HF 
 Be 
 
 UC-NRLF 
 
 B 4 S7T MbT 
 
 
Bookkeeping Exercises 
 
 No. 1 
 
 Recording Transactions, Posting 
 and the Trial Balance 
 
 For Beginning Bookkeeping Students 
 
 Net Price 20 Cents 
 
 PUBLISHED BY 
 
 South-Western Publishing Company 
 Cincinnati, Ohio 
 
BOOKKEEPING EXERCISES 
 
 DEVELOPING THE PRINCIPLES OF DEBITS AxND CREDITS, 
 RECORDING TRANSACTIONS, THE TRIAL BALANCE, 
 BALANCE SHEET, STATEMENT OF PROFIT 
 AND LOSS, AND LEDGER CLOSING 
 
 For Beginning Bookkeeping Students 
 
 PUBLISHED BY 
 
 South-Western Publishing Company 
 
 Cincinnati, Ohio 
 
 1921 
 

 Copyright, 1921 
 
 SOUTH-WESTERN PUBLISHING COMPANY 
 
 Cincinnati, Ohio 
 
Chapter I 
 
 BOOKKEEPING AND ACCOUNTING 
 
 § 1. Each Individual requires food, clothing, education, amusement, and 
 many other things necessary for his comfort and enjoyment. These necessities and 
 luxuries can be obtained with money, which is the medium of exchange. The in- 
 dividual secures money through a compensation for services rendered to others, 
 income from investment, or the profit resulting from the operations of a business. 
 
 James Brown is employed as salesman for the Citizens Motor Car Co.; his income is the 
 salary received for the services rendered. J. W. Smith owns the building in which the Citizens 
 Motor Car Co. is operated; his income is the rent received from the building, which is his investment. 
 W. O. Winkler owns the Citizens Motor Car Co.; his income is the profit made by selling automo- 
 biles at a price greater than the cost. 
 
 § 2. A Business. The one who sells to the individual the food, clothing, 
 education, amusement, or other things which he needs for his comfort and enjoy- 
 ment, is said to be engaged in business, and the operations in connection therewith 
 are referred to as a business. The operations include the buying and selling of the 
 commodities in which the business deals, at a place of business and under a name 
 selected by the owner. There are many kinds of businesses, each supplying a 
 specific demand; there are many businesses of the same kind, each undertaking to 
 supply the same demand. 
 
 John Jones owns and operates a drug store at 405 Main Street, known, and advertised to the 
 public as "The Central Drug Store." Mr Jones is a business man because he operates a business. 
 The operations of his business include the buying and selling of medicine and drugs as well as the 
 other articles a drug store usually handles, and his business is referred to as a drug business. 
 
 § 3. The Purpose of a Business. A business is organized and operated in 
 order that the owner may make a profit:'' and thus enable him to purchase from 
 others the material or services which his business does not provide. The profit 
 results from selling material or service at a price greater than its cost. If the 
 material or service which the business has for sale is sold at a price lower than its 
 cost to the business, the operations have resulted in a loss. The purpose of a busi- 
 ness can be accomplished only after the material or service which it undertakes 
 to provide has been sold to those who demand it; no profit can result until the 
 material or service has been sold. 
 
 Mr. Jones, the druggist referred to in the illustration in Section (§) 2, hopes to make sufficient 
 profit through the operations of his drug business to permit him to purchase food, clothing, education 
 and amusement for himself and family, and the many other articles and services which are needed 
 in everyday life. To make a profit, it is necessary for him to sell the articles which he olTers for sale 
 at a price sufficient to cover (a) the cost of the article, (b) the cost of operating his business (rent, 
 heat, light, etc.), and (c) the profit needed to provide those things necessary for the comfort and 
 enjoyment of himself and family. 
 
 § 4. Assets, Liabilities, and Proprietorship. Property is any object of 
 value that an individual or business may lawfully acquire and hold. Any one kind 
 of property (money, goods purchased for sale, land, buildings, etc.) owned by a busi- 
 ness is referred to as an asset, and all the property owned by a business, as its assets. 
 An oral or written agreement to pay money at a future time is an obligation or 
 debt; an obligation owed by a business is referred to as liability, and all the 
 
 *The words printed in italics are accounting terms and have a special meaning when used in 
 connection with the discussion of bookkeeping and accounting. If the student does not understand 
 the meaning of these terms from the discussion in the text, the teacher will give further explanation 
 upon request. The beginner is not expected to memorize the meaning of these terms, but he should 
 understand their use. 
 
 483G4^ 
 
6 :;. : ; / JB^X)kREEPmG .'AND ACCOUNTI NG. 
 
 obligations of a business, as its liabilities. Proprietorship refers to the interest of the 
 owner in the business; it is the difference between the assets and liabilities of the 
 business. Stated in equation form, assets-liabilities = proprietorship. 
 
 Mr. Jones, the druggist, finds by actual count that on December 31 he owns in connection 
 with his drug business, cash $1,500.00; drugs, medicines, and other material purchased for sale, 
 $4,500.00; and soda fountain equipment and store fixtures, $2,500.00. He owes the bank $1,000.00 
 for money borrowed from it, and one of the wholesale drug companies from which he buys 
 medicine, $500.00. Total assets, $8,500.00, minus total liabilities, $1,500.00, equals proprietorship, 
 $7,000.00. 
 
 § 5. A Business Transaction is an exchange of equivalent values; that 
 is, the business receives something of value for the material or service which it 
 sells to others, and gives something of value to those from whom it purchases 
 material or services. The value received may be an asset, an operating cost, or an 
 obligation (liability) canceled; the value parted with may be an asset, a service 
 rendered, or an obligation (liability) created. The purpose of a business (§ 3) is 
 accomplished through the performance of business transactions. 
 
 Mr. Jones, the druggist, pays money for drugs which he expects to sell; the value received 
 is the drugs, and the value parted with is the money. A railroad receives $5.00 in payment for a 
 ticket; the value received is the money, and the value parted with is the service rendered the pur- 
 chaser of the ticket in transporting him from one place to another as specified in the ticket. Mr. 
 Jones, the druggist, pays the telephone company $5.00 for the use of his 'phone; the value received 
 is the use of the 'phone (operating cost), and the value parted with is the money. A. R. Smith, a 
 farmer, borrows $500.00 from a bank; the value received by him is the money, and the value parted 
 with is the obligation created by the promise to pay $500.00 at a future time. When Mr. Smith 
 pays this obligation, the value received by him is the obligation canceled, and the value parted with 
 is the money. 
 
 § 6. Bookkeeping is the systematic recording of the transactions performed 
 by a business. Accounting is a term usually used with the same meaning as book- 
 keeping; there is a distinction which the student will better understand after he 
 is more familiar with the subject of bookkeeping. 
 
 A bookkeeper records the transactions performed by a business; an auditor verifies the book- 
 keeping records; an accountant installs bookkeeping systems, prepares financial reports, and advises 
 the owner in regard to the information that should be obtained from his bookkeeping records; a 
 certified public accountant (C. P. A.) is one who has passed the required governmental examination 
 and has the authority to practice the profession of accountancy. 
 
 § 7. The Purpose of Bookkeeping for a business is to provide a record 
 of all the transactions performed by the business. From this record, the owner 
 can determine the value of the assets and liabilities of the business, the cost of 
 operating it, and the profit resulting from its operations; this information will 
 enable him to control future operations of the business. The purpose of book- 
 keeping for an individual is to provide a record of his income from salary and 
 investments and his expenditures. From this record he can control future expendi- 
 tures and avoid contracting obligations which can not be paid from his income. 
 
