enter in Notes Payable Hook. See 24a.; No. 56. Jan. 20. Received +790.92 from Dwight Bros, to pay their bal- ance of $816.25 on bill of Jan. 5, allowing 2% discount. (29a.) No. 57. Jan. 20. Paid See-Moon & Co. $911.65 which pays Invoice of Jan. 4 in full, deducting 3\ discount. Paid Atlas Trading Co. $684.97, which pays balance of Invoice of Jan. 5, $706.15, deducting :;■, dis- count. Paid Logan. Bryan & Co. $577.68, which pays balance of Invoice of Jan. 5, $595.55, deducting :i', discount. (28a.) No. 58. Jan. 20. Paid office help for the week $1S0. Paid the payroll of sales force $219.60. Paid drivers of delivery trucks $45. Xo. 59. Jan. 20. Received check for $508.37 from D. M. Noe & Co. to pay their 15 day acceptance due today. (Mark paid in Notes Receivable Book. See 31a.) Post the books to date, and ascertain the cash balance. (See 19a and 42a.) Jan. 22. -Received $18.75 from C. M. & S. Paul R. R. Co., rebate for overweight on freight bills of Jan. 19. (Credit Freight In.) Received $8.75 refund from Auto Repair Co. on bill of Jan. IS. (Credit Delivery Expense.) See 35a and 37a. Jan. 22. W. J. Emerson withdrew $1,000 from bis investment in the business. (See paragraph 8.) Jan. 23. Paid J. II. Andrews $54.35 for resetting Store Fixtures. (Debit Store Fixtures Expense.) Jan. 23. Purchased of Logan. Bryan & Co., merchandise as per Invoice No. 10. 3 15, n 60. $1,272.35. Purchased of Seaman Grocer Co., merchandise as per Invoice No. 11, 3 15, n/60, $1,198.75. Jan. 23. Paid R, K. Miller & Co. $727.74. for our 15 day acceptance, due today. (31a.) Jan. 24. Sold to D. M. Noe & Co., 2 '15. n 3,0. 100 cs. Glucose Syrup @ 4.1.): 125 bx. Silver Prunes @ $4.25. Sold to Davis Bros., 2 15, n/30. 150 cs. Ideal Tomatoes @ $3.75; 100 brls. Sweet Potatoes @ $5.25. Sold to Dwight Bros., 2 15, n 30, 100 brls. II. Apples (§ $5.75; 50 brls. G. Flour (a) $7.35. Sold to \Y. II. Mason & Sons, 2 15, n/30, 100 cs. 12 lb. Chocolate (§ $5. till; 75 cs. M. & J. Coffee @ $8.75. Jan. 25. Paid our 15 day note of $5,000 at Central National Bank by giving a new note for $3,500 for 30 days at tl', . and a check for $1,517.50, which includes the interest on the new note. (47a.) Note: The usual procedure at the bank is that you wouiii give the bank a check foi $5,000 for tl 1.1 note and the bank cancels the el. I ie.tr and returns it to you. You give the bank the new note of $3,500 and tin' bank enters $3,482.50 ($3,500 less $17. eft interest collected in advance) in your pass book. In this case, however, you have included tic $17.50 in your check, and the bank enters $3,500 in your pass book. 50 BOOKKEEPING AND ACCOUNTING No. 68. Jan. 26. Sold House and Lot, 508Cherry St., to A. L. Hawkins, the present occupant, for $8,000. Received his check for $3;500, and lie assumes the mortgage of $4,500 with interesl from its date. We are to retain all rents collected prior to this date. Debit ea 1> $3,5 Debit Mortgage Payal ■ ■■ an relieved of ill'- obligation. Credit Beat Estate, Bouse and Lot, $8,000. We would simply make liim ;i .1 1 i.. the property Bubject to tin- innrtL: trust "i $4,£ ll«' would record In- deed :it the Eecorder's office. As this old, it is no longer an asset, but will appear in the Profit and i o Statement as "Other Income." No. 69. -Ian. 27. Canceled the insurance policy od tin- house, 508 Cherry St.. and received - -> for the returned pari of the premium. Debit Cash $35. T >.■ t .i 1 Real Estate Expense and Income $25 t'"i the on the insurance ($60 less $35). Credit Insurance $60, for the canceled policy. No, 70. -Ian. 27. Paid office help I'm- tin- week $180; Paid payroll of sales force tin' tin' week $219.60. Paid drivers of delivery trucks I'm' the Week $45. No. 71. Jan. 28. T). M. Noe & Co. returned to us 12 brls. Silver Prunes @ $4.25, from lull of .Ian. 24, for credit. Gave Davis Bros, a credit memorandum I'm- $48.25 lor damaged l; Is on loll of .Ian. 21. Gave \Y. II. Mason & Sims a credit memorandum for $38.75 tor shortage on bill of Jan. 24. (See 12a. No. 72. Jan. 29. Received a credit memorandum For $127.35 from See- .Moon & ('<>. for damaged ■_: Is on Invoice No. 8, Jan. 19. Returned ■_ Is of the value of $87.45 to R. K. Miller & Co. from Invoice No. 7, Jan. 11). for credit. (] la. No. 73. Jan. :10. Paid W. P. Dunn Printing Co. $187.50 for printing adver- tising matter. (10a. No. 71. Tost the hooks to dale, and prepare a Trial Balance. (See 57a. Eaving the Trial Balance, the student is required to prepare and post journal entries to provide for the following inventories. (See paragraphs 27 and 28.) Merchandise Inventory. Jan. 31 +8.954.7."' Insurance Expired 15.00 Accrued Liabilities : Interest Accrued on Notes Receivable 7.30 Interest paid in advance on loan 14.00 Accrued Liabilities: Unpaid office help half of week 90.00 Unpaid payroll of sales force, half-week 109.80 Unpaid delivery drivers, half-week 22.50 Interest Accrued on Notes Payable 6.90 Deferred Charges to Operation: Office stationery on hand 72.50 Advertising matter on hand ~\"<> \>< Depreciation : In', mi Office Equipmenl 74.70 i' 1 ' on Store Fixtures 7-M in-, on Delivery Equipment 105.00 Reserve for DnuMful Accounts: •'■', of debil balance of Accounts Receivable.... 246.98 BOOKKEEPING AND ACCOUNTING 51 No. 75. After posting the journal entries to record the above, prepare a Final Trial Balance before closing the books, from which prepare a Balance Sheet, and a Profit and Loss Statement. (See paragraphs 28 to 34, and illustrations.) Close the books, following instructions in paragraphs 35 to 41. closing W. J. Emerson, Personal, Cash account, and W. J. Emerson Capital, in the same manner as there explained for W. J. Goodnow. All the nominal accounts are closed, and the Ledger accounts are ready to receive the business for the next period, that of W. J. Emerson & Co.. a partnership, which will be a continuation of this business, using these same accounts, after the student lias learned to keep other books of original entry : Cash Book, Sales Book, and the Purchases Book, illustrated in the following set, which will be written up on journal and ledger paper. PROBLEM 5. DETAILED STATEMENTS AND SCHEDULES Prepare a detailed statement to reconcile the amount of the Administrative Expense and the amount of the Selling Expense in the business of W. J. Emerson. Prepare a schedule reconciling Accounts Receivable for the amount shown in the Balance Sheet of W. J. Emerson, giving the due date of the amounts that each customer owes. Prepare a schedule reconciling Accounts Payable. giving the due date of the amounts owing to creditors. See paragraphs 33 and 34. PROBLEM 6. WORKING SHEET, BALANCE SHEET, PROFIT AND LOSS STATEMENT In a hardware, clothing, department store or a general store, and many other lines of business, it is not practical to take an inventory of merchandise each month, because it requires much time and labor, and retards business for the time. Such lines of business take an inventory at the end of six months or a year, usually at the end of a year. Then the year is their fiscal period, and their books are closed only once a year. In such cases, the bookkeeper should keep the books posted up to date, daily, and take a Trial Balance at the end of each month. The books cannot be closed until an inventory is taken, but the bookkeeper can submit a detailed statement of Administrative P^xpense and Selling Expense, and schedule the Accounts Receivable and Accounts Payable, giving the management a line on the expenses and on col- lections and on Avhat is soon to be paid. In a business where the inventory can be taken each month, a Balance Sheet and Profit and Loss Statement, and any necessary detailed statements or analysis sheet of expenses and schedules of Accounts Receivable, Notes Receivable. Notes Payable, and Accounts Payable can be prepared each month, even though the books- are not to be closed until the end of the fiscal period. and the Nominal Accounts all left open to run until the end of the period. These reports give the management up-to-date information of the condition and progress of the business. The following Working Sheet will expedite the preparing of these state- incuts, whether the books are to be closed or not. because from this Working Sheet, the Balance Sheet and Profit and Loss Statemenl can lie prepared and 52 I'.OOKKHKIMXC AND ACCOUNTING submitted quickly, and if the books are to be closed this work can be done afterwards. The first two columns in the following Working Sheel arc the Trial Bal- ance taken from the books of C. W. Perkins on December 31, 192 . The second two columns contain the adjustments necessary to r< rd the inventories or supplementary facts in the bonks. The last two columns are the final Trial Balance from which the Balance Sheet ami Profil anil Loss Statement arc prepared. The Profil an. I Loss Statemenl is shown here in this partial solu- tion in oi-,ler to call the student's attention to "Other Income" ami "Deduc- tions from Income," bul the student is required to prepare the Balance Sheet and prove it with this Profit ami Loss Statement, ami to prepare the adjust- ment journal entries. Barking Sheet, C. '*. Perkins, Lece-.ber .'1. 132 Trial Balance AaJ-iatne r.ts Final Trial Balance C. W. Perkir.s. Capital .... C. W. Ferklnj, Personal. . . . II 375 00 Cash 10215 25 . . . 3650 00 . . . 5765 54 Kotes Reoeivable Aoeounts Receivable . . . Insurance flotes Payable Aooounts Payable Real Estate, House and Lot Office Equipment Store Fixtures Delivery Equipment .... Kerohandlse Inventor,, . . Purchases Purchases Discount .... Freight in Sales Sales Discount 180 747 7ee 1050 5647 00 15000 00 7950 00 U 6275 650 379 05 00 : i 00 69 35 1110 90 262 50 32 56 Administrative Expense , . . . 1236 95 Selling Expense Delivery Expense Office Equipment Expense,. . . Store Fixtures Expense .... Real Fstate Expense and Inoo-e Interest and Discount .... Loss on Doubtful Acoounts . . Aoorued Assets Accrued Liabilities Deferred Charges to Operation Res. for Dep.on Office Equipment Res. for Dep.on store Fixtures Res. for Dep.on Delivery Eqnip. Rea.for Doubtful Accounts . . 15102 60 • 219 22 17 50 6 246 20 198 72 50 BO 126 40 50 90 20 72 98 72 254 20 90 74 70 76 84 105 00 a4o 9 8 375 00 10215 25 3650 00 5765 54 165 00 747 00 788 40 lo?" oo 564 7 50 13085 09 663 96 460 95 69 35 1422 99 1204 30 15000 7950 6275 650 379 89 15100 57 44 ie 246 20 BE 35 74 96 7. 17 234 198 90 00 00 05 oo 24 76 50 5C 20 4b46 i 15 l: 164 15 974 u= 74 105 00 Fi6 qft 34 'J74 34 46203 87 46203 87 :, ; ,i I ILLUSTRATION NO 31. WORKINV. SHEET Inventories: Merchandise Inventory. Dec 31, $8,954.75, Insurance expired, $15. Accrued Assets: Interest accrued on Notes Receivable $7.30, Interest paid in advance for hank loan. $13.42. Accrued Liabilities: Unpaid office help, $90, unpaid sales force, $114.80, unpaid delivery drivers. $22.50. Interest accrued on Notes Payable, $6.90. Deferred Charges to Operation: Office stationery on hand, $72.50, advertising matter on hand, $126.40. I depreciation : Office Equipment, $74.70, Store Fixtures, $78.84, Delivery Equipment, $105. Reserve for Doubtful Accounts had debts . $246.98 These items are incorporated in the Working SI t, and the journal entries to record the above items in the honks can be prepared Er the working sheet or from the above items, as in chapter II. The fiscal period is one month, Deeelllher 1 to Dceemher 31 BOOKKEEPING AND ACCOUNTING 53 Adjustment Entries $15.00 Administrative Expense Insurance $15.00 Accrued Assets $20.72 Interest and Discount . . . $20.72 Administrative Expense ... $90.00 Selling Expense 114.80 Delivery Expense 22.50 Interest and Discount 6.90 Accrued Liabilities $234.20 Deferred Charges to Opera- tion $198.90 Administrative Expense . . $72.50 Selling Expense 120.40 When these journal entries are posted to the Ledger accounts, the Ledger accounts will then appear as shown in the Pinal Trial Balance of the Working Sheet. Prepare a Balance Sheet from the Final Trial Balance, and prove it with the following Profit and Loss Statement. Administrative Expense ...$153.54 Selling Expense 105.00 Res. for Dep. on Office Equip $74.70 Res. for Dep. on Store Fixtures 78.84 Res. for Dep. on Delivery Equip 105.011 Loss on Doubtful Accts $246.98 Res. for Doubtful Accts.. $246.98 Profit and Lobb Statement c. ff. Perk ins. December 31, 192 Sales: Less Returns and Allowances " Sales Discount Net Sales $460.95 69 35 Cost of Sales. Merchandise Inventory, Dec Purchases Less Returns and Allowances $379.24 513086 09 89.76 469.00 Purohases Dlsoount Add Freight In Cost of Merchandise Eeduot Merchandise Invt.Dec.31 Cost of Coods Sold Gross Profit on Sales (31.55$ of Sales) Operating Expenses Administrative Expense (9.76^ of Sales) Selling Expense (8.26$ of Sales) Delivery Expense Offioe Equipment Expense Store Fixtures Expense Total Cost of Operations (20.82$ of Sales) Wet Business Profit Other Inoome Real Estate. House and Lot (Froflt) Real Estate Expense and Income 15102 550 Deductions from Income; Interest and Discount Loss on Bad Debts Net Profit (13.48" of Sales) ILLUSTRATION NO. 32. PROFH AND LOSS STATEMENT 5647 12617 663 50 16928 55 6954 75 1422 1204 305 57 44 9 'J 30 00 B5 35 650 00 I? 50 14572 18 74 P46 98 .50 997 3 80 4598 50 3034 1564 667 2231 HuS 1965 49 01 Bfl 51 72 79 54 BOOKKEEPING AND ACCOUNTING A Working Sheel maj have two columns following the two columns for Adjustments, for Profil and Loss or Gains and Losses to which the gains and losses mar be transferred so thai these two columns would conform to the Profit and Loss account and the Profil and Loss Statement, and from which some accountants prepare the closing journal entries. The Working Sheet shown is more simple, if a Working Sheet is to be used. A Working sheet of this kind will expedite the work in examinations. A Working Sheel is most useful in auditing, in which case ten columns are used: Trial Balance debil and credit, Adjustments debil ami credit. Deprecia- tions and Inventories debit and credit, Losses and Cains debit and eredit, and Balance Sheet or Assets. Liabilities and I lapital debit and credit. As the bunks are audited, the necessary adjustments for omissions, transfers required, cor rections, etc., arc entered in Hie Working sheet, and when the audit is com- pleted, journal entries are prepared t<> record these adjustments of whatever kind in the books. The principle and form is the same as the Working Sheet illustrated It is not necessary to show this ten column Working Sheet here, as a method of procedure in auditing is not being taken up. yet this explana- tion will convey the idea to any one who understands the accounting that is shown in this work. CHAPTER IV D. L. MORRISON & CO. A PARTNERSHIP Illustrating the Books of Original Entry 46. The purpose of this set is to illustrate the Cash Book, Purchases Book, and Sales Book, and to show the posting from these books to the Ledger accounts. The set is not completely worked out, but enough of the work is shown so that the student can complete it, by following instructions. Rule special columns where necessary, to conform to the forms shown here. The business papers are not used in this set. The accounting at the end. Balance Sheet, Profit and Loss Statement, adjustment entries for the inventories and the closing is left for the student. It is, therefore, necessary for the student to work out the set from the beginning. 47. The books of original entry are Cash Book, Purchases Book, Sales Book and Journal, as used and shown here. Any book in which transactions are first recorded, as the intermediate step preparatory to posting, is a book of original entry. 48. Cash Book: No Cash account is kept in the Ledger. The Cash Book is the Cash account. The Cash Book has two sides, just as the Cash account has two sides, but the Cash Book requires two pages opposite each other. The left-hand page is the ''debit side" and the right-hand page is the "credit side." All cash received is entered on the left-hand page or "debit side,"' and all cash paid out is entered on the right-hand page or "credit side." Cash is debited when the entry is made on the left-hand page and the other account is credited. Cash is credited when the entry is made on the right- hand page and the other account is debited. 49. Purchases Book: All purchases of merchandise on account are entered in the Purchases Book. Nothing but purchases of merchandise is entered in this book. When merchandise is purchased, "Purchases" is debited and the name of the person or firm from whom purchased is credited. So the names of persons or firms in the Purchases Book are all creditors, and the amounts are posted to the credit of their accounts from this book. At the end of the month, the total of all purchases is posted in one amount to the debit of "Purchases" account. 50. Sales Book: All sales of merchandise on account are entered in the Sales Book. The names of persons or firms in the Sales Book are customers. The amounts in this book are posted to the debit of these customers' accounts. At the end of the month, the total of all sales is posted in one amount to the credit of "Sales" account. 51. Journal: All transactions that do uo1 belong in the Sales Book. Pur- chases Book, or Cash Book, are entered in the Journal. The (ash Book take- all cash transactions out of the Journal. The Purchases Book eliminates all purchases from the Journal. The Sales Book eliminates all sales of merchan- dise from the Journal. The student will soon observe thai this shortens the Journal and saves much work in posting, as well as to give better information of the different departments of the business. 55 5(i BOOKKEEPING AND ACCOUNTING •">:!. Special Columns: If ii is found thai any item such as expense, flis- count, etc., occurs frequently, a special column in the Cash Book will saw much work in posting, for then the total of the special column is posted in ook as one journal entry with the total of cash paid out as th ic credit, and the items in the General column ami the totals of the special columns as the debits, and jiou will understand the theorj of tlie righl hand page of the Cash I'.ook. This is the way to think of these 1 ks when posting them, and when making an entrj in an\ of them. Whenever any Cash I'.ook entry is not clear to you, make a journal entry of tile transaction on scratch paper and post to T Ledger accounts and see that the result of your Cash I'.ook entry amounts to the same thing. Sec illustra tion under 9b, May .">. follow ing. 58. Use one sheet of journal paper for the Purchases Book, ruling a col- umn lor the ledger page (L.F.). I 's e sheet of journal paper for the Sales Book, one sheet for the Journal, and one sheet for the Cash Hook. ruling one extra column, ami a column for the ledger page, ami head tile col- umns to conform to the following Cash I'.ook illustration. i9 As tile student is familiar with the Journal, only the opening entry and a \'r\v journal entries are shown in the illustration of this book. The studenl can easily prepare the remaining journal entries with the references and explanations given. The references la, 5a, 12a, etc.. refer to a similar trans action in Chapter II. ami 2b, 5b, etc.. refer to a similar transaction in this s, t BOOKKEEPING AND ACCOUNTING 57 L/Tr^^r-r^i^r7 S s ^r S s/7^ *f~^ / 'Z C<^c^^u^iXj(--*£4&t (j^^jC^z-^utZ-^t^r-yLy' Zl . a. if Ut**S*g*' St-it^mS //b/. J^^r^^/_ 4*. *f« V- i_'.i. / sw< fauJ^ld/J^/tV - ^msCS/fa/l ■¥* % *JL 1±Z£L _23^L^U^L %/£^/^*Ju *r7l- rL~,s-*j7?j*?l^'S % 1/^SA ( ArA//g^>^ (/ » Q%[a//,^ve~' . jL~r*,jfa#?/«- *t ^r^^aJpjJ^n^U L*> -f!>t*fii-rs-s//h /tl -7- 3 7 is- a i-f jf 'i^ro LL %//?*Artf»J**^» J~*~*, tjTtSC. ^ % y_ Ill iJ- LL 'J>//*~*&s JL.*^„7L*¥* */« dftTfiJ-S/^vf^ 4*~r„J%J?c¥"- "/« ttLss^AAJr^ftJ^^sjT/^U */u £q 1 •■/./ ijT zL ^ W ^/A^ ^^ /^C^, 4^ rrH^ /7^/o y^ */'Q J 3/ - sfcjst~n/?^LJJ'^ffO^' sf/f^fl /jJ^stst-cJhsrUSJ Af ■/J VZl. dJL- iLSL Z£ r e£& ILLUSTRATION' NO. 33. PURCHASES BOOK 60. To Post the Purchase Book: Post each amount to the credit of the account (person or firm) written on the same line with it and write the terms, 3/15, n 90, or whatever the terms may be, in the explanation column in the Ledger account, for convenience in watching the discounts and the due date of invoices. The total Purchases is posted at the end of each month only. At the end of the month, the total of all purchases is posted to the debit side of Purchases account. 61. To Post the Debit Side of the Cash Book: Post each item in the "Gen- eral'' column to the credit side of the account written on the same line with it. In the ease of a payment received from a customer where a discount is allowed, post the item in the General column to the debit side of the customer's account and on the next line on the same date post the discount, as in the fourth entry of the illustration. Trace this in the illustration of the Ledger account of A. R. Parsons & Co. The items in the "Sales" column are checked to show they are not to be posted. The total of this "Sales" column is posted to the credit of "Sales" account at the end of the month. One posting instead of many. The items in the special column should be checked at the time i he entry is made. 62. To Post the Credit Side of the Cash Book: Post each item in the "General'' column to the debit side of the account written on the same line with it. The items in the special columns are checked, and are not posted. At the end of the month the total of Administrative Expense column is posted to the de"bit of Administrative Expense account, and the total of Selling Expense column is posted to the debit of Selling Expense accounl in the Ledger. The purpose of special columns is to save posting. 58 BOOKKEEPIXli AND A('('( >1XTI\(! ' f ■ •- 7.4 J. * zJ^J- Cia~< d s. rr?/ u Z4. '-<2£rr~'. ■ "fes Z ^ ,/,.,/ . „, ( sfil . I ^7 ^f^As^L-*7 // .V £d t. ..7. £<: :,_- • — { %s"/i>. '*M- ... .. '■-■ ■'■•'. '.< •' '. / I /£ , Cd/s^Jt^JJiJr/fairA \ 1%/,* 7fc/Jl, 'd/L /L /tirf/sfC/a */ flAft. V j.. •:.•'.. ■ : . rf.tq&^t+MS V& C.-.-. v: ($+4+K«, f /^yf/y-ri^Vrry/^rff ^^L^V ;. Jfl.tf-h+t/vdnrtJ • ■ . .' -._!• - .-.■' :,-_: .•_- ._• ■ IL^JaJLvJltL- .- . ■. ,. : •_ i- • • ' *- ! l ISH BOOKKEEPING AND ACCOUNTING 59 rt~.J,s J2* ILLUSTRATION NO. 35. CREDIT SIDE OF CASH HOOK nn BOOKKEEPING A\l> ACCOUNTING I /?* r QC&<*no-ns& t/Xs '■ " ■ ; 'A' + Ss*/j> S~.f~rJ teffk ^.Lu (tl^Cp* V" . : ; .22 _ ^J ^W^m ^^rn/Cfc* lead*. -■■ I /flJ^dnjf«fs/t/> r*mS/st( ^7s*rJ/An,J>?s }^ */.S *f* ~/*,U!e fJ/^/L 3. f//~ r ■//>■/> -AL- ,■ ■ . \ ■ .--•_•- - „• X&- V,r *fo w> J*s /^i^f '&L .■■^i/frns/ZL*/ >/"■ % 13Lj^ *^(£-t/ U '■ rsK^S/OT/lMlSlf ,/■■:,■■■; -' :■-' f.s^>±4£,* - .' , [ .-.A\-' _" •I ISA . $* * m^t^ j £CS-^>T~S (*/^?^-+-t-<*&vf- aA^-tv ^-A^ fyi-f-w-zr^T-T/ :rJ%A#A,^ ,&■ L£l 2l£A -££ ■X Jrk/sfcr^S /J37~r>- AS. >/,s % fJ-rsffltJ^.J-fc Ai errs ,3.*?%~~S~fi, /. J -£ 4lfe~i^ VM^kv Z£ej/j,* &/^~l2i+snsfc/js/> *>S3t A Sh. */>*■*/} •■- rets^S^/Z-SA., a^ HA I * J-/sjJ!£^-^/&^m .r& L~L£:_a& ■~r> _A£ ^.Jrf//~sr->^; /^h-rOS- teJ~t, J/#A~^s r-& :l i 1A2. V'-r ?t /jQ -rc-^ . £ /(>Jw sJ4sO- ns-r *;(-{ stt-v?; .5~* ^ z i :: £^ -iA iL 3^. {Z&^zS V*£rrl*J 7.r>- / */ ^y^^t^f +&- . J L £J.\. >/,r- ^jo fs&rfj, SKJ&iZsrs&fS 7^ zX. uSL x£,S,^(Z. A5L ILLUSTRATION NO. 3fl. SALES BOOK 63. To Post the Sales Book: Post the total amount of each sale in the second money column to the debit of the customer's account, and write the terms, 2/10, n/30, or 2/15, n 60, in the explanation column of the Ledger account for convenience in watching the discounts and the due date of bills. The total of sales is not posted until the end of the month. At the end of the month, the total of all sales is posted to the credit of "Sales" account. BOOKKKKPING AND ACCOUNTING LF A*/„*- — '- - ^2^//Zm^-r^Ur>rJa^>l^/A/J^ CJr-*T^'in^^r^-r-n ^sn^r^rTsf^r&^rSr J r^s (-^^^JT^^^^-A^.^y-d/^a. ■nSsr/asrK^frft.-r**^ '•^f/'Ji ■*/< s£+ls,J s/JZty'JlfT^fcvS^^rt* ^S/^--uJLt7^Jjh+-*-<4^Ci0srl** J^*^Ui*-*ss . 1-44 i dA. /.rd**,***?,, c ^.^y /'/^y .. L I iX.^^,/^./-^ -y ^ {■S^e7^p**-fJ>r*1^-^S~ _ .-£—' / . /--.v.: ./•v 'Aj^fsyr^S&fittS/rfJCLvfsX, -? ZS.& o,ao ^ji -j. J!=^7^/-C^rn^^Z^~c^ ~Jt4-t-S0-ifrf-Cl /4r -d-n-f'iJ -&& ^ Ta^ti-K/ AJr-v& L i?.r-?.. Z£ ?7 r m 'x6 X/ , ^v^ jkttstsr-r-.jT. tfs^/A , ; i az ?7«ir/ ^ Z£_ --rTSS.-SS .^^^j 1 ^ ^///^^^ 'X^TT^ '/ y y/y . tr.-'.-Z ^ <-^ L z^Z ' :'~-~ ->■ £ tZ ■ ■ .££- -/ U-CW r^^>>V*?^j:'tf^^*s qoI belong in the Cash Book, Purchase Booh or Sales Hook are entered in the Journal. BOOKKEEPING AND ACCOUNTING 63 BUSINESS TRANSACTIONS lb. May 1. D. L. Morrison and II. L. Brown have formed a partnership according to articles of copartnership signed and executed this day. The partners are to share profits and bear losses equally, and each is to draw a salary of $150 a month. D. L. Morrison invests Cash $2,000, Merchandise Inventory $7,875.50, Office Equipment +851). Delivery Equipment $1,250. He owes a 15 day note for $1,775.50 at 6%, dated May 1, 192—, in favor of L. D. Key, which the business assumes. II. L. Brown invests Cash $7,500 and a 10-day note of $2,500 at II' , . dated May 1, 192 , against W. B. Owen, which he guarantees. Each asset is a debit and each liability is a credit in the opening entry in the Journal. Two Journal entries are required to show each partner's investment. Chuck the c;ish items in the Journal to show they are not to be posted. Enter cash on the debit side of the Cash Book, D. L. Morrison $2,000, H. L. Brown $7,500, investment, and check these items to show they are not to be posted. Entering cash on the debit side of the Cash Book, Debits Cash, just as if it were posted to the debit of a Cash account in the Ledger. See Partner- ship Accounting page 104. 2b. May 2. Bought of Empire Fixture Co.. S Show Cases @ $87.50; 20 Stool Chairs @ $12.50; 15 Tables @ $17,50. (Debit Store Fixtures on the credit side of the Cash Book.) .'3b May 2. Gave Central Stationery Co. a check for $187.50 for blank books and office stationery. Debit Administrative Expense on the credit side of the Cash Book. Place the amount in the Administrative Expense column and check the item in the L.F. column, to show it is not to be posted. 4b. May 2. Purchased of J. M. Sellers & Co., Boston, Mass., merchandise as per Invoice No. 1. 3/15, n/60, $1,215.45. Enter in Purchases Book. It is not necessary to itemize the entry in the Purchases Book, because the invoice is filed for ready reference. Always get the address of a person or firm in the first entry of a transaction with that person or firm so the address will appear in the Ledger account. Enter the terms in the explanation column. 5b. Ma}' 2. Received cash for sundry cash sales, $387,50. Credit "Sales" on the debit side of the Cash Book. Use scratch paper and make a journal entry of this transaction and study how this Cash Book entry debits Cash and credits Sales. 6b. May 3. Sold to A. R. Parsons & Co., Utica, N. Y., 2/15, n/30, 25 brls. G. Flour @ $8.75; 55 cs. R. Sweet Corn @ $5.25. Sold to Dalton Pins Milwaukee, Wis.. 2/15, n 30, 55 brls. Early Potatoes (a> $7.15: 1,(10(1 IDs. M. & J. Coffee @ 38c. Enter in the Sales Book. The sales must be itemized. There are different ways of keeping the sales, but the principle is always the same. They may be kept in a Sales Book as shown in this set, or bills may be typewritten ami :i carbon copy of each .sab- kept in a binder and posted from this carbon to the debit of each customer's account. Then the total of all the sales at the end of the month posted to the credit of ''Sales" account. 7b. May 4. Gave Regan Printing Co. a check for $135.60 for printing adver- tising matter. (Debit Selling Expense on the credit side of the Cash Book. Place the amount in Selling Fxpense column, and check the item in the L.F. column.) 8b. May 4. Sold to T. J. Akin & Sons, Akron. O., 2/15, n 30. 50 cs. 12 lb. Chocolate @ $6.25; 50 cs. Silver Prunes @ $5.15. (6b.) 64 BOOKKEEPING AND ACCOUNTING !tli. May .">. Received $4!)7 .:r> from A. EL Parsons & Co., which pays bill of May 3, allowing 2< . discount, $10.15. Credit A. T{. Parsons & Co on the debi) side of the Cast Booh entering $497.35 in the "General" column, and $10.15 discount in the "Sales Discount" column. Study isli Book entry by making a journal entry on scratch paper and T-Ledger accounts. Cash $497.35 Sales Disi KL15 A. R. Parsons & Co $507.50 Cash Sales Discount A. E. Parsons & Co. 197.35 | 10.15 | 197.35 I I I 10.15 Cash would not be posted, because the $197.:: 1 is debited by being entered on the debit side of the Cash Hunk. Sales Discount would not 1"- po ted because the $10.15 would t;o into the footing of the special column at the end of the month to the debit of Sales Discount. The only posting from the Cash Book at present is the credit ot' A. R. Parsons i Co., in two items, $497.35 for the cash he paid and $10.15 for the discount in the Sales Piscount column, instead of the $507.50 as shown in the journal entry, but which amounts to the same. Whenever a Cash Book entry is not (dear, make a journal entry and T Ledger accounts on scratch paper, as shown. 10b. May 5. Received cash Eor sundry cash sales $527.95. (5b.) 111. May G. Allowed Dalton Bros. $39.85 for damaged goods on lull of May 3. Received a credit memorandum Eor $64.85 from J. M. Sellers & Co, Allowance fur shortage on Invoice No. 1. May 2. (Enter separately in Journal. See 1 la and 12a. li'b. May G. Purchased of Fruitvale Stores Co., Toledo, Ohio, merchandise as per Invoice No. i'. :5 15, n GO, $1,185.75. Purchased of Walters & Anderson. Cleveland, Ohio, :: 15, □ 60, $1,236.50. (4b. May 2. En- ter in Purchases Book separately, i Pile May ii. Received $718.73 from Dalton Bros, which pays balance of $733.40 on hill of Maj 3, allowing i", discount. 14b. May 6. Received cash for sundry cash sales $519.25. (5b.) 15b. May G. Paid .1. M. Sellers & Co.. $1,116.08 which pays balance of In- voice No. 1, $1,150.60 in full, deducting '■'•', discount. Debit .1. M. Sellers & Co. $1,150.60 on tic credit -id,' of tic Cash Book, because we have paid them this amount. (Check $1,116.08 plus '■'■'• discount >:;t.."iL'. Credit Pur- chases Discount .+.".4.52 on the dcl.it side id' the Cash Hook. The difference between thi amount entered on the credit side $1,150.60 and the amount of discount on the debit side $34.52, is the exact amount of cash paid out, $1,116.08. When posted this will affect .1. M, Sellers a i o account properly on the debit Bide, and Purchases Discount Properly on the credit side, and leaves the cash to show correctly. Make a journal entrj mi scratch paper ami T Ledger accounts, and study this < ash Book entry. 1Gb. Ascertain the (ash Balance. From the total of the first and third col limns on the debit page, deduct the total of all three columns on the credit page. This difference is the balance of cash on hand. The "Sales Discount" column is omitted because it is not cash. It will l.e found vor\ convenient to place the footings of each column of the cash hook in \..">4 for damaged g Is on bill of May 11. Allowed A. R, Parsons ,y Co. $58.95 lor shortage on bill of May 8. Dalton Bros, returned 10 cs. Royal Sweet Corn (§ $4.25 from 'bill of .May 8, for credit. (12a.) 37b. May 15. Received an allowance of $129.35 from J. M. Sellers & ( o. lor damaged goods on Invoice NO. 4. May 'J. Received an allowance of $126.50 from Fruitvale Stores Co. for shortage on Invoice No. 5, .May 9. 'See 11a.) 18b. May 1."). Paid L. I). Key $1,779.94 for I). L. Morrison's note of $1,775.50, 15 days at .f)00 at the Central National P.ank on our 10 day note ai 6%, proceeds. $4,991.66. (Credil Notes Payable on the debil side of the ('ash Book, $5,000. Debit Interest and Discount on the credil side of t lie ( 'ash Hook $8.34. The difference is the exact amount of cash re- ceived from t he bank. The entry for the above may be made in Ihe Journal: Cash * 4,001 .(»<"; Interest and Discount 8.34 Notes Payable and the cash item checked and entered on the debit side of tht^ Cash Hook and cheeked there, and the other items posted from the Journal. The B00KKEEP1XC AND ACCOUNTING 67 result would be the same as the Cash Book entry first explained. Si ■ accountants prefer to have the transaction show in the Journal. 411). May 17. Received $663.51 from A. R. Parsons & Co. on accounl and al- lowed 2% discount on balance of hill of May 8, .+ii77.(ir». Received $595.35 from Dalton Bros, to pay balance of $607.50 on bill of May 8, allowing 2', discount. (9b.) 42h. May 17. Received cash for sundry cash sales $714.2."). 43h. May IS. D. L. Morrison drew $12.") for his private use. (Debit D. h. Morrison, Personal on the credit side of the Cash Book.) 44b. May 19. II. L. Brown returned $23.7") of the money drawn for private use. (Credit H. L. Brown, Personal, on the debit side of the Cash Book. I 45b. May 19. Ascertain the casli balance, and post the books to dale (See 16b.) 46b. May 20. Received $909.89 from T. .1. Akin & Sons on account and al- lowed 2% discount on balance of bill of May 11, $92S.46. (9b.) 47b. May 20. Sold to A. R. Parsons & Co.. 2/15, n/30, 125 bx. D. Peaches @ $4.35; 75 cs. Ideal Tomatoes (« $4.75 •, 85 cs. Red Raspberries @ $4.!i.> Sold to Dalton Bros., 2/15, n 30, 75 brls. G. Flour @ $8.75; 85 cs. 1!. Sweet Corn @ $4.25; 65 bx. 12 lb. Chocolate @ $6.25; 1,000 lbs. M & J Coffee @ 53c. Sold to T. J. Akin & Sons, 2/15, n/30, 25 cs. Butter Prints. 1.250 lbs. @ 53e; 80 cs. C. Coffee Ui $8.25; (in brls. Early Potatoes @ $6.15; 100 bx. Silver Prunes @ $5.15. (lib.) 48b. May 22. Received cash for sundry cash sales $728.90. (5b.) Received $635.77 from A. R. Parsons & Co. on account and allowed 2' , discount on bill of May 11, 648.75. (9b.) 49b. May 23. D. L. Morrison and II. L. Brown each gave a check for $1,000 as an additional investment in the business. (Credit each partner's Cap- ital account on the debit side of the Cash Book. (See paragraph 8.) 50b. May 23. Received a 30 day note for $2,790 at 6', of this date from Dal- ton Bros, on account. Received $832.75 from T. J. Akin & Sons on ac- count and allowed 2 f ; discount on bill of May 13, $840.75. 51b. May 23. Gave J. M. Sellers & Co. a 30 day note for $4,260 at 6% of this date, on account. Received a 3D day note of $1,750 at (i',' of this date. from T. J. Akin & Sons, on account. 52b. May 24. Received cash for sundry cash sales $5(>4.80. 53b. May 25. Paid Fruitvale Stores Co. $1,222.20 on account and received 3% discount on balance of $1,260. (15b.) 54b. May 26. Paid Walters & Anderson $1,540.02 on ai un1 and received 3',' discount on invoice of May 11, $1,587.65. (15b. 55b. May 26. Sold to Dalton Bros., 2 15. n 30, 60 brls. G. Flour (5 $8.75; 75cs. Royal Sweet Corn (a $5.25. Sold to T. -I. Akin & Sons 2 \:>, n/30. 75 cs. No. 1 Raisins @ $4.75; 65 brls. \V. Peaches (a $9.25. 68 BOOKKEEPING AND A.C< OTJNTING 56b. May 26. Paid our $5,000 note al the Central National Hank by giving a new noic for $3,500 for 30 'lavs al 6%, and a check for the difference and interest on the new note. Debit Notes Payable $5,000 on the credit Bide of the Cash Book. Debit Interest and Discount $17.50 (on the new note) on the credit side of the Cash Book. Credit Notes Pay- able $3,500 on the i.le of the Cash Book. The difference is the exact amount of cash paid out, and when posted the other accounts will be properly debited and credited. It preferred, the entry may be made in the Journal and the Cash item checked and the in ili. i and checked there. The other items posted from the Journal will give the Bame result, and probably a better record. Notes Payable *o,000.00 rest and Discount 17.50 Notes Payable V (ash 1,517.50 Paid loan at the bank by giving a new note for $3,500 for 30 days al *'•' ■ and cash for the din. rence and in I he new note. 57b. .May _'(i. Received cash for sundry cash sales $849.70. 58b. .May 27. Paid office help for two weeks $350. Paid sales force for two weeks $375. Paid delivery drivers for two weeks $108. (34b. 59b. Ma.\ 28. Purchased of. I. M. Sellers c\; Co., merchandise as per Invoice No. 8, •'! 15, n 60, $1,341.25. Purchased of Pruitvale Stores Co.. merchandise as per Invoice No. It. :■! 15, o 60, $1.7!Mi.P>. Purchased of Walters ec An- derson, merchandise as per Invoice No. 10, 3 15, n 60, $1,432.75. 60b. May 31. Paid partners' salaries for the month, $150 each. (Debit Ad- ministrative Expense on the credit side of Cash Cook.) 61b. I'ost the Books: Total the Purchase Book and post the total to the debit side of the Purchases account. Total the Sales Book and post the total amount of sales to the credit side of Sales account. Total the columns of each side of the Cash Book. Bide and fool the Cash Booh as shown in the illustration of the Cash Book, bringing in the "balance" on the credil side in red ink. Bring the cash balance down below the double ruled lines on the debit side in black ink, and date it "June I." This leaves Hie Cash Book ready to receive the new business for June. If new pages arc to be used for the Cash Book, this cash balance is carried to the new debit page and entered in the General column and checked. I'ost the footing of "Sales Discount" column to the debit of S;des Discount ac- count. Bust the footing id' "'Sales" column to the credit of Sales ac- count. On tin' credit side, posl the footing "f Administrative Expense column to tin' debit of Administrative Expense account, and post the footing of Selling Expense column to the debit of Selling. Expense account. The stu- dent is familiar with the posting of the Journal. Usually the books are posted in this order: Purchases Book, Sales Book. Journal, debit side of Cash Book, credit side of Cash Book. 62b. Prepare a Trial Balance: Bring the cash balance into the Trial Balance. Before beginning the Trial Balance, read 57a, chapter II. Prepare and posl .journal entries to record the following supplementary facts qo1 found in the hooks. See paragraph -' to 29. BOOKKEEPING AND ACCOUNTING 69 Merchandise Inventory, May 31 $12,876.40 Insurance (expired) 22.50 Accrued Assets : Interest accrued on Notes Receivable 6.05 Unpaid office help for half-week 87.50 Unpaid sales force for half-week 1)3.75 Unpaid delivery drivers for half-week 27.00 Unpaid garage bill for trucks 32.50 Deferred Charges to Operation : Postage and office supplies on hand 54.35 Advertising matter on hand 62.50 Depreciation : 10% on office equipment 85.00 On Store Fixtures 121.50 10% on delivery equipment 125.00 Reserve for Doubtful Accounts : 10% of Accounts Receivable 365.35 S3b. Having posted the adjustment journal entries to record the above in- ventories (except Merchandise Inventory) in the books, prepare a Final Trial Balance as in Illustration No. 21. From this Final Trial Balance, prepare a Balance Sheet similar to Illustration No. 22 or No. 23, and a Profit and Loss Statement similar to Illustration No. 24. The preparation of the Balance Sheet and the Profit and Loss State- ment for a Partnership is the same as in the case of a sole proprietor, ex- cept that each partner's present capital is shown in the Balance Sheel in the place of the single proprietor, as in Illustration No. 22, and both together are equal to the difference between the assets and liabilities. In the Profit and Loss Statement, each partner's share of the net profit is added to his net investment in proving this Statement with the Bal- ance Sheet. See Illustration No. 24, and also read paragraph 67 to 69a inclusive. 64b. Close the Books: Prepare and post closing journal entries to close the Nominal accounts. See paragraph 35 to 37. Post these journal en- tries as instructed in paragraphs 35 to 37 in order to show the Trading Section and the Profit and Loss Section in the Profit and Loss account as in Illustration No. 27. 65b. Close the Partners' Personal accounts into their Capital accounts ami credit each partner's Capital account for his share of the net profit. Two journal entries are required, one for the adjustment of each partner's account. D. L. Morrison, Capital $ 239.65 Profit and Loss 2,156.10 D. L. Morrison, Personal $ 239.65 D. L. Morrison. Capital 2,156.10 To close D. L. Morrison's Personal account into his Capital account, and to credit his Capital account for his share of the net profit. II. L. Brown, Capital * 111.25 Profit and Loss 2,156.10 H. L. Brown, Personal 11 1 .25 H. L. Brown, Capital -\ 156.10 To close H. L. Brown's Personal account into his Capital account, and to credit his Capital account for his share of the net profit. era - ■ - • ■ in. - - h, - • Wl ■ ■ and The to • - -*-»■— •^S*—r - T ■ ! :-:keep: 71 - -- - JC ..- - . ?: ' la ' ~_ ! 2& ' . _' ; * 7'^L4**2*J-^S. '-■:*■ - :,. , ^^ /%^ f JZ. BOOKKEEPING AND A« • OUNTINQ JmJ- %u* -f .:/./- ££, Tt -Ud^-fJ/^7 S T\ ('■*> ....• AS AS. , £ ; ■ J J-i o 7 /. i- £i &> < /-*7 y (/* ) ,f> - >v r' :/ /?- r. .3 - J ■ J i! .£7 . .■£&/,,, ^ '?-*■ v a * ' 1 z 1 „- A^- LAf^yf- < .■:.:,-■-■' BOOKKEEPING AND ACCOUNTING K^C/^^r^^ (o^'J ? s^?^j>S (/V '-? 3/ Ci^ L i\/Vja I . X JsfA r Ur-n^ 7 -? ^ e y ( oj ■ f C 7 ! 1 ' ( 00 *7 r, ,7 z 1? t on / 2 t 2. ■* (to^^jh^s, s^ns£ Co^/ks^rv^^-y Id/1 7%t*v a Cs J? 1 u, Z,1 1 m I jC^jytn-^-e y syy^fTs^s^ ( 7j>^y!y j y (■**) • / * ? '' 9?7^; // C; .3 •(' 2T 1 \Jb?sfs*+S •y- Y'sy L^sf^r^-,^/^n^- ^ *; /f?- SfZ- //Za^i /T r. y V Vf { " a 2- -- 77 /6 a " ? I f ?y / 2.t „ r, ' / ' .*?> J « ^ r ^/C'AJL-y^si-cL^-i-PsS <>^2- f- W) 2£u*^ 7? % ??7^, ,? V*- ^* c/ / - ■ 7 TO l^'* , *- K > — .- / ' 6/ / 7 00 .*" -• r / - - ' / i - i >t* 71 BOOKKEEPING AND ACCOUNTING c/.)aA 'V - • 4iL. (^ ' f Sfcc, Th/TA ^s v*£*,*j 2?L -ay >/* **4 d , i < /^mS (JZA^. :ss. I.KH«;i:k ACCOUNTS BOOKKEEPING AND ACCOUNTING 75 PROBLEM 7. DETAILED STATEMENTS AND SCHEDULES Prepare a detailed Statement (or analysis i reconciling the amount of Ad- ministrative Expense and the amount of Selling Expense in the business of D. L. Morrison & Co. Prepare Schedules reconciling Accounts Receivable and Accounts Payable, giving the due dates. See paragraphs 33 and 34. PROBLEM 8. ANOTHER METHOD OF CLOSING THE LEDGER BY JOURNAL ENTRIES 63. The same Trading Accounts and Profit and Loss accounts are used in the following that were used in Chapter 1 1. The Nominal accounts are taken from the Final Trial Balance. Illustration No. 21. The student will use journal and ledger paper and set up the accounts as shown and post the closing journal entries. This method may be preferred where it is not desired to show the Trading Section and the Profit and Loss Section in the Profit and Loss account. The procedure is logical and obtains the same results as by the method previously used. Copy the following Ledger accounts on ledger paper, giving each account six lines : Trading Accounts Merchandise Inventory Dee. 1 8972.50 || Purchases Dec. 31 15353.80 || Dec. 31 Purchases Discount 478.60 || Dec. 31 235.91 Freight In Dec. 31 521.65 || Sales Dec. 31 379.10 || Dec. 31 Sales Discount 14726.15 Dee. 31 86.51 Profit and Loss Accounts Administrative Expense Dec. 31 1261.88 || Selling Expense Dec. 31 1341.15 || Delivery Expense Dec. 31 488.40 || Interest and Discount Dec. 31 23.85 || Real Estate Expense and Income Dec. 31 166.25 || Loss on Doubtful Accounts Dec. 31 213.24 II The Merchandise Inventory Dec. 31 is $16,462.81, the same as was used in the previous closing of the books in Chapter II. The following closing journal entries are required to close the above ac- counts, and to set up the present merchandise inventory as an asset. Record 76 BOOKKEHPIXt; AND ACCOUNTING these journal entries on journal paper and posl them to the above Ledger ac- counts. Studj each entry while recording it and when posting it. December 31. 192 Furohascs Merchandise Invt . Dec 1 To transfer the Inventory fiO to the Purchases account P972 50 Purchases Freight In -31- To close Freight In and 521 65 transfer this cost to Pur B21 65 chases 51- Purchasee Discount Purchases Kerohandlee Invt. Dec. 31 Purchases To close Purchases Dis- count and credit Purchases for discount received -31- To set up the present In- ventory as an asset and credit Purchases 235 91 16462 81 235 91 16462 til Sales Purchases -31- To close Purchases and transfer cost of poods sold to Sales account 7670 63 7670 63 Sales Sales Discount -31- To close Sales Discount and charge Sales for the discount allowed 6b fl 66 51 -31- Sales Profit and Loss Profit and Loss Administrative FXponse Selling Expense Delivery Rxpense Interest and Discount Real Hstate Expense and Income To close Sales and trans- 65G9 91 fer the gross profit to Profit and Loss account -31- To close these Profit and 3494 77 Loss accounts and transfer these expenses to the Prof- it and Loss account 6569 91 1261 88 1341 IB 486 40 23 85 166 25 213 24 II.I.t'STKATTON NO. 39. CLOSING ENTRIES Having posted the above journal onirics to the Ledger accounts, rule and foot the accounts thai balance. Rule a single red ink line under $8,972.50 mi each side of Merchandise Inventory leaving this account open, showing the present Inventory, $16,462.8] on the debil as an asset. Close the Profit and Loss account and bring the net profit or surplus down holow the ruling, and compare ihis Profil and Loss account with the previous Profit and Loss account. BOOKKEEPING AND ACCOUNTING i i CLOSING OUTLINE The following closing outline may aid the student to get the order of pro eedure in closing a set of hooks by tins method fixed in the mind, or it may he used for reference. CD 7 03 8. CC 9. -i -d 10. a Purchases Account 1. Merchandise Inventory at beginning of period, close into 2. Freight In account, close into 3. Purchases Discount account, close into 4. Merchandise Inventory ai end of period to credit of 5. Returns ami Allowances from Purchases, close into Note: Now the difference between the two sides of Purchases account is "the cost of the goods sold." G. Close Purchases into Sales to transfer "the cost of g Is sold" to the debit side of sales. Freight Out account, 'dose into Sales Discount, close into \ Sales Account Returns and Allowances from sales, close into Note: Now the difference between the two sides of Sales account is the "gross profit." Close Sales into Profit aio! Loss to show the "gross profit" on the credit of Profit ami Loss account. This closes the Trading Accounts. In the preceding work there are no accounts for Nos. 5 and 9, because the Returns and Allowances from Purchases (No. 5) were credited to Purchases, and the Returns and Allowances from Sal.-, (No. !i) were debited to Sales, however, when these separate accounts are kept, they are closed as in the outline. Freight (hit account does not appear in the preceding work, but when this account is kept, as explained later, it is closed as liown or direct to Profit atol Loss. 11. Administrative Expense, close into 12. Selling Expense, close into 13. Delivery Expense, close into 14. Interest and Discount, close into 15. Real Estate Expense and Income and any other expense accounts, such as wages, salaries, rent, taxes, etc., .lose into ■ Profit and Loss Account BUSINESS OE COMMERCIAL PAPERS. 63A. The following illustrations show the forms of business papers to be used in the work in Chapter II ami Chapter III. The note, draft and ac- ceptance have already been shown, and tiro not included here. The student will receive the Incoming' Papers from the Incoming Papers Tab, and will make out all Outgoing Papers required in each transaction. ILL MEAD Jh?/7 9;^Y^> -fi '-rt^is, ^ ^rf^r-ns - 5" !9iL^ ^,r^->-*ysfS-*. ■sW I - >/<* ^ eo'jCMT or W. J. EMERSON & CO. General Merchandise -T/? Jt-Ss ^/f"J^.s^ ^.J,*^i .i r J*/^ jtPrf £r* _.-.'., 2./ 2-.ro ■ T/t l ? ■'• ILLUSTRATION NO. -to. A V.UA. FOR THE SALE OF I 7> IinoKKKKlMNi; AND ACCOUNTING Bills and Invoices: The terms "Bill" and "Invoice" mean the same, a list of the goods boughl or sold, with the prices, terms and amount. Poi venience here, the term "Bill' is used for the bill of -u.»K sold to customers. and the term "Invoice" is used for the list of g is purchased. 63B. A Memorandum of Credil or Credil Memorandum is sent to a cus- ininrr in- ivci'iwil from ;i creditor, wIkii an allowance is made for shortage on nt of an error, damaged g Is. goods not up to grade, for overcharge, or for goods returned. M cA. J ^f^,^-, ^7 A-2-y-^ 't^lsl^t^r^f* **-7* ^ i»2- , *aL \V. .1. EMERSON & CO. D(«k«aa m (', IN BR A I. UIRCBANDISE i,^x^-Jrs(s/^^ f: &P - fc (OfO^? J>^*-*S^7-~r?S II.l.rRTIlATlcV NO. 12. A RECEIPT BOOKKEEPING AND ACCOUNTING 79 63D. A Statemenl of Account is usually sent to all customers who have open accounts on the Ledger the first of each month. This statement may be itemized, and if payments have been made, the credits are shown. How- ever, in many cases only the balance at the first of the month is shown, and an itemized statement sent if requested. MONTHLY STATEMENT M ^Q- 1¥l^^K K ^ j zr* - " -< -*=?- -r -^-/ y /. :-- .f.u? 'j£j[^2mLi 19,2- IN ACCOUNT WITH W. J. EMERSON & CO. OCAkCKI IN General Merchandise raf1 is a drafl drawn by one bank on another bank in whi< a the bank 1 ej on deposit. It is called " Exchange " and is usually drawn me bank in a large city. A drafl on ;i New York bank would be • New York Exchange. CENTRAL NATIONAL BANK n Cmicaco . 2 , ? S/ ?- *f, Pay io tbe order ol . . r Jl^r-^-?- f//>-r* ,-t^/ y-rst^vt^fst-f^rf (/ " .- <> / _ ^ y- 0-*?S J *K- /ft a - Dollars l» COLLEGE CO«*CNCI T<. Ih« FIRS'? NATIONAL HANK I YORK, N V ) ^ 377 9??;//.. ILLUSTRATION NO. 15. HANK DRAFT. NEW YORK EXCHANGE 63Ci. A Persona] t Iheck is a check drawn by a depositor on the bank in which his money is on deposit. The bank accounl is usually kepi on the check stub. Each deposil is entered on tin 1 stub and the stuh is filled mil when a check is written and tin' balance broughl down, so that tin' actual balance is always (.n tin 1 stub when the nexl check is to lie written. The stub should be tilled out before writing the check for Tear it may be overlooked. Chicago. "I \Az^7/ .7/ . ;o — /vo / CENTRAL NATIONAL BANK 7<<^/^^^/ la rs II. I i IN Nl I. 16. A PERSI IN \I. CHECK Commercial papers, such as: cheeks, promissory notes, acceptances, postal n c.\ orders, and express money orders, when made payable to bearer or to order, are negotiable papers. That is. the payee or holder may legally transfer such negotiable paper to another. \>\ indorsement. The indorsemenl transfers the legal right to collect the value represented in the paper, and, at the same larantj thai the paper is valid and genuine, should the payer fail to pay. when the paper is due. the holder can hold the indorser, by legally presenting the paper for payment and giving the indorser legal notice. BOOKKEEPING AND ACCOUNTING 81 63IT. Indorsement: In order to transfer a note, draft, acceptance or check, the holder must write his name on the back of the paper. Always across the left-hand eiid. Hold the paper with the left hand in position yon would to read it, then turn it over, the top toward you, and write across the left hand end. There are a number of ways to write the indorsement on commercial paper. The purpose of the transfer should be considered. Blank Indorsement is the name of the payee or holder only. This transfers the paper. Any holder may indorse and use the paper. It be- comes the same as if made payable to bearer. Indorsements (In blank) W. J. Emerson (In full) Pay to the order of T. J. Akin & Co. W. J. Emerson (For Deposit) Pay to Merchants Bank for deposit account of W. J. Emerson (For Collection) Pay to Merchants Bank for collection account of W. J. Emerson (Restricted') Pay to T. L. West only W. J. Emerson (Without Recourse) Pay to Order of T. L. West, without recourse. W. J. Emerson (For Guarantee I hereby guarantee the payment of the within note. "W. J. Emerson. 'For partial Payment) Received on the within note Fifty Dollars ($50), Mar. 15, 192—. Indorsement in Full. When indorsed in this way, the person to whom it is transferred must indorse the paper before any other holder can use it. Indorsement for Deposit: Usually used on checks to be deposited. When thus indorsed, the checks cannot be used for any other pur- pose than deposit. For Collection: Usually used on Notes placed in the bank for collection, or in the hands of a collection agency. The words "Pay to the order of" and the name of the bank or collection agency may be written above the words. This shows the purpose of the indorse- ment, and prevents the returns being used for any other purpose. Restricted Indorsement: Write "Pay to (name of party to whom transferred) only," and sign below. This makes the paper non-ne- gotiable. Without Recourse: An indorsement without recourse means that the party who transfers the paper cannot be required to make the paper good in ease of non-payment. For Guarantee: This means the indorse!- will make the paper good in case of non-pay- ment, but after reasonable effort lias been made to collect from the maker. For Partial Payment, simply write the facts across the back of the paper, and the date. This indorsement is written on the back of a note when the interest is paid and when any part of the principal is paid. 82 BOOKKEEPING AND ACCOUNTING 631. Check Book: Keeping the bank accounl in the check book is a very simple matter, yet, it requires attention and care. It is easy to fail to put the deposit on the cheek stub, but it will be found in the bank pass book and can be taken care of. In case of failure to till oul the check stub when a check is given out, unnecessary trouble is caused. It may be necesary to wait until the canceled checks are returned from the bank before the proper record can be made. Fill out the check stub first, and then write the check. Re sure to enter each deposit on the check stub, and bring down the balance every time a deposit is made or a check is written. It is a great satisfaction to know the balance in the bank at any date and to know it is right. The following illus- tration will show how your cheek stubs should appear: No.. / 'Deposit _ I _ U. Favor (Qrv^r^-C^^. Balance . No. _±£ 0t*tr3£r4L 'Be pos it 77"/ !■>. Favor AJ^7^C^//i^f f^ ( J t'A For ^/^-7^^-^Jr^J Balance Nq._JL 'Deposit .'.'- ■stZ^ifJL 192- . FavorUu^tiJLii fo,6Ll^7/ Balance No._Cz_ Deposit J/a#?/ /?w jrt-t'J*- y/v :..-, ' 22 16 ■: I LUSTRATION NO. 17. CHEI K STUBS, SHOWING HANK BALANCE BOOKKEEPING AND ACCOUNTING s:; 63J. Deposit Ticket: A Deposit Ticket is a list of the items, such as cur- rency, checks, bank drafts, (cash items) to be deposited in the bank. Deposit tickets are furnished by the bank to its depositors. DEPOSIT SLIP Merchant's Bank T9 ..' i£ DEPOSITED BY :k222^z -i?-rts ALL CHECKS MUIT II LISTED SEPARATELY ■ £A ILLUSTRATION NO. 48. DEPOSIT TICKET DEPOSIT SLIP Merchant's Bank .'■ •'.--- ;■ ;- i. u. 5L2S IAA J ILLUSTRATION NO. 49. DEPOSIT TICKET 63K. Bank Pass Book: This book is a record of deposits in the bank. Each deposit is entered in this book by the Bank Teller at the time the deposit is made. In actual business, the depositor makes no entry in this book. The bank enters the deposits and either balances this book by entering on the right hand side all checks paid by the bank, and shows the balance, or, in large %2 vyCo -+-■-'- LEFT SIDE OF PASS BOOK RIGHT-HAND SIDE OF PASS BOOK ILLUSTRATION NO. 50. THE BANK PASS BOOK 81 BOOKKKKI'INC AND ACCOUNTING banks the bank will outer only deposits in the pass book anil then on tho first of each month give the depositor a separate statement showing both deposits and eliecks paid which are canceled and returned to the depi with the statement or with th( book, wh method is used. Eere yon will enter all deposits on the left side of the pass book and all i ■•■ paid out on the right-hand side. The i two sides will show the balance of cash in the bank, as shown by the balance on the check stub, if all checks issued have been paid by the bank. Of course, in actual work there might be checks given out that had not reached the bank. In that case, when thi statement and canceled checl returned from the bank, the checks given out and nol paid would be deducted from the balance shown by the bank to equal the balance shown on the check stub and Cash Book. The following is the form of the bass Book. Deposits on tin Left < I ks given out and paid by the bank- on the right. This Pass Book is balanced on January 6, just to show how to balance it. The Pass Book is balanced by the hank, unless statements are rendered instead. but not until the end of the month, and if the page is filled when the book is balanced, the balance is carried to the next left-hand page, instead of being brought down below the ruling. 63L. Bank Statement: [f the bank gives out statements instead of balanc- ing the Pass Book, then only the deposits would be entered in the Pass h\ the Teller at the time the deposit is made, and the first of each month a statement like the following is given each depositor for the checks paid the preceding month. Month of January 192 Checks 192 Checks 192 Deposits Jan 2 812.00 Jan 15 122.45 Jan 1 9500.00 2 117.25 16 676.69 6 1694.22 2 863.40 18 87.50 10 4987.50 2 1550.00 19 312.85 13 2610-93 3 156.25 20 911-65 20 5129.28 6 444.60 20 664.97 31 3562.50 8 150-00 20 577.68 8 38.75 20 444.60 9 219.86 22 1000.00 10 647.50 23 54.35 11 42.85 23 727.74 11 2992.50 25 1517.50 12 32.50 27 444.60 12 150.00 30 167.50 13 444.60 13 240.00 Balance $11031.29 Please examine thi it and the canceled vouchers returned. Ef no error is reported in 10 davs the account will bi sidered correct. ILLUSTRATION NO. 51. BANK STATEMENT The I'.ank Statement is the same as if the Bank bass Book were balanced and handed back to the depositor. So many fail to hand in their bass Books at the proper time to be balanced, that it is better for the Hank to render statements at the tirst of each month and not balance the Pass Hooks. BOOKKEEPING AND ACCOCXTING 85 63M. Reconciliation of Cash Balance: The bank statement and returned vouchers for the month of Decemher, were received by T. M. James & Co. on January 3, showing their balance at the close of business December 31, $3,648.75. Upon checking the returned vouchers with the Check Book, it was found that the following cheeks given out had not reached the bank and are yet outstanding: No. 527, $75.60, No. 532, $87.50, No. 534, $18.75. Their Cash Book shows a cash balance of $3,466.90. Reconcile the bank account. Reconciliation: Bank balance De.-. 31 $3,648.75 Cash balance per Cash Book, Dec. :il 3,466.90 Difference $ 181.85 Checks Outstanding: No. 527 $75.60 No. 532 S7.50 No. 534 1S.75 Cheeks outstanding, not paid $ 181.85 The above form of reconcilation should be written at the bottom of the debit page of the Cash Book at the end of each month. The bookkeeper should show the management the deposit of the previous day, and the cash balance. This should be submitted every morning. Schedules showing Notes Receivable and Accounts Receivable soon to become due, and those past due, should be sub- mitted as often as necessary, also schedules of Notes Payable soon to become due, and Accounts Payable with date of discount period and the date to be- come due. 63N. Keeping the Bank Account: While the bank keep? the record of all transactions with its depositors and renders a statement to each depositor, at the end of each month, or balances the depositor's Bank Pass Book, yet each depositor should keep a record. Usually the bank account is kept on the cheek stubs of the Check Book, but there are various ways of keeping the record of transactions with the bank. A Bank column may be kept in the easli book. The Bank column on the debit side of the Cash Book will show the deposits from time to time, and the Bank Column on the Credit side of the Cash Book will show the cheeks issued. The difference between the totals of the Bank columns will prove with the Cash balance, at any time. Duplicate copies of the deposit tickets may be kept, ami these will be a very convenient reference in some line of business. If duplicates of the deposit tickets are not kept, a list of each deposit may be kept on the back of the check stubs. 85 BOOKKEEPING AND ACCOUNTING PROBLEM 9. W. G. GEAYSON & CO. A PARTNERSHIP The purpose of this problem is to give further practice in making adjust- ments and closing the books. Points will arise in the course of the soli which may be discussed in class. The following accounts represent the totals of the Ledger accounts W. G. Grayson & Co. a1 the end of a six months' period, from January 1 to June 30. W. G. Grayson and W. B. Rollins an- partners, and share profits and hear losses in proportion to their investments. Trading Accounts Merchandise Inventory w ' I ( }raj son, Capital May 10 K .00 Jan. 1 9000.00 W. G. Grayson, Personal Mar. 1 - i.00 ! Apr. 5 15.25 Y\ r . B. Rollins, Capital | Jan. 1 6000.00 AY . B. Rollins, Personal .Mar. 20 .; -no | Cash June 30 871 0.2.3 | Notes Receivable June 30 7748.00 | June 30 L800.00 Notes Payable | June 30 4980.00 W. 11. Strong June 30 2407.25 E. L. Morton June 30 2137.35 | Davis Bros. | June 30 2154.20 A. C. McClurg & Co. June 30 1985.40 Office Equipment June 30 985.20 | 1 tclivcrv Equipmenl June 30 L26 i 30 •Jan. 1 4865.70 j Purchases •June 30 18531.30 | Jui Purchases Discount U6.20 | June 30 347 80 Sales June 30 429.75 | June 30 Sales Discount 24597.25 June 30 542.50 Freight In June 30 478.20 , Profit and Loss Accounts Administrative Bxpi QS( June 30 754.05 | June 30 Selling Expense 8.75 June 30 850.25 June 30 Delivery Expense 12 7:, June 30 324.45 | Insurance June 30 125.00 | Interest and Discount June 30 37.12 June 30 Copy the above accounts on Ledger paper, allowing each account eighl linos, and after making journal entries to adjust the following inventories, BOOKKEEPING AND ACCOUNTING 87 prepare a Final Trial Balance before closing, from which prepare a Balance Sheet and a Profit and Loss Statement, then prepare and post journal entries to "Close the Ledger." See paragraphs 28 to 41. Merchandise Inventory, June 30 $6,265.80 Insurance Expired 62.50 Accrued Assets : Interest on Notes Receivable 125.50 Accrued Liabilities: Unpaid Office help 185.40 Unpaid payroll Sales Department 137.50 Interest accrued on Notes Payable 22.50 Deferred Charges to Operation : Postage and Office Supplies on hand 75.60 Advertising matter on hand 115.35 Depreciation : 10% on Office Equipment 98.52 15% on Delivery Equipment 189.87 Reserve for Doubtful Accounts : 6% of Accounts Receivable 272.68 First, take a Trial Balance by differences, except in Purchases and Sales account, in which use both the debit and credit amounts, because the credit of Purchases represents the returns from Purchases, and the allowances received from creditors, and the debit of Sales represents the returns from sales and the allowances to customers, and these items are used in the Profit and Loss Statement. Second, prepare and post adjustment journal entries to record the above inventories in the hooks except the Merchandise Inventory. Third, take a Final Trial Balance. Fourth, prepare a Balance Sheet and Profit and Loss Statement and prove them. Fifth, prepare and post closing journal entries to close the Nominal -accounts. The student is instructed to close the Partners' Personal accounts into their Capital accounts, and to credit each partner for his proportion of the net profit. Read Partnership Accounting, paragraphs 82 and 83. Prepare and post journal entries to make this adjustment. Rule and foot the accounts that are closed. Prepare and post journal entries to close Accrued Assets, Accrued Liabilities and Deferred Charges to Operation accounts, and transfer these items back to the accounts they affect. See paragraph 40. Rule and foot these three accounts that are closed. Take a proof Trial Balance. Note: A Working Sheet similar to illustration No. 43 may be used or the steps may be taken as suggested above. >> BOOKKEEPING AND AC< 01 NTING THE BALANCE SHEET AND TRIAL BALANCE When the posting of the I ks is completed, we know thai if the posting lias been done correctly, the Trial Balance must balance. The Trial Balance is the uexl step after posting a1 the end of the month, and at the end ui' any fiscal period. The fad that the Trial Balance balances proves thai the debits have all been posted to the debit side of the Led( units, and that the credits all been posted to the credil side of the Ledger arc. units, yet, there could still be a mistake, for a debil item could be posted to the debit side of the wrong account. A debit of $350 to Davis Bros, mighl be the debit of Harper Bros, i int, and the Trial Balance would balance, bu1 any error of this kind will be found while making oul monthly state in customers, or in receiving monthly statements from creditors which, of course, are compared with their accounts in your books before payment. So the bookkeeper does uol borrow trouble over the possibility of such an error, because he knows if there is such an error, it will be discovered as jusl - ested, and can be corrected without affecting the Trial Balance. 65. Balance Sheet. A Balance Sheel is a statement of the Resources and Liabilities or Assets and Liabilities, and Capital accounts arranged in a proper form to show clearlj thi ndition of the business. The total of the assets minus the total of the liabilities is the net capital, yel simply a list of the assets and a list of the liabilities promiscuously arranged, while il mighl be a eorreel statement of assets and liabilities, is nol a satisfactory Balance sheet. Suppose you were seeking an opening to conned yourself with a - business and had opportunities offered you to become an equal partner in the business of -1111111 T. Long, or in the business of C. M. Senter, both in the same line of business, the location and the persons being equally satisfactory Balance Sheet. John T . Ion/: • Assets: Liabilities: Merchandise 2000 00 Real Estate 10500 00 Notes Payable 6875 00 Cash 1500 00 Aooounts Fayable 9875 00 Office Stationery on hand 275 00 Mortgage Payable 4500 00 Advertising Matter on hand 225 00 Accounts Receivable 2000 00 John T. Long, Capital 7500 00 Office Fixtures 1500 00 Machinery 12750 00 Total Assets 30750 00 30750 00 Balance Sheet, C . M. Senter. Assets. Liabilities: Aooounts Reoeivable 4250 00 Machinery 4250 00 llotes Payable 4750 00 Real Estate 7000 00 Aooounts Payable 9500 00 Cash 5000 00 Mortgage Payable 600q 00 Offioe Supplies on hand 125 00 Salaries advanced to salesmen 50 00 C- M. Senter .Capital 750C 03 Advertising Matter on hand 75 00 Merchandise 1550 00 Offioe Equipment 700 00 Notes Reoeivable 4750 OP Total Assets 27750 00 27750 00 lit 1 sri: \TION NO. MEETS. BOOKKHKlMXt; AND ACCOUNTING 89 in each case, and the Balance Sheets, [llustration No. 52, were presented i i you, upon which you propose to make your decision, which would be your choia tin. Assuming the Balance sheet in each ease is correct as to the Assets and Liabilities, the net capital in each ease is the same, $7,500. You can invest $7,500 in either business and own a half interest. Looking at these statements as they are, it is not easy to see which is the better investment. It would be necessary to arrange the Assets and Liabilities to show the obli gations soon to be paid and the quick assets thai would be available to meet these obligations. (17. Current Assets (or quick assets or liquid assets) are those which may soon be turned into cash to pay the debts soon to become due. Deferred Assets are office supplies on hand, advertising matter on hand, paid for bu1 not used up. and any salaries or other expenses paid in advance that would represent service due the business. Fixed assets (those more permanent •and not available for the payment of debts; are such as Machinery, office equipment, buildings, real estate, good will, etc. Of the Fixed or Permanent assets. Good Will is the most permanent, because the business would have to be sold to convert Good Will into cash. However, to convert the machin erj or buildings into cash would cause the discontinuance of the business il' the money had to be applied on debts. Current Liabilities are those debts soon to become due. and Fixed Liabilities are those longer deferred, as a mortgage due in three years. Arrange the foregoing Balance Sheets as I'm I lows and examine them. Balance Sheet . John T. Long. Current Assets: Cash Aooounts Reoeivable Mdse. Inventory 1500 2000 2000 00 00 QQ 5500 500 00 00 Current Liabilities] Notes Payable Acoounts Payable Total Current Liabilities Fixed Liabilities: Mortgage Payable John T- Long, Capital, 3675 9875 00 OQ 16750 4500 7500 00 00 00 Total Current Assets Deferred Assets: Office Supplies Adv. Matter 275 225 00 00 Total Deferred Assets Fixed Assets. Offioe Fixtures Real Estate Maohinery 1500 10500 12750 00 00 bo 30750 00 Total Fixed Assets 24750 oc Total Assets 30750 00 f B_alsnc_e_ Sheet . C K. Se_nte_r Current Assets: Cash Botes Reoeivable Acoounts Reoeivable Mdse. Inventory Total Current Assets Deferred Assets: Offioe Supplies Advertising Matter Advanoed Salaries Total Deferred Assets Fixed Assets: Offioe Equipment Real Estate Maohinery Total Fixed Assets Total Assets 5000 4750 4250 1F5C 125 75 50 700 7000 4250 15550 250 1195C 00 27750 00 OC 00 Current Liabilities Notes Payable Aooounts Payable Total Current Liabilities Fixed Liabilities: Mortgage payable C. M. Senter, Capital 4750 9500 14250 6000 7500 27750 r CO ILLUSTRATION NO. 63. BALANCE SHEETS 90 BOOKKEEPING AM' ACCOUNTING 68 Examining the Balance Sheets in the forms shown lasl above, you find thai -Inliii T. Long lias eurrenl or available assets of $5,500 with which to ni.it $18,750 of eurrenl Liabilities soon to become due, and it' you put in -^ 7 ,-">i h • for a half-interest, you would yet lack $5,750 of being able 1" meet the eurrenl debts. You find thai C. M. Senter lias eurrenl or quick assets of $15,550 to meel eurrenl debts of $14,250, and it' you pul in $7,500 for a half interest, the eurrenl debts eould all be paid and there would be a balance for working capital of $8,800, in cash and available assets, which is very good for a small concern. Gli. The purpose of the Balance Sheel is not only to list the assets and liabilities to ascertain the net eapital. hut to segregate the various items so as to give the maximum of information to make clear the condition of the business. The foregoing illustrations will emphasize the importance of the Balance Sheel in one respect, hut the Balance Sheet is one of the most important papers or exhibits of the results of the bookkeeping, and of vital interest to: 1. The Manager 3. The Owner or Stockholder l\ The Banker or Creditor I. The Investor If properly prepared, it reveals the condition of the business and should l>e studied by the owner or stockholder to whom it is as important as the l'rolit and Loss Statement. The investor should study and understand it, ami the hanks will he especially interested in it. when considering a loan. 69a. The foregoing Balance Sheets of John T. Long and ('. SI. Senter show the order in which the assets and liabilities are usually arranged. The assets are arranged in the order of their importance as to their being available to obtain the money to pay dohts soon to become due. The liabilities are arranged in the order of their importance as to requiring attention by pay- ment. In a partnership, the form is the same, but the present net capital of each partner is arranged on the liability side in the position of C. M. Senter in the last illustration. For instance, if ('. M. Senter and J. M. Jones were partners and the capital of each were $3,750, the Balance Sheet would show C. M. Senter, Present Capital. *:l,750 J, M. Jones, Present Capital. 3,750 instead of, or in the place of C. M. Senter. Capital. $7,500. The result would be the .same as if there were only one proprietor. CHAPTER V W. J. EMERSON & CO., WHOLESALE A Partnership 70. This business is a continuation of the business of W. J. Emerson ending January 31, 192 , Chapter III, he having' admitted W. II. Whitaker as an equal partner, in order to enlarge the business. The business is conducted under the name of W. J. Emerson & Co. It is designed for the business papers to be used, beginning in the Incoming Papers Tab, where the work ended on January 31, but the results will be exactly the same whether the business papers are used or not. The books to be used are the Cash Book, Purchases Book, Sales Book. Journal, Ledger, Notes Receivable and Notes Payable Book, and the Check Book, Bank Pass Book and the Incoming Papers Tab. The Ledger accounts as they are in the Ledger, after closing the .books of W. J. Emerson on Jan- uary 31, stand ready to receive this business. New accounts are to be opened as needed. References lb, 2b, 3b, etc., refer to entries for similar transactions in the preceding set. References la, 10a, etc., refer to similar transactions in Chapter II. 71. Opening the Books: The admission of a partner requires the same steps, in a general way, as the forming of a new partnership. In fact, it is a new partnership. The Articles of Copartnership, usually the work of a lawyer, should be signed, executed and filed with the Balance Sheet as of January 31, attached. Read "Partnership Accounting" beginning at page 104. The opening entry should state the essential facts, so that any one taking charge of the books may have the necessary information at hand. The details of the partnership agreement, Articles of Copartnership, are omitted from the opening entry because it is not desirable that those who may have access to the books should know the private affairs of the firm. 72. Preliminary: "Write your name on the outside cover of the books to be used, and page the Cash Book, Purchases Book and Sales Book. Write the headings of the columns in the Cash Book, the same as the Cash Book in the preceding business. Turn to the Incoming Papers Tab for the papers for Transaction No. 76, and prepare the opening entry on the next blank page of the Journal. As the assets and liabilities representing W. J. Emerson's Cap- ital, or net investment, are already in the Ledger, it is not necessary to list them in the Journal. State the facts in the opening entry, writing them as worded in No. 76. As the investment of W. J. Emerson is represented by the Ledger Ac- counts as they appear in the Ledger, at the end of January, in Chapter III, it is not necessary to make any entry in the Journal for W. J. Emerson in this opening entry. The Balance Sheet at the end of January shows Mr. Emerson's investment. Mr. Whitaker accepts this statement as correct. The assets and liabilities of Mr. Emerson are already in the Ledger, and the same books are to be continued. Therefore, only one entry, for W. II. Whitaker's investment, is necessary in this opening entry. In this case, the partners are to invest equal amounts, and the articles of agreement state that they are to share profits and bear losses equally, but if there was nothing said in the agreement about the division of profits, then, no matter what amount Mr. Whitaker might invest, the profits would be divided equally. Hence, the importance of having the division of profits specified in the agreement. 91 92 BOOKKEEPING AND AC< OUNTING BUSINESS TRANSACTIONS No. 7(i. Feb. I. W.J. Emerson has this day admitted \V. II. Whitaker as an al partner, according to the Articles of Copartnership, signed ex ecuted and filed, in i tinue the business of W. -I. Emerson, under the tii-iii name of W. -1. Emerson iv. Co. The partners are to invesl equal amounts, and are to share profits and bear losses equally, and eh is to receive a salary of $250 a month. \V. J. Emerson's investment is represented bj the book accounts, as shown by the Balance Sheet of January 31, 192 . which W. II. Whitaker accepts. W. II. Whitaker inw^ cash $4,096.37, ami the two story building and lot a1 Main and South Sts., now occupied by the store, at an agreed value of $16,000 for tlie building and ^L'.oiiii for the land, on which is a mort gage of for three years, which the business $6,000 at .;■, dated February 1. 192 assumes. ( ash Buildin g Land Mortgage Payable W. II. Whitaker, Capital Investment as per agreement. 1096 2500 ::7 mi oil : 00 37 Check the cash item in this opening entry for W. II. Whitaker. and enter the amount on the firsl line of the debit side of tin- Cash Hook. "\Y. II. Whitaker, Investment, $4,096.37" in the General column and check this item in the Cash Transfer the old cash balance of the Cash accounl to the dehil side of the Cash Book, "W. -I. Emerson, Investment, " and enter the amount in the Gen era! column and check it to show- it is not to lie posted, clove the old Cash account, at the same time, by entering the same amount on the credil side ■to close." $132.35 for office stationery and Co. $43.25 f"! oil and lms.. No 77. Feb. 2. Paid Brown Stationery Co. supplies. (3b). Paid Sinclair Oil line. (17b). Xo. 78. Feb. 2. Sold to Smith & Jones l' 10, □ 60, 65* brls Geneva Flour -mi. 85 cs. Royal Sweel Corn \- Co., on account, and a Unwed l" , discounl on bill of Feb. 5, $708.75. Received a 30 day trade acceptance for $515.72, dated Feb. 5, from A. ( '. Williams & ( !o., on account, and allowed 2' , discounl on bill of Feb. 5, $526.25. Received a 30 day trade accept- ance for $626.95, dated Feb. 5, Prom A. II. Moh] & < !o. on account, ami allowed _' ; discount on bill of Feb •">. $639.75. (Enter in Journal separately. Enter acceptances in Notes Receivable Book. When a trade acceptance falls due within tie- dis int period, the discount is allow I'd the same as mi a cash payment. See 9b . No. 00. Feb. 9. Sold to I). M. Noe ,v Co.. 2 15, n 30, ;,iii) lbs. Green Tea @ 72c. loo bx. Evap. Apples (5 $4.75. Sold to Davis Bros. -1 15, n 30, 2,000 lbs. Granulated Sugar @ 12c, Kill cs. Ideal Tomatoes (n $4.75, 50 bx. A. A. Prunes (n $5.75. Sold to Dwight Bros, l' 15, n 30, 100 cs. ' , lb. G. Pepper (g $5.25, 600 lbs. Oolon- Tea (a 65c. Sol, | to W. II. Mas,,,, & s,,ns 2 15, n 30, 800 lbs. M & .1 Coffee @ 58c. Hid cs. Lima Peans (,, $4.35. (6b). No. Ion. Feb. 9. Paid Auto Repair Co $98.35 For repairing delivery trucks. (17b). Received $11.25 from Brown Stationerj Co. as refund for overcharge on bill of Feb. 2. * ('re, lit Administrative expense on the debit side of the ('ash Book). Received $13.25 from Push Printing Co. as a rebate on bill of Pel,. :;. (Credit Selling Expense). No. 101. Feb. 10. Leased the second floor offices of store building to Healy & Frost, law firm, for one year from this date at $240 a month, and re- ceived their check for one month's rent, from February 1. (Credit Real Estate Expense and Income on t lie debit side of the Cash Book.) No. 10l\ Feb. in. W. -I. Emerson and W. II. Whitaker each withdrew $2,500 from investment, i Debit each partner's Capital account on tl relit side of the ( ash Book. See 33b ! . Xo. 103. Feb. 10. Ron-owed $5,000 at tin- Central National Bank on our 15 day note at 6%, proceeds. $4,987.50. (See 23a and 40b.) Filter ill Notes Payable Book. BOOKKEEPING I AND ACCOUNTING 95 No. 104. Feb. 10. Discount the following trade acceptances al the hank at 1%; Harper Bros. 30 day acceptance, $793.80, J. M. Bryant & Co. 30 day acceptance, $694.57, A. ('. Williams & Co., 30 day acceptance, $515,72, A. II. Mold & Co. 30 day acceptance, $626.95. Discouni $26.31. Proceeds, $2,604.73. Credit "Notes Receivable Discounted" on the debit side of the Cash Book for the face value. $2,631.04. Debit Interesl and Dis count on the credit side of the ('ash Book, $26.31. Make the proper record in the Notes Receivable Book. Contingent Liability: The above acceptances have been dis- counted at the bank and the cash received for them but in order to transfer an acceptance or note to the bank, we must indorse the paper. This indorsement makes us responsible for the paper, if the maker or acceptor does not pay when due. so until these papers are due and paid they are each a possible liability of ours, because we must pay the bank if the maker or acceptor does not. For this reason, accountants insist upon opening an account for "Notes Receivable Discounted," to show the "Contingent Liability," until the discounted paper becomes due and is paid.. When the time has expired for the notes or acceptances to become due, if the bank does not call upon us to make any of the paper good, this "Con- tingent Liability" is removed, and the "Notes Receivable Dis- counted" account is closed, by journal entry, and transferred to the Notes Receivable account. No. 105. Feb. 11. Purchased of Atlas Trading Co. merchandise as per Invoice No. 19, 3/15, n/60, $1,894.25. Purchased of Logan, Bryan & Co. mer- chandise as per Invoice No. 20, 3/15, n tilt, $2,136.40. Purchased of Seaman Grocer Co. merchandise as per Invoice No. 21 3/15, n 60, $1,912.30. No. 106. Feb. 11. Received $624.35 for sundry cash sales. (5b). No. 107. Feb. 12. Sold to Johnson & Meyer, Erie, Pa., 2/15, n ,.30, 500 lbs. Lipton's Tea @ 95c, 500 lbs. Cinnamon @ 90c, at delivered price. Prepaid freight to C. & E. I. R. R. Co. $29.85. Sold to A. H. Mohl & Co., 2 15. n 30, 100 cs. Lima Beans @ $4.35. 125 doz. bx. Graham Crackers @ $4.85, at delivered price. Prepaid freight to C. & E. I. R. R. Co. $24.35. (6b). No. 108. Feb. 12. Received $875.63 from Smith & Jones on account and allowed 2f ( discount on balance of bill of Feb. 2, $893.50. (9b.) No. 10D. Feb. 13. Paid office help for the week $187.50. Paid the pay roll of sales force for the week. $218.60. Paid drivers of delivery trucks for the week, $48.75. (16b). No. 110. Feb. 15. A. II. Mohl & Co. returned 10 doz. bx. Graham Crackers at $4.85 for credit. Allowed Davis Bros. $37.50 for damaged goods on bill of Feb. 0. (15a). No. 111! Feb. 15. Paid C. M. & St. Paul R. R. Co. $118.75 for freighl on goods purchased. (Debit Freight In on the credit side of the Cash Book). No. 112. Feb. 15. Received an allowance of $44.25 from Atlas Trading Co. for damaged goods on Invoice No. 18, Feb. 11. Returned g Is to Logan. Bryan ,V- Co. to the value of $36.40 for credit. (11b 96 BOOKKEEPING AND ACCOUNTING No. 113. Feb. 15. Gave Atlas Trading Co. a 30 daj note for $1,850 at 6?, on account. Gave Logan, Bryan & Co. ;i 30 day oote for $2,100 at 6' . mi account. No. 111. Feb. 15. Post the books to date and ascertain the '-ash balance. (See No. 94 Xo. 115. Feb. 16. Paid E. L. Jones for janitor service for offices on second ir, $32.50. (Debit Real Estate expense and Income . Paid Brown Stationery Co. $138.65 for office stationery. Debit adminsitrative expense. No. 116. Feb. 16. Sold to J. .M. Bryanl & Co., 2 15, n 30, 100 cs. Cinnamon, 1,500 Lbs. (u 90c, 750 His. Oolong Tea (5 65c. Sold to A. C Williams & Co., 2 15, ii 30! 2,000 His. M & .1 Coffee (3 18c, 50 cs. Butter Prints, 2,500 lbs. (§ 12c. Snlil to Johnson »v. Meyer, '_' !•">. n 30, 100 bu. Evap. Apples @ $4.75, 100 bx. A. A. Prunes (§ $5.75. Sold in Harper Bros., 2 15, n 30, 1,250 lbs. Oolong Tea (5 65c, 300 ll.s. Cloves <§ $1.35. Xo. 117. Feb. 17. Paid West,,,, Tea & Coffee Co. $1,063.51 and received ■'■ , discount on balance of Invoice of Feb. 3, $1,096.40. (15b . Re- ceived $721.85 for sundry rash sales. (5b . No. 118. Feb. 18. Paid Owen Coal Co. $1S0 for 40 tons of coal for heating store building. (Debil Administrative Expense on the credit side of the I ash Book). Xo. 119. Feb. 18. Paid the Daily News $128.50 for advertising spare from Feb. 11 tn Feb. 18. Debit Selling Expense on the credil side of the Cash Book). No. 120. Feb. 18. Purchased of United Fruil Co. merchandise as per Invoice No. 22, 3 15, ii 60, $1,254.35. Purchased of J. II. Morgan Grocer Co. Invoice No. 23, 3 15, n 60, $948.75. Purchased of Weston Ten & Coffee Co. Invoice Xo. 24, 3 15, n 60, $750. Purchased of Atlas Trading Co., Invoice No. 25, 3 15, n 60, $850. No. 121. Feb. I s . Paid Seaman Grocer Co $957.97 and received 3^i discount on Invoice of Feb. : i. I'aiil J. II. Morgan Grocer Co $803.15 on accounl and received •'!'. discounl on balance of Invoice of Feb. : '>. $827.99. (15b W. J. Emerson drew $52.50 for his private use. No. 122. Feb. is. I; lived $1,758.75 from D. M. Noe & Co. to paj their 30 day note of $1,750 at t:\ and interest. Received $1,909.50 from \V. II. .Mason & Sons to pay their 30 unt entries No. 12:1. Feb. 18. Paid R. K. .Miller & Co. $1,658.25 to pay our 30 day note of $1,650 at C, and the interest, due today. Paid Seaman Grocer Co. $1,809.00 to paj our30daj note for $1,800 a1 C . and the interest, due today, i Enter separately. Debil Notes Payable on the credil side of the Cash Book for the face value, and. on the next line, debit Interest ami Discounl for the amount of the interest iii each ease), BOOKKEEPING AND ACCOUNTING 97 No. 124. Feb. IS. When the pages of the Cash Book are filled or nearly so. transfer the Cash Book to the next two blank pages by ruling single and double red ink lines, near the bottom, across the filled page, making the lines exactly opposite on each page, regardless of whether both pages are tilled to the same line. Total each column of each page between the ruled lines, and write "amounts carried forward" on the same line as the footings, and turn to the next two blank pages and write "amounts brought forward"' on the first writing line of the new pages, and firing the totals of the columns of the pre- ceding pages to the top of the proper columns of these new pages, then proceed with the entries that follow, as usual. Transfer the Cash Book at this point, though the pages may not be entirely filled. No. 125. Feb. 18. Post the books to date, and ascertain the cash balance. No. 126. Feb. 19. Received $15.75 from C. M. & St, Paul R. R. Co. rebate on freight bill of Feb. 15. \V. II. Whitaker returned $18.75 of the money drawn for his private use on Feb. 10. Received $895.40 for sundry cash sales. No. 127. Feb. 19. Sold to D. M. Noe & Co., 2/15, n/30, 20 cs. Cloves, 500 lbs. @ 85c, 1,000 lbs. Black Tea @ 72c. Sold to Davis Bros., 2 15, n/30, 1,000 lbs. Condor Coffee @ 85c, 500 lbs. Oolong Tea @ 65c. Sold to Dwight Bros. 2 15, n 30, 100 bx. Silver Prunes @ $5.15, 125 brls. Va. Sweet Potatoes @ $4.20. Sold to Smith & Jones. 2 15, n '30, 2,000 lbs. Granulated Sugar @ 13c, 125 bx. II. Apples @ $4.75. No. 128. Feb. 20. Paid office help for the week, $187.50. Paid pay roll of sales force, $218.60. Paid drivers of delivery trucks, $48.75. No. 129. Feb. 20. Received $437.32 from Harper Bros, on account and allowed 2% discount on bill of Feb. 5. Received $624.95 for sundry cash sales. No. 130. Feb. 20. Received a 30 day note for $2,010 at 6% from A. C. Williams & Co. on account. Received a 30 day note for $1,837.50 at 6% from J. M. Bryant & Co. on account. No. 131. Feb. 22. Paid United Fruit Co. $1,178.94 on account and received 3' , discount on Invoice of Feb. 6. Paid R. K. .Miller & Co. $1,188.54 and received 3',' discount on Invoice of Feb. 6. Paid See-Moon & Co. $919.07 and received 3 r ; discount on Invoice of Feb. 6. No. 132. Feb. 23. Purchased of R. K. Miller & Co. merchandise as per Invoice No. 26. 3 15, n 60. $1,285.70. Purchased of See-Moon & Co. Invoice Xo. 27, 3 15, n 60. $1,321.75. No. 133. Feb. 24. W. J. Emerson and W. II. Whitaker gave their personal checks for $1,500 each, as an additional investment. Xo. 134. Feb. 24. Collected $73.25 for United Fruit Co., which they instruct us to place to their credit. No. 135. Feb. 24. Allowed Harper Bros. $84.25 for damaged goods on bill of Feb. 16. 98 I'.(i()KKi;i;i'l\i; AND ACCOUNTING No. 136. Feb. 24, Purchased of Logan, Bryan & Co. merchandise as per Invoice No. 28, 3 15, □ 60, $650. Purchased of Seaman Grocer Co. [nvoice No. 29, 3 15, □ 60, $750. No. 137. Feb. 24. Sold to W. II. Mason & Sons, 2 15, n 30, 30 bx. Evap. Apples (§ $3.75, 15 cs. Ideal Tomatoes (§ $3.25. Sold to A. II. Mold & Co. 2 15, n 30, 1,500 lbs. M & .1 Co 45c, 50 cs. Luna Beans (g $4 35. Sold to A. C. Williams & Co.. 2 l.'». n :!H. l.ouu lbs. Oolon- Tea @ 65c, 1,1 lbs. Granulated Sugar (§ 12c. Sold to -I. M. Bryant & Co. 2 15, o 30, 50 cs. >, lb. Ground Pepper @ $5.25, 1,000 lbs. Lipton Tea (a 75c No. 138. Feb. 24. Paid C. & A. R. R. Co. $187.50 for freight on poods pur- chased. Received $484 35 for sundry cash sales. No. 139. Feb. 24. Received $818.30 from I). M. Noe & Co. and allowed 2', discount on bill of Feb. 9. Received +>. 70 from Dwkdit Bros and allowed 2', discounl on bill id' Feb. 9. Received $945.70 from Davis Bros, and allowed 2', discount on balance of bill of Feb. !'. $965 Received $881.02 from \Y. II. Mason & Co. and allowed 2', discount on bill of Feb. 0. No. 140. Feb. 25. Received $716.50 for sundry cash sales. Paid Central .National Bank $3,500 for our MO day note due today. (Interest was paid in advance on this note. | Xo. 141. Feb. 25. paid our $5,000 note at the Central National Bank by giving a new note. MO days, for $3,750 at ti', and our check for the difference and the interest on the new Hole. (56b . Xo. 112. Feb. 2ti. Paid Murch Bros. s47.5ii for repairing and revarnishing office furniture. Paid Empire Fixture Co. $68.50 for repairing and resetting store Fixtures. (Debit Office Equipment Expense and Store Fixtures Kxpense I Xo. 1 (M. Feb. 26, Paid Seaman Grocer Co. $1,854.93 on account and received M', discount on Invoice of Feb. 11. Xo. 114. Feb. 26. Allowed D. M. Noe & Co. +47.5o for shortage on bill of Feb. 19. Xo. 145. Feb. 27. Paid office I. el,, for the week $187.50. Paid sales force for the week $218.60. Paid delivery drivers for the week $48.75. Xo. 146. Feb. 27. Received $906.50 from Johnson & Meyer which pays bill of Feb. 12 in full, allowing 2', discount. Received $972.89 from A. II. Mohl & C. to pay balance of $992.75 on bill of Feb. 12. Re- eeived $649!75 for sundry cash sales. Xo. 147. Feb. 28. Paid partners $250 each tor their salaries lor the month. (Charge half to Administrative Expense and half to Selling Expense If a separate salary ace, Mint were kept, this would be charged to "Salaries" account. | Xo. 148. Feb. 28. Post the books to date, but In fore beginning to posl res 61b. Follow the instructions given there. After posting, lake a BOOKKEEPING AND ACCOUNTING 99 Trial Balance, then prepare and post journal entries to record the following inventories : Merchandise Inventory, Feb. 28 $12,896.80 Insurance (expired) 15.00 Accrued Assets : Interest Accrued on Notes Receivable $5.18 Interest Paid in advance on loan at bank 16.87 Accrued Liabilities: Interest accrued on Notes Payable $8.56 Interest accrued on Mortgage Payable 28.00 Unpaid office help 31.25 Unpaid sales force 36.43 Unpaid delivery drivers 8.13 Deferred Charges to Operation : Postage and office supplies on hand $42.50 Advertising matter on hand 67.50 Depreciation : 10% on Office Equipment $74.70 10% of Store Fixtures 78.84 10% on Deliverv Equipment 105.00 2% on Building 341.30 Reserve for Doubtful Accounts : Additional reserve of 3% of Accounts Receivable $275.87 Note: The above depreciation and the reserve for bad debts is in addition to the depreciation and reserve set up at the end of January. In practice, 10% depreciation would not be written off for a period of one month. If the life of property such as delivery equip- ment is estimated at 10 years, then 10% would be the depreciation for one year. Fifteen per cent per year would be more reasonable for delivery equipment, considering the life of trucks to be six years, which would write off 90% in six years and the balance would be considered the scrap value. On office equipment and store fixtures, 10'; depreciation on a basis of 10 years would be allowable. On buildings not more than - r ', or '.','', should lie written off. On some kinds of machinery from 10% to 50% would be reasonable, depend- ing on the probable life of the machines. No. 149. Take the Final Trial Balance, and prepare a Balance Sheet, Profit and Loss Statement and close the books, showing the Trading Section, and the Profit and Loss Section in the Profit and Loss account to conform with the Profit and Loss Statement. See Illustration No. 27. No. 150. You are instructed to close the partners' Personal accounts into their Capital accounts and to distribute the surplus or net profit by crediting each partner's Capital account with his share of the profit. (See 65b.) No. 151. Take a proof Trial Balance and compare it with the Balance Sheet. No. 152. Prepare and post journal entries to close Accrued Assets. Accrued Liabilities and Deferred Charges to Operation accounts, and transfer the items under these accounts back to the Operating expense accounts that are affected. Date these .March 1. No. 153. "We have just learned that W. IT. Mason & Sons have utterly failed, and the amount they owe us is a total loss. Prepare and post a journal entry to adjust this loss and close their account. (Debit "Reserve for Doubtful Ac- counts" and credit W, II. .Mason & Suns.) (See 68b.) 100 KOOKKKKIMXG AND ACCOUNTING No. 154. Work oul a comparative statemenl for W. J. Emerson Chapter 111. for the month of January, and the data from this, the business of W. J. Emerson & Co., Chapter V. for the month of February, comprising the Cosl of G Is Sold, Ne1 Sales, Gross Profit, Operating Expenses and the Net Profil for each period. 73. Comparative Statecent. W. J. Emerson & Co. of Coats, Sales, Expenses. Profits and Percentages for January and February. 192 January 192 Per Cent of Sales February 192 Per Cent of Sales Inoreaae Deorease Net Sales 14572 30 29416 20 14843 90 Cost of Goods Sold 9823 80 17104 00 7360 20 Cross Profit 4746 50 32 . 58£ 12232 20 41. 58* 7483 70 Operating Expenses 3039 49 20. e# 3816 60 12.94$ 777 31 Ket Profit 1971 37 13.52$ 8086 25 27.495J 6114 88 ILLUSTRATION NO 54 COMPARATIVE STATEMENT 74. Mr. E rson calls your attention to the fad thai on February 1, we had cash on hand $15,127.66, and now on February 28 we have cash on hand si 1,945.40, and thai your reporl shows our ael profil to be $8,086.25. He asks you "Where is this profil .'" The following statemenl showing the increase and decrease in Assets and Liabilities will show where this profil is: Feb. 1 Feb. 26 192 192 Increase Decrease Assets: Cash IB 12 7 66 14945 40 26 Notes Receivable 3650 00 3847 50 197 50 Accounts Receivable 4692 52 8690 90 3996 36 Insuranoe 165 00 150 00 15 00 Ldse. Inventory 8954 75 12896 80 3942 05 Accrued Assets 21 30 36 24 14 94 Deforred Assets 196 90 110 00 88 90 Office Equipment 672 30 597 60 74 70 Store Fixtures 709 56 630 72 76 84 Delivery Equipment 945 00 840 00 105 00 Building 16000 00 16724 10 724 10 Land 2500 00 2500 00 Ket Inorease In Assets 8332 27 8676 97 6876 97 Liabilities: Totes Payable 6950 00 7700 oc 750 00 Aocounts Fayab-le 7265 05 9079 40 1814 35 Accrued Liabilities 229 20 112 37 116 83 Mortgage Fayable 6000 00 6000 00 net Increase in Liabilities 2447 52 2564 35 2564 35 ILLUSTRATION INCREASE ami ASSETS AND LIABILITIES TO SHOW ' 0] PR< IPIT BOOKKEEPING AND ACCOUNTING 101 Increase in Assets $8,332.27 Less Increase in Liabilities 2,447.52 Net Increase $5,884.75 Add : Withdrawn by partners $2,000.00 Partners' Drawing Accounts 201.50 Net Profits as per Exhibit B $8,086.25 In the Assets, every increase shows a gain, and t'wvy decrease shows a loss. In the Liabilities, every increase shows a loss, and every decrease shows a gain. The Net Increase in Assets show $8,332.27 gain. The Net Increase in Liabilities shows $2,447.52 loss. The difference, $5,884.75, shows the part of the profit in the Assets over the Liabilities. The Partners have drawn against the profits $2,201.50 which added to the $5,884.75 accounts for the net profit for the period. $8,086.25. Usually, when the partners draw against profits, the amounts drawn are debited to their Personal accounts, unless otherwise instructed. 75. COMPARATIVE STATEMENT. CENTRAL CONTRACTING CO. The following statement compares the results for the corresponding months each year for four years. It may be extended to each month for the year, and for any number of years desired. October Volume Loss Gain 1917 ,520.78 182.85 November Volume Loss Gain 1917 115,967. 32 806-22 December Volume Loss Gain 1917 $10,482.59 1,504.36 Total 3 Months Volume Loss Gain 1917 |44,970.69 2.493.43 1918 $23,897.39 2,390.22 1918 $14,785.42 200.15 1918 $13,727.00 1,618.16 1918 $52,409.81 3,808.23 1919 $17,944.77 1,076.32 1919 $16,059.03 1,157.93 1919 $14,873. 