 Mr. Jones, the druggist, wishes to know that the amount of money owned by the business 
 is correct according to the transactions performed. He requires a record of all money received and 
 all money paid; the difference between the total receipts and total payments should correspond 
 with the money owned by the business. Robert Brown, who receives a salary of $2,500.00 a year, 
 wishes to know that his expenses will not exceed his income. He records his expenses (rent, gas. 
 coal, clothing, food, etc.) and salary received; the difference between the salary and the total expenses 
 is the excess of his income over his cost of living. 
 
 § 8. An Account is a record of all the transactions with any one asset, 
 liability, operating cost, profit, or loss collected under a specific heading; this 
 heading is designated as the name of the account. It requires two accounts to 
 record a transaction, one to record the value received and the other the value 
 parted with. The record in an account should be arranged to distinguish between 
 values received and values parted with. Thus, if an account is to show a record 
 of money received and paid by a business, amounts received should be recorded 
 in such a way as to distinguish them from amounts paid. For this reason it is 
 
BOOKKEEPING AND ACCOUNTING. 
 
 customary to provide a special ruled form for the recording of transactions in an 
 account. Illustration No. i shows one form of ruling; others will be explained 
 and illustrated later. 
 
 NAME OF THE ACCOUNT 
 Values Received Values Parted With 
 
 Year 
 Month 
 
 Day 
 
 Any special 
 explanation 
 deemed nec- 
 
 Page 
 
 for 
 
 refer- 
 
 Dollars 
 
 Cents 
 
 Year 
 Month 
 
 Day 
 
 Any special 
 explanation 
 deemed 7iec- 
 
 Page 
 
 for 
 
 refer- 
 
 Dollars 
 
 Cents 
 
 (I) 
 
 (2) 
 
 essary. 
 (3) 
 
 ence 
 
 (4) 
 
 (5) 
 
 (6) 
 
 (I) 
 
 (2) 
 
 essarv. 
 (3) 
 
 ence 
 
 (4) 
 
 (5) 
 
 (6) 
 
 Illustration No. i, The Account. 
 
 EXPLANATION. The name of the account is written above the ruled form provided for 
 recording transactions affecting the account. The double line in the center separates values received 
 and values parted with. Columns i and 2 are for the date, and columns 5 and 6, for the value in 
 dollars and cents of each transaction affecting the account. Column 3 is used when special infor- 
 mation is necessary, and column 4, when the transaction is recorded separate from the account and 
 transferred to it. The numbers of the columns on either side are the same because they are used for 
 the same purpose. 
 
 Applying the discussion of an account to the illustration in connection with §7, the money 
 received by Mr. Jones, the druggist, would be recorded on one side of an account, the purpose of 
 which is to show a record of money received and paid, and the money paid would be recorded on the 
 opposite side of the same account. The difference between the two sides is the cash balance (§11). 
 
 § 9. The Name of an Account should indicate the nature of the asset, 
 liability, operating cost, profit, or loss, which its balance represents. Technical 
 names should be avoided so that any one who can understand what he reads may 
 be able to interpret the name of the account. Custom has established the names 
 of many accounts. Thus merchandise purchased is recorded in an account named 
 "Purchases;" merchandise sold, in an account named "Sales;" money received 
 and paid by the business, in an account named "Cash;" transactions with an 
 individual, in an account with his name. The names of the various accounts needed 
 in connection with the recording of transactions for a business and the purpose 
 of each will be discussed in subsequent chapters. 
 
 § 10. Debit and Credit are accounting terms which apply to the two 
 sides of an account, "debit" referring to the left side and "credit" to the right side. 
 When a transaction is performed, the value received is recorded on the debit side of 
 the account affected, and the value parted with on the credit side of the account 
 affected. \'alues recorded on the debit side of an account are referred to as "debits," 
 and those recorded on the credit side of an account, as "credits." 
 
 Applying the illustrations under §§ 7 ?nd 8, the values received in each case would be recorded 
 on the debit side, and the values parted with, on the credit side. Thus Mr. Jones, the druggist 
 would expect all the money received to be recorded on the debit side of the account with money, 
 and all the money paid on the credit side. 
 
 § 11. The Balance of an Account is the difference between the total debits 
 and the total credits of the account. The balance of an account shows the value 
 of an asset or a liability, or the amount of a profit or a loss.* If the debit side of an 
 account is the larger, the balance is referred to as a "debit balance;" if the credit 
 side is the larger, as a "credit balance." Debit balances are assets or losses, and 
 credit balances are liabilities or profits. The term "loss" as used here includes the 
 operating cost of the business as well as direct losses resulting from transactions. 
 
 An account is "open" when the total of one side is greater than the total of 
 the other side, and is "closed" or "in balance" when the totals of both sides are 
 equal. If the balance of an account shows the value of an asset or a liabilit}^ it is 
 sometimes referred to as a real account, and if it shows a profit or a loss, as a nominal 
 account. 
 
 *Negative accounts and other exceptions will be discussed later. 
 
BOOKKEEPING AND ACCOUNTING. 
 
 QUESTIONS 
 
 1. Would it be advisable for a person who receives a salary for his services to 
 
 keep a record of the transactions which he performs in connection with his 
 affairs? Why? 
 
 2. Name some of the transactions which the individual would perform in con- 
 
 nection with his affairs. 
 
 3. Would you think it advisable for a person who receives a salary to appropriate 
 
 fixed amounts for living expenses, clothing, charit>% and savings? State 
 reasons for answer. 
 
 4. Would it be advisable for the owner of an apartment building with six apart- 
 
 ments to keep a record of the transactions performed in connection with 
 
 the operation of the building? Why? 
 Name some of the transactions which the owner of the apartment l)uilding 
 
 would perform. 
 How would he ascertain whether the ownership of the apartments was a profit- 
 able investment? 
 Would you consider a contractor who undertakes to build houses, roads, 
 
 sidewalks, etc., a business man? Why? 
 Name some of the transactions which he would perform in connection with 
 
 the operations of his business. 
 Is the payment of street car fare by the individual who rides on the car a 
 
 business transaction from the standpoint of the street car company? 
 
 10. Name some of the assets which would be needed and some of the liabilities 
 
 which might be incurred in connection with the operation of a railroad. 
 
 11. Name some of the assets and liabilities in connection with the operation of a 
 
 grocery business. 
 
 12. Name some of the assets of a dry goods store. 
 
 13. Would you consider it advisable for those in charge of a city government to 
 
 make a record of the transactions completed in connection with ijfs oper- 
 ations? Why? 
 
 14. Name some of the transactions which would be recorded in connection with 
 
 the operations of a city government. 
 
 15. Is an automobile truck, owned and used by the grocer for delivering groceries, 
 
 one of the assets of his business? 
 
 16. Name some of the operating costs in connection with the operations of a 
 
 steamer which carries freight and passengers. 
 
 17. Name some of the assets which would be needed and the liabilities incurred 
 
 in connection with the operations of this steamer. 
 i<S. Name some of the operating costs in connection with the publication of a 
 daily newspaper. 
 
 19. Name some of the assets and liabilities in connection with the operations of a 
 
 newspaper. 
 