13 2,150.98 1919 ?46,876.93 4,385.23 1920 $17,915.15 3,534.05 1920 $15,207.41 1,274.96 1920 $17,615.32 4,105-51 1920 $50,737.88 8,914.52 ILLUSTRATION NO. 56. MONTHLY COMPARATIVE STATEMENT. A comparative statement of this kind may be prepared for any business where the inventory is taken at the end of each month, or each three months in which case use First Quarter, Second Quarter, Third Quarter, Fourth Quar- ter in the place of the name of the month. PROBLEM 10. DETAILED STATEMENTS AND SCHEDULES Prepare a detailed Statement reconciling the amount of the Administrative Expense and the amount of the Selling Expense in the business of W. J. Emer- son & Co.. for the month of February. Prepare Schedules reconciling Ac- counts Receivable and Accounts Payable, giving the due dates. See paragraph 33 and 34 and notes and illustrations. L02 BOOB KEEPING AND ACCOUNTING COMPARATIVE BALANCE SHEET Comparative Balance Sheet: The Balance Sheets of two or more differenl periods may be arranged in parallel columns for easy comparison. The Bal- ance Sheet (if a business al the beginning of the year may be compared with the I '.a la nee Sheel at the end of the year. The same is true for any two periods. The purpose is to imlicate the changes in the condition of the business. Usually the reports and statements already shown are sufficient information for the management, bul a comparative Balance Sheel and a comparative Profit and Loss statement may lie furnished. The following is the comparative Balance M t of W -l Emerson for January with the Balance Sheet of W. J. Emerson (.v; Co. for February. Profil and Loss Statements may be compared in the same way. The student is required to prepare this comparative Balance sheet from his books in the form shown in the following: Comparative Balance Sheel of W. J. Emerson and YY. .1. Emerson & Co. at the end of January with their Balance Sheet at the end of February. January ,192 February. 192 Current and Accrued Assets: Ca3h - Botes Reoelvable Less Notes Rec . Discounted . . . Accounts Receivable Less Reserve for Bad Debts . . . Accrued Assets l!dse. Inventory, Jan. 31 Total Current and Acorued Assets Deferred Assets: Insurance Unexpired . . . Office Supplies on hand Advertising Matter on hand Total Deferred Assets Fixed Assets: Office F.qulpment Less Res. for Depreciation . Store Fixtures Less Res. for Depreciation . Delivery Equipment Less Res. for Depreciation . Building Less Res. for Depreciation . Land Total AS30ts Inabilities: llotes Payable Aocounts Payable '. . . Accrued Liabilities Mortgage Payable Total Liabilities Bet Worth or Present Capital 4939.50 246.98 165.00 72.50 126.40 747.00 74.70 788.40 78.64 1050.00 105 . 00 6950.00 7265.05 229.20 11031.29 3650.00 4692.52 21.30 8954.75 26349.86 363.90 672.30 709.56 945.00 31040.62 14444.25 16596 37 6478.54 2631.04 9195.75 504.85 150.00 42.60 67.50 747.00 149.40 788.40 157.68 1050.00 210.00 17065.40 341.30 7700.00 9079.40 112.37 6000.00 ir.i.rsTUATioN no. r»7. comparative balance sheet 14945.40 3647.50 8690- 90 36.24 1269 6 80 40416.84 260 00 597.60 630.72 640. OC 16724.10 2500.00 61969.26 22691.77 39077.49 Prepare a comparative Profit and Loss Statement for W. -T. Emerson, chapter II. and \V. J. Emerson & Co., Chapter V, in similar form to the com parative Balance Sheet above. Comparative Statements are a satisfaction and are useful, but the papers already suggested to be submitted to the man- agement are in more usable form for the average person. BOOKKEEPING AND A* Vol N'TINC 103 PROBLEM 11. COMPARATIVE STATEMENT The following shows the Final Trial Balances before closing for the last two six month periods of J. ('. .Miner & Co. Prepare a Balance Sheet and a Profit and Loss Statement from each of these Trial Balances, then prepare a Comparative Statement of the two periods, showing Costs, Sales, Expenses. Profits and Percentages, as in paragraph 73. All adjustment entries have been made and posted. The Merchandise Inventory at the beginning of each period is shown in the Trial Balance. The Merchandise Inventory at the end of the first period was $16,421.75, and at the end of the second period is $23,275.60. The first period extends from January 1 to June 30, and the second period from July 1 to Dec. 31. Final Trial Balance, J. C. Miner & Co. for November and December. Final Trial Balance June 30, 192 Final Trial Balance Deo. 31. 192 J. C. Miners. Capital J. C. Miners, Personal .... C. P. Jones, Capital C. P. Jones, Personal Cash Rotes Receivable Accounts Receivable Hotes Payable Accounts Payable Insurance Office Equipment Store Fixtures Delivery Equipment lldse . Inventory at beginning of the period Purchases . . . .' Purchases Returns and Allowances Freight In Purchases Discount .' Sales .... Sales Returns' and Allowances Sales Discount Freight Out Administrative Expense .... Selling Expense Delivery Expense Loss on Bad Debts Interest and Discount Accrued Assets Aocrued Liabilities De-ferred Charges to Operation . Reserve for Dep.on Offioe Equip. Reserve for Dep.on Store Fixtures Reserve for Dep.on Delivery Equip Reserve for Bad Debts 127 5748 4942 6875 320 897 1125 875 9864 32394 628 437 342 349 1265 2950 1135 385 125 328 341 71481 50 45 12000 12000 51 5645 2875 341 787 36629 275 69 112 87 385 71461 166 123 6214 5895 8614 240 897 1125 875 16421 39496 625 595 427 624 1564 3743 1387 325 175 475 498 15 90716 15 14195 14195 4574 5275 845 1157 48796 385 179 225 175 710 90716 60 60 no 30 90 50 CO 00 00 15 Suggestion: AVhile the problems in between the sets are as important as the bookkeeping, it is not the idea to hold the student away from the regular bookkeeping work. The intention is for the student to proceed with the reg- ular work of bookkeeping and work out the problems at convenient times so as not to interfere with the regular class work. It is not necessary thai all stu- dents be held at the same place in the course. The discussions of material points that may be taken up in class will be as valuable to the student whatever the advancement in the bookkeeping. However, the nearer a student works out the problems up to his advancement in the course the better, and the more satisfactory and successful will be the results. 104 BOOKKEEPING AND ACCOUNTING PARTNERSHIP ACCOUNTING 76. The purpose of forming a partnership may be to concentrate more cap- ital needed to enlarge the business, or to combine different kinds of business efficiency, or for the cooperation of persons of wealth with a person, or persons, who nave the accessary knowledge and experience. To eliminate competition and i ionomize on expenses are other reasons for forming partnerships, and the reasons such organizations will continue to be formed. All partnerships should begin with a written contract or agreemi known as "Articles of Copartnership," which should be prepared by a law- yer, in which all th'- essential facts of the understanding between the partners are clearly stated, such as : 1. Dale, and aames of the parties. ."). Provision for signing papers and 2. Purpose, name of business, and checks. name of firm. (i. Duties or rights of partners. 3. Assets and Liabilities, guarantee, 7. Duration of fiscal period when and attached schedules. profits are to be distributed 4. Amount of investment, division S. Liquidation upon dissolution. of profits and lossi s, withdraw- als and compensation. 77. The legal relations of partners in the event of death, retirement, their liability under certain conditions, etc., cannol be discussed bere sufficiently comprehensive, and the accountant should make a careful study of them in the law texl and special works on this subject. The liability of partners may be unlimited, as in the case of a '■common law partnership," or a limited partnership may be created by "act of legislature" of the state in which it is located, whereby the liability of the partner is limited. The simple fact that a person shares in the pmlits of a business does not necessarily mean thai a partnership exists, but it is one indication. One may agree to receive a share of the profits of a business in lieu of rent or rights and yet not be a partner nor liable for debts of the business as a partner. If a person should allow his name to be used as if he were a partner in order to influence others, he is liable as a partner whether he is a partner or not. 78. Accounting: The system of bookkeeping and accounting in a part- nership business, is in no way different from that of an individual or sole proprietor, excepl thai separate Capital accounts arc kept for each part- ner. The routine of I kkeeping is the same. The purpose of the owners' Personal account, sometimes called the "Drawing Account,"' is to keep the smaller items, not intended for investment nor withdrawal from capital, out of the Capital account. At the end of Ihe year or period, the Personal account may be (dosed into the Capital account, or allowed to run as desired by the owners. Traveling expenses or other expenses of a partner or owner in tin' interest of the business, would be charged to an expense account and cash credited, when he is reimbursed for the money spent, but should the partner hand in bis expense slip and not desire the cash, a journal entry would be re- quired. Debit "Traveling Expense" or "Administrative Expense" or what- ever is the proper expense account, ami credit the partner's Personal account. 79. Opening Entries: If two or more persons form a partnership, the opening entry should contain a separate journal entry for each. If there are assets and liabilities, each asset is debited and each liability is credited, and the Partner's Capital account is credited for the difference his net invest- ment. BOOKKEEPING AND ACCOUNTING 10."> Suppose L. D. Miller, J. M. Zion and D. I'. Mason have formed a partner- ship. L. D. Miller invests cash only, J. M. Zion invests cash and other assets, 1). P. Mason invests cash and other assets and lias liabilities which it is agreed the firm shall assume. The opening entry would be as follows: January 1, 192 S L. D. Miller, 3. M. Zion and D. P. Uaeon have formed a partnership aooording to Articles of Copartnership signed and executed this day. They are to share profits and bear losses in proportion to their investments, and each part ner shall draw a salary of $100 a month. Their Investments are a3 follows: Cash L. D. Killer, Capital Investment as per agreement. Cash Merchandise Notes Receivable J. M. Zion, Capital Investment as per agreement. Cash Merchandise Botes Receivable Office Equipment Accounts Receivable Motes Payable Aooounts Payable D. P. Mason, Capital Investment as per agreement 5000 3500 2500 1000 2500 3000 2500 750 3750 oc 5000 7000 2000 1500 9000 00 00 ILLUSTRATION NO. 58. OPENING ENTRY FOR A PARTNERSHIP The Cash account is checked because it is debited by being entered on the debit side of the Cash Book, where it is checked again, so it will not be posted. The details of Accounts Receivable. Accounts Payable, Notes Receivable, and notes Payable would be scheduled and attached to the Articles of Copartnership. 80. Usually the assets represented by notes and accounts are guaranteed by the partner investing them, then the loss, in ease of default in payment, falls upon the partner who guaranteed this asset. Suppose a note of $500 thai was listed by a partner were placed in the bank for collection, and payment was refused. The hank protests the note and the firm pays the protest charges. $2.50 What entry.' Charge it to the partner guaranteeing it. (Partner) Personal $502.50 Notes Receivable $500.00 Cash 2.50 Should one of the Accounts Receivable, which are guaranteed, prove to be uncollectable, amount $375.60. the entry would be: (Partner) Personal $375.60 Accounts Receivable (customer's name) 5.60 However, if there is no guarantee of the assets invested, the business would sustain the loss, and the usual routine entry would be made for it. JOG BOOKKEEPING AND ACCOUNTING 81. Closing Entries: "Closing the Books," thai is. closing "nominal" ac counts i" the Profil and Loss account, is the same whether a sole owner or two or more partners. Where there arc tw ■ more partners, a journal entry is required to close the Profil and Los account and adjusl the net profil l>y dividing it among the partners. It' there is no written agree nl specifying how profits shall be shared or the bearing of losses, then the profits or Losses are shared or borne equally regardless of the amounl invested by each. 82. Proposition No. 1: Suppose -I- W. Perkins and 0. C. Nelson are part- ners J. W, Perkins' nel investment is $7, i and 0. C. Nelson's oel invi menl is +.".,000. The "Nominal" accounts have been closed to the Profil and Loss account, and thai accounl now shows a net profit of $1,800, to be adjusted c. Nelson. Personal 170.00 To close this account into the partners' Personal accounts, as per agree- ment. BOOKKEEPING AND ACCOUNTING 109 86. Another Method: Another method for determining the interest on the net investment, is to take the equivalent monthly balances as shown in Proposi- tion No. :?. Then' you find J. W. Perkins' average investment is $78,600 for one month, and 0. C. Nelson's average investment is $56,400 for one a th, then: The interest on $78,600 at 6< , for 1 month is $393.00 The interest on $56,400 at 6« , for 1 month is 282.00 You see it amounts to the same and is much more simple, especially if the average investment must be determined anyhow. 171. A Study: Now if the student will use ledger paper and open the Capital accounts as shown in Proposition No. .">, and open a Profit and Loss account (with a debit balance of $1,800) and post these journal entries to these accounts, it will crystalize this whole proposition in the mind, and be much more satisfactory than simply reading it. 87. Dissolution of Partnership: A partnership may be terminated at the will of the partners, or by the expiration of the duration for which the part- nership was formed by the agreement, or upon the death of a partner. Upon the dissolution of a partnership, for whatever reason, a notice of dissolution should be inserted in a newspaper and the same notice mailed to all the trade with whom the firm has had trade relations. The law should be studied by the student or accountant with reference to the legal features. Upon the retiring of a partner by the selling of his interests, the usual leual notice is distributed and the hooks closed as at the end of a fiscal period, and the profit or loss adjusted to show the exact condition of the partners' ac- counts. Then the necessary entries can be made. 88. Proposition No. 5: Suppose .1. \Y. Perkins and O. C. Nelson are part- ners and their Capital accounts stand exactly as shown in Proposition No. :!. considerino- the net profit $1,800 to be divided according to the partners' average investment. Each partner is allowed interest at 6% on his invest- ment and charged on his withdrawals as before. Mr. Nelson decides to retire and sell his interest to Mr. Perkins, How much should Mr. Perkins pay -Mr. Nelson, and what entries, if Mr. Nelson agrees to take $2,000 cash and a P>(»- day note for the balance? As has already been determined. Mr. Nelson's interest on the investment is $282 and Mr. Perkins - interest on investment is $383. Then the first journal entry is: Profit and Loss $675.00 J. W. Perkins, Personal $393.00 O. C. Nelson, Personal 282.00 To adjust partners' interest on their investment. The next entry would be to close the partners' Personal accounts into their Capital accounts: J. W. Perkins, Capital $:507.00 O. C. Nelson, Capital 108.00 J. W. Perkins. Personal $307.00 O. C. Nelson. Personal 1 68.00 To close the partners' Personal accounts into their Capital accounts. Note: The student should open the Capital accounts and the Profit and Loss account, as in "A Study" in Proposition No. t. t.. see lew the above amounts are obtained, which will be very apparent when these entries are posted. When the above entries are posted. O. C. Nelson. Capital, will show a debit el' $168 and a credit of $5,000 or a net worth at present of $4,832. Then Mr. no BOOKKEEPING AM) ACCOUNTING Perkins should pav him $2,000 cash and irive him a 60-day note .'it ii', interesl for $2,832. The miry is: 0. C. Nelson, Capital $4,832.00 Cash $2,000.00 Notes Payable 2,832.00 To pay for the interesl of 0. C. Nelson and to close his Capital account. But, suppose Mr. Nelson should agree to lake $4,000 in cash for his interest. Then a payment of $4,000 must cancel his interest and close his Capital account, and the $832 would belong to Mr. Perkins. In that case, the entry would be: O. C. Nelson. ( lapital $4,832.00 Cash $4,000.00 .1. W. Perkins. Capital 832.00 Again, suppose on the other hand. J, \V. Perkins agrees to pay 0. C. Nelson $6,832 for his interest. It is evident then that both partners consider the busi- ness worth more than the tangible assets, from the fact that the established organization and reputation of the business will materially help to earn profits in the future. This intangible asset raises the question of value of the Good- will of the Business and, in this case, establishes its value. It is represented in the books by an account called "Goodwill." The entry now would be: O. C. Nelson. Capital $4,832.00 Goodwill 2.1)00.0(1 Cash $6,832.00 To (dose O. C. Nelson, Capital, and set up the account "Goodwill," to repre- sent the excess paid ahove his interest shown by the I ks. 89. Goodwill: While the question of "Goodwill" is more frequently con- sidered and its value recorded in corporation bookkeeping, it has already been shown that it may arise in an individual or a partnership business. When an individual, firm or corporation has. during a period of years, established a reputation for fair dealing, standard quality, and the scrupulous fulfilling of obligations to the extent that the confidence of customers means thai they will not only continue to be customers, but their good report will bring other cus- tomers, there is an asset created which, though intangible, tvill produce profits and is of value as a real asset. It is recognized by the courts, by merchants and by accountants as a Legitimate asset. It is a fixed asset, more fixed than other fixed assets, because other fixed assets ma\ be sold without disturbing the business, while the assel "Goodwill" cannot be sold without selling the business. Goodwill may also be created by the location of a business on a crowded corner, or a franchise or a legal or partial business monopoly that will produce profits that cannot be realized by a business not having these advantages. No hard and fast rule can be given that will apply to any and every busi- ness for the establishment of the value of the Goodwill. The conditions, prospects and surrounding circumstances must he considered. '1'he ordinary way of determining the value of Goodwill is to appraise it upon the basis of what is known as the "Purchase of a number of years of the average net profits of the business."' The net prolit in this ease is usually understood to be "the net prolit of the business less seme rate per cent of interest on the net Capital invested each year. BOOKKEEPING AND ACCOUNTING 111 Suppose that the net investment of the Glass & Bryant Mercantile Co was $20,000 during 1919, $22,500 for 1920, and $25,000 for 1921, and that the Del profit shown by the books for these years was as follows: $3,100 for 1919, $3,800 for 1920, and $4,350 for 1921, and it is proposed to pay five years of the average net profit for the Goodwill of the business, thai is, five times the average net profit for three years. Assume 6% to be a fair rate of interest on the investment for each year, then : The net profit for 1919 is $3,100 Less interest on $20,000 at 6% for 1919 i s 1,200 net $1,900 The net profit for 1920 is $3,800 Less interest on $22,500 at 6% for 1920 i s 1,350 net $2,450 The net profit for 1921 is $4,350 Less interest on $25,000 at 6< , for 1921. . 1,500 net $2,850 The total net profit for three years $7,200 $7,200 divided by 3 is $2,400. the average net profit per year. Then if five times the average net profit is paid for the Goodwill, the value is 5 times $2,400 or $12,000, the value of the Goodwill. 90. In some cases depreciation on plant and machinery and equipment have been deducted, and a higher rate of interest on the investment applied. In a trading company one to five times the average net profit is considered, depend- ing upon circumstances peculiar to each case. In manufacturing concerns one to four times, for a professional, one to three times, and for some other lines. much more. The ability to transfer the Goodwill that may exist must also be considered, as well as the time for which it would naturally be effective in the producing of profits. In employing the foregoing method of appraising the value of the Goodwill of a business, it may be found that this asset dues not exist or that its value is not of sufficient consequence as to be worth con- sidering. 91. The question has been raised as to whether or not the fixed asset. "Good- will" should be written off in the same way as depreciation on building or ma chinery. It is suggested by some accountants thai where "Goodwill" has been based upon the purchase of a number of years of the average net earnings, or by the purchase of a number of years of the excess earnings, it should be writ- ten off within the same number of years. Opinions differ, and other account- ants contend that "Goodwill" once properly entered on the books at its cost, should continue at the original value. 112 HOOKKKKPIXCi AND k( ( 0UNT1NG PROBLEM 12. POWERS & WILLIAMS. A PARTNERSHIP At the close of business December 31, a three month period, the Ledger of Powers and Williams showed the follov ounts. The partners share profits and bear losses in proportion to their investments. Copy these accounts ..n ledger paper, giving each accounl eight lines, and after providing for" the inventories thai follow, prepare a Pinal Trial Balance before Closing, Balance sheet, Profil and Loss Statement, and close the Ledger, (lose each partner's Personal account into his Capital account, and eredil each partner's Capital ace, Mint for his share of the net profit, by journal entry. Refer to the steps sug- gested n. Prohlem 9, or use the Working Sheet. W. .1. Towers. ( 'apital Oct. 25 151 10.00 Oct. l !i;,i)ii.tiu in 1000.00 W. J. Powers, Personal Oct. 5 150.00 12 50.75 Oct. 15 38.50 X. M. Williams. Capital Oct. 25 1." .00 Oct. 1 5500.00 10 1000.00 X. M. Williams, Personal Oct. 8 16 175.00 37.50 Oct. 18 40.25 Cash Dec. 31 6875.00 || ( M'lice fixtures Oct. 1 750.00 || Notes Receivable 1 tec. 30 7675.00 || Notes Payable || Dec. 31 4285.00 Accounts Receivable Dee. 31 5692.00 || Accounts Payable || Dec. 31 2850.00 Xot is Receivable Discounted Dec 15 2000.00 Merchandise Inventory Oct. 1 5760.00 Purchases Dec. 31 12075.1111 Dee 31 350.00 Purchases Discount Dec. 31 285.00 Preighl Tn Dee. 31 290.00 | Sales Dee 31 360.00 I 1 Dee. 31 18697 Sales Discount 50 1 >ec 31 125.00 || Administrative Expense Dec. 31 H2H.00 || Selling Expense Dec. 31 740.00 || Freight Out N 1 1 v 18 127.50 || Interest and Discount Oct. 1 36.00 Dec. 31 12 Insurance 50 Oct. 1 120.00 BOOKKEEPING AND ACCOUNTING 113 Inventories : Merchandise Inventory, Dec. 31 $5985.00 Insurance Expired 40.00 Accrued Assets : Interest accrued on Notes Receivable $36.50 Accrued Liabilities : Unpaid office help for half week $180.00 Unpaid Wages, Sales Dept 195.00 Interest accrued on Notes Payable 56.75 Deferred Charges to Operation : Postage and office supplies on hand $ 65.40 Advertising matter on hand 125.00 Depreciation : 8% Depreciation on Office Fixtures $60.00 Reserve for Doubtful Accounts: 5% of Accounts Receivable $284.60 Note: The "Freight Out" account is a Profit and Loss account, not a trading account. (See 34b). It belongs in the Operating Expenses in the Profit and Loss Statement. This problem may be worked out using the Work- ing Sheet as in Problem 6, or by following instructions in paragraphs 27 to 40 inclusive, except that there are no detailed statements nor schedules required to be made. Notes Receivable Discounted should appear in the Balance Sheet as a deduction from Notes Receivable on the Asset side. Refer to Suggestions in Problem 9. PROBLEM 13. TRIAL BALANCE AND STATEMENTS FOR A CORPORATION. ROGERS AND BALDWIN HARDWOOD CO., INCORPORATED The net profits of a corporation are ascertained in the Profit and Loss State- ment the same as in the business of a sole proprietor or a partnership, but the distribution of the net profits in a Corporation is different. The student is already familiar with the method of crediting the proprietor for the net profit at the end of a period, and the crediting of each partner with his share of the profit in a partnership. Naturally, if the business showed a loss, the debit side of the Profit and Loss account would be greater than the credit side, and the difference (the loss) would be debited to the Capital account instead of credited. In a corporation, if all the profits were declared as dividends and distributed (by payment to the stockholders!, the entire profits would be drawn out of the business and the corporation would be in no better financial condition, after years of successful operation, than at the beginning, hence the necessity for withholding some part of the profits at the end of each period, by setting up reasonable reserves and by carrying a part as Surplus. Depreciation and deterioration should be amply provided for and this, of course, takes part of the profits. The portion of the net profits for any period that the Board of Directors of the corporation may decide shall be paid to stockholders is called a "divi- dend." The stockholders are not entitled to any dividends until the Board of Directors have met according to the by-laws and have by vote declared that a certain per cent of the par value of the Capital stock shall be paid to the stock- holders. Of course, the dividend would apply only to the stock issued. "When a dividend is declared, a journal entry is necessary to set up the divi- dend account. Usually the net profit shown by the Profit and Loss account is transferred to a Surplus account, by journal entry, then the journal entry to Ill l'.ooKKKKIMXC AND ACCOUNTING set up the dividend accounl would be, debil "Surplus" and credit "Dividend No. 1" (or whatever number il maj be) for the amounl of the dividend declared From the following Trial Balance of Rogers & Baldwin Hardware Co. for the six month period ending June 30, 192 . prepare a Balance Sheet and Profit and Loss Statement. Trial Balance, Rogers & Baldwin Hardware Co. Jnne 30, 192 Capital Stock Unsubsoribed Stock Surplus Cash Petty Cash Notes Receivable Accounts Receivable Insurance Motes Payable Accounts Payable Building Mortgage Payable Office Equipment Store Fixtures Delivery Equipment Merchandise inventory, Jan. 1 Furohases Furohases Disoount Purchases Returned and Allowances Freight In Sales Sales Returns and Allowances Sales Disoount Administrative Expense Freight Out Wages, sales Dept Salesmena' Salaries Traveling Expenses Advertising Warehouse Expense Delivery Expense Offioe Equipment Expense .... Store Fixtures Expense Building Expense and Income . . . Interest and Discount 2000 11350 80 9875 13987 360 15000 1750 2875 2250 12720 59547 735 429 397 5495 526 1750 2250 1000 950 375 750 93 175 146768 00 75 00 00 50 00 00 00 00 00 85 25 90 70 50 20 40 00 00 00 00 80 00 75 00 50 10 25000 3500 15000 17100 6000 764 643 76413 32 7 146768 00 00 00 00 00 30 25 05 50 10 Inventories or Supplementary Facts are as follows: Merchandise Inventory .Inn,. 30, 1!»:2 $18,408.65 Insurance expired 1- Accrued Assets ; Interest Accrued on Notes Receivable ' $13.25 Warehouse rent paid in advance 50.00 Renl due on offices in building 5 t.58 Accrued Liabilities: Unpaid freighl bills on goods purchased, not taken up $325.60 Interest j rued on Notes Payable 12.50 BOOKKEEPING AND ACCOUNTING 115 Interest accrued on Mortgage Payable Unpaid wages, Sales Dept Unpaid office help Unpaid delivery drivers Deferred Charges to Operation: Postage and office stationery on hand Advertising matter on hand Depreciation : 5% on Office Equipment 5% on Store Fixtures 8% on Delivery Equipment 1 ' , on Building Reserve for Doubtful Accounts : 5' , of Accounts Receivable For Deterioration on value of goods on hand. . The following Working Sheet shows the adjustment of which are not found of record in the books. The journal entr above facts in the books may be prepared from the above or nient columns of the following sheet. 22.50 375.0(1 250.00 37.50 $127.5(1 239.80 $ 87.50 143.75 180.00 150.00 $567.54 725.60 the above facts ies to record the from the adjust- '.Torklng sheet, Rogers & Baldwin Hardware Co. June 30. 192 Capital Stook r/nsubsorlbed stook Surplus Caah ^. . . . Petty Cash notes Receivable Accounts Receivable Insurance notes Payable Aooounts payable Building mortgage Payable Office Equipment Store Fixtures Delivery Equipment lidse . Inventory. Jan. 1 Furohases - Furohases Discount Purohaeee Returned and Allowances Freight in _. . . . Sales '. . . . Sales Returns and Allowances . . Sales Dlsoount Administrative Expense Freight Out Waged, Sales Dept Salesmens' Salaries Traveling Expenses Advertising ..... Warehouse Expense . Delivery Expense Offlae Equipment Expense . . . . Store Fixtures Expense Building Expense and Inoome . . . Interest and Dlsoount Loss on Doubtful Aooounts . . . . Accrued Assets Aoorued Liabilities Deferred Charges to Operation . . Res. for Dep. on Offloe Equipment Ree . for Dep. on store Fixtures Res. for Dep. on Delivery Equip. Res. for Dep. on Building . . . . Res. for Doubtful Aooounts . . . Trial Balanoe Dr. Cr. 20C0 11350 80 9675 13967 '360 15000 1760 2675 2250 12720 59547 735 429 397 5496 526 1750 2250 1000 950 375 750 93 175 15000 17100 764 643 1011 146766 15 Adjustments Dr . C r . 661 375 150 35 667 117 367 ■JBTT 239 50 1023 87 143 180 150 567 2817 oO Final Trial Balanoe Dr. Cr. 11350 80 9875 13987 ISO 1750 2675 2250 12720 59547 429 397 6028 526 2125 2250 1000 710 326 967 93 176 64 667 117 148824 57 3600 15000 17100 784 643 1023 87 143 180 150 667 ILLUSTRATION NO. 59. WORK SHEET. CORPORATION Xote: Two more columns may be added to this Working Sheet for Profit and Loss and the gains and losses transferred to these columns, from which the closing journal entries could be prepared, but the closing journal entries are usually prepared from the Profit and Loss Statement or the Nominal Accounts of the Ledger. 116 BOOKKEEPING AND ACCOUNTING Prepare the Balance Sheet and Profil and Loss Statemenl from the "Final Trial Balance" columns, using the present merchandise inventory, $18,41 - The deterioration of stock $725.60 is simply deducted from the Merchandise Inventory, leaving the Merchandise Inventory $17,683.05 to bi < the Bal- ance Sheel and Profit and Loss Statement. It is necessary to set up a reserve Por deterioration. The Following journal entries, when posted, will record the supplementary Facts in the books, as shown in the Adjustment columns. Administrative Expense $180.00 Insurance -n.00 —30— 1 Assets $117.{ Interest and D - 13.23 Warehou e Expense 50.00 Building Expense :mep. on < tffice Equip - - 7.50 Reserve for Dep on Store Fixtures 1 !.;.7."> Reserve for Dep. on Delivery Equip 180 Resen e for Dep. on Building 150.00 —30— Loss on Doubtful Accounts Reserve for Doubtful Account s $567 5 ! BOOKKEEPING AND ACCOUNTING 117 o o o ■3- 1» i-i o rH HJ lO to o to «JI t- CM o CM o co rH o rH CM to to CO rH ; r- rH in cm CO o rH rH CM CM rH CO o ■* 0) CO o m -H CD 4-1 •H CO o ■** 1-1 4-» a> O lO CM rH i-l r* m o o» ■rH rH 4-» » • r-l Ed •H fit H CO >o 2 - ■H ul r* CO o ►h" (D "Oi-I x> CD to C R^ J5 ^S P < •a ■h cd H CD o to e CD 0) 4-» ■o CD J P O CO ra (t a p H* 4-> CO CD rH rH 4-> M o p h .orH ta P 11 fit H -> o a Drl 0) >-. ■H a) a) h .« X »4 A CC o rH t»>.o fc, O 4-» ►> *-» P O 13 O ■H I-l < JB aS as !-• O i-l a) o co O ID O o p o o as (h-h p E a 4-» [D p P4= r-3. bo rH -M ,0 4-J rH fc o K e c cd o i. o «-> a) 1-1 P 1-1 p. IM aj •o a> 4-» OOh T3 rVl ♦-» P4 co Pili'd h M O o o CD O ■H 'a) PI as p 13 E 01 14 (R«! K 3 P. o P u co o m rH n r-l IT. CO c- lC a) UD o to c~ o CM ^}l rH CO =•8 in CO rH ■v P 2 ID m CM o (4 to moo u3 co to o o o o CO r "3 2 O c- o o ej» OCO oioai in CM o o o O OiO in co c> en iH to O COrH O tr- a> CD CM tO CM lO rH CO c c- o IC^ - f- to co •* r-l CM c »# tfi ID ID -H (H r-l 1 rH P .J J— ^q Si CO CD o <* 143 C ■O O R a) rH LO IC o c o o •• e- t- CO IT JC3 • • CO 00 U3 o C\ ■o o c- ITj to o c o o a] 4-> o> in •* t> c c in li c- ■<3» uj CL C 1 UJ CD • • o at C- co rH CM o rH CO to CO x: co • • ■ CO r-t rH Pi 4-> rH CM CM Uj CO < <* «<> CD O CO i>a «* *> 4-> CD •d T( ■a c co CO CD CO o c CD O It to a) m IhtI O a «: >h CD ID o • +-> 1-1 4-> 4-r >a 4-» c G CD c c o rHiH In o s 1- o 4-» CD 0) Ph OS 4-r CD K In o »-• o B l-i c IH O t3 o a O o .*, p O i-l CO R GO -M X 4-. as i-i CD o •H CO O iH P, O 1- O •H CD < as cd iH H 4- ■H *-> H t» > rH Cd CD In < CO a co CO p< a) U a p CC aS i-< •a ■H -H • P • • >-. 00 (4 CO C- T3 h0"M 4-> ■H • ■H P • -H cr* 1- ■H ^ a A ID CD CD p CQ O 4-> co o W 10 t, CJ o a moo ID 4-* > OH < o - tlO« i. aS ■M OW« P M © Tj H M a> C CD i-l rH •< Pllii P. >i p i as a) co CD CO CD CD CO a ■H CO CD O a >> CO CO co R • CD CD P *-> O U >h OS In 4-» rO o CO a CD CO PI > ■si P T3 co Pi e-i h -C -M CD 4-» CD CD «HM O o CD COT) ■f-* -} (« 118 BOOKKKKlMXi; AND ACCOUNTING Profit and Lose Statement, Rogers & Baldwin Hardware Co. June 30. 192 J18408.65 725.60 Less Sales Returns $429.70 " Sales Dlsoount 397 .PC Bet Sales Cost of Sales: Kerohandise Inventory, Jan. 1 Purchases 159547.25 Less Purchases Returns $643.25 " Purohaaea Dlsoount 784-30 1427.55 Add Freight In Total cost of Merchandise Leas Mdae. Inventory, June 30 Less Res. for Deterioration Cost of Merohandlse sold Gross Profit on sales Operating Expenses: Administrative Expense Selling Expense: Freight Out Wages, Sales Dept . Salesmens' Salaries Traveling Expenae Advertising Warehouse Expense Total Selling Expense Delivery Expense Office Equipment Expenae Store Fixtures Expense Total Operating Expense Ket Profit on Salea Other Inoome: Building Expense and Income Deductions from Income: Interest and Discount Loss on Doubtful Accounts Net Profit or Income Carried to Surplus 76413 827 12720 58119 1061 17683 |526.40 2125.00 2250.00 1000.00 710.20 325-80 6028 6937 967 93 175 BS OS 9E 64 567 25 54 75585 54218 B£ CO 14202 7164 232 7396 631 6764 60 08 .-.' 79 S3 ILLUSTRATION NO. 01. PROFIT AM) Loss STATEMENT. CORPORATION Tlic student will sel up the Trading ami Profit anil Loss accounts shown in the Final Trial Balance and close them into a Profil ami Loss account, then transfer the net profit to Surplus account, by journal entr\ . The board of directors have declared a ten per cent dividend. Prepare and post a journal entry to set up the dividend ace. .unt. which call " Dividend No. 1 " as if it were the firsl dividend t<> lie paid. Read Corporation Accounting, para graph 123. CHAPTER VI CONTROLLING ACCOUNTS Empire Grocer Company, Wholesale A Corporation 92. The books to be used are Purchases Book, Sales Book, Journal, Cash Book, Petty Cash Book, General Ledger, Sales Ledger, and Purchases Ledger. The first four books are the books of original entry. The Petty Cash Book is not used as a book of original entry. 93. The purpose of this set is to illustrate the controlling accounts. The Accounts Receivable account in the General Ledger controls the Sales Ledger. The Accounts Payable account controls the Purchases Ledger. The Petty Cash account controls the Petty Cash Book or petty cash fund, kept in the cash drawer to pay sundry cash expenses. The purpose of a controlling account is to eliminate a certain class of accounts from the General Ledger. Here cus- tomers' accounts are taken out of the General Ledger and kept in the Sales Ledger which is controlled by "Accounts Receivable" account. Creditors' accounts are kept in a Purchases Ledger which is controlled by "Accounts Pay- able" account. 94. If the number of customers' accounts were 500 to 1.500 or more, it would be quite a task and require much time to prepare a trial balance at the end of each month. But if all those customers' accounts are kept in a "Sales Ledger" and the total of all of them is represented under one account in the General Ledger, "Accounts Receivable" the trial balance can be taken from the Gen- eral Ledger, and the work of going over this large number of accounts in the Sales Ledger is eliminated. 95. Accounts Receivable: Using the Sales Ledger eliminates all customers' accounts from the General Ledger, and the total of what all customers owe is shown by "Accounts Receivable" account in the General Ledger. This account controls the Sales Ledger. At the end of each month, the total of the Sales Book is posted to the credit of "Sales" account and also to the debit of "Ac- counts Receivable" in the General Ledger, because this is the total of all debits to customers' accounts in the Sales Ledger. Now. the Accounts Receivable account and the Sales Ledger agree, if no payments have been made by cus- tomers, and no allowances have been made to them. 96. What customers pay in cash and notes or acceptances and what is allowed them in discounts or other allowances, must be credited to "Accounts Receivable" account because these are credited to the Customers' account in the Sales Ledger, then the Accounts Receivable account and the Sales Ledger will always agree. This is the sense in which the Accounts Receivable account controls the Sales Ledger. In order to get these credits properly recorded to the credit of Accounts Receivable, special columns for Accounts Receivable are used in the Cash Book and Journal. 97. Accounts Payable: Using the Purchases Ledger (Creditors' Ledger) eliminates the accounts of all creditors (persons and firms from whom we buy merchandise) from the General Ledger, and the total we owe all creditors is represented by "Accounts Payable" account in the General Ledger. This account controls the Purchases Ledger the same as Accounts Receivable 119 120 BOOKKEEPING AM) A< COUNTING a< uni controls the Sales Ledger. At the end of the month, the total of the Purchases Book is posted to the debil of "Purchases" account, and also to the credil of "Accounts Payable" in the General Ledger, because this is the total of all credits to creditors in the Purchases Ledger. Now. the Accounts Payable aec« t and the Purchases Ledger must agree, if no payments have been made to creditors and no allowances received from them. What we paj "cash aqd Notes Payable, and what we receive in discounts and other allowances are ed to tli>' creditors in the Purchases Ledger, and musl be debited to Ac cmints Payable in the General Ledger. In ordi these debits properlj recorded to I"- posted to Accounts Payable, special columns are used for Accounts Payable in the ('ash Book and Journal. 98 Petty Cash: A Pettj Cash accounl is sel up to control the petty cash fund to be kept in the '-ash drawer to pay petty expenses. Decide the maximum amount necessarj to be kepi in the '-ash drawer, ami make a check for that amount, which charge to Pettj Cash accounl mi the credil side of the Cash Book, open the Petty Cash Book, entering tin- amount received. Special columns may or may n ■ ■z? ^ >rv{- /'..-;, . , ( ■ ■ .'.-• O0\ r — V if'.' - . ■' • •• <-■■■' '■' '■ ' 'i ' ■' 7 s / t s, fe.^,^ **{?»«■&, ***/'*** _-. : ■3S~ ^ /fe /-2. <9 • Oj, ***&**&»*£ 7W^ ~ /J 7-S • ■ ■ ^^fyflW"'"-"^ /3 s-o • ■ ' fid . > 5 " ; .//*rf>i//s£i*?J<*f s^sJ- cC7 it / (, ■ ' -*f & /j3 ,'C <7 .,,.,■: ... /7 ffl — —r-> 4 6#*sJ/s /*> 7Vj£', discount on tnvoice No. 1. for payment in full. Gave Horace \ .Mann a check for $2,195.84 to pay Invoice No. 2 in full, deduct- ing %% discount as per terms. 10c. Sept. 6. Sold Jones & (lark. Cairo. 111.. 2 15, n 60, 325 bx. Silver Prunes @ $4.25, l'7o cs. Glucose Syrup (a $4.15. Sold to Ilartman Bros., Atlanta, Ga., 2 15, n/60. 47."> doz. O'Meal Crackers (n $4.75, 245 bx. D. Peaches a $4.25. Sold to. I. 1). Morton. Lansing, Mich., .2 15. n tin. 125 cs. Butter Prints 5.000 lbs. (a 37y 2 c, 135 cs. c [ or Coffee (§ $7.50. lie. Sept. 0. Post the books to date, and ascertain the cash balance. The Sales 1 liscounl column on the debit side and the Purchase Discounl column on the credit side of the ( 'ash Book are omitted iii figuring the cash ha la ncc. The items in these columns are not cash. A. id the first, second and fourth columns on the del. it. and deduct the total of the first, Second, fourth and fifth columns on the credit side. Total all the columns on each side in light pencil figures dose under the line of tin- last entry on each page so they will be out of the way n\ tlie next entry, then use these pencil Footings as explained above. Do not erase the pencil figures, as they will save addition next time Of course the EootingS of the special columns an- not to be posted until the end oft he month. 12c. Sept. 8. Purchased of W. J. Wilson £ Co.. Atchison. Kan., merchandise as pei- [nvoice No. 3 □ 90, $4,693.25. Purchased of Valley Trading Co.. Peoria. III., merchandise as per Invoice No. I. 3 30, n 90, $4,327.60 BOOKKEEPING AND ACCOUNTING 12:3 Purchased of Snyder & Baker, Chicago, 111., merchandise as per Invoice No. 5, 3, 30, n, 90, $3,682.75. 13c. Sept. 8. Paid from Petty Cash fund: Oil, .+6.50, Gasoline for Trucks. $7.25, Postage, $10.00, Office Supplies, $3.50. For extra help on Delivery Truck, $2.50. (Enter in Petty Cash Book.) 14c. Sept. 9. The statement from the Petty Cash fund shows the following payments: Delivery Expense, $16.25, Administrative Expense. $29.25, Selling Expense, $12.10. (See Petty Cash Book.) Gave a check for the total of these expenses to restore the Petty Cash fund. Debit these expenses on the credit side of the Cash Book, and balance the Petty Cash Book. 15c. Sept. 9. Paid Acme Furniture Co. $92.50 for repairing and revarnishing office desks. Paid J. B. Carpenter $67.85 for adjusting store fixtures. Paid J. C. Burns Insurance agency $480, Premium on Insurance Policy on stock of goods for one year from September 1. 16c. Sept. 10. Received $18.75 refund, from Moon Printing Co. on bill of Sept. 1, on account of error. (Credit Selling Expense on the debit side of the Cash Hook.) Received $21.75 refund from the Office Supply Co. on bill of Sept. 2, for overcharge. (Credit Administrative Expense on the debit side of the Cash Book.) Received $746.25 for sundry cash sales. 17e. Sept. 11. Allowed Jones & Clark $138.75 for damaged goods on bill of Sept. 6. Returned goods to Snyder & Baker to the value of $368.75 for credit. Received a 15 day trade acceptance for $2,829.75, dated Sept. 6, from J. D. Morton on account and allowed 2% discount on bill of Sept. 6. 18c. Sept. 11. Paid from Petty Cash fund for order books for salesmen $49.75. 19c. Sept. 12. Received $2,337.07 from Jones & Clark to pay their balance of $2,383.75 in full, allowing 2% discount. Received $685.70 for sundry cash sales. 20c. Sept. 13. Paid W. J. Wilson & Co. $4,552.45 in full for Invoice No. 3, deducting 3% discount. 21c. Sept. 13. Paid office help for two weeks $375. Paid sales force for two weeks $471.60. Paid delivery drivers for two weeks $110. 22c. Sept. 13. Post the books to date, and ascertain the cash balance. 23c. Sept. 15. Paid C. & A. R. R. Co. $638.50 for freight on goods purchased. 24c. Sept. 16. Received $1,770.12 from W. L. Mason & Co. on account and allowed 2% discount for payment in full of bill of Sept. 2. Received $725.40 for sundry cash sales. 25c. Sept. 17. Hartman Bros, returned 50 bx. D. Peaches @ $4.25 to us for credit. Received an allowance of $287.50 from Valley Trading Co. for damaged goods on Invoice No. 4. 26c. Sept. IS. Sold to W. L. Mason & Co. 2/15, n/60, 500 cs. Ideal Tomatoes @ $3.95, 85 cs. Butter Prints, 4,250 lbs. @ 43c. Sold to L. D. Miller & Son, 2/15, n/60, 135 brls. Sweet Potatoes (a) $5.25, 175 brls. II. Apples @ $5.75. Sold to Jones & Clark, 2/15, n/60, 125 brls. G. Flour @ $7.35, 185 bx. 12 lb. Chocolate @ $5.60. 27c. Sept. 19. Received $13.75 from C. & A. R. R. Co. refund on freight bill of Sept. 15. Received a 15 day acceptance for $3,726.45 from W. L. Mason & Co. on account to pay bill of Sept. 18 in full, allowing 2' , discount. 12J BOOKKEEPING AND ACCOUNTING 28c. Sept. 20. Purchased of Central Milling Co. Invoice No. 6, 3 30, n 90 $4,164.85. Purchased of Horace & Mann Invoice No. 7. ■ '• 30, n 90, • 1,892.45. Purchased of W. J. Wilson & Co. Invoice No. 8, 3 30, n 90, • I 521.65. 29c. Sept. 20. Paid our acceptance of Sept. 5 for $2,595.57, due today, in favor of I lentral Milling I '<>. 30c. Sept. 20. Gave Central Milling Co. a 90 day note at ><■ , for s:;.t; ,, account. 31c. Sept. 22. Paid from petty cash fund for ruts for advertising $10.25, and for form letters $12.50 32c. Sept. 22. Received $3,023.30 from I la n man Bros, in full for bill of Sept. 6, allowing '-" . discount. 33c. Sept. 23. Paid Valley Trading Co. $3,918.90 in full for Invoice N T o. I. deducting •'!', discount. Paid Snyder & Baker $3,214.58 in full for Invoice No. •"). deducting '■'•' , discount. 34c. Sept. i'-'! Received $654.25 for sundry cash sales. 35c. Sept. 2:5. Sold \V. I.. Mason & Co., 2 15, a 60, 300 cs. M & .1 Coffi $8.75, 12ii luls. I'. B. Flour @ $9.25. 36c. Sept. 24. Received a 60 day note at i;\ for $3,735 from W. I.. Mason & ( !o. on account. 37c. Sept. 25. Purchased of Valley Trading Co. merchandise as per Invoice X.,. 9, 3 15, □ tin. $5,897.25. 38c. Sept. 26. Collected -I. D. Morton's acceptance of Sept. 11. due todav, for $2,829.75. 39c. Sept. 27. Paid office help for two weeks, +:!7-">. Paid sales force for two weeks, $471.60. I'aid delivery drivers for two weeks, $110. 40c. Sept. 2s. Sold to J. D. Morton, 2 15, o 60, 275 bx. Silver Prunes (a - 300 cs. Ideal Tomatoes (5 +4.2:.. Sold to W. L. .Mason & Co., 2 L5, n 60, 200 cs. Butter Prints, 6,750 lbs. (3 13c, 200 l>x. 12 11.. Chocolate (g --.tit'. Sold Hartman Pros.. 2 15, n tin. 25 cs. Glucose Syrup (§ $4 15, 15 brls. 11. Apples (5 S."..7o. lie. Sept. 20. Purchased of Snyder & Baker, rchandise as per Invoice No. in. 3 30, n 90, $4,782.65. 42c. Sept. 30. The statement from the petty cash fund shows Selling Expense $72.50. (lave a check for this amount to restore the petty cash fund. 13c. Sept. .".t 1 . Paid officers' salary for the month $750. Mel.it Administrative Expense. If a Salary account were kept, this amount would l.e charged to ( >fficers' Salaries account. I 14c. Sept .'in. Prepare to post. Total all the columns in the Cash Book and Journal. Rule and balance the Cash Book, and rule the Journal, bringing down i he footings in each as shown. Total the Purchases Book and Sales Book and rule and fool them. Do not post the footings of Special columns and the toiaK of the Purchases and Sales Books until all other posting is completed. After the posting is completed, take a Trial Balance, then prepare and post Journal entries to r ird the following supplementary facts in the BOOKKEEPING AND ACCOUNTING 125 books, and take a Final Trial Balance before closing. Refer to paragraphs 27 to 30. Merchandise Inventory, September 30 $32,815.94 Insurance expired 40.00 Accrued Assets: [nteresl accrued on Notes Receivable $3.74 Accrued Liabilities : [nteresl accrued on Notes Payable $6.28 Unpaid office help half-week 93.75 Unpaid sales force half-week 117.90 Unpaid delivery drivers half week 27.50 Deferred Charges to Operation: Postage and office supplies $52.50 Advertising matter on hand 37.50 Depreciation : 5 ft on Office Equipment $67.50 5' i on Store Fixtures 103.7.') 10' , on Delivery Equipment 150.00 Reserve for Doubtful Accounts: 4% of Accounts Receivable $415.79 t5c. Sept. 30. From the Final Trial Balance, prepare a Balance Sheet and a Profit and Loss Statement, and close the books by journal entries. Refer to paragraphs 35 to 37, and Illustrations. 4Gc. Sept. 30. Close the Profit and Loss account into the Surplus account, transferring the net profit to Surplus: Profit and Loss $xxxx.xx Surplus $xxxx.xx Rule and foot all the accounts that have been closed. Any dividend declared would be charged to Surplus and credited to Dividend No. 1 (or whatever number it may be) account. (See paragraph 123.) !7c. Oct. 1. Prepare and post journal entries to close Accrued Assets, Accrued Liabilities and Deferred Charges to Operation accounts, and transfer the items in these accounts back to the accounts affected. Refer to paragraph 40 and Illustration No. 26. Date these entries Oct. 1, because they should be posted below the ruling's as they are to appear in the business of the next period. All entries hereafter are dated October 1. 48c. Oct. 1. The Board of Directors have held a meeting and declared a 20' dividend. Prepare a journal entry and post it, to set up this dividend account. Surplus $xxxx.xx Dividend No. 1 $xxxx.xx Open "Dividend No.. 1" account and post the above journal entry. Dividend No. 1 shows this to be the first dividend declared by the company. The next would be "Dividend No. 2" and so on. In a large corporation where there are many stockholders a check would be made for the total amount of the dividend and deposited in a separate bank account, and the matter of making the checks and mailing them to stockholders put in charge of special clerks to save the officers or others this time, but in a small company the checks would be made by the bookkeeper, signed by the proper officer and mailed as soon as convenient. I'»e. Oct. 1. Have .T. D. Melton a clie.de for $4,000 for his 20'; dividend on 200 .shares of stock. Caw R. ( '. Palmer a check tor $2,000 for his 20',' 126 I'.OOKKKKIMXfi AND ACCOUNTING dividend on 100 shares of stock. Gave T. L. .lames a check for $2,000 for liis 20' I dividend on 100 shares of stock. Debit "Dividend No. 1" on the credil side of the (ash Book, below the ruling for each of these checks separately. Posl these entries to "Dividend No. I" account in the Ledger, which will close the account. 50c. Oct. 1. We have learned thai Hartman Bros, have failed and the amount they owe us is a total loss. Make the Following entry in the Journal and po>t it. to adjust this loss: Reserve for Doubl I'ul Accounts ?1!)0.00 Hartman Bros $190.00 When this journal entry is post,,!, Hartman Bros, account is closed in the Sales Ledger and ilic loss is charged to the Reserve account. II' this Reserve for doubtful accounts had not been set up. this would affect the Profit and Loss account, and he troublesome to adjust, hut in this way the net profit is not disturbed. 51c. <>ct. ]. Rule and foot nil the accounts that are closed and take a proof Trial Balance. Xole: As the hooks id' original entry must all he ruled and footed before the Trial Balance and the Profit and Loss statement can he pre- pared, and as the Board of Directors must have the Profil and Loss State- ment before their meeting in which they may declare a dividend, the last transactions are dated October 1. and these entries are made below the rulings in the Journal and Cash Book and posted. It would be well to make this proof Trial Balance in the form of a Balai Sheet, to be sub- mitted to the management to show thi adition of the business after the dividend has been paid, and before any other business has been recorded. ILLUSTRATION NO 62. PURCHASES HOOK BOOKKEEPING AND ACCOI NT1NG C?'J>?' -mA-es*- ^SL 'f* 127 ^2%^W»^ „ rAS.fi fa X'- ,'■ ■■/■- xw^^/^y%^ "% ■/>ArS/ (SU%J^,J^S z L2^ ; u JsVfaS/.^aSr*, z. ?rASf M&M eu. *ja . :a2_ £^,^^^,aJ/£ '/^% f^ASs-JsjQyi-fciJj-r^ --- J -' S J> J Zj-jJimJs/ V^r^fr; USZA (^ ^t-n r&A V-s, y » tj.f~r. Jl ■"^■^ r^Af J Z£- Jy™# . - :^_ ^Lf^ . JT£& qa-tt u^ f fi.rr .,-.>--;! /i ^.^ ■ .■'.■:< -'■ J J ^^^sUrt^ l //7^A/v/-i/jj?st, C-: 7J42syl*& 4-71 *£- SLQ. '-.£££± is: %z/9fa.^,,xj^ J¥- ■ t-f s/trT-n^stj-f-/ .. - /-• ? Xz y^ y« /'■T- V AJrsst-L^&rtjs ■/Z-fV £i* Z^2. L£^ ^^2. ^£- ^L ^l&SA 't.- r'V& mS, ■ '-r-A/ C^Cifa^J^ ■ l£S- V,s- */ t . \, 7 <-AJ>a ^ts '¥- 6 I' Ml Xl^.vszy^^jj ,i<-AS,££L ■~4^_ _^i J Z£- -»/■*- ^* / /j^r /^ i ^»r J «^//y .^ ^2j2. '-£SiL?JL -J.3- "*£^ J/>/!f^ *A*- ?t/* a %^? >AS,ffl?. _J^A -? Ais'^a. -?± an. ....■ r \ - ZJL * flj%9fa~t~. ■As t>A' /z ^(Ss-r^ySsiJj^ jre.i 2AJ2. & J.L- 2-f ^Avsr^yi-r^rtsnS /J3-7 's-J-t-**Z£ '&.2S. ^_ __i £1 y£nAs*s ( ,-r ■**£ = s=. v- (/fys-vt-r ssyt^fs) CAsss<^^A-f0J~/FZ-S ILLUSTRATION NO. 63. SALES BOOK _^2s ^t^. BOOKKEEPING AND ACCOUNTING IS 'll uCc^ct^C^f-e-^f^- OO^JiZ^^T^fjtt A^'Aff. J.-- ■ Jfcj &&£&L 12 ■■■ ^>> U/fa /&*~*&Jtr?is (TZ,,"/* 2 f. J , ■ ; ■ ,,*/& ,„y a js j •a - . - JUL- JU LU}1 fZ**^^*L£ A-a-rZ^r^7^r^/C^r^. fTetX^ / j-.-;. .V U.2J. :- ■- -^C/> \L^_ .-,: /'Itr&J Cfa.r^tsKiz^&&. , i .-■/;: ii (?/«,/,< c ini^s . s C^/^A^^/yT^ '■V-^-r'.-tf-O'--*?. :/ % It ? / ' > '. a^ 2.&A ISst sst-j-e. UAj&s 26 a^ f^&js^r?. ■J&A n_s.^-s~«sv--*3 .JS.jf*- ■ /i/ ji ,y„v .' ■ m ■ ^ffiyf II.I.fsTi: A-I'l. in NO. 64. t'KllIT SIDE OP CASH BOOK Note: Sales Discount, $161.70, is posted to the debil of Sales Discounl ac- count, and the same amounl is also posted to the debil of Accounts Receivable account BOOKKEEPING AND ACCOUNTING 129 ILLUSTRATION NO. 65. CREDIT SIDE OF CASH BOOK Note: Purchases Discount, $429.33, is posted to the credit of Purchases Dis- count account, and the same amount is also posted to the debil of Arc-mints Payable account. BOOKKEEPING AND ACCOUNTING O) ■ /— A*,'*, '-,'.-. 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Irfss^r-rJi^a-^?^-^ ■ z-f; •■"> J%Mt-dLisr-e/^Ji^rs^d<4 - /a ,lU J1 *^ ///^^J^s^*^s-#^- 3ft :■ l^Y^^f/ S7s ^r>r> >**^p- - C-ift - 3 33 A/0 **/z. ' ■ (^r7/7~r-t/>y** /V~t / tX. 7S7.U 704. . - 2- rj) K%2* t /_ c&*zLL pz*&*\ ±U^ ■ ■ 4-" IJJAZA /■VJ-'. : /^-j^-oe^hyy'(yir-^-t^ -•'/•:•• . ■'- -'-/' -?,?->? £4 3e ( /^^}///7p/Ai<^ (^> /(/>Jssf Lfa s,frrJ[Sf^ , - '.'. ' Jzu^s-eSaS) J^Tf/rurTS^ . . \ ^.^o-t^f^r J^L. il^llHi C ^f^cJe^- 6 drt^usr ? -■ aa. ' ' . ■ . - ,_ ^i-f/ ZA q^ ^C^t^HxJ^nO^ . ±L — t Ch^^ssriZJ J^s^J&sJl ' %# jdeA / H - .■ .!_• .: . .'. .:_.", ^y ^ / _ ^ / I .V /? 3 ^^^^sfr-e^JsfS-^-r^&s T BOOKKEEPING AND ACCOUNTING ■^ L33 (^j \d>J*t -£ t ,* £ AL C^TS^T^^ I ,^t ^f-Jy. w ^'«W;3 j2 .-. /rT?-J J-^lf^r ^^, ^,j--77^-r /2 i.? 1 /^ i- ; / -K&Jvt- 10 eS / *-f J A i ffl JidfJ^ 1/) Q I , / f. / 70 IS ' ' o >r* if-^^r J-^sy^ff^Ki £. ' JM /.■?>- V,? >■ *dts£i4' J-/} /*. 3 X t - ff2. J,J>^ .}0 s~t .? 7 1* < ?- "' j^is.Jj-t-- .y# a> / 4-/19 ' X ,"-'■ .30 y . 1 / A ? ■- •T ■ * ?j-o r e-f 1(1 o>. =1 V : >- i J- / J J . > * -*£eJ>t- •rfi~. f/a) ■ > . Jjj~ e • ■-..."' — '.-.- c - - c ■■- -' ■- '- ■ ■- -■ C'JJ /vV/yiw^/n.*/ './ J*-f?s?sr^^s£i-r-, Y- -■/-;; J .-■ /■ ■ : C^f^^-r-J,^, y y :£> (/S/ ■\7-i ^(J ^ / 4^ 2 i».4 .. « ■'■:j-/ // f ^— 1L i ■ ■ f / V / 7 (2 V 2-i • -v 1 / i* t j-ti *j- { - , ^-r- J~?^r>^ t*Js7< fc^ . L^ -£ -^ -'J J2 v-- : ,<2tw ^^frst-y-^s / ^_ii _ r - / - f^ ^ >-! i n ^Lj, • „• i ,../ **/4 ~de^t ^L J> >2-i L ZJ!Jl *3S>fe^ :..' ., L -iWy/A^-^ (0^/s4?J>^r7s/S>S (>-'/ ' ■/ > 1\ -dt jrf -. ±ZA _u ^LJ 4 iv: *.u ^*t- .a -^j /hj r . s (0^sf?/^j */sS 2 2-J >'7 Jzl-L i. / a <•. .? / C 26 1 1 /=f r .? / / 1 -J 7-7 r, .? 1 / / fiflfi / 2- J <. i^ I I <£ ,1 l-i-i-Z >: s^isf- (P^-r, X±7?*—n*i C- (■>->; _fc/. ^ L idss fast- a _Ll J ■V ■j£ jZZtjt*-, ' f7^^Y. J~^ - -^-r-* (Osk/ /.-*? /.* *Z«J Zl \J • 'J.- i IL /? ^L _. iA. Jl7^-r^i*sr*4^( . 2- -- 2J. • Lld'AA -' . ; ■" ' 2JL ^zL i£A. 12^0 Z^ •3_ _i ,-j_^_ J>JYfass.~ **t~ - : >/<.V (*%. j i^. .-,- ^ m^OL ^z. d. J— l L ' /y\60 ■- '_.'•„.' i .-.: > '-' ' ' 2 136 BOOKKEEPING AND ACCOUNTING • / • ■ '**- -r . *A J -7-T / / «f«7i /X- ?- ,1 J i 7 f 7 7- / r >; i j • jijy^ .. ■■ r -eL ^L ^j -h J-\ 2=£Z ^_ •". t' f . tj* .^As t**s _ £2. Purchases Ledger . (Ll^.,.^-^, /y //7s//r^r?^ (-f< I •",' -fi .' - >U—ii. ■_/_ . -^^~^>^ _ •J-.J../ >Vjo *ff» ( these ways. There is no quesl ion about that. If an error is made by writing 54 for 15, or 36 for 63, or any other transposi- tion, the difference is always divisible by nine. For instance, 63 less 36 is 27; L'7 divided by 9 is 3, the difference between the two digits id' the number trans- posed; 6 less :; U :!. So if the Trial Balance is out LIT. it is probably a trans position of 36 or 63. The same is true of any other transposition. Write Is for 81, ami the balance is out 63, which divided by !' is 7. the difference between 1 ami s. so if the quotient after dividing by 9 is 7. it may he a transposition of 18, 29 or 81. Suppose the Trial Balance were out 270; 27(1 divided by 9 is 30. The cipher shows that the transposition i> in the tens and hundreds column, and the 3 is the difference between the two figures transposed, so the number may he 470 for 740, 360 lor o 0, or 580 for 850, or any number the difference in the digits oi which is li. and in the lens and hundreds column. Ascertain the amount the Trial Balance is out. then look for this amount. also for One-half this a nut. for if an item were posted to the wrong side, the balance would be out double the amount of the it< m. Then verify the cash bal- ance and all the additions and subtractions. If this does qoI discover the error, check all the postings carefully, placing a cheek mark opposite each item in the ledger and in the book from which posted. After checking, look over the Ledger accounts, and the item not checked will he the error, if the error was made in posting. If it is not in posting, it is in adding or subtracting. A Trade Acceptance: A Trade Acceptance is a time draft, accepted, and is treated in the hooks ;is Notes Receivable, the same as any other note or ac- ceptance. It is defined by the Federal Reserve Hoard as a •'Hill of Exchange" (time draft) drawn by the seller of goods on the purchaser, and accepted by the purchaser. It is virtually tin- same in form as the ordinary acceptance, but its purpose iv different. BOOKKEEPING AND ACCOUNTING 130 The usual time draft accepted (acceptance) is used to make collection of accounts thai arc due or past due, and the fact that the ordinary time draft is drawn and accepted, is evidence of an extension of time on the bonk account, with whatever that may mean, while the purpose of the Trade Acceptance is to provide an evidence of debt that can be used by the holder (the seller) in a better way than he can the open book account. In other words, it is a plan for putting the book accounts in the form of commercial paper, so they can be used through the bank, thus keeping the money in action instead of lying idle in open book accounts. The Trade Acceptance is drawn and accepted at the time the sale is made or within a very few days thereafter, and carries with it no evidence of un- certainty. So this kind of paper is in the class of "preferred commercial paper" and can be discounted at banks to an almost unlimited extent by a business, at a low rate and without affecting the real borrowing capacity of the business. It does not cost the purchaser anything, and gives him all the time he ex- pects even on the open book account. It increases the seller's working capital and buying power, so that he can buy to better advantage and thus be in a position to do better by the purchaser (his customer). It is better for both the seller and the buyer. Reserve Banks are permitted to take Trade Acceptances as preferred com- mercial paper in almost unlimited amount as rediscounts from member banks, and even to buy or discount this kind of paper direct from the holder if other banks do not take it. This is important to show the class in which Trade Ac- ceptances are considered, but the value to the business interests of the United States, if this method were universal here, is almost beyond the stretch of the imagination. On open book accounts, a business cannot expect to borrow at the bank more than 50', of their value, and in most cases much less, while if these ac- counts had been put into Trade Acceptances at the time the sales were made, the business could discount all of them at once, and have the money right back in the business, and in action. In most cases it would be unnecessary for the business to make large and long loans at the bank, if this were done. If Trade Acceptances were universally used in the United States, it would increase the working capital and business capacity of the concerns of this country probably 7o r ,', and perhaps much more. It is hard to realize what this would mean. It would be a great saving to buyer and seller. It would be a great convenience to both. It would make the conducting of every business simpler and much more satisfactory. Every bookkeeper, every credit man, and every one in a position to do so should advocate the Trade Acceptance instead of the open book account. It is applicable to any wholesale or man- ufacturing business, and to a very large extent the retail business as well. It is the next thi lg to a cash business and very much more practical. With us. it is a matter of education. In Europe, it is in general use. 140 BOOKKEEPING AND ACCOUNTING CORPORATION ACCOUNTING 103. A Corporation is an association of individuals united for some com- mon purpose, permitted by the law to use a common uame, and to change its withoul dissolution of the association. Under this uame it may sue or I"- sued, and transact business the same as a person, in which sense it is an artificial person, created by law. 104. Any change of partners in a partnership by retirement, death or other- wise, of one of the partners, dissolves the partnership, and makes reorganiza- tion, the forming of a oew partnership, necessary if the partnership business is to be continued. So the life of a partnership depends upon the life of the in- dividual and on bis ability to continue. 105. Tl bjects of forming a corporation, or incorporating a business, to secure more time, greater duration, than the probable life of an individual affords; to make it convenient to transfer the rights of ownership, or interest in the business, withoul affecting the organization; to provide greater capital by making it convenient for investors of even limited means to 1" me in- terested in the business on the same basis as tln.se of larger means; to limit the liability of. the owners who are the stockholders. 106 The i apital in a partnership is not limited to any particular amount by law and may be increased to the limit of the ability of the owners, or decreased at the option of the owners; while the capital of a corporation is established by law, and is specified in its "Certificate of Incorporation," and this specified capital, so stated, cannol be increased uor reduced withoul taking the neces- sary steps required by law. IdT. Any business may change to a corporation, or any body of men may form a corporation, by making application for a "certificate of incorporation" to the proper authorities of the state under whose laws it is desired to incorporate, and complying with the corporation laws of that state. This application or certificate must be signed and executed before a notary public, or some official authorized to take the acknowledgment, by three or more persons, all of whom are subscribers to the stock of the proposed corporation and must state: 1. The name of the proposed corporation, which na must not con with the name of any other corporation of thai state. 2. The purpose lor which formed, the amount of capital stock-, both com- mon and preferred, and the number of shares and par value of each. 3. The location of the principal husiness office, and the number, name and addresses id' the lirst directors, not less than three, who must he subscribers to the stock of the corporation. 108. The specific requirements are different in different states. The stoch holders are the owners, lmt the board of directors, elected by the stockholders, are the managers. The husiness is conducted bj officers elected l>\ the hoard of directors, usually President, Vice-President, Secretary and Treasurer, whose unties and powers are prescribed by the by-laws of the corporation and author- izations h\ the hoard of directors. Instead of submitting a sample ■'Certificate of Incorporation," the student is referred to the law text in which the proper steps, legal features ami requirements are set forth. It is usually the part of wisdom to place the matter of incorporation in the hands of a skilled lawyer. However, a care- ful study of corporate organization and management will enable the student to better understand the affairs of the corporation. BOOKKEEPING AND ACCOUNTING 141 The books usually kept to record the acts of the stockholders and Board of Directors, and records of subscriptions, stock issued, transfer of stock, and dividends in a large corporation are: Subscription Book Siock ( lertificate Book Si nek Ledger Minute Book Dividend Book If stock is to be paid for in installments, an Installment Book is kept, which is like a receipt book. In a small corporation, a subscription list may be made, but the books usually kept are the Minute Hook and the Stock Certificate Book. The Minute Book is a record of the acts of the Stockholders at stock- holder's meetings, and of the Board of Directors at their stated and special meetings. The Stock Certificate Book is a record of the stock issued and of cancellations. 110. If the stock is to be paid for in installments, each subscriber is given a receipt from the Installment Book, upon the payment of each installment, and when the last installment is paid, a Stock Certificate is issued for the number of shares paid for and these receipts arc taken up. These books are kept outside of, or aside from the regular business bookkeeping. They are usually kept by the Secretary or Secretary-Treasurer if one person tills both offices. These books are all printed blank forms ready to be tilled out, and the posting from the stubs of the Stock Certificate Book to the Stock Ledger is a simple matter, and as the student may see and examine these blank forms at any place where these supplies are kept for sale, it is not necessary to il- lustrate them here. 111. Opening Entries: R. C. Duffin. C. M. Miller. A. C. Allyn and E. W. Thomas have decided to incorporate the Atlas Trading Co. under the laws of the State of New Jersey. They have made application and received their Certificate of Incorporation authorizing a Capital Stock of $50,000, divided into 500 shares of the par value of $100. R. C. Duffin has subscribed for 150 shares at par, C. M. Miller for 125 shares at par, A. C. Allyn for 125 shares at par, and E. W. Thomas for 100 shares at par. All have paid for their stock in cash, and you are requested to open the books. January 1, 192 . is The Atlas Trading Company, incorporated under the laws of the State of New Jersey , on January 1, 192 , with an authorized cap- ital of #50,000, divided into 500 shares of the par value of $100. Subscriptions Capital Stock For various subscriptions to the Capi- tal Stock of this company, as per Subscrip- tion Book. -1- Cash Subscriptions For payments received in full from all subscribers to Capital Stock, as per Stock Certificate Book. 50000 50000 00 00 50000 50000 CO oc 142 BOOKKHHl'INC AMi ACCOUNTING If this were a partnership, cash would he debited ami each person credited for tin- amount invested, bul accounts arc not kept for stockholders of a Cor- poration. Instead of th,- names of the investors, "Capital Stock" accounl is used. Tin' names of the stockholders appear only in the Subscription Book, Stork Certificate Book, and, in large corporations, in other books already mention separate from ami independent of the business bookkeep- ing. The op atry would be as in the preceding illustration. The firsl entry represents tin- subscriptions in tin- hooks and opens the Capital Stork account for the authorized amount. The second entry debits the cash received ami closes the Subscriptions account. It is m>t necessary 1" list the names of the stockholders as tin' stock record l k s have that in- formation. Tin' cash item is checked in the Journal to show it is not in bp 1 Misted, ami the cash is entered on the debil side of tie- ('ash Book and checked there. 111'. Suppose, instead of paying the whole amount of their subscriptions at once in cash, the subscribers had agreed to pay their subscriptions in four in- stallments, monthly, beginning January 1. Then the subscriptions in the Sub- scription Hook would he entered in the Installment Book, and the opening en try would be: January 1, 192 . The Atlas Trading Company, incorporated January 1, 192 , under the laws of the State of New Jersey, with an authorized capital of $50,000, divided into 500 shares of the par value of §100, the subscriptions to the Capital Stook to be paid in four equal in- stallments. Installment No. 1. Jan. 1, 192 Installment No. 2. Feb. 1, 192 Installment No. 3, Mar. 1, 192 Installment No. 4, Apr. 1, 192 Subscriptions For various subscribers to the stook of this company as per Subscription Book and Installment Book. -1- Cash Installment No. 1. Jan. 1, 192 For payment received in full for In- stallment No. 1, by all subscribers. 12500 12500 12500 12500 12500 00 50000 12500 00 00 On January 1. at the time the hooks are opened, the first installment is paid, hence the entry for the cash received. Of course, this cash would I" entered in the Cash Book, "credit Installment No. 1. .Ian. 1. sIl'.oIiH" on the debit side of the Cash Book, and checked, and only the item "Installment No. 1." posted to the credit of this accounl from the Journal which would close this account. The Journal entry for each installment could be omitted ami the entry for each installment, when paid, entered in iin- Cash Book and posted to the proper Installment account from there. The result would he the same, but we prefer to r rd these payments in the Journal and show them by journal entry, and check the cash as explained. BOOKKEEPING AND ACCOUNTING 14:! As each installment is paid, an entry similar to the one above is made. When the final installment has been paid, the receipts issued from the Install- ment Book are taken up and the Stock Certificates issued from the Stock Cer tificate Book to the various subscribers for the number of shares for which they have paid, and posted from the Stock Certificate Book to the subscribers' names in the "Stock Ledger." Then the Subscription account must be closed and the Capital Stock account set up. Cash is already debited for the full amount of Subscription and the Installment accounts are all closed, so tke •Journal entry required now is: Subscriptions $50,000 Capital Stock $50,000 For the subscriptions to the Capital Stock paid in full by all subscribers. Note: The posting of this entry would close Subscriptions account, and set up the Capital Stock account. Three months have elapsed since the corporation opened its books for busi- ness, and in the meantime there may have been many business transactions necessary to be recorded in the books of original entry and posted to Ledger accounts, but these entries for the subscriptions and Capital Stock need not interfere with that work. Trial Balances for the end of January, February and March would be taken before the final entry setting up the Capital Stock ac- count could be made, but Trial Balances may be taken in the usual manner, the Installment accounts and the Subscription account representing the paid up capital until these accounts are closed and the Capital Stock account opened, then the Installment accounts and the Subscription account will disappear from the next Trial Balance and the Capital Stock account will appear. 113. Controlling Account: It should be observed that the Capital Stock account in the General Ledger may be considered a controlling account for the "Stock Ledger" previously mentioned. Of course, each stockholder is credited with the amount of stock he holds and all transfers of stock are posted from the Stock Certificate Book to the debit and credit of the stock- holders in the Stock Ledger. The total of all the credit balances in the Stock Ledger must equal the amount shown by the Capital Stock account in the General Ledger. 114. Other Entries: It may happen that when a corporation is organized and all the stock is issued, there is not sufficient cash to carry on the business, because all or nearly all the capital stock was issued in lieu of or in payment for property turned over to the corporation by the subscribers. Money might be borrowed on notes or bonds, but suppose the stockholders should vote to donate 10% of their stock to be sold to raise money for the working capital Should the stockholders of the Atlas Trading Co., shown in the first opening entry, decide to donate 10% or 50 shares of their stock for this purpose, what entry? This stock handed back to the corporation cannot be charged to Capital Snick account because this would reduce the Capital Stock and this is not law- ful. The capital stock cannot be reduced nor increased without formal appli- cation and legal permission by the state. This 50 shares of stock donated is placed in the hands of the Treasurer to be disposed of for the purpose in- tended, and until disposed of is Treasury Stock. The entry would be: Treasury Stock $5,000 Working Capital $5,000 The term "working capital" in this entry may be objected to on the ground that there is no working capital until this treasury stock is sold, or that the amount of it is in doubt, because the stock may be sold below par or 144 BOOKKEEPING AND ACCOUNTING 000 If the Treasury 1,250 above par. and that this fad is better represented by using the term "Contin- gent Working Capital," or "Working Capital Reserve," or "Working Capital Suspense," until the exact amount is known, anil then close this a >un1 and sel up the account, "Working Capital" by the entry, "Contingent Working Capital" to "Working Capital" for the proper amount. Winn this Treasury stuck is sold or any part of it, the Cash Beok entrj would I"', credil "Treasury Stock" on the debil side of the Cash Book, and when it is all sold the Treasury Stock account would I lose. I. But suppose this 50 shares of Treasury Stuck were sold al -V, discount, what entry Cash $3,750 Working Capital 1,250 Treasury Stock In this case the working capital would be reduced $1,250. Stock were sold at 25' , premium, -•">', above par. what entry? Cash $6,250 Treasury stock Working I Capital Then the working capita] would be increased $1,250. These are usually Cash Book entries, hut may be entered in the Journal and Cash Booh both as previously shown. 115. Unsubscribed Stock: In a "close corporation." thai is. where then are a few stockholders who take all the stock, the stock is usually all taken and paid for at the time or within some limited time, hut in many cases, and espe cially in larger capitalization, usually only a part of the stock is subscribed al the time of organization. Only the stock thai is paid for can be issued, and the remainder is unissued or unsubscribed stock. Suppose the Atlas Trading Co. is incorporated under the laws of the S of New Jersey on January 1, 1!>2 — . with an authorized capital of $75,000, di- vided into 750 shares of the par value of -id 11 ' 1 , and the subscriptions as per Subscription Book are: ]{. C. Duffin, 150 shares: c. M. Miller, 125 shares; C II. Ready, 100 shares: A. c. Allyn, 75 shares; B. W. Thomas, 50 shares, all at par. which subscriptions they pay in full in cash. There is left 250 shares un- subscribed. Prepare the opening entry. January 1, 19C The Atlas Trading Company, incorporated Junuary 1, 192, under the laws of the State of l!ew Jersey, with an authorized capital of $75,000, divided into 750 shares of the par value of $100. Subscriptions rrnsubsoribed Capital Stock Capital Stock For various subscribers to the stock of this company, as per Subscription Book. -1- Cash Subscriptions Received payment in full lor all sub- scriptions to capital stock, as per the Subscription Book and Stock Certificate Book. 50000 £5000 50000 00 75000 50000 00 00 BOOKKEEPING AND ACCOUNTING 145 Then, suppose at a later date, January 5, E. D. Morgan, A. L. Hawkins and B. S. Peters subscribe for 20 shares each at par, which they pay in cash. These subscriptions would appear in the Subscription Book, and the Journal entries would be : Subscriptions $6,000 Unsubscribed Capital Stock $6,000 For subscript inns of E. D. Morgan, A. L. Hawkins and 1'.. S. Peters, 2(1 shares each at par, as per subscription book. Cash . $6,000 Subscriptions $6,000 Received payment in full for 60 shares of the capital stock of this company as per Subscription Book. 116. Proposition 1. Preferred Stock. The Acme Tool Co. incorporated under the laws of the State of Illinois on January 1. 192 — , with an authorized capital of $100,000 of which $50,000 is Preferred Stock, divided into 500 share, of the par value of $100. and $50,000 is Common Stock, divided into 500 shares of the par value of $100. H. M. Huff, C. M. Barnes, L. D. Miller, O. H. AVhite and T. L. Jones have each subscribed for 75 shares of the Preferred Stock at par, and 75 shares of the Common Stock at par. All have paid their subscriptions in cash, except II. M. Huff, who assigns a patent valued at $2,250, to the company to apply on his subscription to the Common Stock, and is allowed 30 days in which to pay the remainder of his subscription. This leaves 125 shares of the Preferred Stock unsubscribed and 125 shares of the Common Stock unsubscribed. Prepare the opening entry. January 1, 192 The Aome Tool Company, Incorporated under the laws of the State of Illinois on January 1, 192 . with an authorized capital of $100,000 of whtoh $50,000 is Preferred Stock, divided in- to 500 shares of the par value of $100, and $50,000 is Common Stock, divided into 500 shares of the par value of $100. Subscriptions to Preferred Stock Subscriptions to Common Stock rnsubaoribed Preferred Stock Unsubscribed Common Stook Common Capital Stook Preferred capital Stock 37500 37500 12500 12500 00 00 00 00 50000 50000 00 00 For various subscriptions to the stock of thi3 oompany, as per Subscription Book. 00 First Mortgage Bonds Payable $50,000 The Underwriting Expense $2,500 would be written off the same as "Dis cciuiit on Stock, " already explained. Bui suppose, instead of a fixed underwrit- ing expense as above, the bonds ;nv taken by bond houses at "93," thai is 7', below par. What entry ! Cash $46 ' Discounl on Bonds :i..">(i(i First Mortgage Bonds Payable >:hi,000 This "Discounl on I'. Is" should be written off the same as "Discount on Stock," explained before. Again, suppose. as is sometimes done, the company should offer one share of unsubscribed stock as a bonus with each $1,01 bond, as an inducement to investors, and the bond houses tool; the bonds and the bonus stock at "96" for the bonds. What entry.' Cash $48, i Stock Bonus 5,1 00 Discounl on I! is L'.OOO Fust Mortgage Bonds Payable $50,1 l Qsubscribed stock o.nOO Both the Stock Bonus and the Discount on Bonds would be written off from lime to time the same as Discounl on Stock previously explained. Of course if Treasury Stock were given as the bonus, the term '■Treasury Stock" would be Used instead of "1 n subscribed Stock." 123. Dividends: Thai pan of the profits which the board of directors may decide shall be paid to stockholders is called a "Dividend." It is not usual and would not be wise for a corporal ion to pa} out all of the profits in dividends to ickholders each year, for then the corporation would be in no better condi- tion after a number of years than it was when it began. U is the part of wis- dom and g 1 financing to withhold or reserve a considerable pari of the net dues each year. These profits withheld will appear in the Surplus ac- count and in the reserve accounts, Reserve for Bad Debts, Reserve for De preciation, Reserve for Taxes, etc. Stockholders are no1 entitled to dividends until the board of directors have by vote "declared a dividend." The net profil of a corporation is determined exactly the same as the nel profit in an.\ other business. Only the entries for the distribution of the profits at the end id' a period is different from that of a partnership or a sob- proprietor. The Union steel <',, is incorporated with an authorized capital of $100 divided into 1,000 shares of the pal' vain -' 850 shares , -- 1 1 f I he stock has been issued to stockholders, and 1 51 i shares or $15,000, of the stock is unsubscribed. At the end of the fiscal period, the Profil and LOSS State- BOOKKEEPING AND ACCOUNTING 157 ment shows a net profit of $15,300, after all depreciation is written off, and the usual reserve accounts set up. The Hoard of Directors, at a regular meet ing, have declared a dividend of 10', or $10 a share, and instruct that the re- mainder of the net profit be carried to Surplus. The entry to close the Profit and Loss account and distribute the net profit, is as follows: Profit and Loss $15,300.00 Dividend No. 1 $8,500.00 Surplus 6,800.00 The 10',' dividend can apply only on the stock that has been issued $85,000 or 850 shares. When this entry is posted, the Profit and Loss account is closed, "Dividend Xo. 1" account is opened and the remainder of the profit is trans- ferred to Surplus. Now, as cheeks are sent to each stockholder for his part of the dividend. Debit "Dividend No. 1" on the credit side of the Cash Book, and when the dividend is all paid, "Dividend No. 1" account will be closed. Dividend No. 1 would indicate that this is the first dividend paid, and subsequent dividends would be designated as Dividend No. '2, and so on, numbered consecutively. It may happen, in some eases that one or more dividend checks may be returned on account of wrong address, and the stockholder cannot be located at present. The returned check is canceled and an entry made in the Cash Book, crediting "Unpaid Dividends" on the debit side of the Cash Book, and this account would stand open until the party or parties were located and the amount paid. In a large corporation where there are a large number of stockholders, a Transfer Book is kept to show the various transfers of stock. This book is posted to the Stock Ledger. A Dividend Book is kept to show the dividend to which each stockholder of record is entitled. A check is issued for the en- tire amount of the dividend and deposited in a separate bank account under an appropriate name. Then checks are drawn on this account for each stock- holder. The purpose is to segregate the work where a large number of dividend checks are to be sent out a number of times a year, probably every three months. In this way this vast amount of check writing and detail in keeping the Transfer Book and Dividend Book and Stock Ledger can be made independently of the regular bookkeeping, and put in charge of a separate set of clerks. GHAPTEB VII SPECIAL COLUMN JOURNAL— CASH JOURNAL li't. This Special Column Journal combines the four books of original en- try. Purchases Book, Sales Book, (ash Book and Journal, into one book. The purpose of it is to show to what extent special columns may he used. This Form may be adapted to a trading business as shown here, or it may be adapted to a non-trading business, such as: Law Office, Architect, or other professional firms, or to a Hospital or Social Organization, by simply using the headings for the special columns that the nature of tic business may require. 12">. The columns to the left, the ('ash Columns, show the cash received and paid out, and is the Cash account. The difference between the total tit' the two columns is the cash balance at any date. The cash balance is taken to the Trial Balance at the end of the month, the same as if it were a Ledger account. No items are posted from these columns. 126. Post the items in the General column only, and post the footing of all special columns at the end of the month. Check every item that cues in a special column to show it is not to he posted unless the item should appear on the same line with an item in the General column, that must he posted. In posting payments received from customers who gel a discount, posl both items to the credit of the customer's account the same as you did in the first Cash Hook'. In posting payments to creditors where a discount is received, post both items to the debit of the creditor's account. Where an entry requires two lines to make the entry plain, use only one date, that is, use the date hut once. 127. Each page of this Cash Journal must he proved at the time the foot- ings of the columns are carried forward to a new page. The total of all the debit columns must equal the total of all the credit columns, except that the Purchases Discount column and the Sales Discount column are omitted in the proof, because these columns are posted to both the debit and credit sides of the Ledger. 128. The student will use the business transactions of Chapter TV for this set. Page the books ami write the headings for the special columns as in the following illustrations. After the transactions are recorded and posted, prepan a Trial Balance, Balance Sheet. Profil and l.oss Statement, and (dose the books. The only inventory to be used at the end of this set is Mer- chandise Inventory, .May 31, $12,876.40. No adjustment entries are to be made. 120. As the transactions in this business are exactly the same as in D. L, Morrison & Co., Chapter IV. where the adjustments were made, it will be inter i -tinL r to compare the net profil shown by the 1'rolit and Loss Statement with the net profil here where the adjustments are not made. Two pages of the work are shown here to show how the transfer to a new page IS made when a page is filled, ami the last part is shown in order to illustrate the posting and paging when posting the special columns. Accountants have made objections to the ('ash Journal on account of insufficient explanations, making it difficult to properly audit the books, ('arc should be exercised to make the explanation clear in each ent ry. 158 BOOKKEEPING AND ACCOUNTING 159 ll.ll BOOKKEEPING A\I> ACCOUNTING BOOKKEEPING AND ACCOUNTING 1G1 - CD " O O ~ ■— CS U CD — crt — O be CB - r-1 Cfl Ctj cd C/2 O CD — — Pi 1 d £ - CD ^ +-> =+H -= ^ <1> <; -M CD -H O i- e. CD CD 01) cci K w CD X M CD T3 += & U *-l X >J a> .J C/3 CS — r"J Jh S-4 -*— -*-J CD O CB .— =1 +-» CD a» T3 — fir _ — . y CD sd -«_> C— < _ «: Q a? tn > Oj a "-H X! 13 r™ 1 H »~ a; ™ M (-\ cis ■*-* M a) ; •— ~ rH — Tfi =1 T CS d CHAPTEB VIII A SYSTEM OF ACCOUNTS FOR RETAIL MERCHANTS 131. There is a tendency among retail merchants to keep their books in a way that does not show tin- results aecessarj to give tin- required information tor the best management of tin- business. T uany keep only personal ac- counts and '-ash. or single entrj books, which do not show the costs of doing business. The buying price of goods is onlj a part of tin 1 actual cost. Every expense adds t" I be cosl . L32. A merchanl must know his overhead expenses and their relation to the amount id' goods sold, as w.dl as the buying cost, in order to price the ■-: Is intelligently, lie must know the financial condition of the business in order to manage it properly. Competition often compels the merchanl to make close prices, and he should positively know the limit to which he may go without loss. Banks are giving more and more attention to the accounting methods of merchants, in the matter id' credit. A merchant who can show a statement id' his business that means progress and careful study of the Iiumhons. win receive more consideration, with the same assets, than one who cannot. 133. The liest system of accounts fur any business i~ one which will furnish the required information with the least effort. Goods uo1 priced high enough to cover the cost of the -noils and tin- overhead expenses, arc sold at a loss. A convenient way to arrive at the percentage of overhead, is to take the operating expense for the |>ast period six months or a year — and find the per cent of net sales. For instance, if a merchant's sales last year weri - iO.OOO and his total operal ing expenses were $10,000, his overhead expense was 20' I i $10,000 divided by $50,000). If he decides he should have a net profit of 'JO', on the Is sold, he should add 20 % profit to the 20^! overhead, which 'ji\cs 10%. Then 10091 less In' , . or 60' . is the invoice est. The cost of any article divided by (id will give the sdline- price. If an article cosl $1.50, the selling price is $1.50 divided by bn\ or $2.50. If an article cost $7.50, then *7,">d divided by , is $12.50, the selling price. 134. Turnover: The rapidity of "turnover" is an important element in a retail Kumiicss. •'Turnover" means the number of times the entire stock, or the stock of any department is all sold and replaced, during the year or any period. To ascertain the turnover, divide the "cost of the goods sold" by the average stock carried. For instance, a merchant carries an average stock of $15,000 and at the end of the year finds the "cosl of the goods sold" was $60,000. He has turned his stock four times. $60,000 divided by $15,000 A slow turnover may he due to poorly selected stock, or to poor judgmenl in buying, or overstocking by buying too much, or it may lie due to inefficient selline ability. After careful, .judicious buying and properly pricing, no ell'ort should be spared to increase the turnover to the maximum. 135. This system of accounts can be applied to a small business or 1o a large department store. Departments are not used in this set. but it will be shown how easily the departments can be provided for. and the system would be the same. 136. The 1 ks to be used are Journal, Cash Book, Purchases Book, Petty ('ash Book, General Ledger, Sales Ledger, and Purchases Ledger. In a small business the Purchases Ledger may be omitted, and the creditors' accounts 162 BOOKKEEPING AND ACCOUNTING JULY 1. 192 163 Accts, Pay. Accts. Rec. 201 103 1285 127 ::. s.-, :;\- ."id o.-, 25 1800 13225 975 1025 975 5500 13500 11 60 13 26 II. J. Brown and J. M. Stone have formed a partnership ac- cording to Articles of Copart- nership signed and executed this day. The business is to be con- ducted under the name of H. J. Brown & Co. and the partners are to share profits and bear losses in proportion to their in- vestments. Each partner is to receive a salary of $150 a month. Their investments are as follows: Cash Merchandise Inventory Office Equipment Store Fixture Delivery Equipment H. J. Brown, Capital Investment as per agreement. — 1— < lash Building Mortgage Payable J. M. Stone, Capital Investment as per agreement. Accounts Receivable Sales Charge tickets of the day's sales. — 3— Account Receivable Sales Charge tickets of the day's sales. — 3— Sales Returns and Allowances Accounts Receivable Credit tickets for the day. —4— J. H. Mann & Co. Notes Payable Purchases Discount Cave 15 day acceptance and re- ceived 3% discount. — 4— Royce Bros. Purchase Returns and Allow- ances Returned goods from Invoice No. 2 —4— Accounts Receivable Sales Charge tickets of the day's sales. 14 General I Mil HI 7000 12000 lie 1247 38 85 ,\i rls. Rec. Sllle; 11 201 103 50 05 i in 342 25 ILLUSTRATION NO. 12. SIX COLUMN JOURNAL [64 BOOKKEEPING AND ACCOUNTING i in the General Ledger. All th< Ledger accounts may be kepi in i Ledger, but in that case the customers' accounts should l><- given a separate section in the book and that section treated as a Sales Ledger, controlled bj Accounts Receivable account. The creditors' accounts should he given a sepa rate section and treated as a Purchases Ledger, i trolled by "Accounts Pay- able." This will save much time ami labor in preparing the Trial Balance each month. 137. Xo Sales Book is kept, as the sales are represented by tickets. There air four kinds of tickets: ( barge Tickets, (ash Tickets, Credil Tickets ami i lollection Tickets. These tickets are kept separate, ami after being entered in the books at the end of the day. are tiled separately by dates. I'm- reference. 1 18. The ordinary two column Journal and the ordinary Cash Book may be used, hut as the controlling accounts, "Accounts Receivabli " and "Accounts Payable" are used, special columns are required in these books. If a Cash Register were used, it would control the cash for each day. but would not affecl nor change the 1 kkeeping. With the illustrations given here, the student will readily understand how to make any entry for any transaction in this set. Tin. The following illustrations show the form of Journal and Cash Book. The form id' the Purchases Book and of the Petty Cash Book is the 5 the forms with which the student is already familiar. These two books are kept and posted the same as in Chapter VI. 1-10. Post tin- items not clucked only, from the Journal. Check the items that go in Special Columns at the time entry is made. The special columns arc necessary in the -Journal on account id' the controlling accounts. If the con- trolling accounts were not used, these special columns would he unnecessary. Only a few of the .journal entries are given to show how the entries are made. At the end of the month, the total of Accounts Payable column is posted tn the deldt .if Accounts Payable account in the General Ledger. The total of Ac- counts Receivable column on the debil side of the Journal is posted to the ,]■ of Accounts Receivable and the total mi the credit side is posted to the credit ul' Accounts Receivable in the < feneral Ledger. The total of Sales column is posted to the credit of Sales account. ^^ &**^s ILLUSTRATION T SIDE • '!■' CASH HOOK Ml. ('heck each item that goes in a special Column at the time the entry is made, the Iv the items not checked are to he posted. In a small business where it is not desired to keep a Sales Ledger, the Accounts Receivable column BOOKKEEPING AND ACCOUNTING 165 would not be necessary, but the Sales column should be used in any ease. At the end of the month, the total of Accounts Receivable column is posted to the credit of Accounts Receivable account in the General Ledger, and the total of Sales column is posted to the credit of Sales account. In the fifth entry from the top, when this entry is made in the Cash Book, the tickets that make up the $125 are posted to the credit of the customer's accounts in the Sales Ledger direct from the tickets, and the tickets are fastened together and filed under the date of July 3, for reference. If desired, the customers' names may be entered in the Cash Book from the tickets and the amount of each entered in Accounts Receivable column. Then these separate amounts would be posted to the credit of customers' accounts from the Cash Book. It simply saves space and writing to make the entry as shown above. The result would be the same. ( — m -J^f-i - jg*L. dZ-- /C/^-^-j^ ^/./y/^J- Ag^7 W^gr-^- L.F. &L ■±^ *& ^'h^J- Jl4 Csd*£mw7y(o,?J7. ^j.jjxr^u. '"^^^V^ r. : f7/,sv-f<+-LS (n/rJ2&riJS; LfsSti? C^a^J,y C&/& //a/nd a^rt^l^Ki^nj^ V -.- /^-f^^a.A/'^L, ="=*" . j'lL 1' .-' U- %+(*,*%%>%. 7-^ •„! „>;. 2SSA ±£_ *- ^iLCL t, <.?!,ur/. , ,,.„ £_ Cifc-Tfrjt ^ A-lh-trx/ CLs"/v^7eJ. 0.3J, -'•' V I ILLUSTRATION NO. 74. CREDIT SIDE OP CASH BOOK 142. Prom the credit side of the Cash Book, post each item in the General column to the debit side of the Ledger account written on the same line with it. Post each item in the Accounts Payable column to the debit of the account written on the same line with it, and on the next line in the Ledger account post the item in Purchases Discount column. 143. At the end of the month, post the total of Accounts Payable column to the debit of Accounts Payable account in the General Ledger. The total of Purchases Discount column is posted to the credit of Purchases Discount account and also to the credit of Accounts Payable account in the General Ledger. 144. To ascertain the cash balance, find the total of all three columns of the debit page of the Cash Book and from this total deduct the total of the first two columns of the credit page of the Cash Book. The Purchases Discount column is not included, because it is not cash. 145. Preference of Form: If it is desired to use only Journal and Ledger, the entries can all be made in the Journal, using the tickets exactly the same as shown in this set. If it is desired to use the ordinary two-column Journal and the ordinary form of Cash Book without special columns, the entries would be made the same as in the form shown here. Some merchants have the idea that the fewer honks they have to keep the less the work required to keep them. A mistaken idea. The purpose of the Cash Book is to eliminate all cash trans- 161 BOOKKEEPING AND ACCOUNTING actions from the Journal. This shortens the Journal. It takes loss writing lo make an entrj in the Cash Book. The cash is segregated .