 20. Would the farmer be regarded as a business man? 
 
 21. Name some of the transactions which would occur in connection with the 
 
 operations of a farm. 
 
 22. Name some of the assets needed by the farmer and some of the liabilities he 
 
 might incur in connection with the operations of his farm. 
 2}^. Name some of the operating expenses which it would be necessary for the 
 farmer to pay in connection with the operations of his farm. 
 
 24. Name some of the transactions which a physician would perform in connection 
 
 ■ with his practice. 
 
 25. Name three businesses of the same kind. Name three businesses of different 
 
 kinds. 
 
Chapter II 
 
 RECORDING TRANSACTIONS 
 
 § 12. The Purpose of Accounting (bookkeeping) is to provide the owner 
 with the information which will enable him to know the results of the operations 
 of his business and to control future operations. This information can be obtained 
 only by recording each transaction as it occurs. 
 
 § 13. Method of Recording Transactions. The bookkeeper records the 
 transactions as they occur and in the order of their occurrence. Each transaction 
 involves a value received and a value parted with, hence a record in two accounts. 
 Each transaction may be recorded direct in the accounts affected by it or in a 
 separate record and transferred to the accounts. For the purpose of instruction, 
 both methods are illustrated, but in practice, transactions are always recorded 
 separate from the account and transferred to it. The recording of transactions 
 involves the use of books of account because transactions can not b' recorded 
 without paper on which to record them. 
 
 § 14. Books of Account are bound or loose-leaf, and ruled to meet particular 
 needs. The various books of account used in connection with the recording of 
 transactions will be explained and illustrated as they are introduced in connection 
 with exercises in this text. In the first three exercises, the ledger is the only book 
 of account required. 
 
 § 15. The Ledger is a bound book, loose-leaf book, or cards with ruling to 
 contain a record of transactions in accounts. The name of the account is written 
 at the top of the page and each transaction recorded on a horizontal blue line on 
 the opposite sides of two accounts. If an entire page is not needed in connection 
 with recording the transactions for an account, the name of the account may be 
 written across the page in a place other than the top. If more than one account 
 is written on a page, it is customary to indicate the name of a new account by 
 drawing double red lines either all the way across the page as in Illustration No. 
 3, or beneath the name of the account. Illustration No. 2 shows one form of ruling 
 for a ledger page. 
 
 The number of accounts in the ledger depends entirely on the nature of the 
 operations of the business and the extent of these operations. The various accounts 
 that are usually found in the ledger will be discussed as they are needed in connection 
 with the explanation of the accounts and exercises requiring the recording of trans- 
 actions in them. Accounts with Cash, Purchases, and Sales are discussed and the 
 recording of transactions affecting them illustrated in this chapter. 
 
 — . — I — { 1 . -- ,- - ' 
 
 I 
 
 Illustration No. 2, One Form of Ruling for a Ledger 
 
 9 
 
10 CASH, PURCHASES, AND SALES ACCOUNTS 
 
 CASH ACCOUNT 
 
 § 16. The Purpose of this Account is to show a record of all the transac- 
 tions in which cash is received and paid. "Cash" is a term applied to money or any 
 commercial paper which the bank will accept at its face value a"s money. The 
 various forms of commercial paper which are regarded as cash will be explained and 
 illustrated later. 
 
 Debit the Cash Account: Credit the Cash Account: 
 
 *[ I. For cash received. ^2. For cash paid. 
 
 ^1 3. The Balance of the Cash Account shows the amount of cash which 
 belongs to the business as a result of the cash transactions completed; it is one of 
 the assets of the business. This cash may be in the safe, in the bank for safe- 
 keeping, or a part in each place. 
 
 ^ 4. Proving Cash. Since the Cash account is a record of all the cash received 
 and paid, the balance should be the same as the cash belonging to the business. If 
 there has been an error in making change, or a transaction affecting cash has not 
 been recorded, it is obvious that the balance of the account will not be the same 
 as the cash on hand. It is customary in business to prove the cash record with 
 the cash on hand at the end of each business day. This proof is effected by 
 counting the cash and comparing the amount with the balance of the Cash account. 
 
 PURCHASES ACCOUNT 
 
 § 17. The Purpose of this Account is to show the net cost of all the mer- 
 chandise purchased for sale. Merchandise is a general term applied to goods 
 bought and sold in the trading business, such as groceries, clothing, shoes, hats, 
 hardware, drugs, miisical instruments, jewelry, etc. 
 
 Debit the Purchases Account: Credit the Purchases Account: 
 
 ^ I. For the cost of merchandise *[ 2. For the cost price of merchan- 
 
 purchased, and the transporta- dise returned to the seller, 
 
 tion (freight, express, and post- and allowances granted by 
 
 age), dray age, and storage him. 
 cost of the same. 
 
 •; 3. The Balance of the Purchases Account shows the net cost of merchandise 
 purchased during the period for which the record is kept. This balance will not, 
 as a rule, represent the value of the merchandise owned by the business because 
 the merchandise was purchased for sale and a part of it has probably been sold. 
 
 SALES ACCOUNT 
 
 § 18. The Purpose of this Account is to show the net returns from the 
 sales of merchandise. It is a record of the transactions affecting the sales of those 
 articles purchased for sale, the cost of which is charged to the Purchases account. 
 
 Debit the Sales Account: Credit the Sales Account: 
 
 ^ I. For the selling price of merchan- ^ 2. For the selling price of merchan- 
 
 dise returned by the customer, dise sold, 
 
 and allowances granted to him. 
 
 ^ 3. The Balance of the Sales Account shows the net returns from the sales 
 of merchandise during the period for which the record is kept. 
 
RECORDING TRANSACTIONS. 
 
 II 
 
 RECORDING TRANSACTIONS DIRECT IN THE LEDGER 
 
 § 19. Transactions May Be Recorded direct in the ledger or in a separate 
 book and transferred to the ledger, as explained in §13. When the transactions 
 are recorded direct in the ledger, the date of each transaction and the amount 
 are recorded on the debit side of the account which shows the value received, and 
 the date and the amount, on the credit side of the account which shows the value 
 parted with; each transaction is recorded at the time it occurs. 
 
 The following transactions affecting the purchases and sales of merchandise 
 for cash, performed by the soda fountain department of the Central Drug Co. 
 during the week beginning July 2, are shown recorded direct in the Cash, Purchases, 
 and Sales accounts in Illustration No. 3. 
 July 2. Cash sales for the day per cash register, $39.40. 
 
 3. Bought syrups and extracts, $5.00; Coca-Cola, $12.75; ice cream, $19.20. 
 Cash sales for the day per cash register, $50.30. 
 {Concluded on pa^e 12) 
 
 
 /f7- 
 
 3 ^\^a 
 
 7 iS » o 
 
 ^ 
 
 
 
 
 
 
 1 
 
 
 i 
 
 
 \ 
 
 
 1 ; 
 
 
 
 pv 
 
 J 
 
 
 
 
 
 J- 
 
 'f 
 
 A / : 
 
 - 
 
 
 
 
 
 
 r -^ ft <r 
 
 
 . 
 
 
 
 
 
 
 -s^c^ 
 
 , 
 
 
 
 il 
 
 
 
 
 
 
 V 
 
 11 
 
 
 
 
 pf 
 
 7 
 
 
 
 y 
 
 S'a 
 
 dZu^ 
 
 7^ 
 
 
 
 J a 
 
 -^ 
 
 
 Jr^ 
 
 ■? 
 