-ill in one book, which is far more satisfactory. The purpose of the Purchases Book is to take all transactions for the purchase of merchandise ou1 of the Journal. This shortens the Journal and segregates all the purchases of merchandise in one ik, which is more convenienl for reference and more satisfactory in every way. Whatever form of bookkeeping is being used in ;i business, ii is easy to change to this form. Business Transactions July 1. II. -I. Bi d J. M. Stone have formed a partnership according to Articles of Copartnership signed ami executed tins day. The busi- ness is to be conducted under the name of 11. -I. Brown & Co., ami the partners are to share profits ami bear hisses in proportion to their investments. Bach partner is in receive a salary "i' +1-"' 11 a month. Their investments air as follows: Cash $1,8 Merchandise Inventory 13,225.00 ( >ffice Equipmenl 975.00 Store Fixtures 1 .< 125.00 Delivery Equipment 1)75.00 II. J. Brown, Capital $18,000.00 Investment as per agreement. Cash - 5,i .00 Building occupied by the store 13,500.00 Mortgage Payable, dated July 1. r,\ $ 7,000.00 J. M. Sto,,,.. Capital 12,000.00 Investment as per agreement. Check the i e h iti ma in the Journal and enter the cash on the debit side of tlio c.-isli Book in the General column, and check the cash items there. The ••heck shows these items are no) to be posted. Open all the above accounts in General Ledger, except cash. The Cash Book is the Cash account. Schedule 1. Office Equipment: 3 Desks (§ $45, 8 chairs (§ $9.50, •_> Filing Cases (§ $75, 2 Typewriters (§ $100, 1 Adding Machine $4] 1. Schedule 2. Store Fixtures: 5 Show Cases (g ^17.">. 15 Chairs (a $10 Schedule 3. Delivery Equipmenl : 2 One-ton trm-ks @ $487.50. When posting, iten i instead of posting the total amounts in the Ledger accounts, so the books will show the original cost of each article, in cs of loss ii\ tii e or "i herwise. July -. Paid J. C. Adams & Co. +12."). 80 for blank 1 ks and office stationery. Paid Sinclair Oil Co. $32.50 for oil and gasoline for delivery trucks. i Debit Administrative Expense $125.80, and Deliverj Expense, $32.50. on the credil side of the i 'ash Book.) 2. Purchased of J. H. Mann & Co., Chicago 111. Merchandise as per Invoice No. 1. 3 10, a 60, $1,285.75. Purchased of Royce Bros., Kansas ( ity, Mo., Merchandise as per Invoice No. 2, 3 15, n 60, $1,375 BOOKKEEPING AND ACCOUNTING 1G7 The following are the sale tickets for the day : Charge Tickets: J. E. Perkins, 1 Suit, $47.50. S. T. Smith, 100 lbs. Nails @ 13c, 1 Cream Separator, $72.50. O. G. Payton, 8 yds. Printed Georgette @ $3.50, D. L. Jones, 9 yds. Satin @ $4.50. Cash Tickets: Cash, 2 pr. Shoes @ $5.25. Cash, 1 Woman's Suit. $7S.50. Cash, 9 yds. Satin @ $4.50. Cash, 3 pr. Shoes @ $5.25, $15.75. H. J, BROWN & CO. CENERAt. MERCHANDISE Chicago. ^CC^y J2j 192 ~ Name Address Dept. ^7 Clerk O Ami. Rec'd ../.. Ji'' Charge Ticket «#7 o a H. J. BROWN & CO. GENERAL MERCHANDISE Chicago, is £-£-&/ -2, 192 ~ £^ Name Address Dept. /3 Clerk s5I Ami. Rec'd Charge Ticket H, J, BROWN & CO. GENERAL MERCHANDISE Chicago. yotJZtf 2, s ■-;•• Name O.^^czy^m/ Address Pept. (y Clerk */- Amt. Rec'd ?,-3~a Charge Ticket 192 — a ? -192- Chicago, ^ Name Address 'an*^ Dept <=& Clerk y Ami. Rec'd f'*^&fd(Z&K/.„. 4,4-J Charge Ticket ¥*■ <$-J!JL^CJ. ^;.' ft 2£L The total of the Cash Tickets is $145.25. Enter on the debit side of the Cash Book, "Salt's, Sundry Ca h Sales, $145.25" in the Sales column, and check in the I.. F. column. Pile the Charge Tii 1 fastened together) .-ill undet the date of July 2. File the Cash Tickets all together under the date of July 2, in a separate rile. They are kepi for ready reference in case any question comes op. The department and clerk huiu1.it arc marked on these tickets to Bhow the record, but we are not keeping books for each depart- ment in this Bet, so ignore that marking. It is only to show how they arc made out whore there arc departments. In a department store, the tickets for each department would be kept on a separate hook, and the entry in the Cash Book would be, "Sales Dept. A," "Sales Dept. B," and , Eoi each department, instead of entering the total Sales as we are doing in this et The method and principle would be the No name is written on the Cash Tickets because accounts are not kept with those who pay cash. In the first Cash Ticket, the customer gave the clerk $15 to pay the $10.50. Note the amount received is entered on the ticket, the difference is the amount of change retui ned 1 t he cust oi July 2. Set up a Petty < lash account for $75 for the petty cash fund in the cash drawer to pay petty expenses. (Debil Petty Cash on the credil side of the Cash Book. See Petty Cash Boob Illustration No. 61a, Chapter VJ.l 3. Paid for Postage $10.50, Messenger $1.25, Rubber Bands $1.35; paid express on advertising matter $3.25, from petty cash fund. (Enter in Petty Cash Booh ::. Paid C. & B. I. R. R. Co. $125 for freighl on goods purchased. Paid J. 11. Logan $75.85 for repairs on building. (Debil Freighl In and Building Expense and Income on the credil side of the Cash Book.) BOOKKEEPING AND A< "VorXTING 160 Julv 3. The following are the Sale Tickets for the day: Charge Tickets: K. G. Martin. 504 Ash St., 3 bu. Early Potatoes @ $1.85, 100 lbs. G. Flour, $5.75; L. 1). .Miller. 985 Rush St., 2 pr. Shoes (5 $6.50, 1 Suit, $47.50; II. P. -lours. 1275 Main St.. LOO lbs. Nails @ 13c, 1 Set Garden Tools, $6.75; J. L. Peters, 1912 Morgan St.. 5 gal. Peaches @ $1.35. 1 Hat, $4.75. Cash Tickets: Cash, 1 Grind Stone, $11.75, 1 Saw, $3.50. Cash. Marmalade, $2.25, 2 gal. Peaches @ $1.25. Cash, 5 yds. Satin @ $4.50, 8 yds. Ribbon @ 80c. Cash, 1 Washing Machine," $05. The student may prepare tickets for the above, or make the entries as on July 2, preceding, without the tickets. 3. The following are the Credit Tickets for the day : Credit Tickets: J. E. Perkins, allowance, $1.85. L. D. Miller, returned 1 pr. Shoes, $6.50. R. G. Martin, allowance, $1.75. D. L. Jones, allowance, $1.50. A credit ticket is made for each allowance to a customer for overcharge or error in the price or for any defect in an article, and for any goods returned. In case any goods are exchanged for something else of different value, make out two tickets. One Credit Ticket for the article returned and one Charge Ticket for the article given in exchange the same as if it were a sale, so the credit and the charge will appear on the customer's account. H. J. BROWN & CO. GENERAL MERCHANDISE Chicago. £^± ^ 3 192- Name J/&C?t^&^Z4S . Address Dept. (2/ Clerk ^S Ami. Reed '/ ^S, 192 — /- Name ^J^^J^r, Address Dept. Clerk Ami. Rec'd Collection Ticket \527 <7^ H. J. BROWN & CO. GENERAL MERCHANDISE Chicago, - r -192- Name Address Dept. ~&-g?< >cm. Clerk Ami. Reed Collection Ticket ys\cc ILLUSTRATION NO. 78. COLI.Ei'TION TICKETS The total of those collection tickets is $125. Enter in the < ash Book. Credit Accounts Receivable on the debit side of the Cash Book, and place the amount in Accounts Receivi column. Post thi amount of each ticket to the Credit of the custon - i - account, .'11111 file all the Collection Tickets togethei under date of July 3. In older tn gel the idea, the studenl may make the tickets, and after ma the entries as instructed, file each bunch of tickets in an envelope with the proper date and the kind of tickets written . D. Miller, cm account, $35, and so on, placing each amounl in the Accounts Receiv- able column. Then the amounts would be posted to the customer's accounl from the Cash Book instead of from the tickets. 'This mighl be preferred as a matter of reference, but it makes more writing, and the filed collection tickets are a sufficient reference. July I. Gave J. II. Mann & Co a 15 day trade acceptance, dated July 2, for ^1 .L' 47.1 s ami received :!' , discount on Invoice No. 1. which is pay- ment in full. 1 Returned goods to Royce Bros, to the value of $127.85 for credit. Received $11.25 from J. C. Adams Stationery Co. as refund on bill for office supple is BOOKKEEPING AND ACCOUNTING 171 4. The following are the tickets for the day: Charge Tickets: J. M. Zion, 612 Elm St., 1 Tie, $1.75, 1 Hat, $4.50, 1 pr. Shoes. $7.50. W: R. Dawes, 727 Grove St.. !) yds. Satin @ $4.50, 8 yds. Taffeta @ $3.24. J. E. Perkins, 1 Cream Separator, $95. S. T. Smith, 1 Suit, $62.50, 1 Hat, $5.25. J. M. Leverich, 5112 Washington Ave., 1 Woman's Suit, $82.50, 1 Summer Dress, $16.75. Cash Tickets: Cash, 3 pr. Shoes @ $4.50. Cash, 2 Suits @ $43.75. Cash, 10 yds. Satin @ $3.75. Cash, 9 yds. Printed Georgette @ $3.25. Cash, 1 Oil Stove, $13.75. Cash, 1 Carpet Sweeper, $27.50. Credit Tickets: O. G. Payton, allowance, $2.25. II. P. Jones, allowance. $2.75. D. L. Jones, allowance, $6.50. Collection Tickets: Received on account from J. E. Perkins, $27.50, L. D. Miller, $15, S. T. Smith. $20, II. P. Jones, $10.00. Find the total of each kind of tickets and enter that of the Charge Tickets and Credit Tickets in the Journal and that of the Cash Tickets and Collection Tickets in the Cash Book, as shown in the preceding transactions. 5. Paid for Postage, $13.00, Light Bill, $2.75, Statement Blanks for office, $5.75. Paid extra delivery help, $5.25, gasoline, $12.50. Paid for "ad" in newspaper, $8.75. All paid from petty cash fund. 5. Paid Delway Repair Co. $79.95 for overhauling one truck. 5. The following are the tickets for the day : Charge Tickets: II. P. Jones, 2 pr. Cloves @ $3.25, 1 Hat, $5.25, 1 Suit, $45.00. J. M. Zion, 2 bu. E. Potatoes @ $4.25, 50 lbs. G. Flour, $2.50, 1 bx. Ivory Soap, $1.75. J. L. Peters, 15 yds. Percale @ 60c, 12 yd. Satin @ $4.50, 10 yds. Ribbon @ 35c. G. H. Wilson, 1412 Main St., 13 yd. Scrim @ 50c, 25 yd. Gingham @ $1.25, 25 yd. Sheeting @ 90c. J. M. Leverich, 916 Arsenal St., 6 Shirts @ $3.25, 1 Tie, $2.25, 1 doz. Collars, $1.80. S. T. Smith, 25 lbs. G. Sugar @ 10c, 1 Woman's Suit, $75, 45 yds. Muslin @ 45c. Cash Tickets: Cash, 100 ft. Garden Hose @ 18c, 1 Oil Stove, $12.50. 100 lbs. Nails @ 15c. Cash, 1 Set Garden fools, $5.64, 1 Razor, $3.25. 1 Set Silver. $12.50. Cash, 100 lbs. F. Flour, $5.25, 2 bu. Potatoes @ $4.75. Cash, 12 cans Corn @ 18c, 1 Washing Machine, $85. Cash, 1 Carpet Sweeper, $27.50. Cash, 3 Shirt Waists @ $9.50, 1 Summer Dress, $16.75. Collection Tickets: Received payments on account from J. M. Leverich $50, W. R. Dawes, $35, S. T. Smith $25, J. E. Perkins $20. 5. Ptirchased of Headly Grocer Co., St. Louis, Mo., Merchandise as per Invoice No. 3, 3/15, n/60, $1,428.35. Purchased of R, K. Kelly Co.. Detroit, Mich., Invoice No. 4. 3/15, n/60, $585.25. Purchased of W. N. Wilson & Co., Invoice No. 5, 3/15, n/60, $478.25. 5. II. J. Brown drew $125 for his private use, and J. M. Stone drew $85 fur his private use. (Debit each partner's Personal Account.) 6. Paid office help for the week $127.50. Paid sales force for the week $135.40. Paid delivery drivers for the week $37.50. 6. The following are the sale tickets for the day: Charge Tickets: E. M. Johnson. 1512 Maple Ave.. 1 Summer Dress, $12.35, 24 yds. Gingham @ $1.25, 35 yds. Muslin @ 45c, 2 Shirt Waists @ $9.50. J. M. Leverich, 1 Suit, $50, 1 Hat, $3.75, 1 pr. Gloves, $3.50. 1 pr. Shoes, $9.50. W. R. Dawes, 1 Cream Separator. $67.50. 1 Wash- in- Machine, $43.50. 1 Silver Set, $22.50. L. D. Miller, 1 Suit. $27.50, 172 BOOKKEEPING AND ACCOUNTING 2l,u, Potai 3 $4.75, 100 lbs. G. Flour, $6.25. R. G. Martin. 12 yds. Satin n, $3.75, 25 yds Percale (5 60c, 12 yds. Taffeta (g $3.30. W. I! Holmes, 71) Olive St.. l Razor, $3.25, 1 Sel Garden Tools, $5.75, 1 Grind Stone, $6.75, 1 < Iream Separator, $75, 1 Washing Machine, $99.40. Cash Tickets: Cash, 1 Oil Stove, $12.50, 1 Se1 Silver, $13 75, 2 Tea Kettles (g $2.85. Cash, 2 bu. Potatoes (§ $4.75, 3 gal. Peaches (5 $1.25, 12 can-; Tomatoes (§ 15c. Cash, 2 pr. Gloves (a $3.25, 1 Tie, .+2.2.".. 1 s,ut. $47.50, 1 pr. Shoes, $7.50. Cash, L5 yds. Ta - i0, 9 yds. Printed Georgette (g $3.50. Cash, 1 bu. Potatoes, $5.25, 3 pkgs. Ralston (g 25c, 100 lbs. F. Flour $6.25. ('ash. 1 pr. Shoes, $7.50, 4.". yds. .Muslin (a 45c, 9 yds. Printed Georgette (g $3.50. 6. Received a credit memorandum for $112. .'!."> from ETeadly Grocer Co., allowance for damaged goods on Invoice No. 3. S. Gave a cash refund for goods returned thai were purchased for cash. $12.30. 8. The statemenl of petty '-ash expenses is as follow - : 1 >elivery Expense, $17.75, Administrative Expense $34.60, Selling Expense $12.00. (Give a check payable to cash for the total of these expenses, to restore the petty cash fund, and debil each expense account on the credit side of the Cash Book.) Balance the Petty ('ash Book. 8. The following are the tickets for the daj : Charge Tickets: O. <"!. Payton, 43 yds. Scrim @ 50c, 35 yds. Muslin (a 45c. 15 yds. Printed Georgette @ $3.50, I). L. Jones. 1 Woman's Suit. $78.50, 3 Shirt Waists «, $9.75, 1 Sweater Coat. $26.50 R. G. .Martin. 1 Cream Separator, $57.50, 1 Set Silver, $28.50, 100 ft. Garden Hose (a 18*/>c. L. I). Miller. 2 pr. Cloves u, $3.75, 1 Shirts @ $2.75, 1 Suit. $47.50. E. L. Pearson, HI.". Market St.. 2 bu. Potatoes @ $4.75, 100 lbs. G. Plour, $6.25, 1 doz. Family Soap u, 15c. B. Mitchell, 71S Chestnut St.. 1 Carpel Sweeper. $27.50, 1 Grind Stone. $6.75, 1 Set Garden Tools. $5.75. E. .1. Roberts, 2514 Ash St.. 1 doz. Collars. $1.75, (i Shirts @ $3.25, 1 Hat, $1.7:,. 1 Suit. $62.50. II. -I. Brown took- from the store for private use. 1 Suit. $57.50, 1 pr. Gloves $3.75, 1 pr. Shoes, $8.50. Cash Tickets: Cash. 1 Woman's Suit. $54.50, 1 Sweater Coat. $30, 1 pr. (doves. $4.50. Cash, 12 yds. Printed Georgette (g $3.50, 25 yds. Gingham (a $1.25. Cash, 3 Shirts (a $2.7-">. 1 pr. Shoes. $7.50, 1 do/. Collars. $1.75, 1 Tie, $1.7.",. Cash. 50 lbs. G. Flour, $2.50, 6 cans Toma- toes (g 15c, 2 bu. Potatoes (g - 1 7.",. ('ash. 12 yds. Taffeta (5 $3.30, 12 yds. Ribbon (g 35c, 25yds. Muslin 0, 45c. Cash. 1 oil Stove, $7.75, 100 lbs. Nails (« 15c, 1 Washing Machine, $42.50. Collection Tickets: Received pavments on account from: -1. E Perkins $25, O. G. Payton $30, R. G. Martin $15, L. D. Miller $2.",. W. R. Dawes $2.">. E. M. Johnson $35. 8. Purchased of Bartletl Bros., Peoria, Ilk. Invoice No. 6, 3 1">. n 60, $486.25. Purchased of S. G. Crane . Postage, $10.25, Phone Pill. $5.00, from the petty cash fund. BOOKKEEPING ANT) ACCOUNTING 173 9. Paid Headly Grocer Co. $1,215.17 in lull for balance of Invoice No. 3, $1,252.75, deducting 3 % discount. 0. The following are the tickets for the day: Charge Tickets: J. E. Perkins. 15 yds. Ribbon @ 35c, 18 yds. Gingham @ $1.25, 12 yds. Printed Georgette @ $3.50. S. T. Smith, 1 Sweater Coat, $27.50, 3 Shirt Waists @ $8.75, 1 Summer Dress, $16.75. II. P. Jones, 3 bu. Potatoes (§ $4.75, 100 lbs. G. Flour, $6.25, 25 lbs. Sugar @ 15c. J. L. Peters, 1 Hat, $3.75, 1 Suit, $62.50, 1 pr. Shoes, $8.75. J. M. Zion, 1 doz. Collars. $1.75, 6 Shirts @ $2.75, 2 pr. Shoes at $6.25. Credit Tickets: W. II. Holmes returned Razor, $3.25. E. L. Pear- son for overcharge, $1.25. B. Mitchel returned Garden Rake, $1.75. E. J. Roberts for error on ticket, $1.10. Cash Tickets: Cash. 1 Carpet Sweeper, $22,50. Cash, 100 ft. Garden Hose (<<• 18'..e. Cash, Kid lbs. V. Flour, $6.25, 3 gal. Peaches @ $1.25. Cash, 1 "Woman 's Suit. $76.00. Cash, 12 yds. Satin @ $3.75. Cash, 16 yds. Printed Georgette @ $3.65. Cash, 2 pr. Gloves @ $4.25, 1 Suit, $47.50. Cash, 3 pr. Shoes @ $5.25. Collection Tickets: Received payments on account as follows: G. II. Wilson $15, E. M. Johnson $2*7.50, J. M. Leverich $15, J. M. Zion $20, J. L. Peters $15. 10. Borrowed $5,000 at Central National Bank on our 15 day note at 6%. (Credit Notes Payable, $5,000 on the debit side of the Cash Book, and debit Interest and Discount $12,50 on the Credit side of the Cash Book.) 10. Paid for oil, $3.50, gasoline for delivery trucks, $5.75. Paid for postage and office supplies, $13.50. Paid parcel post, $5.00, and pre- paid express, $6.50, on goods shipped. All from petty cash. 10. The following are the tickets for the day : Charge Tickets : D. P. Mason, 2412 Elm St., 12 yds. Lace @ 30c, 61 yds. Ribbon @ $1.25. J. M. Bryant, 1618 Market St., 1 doz. Hose, $7.50, 1 Suit, $67.50. R. M. Cruthers, 915 Cherry St., 2 bu. Potatoes @ $4.75, 1 doz. Ivory Soap, $1.25, 100 lbs. G. Flour, $6.25. W. R. Dawes, 12 yds. Taffeta @ $3.30, 18 yds. Percale @ 65c. J. M. Leverich, 1 Misses' Suit $62.50, 20 yds. Scrim @ 55c. Cash Tickets: Cash, 1 Razor, $3.75. 1 Set Silver, $13.50. Cash, 100 lbs. Flour, $6.25. 25 lbs. Sugar @ 16c. Cash, 1 Sweater Coat, $27.50, 1 Summer Dress, $16.75. Cash, 25 yds. Gingham @ $1.25, 15 yds. Printed Georgette @ $3.50. Cash, 13 yds. Taffeta @ $3.30. 11. Collection Tickets: Received cash for the following payments on account : J. E. Perkins $50, O. G. Payton $35, D. L. Jones $65, R. G. Martin $85, L. D. Miller $50, II. P. Jones $35. 11. Paid Regan Printing Co. $37.50 for letterheads and envelopes for office use. Paid Santa Fe R. R. Co. $48.75 for freight on Invoice from Headly Grocer Co. 11. The following are the sale tickets for the day: Charge Tickets: E. M. Johnson. 100 ft. Garden Hose @ 18V>c, 1 Set Silver $12,50. 1 Razor, $3.75. G. E. Wilson, 1325 Oak St., 25 lbs. Sugar @ 17c, 100 lbs. G. Flour, $6.25, 2 bu. Potatoes @ $4.75. W. II. Holmes, 12 yds. Taffeta @ $3.30, 35 yds. Ribbon @ 65c, 1 Summer Dress. $10.05. 174 BOOKKEEPING AND ACCOUNTING Cash Tickets: Cash, 12 Lbs. Oolong Tea (q 65c, 50 lbs. M. & J. 1 offee <" 57c. Cash, 2 bx. Graham Cra - I 25, 3 bx. 1). Peaches (§ $4.35, t bx. Silver Prunes (5 $5 15 Cash, 1 Suit, $63.75, 1 Tie, $2.50. ( 'ash. Il' yds. printed Geo • - L2. Returned goods to R. II. Kelly Co. to the value of $32.50 for credit. R ived a memorandum of credit for $34.50 From W. X. Wilson & I for overcharge. Paid Monon R. R. Co. $132.75 for freighl on Invoices Nos. 5 and 6. Received $11.25 rebate from C. M. & St. P. R. R. on freighl bill of July 5 for overcharge. 12. Paid li. II. Kelly Co. $536.17 in full for Invoice No. 4. deducting ■'■ ■ discounl en balance of $552.75. 12. The following arc the sale tickets for the day: Charge Tickets: B. L. Pearson, 2 bx. Chocolate (g $6.25, 3 Raisins (§ $4.85, •'{ bx. Graham Crackers (a $:{.(>(). I!. Mitchell, :S bx Silver Prunes (>i $5.15, 1 Suit, $43.50. E. .1. Roberts, 1 Cream Sepa rator, $62.50, 3 pr. Shoes (<• $5.25. J. M. Stone for private use. 3 cs. Tomatoes (r, $5.25, 25 lbs. M. & J. Coffee @ 58c. Cash Tickets: Cash, 3 bx. Graham Crackers (3 $3.25, 2 bx. Silver Prunes (n $5.15. Cash. 1 set Garden Tools, $6.75, 1 set Silver. .+ 14.7."). 1 Saw. $3.50. Cash. 35 yds. .Muslin (« 4.V, 42 yds. Ribbon (n 95c, 12 yds. Satin @ $3.85. 13. Paid bookkeeper and office help for the week $127.50. Paid sales clerks and window trimmer for the week. $135.40. Paid delivery drivers for the week. $37.50. 13. Purchased merchandise as follows: Of W. D. Sims & Co.. I'tiea. N. V.. Invoice No. !», 3 15, o 60, for $539.25. Of J. II. Wiley & Co., York. l'a.. Invoice No. 10, 3 15, n 60, for $674.35. Of G. II. Ransom & Bro., Toledo, O., Invoice No. 11,3 I5,n 60, for $712.95. 13. Paid W. X. Wilson & Co. $430.19 in full for Invoice No. 5, deducting '■*' < discount on balance of $443.50. li.'. Collection Tickets: Received cash for the following payments on ac count: W. II. Holmes $50, B. .Mitchell $25, E. J. Roberts $50, J. M. Zion $15, W. R. Dawes $85. 13. The following are the sale tickets for the day: Charge Tickets: R. M. Cruthers, 25 lbs M & -l Coffee (g 58c, 2cs. Raisins (§ $4.85, 1 pr. shoe-. $7.50. J. M. Bryant, 1 Suil $57.50, 12 collars. $1.75, 16 yds. Taffeta @ $3.30. D. P. Mason. 2 bx. Silver Prunes (a $5.15, 2 bx. Chocolate (a $6.25, 6 Shirts w $2.75. .1 E Perkins. 2 pr. (doves ( „ $3 75, 1 Sun. $48.50, 1 Tie, $2.25. S. T. Smith, 12 yds Taffeta (§ $3.30, 25 yds. Gingham (§ $1.25, 9 yds. Satin (§ $3.50. O. G. Payton, 35 yds. Muslin (a 15c, 33 yds. Sheeting @ 90c, 2 pr. shoes < :: l'.".. (ash. 1 Cream Sep- arator $62.50. ('ash. 25 yds. Scrim (a 55c, 13 yds. Printed Georgette @$3.50. Cash. 1 Set Garden Tools, $6.75, 1 Sel silver, $14.75, I Sum- mer Dress, $] 6.75. 13. The statement of the petty cash fund for the week is as follows: De livery Expense, $9.25, Administrative Expense .>! () . Selling Expense $30.60. Restore the cash and balaj the Petty Cash Book. 13. Paid Bartletl Pros. $471.66 in full for Invoice No. 6, deducting ■':•. discount. BOOKKEEPING AND ACCOUNTING 175 13. Ascertain the cash balance and post the books to date. Be careful to enter the terms of each credit in the explanation column of the ledger account when posting from the Purchases Honk (3 15, a 60) so as to keep close watch on the discount period, in making payments in time to secure the discount. 15. Received cash for the following payments on account: Collection Tickets: D. P. Mason $60, -T. M. Bryant $75. J. E. Per- kins $45, S. T. Smith $35, 0. G. Payton $60, D. L. Jones $25, R. G. .Martin $55. 15. The following are the tickets for the day : Charge Tickets: D. L. Jones, 2 cs. Ideal Tomatoes @ $6.25, 20 lbs. M & J Coffee @ 58c, 2 cs. Raisins @ $4.85. R. G. Martin, 9 yds. Satin @ $3.50, 25 yds. Muslin @ 45c. L. D. Miller, 3 Shirt Waists @ $9.75. 1 Sweater Coat @ $27.50. IT. P. Jones, 1 Cream Separator, $72.50. Cash Tickets: 1 pr. Gloves, $3.75, 1 Hat $5.25, Cash, 1 Suit $42.50, 1 pr. Shoes, $8.50. Cash, 1 Carpet Sweeper, $14.25, 1 Set Silver, $12.25, Cash, 1 Woman's Suit, $73.50. Cash, 35 yds. Scrim @ 65c, 12 yds. Taf- feta @ $3.30. Cash, 1 Suit, $67.50. 16. Gave S. G. Crane & Co. a 30 day note at 6% for $2,387.90 on account. Gave J. II. "Wiley & Co. a 30 day note at 6% for $1,674.35 on account. 16. Collection Tickets: Received cash for the following payments on ac- count : J. M. Bryant $35, J. M. Leverich $65, G. II. Wilson $25, W. II. Holmes $65. 16. .Paid for twine, $3.85, extra wages for delivery, $4.75; parcel post, $7.50. Paid for cleaning windows. $5.60, office supplies, $8.95, from petty cash fund. 16. The following are the tickets for the day : Charge Tickets: J. L. Peters. 1 Suit. $42.50, 1 pr. Shoes $5.75. J. M. Zion, 10 lbs. Oolong Tea @ 6Sc, 2 bx. D. Peaches $4.35. 12 lbs. M & J Coffee @ 65c. W. R. Dawes, 1 Carpet Sweeper, $18.75, 1 Wash- ing Machine, $67.50, 100 lbs. Nails @ 15c. J. M. Leverich, 15 yds. Printed Georgette @ $3.50, 45 yds. Gingham @ $1.25. E. M. John- son, 1 Misses' Suit $68.75, 1 Sweater Coat, $27.50, 3 Shirt Waists (a) $11.25. G. II. Wilson. 13 yds. Taffeta @ $3.30, 17 yds. Ribbon @ 45c, 45 3"ds. Muslin @ 45c. Cash Tickets: Cash, 3 bx. Graham Crackers @ $3.25, 3 cs. Lima Beans © $3.60. Cash. 1 Suit. $48.75, 1 Hat $5.50. Cash, 15 yds. Satin @ $3.50, 3 pr. Gloves @ $3.75. Cash, 1 Ra"zor. $3.25, 1 Set Silver. $14.50. Cash, 3 bx. Chocolate @ $6.25, 2 cs. Raisins @ $4.85. 17. Paid B. & O. R. R. Co. $126.54 for freight on goods purchased. 17. Purchased merchandise of J. M. Smyth Co., Boston, Mass., Invoice No. 12, 3 15, n GO, $895.60; of Central' Grocer Co., Invoice No. 13. 3/15 n/60, $1,185.90; of Eastern Grocer Co.. York, Pa. Invoice No. 14. 3/15, n'60, $1,295.85; of J. II. Mann & Co., Invoice No. 15, 3/15, n/60, $723.50; of Royce Bros. Invoice No. 16, 3/15, n/60, $1,132.75. 17. Collection Tickets: Received cash for the following payments on ac- count: R. M. Cruthers $25, E. L. Pearson $25. E. M. Johnson $50, J. L. Peters $25, L. D. Miller $25. 176 BOOKKEEPING AND ACCOUNTING 17. The following are the tickets for the day: Charge Tickets: W. II. Bolmes, 23 yds. Satin (g $3.50, 55 yds. Rib- bon @ 85c, E. L. Pearson, 2 Women's Suits (g $62.50, 5 Shirt Waists @ $9.75 each, B Mitchell, 12 lbs. M & -l Coffee <<> 58c, 3 bx. Silver Prunes (" $5.15, 3 bx. Chocolate (g $6.25, E. J. Roberts, 1 Washing Machine $67.50, 1 Sel Garden Tools $6.75, 1 Oil Stove, $13:75, D. P. Mason, 5 bu. Potatoes (5 $4.75, 100 lbs. G. Flour, $7.25, 10 bx. D Peaches (g $4.35, R. M. Cruthers, 2 Suits (g $47.50, 3 pr Shoes <§ $5.75, 6 Shirts (5 $4.25. Credit Tickets: G. II. Wilson returned goods, $3.25, E. M. Johns □ allowance for error, $1.25, J. M. Leverich for overcharge, $1.75. Cash Tickets: Cash, 18 yds. Printed Georgette I, 18 yds Taffeta (g $3.30, Cash, 100 ft. Garden Hose (§ 18y 2 c, 1 Cream Sep- arator, $77.50, (ash. 2 Women's Suits (5 $67.50, Cash, 7.". yds Sheei ing ui 96c, 1 Suit, $72.50. Cash. 1 Washing Machine, $72.50, 1 Cream Separator, $75. 19. Received $13.75 from Monon R. I>. Co. refund on freighl bill on ac- ruiiiit of overweight. Paid J. II. Maun & Co -i 147.18 for our ac ceptance of July t. 20. Paid office help for the week $127.50. Paid sales force, $135.40. Paid delivery drivers >f : i7..~>ii. I'd. Received a credh memorandum from W. D. Sims & Co. for $17.65 for overcharge on Invoice No. 9. Received a eredil memorandum for $24.85 from J. II. Wiley & Co. for damaged goods. Returned goods to the value of $29.75 to G. II. Ransom & Bro. for credit. 20. The following are the tickets for the day: Charge Tickets: J. R. Dolan, 1462 Morgan St.. 2 Suits (5 $54.25, 1 Woman's Suit. $87.50, B. W. Thomas, 1912 Pine St.. 24 yds. Satin @ $3.50, 12 yds. Taffeta u, $3.30, 7:. yds. Sheeting (g 95c. J. M Bryant, 3 women's Suits (5 $62.50, Is yds. Printed Georgette (g $3.30. J. B. Perkins, 1 Cream Separator $67.50, 1 Washing Machine $63.75 S. T. Smith. 2 Su.ts (a $47.50, 2 Hats ui $5.25, 3 pr. Sho -- K O. G. Payton, 27 yds. Satin @ $3.50, 64 yds. Muslin (a 85c, 23 yds. Printed Georgette (a $3.30. Cash Tickets: Cash, 2 Summer Dresses (g $17.25, 2 Sweater Coats @ $13.25. Cash. 27 yds. Taffeta (g $3.30, ::_• y.ls. Satin (a >;.">" Cash. 2 Suits (a $47.50, 3 pr. Shoes (g $7.25. Cash. 12 Collars $1.75, 3 pr. Gloves (<> $3.75. Cash, 1 Cream Separator, $87.50. Cash, t pr. shoes @ $7.35. Cash. I bx. D. Peaches (5 $4.25, 1 Woman's Suit. $92.50. Cash. 6 shirts („ $5.25, 1 Suit. $62.40. , 22. Paid Murch Bros. $68.75 for repairing doors and windows in the store building. Paid Johns & Martin $464.29 in full for Invoice No. 8, deducting 3' . discount. 22. The statement of expenses prepared from the Petty Cash Booh shows the following total amounts paid ou1 : Delivery Expense, $15.20, Administrative Expense $14.55, Selling Expense $16.10. '2-. Collection Tickets: Received Cash for the following payments on ac- eount : E. W. Thomas $7.".. J. R. Dolan $85, R. M. Cruthers $45, J. M. Bryant $125, D. P. Mason $25. 22. The following are the sale tickets for the day : Charge Tickets : R. G. Martin, 3 Suits <§ $45, 3 Hats (8 $4.75, L D Miller, 37 yds. Satin (g $3.50, \3 yds. Printed Georgette (g $3.50. II. BOOKKEEPING AND ACCOUNTING 177 P. Jones, 10 lbs. Oolong' Tea @ 75c, 3 cs. Tomatoes @ $5.25, 1 Woman "s Suit $97.50. J. L. Peters. 200 lbs. F. Flour @ $7.25, 1 Washing Ma- chine $87.50, 1 Cream Separator, $87.50. W. R. Dawes, 3 Suits @ $67.50, 3 pr. Gloves @ $5.25, 3 Hats @ $4.85. Cash Tickets: Cash. 1 woman's Suit $112.50, Cash, 6 Shirt Waists @ $13.50 each. Cash, 1 Washing Machine $72.50. Cash, 1 Cream Sep- ator $77.50. Cash, 1 Carpet Sweeper. $17.50. Cash, 43 yds. Georgette @ $3.50, 32 yds. Satin @ $3.50. Cash, 3 Suits @ $67.50. Cash, 2 Women's Suits @ $87.50. Cash, 1 Woman's Suit, $97.50. 22. Post the books to date, and ascertain the Cash Balance. 23. The following are the credit tickets for the day: Charge Tickets: J. M. Zion, 3 Saws @ $3.50, 1 Washing Machine, $62.50. J. M. Leverich, 2 Suits @ $42.50, 2 Hats @ $5.25, 6 Shirts @ $3.75. E. M. Johnson, 25 lbs. Sugar @ 19c, 100 lbs. Flour, $7.25, 3 bu. Potatoes @ $5.25. G. H. Wilson, 2 Women's Suits @ $77.50, 6 Shirt Waits @ $9.75. Credit Tickets: J. E. Perkins overcharge $3.25, S. T. Smith goods returned $2.85. O. G. Payton, error on bill $1.35, D. L. Jones defective goods $2.25, R. G. Martin returned goods, $3.25. Cash Tickets: Cash, 32 vds. Satin @ $3.50, 54 yds. Ribbon @ 75c. Cash, 3 Women's Suits $62.50, 42 yds. Printed Georgette @ $3.50. Cash. 3 pr. Gloves @ $4.75; 3 Suits @ $43.50. Cash, 2 Women's Suits @ $82.50. Cash, 45 yds. Taffeta @ $3.30. Cash, 3 Sweater Coats @ $27.50. Cash, 1 Cream Separator, $87.50. 23. Paid W. D. Sims & Co. $505.95 in full for Invoice No. 9, deducting 3% discount on the balance of $521.60. Paid Markham Insurance Agency $270, for policy on stock of goods to cover from July 1, one year. 23. Purchased merchandise of Headly Grocer Co., Invoice No. 17, 3/15, n/60, $657.95; of R. K. Kelly Co., Invoice No. 18. 3/15, n/60, $538.65,- of W. N. Wilson & Co. Invoice No. 19, 3/15, n/60, $741.35; of Bartlett Bros.. Invoice No. 20, 3/15, n/60, $528.45. 23. Received $5.35 refund from Murch Bros, for error in repair bill of July 21. (Credit Building Expense on debit side of the Cash Book.) Paid for Oil $6.35, gasoline $9.85 for delivery trucks, office supplies $5.35, postage $6.75 for office. Prepaid express. $3.50, parcel post $4.50. wrapping paper $11.25, from the petty cash fund. 24. The following are the sale and credit tickets for the day. Charge Tickets: E. W. Thomas. 3 pr. Gloves @ $3.25, 3 Suits @ $47.50. J. R. Dolan, 36 yds. Satin @ $3.50, 63 yds. Sheeting @ 85c, 54 yds. Muslin @ 45c. R. M. Cruthers 5 bu. Potatoes @ $4.75; 3 cs. Tomatoes @ $5.25, 3 bx. Silver Prunes @ $5.15. J. M. Bryant, 3 bx. Chocolate @ $6.25, 2 Suits (a> $52.5(1, 4 pr. Shoes @ $5.75. D. P. Ma- son. 1 Cream Separator $93.50, 3 Saws @ $3.50, 2 pr. Shoes @ $4.75. II. J. Brown, 2 es. Raisins @ $4.85, 3 bx. Silver Prunes @ $5.15, for private use. Credit Tickets: W. II. Holmes, returned goods $2.75, E. L. Pearson, error on bill $1.25. B. Mitchell overcharge $2.35, E. J. Roberts dam- aged article. $3.25. Cash Tickets: Cash. 52 vds. Satin (a> $3.50; Cash, 63 yds. Printed Georgette @ $3.50. Cash. 2 Women's Suits @ $83.75. Cash, 5 Shirt Waists @ $13.25. 2 Summer Dresses @ $16.75. Cash. 1 Carpet Sweeper $23.75, Cash. 1 Cream Separator $97.50. Cash, 1 Woman 's Suit, $87.50. L78 BOOKKEEPING AND ACCOUNTING 24. Collection Tickets: Received '-ash for the following payments on ac- count: E. W. Thomas $125, J. R. Dolan $150, R. M. Cruthers $75, D. P. .Mas,, i, $125; W. R. Dawes $175. 24. Received a credit memorandum for 118.65 from Bartleti Bros, for damaged goods. Received a credil memorandum for $28.75 from Johns iv Martin for overcharge. Returned goods to S. G. Crane ^v i !o. in i he value of $32.75 for credit. l'4. Purchased merchandise of S. G. Crane & Co. [nvoice No. 21, 3 1">. ii 60, $594.75; of Johns & .Martin, [nvoice No. 32, 3 15, o 60, $72 I - of W. I). Sim. & Co. [nvoice No. 23, 3 15, o 60, $632.95; of Eastern Grocer Co. [nvoice No. 24, 3 15, d 60, $498.70. 25. The following are the sale and credil tickets for the day: Charge Tickets: W. II Holmes, 2 Women's Suits u, $67.50, 62 yds. Satin ui $3.50. E, L. Pearson, 54 yds. Taffeta (§ $3.30, 3 pr. Gloves (a $4.75, 12 yds. Gingham (§ $1.25. B. Mitchell, 3 Suits (g $47.50, 3 Hats ui $5.25, 56 yds. Printed G -getti • 1.50 B. -I Roberts, 1 Cream Separator $77.50, I Washing Machine $85, 100 ft. Garden Hose @ ISUc. J. E. Perkins 3 bu. Potatoes (§ $4.75, 15 lbs. Sugar (§ 19c. 5 cs Tomatoes (5 $5.25. Ciedit Tickets: J. L, Peters, returned goods $3.45, J. M. Zion, iit n tickel $2.15, G. W. Wilson allowance $2.35, J. M. Leverich, damaged goods $3.50. Cash Tickets: Cash, 63 yds. Satin (5 $3.50. Cash.:; W m's Suits @ $86.75, Cash, 75 yds. Muslin (§ 45c, Cash, 54 yds. Printed Georgette @.$3.50. Cash. [2 Collars. $1.75, 2 Suits @ $52.50. ('ash. 1 Washing Machine $72.50. Cash. 1 Set Silver, $6.75. Cash. 1 Oil Stove $16.75. Cash. 1 Cream Separator $77.50. '_!•">. Gave II. J. 1! row ii $38.50 to be used as expenses on buying trip. I'aiil W. P. Dunn vv. Co. for printing advertising matter $149.25. (Cha to selling expense, unless an accounl is being kept for Buying Ex- pense. I 25. Paid Regan Printing Co. $138.95 for printing letterheads and en- velopes for general office use. 25. Paid our $5,000 note at the Central National Bank bj giving a new- note for $4,500, 30 'lays at 6%, and our check for $522.50 for the dif- ference ineliidiiiL! the interest on the new note. (Knter in the .lournal and check the cash item and enter the cash on the credil side of the (ash Book and check it there.) L'(i. The following are the sale and credit tickets for the day: Charge Tickets: S. T. Smith 54 yds. Taffeta @ $3.30, 1 Suil $55. (). G. I'ayton, 1 Woman's Suit. $87.50, 5 Shirt Waists «, $9.75. i >. L Jones, 1 Oil Stove $14.75, 1 Cream Separator $72.50. J. 1-'. Monroe, 615 South St., 65 yds. Gingham (§ $1.25, 56 yds. Muslin (5 60c. J. II. Hendricks. 1025 Stat.' St.. 5 bu. Potatoes (g $4.75, 5cs. Silver Prunes (§ $5.15. Credit Tickets: B. Mitchell returned goods, $3.20, I.. D. Miller over- charge, $1.75, II. 1'. do nes. error on t ieket $2.35. W. R. Dawes damaged article. $3.75. Cash Tickets: 3 bx. Cheese, 60 lbs. <§ 18c Cash. 20 lbs. M & .1 i offee (" 63c. Cash 37 yds. Satin (5 $3.50. Cash. 1 Woman's Suit. $97.50. Cash. ■_' hats u, $5.25. Cash, 1 Suit $47.50, 1 pr. Gloves $4.65. Cash,] Washing Machine $72.50. Cash, 5 bu. Potatoes (5 $4.75. Cash, :; pr. Shoes (q J>6.25. BOOKKEEPING AND ACCOUNTING 179 26. Paid City Garage Co. for garage bill, $75. Paid from petty cash fund for order book $4.50, and express charges $4.75 (Selling Expense) ; for postage $2.50. and post cards $1.75. 26. Paid G. H. Kansom & Bro. $662.70 in full for invoice of July 13, de- ducting 3% discount from balance of $683.20. 26. Purchased merchandise of J. II. Wiley & Co. Invoice No. 25, 3/15, n/60, $389.35; of G. II. Ransom & Co. Invoice No. 26, 3/15, n/60, $1,312.50. 27. Returned goods to J. M. Smyth & Co. value $86.54 for credit. Re- ceived credit memorandum for $58.35 from Eastern Grocer Co. for defective goods on invoice No. 14, July 17. 27. The following are the sale tickets for the day: Charge Tickets: R. G. Martin, 46 yds. Satin @ $3.50, 1 Suit. $52.50, L. D. Miller. 1 Woman's Suit $97.50. 63 yds. Taffeta @ $3.30. II. P. Jones, 3 pr. Shoes @ $6.25, 2 Suits @ $42.50, 2 Hats @ $4.50. W. O. Anderson, 412 Monroe St.. 1 Cream Separator $77.50, 1 Washing Ma- chine. $67.75, 1 pr. Shoes $7.50. W. D. Shepard, 872 Pine St., 1 Oil Stove $13.50, 1 Set Silver, $16.75. 1 Carpet Sweeper, $27.50. Cash Tickets: Cash, 1 Woman's Suit $87.50. Cash, 3 Sweater Coats @ $27.50. Cash, 1 Washing Machine ^85. Cash, 58 yds. Satin @ $3.50. Cash. 3 pr. Gloves @ $5.25. 62 yds. Ribbon @ 65c. Cash, 4 cs. Raisins (5 $4.85. Cash. 2 Suits @ $37.50. Cash, 6 Shirts @ $3.75. Cash, 5 bu. Potatoes @ $4.75. Cash, 1 Cream Separator $67.50. 27. Paid bookkeeper and office help for the week $127.50. Paid clerk hire for the week $135.40. Paid drivers of trucks for the week $37.50. 27. Post the books to date, and ascertain the cash balance. 29. Received $13.75 rebate from W. P. Dunn & Co. on bill for printing ad- vertising matter. W. J. Brown returned $25 of the money taken to be used as expenses on buying trip on July 25. (Credit Selling Ex- pense.) Received $15.35 from Regan Printing Co. for error on bill of July 25, for printing office stationery. (Credit Administrative Expense.) 29. The following are the sale tickets for the day: Charge Tickets: J. L. White, 1615 South 12th St., 2 Suits @ $57.25, 2 Hats @ $6.00. J. F. Monroe, 57 yds. Satin @ $3.50, 60 yds. Ribbon @ 68c, 75 yds. Sheeting (a 90c. J. II. Hendricks 1 Woman's Suit $95, 2 Summer Dresses @ $16.75, 3 pr. Shoes @ $7.25. C. W. Thomas, 1 Set Garden Tools. $6.75. 1 Cream Separator $97.50, 1 Hat $5.50. J. R. Dolan, 5 bu. Potatoes @ $4.75. 100 lbs. G. Flour $7.50, 2 Suits, $43.75 each. R. M. Cruthers, 1 Oil Stove, $18.75, 1 Washing Machine $87.50, 1 Carpet Sweeper $22.50. Cash Tickets: Cash, 57 yds. Satin @ $3.50. Cash, 62 yds. Printed Georgette @ $3.50. Cash. 54 yds. Gingham @ $1.25, Cash, 80 yds. Sheeting @ 95c. Cash. 1 Woman's Suit, $97.50. Cash, 100 ft. Gar- den Hose, $18.75. Cash, 1 Washing Machine, $73.25. Cash, 1 Suit, $55. 29. Collection Tickets: Received cash for the following payments on account : J. F. Monroe $175. J. II. Hendricks $75, E. W. Thomas $150, R. M. Cruthers $125, J. M. Bryant $175. 29. Paid J. M. Smyth & Co. $784.79 in full for invoice of July 17, deduct- in- 3\ discount. Paid Eastern Grocer Co. $1,103.37 in full for in- voice of July 17, deducting 3'/ discount. L80 BOOKKEEPING AND ACCOUNTING 30. The following are the sale tickets for the day: Charge Tickets: W. <>. Anderson, 37 yds. Satin (g $3.50, 2 Suit $43.75, W. D. Shephard, 2 Women's Suits (§ $83.75, 72 yds. Shi ing Ui 90c, 3 pr. Shoes (g $5.25. J. M. Bryant, 3 Shirl Waista £9.75, 1 Cream Separator $125, 2 pr. - g $4-50. D P. Mason, 1 Washing Machine, $87.50, 1 Set Silver $22.50. E. J. Roberts, 7.". yds. Taffeta , 2 Suits (5 $47.50, 3 pr. Shoes \. Graham Cracl @ $3.25. I lash, 6 es. Lima Beans (§ $3.60. I 'ash. 100 lbs. Flour, $8.00. Cash, 1 Carpel Sweeper, $27.50. Cash, 1 Woman's Suit. $83.75. Cash, 73 yds. Satin @ $3.50. Cash. 7< yds. Taffeta <§ $3.30. Cash, 1 Suit. $62.50. 30. Received $6.75 from City Garage Co. rebate on garage bill of July 26. 30. Purchased merchandise of J. II. Wiley & Co. [nvoice No. 27, 3 15, n 30, $726.54; of G. II. Ransom & Bro. Invoice No. 28, 3 15, a '30. £824.95; of J. M. Smyth & Co. Invoice No. 29, 3 15, o 30, $427.85. 30. Collection Tickets: Received '-ash for the following payments on coui I : J. h. White $75, W. I). Shephard $135, W. O. Anderson, $150, J. M. Bryanl $150, I). P. Mason $175, B. J. Roberts +175. 31. The follow ing are the sale tickets for the day: Charge Tickets: W. II. Holmes, 2 Women's Suits <„ $67.50, 2 pr. cloves in sl.7-~>. I-;. L. l'earson, ~. s yds. Satin (3 $3.50, 7J yds Serin 55e, 45 yds. Percale (g 75c. B. Mitchell, 3 shin Waists (§ $12.75 I Sweater Coats (§ $27.50, 3 pr. Shoes (5 $6.50. J. II. Bendricks, 1 Cream Separator $125, 1 Oil Stove $17.50, 1 Washing Machine $97.50. J. L. White, 14 yds. Printed Georgette (§ $3.50, 72 yds. Taffeta 1 Suit, $70. Cash Tickets: Cash. 1 Cream Separator $112.50. Cash. 3 Sui1 $42.50. Cash, 1 Washing Machine $72.50. Cash. 1 Carpel Sweeper $27.50. Cash, 3 pr. Shoes (5 $5.25. Cash. 3 bu. Potato -17.".. Cash. 3 cs. I tiocolate (S $6.25. Cash. 1 Suit $52.50. Cash. 25 lbs. Oolong Tea (5 78c. Cash. 65 yds. Satin (§ $3.50. Cash. 1 Woman's Suit, $87.50. Cash. 56 yds. Printed Georgette (a $3.50. Cash. 64 yds. Taffeta (§ $3.30. 31. Collection Tickets: Received '-ash for the following payments on ac- count: B. Mitchell $175, E. L. Pearson $125, W. II. Holmes $225, II. J. Brown $94.90. J. M. Stone $30.25. 31. You are instructed to credil each partner's Personal Account for his -alary as they do not wish to draw their salaries at present. (Debil Selling Expense for one-half and Administrative Expense for i hali 31. The statement from the petty cash fund shows the following dish ments: Deliverj Expense $16.20, Administrative Expense $16.35, S ing Expense $29.50. Debit these mi the credit side of the Cash Hook and make a cheek for the total $62.05 to restore the petty cash fund. 31. Prepare a Trial Balance and after providing for the following inven- tories, prepare a Final Trial Balance before closing, from which pre- pare a Profil and LoSS Statement an. I Balance Sheet and ch.se the BOOKKEEPING AND ACCOUNTING 181 books. Bear in mind that the partners share profits in proportion to their investments. Inventories : Merchandise Inventory, July 31 $18,650.75 Insurance Expired 22.50 Accrued Assets : Interest paid in advance on bank loan 4.50 Rent of store building at the price that could be obtained - 350.00 Accrued Liabilities : Unpaid office help for half week 63.75 Unpaid sales force half week 67.70 Unpaid drivers of delivery trucks 18.75 Interest accrued on Mortgage Payable 35.00 Interest accrued on Notes Payable 10.16 Deferred Charges to Operation .- Postage and office stationery on hand 73.85 Advertising matter on hand 56.25 Depreciation : 5% on office equipment 37.50 5% on store fixtures 93.75 5% on delivery equipment 112.50 2% on Building 370.00 Reserve for Doubtful Accounts : 2';; of debit balance of Accounts Receivable. . . 174.28 146. At the end of each month, a Trial Balance is taken, the Cash bal- anced and the Sales Ledger proved with the Accounts Receivable account and the Purchase Ledger proved with the Accounts Payable account. Monthly statements are sent to each customer. The Profit and Loss Statement can be made only when an inventory is taken at the end of a period. Of course, in a business where the inventory can be ascertained at the end of each month, it is well to prepare Profit and Loss Statement and Balance Sheet every month without closing the books, and close the books at the end of the fiscal period, only. In any ease, the bank balance or cash balance, Schedules of items to be collected and items to be paid, with dates, can be furnished the management every day or every week, and at the end of the month. For a Departmentized Business 147. If it is desired to show the progress, condition and profits of each de- partment, where a mercantile business is departmentized, special columns may be kept for each department in the Purchases Book and the Sales Book. These books may be in the form shown in Chapter IX. and each page proved in the same manner, except that the special columns would be headed Dept. A, Dept. B, Dept. C, or whatever the departments may be. The accounts in the Ledger opened are Purchases Dept. A, Purchases Dept. B, etc., and the Sales accounts opened, Sales Dept. A. Sales Dept. B, etc., for whatever departments are in operation. In the Cash Book, these special columns may be used, or the cash sales may be entered, Sales Dept. A, in the General column, which of course would cause more writing and more posting than to have special columns which are posted in totals at the end of the month. If a Sales Book is not kept, the Cash sale tickets for each department are kept separately, and the total of 182 BOOKKEEPING AND ACCOUNTING tin' tickets for each departmenl is entered on the debil side of the Cash liook cacli day. Sales Dept. A. Sales Dept. B, etc. 148. From this it will be seen thai in order to keep accounts for each de- partment the foregoing forms of books would only need these special columns added. Then the system would be the same so far as the principle of re- ding the ruin.- is concerned. The matter of Purchases Returns and Al- lowances and Sales Returns and Allowances would require special attention in order to be applied to the proper department. The Sales Returns and Allowances would be taken care of in the < ' i-<-< 1 i i Tickets for each depart- ment. A separate Purchases Returns and Allowances Hook may be kept with special columns for each department. 149. "Freight, Express and Cartage In" and "Freight, Express and I age Out" may be charged to cadi department at the time these charges are paid, if it is practical to apply the proper charge to the proper department, and where it is not practical to do so on accounl of g Is being received in mixed shipments, these charges may be debited to the above accounts until the end of the period, and then apportioned to the different departments, and these accounts closed to t he proper Purchases Dept. accounl for its approximate portion. The Freight, Express and Cartage Out, is a Selling Expense and should be charged tO Sales Dept. A, Sales I >ept. I!, etc.. for the portion of eaeh. 150. [fa mercantile luisMiess were selling two.iines of goods, such as Hard- ware and Furniture, and were not departmentized, it may he desired to ascer- tain the business facts about the dealings in hardware and in furniture sep- arately. Then a special column headed "Hardware" and a special column headed "Furniture" in Hie hooks of original entry will give the information separately from which to ascertain the "cost of the " | s sold." the "Net Sales." the "Cross Profit," the "Selling Cost." "Administrative Cost," and the net pi-oiit for each kind of goods. 151. Consignments: A consignment is a shipment of ^«nls by the owner to a second party to he so hi on commission for the accounl of the shipper. The shipper is knov □ as the consignor and the party to whom the goods are shipped the consignee. 152. The consignee must exercise diligence in Hie care of the uoods received on consignment. The degree of diligence depends upon the nature of the goods, and must he as greal care as would he reasonable were the goods i,j s own. The consigi must keep the goods received on consignment entirely separate from his own goods or the goods of others. 153. The consignee pays such charges as freight, drayage, insurance or ■■ 1 1 1 y cost of handling, and in many cases makes advanced payments to the owner. When the goods are sold, these charges, any advanced payments and the agent's or consignee's commission lor handling and selline are de- ducted from the amount received for the goods, ami the remainder, the net proceeds, is remitted to the consignor, should the goods not sell tor enough to pay the charges and the commission, the consignee has a claim against the consignor for the deficit. The commission. 5%, or whatever the rate charged, is calculated on the uross sales before deducting the charges. 154. This method id' marketing is employed mainly in selling live stock and country produce. When the shipment is sold by the consignee, he renders an Account Sales to the consignor along with remittance, or w ith his letter inform- ing the consignor that the net proceeds shown by the Accounl Sales has been placed to his credit and is suhject to his draft. Tic A tint Sales shows the Selling Price and all the charges and the commission in detail, with the bal- ance due the shipper- -t he net proceeds. 155. In some lines of business, the method of shipping goods on consign- ment is an advantage to both the owner and the consignee. The consignor re- BOOKKEEPING AND ACCOUNTING 183 (;iins title to the goods until they are sold, and the consignee is responsible for the goods, barring unavoidable causes of loss or damage, until they are sold. After the goods are sold, he is responsible, as an agent, for the money due the consignee, a misuse of which would subject the consignee to criminal action. 156. The advantage to both parties lies in the probable fact that the con- signee may not be financially able to buy the goods outright, but has the ability and facilities for selling; and the consignor, without relying upon the con- signee's ability to pay. has the opportunity to place his goods where they can be moved, being protected by the fact that the consignee will not use the money or goods wrongly that does not belong to him for the reason already mentioned. In thus shipping goods on consignment to be sold on commission, great care must be exercised by the shipper to have the papers positively show that the goods are shipped on consignment, thus establishing the ownership. If this cannot be shown, the value of the goods may become an open account, which would be a very different matter. 157. Consignor's Records: C. P. Emory & Co. shipped to Senter Grain Co. to be sold for their account. 500 bu. R. Wheat. C. P. Emory & Co. paid for loading car $12.50. Senter Grain Co. paid freight $65.30, labor $16.50, in- surance, $5.50, and sold wheat for $1.75 per bu.. $875, and charged $13.75 storage and 5% commission, remitting the net proceeds, $730.20. The records in the books of C. P. Emery & Co. are : ( lonsignment No. 1, to Senter Grain Co $12.50 Cash $12.50 For loading car of wheat. Then on receipt of the Account Sales and the remittance for the net pro- ceeds : Cash $730.20 Consignment No. 1, Senter (train Co $730.20 For net proceeds shown by Account Sales received this date. Const. No. 1, Senter Grain Co $717.70 Sales $717.70 To transfer net proceeds to Sales account and to close the consignment account. The first two entries would be Cash Book entries, but are shown as journal entries for convenience. The last entry is a journal entry. When these entries are posted, the Consignment account will be closed and Sales account credited for the amount of the sale. At the end of a period, any consignment that has not been reported sold must be included in the Merchandise Inventory. The term "Shipment" or "Consignment" may be used. Both are used in this illustration. 158. Consignee's Records: The records in the books of Senter Grain Co. for the shipment are: Shipment No. 1, C. P. Emerv & Co $87.30 Cash $87.30 Paid freight $65.30, Labor, $16.50, Insurance, $5.50. "When the consignment is sold the entry is made to record the commission and storage. Shipment No. 1, C. P. Emery & Co $57.50 Commission 5% $43.75 Storage ' 3.75 For Commission and Storage charges on Shipment No. 1, < '. I'. Emery & Co. Cash $875.00 Shipment No. 1, C. P. Emery & Co $875.00 To record the sale of this shipment. Shipment No. 1, C. P. Emery & Co $730.20 Cash ' $730.20 To record the payment of the net proceeds of Shipment No. 1, C. P. Emery & Co. 184 BOOKKEEPING AND ACCOUNTING 159. Of course all these entries would lie < 'ash Rook entries except the entry to record the Commission and Storage, but the results are the same. If the st in lent will set up T-Ledger accounts and posl the entries for the Consignor, and then set up another set of T-l.ede.er nmuiiits an.l posl the entries for the Con- signee, the records will appear clearly. It will show that the consignment accounl oft! ignor is closed and the result is the same as a sale of $717.70 for cash. The s >nd set will show the Shipmenl account of the Consignee is close,! and it will appear that Senter Grail] Co. have retained $57.50 cash. : have a ereilit to commission accounl foe $43.75 ami Storage accounl for $13.75. A second shipment to the same party is called shipment No. 2 or Consignment No. i'. Always write the name of tin- person or firm after the shipment No. or Consignment No. 160. In tl \ ei it the net proceeds are not remitted by Senter drain Co., the consignee, bul placed to the credil of the consignor, C. I'. Emery & Co., the consignor's record would be: Sen' i Co $730.20 Consignment No. L, Senter Grain Co $730.20 For not down by A. -count Sales ir.rivcl this date. 161. The entry to close the i lonsignment account and transfer the balance of the Consignment account to Sales accounl would he the sane- as the entry given. The consignee, in that case, would make the last entry as follows: Shipmi lit No. 1, C. P. Emery & Co $730.20 C. P. Emerj £ Co ' *7;;e.L'n To credil the net proceeds of this shipment to the consignor. 162. The following is a form of Account Sales submitted by the consignee. li has no connection with the foregoing hut is given to show how the sales, charges ami net proceeds may he shown. Any unsold items may he stated fol- lowing the record of sales, for the convenience of the consignor. Any facts may he briefly stated. ACCOUNT SALES. he. Received, From }Com mission Merchant!. 7. 9-2- , to be sold on Commission. jJMSj At^J^AiS -^^/^W $&**/ /O™ J/-SV /, ?,< ? Jh s/ C?/yj>Z. / ■zs- /■$- entory, Purchases and Freighl In accounts. The manufacturer buys raw materials, hires labor, and pays other necessary expenses to produce the goods he sells, the cosl of which is shown by the Materials account, Labor account, Factoi Expense account, and any other account thai affects the "cosl to make." The Balance Sheel in a Manufacturing business is prepared the same as in ,i Mercantile business. The Profit and Loss Statement in a manufacturi business is very similar id that of a trading business, in thai the" Manufacturing cosl of goods sold" must lir deducted from the uel sales to obtain the "gross profit." The following is the Pinal Trial Balance, before closing, of the Davis Manu- facturing Co., nn December 31, 192 . at the close of the year's business, from which prepare a Balance Sheel and Profit and Loss Statement. Final Trial Balance before Closing, Davis Manufacturing Co. Deo. 31, 19 Preferred Capital Stock Common Capital' Stock unsubsorlbed Common Stock Surplus Cash on hand and in bank Rotes Receivable Aocounts Receivable Unexpired lnsuranoe Fostage and Stationery on hand Machinery T00I3 Office Equipment Building') Factory ) Notes Payable Aocounts Payable Aocrued Liabilities (Unpaid payroll) . . Reserve for Doubtful Accounts Reserve for Depredation on Machinery . . Reserve for Depreciation on Building . . Reserve for Depreciation on Offioe Equip. Reserve for Depreciation on T00I3 .... Raw Materials Inventory, Jan. 1 .... Finished Goods Inventory, Jan. 1 .... Raw Material in Process Inventory , Jan. 1, Labor in Process Inventory, Jan. 1, . . . Raw Materials Purchased Purchases Discount - Direct Labor . . Freight In Sales Sales Returns and Allowances Sales Discount Manufacturing Expense Selling Expense Administrative Expense Interest and Discount collection and Exohange 5000 16650 27500 36967 250 175 20000 5400 3250 21250 12500 27375 1500 1750 162150 22500 3750 2250 1250 24650 7500 7115 17561 85 525! 00 41501 1 '-'l 50000 50000 12500 20500 34631 1150 779 2000 637 325 540 650 241301 415014 9£ ILLUSTRATION NO. 80. PINAL TRIAL BALANCE Inventories Deeeinher 31 : l.'au Materials $27,500 Finished Goods 35,250 Materials in process Labor in process 1,875 BOOKKEEPING AND ACCOUNTING 187 The following are the details of Manufacturing Expenses, .+24,050, Selling Expense, $7,500, and Administrative Expense. +7,115.00. shown in the Trial Balance and are considered in preparing- the l'rolit and Loss Statement : Manufacturing Expenses: Selling Expense: Taxes on factory $350.00 Freight Out $450.(10 Stationery and Supplies 4:25.00 Shipping Expense 575.00 Insurance on material and build- Commission 1200.00 ing 375.00 Salesmen's Salary 4000.00 Superintendence 5900.00 Advertising 1275.00 Engineers and Firemen 6512.00 Foremen's Salary 6600.00 $7,500.00 Fuel and Light . ". 725.00 Building Repairs 564.85 Administrative Expense: Machinery Repairs 375.00 Office Expenses $2115. (ill Boiler Repairs 185.65 Office Salaries 4000.00 Dep. on Building 637.50 Director's Fees 300.00 Dep. on Machinery 2000.00 Attorney's Fees 700.00 $24,650.00 $7,115.00 Note: The above items might take the place of these expense accounts in the Trial Balance. They are presented as above to shorten the Trial Balance. These separate detailed statements should be submitted to the management from which they may study the expenses, if they are not entered in detail in the Profit and Loss Statement. (See Illus- tration No. 25.) Profit and Loss Statement, Davis Manufacturing Co., Dec. 31, 19 Sales $241,301.00 Less Sales Returns and Allowances $2,250.00 Less Sales Discount 1,250.00 3,50(1. no Net Sales $237,801.00 Prime Cost: Raw Materials Inventory Jan. 1 $12,500.00 Raw Materials in process, Jan. 1 1,500.00 Labor in process, Jan. 1 1,750.00 Purchases Raw Material 162,150.25 Freight In 3,750.09 Direct Labor 22,500.00 $204,150.25 Less Raw Materials, Dee. 31 $27,500.00 Less Raw Materials in process, Ore. ::i 2,250.00 Less Labor in process, Dec :;l 1,875.00 31,625.00 Prime Cost $172,525.25 (72.55% of sales) Factory Overhead: Taxes on factory $350.00 Stationery and Supplies 425. 00 Insurance on Material and Machinery :;75.00 Superintendence ' 5,900.00 Engineers and Firemen 0,5 12.no Foremen 's Salary 6,600.00 Fuel and Light... 725.00 Building Repairs 504.85 Machinery Repairs 375.00 Boiler Repairs 185.65 Dep. on Building 637.50 Dep. on Machinery 2,000.00 Factory Overhead (10.36% of sales) $24,650. 00 Total Manufacturing Cost $197,175.25 (82.91% of sales.) carried for'd 1.- BOOKKEEPING AND ACCOUNTING Total Manufacturing Cost, Brot, For'd Add Inventory Finished G Is, Jan. 1 27,375.35 D lucl Inventory Finished G Is, Dec. 31 35 Manufacturing sold $189,300.60 79.6 . -.1 I Gross profit ou sales > 18,500.40 Selling Cost: Freight Out $450.00 Shipping Expense 575.00 Col ■ 1,200.00 8ah 3alary 4,000.00 Advertising 1,275.00 Selling Ci oi sales) $7,500.00 Administrati Office Expi uses $1,250.00 Office Salaries 4,000.00 I'm Pees 30' i Attorney 's Fees 700.00 Cost of Administration (2.6395 of sales) $7, 115.00 $14,615.00 Gross Business Profit $33,885.40 Deductions from Income: Interest and Discount $1,756.85 Collection and Exchange 52£ 2,281.{ (.9695 of sale $31,6 Add Other Income: Purchase Discount (.2795 of sales) Net Business Profit (13.9395 ol sales) 253.80 Carried to Surplus. ILLUSTRATION NO 82. PROFIT AND I.oss STATEMENT. MANUFACTURING Proof of Percentages: Manufacturing cost 79.6 '• of sales Selling cost .f.15 . oi sales Administration rest 2.639o of sales Other deductions 96% of sales 86.34' . of sales Less other Income 27' I of sa 86.07' I of sales Add net profit 13.93% of sales Total 100 '. of sales > : The student will observe thai Purchases Discount $650.25 is treated as "Other I me" instead of being deducted from the cost of purchases as was .lone previously in a trading business. Some accountants insist that tliis item should be treated as a non- operating income whether in a trading business or a manufacturing business. BOOKKEEPING AND ACCOUNTING IS!) CO rH in m co o om oco o o o o OH oco to U3 cm to o o o o in o o o in o o CM CO e © o o 60 3 J-> o a) .a c © aj © ■H C*>>H j3 a v. a! Ph 3 >> o as co P4 4J-H a a) u 3-p >■<-• cd i-^ r-l •d a) ■H *J a) o Pi Eh fl co P H a. to ■a a a) p. C3 o >: co o a n o o *j .M o .K CO O UO O CO o rH •<-> HJ CO CO rH CO «V E) T •-an co co P P P P CO CO o o CO r-\ CM CT> <* o o oo oo m o >o in ID c- rH CM in o o o o rH O O OO cd o om o co o m c> m rH in eg cd cm CD C- CM rH in CO CM CO oo oo O m in o CMrH O O in CM Cft CM o O O O O CO O o CD <3" O m co co co M4» O © O O CD OHVlofl HB <$ 43 Cd © • a) t» > •Home o tj © HOOl. JlkOl. ■H PhO P * O © fl TJ +J «rl © rH Cd .C 0) 3 >-" Ot<0 S .a fl En a) cd -h «r}Ci. j-. p. +j P, h a) h 91 •H i © © el o; in vi r-4 i. c; i- 'iji:; Pi © Pt Pi C ©C0©flC0© C0©>HC0 O llP-ri BOM fflfitl HI ■H© A3© rH© rH© SHI-3 OhJ Ol-H t

4-> v< cd © -H CO O © © "M C CO \ on the Preferred Stock and l.v, on the Comn sinck. ' I ' 1 1 . ■ \ have instructed thai an additional "Reserve for Doubtful Accounts" for $3,000 be Bel up. After preparing the Balance Sheet and Profil and Loss Statement, pn , journal entries to sel up the Dividend Accounts and to <-ivdit the Reserve for Doubtful Accounts. Assuming the Nominal accounts have been closed into Profit and Loss Account, the 6rs1 journal entry would be ;h follows: Profil and Loss $32.2.">3.80 Reserve for Doubtful Accts $3,000.00 Surplus 29,253 80 When this entry is posted, Profil and Loss account will be closed, the addi- tional reserve credited to Reserve for Doubtful Accounts, and the remaining Surplus carried to the Surplus account. The uexl entry is to take the amount to be paid as dividends to stockholders out of the Surplus account and to open the Dividend Accounts: Surplus .-);14,250.00 Dividend No. 1. Preferred Stock.. $7,500.00 Dividend No. 1, Common Stock ;.. . li.T.'.iiini When this entry is posted, the Dividend Accounts will be opened and the Surplus account will show the balance of Surplus. As these Dividends are paid by check, debit the proper dividend account on the credit side of the Cash Book. When the dividends are paid and the (ash Hook entries are posted, the Divi- dend Accounts will I losed. The student will find it very interesting in the study of these statements, to set up the "Nominal" ace, units and close them !>y journal entries, and then post the preceding journal entries to distribute tin- profit as shown by the I'rolit and Loss are. unit. The Profil and Loss statement ean be arranged in the same form as the Balance Sheet hut in sections, showing the Manufacturing Section, the Trading Section, the Administrative Section, the Profit and Loss Section and the Appro pi'iation or Distribution of Profits Section, to conform to the Manufacturing Ac- count, Trading Account, Administrative Account, Profit and Loss Ac-, , nut and Appropriation Account as shown at the end of Problem 20, but the form shown is more convenient to write ou the typewriter. PROBLEM 16. O. C. NELSON MANUFACTURING CO. 169. The following is the Trial Balance of the O. C. Nelson Manufacturing Co. at tin' dose of the year's luismess. December 31, 192 . Provide for the inventories which follow, and prepare a Final Trial Balance, Balance Sheet and Profit ami Loss State at. Tin- depreciation on building, machinery and tools and Hauling Equipment are charged or deducted in the Pactorj Over- head, as in the pn ling statement. The depreciation on Office Equipment is included in Administrative cost. The other inventories are used as shown in the preceding statement. BOOKKEEPING AND ACCOUNTING 191 Trial Balanoe. 0. C. Kelson Manufacturing Co. Deoember 31, 192 Capital Stock Unsubsoribed Stock Surplus ■ . Cash Acoounts Receivable Notes Receivable Notea Payable Accounts Payable Reserve for Doubtful Acoounts .... Notes Receivable Discounted ...... Office Equipment . . . . Hauling Equipment Building (Factory) Machinery Toola Raw Materials Inventory, Jan. 1.. . . Raw Material in Process, Jan. 1 . . Fini8hed Goods Inventory, Jan. 1 . . Furohaaea, Raw Material Returns and Allowancea from Purchases Disoount on Purchases Freight In Direct Labor Fuel and tight Indirect Labor Stationery and Supplies *. Foremen's Salary Building Repairs Machinery Repairs Insurance on Material and Faotory . . Sales Sales Returns and Allowances Sales Discount Freight Out Shipping Expense Hauling Expense Commission Salesmen's Salary Traveling Expenses Advertising Warehouse Expense Office Expense Office Salaries Director's Fees 75000 00 10000 00 5000 00 17535 10 39750 75 21564 50 19800 00 21375 85 800 00 2500 00 2375 00 4500 00 17500 00 16750 00 2500 00 11875 25 4238 40 18945 36 107649 80 1235 75 826 60 1250 00 22437 60 2260 00 1250 00 775 60 4765 00 475 00 425 46 500 00 206869 65 542 65 2125 40 721 35 235 40 1150 00 1323 75 4000 00 1200 00 1050 25 845 55 3250 00 7200 00 450 00 333407 05 333407 05 Inventories : Dec. 31, 192 . Raw Materials, Dee. 31 $9,540.75 Raw Materials in process, Dec. 31 1,750.00 Labor in process, Dec. 31 1,125.00 Finished Goods, Dec. 31 13,976.40 10% depreciation on office equipment 237.50 1095 depreciation on hauling equipment 450.00 5" I depreciation of building 875.00 20% depreciation on machinery :{.35(>.i)U 20% depreciation on tools 500.00 Additional Reserve for Doubtful Accounts 2,000.00 CHAPTER IX CENTRAL FOUNDRY COMPANY. INC. Manufacturing Iron, Brass, Sand Blast and Phosphorus Bronze Castings. 170. The Books to be used are the Purchases Book, Sales Hook. Journal, Cash Book, Pettj Cash Book, Notes Receivable and Payable Book, General Ledger, Sales Ledger and Purchases Ledger. Eight special columns are required for the Purchases Book, four special columns for the Sales Book, three special coll is on the debit side of the Cash Book, and four Special columns on the credit side of the Cash Book. The Petty Cash Bonk requires four special Columns and the -Journal requires three money columns on each side. The necessary columns are shown in the illustrations which follow. 171. The accounts in the General Ledger should be opened in the order to be most convenient for preparing the .statements from the Trial Balance, when taken, or tlcy may be arranged in the Trial Balance with the asset, liability and capital ai-ci unts grouped, and the cost accounts and sales grouped, and the operating expense accounts grouped, when the Trial Balance is prepared. 172. If separate books are not used for the Sales Ledger and the Purchases Ledger, they should each be given a separate section in the Ledger to represent the Sales Ledycr which is controlled by Accounts Receivable account, and the Purchases Ledger which is controlled by Accounts Payable account. The Motes Receivable account controls the Notes Receivable Book, and the Notes Payable account controls the .Votes Payable Book. The Petty Cash account controls the Petty Cash Book. These books should be proved against these accounts at the end of the month. 11'A. There are three principal elements in the cost of manufacture, "Cosl of Material," "< lost of Labor" and the " Manufacturing Expense.*' The accounts kept to control these costs are ".Materials" account i or Paw .Materials account I, "Labor" account (direct labor', and "Factory Expense," or "Manufacturing Expense" (which includes indirect labor). The ".Materials" or "Raw .Material" may be represented by two or mote accounts according as various materials are used. The accounts, as controlling accounts are used in the busi- ness of the Valley Tanning Co., Paragraph "-'40. Cost of Material -f- Direct Labor = Prime cost. Prime Cost -f- Manufacturing Expense Manufacturing cost or cost to make. Manufacturing Cost + Administrative Expense = Total Cost. 174. The Journal is not shown because it is the same form as in Chapter VI. The preliminary wording for the opening entry for a corporation has been pre- sented under "Corporation Accounting." The journal entries, following the usual preliminary wording in the Journal, for this business are: March 1 Subscriptions $71,500.00 I'nsiil.s.Tilic.l stock 3,500.00 I apita! Stoci -7.-mio0.00 As per Subscript inn Book. 192 BOOKKEEPING AND ACCOUNTING 193 Cash $42,500.00 Buildings 15,000.00 Land 5,000.00 Machinery 12,000.00 Subscriptions Surplus Received in payment of all subscriptions to the Capital Stock of this company as per Minute Book, and Subscription Book, and stock issued as per Stock Certificate Book. $71,500.00 3,000.00 //f^zr^r-zdn/ Z / 6a^^^^^^^ Jjjibst- A/Mj- <2a*t**. VL ^ Jj^^^sd^/^I^^O Ml'. ^lzs'MJL^A S~*-7-T, rJ£,M*,/2,^p'/>*t., S >< V *pv.//*>. Ilk i- -2^- ^V MMw /V^A^I^^i^A^l^trn^ Mt8£ •■• //).}/ U ff/Jg, Zyj2 -Jl L?roJAo /Jttjs>( ^ 7st &*J -3 J 4+ J2=- C^7**Ju? /7/^^cAJ AJ^h^ JjAlfJ. ' ^rC zJ . Jl£ :SA M^/Uh^^C^^tgj ^ty£A 17r/&4i-(-mt;( ^ '^-^-y / f-r ILLUSTRATION NO. SALES BOOK 175. The amount entered in the "Amount Debit" column of the Sales Book is posted to the debit of the account written on the same line with it. Observe that the amount in the "Amount Debit" column is distributed to the special columns. Care should be taken at the time the entry is made, to distribute the proper amount to the proper special column. At the end of the month, the total of each special column is posted to the credit of the proper sales accounts, and the total of all sales is posted to the debit of Accounts Receivable account, thus : Accounts Receivable Dr $58,452.96 Sales Phos. Bronze Castings Cr.. . Sales Brass Castings Cr Sales Sand Blast Castings Cr. . . . Sales Iron Castings Cr $58,452.90 176. The total of the General or "Amount Credit" column is the total of all sales and is the amount to be posted to the debit of Accounts Receivable. The sum of all the totals of the special columns must equal the total of the General column. This is the proof of the page when transferring to a new page. The cash items in the Sales Book are checked and not posted, and are entered in the Cash Book, and checked there. In this way cash is debited in the Cash Book and Sales is credited from the Sales Book. $15,739.00 20,285.54 11,873.97 10,554.45 194 BOOKKEEPING AND ACCOUNTING ,- ( \^L^^^~ Jk l _.'_ /^a^U. ■/.'u ^lZ -^■/^ - .< t 1 £f^ &? ■&JMM i-,- ' .'J. : ri* stJ?S-*£zJ^ /$,;,*>£;£&*<) -2 4- 'J &■ J > Vil7-y J uJ,™~~.;{osfJs ..■■ /AM' JJ- 3A\ -v (-^^J^JaJ/J ^///CV^ J ;•/'.? _;,.\_ (^^U^JjJ^^faj 6Jr4>r*/*,^( z/ A£ZJ.. /j-ijr ILLUSTRATION NO SI. DEBIT SIDE OF CASH BOOK 177. From the debil side of the Cash Book, post the items in the General column to the eredil of the account written on the same line. Posl the items in the Accounts Receivable column to the eredil of the customers' accounts in the Sal* Ledger, posting the item in the Sales Discount column, at the same time, on the pfexl line to the credit of the customer's account. At the time of making an entry, transfer the cash received to the Bank column. 178. At the end of the month, the total of Accounts Receivable column is (posted to the ei-edit of Accounts Receivable account in the General Ledger. The total of Sales Discount column is posted to the debit of Sales Discount account and also to the eredil of Accounts Receivable account. Observe that the "Cash Sales" entries are checked. They come from the Sales Book where i he\ are checked also. C — t7^^?y O^ ^ ? (J^r^te sA. JsJU^t- A^ijP* /._:-.-.- Z *2 ' A f : -i > AI^L ItySB. (Zi U i Jfyffifr A ifi . , /f/j, ii£ij>' j C^JL/Tt,* (^-/Z^tJLs ? /ZjfOO . 4*..;&~jg,*.G4,jG. w -?J-0 06 fJ-d, . ,," ' ';: />A 32-Q / m /JZrtLfCO^Jl Cfc^r^J I '/ ' * v /20 ■,■• . ; .■ ' 6& 73£ . ,' /j\ JJJ 6LLL JL»f4jU.;{*j9>2« ILLUSTRATION NO. 85. CREDIT SIDE OF CASH BOOK 179. From the credit side of the Cash Hook, post the items in the General column to the debil of the respective accounts. Post the items in the Accounts BOOKKEEPING AND ACCOUNTING 195 Payable. column to the debit of the creditors' accounts in the Purchases Ledger, and at the same time, on the next line, post the item in the Purchases Discount column to the debit of the creditor's account in each case. At the time of making an entry, enter the number of the check in the "Check No." column and transfer the amount to the Bank Column. The Check No. column is at the right. 180. At the end of the month, post the total of Administrative Expense column to the debit of this account in the General Ledger. Post the total of Accounts Payable column to the debit of Accounts Payable account. Post the total of Purchases Discount column to the credit of Purchases Discount account and also to the debit of Accounts Payable account. 181. To ascertain the cash balance, find the sum of the totals of the first two columns of the debit side of the Cash Book, and from this sum deduct the sum of the totals of the first, second and fourth columns of the credit side of the Cash Book. The total of the Bank column will always equal the total of the first two columns. This will be a proof of addition when transferring to a new page, and when ascertaining the cash balance. When a deposit is made in the bank, total the Bank column to that date in small figures and rule a red ink line under the last item deposited or write the date in small figures to show what has been deposited. 182. To reconcile the Bank Statement, check the checks shown on the Bank Statement against your cheeks in the Bank column of the credit side of the Cash Book. Check the deposits shown on the Bank Statement against the deposits indicated in the Bank column of the debit side of the Cash Book. Add the sum of cash not deposited to the Bank Balance and deduct the sum of the checks issued but not yet paid by the Bank, and this will reconcile your cash balance with the bank balance. 183. In opening Ledger accounts, allow 12 lines each for Sales Returns and Allowances, Purchases Returns and Allowances, Selling Expense, Hauling Ex- pense, and Union Sand Co. Allow eight lines for all other accounts. In posting from the Purchases Book, use the word Purchases before the name of each kind of material purchased. At the end of the month, the total of each special column is posted to the debit of the proper Purchases account: Purchases Sand, Purchases Coke, Purchases Copper, Purchases Oil, Purchases Iron, Pur- chases Zinc, Purchases Coal, Purchases Phosphorus. Each amount in the General column is posted to the credit of the creditor's account in the Pur- chases Ledger, and, at the end of the month, the total of the General column is posted to the credit of Accounts Payable account, in the General Ledger. 184. The Petty Cash Book is controlled by the Petty Cash account. The amount paid out of this fund is restored from time to time when necessary, and the amounts are charged to the various expense accounts affected, so that the amounts paid out of this fund are properly recorded in the books without disturbing the original Petty Cash account. The Petty Cash Book should be balanced as often as the fund is restored. This book may have special columns for Hauling Expense, Admin. Expense, Selling Expense and Factory Expense. Hauling Expense is a factory expense, of course, and all expense for hauling may be thrown into Factory Expense. See Petty Cash Book, Chapter VI. licM>KKKKIMX<; AND ACCOUNTING BOOKKEEPING AND ACCOUNTING 197 Mar. 1. 192. J. C. Noble, II. J. Grover, R. J. Miles and A. C. Collins incor- porated the Central Foundry Co. under the laws of the State of New Jersey on March 1, 192 , with an authorized capital of ,$75,000, divided into 750 shares of the par value of $100. J. C. Nohle subscribed for 250 shares at par, H. J. Grover subscribed for 170 shares at par, R. J. Miles subscribed for 100 shares at par, and A. C. Collins subscribed for 75 shares at par. J. C. Noble owned a plot of ground on which is located a factory building, which he has transferred to the corpora- tion at an agreed valuation of $15,000 for the building and $5,000 for the land, to apply on his subscription, and has paid the remainder of his subscription $5,000 in cash. II. J. Grover has transferred by bill of sale to the corporation, suitable machinery at an agreed valuation of $12,000 to apply on his subscription, and has paid the remainder, $5,000, in cash. R. J. Miles and A. C. Collins have paid their subscriptions in full in cash. The incorporators have agreed to allow E. J. Miner to subscribe for 60 shares at $125 a share, and C. M. Senter, 60 shares at $125 a share, for which they have subscribed and paid in cash. Prepare the opening entries in the Journal and enter the Cash, $42,500. as a deposit on a new page in the bank pass book. This pass book may or may not be kept. Keeping it would perhaps give a bet- ter idea of the use of the bank columns in the Cash Book, if the de- posits are entered on the left hand page, and the checks entered on the opposite page and balanced whenever the cash is balanced. The Pass Book, the Cash Book and the Bank columns of the Cash Book should all agree. Check the cash item in the opening entry and enter the $42,500 on the debit side of the Cash book and check it there. 1. Paid cash to Davis Office Supply Co. for 12 Desks @ $115, 25 Chairs net, 8 Crucibles @ $400 each on account. Bought of Akron Tool Co.. Akron, Ohio, miscellaneous tools for $1,250, on account. 30 days. Bought of Acme Boiler Works, Canton, Ohio, 6 Boilers @ $1,125 each, on account, 30 days. Bought of Federal Truck Co., Buffalo, N. Y.. 3 Two-ton Trucks @ $1,750 each, (Hauling Equipment), on account, 30 days. Note: These purchases are not entered in the Purchases Book Only purchases of raw material are entered in the Purchases Book. Enter the above purchases in the Journal and the amounts in the Gen- eral column. The above accounts must all go in the General Ledger. Concerns from whom property is bought should not be mixed in the Purchases Ledger with the accounts of concerns from whom raw material is bought, hence, the amounts owed to these concerns for property bought is not placed in any Accounts Payable column in any book. 1. Bought of Pittsburgh Manufacturing Co., Pittsburgh, Pa., 30 days @ $8.50, 4 Office Rugs @ $125, 3 Filing Cases @ $75, 4 Typewriters @ $95, 4 Typewriter Desks and Chairs @ $45. Paid cash to Brown Sta- tionery Co. $187.35 for blank books and office stationery. (Cash Book. Office Equipment and Administrative Expense.) 1. Bought of Ames Coal & Coke Co.. Chicago, 111., 185 tons Egg < 'oal @ $4.75, and 125 tons Coke @ $8.05, Invoice No. 1, 3/15, n '60. Boughl of Sinclair Oil Co., Detroit. Mich., 5,625 gal. Fuel Oil @ 13i/oC. Invoice No. 2, 3/15, n/60. Bought of The Chicago Metal Co., Chicago. 111.. 375 Pigs of Iron (100 lbs. each. Ton, 2000 lbs.) @ $27.5(1 per ton. and 15,625 lbs. Zinc @ 18c, Invoice No. 3, 3/15, n/60. Bought of Union 198 BOOKKEEPING AND A \TI\<; Sand Co., s 'i tons Sand (g $2.75 per ton, Invoice No. 1. 3 15, a 60. Bought of Western Smelting I to., Moline, 111.. 12,645 lbs. I topper (g I8e, Invoice No. 5, 3 15, □ 60. Boughl of Walker Hies.. Toledo, Ohio, 2,125 lbs. Phosphorus (§ 37c, [nvoice No. 6, 3 1~>. n 60. .Alar. 1. It has been decided to keep ool more than $125 in the rash drawer for a petty rash fund, from which to pay petty expenses. Sel up the Petty (ash account and open the Petty ('ash Book. See Petty Cash Bi I llust nil ion No. 61a. •-'. Paid for Carbon Paper, $3.25, Rubber Bands, $2.85. Paid for win- dow cleaning at Factory buildin -i 0. Faetorj Expense. Paid for Oil, $4.50, and Gasoline, $11.25, for trucks. (Hauling Expense. Paid For Order Books for salesmen, $3.75. (Selling Expense.) All from the petty cash. 2. Gave Pittsburgh Manufacturing Co. a 90 day note for $2,000 at c, interest on account. (General Ledger account. Enter in General colui i'. Sold J. L. Sparks & Co., Akron, Ohio, 5,275 lbs. Iron Castin 15c, and L-,750 Ihs. Sand Blast Castings (§ 22%c, 2 L0, □ 30. Sold Hill >.v Met anna. < lanton, Ohio. 2,375 Ihs. Phos. Bronze i lastings (5 4:_V. and 2,750 Ihs. Brass Castings (a :;7C.,.. 2 10, n 30. Sold Murch Bi Canton, Ohio, for cash 500 Ihs. Brass Castings (§ ■'>''->■ and 375 Lbs. tron Castiuus ui lor. Muter in Sales Hook separately. Check the ••ash item in the Sales Book and enter the amount in the Cash Hook and check it thei 2. Gave A.mes Coal & Coke Co. a 15 day acceptance for $1,078.45 and a check for $750, which pays [nvoice, $1,885 in full, deducting ■'!'. discount. Paid Markham Insurance Agencj $320 premium on pol- icy to coyer building For one year from March 1. 1'aid J. B. .Minn- $375 for repairs on the building. 2. Received a L0 day acceptance for $1,822.80 iron; J. |. sparks & Co. on account, in Full For bill of March 1, allowing 2 $ discount. t. Received $18.75 from Brown Stationery Co., refund on bill of March 1, on account of error. Received $21.35 from J. E. .Miner for over- charge on repair bill of March 2. I. Paid Pittsburgh Manufacturing Co $1,200 in Full of account. Paid Sinclair Oil Co. $736 n account and received '■'■'. discount on the [nvoice of March 1. 1. Received a memorandum of credit for $23.85 from the Chicago Metal i to. For error in weight on Invoice No. 3, and Erom the Western Smelt- ing Co. for $82.45 For inferior grade of material. I. Paid for Postage $12.50, Post cards $1.75. Paid for prepaid express $9.95, Parcel post $14.50 (selling expense), From tin- petty rash fund. I. Paid C. P.. & Q. R. R. Co. $192.50 for freight on goods purchased on March 1. Paid Cooper Bros. $125 for repairing Boilers, and the City Machine Shop $187.50 For repairing machinery. •I. Boughl of New Jersey Zinc Co., Pittsburgh, Pa., 1,500 Lbs. Zinc (q ltd_.c. [nvoice No. 7. '■'< l.">. n mi. Moujrlit of Keys! Coal Co.. Belle ville. III.. 4l' tons Coal (3 $5.25, Invoice No 8, 3 L5, o 60. Boughl oi I s. Copper Co., Cincinnati. Ohio. 1,750 Lbs. Copper (" PC. [nvoici No. 9, 3 P.. , I Sold P. Nelson & Co., Grand Rapids, Mich.. 3,500 Lbs. lion Castings ( , ; ! ic, and .".mi lhv Brass Castings (5 37%c, 2 10, n 30. Sold Henning Pros. Lansing, Midi.. 4,800 Ihs. Sand Blast Castings (5 •_"-"■.,•. 2 Id. n ::u. Sold Seymour* Peck. Akron, Ohio, 2,800 Ihs. Phos. Bronze Cast ings {« P-V. 2 ID. n 30. Sold A. C Harris & Co.. Superior. Wis.. 2,300 BOOKKEEPING AND ACCOUNTING 199 lbs. Brass Castings @ 37*40, 2/10, n/30. Sold Mussey Bros, i'or cash 575 lbs. Brass Castings @ 37 1 />c, and 250 lbs. Phos. Bronze Castings @ 42c. Mar. 5. Paid for repair on truck $2.75. Paid for stationery for use in fac- tory $6.25. (Factory Expense.) All paid from the petty cash fund. 5. Gave Hill & McCanna credit memorandum for $17.35 for shortage on bill of March 2. and allowed P. Nelson & Co. $12.50 for overcharge on bill of March 4. 6. Received $15.25 rebate on freight bill of March 4, on account of over- weight charge. 6. Paid payroll for the week as follows: Direct Labor as per payroll $1,125. Office Salaries (bookkeeper and office help) $380, Superin- tendence $125. Engineers and Firemen $100. Hauling Expense (3 drivers) $75. Total payroll check $1,805. 6. Total, in very small pencil figures, the checks received in the bank • column on the debit side of the Cash Book since the $42,500 was en- tered in the pass book as a deposit. Enter this amount as a deposit in the pass book. Enter each check paid out in the Bank column on the credit side of the Cash Book on the right hand page of the pass book, separately. Balance the pass book. Ascertain the cash balance and see that the Cash Book balance, the pass book and the Bank Columns agree. Post the books to date. 8. Received an allowance for wrong weight $52.85 from the U. S. Cop- per Co. on Invoice No. 9. Received an allowance for overcharge $37.50 from Walker Bros, on Invoice No. 6. 8. Gave Western Smelting Co. a check for $2,127.84 on account and re- ceived 3% discount. 8. The petty cash statement from the petty cash fund shows the follow- ing payments: Hauling Expense $18.50, Administrative Expense $20.35, Selling Expense $28, Factory Expense $19.50. Gave a check for the total of these items to restore the petty cash fund. Balance the Petty Cash Book, and debit these expenses on the credit side of the Cash Book. 8. Purchased of Ames Coal & Coke Co. 75 tons Egg Coal @ $4.75. and 45 tons Coke @ $7.25, Invoice No. 10, 3/15, n/60. Purchased of Sin- clair Oil Co. 3,750 gal. Fuel Oil @ 12y 2 c, Invoice No. 11, 3/15, n/60. Purchased of Union Sand Co. 85 tons Sand @ $2.35, Invoice No. 12. 3 15, ii (in. Purchased of the Mineral Supply Co., Detroit, Mich., 570 pigs Iron (100 lbs.) (5 $29.50 per ton, and 2.250 lbs. Phosphorus (a) 28c, Invoice No. 13, 3/15, n/60. Purchased of New Jersey Zinc Co. 12.425 lbs. Zinc @ 18c, Invoice No. 14, 3/15, n/60. Purchased of U. S. (Nip- per Co. 5,250 lbs. Copper @ 19c, Invoice No. 15, 3/15, n/60. 8. Sold Spencer Bros., York, Pa., 2,750 lbs. Iron Castings @ 15c, and 1,625 lbs. Sand Blast Castings @ 22c, 2/10, n/30. Sold J. A. Granger, Louisville, Ky., 1,375 lbs. Brass Castings @ 37 1 /;C, and 1,175 lbs. Phos. Bronze Castings @ 42c, 2/10, n/30. Sold J. Curtis & Co., Detroit, Mich., 3,250 lbs. Iron Castings @ 15c, and 1,275 lbs. Sand Blast Cast- ings @ 22c, 2/10, n/30. Sold .Johnson Bros, for cash 875 lbs. Brass Castings @ 37 1 />c and 675 lbs. Phos. Bronze Castings @ 42c. !). Gave New Jersey Zinc Co. a check for $240.07 in full for invoice of March 4 deducting 3',; discount. Gave them a 15 day acceptance for $2,169.40 in full for Invoice of March 8 and received 3% discount 9. Sold J. White & Co., South Bend, Ind., 3.375 lbs. Iron Castings @ 15c and 1.125 lbs. Phos. Bronze Castings @ 42c. 2/15. n 30. Sold .las. Doak & Co., Gary, Ind., 1,675 lbs. Sand Blast Castings @ 22c and 1,435 200 BOOKKEEPING AND ACCOUNTING lbs. Brass Castings @ 37%c, 2 I5,n 30. Sold H. A. James & Co., Ham mond, bad., 2,450 lbs. [ron Castings (§ 15c, and 875 lbs. Phos. Bronze Castings (§ 42c, 2 15, d 30. Sold Davis Bros, for cash l.iT.O lbs. Saml Blast Castings (§ 22c, and 575 lbs. rims. Bronze Castings @ 42c. .Mar. 9. Allowed Benning Bros, claim for shortage of $32.50 on bill of .Mar. 4. Allow rd A. C. Harris & < '<> $19.75 for defective castings on bill of Mar. 1. Received a check for $686.00 from P. Nelson & Co., and allowed 2' I discount. Paid Akron Tool Co. *1.-5h in lull of account, (Ceneral Ledger account. Enter in the General column. 9. Received an allowance from Keystone Coal Co. for short weight, $18.75, from Mineral Supply Co. for error in invoice No. 13, $25. !>. Received 15 day acceptance from J. A. Granger for $988.95 and al- lowed l" , discount. Received a check for $754.60 from spencer Bros. on account and allowed -'. discount. 9. Paid for stationery for Factorj $8 75, 1 Irder Books for salesmen $^2.50, Postage for office use $15, Letterheads and Envelopes for office use $32.50, extra helper on truck $8.50. All from petty cash fund. 10. Purchased of L. A. Kuhn & Bro., Jersey < lity, X. J., '■'•''> pigs Iron (ion lbs.) (5 $29.50 per ton, and 1.475 lbs. Phosphorus (§ 28c, Invoice Nu. 16, 3 15, n 30. Purchased of Union Sand Co. 75 tons Sand (n $2.25, Invoice No. 17. 3, 15, o 60! Purchased of Wilson .Metal Co., Boston, Mass.. 3,750 lbs. Copper (g 19c, and 3,575 lbs. Zinc (§ 18c, Invoice No. 18, 3 15, n 60. Purchased of Ames Coal & Coke Co. 65 tons Egg Coal Ui $4.50, and 35 tons Coke (,; $6.75, Invoice No. 19, 3 15, n/60. 10. Paid Regan Printing Co $387.50 for printing advertising booklets. (Selling Expense.) Paid Acme Boiler Works $1,750 on account. 'ieneral column. i Paid U. S. Copper Co. $824.16 on account and re- ceived :i', discount on balance of March 4. 11. Sold Atlas Sale- Co., Vonkers. \. Y.. 4,650 lbs. Iron Castings (" 15c, and 3,577) lb-. ISrass Castings (a M7C.e. L' 15. n INI. Sold M. Driscoll & Co., Philadelphia, Pa., 3,725 lbs. Sand Blasl Castings (§ 22c, and 2,735 lbs. Phos. Bronze Castings (5 12c, 2 15. n 30. Sold Bill & McCanna t,875 lbs. Inm Castings (§ L5c, and 3,785 lbs. lb-ass Castings (« ■17 1 .,c, ■2 15, n 30. Sold Martin & Martin for cash 2^875 lbs. Sand Blasl Castings (g 22c, and 1,895 lbs. Phos. Bronze Castings (5 42c. 11. Paid extra helpers for hauling $15.75, Office Supplies $5.25, Form Sales Letters $12.50 (Selling Expense), extra help for cleaning Fac tory $13.50, from petty cash fund. 12. Received a check for $1,026.55 from Benning Bros, and allowed them L" , discount. 12. Received $1,970.58 from Hill & McCanna, which pays bill of Mar. 2 in full, allowing -' , discount. Received $1,920.80 from J. L. Sparks & ('o. to pay their acceptance of March 2, due today. 1l'. Paid for Stamped Envelopes $110, and paid Jones Bros. $87.25 for printing office stationery. (Administrative Expense.) Paid Federal Truck Co. $2,500 on account. (General column.) 12. Purchased of Sinclair oil Co. 8,525 gal. Fuel Oil (§ Il'Cc. [nvoice No. 20,3 15. ii 60. Purchased of Chicago Metal Co. 750 pigs of Iron (100 III-, in $27 per ton, and 5,750 lbs. Phosphorus (§ 29c, Invoice No. 21, 3/15. n 60. Purchased of Union Sand Co. 125 tons Sand (§ $2.25 per ton, Invoice No. 22, 3 15, n 60. Purchased of Western Smelting Co. 9,895 lbs. Copper (g L9c, and, 13,428 lbs. Zinc (§ 18c, [nvoice No. 23, 3 1-5. n 60. Purchased of Keystone Coal Co.. 1S5 ions Kl-i: Coal {n $4.75, and 135 tons Coke <§ $6.25, Invoice No. 24, 3, 15; n/60. BOOKKEEPING AND ACCOUNTING 201 Mar. 13. Paid payroll for the week as follows : Direct Labor as per payroll $2,375, Office Salaries (office help, Administrative Expense) $47"). Superintendence $125, Engineers and Firemen $100, Truck drivers (Hauling Expense) $75. Total payroll check $3,150. 13. Paid McGuire & Orr $280 for rent of Warehouse for one month, March 1 to April 1. Received $1,152.48 from Seymour & Peck on account and allowed 2% discount. Received $825.89 from A. C. Harris & Co. on account and allowed 2% discount. 15. Paid Salesmen's Salaries for two weeks to March 13, $300. three sales- men at $50 a week. Received $11.25 refund from Jones Bros, on their bill for office supplies of March 12. 15. Allowed J. Curtis & Co. $28.50 for shortage on bill of March 8. Al- lowed Jas. Doak & Co. $37.25 for defective castings. Allowed .). White & Co. $32.50 for goods returned from bill of March 8. 16. Gave Wilson Metal Co. a 15 day acceptance, dated March 10, for $1,315.32 on account and received 3% discount on $1,356, Invoice of March 10. 16. Purchased of Mineral Supply Co. 565 pigs of Iron (100 lbs.) @ $27.50 per ton, and 6.750 lbs. Copper @ 19c, Invoice No. 25, 3/15, n/60. Pur- chased of New Jersey Zinc Co. 12,895 lbs. Zinc @ 18c, Invoice No. 26, 3 15, n '60. Purchased of Chicago Metal Co. 625 pigs of Iron (100 lbs.) @ $27.50 per ton, and 6,350 lbs. Phosphorus @ 29c, Invoice No. 27. 3/15, n/60. Purchased of Union Sand Co. 175 tons Sand @ $2.35 per ton, Invoice No. 28, 3/15, n/60. 16. Paid Union Sand Co. $213.40 and received 3', discount on Invoice of March 1. Paid Walker Bros. $726.29, and received '3% discount on balance of Invoice of March 1. 17. The statement of petty cash expenses shows the following payments: Hauling Expense $24.25, Administrative Expense $52.75, Selling Ex- pense $25, Factory Expense $22.50. Gave a check for the total of these expenses to restore petty cash fund. Balance the Petty Cash Book, and ascertain the Cash Balance. Enter as a deposit the total of checks received since the last deposit as shown by the Bank column. Enter all checks paid out in the Pass Book, and see that the cash balance, the Bank columns and the Bank Pass Book agree. Post the books to date. 17. Gave Ames Coal & Coke Co. a check for $1,078.45 to pay our acceptance of March 2, due today. Paid J. B. Norton $187.50 for carpenter work in warehouse. (Warehouse Expense.) Paid Bradner Smith $275.80 for sundry supplies for the factory. (Factory Expense.) 17. Paid Ames Coal & Coke Co. $662.02 on account and received 3% dis- count on Invoice of March S, $682.50. Note : Transfer the Cash Book to new pages whether the present pages are entirely filled or not. The next two pages will be sufficient. Rule single and double red ink lines across the two pages exactly opposite and foot all the columns and carry the footings to the top of the new pages. The Cash Book is not formally balanced and ruled until the end of the month 18. Sold J. L. Sparks & Co. 6,438 lbs. Iron Castings @ 15c, and 7,652 lbs. Brass Castings @ 37y 2 c, 2/15, n 30. Sold Hill & McCanna 8,796 lbs. Sand Blast Castings @ 22c, and 6,385 lbs. Phos. Bronze Castings @ 42c, 2/15, n/60. Sold Henning Bros. 5,985 lbs. Iron Castings @ 15c, and 4.875 lbs. Brass Castings @ 37V 2 c, 2/15, n/60. 18. Paid from the petty cash fund : Rubber Bands $2.45, Carbon Paper $3.50. Oil $5.85 and Gasoline for trucks $18.75. Prepaid Express 202 BOOKKEEPING AND ACCOUNTING on castings $17.25. (Selling Expense.) Window cleaning at Factory $12.50. Mar. 18. Paid Keystone Coal Co. $195.70 in full for Invoice of March 4. $220.50, deducting 3' I discount on the balance after the allowance of March 9. !>' ived $724.71 from .1. Curtis & Co. on accounl ami allowed 2\ discount. ID. Paid C & A. R. I; l o - 189.85 for freight on four cars of material bought March 8. Paid Acme Boiler Works $2,500 on account. Received $2,107.62 from Mill & McCanna mi accounl ami allowed 2', discount on lull of March 1 1. 111. Paid Central Phone Co. $375 for advertising space for on.' year from March 1, in Phone Book. I Selling Expense. < rave Chicago Metal Co. a t;n day note at 6« . tor $3,304.28 on account. 20. Purchased of Amos Coal & Coke Co 225 tons Egg Coal (5 $4.50, and 17.". ions Coke at $5.25, Invoice No. 29. 3 L5, n 60. Purchased of Sin- clair Oil Co. 9,485 gal. Fuel Oil (§ 12c, Invoice No. 30, 3 15, n tin. 20. Paid payroll for the work as follows: Direct Labor as per payroll $2,400, Office Salaries (Office help $500, Superintendence $180, Engi- neers ami Firemen $125, Truck Drivers $75. Total payroll check *:!,280. 20. Allowed Hill & .Met 'anna $74.75 for shortage on bill of March 18. Allowed .1. L. Sparks & Co. $122.50 for defective '-asiin-s ,, n bill of March 18. Received a Co day note for $2,000 at o\ from Atlas Sales Co. on account. Received a 60 day note for $2,150 at t'>' , from Hill & McCanna on account. 22. Paid from petty cash fund: Office Supplies $6.50, Second Sheets $2.75. For Stationery for Factory $11.25. For extra help for hauling $5.85. For Advertisement in the Daily News $8.50. 22. Paid Anne Boiler Works $2,500 on account. Paid Federal Truck Co. •$2,750 on account. 22. Sold M. Driscoll & Co. 1,200 His. Iron Castings (a IV. and 850 lbs. Bl Castings (§ 37%c, 2 15, n 30. Sold Atlas Sales Co. 750 lbs. Sand Blasl Castings (§ 22c, and 560 lbs. Phos. Bronze Castings in 12c. 2 15, n 30. Sold II. A. James & Co. 650 lbs. Iron Castings @ 15c, and 540 lbs. Brass Castings (§ 37Vfcc, 2 15, o 30. Sold .las. Doak & Co. 850 lbs. Sand Blast Castings (5 22c, and (175 lbs. Phos. Bronze Castings (r; 42e. 2 1 >. n :S0. Sold .1. White & Co. 950 lbs. Iron Castings (§ 15c, and 1,150 lbs. Brass Castings <§ 37%c, 2 15. ,, 30. Sold for cash to .Morris & Co. 1.200 lbs. Sand Blast Castings (§ 22c, and 600 lbs. Phos. Bronze Castings (« t2c, 22. Received a 60 day note at i;\ from Henning Pros, for $2,725.88 on ac- count, in full for invoice of March 18. 2:1. Paid Sinclair Oil Co $454.69 and received '■'•'■ discount. Paid Onion Sand Co. $193.76 on account and received '■'•', discount. Paid !'. S. Copper Co. $967.57 on account and received •>', discount. Paid Min- eral Supply Co. $1,422.38 on account and received '■'<'■ discount. 23. Received $927.32 from .1. White & Co. on account ami allowed 2', discount. Received $851.99 from .lames Doak & Co. on accounl ami allowed 2' , discount. 23. Purchased of Walker Pros. 7,560 lbs. Copper (5 19c, Invoice No. 31, :{ 15. n 30. Purchased of Keystone Coal Co. 125 ions Egg Coal (a $4.50. and 95 tons Coke (§ $6.S0, Invoice No I 15. n 60 Pur chased of 1'. s. Copper Co. 8,540 lbs. Copper c 19c, Invoice No. 33, BOOKKEEPING AND ACCOUNTING '203 3/15, n/60. Purchased of L. A. Kulm & Bro. 750 pigs of iron ( 100 lbs. ) @ $25 per ton, and 4,750 lbs. Phosphorus @ 30c, Invoice No. 34, 3/15, n/60. Purchased of Wilson Metal Co. 7,500 lbs. Copper @ 20c, and 5,400 lbs. Phosphorus @ 30c, Invoice No. 35, 3/15, n/60. Purchased of Sinclair Oil Co. 3,750 gal. Fuel Oil @ He, Invoice No. 36, 3/15, n/60. Mar. 24. Received $720.30 from II. A. James & Co. on account and allowed 2% discount. Received $998.95 from J. A. Granger to pay his 15 day acceptance, due today. 24. Paid New Jersey Zinc Co. $2,169.40 for our 15 day acceptance due today. 24. Paid Salesmen's Salaries for two weeks to March 20, $500. (Selling Expense.) 25. Received allowance for $38.90 from Western Smelting Co. for short weight. Received allowance for $49.95 from L. A. Kulm & Bro. for overcharge on March 10. Received allowance from New Jersey Zinc Co. $89.75 for shortage. 25. Paid Union Sand Co. $163.69 on account and received 3% discount. Paid L. A. Kulm & Bro. $888.69 on account and received 3% discount. Paid Ames Coal & Coke Co. $512.89 on account and received 3% dis- count. 26. Received $1,928.84 from M. Driscoll & Co. on account and allowed 2',' discount. 26. Paid C. B. & Q. R. R. Co. $348.75 for freight on three cars of material. Paid R. C. Adams & Co. $127.85 for sundry Warehouse supplies. Paid for labor at Warehouse, $58.60. (Warehouse Expense $186.45.) 26. Sold P. Nelson & Co. 7,850 lbs. Iron Castings @ 15c and 7,530 lbs. Bras* Castings @ 37y 2 c, 2/15, n/30. Sold Henning Bros. 4,750 lbs. Sand Blast Castings @ 22c, and 4,250 lbs. Phos. Bronze Castings @ 42c, 2/15, n/60. Sold to Sevmour & Peck 8,540 lbs. Iron Castings @ 15c. and 6,375 lbs. Brass Castings @ 37y 2 c, 2/15, n/60. Sold A. C. Harris & Co. 8,750 lbs. Sand Blast Castings @ 22e, and 5,750 lbs. Phos. Bronze Castings @ 42c, 2 15, n/30. Sold Sims Bros, for cash 3750 lbs. Iron Castings @ 15c, and 3,250 lbs. Brass Castings @ 37^0. 27. Paid payroll for the week as follows: Direct Labor per payroll, $2,750, Office Salaries (office help) $565. Superintendence $180. Engineers and Firemen $125. Truck Drivers $75. Total payroll check $3,695. 27. Paid Sinclair Oil Co. $1,033.56 on account and received 3% discount. Paid Chicago Metal Co. $2,599.60 on account and received 3% discount. Paid Union Sand Co. $272.78 on account and received 3% discount. Paid Keystone Coal Co. $1,670.82 on account and received 3% discount. 29. Allowed" Atlas Sales Co. $11.85 for defective castings. Allowed Den- ning Bros. $27.65 for shortage on bill of March 26. 29. Sold Spencer Bros. 3.250 lbs. Sand Blast Castings @ 22c and 2,750 lbs. Phos. Bronze Castings @ 42c, 2/15, n/30. Sold to J. A. Grange & Co. 2,500 lbs. Iron Castings @ 15c, and 3,000 lbs. Brass Castings (5 37i/.e, 2/15, n/30. Sold J. Curtis & Co. 2,800 lbs. Sand Blast Castings @ 22c, and 2.000 lbs. Phos. Bronze Castings @ 42c, 2 '15, n/30. Sold Jones & Smith for cash 2.000 lbs. Iron Castings @ 15c, and 1,200 lbs. Brass Castings @ 37 1 / 2 c. 30. Paid Salesmen's salaries to March 27, $250. Paid Officers' salaries $700. 31. The statement of petty cash expense shows the following payments: Hauling Expense $30.55. Administrative Expense $15.20. Selling 204 BOOKKEEPING AND ACCOUNTING Expense $25.75. Factory Expense $23.75. Gave a check for the total of these payments to restore the petty '-ash fund. Mar. 31. Balance the Petty (ash Book, and ascertain the cash balance follow- ing instructions under March 6. Post the books to date and take a Trial Balance. 31. .Make the uecessarj adjustments, using the following inventories, and prepare a Pinal Trial I'.alance before closing. Prepare a Profit and Loss Statement and Balance Sheet, and close the books. Inventories : Materials Inventory March -'51 : ."ill tons San. I (a $2.75 $137.50 270 tons Coke (§ $2.50 675.00 .".(Mill -al. Oil (n'S,- 400.00 L25 tons [ron (§ $15 1,875.00 7000 lbs. /.in,- (,, l k 980.00 125 tons < !oal (§ $5.25 656.25 2000 lbs. Phosphorus (5 23e 4(10.00 $5,183.75 Materials in process March 31 $ 850.00 Labor in process March 31 325.00 Finished goods March 31 18,175 50 Insurance expired 26. 