 
 
 0. y 
 cTa 
 
 J <? 
 
 
 
 
 - 
 
 — 
 
 
 
 
 
 s~a 
 
 \ 
 
 
 ' 
 
 
 j~ 
 
 
 
 
 
 / 
 
 
 7 ' 
 
 Illustration No. 3, A Ledger Containing Three Accounts. 
 
 EXPLANATION. B5' comparing the transactions with the record in the ledger, it will be 
 observed that cash is the value received in the first transaction, hence the date, July 2, and the 
 amount, $39.40, are recorded on the debit side of the Cash account; sales (merchandise sold) is 
 the value parted with, hence the date, July 2, and the amount, $39.40, are recorded on the credit 
 side of the Sales account. In the second transaction, purchases (merchandise bought) is the value 
 received, hence the date, July 3, and the amount, $36.95, are recorded on the debit side of the Pur- 
 chases account; cash is the value parted with, hence the date, July 3, and the amount, $36.95, are 
 recorded on the credit side of the Cash account. The other transactions are recorded in the same 
 manner. The writing and large figures are written with black ink and the small figures (totals) 
 with a sharp pencil. 
 
12 
 
 TRIAL BALANCE. 
 
 5. Returned one gallon of ice cream purchased on the 3d, and received $2.50, 
 
 the cost price for the same. 
 Bought sandwiches, $12.50; flavoring, $16.40; ice cream, $20.00. 
 
 6. Cash sales for the day per cash register, $21.50. 
 
 7. Gave James Smith $1.50 for one-half gallon of ice cream which he re- 
 
 turned because it was received in bad condition. 
 Cash sales for the day per cash register, $62.50. 
 
 § 20. A Trial Balance is a list of the open accounts in the ledger with the 
 balance or the total debits and total credits set opposite the name of each account. 
 The Trial Balance is usually prepared on paper with two money columns ruled at 
 the right, so that debit totals or debit balances may be entered in one column and 
 credit totals or credit balances in the other. If the total debits equal the total 
 credits, the Trial Balance is said to be in balance and proves that the debits and 
 credits recorded in the accounts are equal. 
 
 When both sides of the accounts are used in the Trial Balance, it is sometimes referred to as a 
 "Trial Balance of totals," and when the balances of the accounts arc used, as a "Trial Balance of 
 balances.'' A complete discussion of the method of detecting errors when the Trial Balance does 
 not balance will be given later. It is quite evident to the student that, if the ledger is not in bal- 
 ance as indicated by the Trial Balance, it is necessary to check the transactions recorded in the 
 ledger to detect the errors. 
 
 -^ 
 
 C,^-^?-jJ25^^-s&-<^d^<L/<r'-s-«i-«9' C__-«7r 
 
 '^'7'-r>c^ 
 
 J^/ '?^-Z..^CZ^ ^^^z-<^«>j»^-c-<^ J/^^t^-^Y /, /jf?^ 
 
 
 /\J~o 
 
 
 ^AA vA/II 7'4.3\.:i-^ 
 
 Illustration No. 4, A Trial Balance of Totals. 
 
 EXPLANATION. This Trial Balance is prepared from the ledger in Illustration No. 3. 
 The name of each account is written at the left and the total debits and total credits in the two 
 money columns at the right. The name of each account, the amount, and the totals of the columns 
 are written in black ink; if the Trial Balance is footed before it is ruled, the totals are entered in 
 small pencil figures in the same manner as the totals in Illustration No. 3. By comparing Illustration 
 No. 4 with Illustration No. 3, the student will observe that it is necessary to add the accounts in the 
 ledger and write the totals in small pencil figures before preparing the Trial Balance. 
 
 r r 
 
 
 
 r 3 
 
 /•^i 
 
 ^-^i 
 
 //>AfJ^^Z> 
 
 -^^ 
 
 y-^-o 
 
 7-0 
 
 Illustration No. 5, A Trial Balance of Balances. 
 
 EXPLANATION. It is customary, when taking a Trial Balance of balances, to write the 
 balance in the explanation column on the larger side of the account. These balances .ire not shown 
 in Illustration No. 3 because they are not necessary in taking a Trial Balance of totals. 
 
RECORDING TRANSACTIONS IN THE LEDGER. 13 
 
 Exercise No. 1, Recording Transactions Direct in the Ledger. 
 
 Record on ledger paper* (paper with the same ruHng as Illustration No. 2) the 
 following transactions performed during the month of January by J. W. McCor- 
 mick, a dealer in musical instruments. It will require fourteen lines for recording 
 the transactions in the Cash account, eight lines for those in the Purchases account, 
 and twelve lines for those in the Sales account. If one sheet of ledger paper is used 
 for the three accounts, separate them by red lines as in Illustration No. 3, being 
 sure to allow the number of lines necessary for recording the transactions, as in- 
 dicated. 
 
 Jan. I. Sold for cash one piano, $450.00. 
 
 2. Bought for cash one hundred Victrola records, $110.00. 
 5. Sold for cash one Victrola, $225.00; records, $10.50. 
 
 Enter as one amount in the same manner as the transaction of July 3 recorded in 
 Illustration No. 3. 
 7. Sold for cash one piano, $350.00. 
 10. Sold for cash one player-piano, $500.00; rolls, $22.50. 
 12. Bought for cash three Victrolas, $320.00; paid freight on the same, $52.50. 
 14. Sold for cash one Victrola, $200.00; records, $42.50. 
 
 17. Gave J. O. Smith $1.50 for a damaged record which he purchased on the 
 
 14th and returned. 
 
 18. Sold for cash one Victrola, $50.00; records, $6.50. 
 
 20. Bought for cash one piano, $225.00; paid freight and drayage on the 
 
 same, $42.65. 
 23. Sent the damaged record returned to us on the 17th to the distributing 
 
 agent of the records and received 90c for the same. 
 27. Sold for cash one Victrola, $75.00; records, $10.50. 
 
 Bought for cash one piano, $300.00; paid freight on the same, $48.65. 
 
 30. Received $3.50 from the railroad company to pay for overcharge on 
 
 freight paid on the 20th. 
 
 31. Sold for cash one piano, $350.00. 
 
 When these transactions have been recorded in the three accounts, add the 
 debit side and the credit side of each account, enter the totals in small pencil figures 
 as in Illustration No. 2, and prove the equality of the debits and credits by a Trial 
 Balance of totals as in Illustration No. 4. 
 
 Exercise No. 2, Recording Transactions Direct in the Ledger. 
 
 Record on ledger paper* the following transactions performed during the week 
 beginning May 28 by Charles Smith, a butcher. Allow space for the accounts as 
 follows: Cash, ten lines; Purchases, eight lines; Sales, nine lines. 
 May 28. Cash sales for the day per cash register, $42.85. 
 
 29. Bought meat for cash, $22.50. 
 
 Cash sales for the day per cash register, $35.60. 
 
 30. Paid the express company $20.00, $18.75 of which was for a C. O. D. 
 
 shipment of lard and $1.25 for express charges on the same. 
 Cash sales for the day per cash register, $45.25. 
 
 31. Gave Mrs. R. K. Polk $1.10 cash for a steak which she returned because 
 
 it was not satisfactory. 
 June I. Bought meat for cash, $57.50. 
 
 Cash sales for the day per cash register, $49.90. 
 