67 • • Interest accrued on Notes Receivable 20.89 Unpaid Office Help 175.00 Unpaid Sales Force 250.00 Interest accrued on Notes Paj able 13.28 Office Supplies on hand 175.00 Advertising matter on hand 22.">. Advertising Contract paid in advance 343.75 Depreciation on ( Mice Equipmenl 287.7."> I >epreciation of Hauling Equipment 525.00 Depreciation on Machinery 1,200.00 Depreciation on Tools 125.00 Depreciation on Crucibles 960.00 Depreciation on Boilers 1,350.00 I depreciation on Buildings 375.00 Reserve for Doubtful Accounts .'.bii.OO Note: In preparing the Profit and Loss Statement, the total of the debit of the accounts: Sand. Coke, Copper, Oil, Iron. Zinc, Coal and Phosphorus, is the Raw .Material Purchases, and may be represented in one sum. The total of the credit of the accounts: Iron Castings, Sand Blast Castings, Brass Cast- ings, and Phosphorus Bronze Castings, is the amount of Sales, and may be used in the Profit and Loss Statement in one sum. The purchases accounts may be opened in the Ledger under the following headings: Purchases Sand. Pur- chases Coke, Purchases Copper, Purchases Oil, Purchases Iron. Purchases Zinc, Purchases Coal, Purchases Phosphorus. The sales accounts may be opened under the headings: Sales Iron Castings, Sales Sand Blast Castings, Sales Brass Cast- ings, Sabs Phosphorus Bronze Castings. This will designate the purchases and sales more definitely than to use the names as they appear in the Purchases Boob and in the Sales Look. BOOKKEEPING AND ACCOUNTING 205 SINGLE ENTRY BOOKKEEPING 185. In Single Entry Bookkeeping, accounts arc kept with persons or firms only. Usually only a Journal and Ledger are kept. The Ledger is never in balance, because only one side of a transaction is posted, and this record is made only when the account of a person or firm is involved. A Cash Book may be and is sometimes kept, but it is only for the purpose of recording the cash received and paid out in order to ascertain the Cash balance. If a cash trans- action affects a persona] account, it is entered in the Journal also, and posted from the Journal to the debit or credit of the personal account. 186. The following transactions and the Journal Memoranda of the transac- tions are sufficient to show the method of single entry bookkeeping. We call the record "Journal Memoranda," because they are not journal entries, as only one side of the transaction is considered. If a transaction does not involve a per- sonal account, no entry is made for it, unless a Cash Book is kept, and then the only purpose of the Cash Book entry is to be able to determine the cash balance. January 1, 192 12 D. P. Mason, Proprietor Began business, investing Cash Merchandise Central Milling Co . -5- Bought on acoount 50 brls. Flour at $8.50 Central Milling Co. ■15- Gave them our 30 day note on aooount. -20- 23 D. L. Pearson Sold on account: 5 bx. D- Peaohes at $3.25 10 bsk. Grapes at $2.15 ■25- R. M. Johnson Cr. 8000 3500 4500 00 00 Cr. 425 Dr. 150 Dr. 37 16 21 25 50 Dr. 79 ) 25 54 00 80 00 00 00 75 80 Sold on account: 200 lbs. G. Sugar at .12 l/2 8 sks. G. Flour at $6.85 ILLUSTRATION NO. 88. SINGLE ENTRY JOURNAL The above is the single entry record of the following : Jan. 1. D. P. Mason, Proprietor, began business and invested Cash $3,500 and Merchandise $4,500. 5. Bought of Central MiJling Co. 50 brls. Flour @ $8.50 on account. 206 BOOKKEEPING AND ACCOUNTING Jan. 10. Boughl 25 bu. Earlj Potatoe - 1.50 for cash. 12. Sold 1 brl. Flour $9.50, 8 bu. Earlj Potatoes . 1'. Mason, Proprietor I io.OO •Customers: J. 1'. Jessup $525.75 A. I.. Jennings 464.85 I). M. Sims 498.50 '' I.. Bughes 631.25 I reditors: Mas.. n Bros. A. Co I.7s;.50 .1. I.. Priest & s,,ii 825 i B. .1. Peters & Co 1,350.00 $2.1^0.:ia $11,962.90 191. of course, the Ledger is not in balance. A Trial Balance cannot he taken from single entry 1 ks. In the period from January 1 to June 30, .Mr. Mason maj or m;i\ not have made a profit, lie eannot tell from his books 192. The tirst step is to ascertain the value of all the property pertaining to the husiness that is not recorded in the hooks, and prepare a Balance Sheel or statement of Assets and Liabilities. .Mr. Mason ehes you the following additional information in aid you in determining his present capital and in changing t he books to double entry : (ash in hank $3,500. Value of merchandise on hand $7,964.50; he holds one note in his favor from C. T. Smith & Co. for $1,250 at 6' , . dated March I. and due A.UgUSl I, and two notes in his favor from .lones & Anderson for $500 each at 6%, dated February 1 and April 1, and due August 1. Office Furniture BOOKKEEPING AND ACCOUNTING 207 $750. lie has outstanding' a ninety day note in favor of Middleton Grocer Co. for $2,500 at (V/ ( dated June 1. Statement of D. P. Mason, June 30, 192 Assets: Cash Notes Reoelvable Aooounts Receivable Mdse. Inventory Offloe Furniture 3500 2250 2120 7964 750 00 00 35 50 00 Liabilities: Not es Payable Aooounts Payable D. P. Mason's Present Capital £500 3962 10121 00 90 95 Total Assets 16584 85 16584 85 ILLUSTRATION NO. 89. D. P. MASON'S BALANCE SHEET D. P. Mason "s investment January 1, was $8,000. His present capital is $10,121.95. His profit for the six months is $2,121.95 ($10,121.95 less $8,000). The next step is to credit D. P. Mason for the net profit for the six months by an entry in single entry form: P. P. Mason, Proprietor Cr. $2,121.95 To credit the net profit for the six months period. After this entry is posted, D. P. Mason's account will conform to the state- ment or Balance Sheet, and the next step is to prepare and post the entry to change the books to double entry. July 1, 192 Having decided to ohange the books from Single Entry to Double Entry, the following exhibits the present condi- tion of the business: S Cash 3500 00 16 Notes Receivable 2250 00 V J, p. Jessup 525 75 r A- L. Jennings 464 B5 S D. M. Sims 498 bO V C. L. Hughes 631 25 14 Mdse. Inventory 7964 bO 9 Office Furniture 760 00 17 Notes Payable 2500 00 y Mason Bros. & Co. 1787 50 is J. L. Priest & Son 825 40 R. J. Peters & Co. 1350 00 S D. P. Mason, Capital 10121 95 Items checked are already In the Ledger exoept Cash, which is entered In the Cs ish Bo 3k. ILLUSTRATION NO. 80. ENTRY TO CHANGE TO DOUBLE ENTRY Note: The accrued interest on Notes Receivable to June 30, $25.42, and the accrued interest on Notes Payable to June 30. $20.08. are not included in the Assets and Liabilities, because these items will be taken care of when the notes are paid. Of course, this would affect D. P. Mason's net profit $5.34. but lios BOOKKEEPING AND ACCOUNTING as there is no other interest involved than D. P. Mason, it is practical to allow this matter to adjust itself when the notes are paid. If D. P. Mason were admit- ting a partner, it would be a different matter, Then the debil balance of [nten st, $5 34, should appear in the assets. 193. When the items nol checked are posted, the Ledger will be in balance, and the books are ready to receive the business to be recorded by the double entry method. If an entirelj n< « sel of books were to be used, then all the items in the above entry, including those checked would have to be posted in the new Ledger. It' there were a large number of customers and creditors so thai Accounts Receivable and Accounts Payable would be used in this opening entry to change the books, then, if a new set of books were to be opened, Schedules of Accounts Receivable and Accounts Payable should be entered in the Journal, following the opening entry, and posted to the debit of customers' accounts aud the credit of creditors' accounts in the n>-w Ledger. CHAPTER X COST ACCOUNTING, PART I 19L The purpose of the following' illustrations and problems is to show how to determine from the Trial Balance the unit eost of a single article or prod- uct, as well as the percentage of cost based upon sales. It does not involve a system of cost accounts, although the same final results are obtained as if a system of cost records were kept. 195. The difference is that determining the cost from the results of the bookkeeping at the end of a period, gives the information as to costs, too late to apply any remedy to reduce expenses, where they might be reduced ; while a system of cost records gives the necessary information from week to week or month to month, so that remedies may be immediately applied by the management. However, even where a system of cost records is not kept, the information that can be ascertained, from the Trial Balance and the supple- mentary facts, is very valuable for future comparisons and for price making. 196. In order to ascertain the cost per unit, (per 1,000 feet of lumber, per barrel, per ton, per dozen, per hundred or for a single machine) only the Profit and Loss Statement is necessary to ascertain the unit cost and per- centages of sales, as shown in the following illustration, however, the student is asked to prepare a Balance Sheet and prove it with the Profit and Loss Statement in order to verity its correctness. 197. The forms of the Balance Sheet and Profit and Loss Statement are not different from the forms of such statements for a manufacturing business, with which the student is already familiar. If this problem is worked out completely, the next problem, No. 19. which is similar, will not be difficult. 198. While the usefulness of the information contained in the percentages and figures, showing the unit cost, is apparent, in the two problems following, it is not real cost accounting. However, where a system of factory cost records are not kept, figuring the unit cost as shown in these statements does obtain, at the end of a period, the unit cost that would be shown monthly by a cost system. When the solutions at the end of the Profit and Loss Statement are studied in connection with the Profit and Loss statement, the value of this information will be seen. In a milling business, where a cost system is not kept, it is valu- able information to know, at the end of a period, three months, six months, or a year, just what it cost to produce a barrel of flour. In many other lines, where a complete cost system is not maintained, this information, as to the cost of the unit, is valuable. 199. Problem 17. The Mead Bicycle Company, a corporation, at the end of the year's business, December 31. 192 , desire to know what it has cost them to produce a single bicycle, that is, the unit cost of their product. The following is their Trial Balance, taken from their Ledger on December 31, at the close of 209 210 BOOKKEEPING AND ACCOUNTING business. They had on hand al the beginning of the year, January 1. I.l'.'iO bicycles inventoried al $35 each Thej have sold 6,500 wheels and have 950 bicycles on hand at the end of t he j ear. Trial Balance, L;ead Bicycle Co. Capital Stook t'nsubsorlbed Stook Surplus • Cash Rotes Receivable Acoounts Receivable Rotes Payable Aooonnts Payable Building (Faotory) Uaohlnery Toole Oi'floe Equipment Hauling Equipment , Sales Sales Returns and Allowanoes . . . . , Sales Discount , Raw Material, Jan. 1 Purchases Raw Materials Finished Goods, Jan. 1, (1,250 Bioyolee at $35) Freight In , Purohases Returns and Allowances . . . Purohases Bisoount Direct Labor Fuel and tight Building Repairs Maohinery Repairs Tool Repairs Paint Foremen's Salary Electrlo Power Taxes on Plant Insurance on Plant and Material . . . . Freight Out ■ . , Salesmen's Salary Traveling Expenses Advertising ' Agent's Comr.lssion Branch Expenses •. . , Office Supplies ...'........ Office Salaries _• < Director's Fees Legal Expenses Interest and Discount Collection and Exchange Dec. 31, 192 250000 00 25000 00 12500 00 57560 50 63250 75 125714 40 14500 00 17525 65 65000 00 63250 00 5300 00 2750 00 5500 00 563663 35 4750 85 6432 50 10264 50 102407 00 43750 00 162 7 00 3756 50 8121 75 92300 00 6250 00 450 00 500 00 60 00 2646 00 13600 00 1650 0? 500 00 600 00 2150 00 4500 00 3250 00 1200 00 67300 00 53250 00 1525 00 10621 75 500 00 275 00 1150 00 450 00 870087 £5 670067 25 ILLUSTRATION NO 91. FIRST TU1A1. BALANCE I ii % entories I lecember 31: Raw Materials $9,850 Finished Hue, Is 33,250 Nine hundred and fifty Bicycles invoiced at $35 each. Res. for Doubtful accounts.... Res. for Dep. on Building Res. for Dep. on Machinery Eos. for Dep. on Tools BOOKKEEPING AND ACCOUNTING 211 Profit and Loss Statement, Mead Bicycle Co., Dec. 31, 192 Sales $563,683.35 Less Sales Returns and Allowances $4,750.85 Less Sales Discounts 6,432.50 11,183.35 Net Sales (6500 Bicycles @ $85) $552,500.00 Prime Cost: Raw Materials, Jan. 1 $10,264.50 Purchases Raw Material $102,407.00 Less Purchases Returns ami Allowance . . . 3,756.50 98,560.50 Freight In 1,S27.00 Direct Labor 92,300.00 $203,042.00 Less Raw Material Inventory, Dee. 31.. 9,850.00 Prime Cost ($31.16 each fur 6,200 Wheels) $193,192.00 34.969 of Sales. Production Cost: Fuel and Light $8,250.00 Building Repairs 450.00 Machinery Repairs 500.00 Tool Repairs 60.00 Paint 2.S4S.00 Foremen 's Salary 13,600.00 Electric Power 1,850.00 Taxes on Plant 500.00 Insurance on Plant and Machinery 600.00 Res. for Dep. on Building ' 2,500.00 Res. for Dep. on Machinery 5,500.00 Res. for Dep. on Tools 2,650.00 Factory Overhead (7.11% of Sales, $6.34 per wheel $39,308.00 Manufacturing Cost (42% of Sales) ($37.50 per wheel — on 6,200 wheels) $232,500.00 Add Inventory Finished Goods, Jan. 1 43,750.00 $276,250.00 Deduct Invt. Finished Goods, Dec .".1 (Inventoried 950 wheels @ $35) 33,250.00 Manufacturing Cost of Goods Sold (44', of Sales) $243,000.00 Gross Profit on Sales $309,500.00 Selling Cost: ' Freight Out $2,150.00 Salesmen 's Salaries 4,500.00 Traveling Expenses 3,250.00 Advertising 1,200.00 Agents Commission 87,300.00 Branch Expenses 53,250.00 Selling Cost (27.44T of Sales) $151,650.00 ($23.33 each on 6,500 wheels) » Profit on Sales $157,850.00 Administration Cost: Office Supplies $1,525.00 Office Salaries 10,821.75 Director 's Fees 500.00 Legal Expenses 275.00 Cost of Administration ( 2.37< , of Sales) $13,121.75 Gross Business Profit, carried for'd $144,728.25 212 BOOKKEEPING AND A.I I OUNTING i Profit, Brot l'..r .1 $144,728.25 Other Income: Purchases Discount (1.47%) i 21.75 950.00 Deductions from Income: Interest from Discount $1,150.00 i ion and Exchange 00 Loss on I loubt i'"l Accounts 5.00" Deductions 1.19' — ".00 Net Profit (26.479 " ! s :''">' $14<;,:!u0.00 ($22.50 each on 6,500 whi ILLTJSTBATION NO 92 PROFIT AND LOSS STATEMENT. MANUFACTURING Note: It would be practical to leave the Inventory Value of the finished goods until the actual cost, this year, of manufacturing a wheel, is determined in the above statement, which we find was $37.50, and thru inventory the number of wheels on hand al the end of the year at this actual cost price, instead of in- ventorying the 950 wheels on hand at $35, which was the same as last year's inventorj pi ce This would make $2.50 a wheel difference in inventorj price ol the 950 wheels, and would affeel the profil just thai amount. The studenl is asked to carry ou1 this idea in t lie next problem. 200. To find the number of Machines Produced: The number of wheels sold during the year 6500 The number of wheels on hand I >ec. 31 ! Less number of wheels mi hand Jan. 1 1250 Number of wheels manufactured 6200 Prime ( lost per Wheel : Prime cosl as per statement $193,192.00 Number of wheels produced ti'JOo Prime eosl per wheel 31.1t> ($193,192 divided by 6200) Selling Price : If the profil of this year is to be maintained for next vear. add 172.789! to the Prime Cost. 172.78?! of $31.16 is $53.84. $31.16 plus $53.84 is $85, the si lling price. To find Total Unit i 'est : The j i . - t profil for the year is $] 16,250 Net sales for the year $552,500 Less net profil 146,250 Total cost and expenses for the year $406,250 Number of wheels sold Final cosl per wheel $62 $406,250 divided by 6500 To find the Ne1 Profil on a Wheel: The net profil for the year $146,250 Total number sold 6500 Profil on eaidi wheel is $22.50 ($146,250 divided by 6500). BOOKKEEPING AND ACCOUNTING 213 Percentage Proof: Manufacturing cost of goods sold 44 % of sales Selling Cost 27.44' , of sales Administration Cost 2.37% of sales Other deductions 1.19% of sales Net Profit 26.47 % of sales 101.47';; of sales Less other income 1.47% of sales Net Sales .TOO % of sales Note : There are some slight discrepancies on account of dropping decimals, but these discrepancies have offset each other in this case. Prepare a Balance Sheet and prove it with the foregoing Profit and Loss Statement PROBLEM 18. ILLINOIS COAL MINING CO., INCORPORATED 201. The Illinois Coal Mining Co. was incorporated and began business January 1, 192 . During the year to December 31. 192 , they sold 65,000 tons of coal at $2.20 per ton, at the mine. From the following Trial Balance taken from their Ledger, find the Prime Cost per ton. the "Cost of Mining" per ton. the total net cost per ton, and the net profit. To do this, it is only necessary to prepare a Profit and Loss Statement, but prepare a Balance Sheet also and prove it with the Profit and Loss Statement. Trial Balance, Illinois Coal Mining Co., Incorporated Capital Stock $150,000.00 Cash $23,750.00 Notes Receivable 9,925.00 Accounts Receivable 9,725.00 Notes Payable 12,000.00 Accounts Payable 10,500.00 Buildings 27,500.00 Land 160,000.00 Machinery 22,500.00 Construction 20,000.00 Mortgage Payable 40,000.00 Labor 36,850.00 Royalties 2,100.00 Superintendence 9,750.00 Machinery Repairs 1,815.00 Building Repairs 1 ,635.00 Oil 3,750.00 Fuel 4,150.00 Mine Supplies 3,125.00 Mine Expenses 6,125.00 Insurance on Mines 1,250.00 Sales of Coal 143,000.00 Selling Commission 3,875.00 Salesmen 's Salaries 2,575.00 Office Salaries 1,600.00 Office Expenses 1,200.00 Directors ' Fees 300.00 Interest on Mortgage 2,000.00 $355,500.00 $355,500.00 The inventory of coal on hand is 3,000 tons. Charge off 10% depreciation on Buildings, Machinery and Construction. Royalty is the price paid for the use of patented machinery. Labor and Royalties are each a part of the prime cost. The depreciation is a part of the Mining Overhead. When the Mining Cost per ton is ascertained, then the value of the 3,000 tons on hand can be determined, which, when deducted from the total Mining Cost, will give the cost of mining the whole number of tons sold. This problem is to be worked out similar to problem 17. 214 BOOKKEEPING AND ACCOUNTING Cost Accounting, Part II. 202. Cosl Accounting to be effective in enabling the management to apply remedies in cutting down costs, where the excess cost, waste or losl motion is apparent, must give up-to-date information so thai any lack of efficiency or excessive expense may be discovered within a month, instead of a1 the end of a period of three months, six months, or a year, as in the foregoing problems. 203. Cosl records and books are separate from the general bookkeeping. However, the closer the cosl records and cosl books can be c< cted with and controlled by the manufacturing accounts in the General Ledger, the better the results thai come oul of the cosl system. 204. The purpose of a cosl system is to show il sad cosl of the unit per 1,000, per hundred, per dozen, per barrel, or for a single article or job) produced. On completion of a eontracl or job, a comparison of the results shown by the cosl records with the estimate made when the job or eontracl was accepted, will give accurate information for future estimati 205. A cosl system should be developed in connection with the actual op- eration of the particular business Eor which i1 is intended, and planned to economize time and expense. Personal contact and actual acquaintance with everj operation is necessary. A cumbersome system thai requires mure time and expense to keep than it Would save for the business is about as good as none, so the expense of the cost system must be considered as well as the other costs. 206. A system may be devised to show the operating costs of a department, or for the entire plant where only one kind of goods are manufactured, in- volving the cost of materials, cost of labor and the expenses, and it may be planned to show the cosl of materials, cosl of direct or productive labor, and the c,,st of factory expenses (indireel labor and expenses) for a particular contract, quantity, job or other unit. In any ease, one of the main objects is to finally show the "Gross profit" on the "manufactured goods sold" which is the differe ■ between the "manufacturing cost of the goods sold" and the ■'net sales." l'h7 A special system must be planned lor each particular business Prob- ably no two plants would present the same conditions. It is not possible to devise a system of cost accounting which will apply to establishments in dif- ferent lines of manufacturing. One factory works to produce a single form of some staple article or commodity, another produces a special kind of machine, each involving a series of operations peculiar to that particular factory. No general set forms can be designed which would be suitable for all of them. It is 1 1 . . 1 [possible to devise forms for ascertaining the costs 'hat would apply in detail to factories in the same line, on accounl of the different conditions and surrounding circumstances. Intimate acquaintance with the equipment, op- erations and conditions are absolutely necessary, which means lirst hand in- formation secured by personal contad with the actual facts. 208. Naturally, the larger and more complicated the business, the more specific information is required, and the finer the distinctions and calculations tiiat are necessary. Cosl Accounting is a tremendous subject. It is not at- tempted here to much more than introduce the subject. 209. In a plant of ordinary size, or in a plaid just starting, it is not so dif- ficult to devise a system of cost records that will secure the necessary in- formation, if working in connection with the actual operations, as it would seem, ■ bile studying the subject in the abstract. BOOKKEEPING AND ACCOUNTING 215 210. Factories may be classified as two kinds: One kind produces great numbers of a standard article, such as a motor, bicycle or a fountain pen. The other turns out goods upon the order of customers, which orders vary so much that it is seldom that any two orders are the same. In either case, the factory is usually departmentized and each department is organized to perform some part of the series of operations necessary to production. 211. A printing plant is a good example of the latter kind of factory. Orders are taken from customers. Estimates are made upon which the order is accepted. A production order is given by the managing head. A production order form may be devised which can be tilled out readily and which will con- tain all necessary directions for the different departments which are to co- operate in tilling the order. The production order may be made in any num- ber required, so that a copy may go to each department interested, and one copy can be used for making a summary of the cost of the job as the necessary information develops. The production order is given a serial number, and this number must appear on all tickets, requisition orders, etc., connected with this particular job. 212. Cost accounting follows the materials through the factory, and every time the material moves it costs money and a record must be made of the facts, and also of the incidental facts or indirect expense. Forms must be de- signed to ascertain the following necessary facts : First: The exact cost of materials used, and the quantity and cost for each job or piece. Second: Direct Labor cost must be ascertained, and the cost records must show how much of the Direct Labor cost should be charged to each job, con- tract, piece or quantity. Note: Direct Labor is the wages of those employed directly on the production of the product of the factory. Indirect Labor is the wages of those employed in and about the factory, but not on the work of actual production. Third: Indirect Expense (Factory Expense, Burden or Overhead) must be ascertained and apportioned, that is. charged to each job or other unit on some equitable basis. Note: Indirect Expenses are items of expense which cannot be separated and eharged lo each job or contract as can the cost of Direct Labor and Materials. Fourth: If it is desired that the cost system shall show the final cost of the unit, it is necessary to ascertain the selling and administrative expense and any other costs, and apportion them to each unit on some equitable basis. 213. The summing up of the results is simple enough, after all the facts are ascertained by the various cost records, to find the unit cost of a job, piece or contract. 214. Certain Manufacturing Accounts are kept in the General Ledger to control the cost system, similar to the manner in which Accounts Receivable controls the Sales Ledger and Accounts Payable controls the Purchases Ledger or < Yeditors' Ledger. 215. Materials must be purchased, and a purchase order form is designed. Materials purchased are received with invoice and recorded in the Purchases Book, and finally debited to Raw Materials account in the General Ledger. 216. All materials purchased for manufacturing purposes is received in store and entered in the Stores Record Book or Stores Ledger. The Stores Record 516 BOOKKEEPING AND ACCOUNTING shows the date the materials are received, the quantity, the price, and the cost, in the lirst section of the following form. In the nexl section, it shows the date the materials are issued, the Requisition No., the quantity, the price and the cost. The last section shows the balance in Stores and the cosl or value. Materials are issued from stores on requisition only, by the Storekeeper. STORES RECORD BOOK I description I lave on band uo more than < Irder when supply falls below R a c e 1 Tad 1 a u a d Bala n o 6 Data Order no. Quant 1 ty Prioe Coat Data Raq no. Quant lty Prloa Coa: Quantity Coat Jan. 1 !n»ty . 6000 It a .60 3000 OC Jan. 26 36 40000 lba 60 20000 00 16000 lba 6000 00 Jan. 16 12 60000 ' 60 26000 00 Kay 20 36 40000 60 20000 00 26000 - 13OO0 00 Uay 16 13 6O0O0 " .60 26000 00 July 26 37 40000 " .60 17000 00 12000 " 6000 00 Joly £0 14 20000 " .60 10000 00 ILLUSTRATION N< I. 93. STORES RECORD BOOK l'17. The difference between the quantity received and the quantity issued from day to day or ti to time is the balance nn hand, always a! cost. Cosl means the invoice price plus the freight and handling charges, if that can lie ascertained readily. It' nut. it may lie charged in a separate account and pro- rated later, and the invoice cosl used. It will he seen thai the stores record is a perpetual inventory. It is controlled by the Raw .Materials account in the i ieueral Ledger. 218. Assume, for illustration, that the K'aw Materials Inventory at the be- ginning was $3,000. The purchases during the period was $60,000. The various quantities issued during the period on requisition was $57,000. When ties,- purchases are entered in the General Books, and posted to the dehil of Raw Materials account, and the various Requisition Orders are en- tered, and posted to the credit of Raw Materials account, the Raw Materials account in the General Ledger will appear as follows: Raw Materials dan. L'."> Issued Re,,. No 35 $20,000 May 20 Issued Req. No. 36 20, July 25 Issued Req. No. 37 17,000 ■ Ian. 1 Inventory $ 3,000 15 Purchases 25,000 May 15 Purchases 25,1 July 20 Purchases 10.000 219. Control of Materials: The balance of Raw Materials accounl is $6,000 and the balance shown by the Stores Record hook must equal this amount, so the Raw Materials account in the General Ledger controls the stores Ledger. If then- are various kinds of materials used, there must he a similar Stores Ledger sheet for each Kind, size or grade. The stores Ledger controls the materials in the factory somewhat like the ('ash Hook controls the Cash. There is no standard form of Stores Ledger Record. A form is designed to suit the case. BOOKKEEPING AND ACCOUNTING 217 220. At the time the requisitions were issued and the entries made to credit Raw Materials account in the General Ledger, Materials in Process account was debited for the amount issued. Materials in Process $20,00 Raw Material For materials issued on requisition No. 35 $20,000 221. This Materials in Process account is debited for all materials issued and put in process of manufacture and is credited for all materials consumed in manufacture of Finished Goods. The balance of Materials in Process account shows the inventory of Materials remaining in process, and should be equal to the total of all the materials columns of the cost sheets of the cost Ledger of all the jobs not completed. (See the form of Cost Sheet following.) This ac- count controls the Materials on the Cost Sheets, which must be accounted for accordingly. 222. The Stores Record must account for all materials received and issued. Materials are issued to the various departments for work in process on requisi- tion. This requisition specifies the quantity required and should designate the 1'iirpose for which it is to be used. There arc various forms of requisition blanks. The following is a simple form: Requisition No. 32 Deliver to Department A. For Job No. 1 the following: Quantity Kind of Materials Price Total 598 yds. Blue Serge (a) 1 25 747 50 0. K. by a^a. Supt , <%%< ILLUSTRATION NO. 94. REQUISITION BLANK 223. When a requisition is received and the materials are issued, the record is made in the Stores Record Book as shown in the illustration of the Stores Record. 224. A Materials Record Book is kept to show the materials consumed in manufacturing a particular unit, and when the amount of materials for each -is BOOKKEEPING AND ACCOUNTING unit is ascertained, it is posted, or charged to thai particular joh in the Materials Record Book. The Following is one form of a Materials Record Book. Materials Record Charge to job Number Seqaisition number 1 p 3 4 5 6 7 8 9 32 33 34 7-17 50 250 00 235 00 ILLUSTRATION NO D5. MATERIALS IIIX'ORD BOOK The cost of materials issued for a job is entered in the column of thai - 1 « ■ 1 » No. At the end of each month, these columns are totaled to ascertain the cosl of materials used on each job. In order to avoid the taking of physical inven- tories as much as possible, it ma.\ be required that for the last few days of the month, no more material than is absolutely necessary be requisitioned. l'l'.T The results of the Materials Record for each job, each month, is trans- ferred to the Cosl sheets in the Cos1 Ledger. Bach job is given a Cos1 Sheet, and the cosl of materials is posted from the Materials Record to thai jol>. following is a form of Cosl si t in the Cosl designated by Ledger. Job No. 1 Description. Tin Coats. COST SHEET Year. 192 Price tlateriala direct Factory Month Quantity Unit Consumed Labor Overhead Froduced Cost 747 50 1275 00 OP Jan Fob Inarch April May June July 500 c 01 A u " 3ert Oct Nov Deo ILLUSTRATION NO 08 COST LEDl BOOKKEEPING AND ACCOUNTING 21 & The cost of materials for Job No. 1 is posted from the Materials Record Book. Assume that the Payroll Summary, made from the workers' tickets for each job, shows that the Direct Labor for Job No. 1 is $1,27.3. Assume that the Indirect Expense upon which it is apportioned to be charged to each job, is $482 for Job No. 1. Then the charges on the Cost Sheet of Job No. 1 should be as shown in the above Cost Sheet. 228. The summing up of the results are simple enough, after all the facts are ascertained by the cost system. To illustrate assume that the Cost Sheet of a job shows Materials consumed $747.50, Direct Labor cost $1,275, Indirect Expense or Factory Overhead apportioned $482, and that the Selling Expense apportioned and charged to this job is $275, and the Administrative Expense apportioned is $175, and other expenses apportioned $50. Calculate the unit cost. JOB No. 1. (500 COATS) Total Cost Unit Cost Materials Direct Labor Factory Overhead 747 1275 482 50 00 50 5 6 01 01 Manufacturing Cost Selling Expense, Apportioned Administrative Expense. Apportioned Other Expenses, Apportioned 2505 275 175 50 00 00 00 00 Total Pinal Cost 3005 00 ILLUSTRATION NO. 07. SUMMARY OF 20STS 226. Payroll: The workers register the time of their arrival and of their departure on a time clock, and from these time tickets the payroll is made up. The foreman in charge of each department will indicate on the card of each worker the job number of the job on which the worker is employed and to which his wages will apply. There are some complications when workers are employed on different jobs during the day, but each change and the time is indicated on the worker's time card or ticket, so that in making up the summary the proper charge can be made to each job on which employed. A worker may be employed part of the day on productive work and part on unproductive work. The time ticket will indicate the part applied to Direct Labor, and that to be applied to indirect labor. Separate time tickets may be used for each change. The form of the time ticket is designed to record the information desired. A form may be designed to show the efficiency of the worker. There are about as many different forms of cost records as there are different lines of business, and even businesses in the same line. It is useless to attempt to show dif- ferent forms here. The thing to do is to study the particular business and decide upon the information desired and then design forms to get it. From the time tickets of the day, the total time and wages are obtained for the day, the total time and wages of Direct or Productive labor, and the total wages to be charged to each job or department, and the names of workers, time and rate are entered on the payroll sheet. At the end of the week or two weeks the payroll is completed and totaled. A single check is drawn for 22i i BOOKKEEPING AND ACCOUNTING each payroll, and entered in the Cash Book, debiting Payroll account or Labor payroll. The following is n form of a Payroll Book: PAYROLL BOOK Fay Roll BO. 2. Sheet No. 2 Fay Roll for i:onth Ending January 31. 19 games Clock | Ho. Wages ueduotlons Act , due Productive hrs. amt. Eon- hrs Prod . atct . L. Jones C. Cofer P. »eyer J . Logan D. Uartln P SohultE L. Killer J. Pears ". Sinner L. i/033 D. Frbr.k R Koran B. Luoas J. Ellis It. 2ook J. ^-Jllen A. Patton U. lorer.L A. Zlon Total 50 51 52 63 54 55 56 57 56 59 60 61 62 63 64 65 66 67 66 200 150 100 100 175 175 150 165 100 125 135 150 125 50 100 150 150 150 150 2600 200 160 100 100 17? 175 150 165 100 125 135 150 125 50 100 150 150 160 150 :6co 220 220 200 150 220 175 220 I 175 220 220 220 220 160 220 220 220 220 2620 150 165 135 150 100 150 150 150 150 000 or 220 220 220 220 220 110 1210 100 100 100 125 50 600 CO ILLUSTRATION NO 98. PAY ROLL BOOK At the end of the month, tin' dired Labor is transferred from the Pay Roll account to Direcl Labor account, and tin* Indirect Labor is transferred to In- direct Expense account, closing the Pay Roll account, requiring the following journal entry. If it is desired, an extra column for Selling Expense may be added to record the wanes of the sales force. Direcl Labor $2,000 Indirect Expense 600 Paj Roll $2,600 227. It' any money were advanced to workers, it would appear in the Deduc- tions column, and be entered in the Cash Book, charged to Pay Roll. Then the Amount Due column would be thai much less, and when the check for the amount due on the Pay Roll is charged, the Pay Roll account would be the same. $2,600. BOOKKEEPING AND ACCOUNTING 221 228. If the Direct Labor is to be charged to each job, the record cards of the workers would be assembled and a summary made of the amount to be charged to each job. This summary would show the Job No. and a column for the num- ber of hours and the amount for each Job. No. The total amount for each job would then be posted to the Cost Sheet of each job, under the head of Direct Labor. At the time this Direct Labor is charged to each job, Direct Labor ac- count is credited with the total labor consumed on the completion of the jobs. 229. The balance of Direct Labor account will show the direct labor on work in process, not completed, and should be equal to the total of direct labor on the Cost Sheets of uncompleted jobs. Thus Direct Labor account controls the direct labor charges on the cost cards. 230. Indirect Expense: Indirect Expenses are indirect labor and all other expenses, such as light, heat, taxes on plant, insurance on plant, repairs, sup- plies, rent, depreciation, etc., that are a part of the cost of production, but can- not be separated and charged to particular units. It must be porated or ap- portioned. These expenses are charged to Indirect Expense or Factory Expense account. When the amount of indirect labor is ascertained from the Pay Roll records the amount is transferred to Indirect Expense account from the Pay Roll account as shown in the entry following Pay Roll illustration. The Indirect Expense is prorated or apportioned and charged to the different units on the basis of a percentage of the Direct Labor or a percentage of Prime Cost (Material and Direct Labor). On whatever basis has been decided, the part of Indirect Expense that should be charged to each job is charged to each unit or job on the Cost Sheets and the total applied on the Finished product is credited to Indirect Expense account. The balance of this account will show the cost of indirect expense that has been charged or is to be charged to the jobs or units that are not completed, and thus controls the Indirect Expense in process, the inventory of which would equal the balance of Indirect Expense account. 231. To Apportion Indirect Expense: The matter of correctly apportioning the Indirect Expense, Burden or Factory Overhead, to the various units is the most difficult in cost accounting. Not so difficult after the basis has been de- termined, but it is difficult to decide what basis would be the most equitable for a particular business. The following illustration shows the plan of dis- tributing the Factory Overhead based upon a percentage of Direct Labor, and also upon the basis of Productive Hours. Illustration No. 100 shows the Selling Expense and other expenses distributed to the unit on a percentage of the '"Cost of the goods sold." Illustration No. 101 shows the amount that is apportioned and should be charged to each job, based upon Direct Labor and also based upon Prime Cost (Materials plus Direct Labor), assuming that the Factory Overhead for the period was $5,500. It will be noticed that there is quite a difference between the amount to be charged to Job No. 1 and No. 2, and the other jobs also, when calculated on the basis of Direct Labor and when calculated on the basis of Prime Cost. Which is better? The question cannot be answered without actual contact with the operations in the particular business. This is the reason it is said that the distribution of the Factory Overhead is the most difficult for the accountant to accurately determine in cost accounting. 222 BOOKKEEPING AND ACCOUNTING Proposition 1. There is some connection or relation a the cost of Direcl Labor of each department and the total of all other expenses, hence, the Overhead may be distributed to and charged to each department on tl the Direcl Labor Cost. Prom thi following e the Overhead or Burden on the basis of a percentage of Direcl Labor: Power Expense . . . Building Expense . . Repairs Taxes Depreciation . . . . Indirect Labor . . . Factory Expense . . . Factory Supplies . . Miscellaneous Expense Insurar.ae Total Direct Labor . . . . Factory Overhead Totals $8450 4000 5650 550 2800 7500 5250 600 2150 640 37790 Eept $2800 1350 1850 175 1250 2750 1750 250 675 160 13210 39660 Dept . #3750 115 2250 225 900 2950 2250 375 95 280 15660 61320 Dept. C 11900 1500 1550 L50 r^O 1800 1250 175 325 200 9500 19000 ILLUSTRATION -VO. DO niSTKIHI'TIOX OF INDIRECT EXP1 Solution : Departmenl A: Overhead $13,210. Direcl Labor, $39,61 $13,210 divided b I is 33 1 Departmenl B: Overhead, $1 1,080 Dired Labor $61,320; $15,080 divided bj $61,320 is 2595 . Departmenl C. Overhead $9,500. Direcl Labor $19,000; 100 divided by $19,000 is 50?! . Proposition 2: Assume the productive hours in the above illustration to be: Department A, 16,500 hours. Departmenl B, 28,500 hours. Departmenl C, 47,500. Distribute the overhead on the basis of productive hours Solul ion : Departmenl A: Overhead, $13,210. Productive hours, 16,500; $13,210 divided by 16,500 is 80 cents per hour. irtmenl I!: Overhead, $15,080. Productive hours 28,500; $15,080 divided bj 28,500 is 52.9 < r hour. DepartmentC: Overhead $9,500. Productive hours, 19,000; $9,500 divided bj 19,400 is 50 cents per hour. BOOKKEEPING AND ACCOUNTING 223 Proposition 3: The percentage of Shipping expense, Selling expense and General or Administrative expense to be charged to each department, piece or job to arrive at the ''cost to make" may be determined by dividing the total of shipping', selling and general expense by the "cost of the goods sold" for a given period. From the following data, calculate the percentage to be charged for ship- ping, selling and general expenses, assuming the "cost of the goods sold" to be $125,000. .Shipping, Selling and Admlnist rat lve Expense Distribution Total Shipping Selling Admin . Expense Labor Diaoount on Sales . . Salaries Officers' Salaries . . Depreciation Repairs Commissions Advertising Building Expense . . • Insurance Taxes Delivery Expense . • • Heserve for Bad Debts Miscellaneous Expenses Total 1250 1500 12330 5250 450 175 3750 1750 1080 320 375 2750 1250 520 32750 TO on 00 00 00 no 00 00 00 00 00 00 00 00 12F0I 00 125 75 450 25 125 150 00 2200 00 00 oc 00 00 00 12330 3750 1675 370 00 18125 00 oo 00 00 1500 5250 325 175 &30 295 250 2750 1250 On 12425 00 00 00 00 00 00 00 00 00 00 ILLUSTRATION' NO. 100. DISTRIBUTION RATE Total Shipping, Selling and Administrative Expenses. .$ 32,750 Cost of Goods Sold 125,000 $32,750 divided by $125,000 is 26.2%. Proposition 4: Assume that at the end of the month the depreciation and all supplementary accrued and deferred items have been determined, and the Factory Overhead is found to be $5,500. Assume further that the cost of mate- rial and direct labor for each job is as shown in the following illustration. Cal- culate what part of this $5,500 should be charged to each job, on the basis of the proportion of Direct Labor and on the basis of Prime Cost (materials consumed plus direct labor), in the following six jobs: Job Numbers 1 Z 3 | 4 5 6 Total Materials Direct Xabor 4500 7250 00 00 5250 4325 00 00 2250 8850 00 J 1200 00 J 1750 00 00 3750 4500 00 00 7500 9875 00 00 24450 30550 00 00 Total 11750 00 9575 00 5100 OOJ 2950 00 6250 00 17375 00 55000 00 1 1 ■ 1 Illustration No. 101. Distribution of Factory Overhead or Indirect Expense on Basis of Direct Labor, and on Basis of Prime Cost Solution : On the basis of Direct Labor, the amount of the Overhead to be charged to Job No. 1 would be 7250 of $5,500 or $1,305.25. 30550 Job Xo. 2 : 4325 of $5,500 or $778.64, and so on for the other jobs. 30550 224 BOOKKEEPING AND Al I 01 NTING On the basis of Prime Cosl (materials plus direcl labor) the amounl of ( (verhead to be charged to each job would l"- : Job. No. 1 : 1 1 ~-~»< i of $5,S r $1,175. 55000 Job. No. 2: 9.">7."> of $5,50i i7.50, and so on. "55000 Explanation: In tin' tir.st. tin- total n^i of Direct Labor for all the jobs is $30,550. Then Job. No. 1 should be charged such a part of the $5,500 as $7,250 is a part of the total, $30,550. 1 hi the basis of Prime < lost, the total of the Prime ' losl on all jobs is - The Prime Cosl of Job No. 1 is $11,750. The Job No. 1. on this basis, should be charged such a pari of the $5,500 as $11,750 is part of $55,000, or $1,175. It will lie noticed that on the basis of Direcl Labor the part of the $5,500 to be charged to Job No. 1 is $1,305.24, while on the basis of Prime Cosl the amount to lie char-red to Job No. 1 is $1,175. There is $130.24 difference. Which is better! That depends upon the nature of the business. Those in personal eon- tact with the facts must decide that. This is the reason that indirect Expense or Factory Overhead i^ dis! ributed on differenl bases for different plants. MANUFACTURING ACCOUNTS L'-'iL'. Manufacturing Account: The .Material- in Process account, the Direct Labor account and the indirect Expense or Factory Expense account might all be kept under the one account "Manufacturing Account.'" in which case all id' the variou- costs shown in these three accounts would he debited to Man- ufacturing Account, and finally an analysis sheet could show the detailed facts. hut the three accounts are used in the next set. to show how they may he used as controlling accounts to control the cost records for materials. Labor and indirect expenses. The following will serve as a guide in debiting and crediting the manufac- turing cost accounts : 233. Raw Materials Account: .Materials are issued from stores upon requisition only. The inventory of materials on hand as shown by the S Record or stores Ledger must agree with the balance shown by the Raw Mate- rials account. Thus this accounl controls the stores. Debit Raw Matt rial* Account: Credit Raw Materials Account : 1. For all materials purchased to he 4. For any materials issued from used in manufacturing. Stores on requisition, at cost, and 2. For all freight, cartage and any at the same time debit Materials charges to place the materials in in Process Account. Stores, unless a separate a unit is kept for freighl and cartage. :i. For any materials returned Irom Work in process which has been issued on requisition. If materials are received in mixed shipments so the proper amount for freighl and handling cannot be charged to each kind of material, or for any other rea- son, a separate accounl may be kept lor these charges, and then prorated later or at the end of the period. BOOKKEEPING AND ACCOUNTING 225 234. Work in Process : Work in process involves three accounts, Materials in Process, Direct Labor and indirect Expense accounts. The term "Work in Process" covers the manufacture from the time the raw materials are issued from Stores until the Finished Goods are ready for sale or delivery. 235. Materials in Process: The materials issued from Stores and put in process of manufacture, is represented by Materials in Process account. The materials actually consumed plus the cost of Direct Labor is the Prime Cost of the goods manufactured. Debit Materials in Process Account : Credit Materials in Process Account: 1. For all materials received from 2. For all materials returned to Stores on requisition, at cost, and Stores, at cost, at the same time credit Raw Mate- 3. For the value at cost of the mate- rials account. rials actually consumed in manu- facture, and at the same time debit, Finished Goods account. The cost of material in process, shown by the Cost Sheets of the work not completed, must equal the balance of this account, which is the inventory of materials in process, and thus this account controls the materials in process. 236. Direct Labor: Direct Labor is the labor employed in the actual direct operations of manufacturing the product of the factory. Indirect Labor is labor that cannot be specifically identified with or charged to any particular job or other unit. The term Productive Labor is also used for Direct Labor. Debit Direct Labor Account : • Credit Direct Labor Account : 1. For all wages paid for direct la- 2. For the amount of direct labor as bor, as shown by the Pay Roll shown by the Cost Sheets of the records. Cost Ledger on all jobs, orders or contracts finished. The total amount of direct labor shown by the Cost Cards or Cost Sheets of the Cost Ledger on jobs, orders or Contracts not completed must equal the balance of Direct Labor account, which is the inventory of Direct Labor in Process. Thus, this account controls the direct Labor in Process. 