 {Concluded on page 14) 
 
 *NOTE. The exercises in the text are not to be recorded in the books of account provided 
 for the practice set. Unless special blanks, marked "For Exercises in the Text," are provided, the 
 student should use loose sheets of ruled paper. Unless otherwise instructed, the student will present 
 to the instructor for approval each exercise as it is completed. 
 
14 ROOKS OF ORIGINAL ENTRY 
 
 Exercise No. 2 — (Continued from page ij.) 
 
 June 2. Received I3.50 from the Central Provision Co. for lard which we returned 
 as per agreement. 
 Bought meat for cash, $36.40. 
 Cash sales for the day per cash register, $72.19. 
 When these transactions have been recorded in the three accounts, add the 
 debit side and the credit side of each account, enter the totals in small pencil figures, 
 and prove the equality of the debits and credits by a Trial Balance of totals as in 
 Illustration No. 4. 
 
 Exercise No. 3, Recording Transactions Direct in the Ledger. 
 
 Record on ledger paper the following transactions performed during the week 
 beginning September 15 by G. S. Johnson, who conducts the Central Cafeteria. 
 Allow space for the accounts as follows: Cash, eleven lines; Purchases, nine lines; 
 Sales, ten lines. 
 
 Sept. 15. Paid cash for meat, $25.50; bread, $4.75. 
 Received for cash sales, $37.55. 
 
 16. Paid cash for vegetables, $12.80. 
 Received for cash sales, $32.65. 
 
 17. Paid cash for canned goods, $13.75; meat, $15.00; bread, $5.50. 
 Received for cash sales, $29.90. 
 
 18. Received cash, $2.50, for canned goods returned by us as per agreement. 
 Received for cash sales, $31.55. 
 
 19. Paid cash for meat, $9.75; bread, $3.40. 
 Received for cash sales, $27.90. 
 
 20. Paid cash for vegetables, $13.50; bread, $5.60; butter, $7.55. 
 Received for cash sales, $44.59. 
 
 When these transactions have been recorded in the three accounts, foot the 
 debit and credit side of each account which has more than one amount recorded 
 on it; enter the balance with small pencil figures in the explanation column on 
 the larger side, and take a Trial Balance of balances as in Illustration No. ''5. 
 
 § 2L A Book of Original Entry. As explained in § 13, transactions ma\' 
 be recorded direct in the ledger or in a separate book of account and transferred to 
 the ledger. A book of original entry is a book of account used for recording trans- 
 actions separate from the ledger. When transactions are recorded separate from 
 the ledger, the facts shown by this record must be transferred to the ledger because 
 the information required by the owner is obtained from the accounts in the ledger. 
 There are many kinds of books of original entry, each of which will be explained as 
 it is needed in connection with recording the transactions in the exercises. At 
 present the journal is the only book of original entry used for recording transactions. 
 
 § 22. The Journal is a book of original entry (bound or loose-leaf) ruled to 
 provide for the recording of business transactions. If it is the only book of original 
 entry, all the transactions are recorded in it; if other books of original entry are 
 used, it contains only those transactions which are not recorded in the other books. 
 The ruling in the journal provides space for the date of the transaction, the name 
 of the account debited and the amount, the name of the account credited and the 
 amount, and an explanation of the transaction. Illustration No. 6 shows one form 
 of ruling for the journal; others will be explained and illustrated later. 
 
 ^ I. Journalizing is indicating the names of the accounts debited and credited 
 in a transaction before recording it in a book of original entry; if written, the names 
 of the accounts debited and credited and the amounts are arranged in journal form 
 as in Illustration No. 7. 
 
RECORDING TRANSACTIONS IX THE JOURNAL. 
 
 15 
 
 Illustration No. 6/^Ruling for a Page in the Journal. 
 EXPLANATION. The date of the first transaction recorded on the page is written on the 
 blue line at the top, and the date of succeeding transactions on the blue Hne immediately below the 
 last transaction recorded. The name of the account debited is written at the left, and the amount 
 in the first money column on the same line with it; the name of the account credited is written on 
 the line below, one-half inch to the right of the name of the account debited, and the amount in 
 the second money column on the same line with it. The explanation is begun on the line below the 
 name of the account credited and may occupy one or more lines, depending on the nature of the 
 transaction. The space between the two red lines at the left is for the page of the account in the 
 ledger. The name of the account credited is written to the right of the name of the account debited 
 so as to distinguish between the two accounts affected by the transaction. 
 
 RECORDING TRANSACTIONS IN THE JOURNAL 
 
 § 23. Transactions Are Recorded in the Journal in the order in which 
 they occur. A complete record of a transaction in the journal must show the date 
 of the transaction, the name of the account debited and the amount, the name of 
 the account credited and the amount, and the explanation. This explanation is 
 for the information of the bookkeeper or any person who may have occasion to 
 examine the record. 
 
 The following transactions affecting the purchases and sales of merchandise 
 for cash, performed by the soda fountain department of the Central Drug Co. during 
 the week beginning July 2, are shown recorded in the journal in Illustration No. 7. 
 These transactions are the same as those beginning on page 9. 
 July 2. Cash sales for the day per cash register, $39.40. 
 
 3. Bought syrups and extracts, $5.00; Coca-Cola, $12.75; ice cream, $19.20. 
 Cash sales for the day per cash register, $50.30. 
 
 5. Returned one gallon of ice cream purchased on the 3d. and received $2.00, 
 
 the cost price, for the same. 
 Bought sandwiches, $12.50; flavoring, $16.40; ice cream, $20.00. 
 
 6. Cash sales for the day per cash regis,ter, $21.50. 
 
 7. Gave James Smith $1.50 for one-half gallon of ice cream which he re- 
 
 turned because it was received in bad condition. 
 Cash sales for the day per cash register, $62.50. 
 
i6 
 
 THE JOURNAL. 
 
 r / 
 
 -J^"^^ ^'''f^ 
 
 3 
 
 
 ' i:>^-^<z-<^^z^^ 
 
 
 i, (_^tf£-c:^<n-^ 
 
 7 
 
 L-iSSL-<^-<*C-',<^<X-.^k^ -^2£^»r7^.-^^l^ l!^^X^^ 
 
 -^f 
 
 ^^ 
 
 ^.-^ 
 
 /^- 
 
 vT-^ 
 
 1 
 
 ;^,y-> 
 
 -^Zl 
 
 ^ <^Wa 
 
 S o .'^ ^ 
 
 ^a J a 
 
 >,urtf' 
 
 _^-^ 
 
 lr 
 
 t ' 
 
 1 ' 
 
 t ■ 
 
 
 ^z: 
 
 >/ 
 
 ^^ 
 
 ^i? 
 
 ^> 
 
 i^*^; 
 
 / c^T",^ 
 
 C ■>^^''eP 
 
 Illustration No. 7, A Journal Page with Transactions Recorded on It. 
 
 . EXPLANATION. A comparison of this illustration with the transactions on page 15 and 
 with the explanation of Illustration No. 6 is all the explanation that is needed for this illustration. 
 
POSTING FROM THE JOURNAL. 
 
 17 
 
 § 24. Posting from the Journal is transferring the amounts from the 
 journal to the accounts in the ledger. Each amount in the debit column is posted 
 to the debit side of the account written on the same line with it. Each amount 
 in the credit column is posted to the credit side of the account written on the same 
 line with it. The page in the journal and the letter "J" are entered in the folio 
 column in the ledger for reference; the page of the account in the ledger is written 
 in the folio column in the journal to indicate the posting. These amounts are 
 posted to the ledger in the same order as they are recorded in the journal. The 
 purpose of posting is to provide a record of the transactions in account form. 
 
 The transactions recorded in Illustration No. 7, when posted to the ledger 
 accounts, will appear as in Illustration No. 8, and a Trial Balance from these ledger 
 accounts will appear as in Illustration No. 4 or No. 5. 
 
 : L_-«z..<^=^<!f: 
 
 Illustration No. 8, A Ledger with Three Accounts Resulting from Posting. 
 
 EXPLANATION. By comparing this illustration with Illustration No. 7, it will be observed 
 that each amount written in the first column in the journal is transferred to the debit side of the 
 account written on the same line with it, and each amount written in the second column in the journal 
 is transferred to the credit side of the account written on the same line with it. The posting is 
 indicated by writing the journal page "i" in the folio column (see column 4, Illustration No. i) in 
 the ledger, and by writing the ledger page "i" in the folio column of the journal (see explanation of 
 Illustration No. 6). Unless the posting is indicated by these numbers as each transaction is posted 
 the bookkeeper might post the same amount again, especially if there should be an interruption in 
 his work while he was posting. 
 
 A comparison of Illustration No. 8 with Illustration No. 3 shows that the facts are the same 
 except that the folio column is used in the former because the amounts are transferred from a book 
 of original entry, while it is not used in the latter because the transactions were recorded direct in 
 the ledger, hence no references were needed 
 
1 8 RECORDING TRANSACTIONS IN THE JOURNAL. 
 
 Exercise No. 4, Recording Transactions in the Journal and Posting. 
 
 Record on journal paper* (paper with the same ruUng as Illustration No. 6) 
 the following transactions performed during the month of March by Robert Smith, 
 a dealer in used automobiles: 
 
 March i. Sold A. L. Lott a used Chandler for $840.00 cash. 
 
 3. Bought a used Ford from W. H. Roland for $250.00 cash. 
 8. Sold W. W. Jones a used 1920 Franklin for $925.00 cash. 
 15. Bought a used Packard from Robert MacFarland for $980.00 cash. 
 19. Sold Davis Bros, the used Packard purchased on the 15th, for $1,200.00 
 
 cash. 
 25. Bought a used Hudson from David Browning at Danville for $950.00 
 
 cash; paid Charlie Smith $25.00 for delivering this car. 
 31. Sold B. M. Morris the used Hudson purchased on the 25th, for 
 $1,250.00 cash. 
 
 When the above transactions have been recorded in the journal as instructed, 
 open accounts on a sheet of ledger paper with Cash (8), Purchases (7), and Sales 
 (8), allowing for each account the number of lines indicated by the number given 
 in parenthesis after the name of the account; post the transactions, and prove the 
 posting by a Trial Balance of totals. Use loose paper unless otherwise instructed. 
 
 Exercise No. 5, Recording Transactions in the Journal and Posting. 
 
 Record on journal paper* the following cash transactions performed by the 
 H. F. Ritter Electric Co. during the month of August: 
 
 Aug. I. Sold M. N. Stewart a No. 9 electric washer, $135.50. 
 2. Sold A. L. Graham three Solvay electric fans, $99.75. 
 5. Bought three electric lamps from the General Electric Co., $85.70. 
 9. Received $275.00 from the Dowell Construction Co. in. payment for 
 
 one No. 10 electric washer. 
 12. Bought two electric washers from the General Electric Co., $325.00. 
 16. Sold Mrs. J. M. Taylor one electric iron, $13.50. 
 18. Sold Mrs. A. L. Day one electric lamp, $42.50. 
 21. Gave H. L. Jones $5.50 for an electric iron which he purchased for cash 
 
 and returned per agreement. 
 25. Sold Dr. C. C. Doyle one No. 5 electric pad, $22.50; one No. 6 Violet 
 
 Ray machine, $35.00. 
 28. Received $12.50 from the General Electric Co. for a lamp w-hich we 
 purchased from them on the 5th, but returned because it was not the 
 kind ordered. 
 
 When the above transactions have been recorded in the journal as instructed, 
 open accounts on a sheet of ledger paper with Cash (11), Purchases (6), and Sales 
 (10), allowing for each account the number of lines indicated; post the transac- 
 tions, and prove the posting by a Trial Balance of totals. 
 
 Exercise No. 6, Recording Transactions in the Journal and Posting. 
 
 Record on journal paper* the following transactions performed during the 
 month of March by Martin R. Daley, a retail furniture dealer: 
 March i. Sold for cash one bedroom suite, $175.00; one dining room suite, 
 $196.50. 
 
 (Concluded on page ig.) 
 
 *See note at the bottom of page 13. 
 
QUESTIONS ON RECORDING TRANSACTIONS. 19 
 
 (Exercise No. 6 — Continued from page 18.) 
 
 5. Paid cash for furniture purchased, $209.60. 
 10. Paid $18.75 cash, freight on furniture purchased. 
 12. Received cash for six rugs sold, $205.75. 
 
 Paid cash for furniture purchased, $172.60. 
 15. Gave a customer cash, $5.50, for a chair returned as per agreement. 
 18. Paid cash for furniture purchased, $82.50. 
 21. Received $14.75 cash for three small rugs returned by us to the seller 
 
 as per agreement. 
 25. Sold for cash one refrigerator, $55.00; one gas range, $47.50; one 
 
 kitchen cabinet, $65.00. 
 30. Paid the American Railway Express Co. cash, $2.50, for express 
 
 charges on furniture purchased. 
 
 When the above transactions have been recorded in the journal as instructed, 
 open accounts on a sheet of ledger paper with Cash (10), Purchases (9), and Sales 
 (7), allowing for each account the number of lines indicated; post the transactions 
 and prove the posting by a Trial Balance of balances. 
 
 QUESTIONS 
 
 1. What is the purpose of bookkeeping and how is it accomplished? 
 
 2. In what order are the transactions recorded? 
 
 3. State the two methods of recording transactions. 
 
 4. How would you record a cash sale in the journal? Direct in the ledger? 
 
 5. Which is preferable, a bound book or a loose-leaf book? 
 
 6. If a merchant wishes to know the total sales of merchandise for any given 
 
 number of months, from which book of account would he obtain the 
 information? from what account? 
 
 7. If a drug store has five departments, would it be necessary to maintain a Cash 
 
 account for each department? Give reasons for your answer. 
 
 8. Would it be necessary to keep a separate record of the sales made by each of 
 
 the five departments mentioned in Question No. 7? 
 
 9. If you w^ere keeping books for a local merchant and, when you proved cash at 
 
 the close of January 10, you found that you had $2.00 more cash than the 
 amount shown bv the Cash account, what entry would you make for the 
 $2.00? 
 
 10. Why will the Sales account always show a credit balance? 
 
 11. Why will the Purchases account always show a debit balance? 
 
 12. Why will the Cash account always show a debit balance? 
 
 13. Why does the Trial Balance prove that the total debits equal the total credits 
 
 in the ledger? 
 
 14. If $10.00 cash is received for a sale of merchandise and the amount is erron- 
 
 neously entered on the credit side of the Purchases account instead of the 
 Sales account, how would it alTect the Trial Balance? 
 