237. Indirect Expense: Indirect Expense variously termed Manufactur- ing Expense, Factory Overhead or Factory Expense, are such as heat, light, power, supplies, indirect labor, superintendence, rent, repairs, insurance on plant, depreciation on plant, machinery and tools, etc. Debit Indirect Expense Account: Credit-Indirect Expense Account: 1. For salary of foremen, superin- 4. For amount apportioned and tendents and other salaries that charged to completed jobs, orders affect factory expense which can- or contracts, and charged to some not be applied to any particular other account, in the cost of fin unit. ished goods. 2. For indirect labor and supplies 5. For any rebates or allowances that enter into the cost of the that affect a charge to this ac- goods. count. 3. For rent, heat, light, power, water, taxes, insurance on plant, depre- ciation, and any factory expense. The remainder of Indirect Expense not apportioned to the finished product, but charged in the work in process, as shown by the cost records, must equal the balance of this account. Thus the balance of this account controls the In- direct Expense in process, and is the Indirect Expense Inventory. 226 BOOKKEEPING AND ACCOUNTING Distribution: Ladirecl Expense is the mosl difficult for the Accountant to distribute accurately to the various units (jobs, orders or contracts) at the end of the month or period. Thej are apportioned mi a liasis that, from the nature of the business, would -'■•■m to be the must accurate, that is on ;i basis of the relation of tin' job, quantity or contract to the total factory expense. The basis is differenl in differenl factories on account of the difference in this relation. Indirect Expense may be distributed on the basis of: (See Illustra- tions 99 and 101.) 1. Direct Labor. 4. Prime Cost (Materials plus Direct 2. Total Productive Hours. Labor). :i. .Materials consumed. 5. Total number of units produced. 238. Finished Goods: Finished Goods, as the name implies, arc the g Is completed and ready Eor delivery, for sale, or ready to be sent to the warehouse. Debit Finish* , hit Cost of Sales Account: Credit Cost of Sales Account: 1. For tin- "cost of g Is sold," and 2. For the amount to (lose the ac- at the same lime credit the Fin- count into Profit and Loss, ished < binds account. There are differenl ways of arriving at the "Cost of Sales." The cost price may be entered in a column provided in the Sales Hook, and the cost as well as the selling price shown. The cost and selling price may be entered on all orders, from which the cost can be tabulated. Only one entry tor the month or period is made, debiting "Cost of Sales" and crediting "Finished (Ioods" for the same amount. The differenl forms of Cost Cards. Cost Sheets ami books for a complete cost system cannot be illustrated here. Space will not permit it. However, a good idea of them, how to design them, the purpose for which they are to be used, and the business the more detailed information is necessary, requiring other con the principle for obtaining the results, is conveyed. The more complicated trolling accounts, but the principle would remain the same. BOOKKEEPING AND ACCOUNTING 227 VALLEY TANNING COMPANY. A CORPORATION 240. In the foregoing, different forms were suggested and illustrated which are designed to obtain necessary cost information so that the proper charge for material, direct labor and indirect expense could be applied to each job, order, contract or other unit. There are many different forms and these illustrated arc only suggestive. Each business would require forms peculiar to it, but those illustrated with the suggestions given, outline the information necessary to be obtained by a cost system. 241. This set has no connection with the forms already illustrated except the illustration of the Payroll. The Payroll Book for this business would be similar to the illustration shown except that another column should be added for "Selling Expense." to provide for that part of the Payroll that applies to the sales force. 242. The purpose of this set is to show how the Raw Materials Purchases ac- count, the Materials in Process account, and the Supplies account control the Materials in Stores and in Process in the factory, and how the Direct Labor and Indirect Expense accounts control the Payroll records and the Indirect Expenses. It is made as simple and short as possible with this one thing in view, the con- trol of the factory operations by the General Ledger accounts. 243. The books to be used are the Purchases Book with seven columns: General, Raw Hides Materials, Tanning Materials, Supplies, Indirect Expense. Water and Selling Expense, similar to the form of the Purchases Book in Chap- ter IX. The Sales Book is of the ordinai'y form. The Cash Book should have three columns on the debit side: General, Accounts Receivable and Sales Dis- count. The credit side of the Cash Book should have three columns : Gen- eral, Accounts Payable and Purchases Discount. The Journal should have two columns on the left : General and Accounts Receivable, and on the right : Gen- eral and Accounts Payable. The Journal is similar to the Journal in Chapter VI, except that it has two columns on each side instead of three. 244. The Tanning business is selected because it produces only one com- modity, sole leather, and the purpose is to use the usual controlling accounts, and show how they control the operations in the factory. The materials are han- dled by Lots as shown by the Stores Record of Raw Hides as illustrated. Similar forms may be ruled and kept for Tannin",- Materials and Supplies, if desired, but the illustration of the Stores Record for Raw Hides is sufficient to show a form and how to keep a record of the materials in stores, showing a perpetual in- ventory. 245. As only one commodity is produced, there is no unit quantity or job to which to charge costs of materials, direct labor, and to apportion and charge the indirect expense, however, materials are requisitioned in quantities and put through the process of manufacture and the time of the workers is kept so as to show the direct labor that has been consumed on the goods that are finished, and the amount of direct labor in process at the end of the month is equal to the balance shown by the Direct Labor account. Similarly the amount of in- direct expense that applies on the goods finished is apportioned to the quantity completed, at the end of the month, and charged to the Finished Goods account, and the indirect expense not charged to the finished product and w r hich ap- plies to the work in process must equal the balance of Indirect Expense ac- count. L'L'S BOOKKEEPING AND ACCOUNTING 246. A Journal, as the only book of original entry, may he used with the same results. It' a Sales Ledger ami Purchasi I.- 1 er are used, special columns must be provided for Accounts Receivable and Accounts Payable as these arc controlling accounts in the General Ledger. The instructions and suggestions following each transaction is given with a view in using the 1 ks of original entry that have been suggested, hut they will apply whatever forme are used. STOCK PFCORD Description: Raw Hides. R e c e i v e d 192 Lot No. Name Pounds Price Amount Jan Inventory C. K. Porter & Co. Swift & Co. Wilson & Co. Swift & Co. 80,640 lbs. 45.666 lbs. 126,336 47,720 43.672 45,696 25 20160 00 25 11424 00 25 11930 00 25 10916 00 25 11424 00 I 8 8 u e d 192 Req. No. Lot l.lbs. Lot 2. lbs. Lot 3-lbs. Lot 4-lbs. Balance Jan 4 39 13 42 19 45 26 48 Total 24192 22176 00 24698 00 25956 00 28224 00 126336 Il.I.rsxr. AT'OX NO. 102. ■- ORD HOOK l!47. A Similar Stock Record Sheel in the Stork Keoord Rook rnnld ho used for Tanning .Materials and Supplies, hut that is qo1 required in this set. as the illustration of the perpetual inventory <>( Raw Eides Matt rials seems sufficient to show how to keep the record for any materials. A more elaborate form could he d.viscd that would show the balance in quantity as well as in value, lllus tration No. 93 is another form. There should he a separate record for each kind of material. In the purchases, as recorded in the Purchases Book, the purchases for the sales force are do pari of the materials. This special col u in the Purchases Book for Selling Expense is used to show how all Pur chases may he recorded in the Purchases Hook. The student is asked to read carefully paragraphs 202 in 239, and study the forms illustrated, while writing up this set, although they are not directly connected with these transactions. BOOKKEEPING AND ACCOUNTING 229 BUSINESS TRANSACTIONS Jan. 1. The Valley Tanning Co., manufacturers of Sole Leather, is incor- porated under the laws of the State of Ohio, with an authorized capital of $75,000 divided into 75 shares of the par value of $100. All the stock is is- sued. On January 1, 192 , after closing the books at the end of the fiscal period, December 31, their Ledger accounts showed the following assets and liabilities: Assets : Cash $14,970 Notes Receivable 5,750 Hanson Bros 2,235 L. IT. Ames & Co 2,671 Raw Hides Materials Inven- tory, 80.640 lbs. @ 25c 20,160 Tanning Materials Inventory. . 4,020 Supplies Inventory 1.000 Materials in Process Inventory. 14,640 Productive Labor in Process. . 1,174 Indirect Expense 680 Finished Goods Inventory 5,000 Insurance 200 Plant and Machinery 20,000 $92,500 Liabilities : Capital Stock Notes Payable — Lank C. K. Porter & Co ... . J. D. Barnes & Co. . . . .$75,000 . 10,000 . 4,500 . 3,000 $92,500 Set up these accounts in the Ledger by arranging the above in the form of an opening entry in the Journal and posting. Allow each account ten lines. Open new accounts as needed. See Corporation Accounting for form of opening entry. Jan. 3. Purchases: Purchased of C. K. Porter & Co. Raw Hides as per Invoice No. 32, 45,696 lbs. @ 25 cts., 3/15, n/60, $11,424. Purchased of J. C. Barnes & Co. Tanning Materials as per Invoice No. 33, 3/15, n/60, $2,300. Pur- chased Supplies of Jameson Bros., as per Invoice No. 34, 3/15, n/60, $850. Received bill from Ellis Bros, for printing stationery for factory use, Invoice No. 35, $125. (Indirect Expense.) Received bill from Rush Printing Co. for printing advertising matter, Invoice No. 36, $350. (Selling Expense.) Received bill from the City Water Works for water to be used in process, Invoice No. 37, $400, as per contract for the month. (Debit Water account.) Enter separately in the Purchases Book, in the General column, and transfer the amount so entered to the special column of the proper heading. Rule a Stores Record sheet and enter the inventory of Raw Hides, 80,640 lbs. @ 25 cts., and enter the purchases of Raw Hides, 45,696 lbs. @ 25 cts., as in the Illustration No. 102. Jan. 4. Issued from stores on Requisition No. 39 Raw Materials, Raw Hides, 37,632 lbs. @ 25 cts., $9,408. On Requisition No. 40, Tanning Materials, $1,805. On Requisition No. 41, Supplies, $100. Water used in process $100. Enter the amount of Raw Hides issued from stores on requisition in the Stores Record and show the balance on hand $22,176. Enter the materials issued in the Journal: Materials in Process $11,313 Indirect Expense (Water) 10U Raw Hides Material $9,408 Tanning Materials 1,805 Water 1 00 Supplies 100 For materials issued and put in process. Water consumed is charged to Indirect Expense. (See Paragraphs 233, 234.) 230 BOOKKEEPING AND ACCOUNTING Use the "Lot 1" column under "Issued" in the Stores Record until all materials of "Lot 1 " sd, then use "Lot 2" column. Jan. 6. Paid thi Payroll of the week as per Payroll Book, $900, including wages of sales force. Debit Payroll account on the credit side of the Cash Book. This Payroll includes direi ndirecl labor and wages of th< Jan. 8. Sold to Parker & Davis 16,200 lbs Sole Leather @ 50 cts. Sold to Mehl & Levis 12,816 lbs. Sole Leather (q 50 cts. Terms 2 15, n Jan. 10. Paid C. K. Porter & i iOO on account. Paid J. C. Barnes & l $1,250 on account. They allowed us 3$ discounl in cadi case. Divide the $1,500 by .'.'7 to find the amount to I >e cl I to C. K. Porter & Co 'I i en this amount and $1,500 is the discount, Do the same tor the payment to .1. i . Barnes ..v Co. I i partial payments. Jan, 10. Received $1,250 from Hanson Bros, on a >unt, ami $1,000 from L. 11. Ames >.v Co, on account, and allowed l" , discount in each case. Divii 18 to find tl ' t.i be credited t,, Sanson Rros. Tim differ- ence is the Sales Discount. Do the same foi the amount received from I.. II. Ames ,\ Jan. 12. Purchases: Purchased of Swift & Co. Raw Hides ;is p er i n , No. 38, 17,720 lbs. (5 ■_':> cts., 3 15, d 60, $11,930. Purchased of .1. < \ Barnes & Co. Tanning .Materials as per Invoice No. 39, $2,500. Purchased of Jameson Bros. Supplies as per Invoice No. K'l. $)?>Q. U ■ d lull for advertising from Brown Bros. Agency, Invoice No. 41, $350. Received loll from Ellis Urns. I'm- printing factory stationery, Invoice No. 12, $125. (Indirect Expense.) Jan. 13. Paid the Payroll Tor the week including labor and wages of the sales force, $900. See Jan. 6.) Paid Ames Bros. $112.50 for repairing machinery. Jan. 13. Sold to .1. 1). Ryan & Co. 15,400 lbs. Sole Leather c 50 cts. Sold to I-. II. Ames & Co. 13,416 His. Sole heather (« 50 cts. Sold to Lacey >\ Cable 30,000 lbs. Offal (a_ 2 cts. (Credit to .Materials m Process.) Enter the sales in the Sales Booh as usual, excepl the Bale of Offal t" Lacey & Cable. Offal i hair, dirt and -. It is not considered worth anything, and whatever i^ received from the sale of it is deducted from tin' ,-,>-t of the material used, therefore, this is entered in tin' Journal: i . ey .V Cable $600 Materials in I' I >ffal i $600 P01 the sale of 30, II' Jan. 13. Issued I'r stores en Requisition X". 12, Raw Materials, Raw Hides, 37,632 lbs. (" 25 cts., $9,408 On Requisition No. 13, banning Materials. $1,805. On Requisition No. -14. Supplies slim. Water used in process for the week, $100. (See dan I • Ian. 15. Paid our $5,000 uote at the bank by giving a new note fo - at »i', t'ni' tin days and our check For $1,535 for the difference and the interesl on the new note. Jan. Hi. Received $940.30 from Hanson Bros, on account and allowed L" , discounl on their balance $959.49. Received $7,938 from Parker & l>a\is mi accounl and allowed them l" , discount, which pays their bill of Jan. v in mil. Jan. 17. Paid C. K. Porter & Co $2,865 and r ived J', discounl on $2,953.61. Paid J. C. Harm's & Co. $3,891 and received J', discount on $4,011.34 BOOKKEEPING AND ACCOUNTING 231 Jan. 18. Purchases : Purchased of Wilson & Co. Raw Hides on account as per Invoice No. 43, 43,672 lbs. @ 25 cts., 3/15, n/60, $10,918, Purchased of Johnson & Murphy, Tanning Materials on account, as per Invoice No. 44, $2,100. Purchased of Jones & Davis, Supplies on account, as per Invoice No. 45, $750. Received bill from Powers & Lyons for $125 for record books for factory use, Invoice No. 46. (Indirect Expense.) Received bill from J. C. Orr & Co. for advertising, $350, Invoice No. 47. (Jan. 3.) Jan. 18. Sold to Sidney Walker & Co. 10.473 lbs. Sole Leather @ 50 cts., 2 15, n/60. Sold to II. C. Scheider & Co. 6.478 lbs. Sole Leather @ 50 cts., 2/15, n/30. Sold to Duncan Bros. 8,355 lbs. Sole Leather @ 50 cts., 2/15, n/30. Jan. 18. Received $1,617.58 from L. H. Ames & Co. on account and allowed them a -' , discount. Received $2,500 from Mehl & Levis on account and allowed them 2% discount. Jan. 19. Issued from Stores on Requisition No. 45 Raw Materials, Raw Hides, 38.632 lbs. @ 25 cts., $9,658. On Requisition No. 46, Tanning Materials, $1,875. On Requisition No. 47, Supplies, $100. Water used in process, $100. (Jan 4.) Jan. 19. Paid Swift & Co. $2,500 on account and they allowed us 3% discount. Jan. 20. Paid Payroll for the week $900, including labor and wages of Hie sales force. Jan. 25. Purchases: Purchased of Swift & Co. Raw Hides on account, as per Invoice No. 48, 45,696 lbs. @ 25 cts., 3/15, n/60, $11,424. Purchased of J. C. Barnes & Co. on account Tanning Materials, as per Invoice No. 49, $2,300. Purchased of Jones & Davis on account. Supplies as per Invoice No. 50, $850. Received bill from Powers & Lyons for miscellaneous articles for use in factory, Invoice No. 51, $125. (Indirect Expense.) Received bill from J. C. Orr & Co. for miscellaneous items for use by the sales force, $350, Invoice No. 52. (Jan. 3.) Jan. 25. Paid J. C. Orr & Co. $339.50 and received 3% discount. Paid City Water Works $400 on account, as per contract. No discount. Jan. 26. Issued from stores on Requisition No. 48 Raw Materials, Raw Hides, 36,632 lbs. @ 25 cts., $9,158. On Requisition No. 49, Tanning Materials, $1,735. On Requisition No. 50, Supplies, $100. Water used in process for the week, $100. (Same as Jan. 4.) Jan. 26. Sold to Hanson Bros. 7,275 lbs. Sole Leather @ 50 cts., 2/15, n/60. Sold to Morgan & Zion 9,275 lbs. Sole Leather @ 50 cts., 2/15, n/60. Jan. 26. Received $3,626 from J. D. Ryan & Co. on account and allowed them 2',' discount. Received $4,410 from Sidney Walker & Co. on account and allowed them 2% discount. Jan. 27. Paid Wilson & Co. $6,305 on account and received 3% discount. Paid Brown Bros. $125 on account. Jan. 27. Paid Payroll for the week, $900. including the wages of the sales force. Jan. 28. Sold to Parker & Davis 7,665 lbs. Sole Leather @ 50 cts., 2 15. a tio. Sold to Brown Shoe Co. 7,935 lbs. Sole Leather @ 50 cts., 2/15, n/60. Jan. 31. Post the books. Rule and post the totals of the Journal. Pur- chases Book, Sales Book and the Cash Book. Jan. 31. Prove the Sales Ledger with Accounts Receivable account, and prove the Purchases Ledger with Accounts Payable account. 232 BOOKKEEPING AND ACCOUNTING Jan. 31. Inventories: Raw Bides $28,224.00 Tanning Materials 6,000.00 Supplies 4,000.00 Materials in Process 18,320.00 Direcl Lain,]- in Process 1,300.00 [ndirecl Expense in Process 1,172.50 Finished Goods on hand 4,1 .00 Insurance unexpired 1 in. 00 Depreciation on plant 200.00 Taxes accrued on plant W.OO Jan. 31. The Depreciation on Machinery, $200, Insurance expired on plant. $60, the Taxes Accrued on plant, $40, and Machinery Repairs, $112.50, are charged to I mlii-et-t Kxpense account (Journal . Indirect Expense $412.50 Reserve Eoi Dep. on Machinery Insurance on plant i'.ii imi Taxes Accrued 40.00 Machinery Repairs 112.50 Jan. 31. The Payroll records show the amount paid for Direct Labor is $2,000, the amount paid for indirect labor is $600, the amount paid for wages of the sales force is sl.nuu. Sec form of Payroll, Illustration No. 98, Paragraph 226.) I ;1 Labor $2,( [ndirecl Expense (labor) 600 Selling Expense (sales force) 1,000 Payroll $3,600 To distribute the Payroll as per analysis of the Payroll records. Jan. 31. The cosl records show the value of the materials consumed on the product completed is $41,572 which less the sale of Offal leaves the net cost of materials consumed $40,972. Debit Finished Goods account $40,972 for the cost of materials used in completed product, and credit .Materials in Process account.) Journal. (See paragraphs 235 to 238 Jan. 31. An analysis of the Payroll records shows that the amount of Dired Labor expended on the completed product is $1,874. (Debil Finished Goods account, $1,874 for the direct labor on the finished product and credit Direct Labor account. Paragraph 236-2.) Jan. 31. An analysis of the indirect expenses show the amount of these expenses that are apportioned to be charged to the completed quantities is $1,420. (Debit Finished Goods account, $1,420 for the portion of indirect expense to be charged to the finished product, and credit Indirect Expense account. Paragraph 237. Note: Tl bjeel of the last three entries is to establish the cost of the finished product. Jan. 31. The costs tabulated from orders on which both the cost and selling price is entered, show the "Cosl of Goods Sold," the "('est of Sales" to be $45,266. (Debil "Cosl of Sales" ace, unit $45,266, and credit Finished ( foods account. See paragraph 239 Jan. 31. Balance and rule and total the Raw Hides Materials, Tanning Materials. Supplies, Materials in Process, Dired Labor, finished Goods and Indirect Expense accounts, and bring these balances down below the rulings on the debit side of each account. Compare these balances with the physical inventories from the factory. They should be the same, thus showing thai these accounts control the materials and the other factory co-t records. Prepare a Trial Balance. BOOKKEEPING AND ACCOUNTING 233 •Ian. 31. If the work has been performed correctly to this point, the Trial Balance before closing should appear as follows: Trial Balance Before Closing, Valley Tanning Co. January 31, 192 1 Capital $75,000.00 2 Cash $13,828.88 3 Notes Receivable 5,750.00 4 Accounts Receivable 39.392.98 5 Notes Payable 8,500.00 6 Accounts Payable 48,343.68 7 Insurance 1 40.00 S Plant and Machinery 20,000.00 9 Reserve for Depreciation on Machinery 200.00 10 Interest ' 35.00 12 Taxes Accrued 40.00 13 Selling Expense 2,400.00 14 Purchases Discount 576.82 15 Sales Discount 475.14 16 Raw Hides Material Inventory 28,224.00 17 Tanning- Materials Inventory 6,000.00 18 Supplies Inventory 4,000.00 19 Materials in Process Inventory 18,320.00 20 Direct Labor in Process 1,300.00 21 Indirect Expense in Process 1,172.50 22 Finished Goods Inventory 4,000.00 23 Cost of Sales 45,266.00 24 Sales 57,644.00 $190,304.50 $190,304.50 Jan. 31. After preparing the Balance Sheet and Profit and Loss State- ment, close the Nominal accounts into Profit and Loss account and close the Profit and Loss account to Surplus. Prepare the Profit and Loss Statement first, and show the surplus in the Balance Sheet. Closing Journal Entries Profit and Loss $45,266.00 Cost of Sales $45,266.00 Sales $57,644.00 Profit and Loss $57,644.00 Profit and Loss $2,910.14 Interest $35.00 Sales Discount 475.14 Selling Expense 2,400.00 Purchases Discount $576.82 Profit and Loss $576.82 Profit and Loss $*•••*•• Surplus $*****.*• To close the Nominal accounts. In posting to the debit and credit of Profit and Loss account, itemize so the account will show the name of each debit and credit, the same as in Illustration No. 27. The following statement of the manufacturing operations will show, in the form of a report, the same facts as are shown by the accounts. The main pur- pose of this simple short set is to show the controlling accounts, that is, how these accounts are used to control the operations in the factory. 234 BOOKKEEPING AND ACCOUNTING Statement of Manufacturing Operations Valley Tanning Co. Raw Materials Aoootints: Raw Hides Inventory, Jan. 1 . . . . Tanning Materials Inventory. Jan. 1 Supplies Inventory, Jan. 1 .... Materials Furohased during Ferlod: Raw HidOB Tanning Materials Supplies Total Cost of Materials Cost of Materials Issued and put in Process: Raw Hides . . . Tanning Materials Supplies .... Total Cost . . Inventory of Materials on hand Jan. 31 Represented by: Haw Hides Tanning Materials Supplies Materials In Process Aocount: Materials in Process Inventory, Jan. 1 . . Cost of Materials Requisitioned for Period Less Cost of Materials used on completer Trodnot for the Period And the Sale of Offal Inventory of Materials In Process Jan. 31 . . Direct Labor Account : Inventory Direct Labor in Process, Jan. 1 . Direct Labor on work In Frocess for Period Less Direct Labor on Goods Finished . . . Inventory of Direot Labor in Process Jan. 31 Finished Goods Acoount: Inventory uoods on hand Jan. 1 . . Cost of Goods oonpleter for period: Materials Direct Labor Indirect Expense Less Cost of Goods Sold for Period .... Inventory Finished Coods, Jan. 31 ... Indirect Expense Account: Inventory of Expenses in Process . . Indirect Expense for Perioj . . . Less Indirect Expense Apportioned to complete product Inventory of Indirect Expense in Process, Jan. 31 20160 4020 1000 45696 9200 3400 37632 7220 400 28224 6000 4000 38224 40972 600 1174 2000 5000 40972 18*74 1420 680 1800 00 25180 56296 83476 4! 2! :. 36224 59892 41572 1 '.' — 3174 1674 1300 19226 45266 ■;c\v 2480 142^ 1060 00 QQ. x OC 00 00 00 00 00 00 OC 00 00 00 00 00 00 ILLUSTRATION NO. 108. STATEMENT OF OPERATIONS BOOKKEKl'ING AND ACCOUNTING 235 PROBLEM 19. NATIONAL MANUFACTURING COMPANY Prom the following Trial Balance of the Ledger of the National Manufac- turing Co., and the inventories following the Trial Balance, set up the Nominal accounts, Reserve accounts and Surplus, on Ledger paper and close the accounts, showing the Manufacturing Account, Trading Account, Administrative Account, Profit and Loss Account and the Appropriation Account. The journal entries suggested provide for the inventories, the additional reserves and dividend, so that an adjusted or Final Trial Balance is not neces- sary, but may be prepared. The Balance Sheet is to be prepared after the closing entries arc posted. The Profit and Loss Statement should show the distribution of the profit at the end. Trial Balance, national Manufacturing Co. Deo. 31, 19 1 2 3 4 5 6 7 8 S 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 26 26 27 28 29 30 31 32 33 34 36 36 37 38 39 40 41 42 43 44 45 46 Capital Stook Unsubscribed Stock Surplus : Cash notes Receivable Aooounts Receivable Notes Payable. Trade Notes Payable, Bank Accounts Payable Buildings (Factory] Maohinery Tools Reserve for Depreciation on Machinery Reserve for Depreciation, on Tools . . Reserve for Doubtful Accounts .... Raw Materials Inventory, Jan. 1, . . . Finished Goods Inventory, Jan. 1, . . Materials in Process Inventory, Jan. 1, Raw Material-Purchases Purchases Returns and Allowances . . . Freight and Cartage In Heat, Light and Power Labor-Payroll ... Foremen's Salary , . Machinery Repairs Faotor'y Expenses ."- Insuranoe on Factory Sales Sales Returns and Allowances Sales Discount Freight Out . , Shipping Expense . . Salesmen's Commission Traveling Expense Advertising Warehouse Rent Insuranoe on Warehouse Office Expense Office Salaries Officer'9 Salaries Directors' Fees Legal Expense ... Interest-Trade Interest-Bank- Collection and Exchange Purchases Discount 30000 00 10000 00 9000 00 14000 00 13000 00 20300 00 8800 00 21000 00 22000 00 10000 00 16000 00 2600 00 3000 00 600 00 500 00 3000 00 5000 00 1000 00 60000 00 2500 00 1200 00 2300 00 19200 00 2750 00 950 00 1000 00 500 00 121450 00 6500 00 1700 00 1300 00 2500 00 6300 00 2700 00 2200 00 2200 00 400 00 2250 00 2500 00 4000 00 300 00 150 00 250 00 1500 00 100 00 800 00 219650 00 219650 00 236 BOOKKEEPING AND ACCOUNTING It the sin, |, ni will prepare and post the closing journal entries as 8ug gested, the Nominal accounts will be closed, the accounts mentioned above will appear as shown, and tin- Reserve accounts, Unexpired Insurance on Factory, Unexpired Insurance on Warehouse, Dividend No. 1, Payable and Surplus accounts will remain open. These accounts with the Assets, Liabilities and Capita] Stock accounts will appear in the Balance Sheel Inventories : Raw materials on hand Dec. -'!1 $G..">00 Materials in Process Inventory Dec. 31 4,500 Finished Goods Inventory, Dec 31 9,500 Reserve for Dep. on Machinery 1,300 Reserve for Dep. OH Tools 400 Insurance on Factory Unexpired 250 Insurance on Warehouse Unexpired 120 The board of directors have declared a 20', dividend on stock issued. It lias been decided to set up or write off an additional Reserve for Doubtful Accounts of $1,600. An analysis of the Payroll records show thai $17,500 is Direct Labor and $1,700 is Indirecl Labor or factory Expense. CLOSING JOURNAL ENTRIES 1. Insurance on Factory Unexpired $2.">0.00 Insurance on Factory $250.00 To transfer the Unexpired Insurance Prom Insurance on Factory account and establish the amount of insurance expired. 2. Insurance on Warehouse Unexpired $120.00 Insurance on Warehouse $120. 0t> 3. Direct Labor $17,500.00 Factory Expense l.TOO.nu Payroll $19,200.00 To dose Payroll account and distribute the wages as per analysis of Payroll records. 4. Raw Materials Purchases $3,000.00 Raw Materials Inventory Jan. 1 $3,000.00 To close the beginning inventory and transfer it to Raw Mate- rials Purchases with a view to ascertaining the cosl of Raw .Materials used. Note: These explanations are longer than the usual explanation, in order thai they may be made Buggestive. Use the number of the entry as the page of the Journal, when posting. All of these journal entries should be dated December 31. 5. Raw Materials Inventory. Dee. 31 $6,500.00 Purchases Returns and Allowances 2,500.00 Raw Materials Purchases $!l.0(Hl nn To set up present inventory and to transfer these amounts to Raw Materials Purchases account, as deductions Erom the cost of materials, with a view to establishing the cost of materials used in manufacture for the period. BOOKKEEPING AND ACCOUNTING 237 G. Manufacturing Account $73,700.0(1 Raw Materials Purchases $54,000.00 Materials in Process. Jan. 1 1.000.00 Freight and Cartage In 1,200.00 Direct Labor 1 7,500.00 To set up the Manufacturing Account to show the "Manufacturing Cost," and to close and transfer the latter accounts to it. Note: In posting the $73,700 to the debit of Manufacturing Account, itemize it on the debit: Raw Materials Purchases $54,000, Materials in Process, Jan. 1, $1,000, Freight and Cartage In, $1,1200, Direct Labor, $17,500, instead of posting the amount in one sum. 7. Manufacturing Account $10,650.00 Insurance on Factory (expired) $250.00 Machinery Repairs 950.00 Factory Expense 2,700.00 Heat, Light and Power 2,300.00 Foreman 's Salary 2,750.00 Depreciation on Machinery 1.300.00 Depreciation on Tools 400.00 To close these accounts into Manufacturing Account with a view to establishing "Manufacturing Cost." Note: In posting the $10,650 to the debit of Manufacturing Account, itemize it as explained in Number 6, instead of posting the amount in one sum. 8. Materials in Process, Dec. 31 $4,500.00 Manufacturing Account $4,500.00 To set up the present inventory and credit Manufacturing Account as a deduction from cost of materials, with a view to arriving at the cost of materials consumed. !). Trading Account $79,850.00 Manufacturing Account $79,850.00 To close the Manufacturing Account, showing the "Manufacturing Cost," and to set up the Trading Account with a view to showing the profit on sales. 10. Trading Account $5,000.00 Finished Goods Inventory, Jan. 1 $5,000.00 To close the beginning inventory and transfer it to the Trading Account. 11. Finished Goods Inventory, Dec. 31 $9,500.00 Trading Account $9,500.00 To set up present inventory and credit Trading Account as a deduction. When the foregoing entries are posted to this point, the Trading Account shows the "Cost of Goods Sold" or "Tost of Sales." 238 BOOKKEEPING AND ACCOUNTING 12. Trading Account $17,480.00 Shipping Expense $2,500.00 Freight Out 1,300.00 Salesmen's Commission 6,300.00 Traveling Expense 2,700.00 Advertising 2,200.00 Warehouse Renl 2,2< Insurance on Warehouse (expired) 2Si » > ■< ' T<» close these selling expenses into Trading Account with a view to establishing the profil in trading or profil on sales Note: in posting to the it i.f Trading Account, itemize in tl xplanation column iggested in Numbers r> and ~. 13. Sales $8,200.00 Sales Returns and Allowances - ".00.00 Sales Discounl 1.7oo.ou To close the latter accounts into Sales a >unt with a view to establishing the net sales. 14. Sales $113,250.00 Trading Account $113,250.00 To close the Sales account and credit the trading account with the net sales. 15. Trading Account $20,420,00 Administrative Account $20,420.00 To close the Trading Account, showing the "Profit on Sales," into Administrative Account. 10. Administrative Account $9,200.00 Office Expense $2,250.00 Office Salaries 2,500.00 Officers' Salaries 1,000.00 Directors' Fees 300.00 Legal Expenses 150.00 To close those administrative expense a en units into Administrative Account. In posting, itemize in the explanation column as explained in numbers 6 and 7. 17. Administrative Account $11,220.00 Profit and Loss Account $11,220.00 To close Administrative Account, showing the cosl of administra- tion, into Profit and Loss account. 18. Profil and Loss Account $1,850.00 Interest— Trade $250.00 Interest— Hank 1,500.00 Collection & Exchange 100.00 To close these i perating expense accounts into the Profit and Loss Account, as deductions from income. | Itemize when posting.) BOOKKEEPING AND ACCOUNTING 239 If). Purchases Discount $800.00 Profit and Loss Account $800.00 To close Purchases Discount, as a non-operating income, into Profit and Loss account. 20. Profit and Loss Account $10,170.00 Appropriation Account $10,170.00 To close Profit and Loss account into Appropriation account, to show the distribution of profits. 21. Appropriation Account $10,170.00 Reserve for Doubtful Accounts $1,000.00 Dividend No. 1. Payable 4,000.00 Surplus 4,570.00 To close Appropriation Account, showing distribution of profits, and to set up the additional Reserve and the Dividend Account, and to transfer the remainder of the profits to the Surplus account. (Itemize when posting.) If the closing entries are properly posted, the Manufacturing Account, Trading Account, Administrative Account, Profit and Loss Account, and the Appropriation Account will appear as follows, but the student will have to set up all the accounts affected and post the closing entries in order to be able to prepare the Balance Sheet to show the condition of the business after the books are closed and the profits are distributed. Prove the Balance Sheet with the Profit and Loss Statement. 240 BOOKKEEPING AND ACCOUNTING MANUFACTURING ACCOUNT Dec. 31. Raw Materials consumed .. $54,000 31. Matt-rials in Pro lnvtv., Jan. 1 1, 31. Freight and Cartage In. .. I 31. I i I aboi L7, 31. Heat, Light and Power ... 31. Foremen's Salary 31. Machinery Repairs 950 31. Factory Expense 'J. 7"" 31. Insuran a Factory rpired) 250 31. Depreciation on Machinery $1,3110 31. I >epre< iation on Tools. . . .'. 400 $84,350 I. Materials in Pr Invtv. Dec. 31 ..$ 1,500 31. Manufacturing Cost to Trading Account 79,850 $84,350 TRADING ACCOUNT Dec. 31. Manufacturing Cost from 1 li . 31. Finished (ion. is, Invtv. M.n ofacturing acct. . . . 350 Dec. ;:i ..$ 9 31. Finished Goods Invtv., 5,000 31. Sales 11 31. rtage Out. 1,300 31. Shipping Bz pense . 2,500 31. Salesmen 's Salary . 6,300 31. Traveling Expenses .... . 2,700 31. . L',200 31. 31. 2,200 .$ 280 Insurance on Warehouse. 31. Profit in Trading to li minis! rath e Account.. . 20,420 $122,750 $122,750 ADMINISTRATIVE ACCOUNT Dee. 31. Office Expenses $ 2,250 31. Office Salaries 2,500 31. Officers ' Salaries 4,000 31. Directors' Fees 300 31. Legal Expenses 150 i Business l'rolit to Profit and Loss Acct 11,220 $20,420 Dec. 31. Profit in Trading from Trading Account $20,420 $20,420 PROFIT AND LOSS ACCOUNT Dei : ' In'erest— Lank 1,500 31. lot' resi Trade 250 31. Collection ami Exchange.. 100 31. Net Profit to Appropria- tion Acct 10,170 $12,020 Pec. 31. Business Profit from Profit and Loss Act $11,220 31. Purchases Miscount 800 BOOKKEEPING AND ACCOUNTING APPROPRIATION ACCOUNT 241 Dec. 31. Reserve for Bad Bebts $ 1,600 31. Dividend No. 1 Payable.. 4,000 31. Surplus 4,570 $10,170 Dec. 31. Net Profit from Profit and Loss Acct $10,170 $10,170 Usually the debits to these accounts would not be itemized as shown. The large amounts that have been itemized would ordinarily be posted in one amount. The purpose in requiring that these accounts be posted and shown as above is that they may more nearly conform to the Profit and Loss Statement. PROFIT AND LOSS STATEMENT, NATIONAL MANUFACTURING CO., DEC. 31, 192 Sales $121,450.00 Sales Returns and Allowances $6,500 Sales Discount 1,700 8,200.00 Net Sales $113,250.00 Prime Costs: Raw Materials Invty. Jan. 1 $ 3,000.00 Materials in Process, Invt., Jan. 1,000.00 Raw Materials Purchases for Period 60,000.00 Freight and Cartage In 1,200.00 Direct Labor 17,500.00 $82,700.00 Less Purchases Returns and Allow. .$2,500 Less Raw Materials Invty., Dec. 31. . 6,500 Less Materials in Process Dee. 31 ... . . 4,500 13,500.00 Prime Cost $ 69,200.00 Factory Overhead : Heat Light and Power $2,300 Foremen's Salary 2,750 Machinery Repairs 050 Factory Expenses 2,700 Insurance on Factory 250 Depreciation on Machinery 1,300 Depreciation on Tools 400 Factory Overhead 10,650.00 Manufacturing Cost for period $ 79,850.00 Add Finished Goods Invty., Jan. 1 . . 5,000.00 $ 84,850.00 Deduct Finished Goods Inventory, Dec. 31 9,500.00 ( !ost of Sales for the period $ 75,350.00 Cross Profit on Sales, Carried For'd $ 37,900.00 242 BOOKKEEPING AND ACCOUNTING Gross Profit on Sales Brot. Ford 37,:i00.00 Selling < losl : Shipping Expense $2,500.00 Freight I tat 1.300.00 Traveling Expenses 2,700.00 Salesmen's Commission 6,300.00 Advertising 2.200.00 [nsurance on Warehouse 280.00 Warehouse Renl 2.200.00 Selling Expense 17.4so.oo Net Profit on Sales $ 20,420.00 Administrative Cost: < Mice Expense $2,250.00 ( M'iiee Salaries 2,500.00 Omeers' Salaries 4,000.00 Director ' Pees 300.00 Legal Expense 150.00 Cost of Administration P. 200.00 Profit from Operations $ 11.220.00 Deduct Non-Operating Expenses: Interest— Trade 250.00 Interest— Bank 1,500.00 Collection and Exchange 100.00 Deductions from Income I.S.'hmxi $ 0.370.00 Add Other Income : I 'urehases Discount 800.00 Net Profit * 10,170.00 Distribution: Reserve Eor Doubtful Accounts $1,600.00 Dividend No. 1 Payable 4.00H.OO 5,600.00 Carried to Surplus Account $ 4.570.00 Prepare a Balance sheet and prove it with the Profit and Loss Statement. Compare the Profil and Loss Statement with the Manufacturing Account. Trading Account. Administrative Account. Profit and Loss Account, and Ap- propriation Account. The Profil and Loss statement may be arranged in sections, in the technical form, to conform to the foregoing five accounts. Alphabetical Index Table of Contents PAGES Abbreviations 2 Acceptance 10 Acceptance — Trade 10-138 Accounting-, Corporation 140 Accounting, Partnership 63-104 Accounts Closed 41 Accounts, Ledger 7-25-70-132 Accounts Payable 11-119 Accounts Receivable 11-119 Accruals 30-32 Accrued Assets 30-32 Accrued Liabilities 30-32 Adjusting Journal Entries 31-53 Administrative Account 240 Administrative Expense Ac- count 12-28-73 Admitting a Partner 91-92 Analysis Sheet 37 Analyzing Balance Sheets 88 Apportioning Administrative and Selling Expense 223 Apportioning Indirect Expense. 221 to 226 Appropriation Account 241 Assets or Resources 11-33-44 Average Investment. Partners'. 106 Balance of Account 25 Balance Sheets 34-35-88 Bank Balance, Reconciliation. . . 85 Bank Pass Book. ..'. 83 Bank Statement 84 Bills or Invoices 78 Bond Issues 155 Bonus 156 Bookkeeping and Accounting. . . 137 Books of Original Entry 55 Building Account 92 Building Expense and Income. 28-197 Business Papers 9-77 Capita] or Investment 4-11-25-63 Capital Accounts 4-25-63 Capital Stock Account. . .115-121-141 PAGES Cash Account 25 Cash Balance 25-58-85 Cash Book 58-59-128-129-164-165 Cash Journal 158 Changing to a Corporation. . . 147-1 48 Checking 138 Checks 80 Check Book 82 Closing Accrued Asset, Accrued Liabilities and Deferred Charges to Operation Ac- counts 42 Closing Entries 39-42-76-236 Closing the Ledger 38-75-76 Closing Partners' Accounts... . .69-70 Closing Procedure 41-77 Closing Proprietor's Accounts.. 25 C. O. D. Accounts and Shipments. 185 Commercial Papers 9-77 Common Stock 146 Common Capital Stock 145-146 Comparative Balance Sheets. 102-103 Comparative Statements . . . .100-101 Comparative Profit and Loss Statements 103 Consignee's Record 183 ( Jonsignments 182 Consignor's Record 183 Consolidation 149 to 154 Contingent Liability 95 Contingent Working Capital . 143-144 Controlling Accounts — Manufac- turing 224-226 Controlling Accounts — Trading . 119 Corporation Accounting 140 Cost Accounting, Part 1 209 Cost Accounting, Part II 214 Cost Sheet or Cost Ledger 218 Cost of Goods Sold 226 Cost of Sales 226 Credit Memorandum 78 Creditors' Accounts 119 Creditors' Ledger 119 and 136 Current Assets 89 BOOKKEEPING AND ACCOUNTING PAGES stomers' Accounts. . . .119 and I lustomers' Ledger 119 and I >ebi1 ami ( Iredit, Principles of. 1 to 8 I >• ductions from [ncome 36 I (eferred Assets I >eferred Charges to < Ipefation. 31-32 Delivery Equipmenl Account. .14-26 Delivery Expense Account 14-28 I >epartmen1 ized Business 18] Deposil Tickets B3 I >epreciation, Resen e For 31-32 Detailed Statements 37 Diivet Labor 220-225 I >iscoun1 and Premium 155 Dissolution of Partnership 109 Distribution of Profits 100 Dividends 156 Dividend Accounts 157 Drafts 9-10 Errors in Trial Balance 138 Exhibits 34 Expense Accounts 12 Factory Expense 22] Factory Overhead 187-22] Final Trial Balance before • Hos- ing i!:!-."}!' Finished G Is Account 226 Finished Goods Inventory 226 Fiscal Period 12 Fixed Assets 89 FYeighl In Accounl 16 18-2'3 Freighl < hit Accounl 66 72 Furniture and Fixtures Accounl 14-26 Genera] Column. . .58-59-128-129-130 ( reneral Expense 1 2 Genera] Ledger. .119 and 132 to 135 G Iwill, Value of 110-11] Indirect Expense 22] 225 Indirect Expense Apportioned. . 22] Indirect Labor 220 22] [ndorsemenl 81 Insurance 16-2G rnteresi 17 !8 Interest on [nvestmenl 1 |N ln\ entories 30-3] [nventory Accounts 26-41-72 Invoice 77 Invoice of Shipmen! 182-183 I'AGES Journal 6 21-22 23 24 Journal Entries 6-21-22-23 24 Journal, Special < !olumn. . L58 to 161 Land Account 92 lc duer Accounts 7-25-70 Liabilities 11-33 1 1 Loss on Doubtful Accounts 32 Manufacturing Accounl L'lu Manufacturing Accounts 224 Manufacturing Business ....192-227 Manufacturing < !os1 for Period. . L88-211-226 Manufacturing Cosl oi Goods Sold 188-211-226 Manufacturing Statements! 36 to 190 Manufacturing Statement of < Op- erations L'"> I Materials R rd 218 Materials in Process Account. 217-225 Materials in Process Inventory. . 225 Merchandise Accounts 12-33 11 \'et Capital 11 Net Proceeds 184 Xct Profit 42 Non-Operating Expense Ac- counts 3(1 Non-Operating I n c o m e Ac- counts 118-188 Notes :i Notes Payable 10 Notes Receivable 1" Notes Receivable Discounted... 95 i Office Equipment 14'Jn' < Office Equipmenl Expense . 17 65-73 < Opening Entries ii-1 1-25-63-70 Opening Entries; Corporation. . Ill to L45 i Opening Entries, Partnership. . . 104 rating Accounts 33 Operating Kxpenses — Profit and Loss Accounts 33 Order of Posting 68 Partners" Capital Accounts. .4-70-106 Partners' Dn ision of Profits. . . . 69-106-107 Partners' Personal Accounts... 4-70 Partnership Accounting 1"! Partnership, Dissolution of 109 Partial Payments 16-8] BOOKKEEPING AND ACCOUNTING FAGES Pass Book 83 Payroll Account 220 Payroll Book 219 Personal Accounts 29 Petty Cash Account 120-122 Petty Cash Book 120 Posting .5-6-7-57 to 62 and 119 to 120 Preferred Stock 145-146 Preferred Capital Stock 145-146 Productive Hours 222 Productive Labor 219-220 Profit and Loss Account 42-240 Profit and Loss Accounts 33-75 Profit and Loss Statement 36-53 Proof Trial Balance 43 Proprietors' Capital Account. 4-14-25 Proprietors' Personal Account.4-14-25 Purchases Account 27-41 Purchases Book 57-126-196 Purchases Discount 27-41 Purchases Ledger 136 Purchases Returns and Allow- ances 15 Raw Materials Account 216-234 Real Estate Expense and Income. 28 Receipt 78 Reconciliation of Accounts pay- able ! . 38 Reconciliation of Accounts Re- ceivable 38 Reconciliation of Administrative Expense 37 Reconciliation of Bank Balance. 85 Reconciliation of Selling Ex- pense 37 Reserve Accounts 30 to 33 Reserve for Depreciation 30-31 Reserve for Doubtful Accounts. 30-31 Requisition, Form of 220 Rules 13 Sales Account 12-27-72 Sales Book 60-127-193 Sales Discount 41 Sales Ledger 135 Sales Returns and Allowances. . 15 Schedules 37-38 Selling Cost 118-211-242 PAGES Selling Expense 12-16-28 Selling Expense Account. . .28-73-135 Shipments 182-183 Shipping Invoice 182-183 Single Entry Bookkeeping 205 Single Entry Changed to Double Entry 205-207 Six Column Working Sheet. . .52-115 Special Columns 56 Special Column Cash Book 58-59-194-195 Special Column Journal 158 Special Column Purchases Book . 196 Special Column Sales Book 193 Statement of Account 79 Statements, Corporation 113-118 Statements, Manufacturing. . .186-190 Stores Ledger 228 Stores Record 216 Subscriptions 141-142 Subsidiary Ledgers 121 Surplus 123 T-Ledger Accounts 64 Terms of Sale 14 Tickets, Sale, Credit and Collec- tion 167-168 Trade Acceptance 10-15-137 Trading Account 240 Trading Accounts 33-75 Trading Section — Profit and Loss Account 33 Trading Statement 44 Treasury Stock 143-144 Trial Balance 30 Trial Balances, Errors in 138 Trial Balance, Pinal 33 Trial Balance, Proof 43 Turnover 162 Unsubscribed Stock 144-145 Unit Value of Article from Trial Balance 210 Working Capital 143 Working Capital, Contingent. 143-144 Working Capital, Suspense. .143-144 Work in Process 225 Working Sheet 52-115 Illustration of Various Forms PAGES 1 to S Journal Entry Studies. . 1 to 4 9 Opening Entry 4 10 Journal G 11 Ledger Accounts 7 12-13 Trial Balances 8 14 Notes 9 15 Sight Draft 9 16 Acceptance 10 17 Trade Acceptance 10 18 Journal 21 to 24 18a Ledger Accounts 25 to 29 19 Trial Balance 30 20 Adjusting Entries 31 21 Final Trial Balance 33 22 Balance Sheet 34 23 Balance Sheet 35 24 Profit and Loss Statement 36 25 Analysis Sheet 37 26 Schedules 38 26a Accounts Closed 41 27 Profit and Loss Account . 42 28 Closing Entries 43 29 Proof Trial Balance 44 30 Trading Statement 44 31 Working Sheet 52 32 Profit and Loss Statement 53 33 Purchases Book 57 34 Debit of Cash Book 58 35 ( Iredit of Cash Book 59 36 Sales Book 60-61 37 Journal 62 38 Ledger Accounts 70-74 39 Closing Entries 76 40 Invoice 77 41 Credit Memorandum .... 78 42 Receipt 78 43 Statement of Account... 79 44 Cashier's Check 79 45 Bank Draft 80 46 Personal Check 80 47 Check Stub 82 48-49 Deposit Ticket 83 50 Pass Book 83 51 Bank Statement 84 PAGES 52 Balance Sheets 88 53 Balance Sheets 89 54 Comparative Statement . . 100 55 Distribution of Profit 100 56 Comparative Statement. . 101 57 Comparative Balance Sheet 102 58 Opening Entry for Part- nership 105 59 Working Sheet 115 60 Balance Sheet for Corpo- ration 117 61 Profit and Loss Statement for Corporation 118 61a Petty Cash Book 120 62 Purchases Book 126 63 Sales Book 127 64 Debit of Cash Book 128 65 Credit of Cash Book 129 66 Three Column Journal . . . 130 67 Ledger Accounts. .132 to 137 68 Balance Sheet for Corpo- ration 154 69 Special Column Journal. 159 70 Special Column Journal. 160 71 Special Column Journal. 161 72 Three Column Journal. . . 163 73 Debit of Cash Book 1 04 74 Credit of Cash Book 165 75 Charge Tickets 167 76 Cash Tickets 168 77 Credit Tickets 169 78 Collection Tickets 170 79 Account Sales 184 80 Final Trial Balance 186 81 Profit and Loss Statement for Manufacturing. 187-188 82 Balance Sheet for Manu- facturing 189 83 Special Column Sales Rook 193 S4 Debit of Cash Book with Bank < 'olumn 194 BOOKKEEPING AND ACCOUNTING PAGES 85 Credil of » lash Book with Bank Column 195 36 S] •■' ial I lolumn Purchases Book 196 88 Single Entry Journal 205 89 Balance Sheet, Single En- try 207 00 Entry to Change to Dou- ble Entry 207 01 Trial Balance 210 92 Profit and Loss State- ment, Manufacturing, Showing Cnii Cost.. 2] 1-212 PAGES 93 Stores Record 216 94 Requisition < (rder :M7 95 Materials Record 218 96 Cosl Sheet 218 97 Summary 219 98 Payroll Book 220 99 Distribution of [ndirecl Expense 222 100 Distribution Rate of Ex- penses 223 lni Distribution of Factory Overhead '. 223 102 stock Record 228 103 Statement of Operations. 234 Accounting Problems Between the Sets PAI 1 Assets and Liabilities 11 2 Assets and Liabilities 12 3 Trading Statemenl 44 4 Trading Statemenl 44 ."> Detailed Statements 51 6 Working Sheet 52-53 7 Detailed Statements 75 8 Method of Closing 75 76 9 Closing Books, Partnership. 86 10 Detailed Statements 101 11 Comparative Statement ... . 103 12 ( 'losing t he Books, Partner ship Hi' 13 Working Sheel and State- ments for a Corporation. . 11") PAGES II Detailed Statements and Schedules 1 : '>7 15 Manufacturing Statements. 186 190 16 O. C. Nelson Manufacturing Co 190 17 .Mead Bicycle Co., I'nit Cost 209-212 18 Illinois Coal Mining Co., I'nit Cos! 213 19 Closing Entries to show the Manufacl uring Account, Trading Account, Admin- istrative Account, Profit and Loss Accounl and Ap propriation Account. .235-242 V* • 483125 UNIVERSITY OF CALIFORNIA LIBRARY