 15. How would the error mentioned in Question 14 affect the balance of the Pur- 
 
 chases account? the Sales account? 
 
20 QUESTIONS ON RECORDING TRANSACTIONS. 
 
 1 6. If the debits and credits on the Trial Balance are not equal, how does the book- 
 
 keeper, who has recorded the transactions separate from the ledger, ascertain 
 the error? 
 
 17. Why is it advisable to give an explanation of each entry in the journal? 
 
 18. If $10.10 cash is received for merchandise sold and recorded in the journal as 
 
 Cash, Dr., $10.00, and Sales, Cr., $10.10, what effect will this have on the 
 Trial Balance if the entry is posted as recorded? 
 
 19. What does a telephone company sell? 
 
 20. Would these sales be recorded in a Sales account? 
 
 21. W^ould the bookkeeper for a city government ha\e a Sales account in his 
 
 ledger? 
 
 22. Would the farmer who keeps a record of the transactions he performs ha\e a 
 
 Sales account in his ledger? 
 
 23. If a merchant discontinues business and sells all the merchandise which he 
 
 owns, what will the balance of the Sales account show? 
 
 24. Under the conditions mentioned in Question No. 23, what would the balance 
 
 of the Purchases account show? 
 
 25. If a grocer buys an automobile truck to be used in delivering merchandise, 
 
 would the value of this truck be debited to the Purchases account? Give 
 reasons for vour answer. 
 
Chapter III 
 
 RECORDING TRANSACTIONS— Continued 
 
 § 25. Purchases and Sales of Merchandise on Account. It is not 
 
 always possible for the owner of a business to pay cash at the time merchandise 
 is purchased, or to demand cash at the time* merchandise is sold. When the owner 
 of the business does not pay cash for merchandise at the time purchased, the 
 seller extends credit to the business; that is, he accepts the owner's promise to 
 pay at a future date as the value received in the transaction. The owner of the 
 business to which credit is extended regards his promise to pay at a future date 
 for merchandise purchased as a value parted with in a transaction in which mer- 
 chandise is purchased on account. When the liability is paid, the cancellation 
 of the obligation is the value received. 
 
 When the owner of the business does not receive cash for merchandise at the 
 time it is sold, he extends credit to the customer; that is, he accepts the customer's 
 promise to pay at a future date as the value received in the transaction. When 
 the customer pays the amount he owes the business, the cancellation of his debt is 
 regarded as the value parted with. 
 
 The one who extends credit to a business is referred to as a creditor, and the 
 one to whom the business extends credit, as a debtor; the term "customer" applies 
 to one to whom the business sells, either for cash or on account. 
 
 If no specific time of payment is mentioned, it is understood that collection is 
 to be made on the first of the following month; if a specific time is mentioned, then 
 payment is due on that date. 
 
 Mr. Jones, who operates the drug business at 405 Main Street, wishes to purchase a quantity 
 of drugs from a wholesale house, but does not have sufficient cash with which to pay for them. By 
 agreement, he is allowed thirty days in which to pay for the drugs. The wholesale drug house which 
 extends this credit becomes one of his creditors, and he one of its debtors. 
 
 James Smith, an employee of a local bank, receives his salary monthly. He is in need of 
 drugs, but has not sufficient money to pay for them. Mr. Jones agrees to sell him the drugs and 
 allow him. to pay for them at the time he receives his salary. Mr. Smith becomes one of the debtors 
 of the business, and Mr. Jones one of Mr. Smith's creditors. 
 
 ACCOUNTS WITH PERSONS 
 
 § 26. Accounts with Persons are those required when credit is extended 
 to the business through the purchase of merchandise, or when the business extends 
 credit to its customers through the sale of merchandise. Accounts with persons 
 are divided into two classes: one (accounts with customers) shows the result of 
 transactions with the persons to whom the business sells merchandise or other 
 assets on account, usually referred to as "accounts receivable;" and the other 
 (accounts with creditors) shows the result of transactions with those from whom 
 merchandise or other assets are purchased on account, usually referred to as "ac- 
 counts payable." 
 
 ACCOUNTS RECEIVABLE 
 
 § 27. The Purpose of an Account with a Customer is to show a record 
 of the transactions in which the business sells merchandise or some other asset 
 to him on account. When a customer pays cash for merchandise, it is not nec- 
 essary to record the transactions in an account with him; but when he buys and 
 
 21 
 
22 ACCOUNTS RECEIVABLE AND PAYABLE. 
 
 does not pay cash, it is necessary to record the date and amount of the sale in an 
 account with him so that the owner may know the amount the customer owes 
 him when settlement is desired. A separate account is kept with each customer 
 because the owner of the business should know the amount due from each customer 
 to whom he sells on account as well as the total amount due from all customers. 
 
 Debit the Account of • Credit the Account of 
 
 Each Customer: Each Customer: 
 
 ^ I. For the selling price of merchan- ^ 2. For the cash or other assets re- 
 
 dise or other assets sold to him ceived from him to apply on ae- 
 
 on account, and for transpor- count, and for the amount of 
 
 tation if the terms of sale do any allowance or deduction 
 
 not include delivery. granted to him. Partial Pay- 
 
 ments are indicated as ex- 
 plained in T[ 5. 
 
 •[ 3. The Balance of an Account Receivable shows the amount the customer 
 owes the business. It is one of the assets of the business. The debit side will be 
 the larger unless the customer should pay for more than he has purchased. When 
 the two sides are equal, his account is said to be in balance; this indicates that he 
 has paid the business for all the assets purchased on account. 
 
 ^ 4. Riding an Account Receivable. When the account with a customer is 
 in balance, it should be ruled with a red line as in the account with Walter Rogers 
 in Illustration No. 9. If there are a number of debits or credits, the two sides should 
 be footed to prove that they are equal before ruling. When possible, the red line 
 should be ruled on the same bllie line on each side of the account so that the cus- 
 tomer's obligation to the business and his settlement of it will be between parallel 
 lines. The use of red ink for ruling is not arbitrary but is it customary for book- 
 keepers to use it, hence its use in the illustrations. 
 
 II 5. Partial Payments. A debtor has the right, by law, to indicate on what 
 item his payment shall be applied. Thus if he owes several amounts and wishes 
 the payment to be applied to any one particular amount, and indicates this, the 
 credit must be applied on that amount. In cases of this kind the bookkeeper 
 should indicate the amount on which the credit is applied by placing a letter at 
 the left of the amount of the item on the debit side, and placing the same letter to 
 the left of each pa^anent on the credit side. It is best to begin with "a" and continue 
 with as many letters as may be required for payments on different charges. The 
 letters are not necessary when an item is paid in full by one payment, and the ac- 
 count is ruled. If the payments are indicated by the letter as explained the book- 
 keeper can ascertain the amount due for any one sale without referring to a book 
 of original entry. 
 
 ACCOUNTS PAYABLE 
 
 § 28. The Purpose of an Account with a Creditor is to show a record of 
 the transactions in which the business buys merchandise or some other asset from 
 him on account. When merchandise is purchased for cash, no account with the one 
 from whom it is purchased is necessary because the transaction is completed; but 
 when the business buys on account, it is necessary to keep a record of such trans- 
 actions in order that the owner may know the amount he owes at the time settle- 
 ment is made. A separate account is kept with each creditor because the owner of 
 
RECORDING TRANSACTIONS IN THE LEDGER. 
 
 23 
 
 the business should know the amount lie owes each creditor as well as the total 
 amount due all creditors. 
 
 Credit the Account of 
 Each Creditor: 
 
 ^[ 2. For the cost of merchandise or 
 other assets purchased from 
 him on account, and for trans- 
 portation if the terms of pur- 
 chase do not include delivery. 
 
 Debit the Account of 
 Each Creditor: 
 ■^ I. For cash or other assets of the 
 business given him to apply 
 on account, and for any al- 
 lowance or deduction granted 
 to the business by him. Partial 
 payments are indicated as 
 explained in § 27, ^ 5. 
 
 ^ 3. The Balance of an Account Payable shows the amount the business 
 owes the creditor. The credit side will be the larger unless the business should pay 
 a creditor more than it owes him. The balance due a creditor is one of the verbal 
 obligations of the business, hence a liability. 
 
 ^ 4. Ruling an Account Payable. The account wnth a creditor is ruled in 
 the same manner as an account with a customer, as described in § 27, ^ 4. 
 
 ^ 5. Partial Payments should be indicated by letter as explained in § 27, 
 If 5. This enables the bookkeeper to ascertain the balance due on any one purchase 
 without referring to a book of original entry. 
 
 RECORDING TRANSACTIONS DIRECT IN THE LEDGER 
 
 § 29. Transactions with customers 0*1 account, and with creditors may be 
 recorded direct in the ledger in the same manner as cash transactions. When 
 credit is extended to a customer of the business, his promise to pay the amount of 
 the sale is recorded on the debit side of his account as the value received, and the 
 value of the merchandise sold, on the credit side of the Sales account in the same 
 manner as a cash sale. When credit is extended to the business, the cost of the 
 merchandise purchased is recorded on the debit side of the Purchases account in 
 the same manner as a cash purchase, and the same amount is recorded on the credit 
 side of the creditor's account because the promise of the owner of the business to 
 pay for the merchandise bought is regarded as the value parted with. The account 
 with a customer remains on the ledger as an asset, and that with a creditor as a 
 liability, until settlement is made, either with cash or some other asset. 
 
 The following transactions affecting the purchases and sales of merchandise 
 for cash and on account, performed by J. H. Henderson, a retail furniture dealer, 
 during the month of November, are shown recorded direct in accounts with Cash, 
 Purchases, Sales, customers, and creditors in Illustration No. 9 and a Trial Balance 
 of totals made from the accounts, in Illustration No. 10. 
 
 Nov. 
 
 I. 
 
 6 
 12 
 
 14 
 20 
 
 25- 
 26. 
 29. 
 
 Purchased furniture from the Consolidated Furniture Co., Grand 
 
 Rapids, on sixty days' time, $215.75. 
 Sold C. H. Powers, Arlington, on account, one bedroom suite, $125.00. 
 Sold Walter Rogers, City, on account, one hatrack, $22.50. 
 Received cash for furniture sold today, $625.50. 
 Paid the Consolidated Furniture Co. $100.00 on account. 
 Received $22.50 from Walter Rogers in payment for the hatrack sold 
 
 him on the 6th. 
 Received $25.00 from C. H. Powers to apply on account. 
 Sold C. H. Powers on account three leather rockers at $25.50 each. 
 C. H. Powers returned one of the rockers and was allowed credit for 
 
 $25-50. 
 
24 RECORDING TRANSACTIONS IN THE LEDGER. 
 
 
 ^ 
 
 ■?j > Jya jl ^a-^z/- 5u.^j 
 
 -4t- 
 
 JM^-'^-^ 
 
 L.^^t:'-^;'2,.J.'-G'-7:>C'C^!!^^ O*^ 
 
 
 Illustration No. 9, A Ledger with Six Accounts. 
 
 EXPLANATION. This illustration is in the same form as Illustration No. 3, with the 
 exception of three additional accounts, two with customers and one with a creditor. A comparison 
 of the transactions with the record will show that the value received in each is recorded on the debit 
 side, and the value parted with on the credit side. The "60 days" in the explanation column of 
 the account with the Consolidated Furniture Co. refers to the time when payment is to be made. 
 Since the purchase is on November i, payment will be expected on December 31. When no specific 
 time of settlement is mentioned, the purchase or sale is sometimes referred to as "on account," 
 and settlement is usually required on the first of the month following the purchase or sale. 
 
RECORDING TRANSACTIONS IN THE LEDGER. 
 
 25 
 
 *0 
 
 
 .Ja /<?■'> 
 
 
 Illustration No. 10, A Trial Balance of Totals. 
 
 EXPLANATION. This Trial Balance which is prepared from the ledger in Illustration No. 
 9 is the same form as Illustration No. 4 with the addition of two personal accounts. By com- 
 paring this illustration with Illustration No. 9, it will be observed that the account with Walter 
 Rogers does not appear on the Trial Balance. The reason for this is because the amounts recorded 
 on the debit and credit sides are equal. This emphasizes the fact that only the open accounts in 
 the ledger appear on the Trial Balance. 
 
 Exercise No. 7, Recording Transactions Direct in the Ledger. 
 
 Record on ledger paper* the following transactions performed during the month 
 of October by J. J. Hammond, a retail shoe dealer. Allow space for the accounts as 
 follows: Cash, ten lines; Purchases, eleven lines; Sales, twelve lines; J. C. Mason, 
 five lines; Walter Love, six lines; J. C. Miller, five lines; Robert Whitacre, five 
 lines; W. O. Crosswhite, seven lines; Davis Bros., five lines; Smith Shoe Company, 
 six lines. Give each customer and creditor a local address. 
 Oct. 2. Bought shoes from W. O. Crosswhite on account, $187.65. 
 
 3. Sold J. C. Mason on account one pair of shoes, $11.50. 
 
 5. Bought shoes from Davis Bros, on account $281.36. 
 
 7. Received for cash sales of shoes, $127.50. 
 
 9. Paid W. O. Crosswhite $100.00 on account. 
 
 10. Sold Walter Love on account six pairs of shoes, $56.50. 
 
 11. Bought shoes from the Smith Shoe Company on sixty days' time, $211.85. 
 
 12. Received for cash sales of shoes, $97.50. 
 
 13. Paid W. O. Cro.sswhite $87.65 in full of account. 
 
 14. Sold J. C. Miller on account two pairs of shoes, $25.25. 
 
 16. Received for cash sales of shoes, $106.95. 
 
 17. Allowed Walter Love credit for one pair of shoes returned, $17.50. 
 
 18. Bought shoes from W. O. Crosswhite on account, $321.85. 
 
 19. Paid $82.50 for shoes purchased and delivered today. 
 
 20. Paid Mrs. W. C. Davis $6.00 for a pair of shoes returned for which she 
 
 had paid cash when sold to her. 
 23. Received $39.00 from Walter Love in full of account. 
 
 25. Paid the Smith Shoe Company $25.00 on account. 
 
 26. Received for cash sales of shoes, $88.90. 
 
 27. Paid the Lawton Transfer Co. $65.50 for freight and drayage on shoes 
 
 purchased. 
 
 28. Sold Robert W'hitacre one pair of shoes on account, $15.00. 
 
 30, Bought shoes from the Smith Shoe Company on sixty days' time, $175.75. 
 
 31. Davis Bros, allowed us credit for $62.50 for shoes returned to them. 
 When these transactions have been recorded in the accounts, prove the equality 
 
 of the debits and credits by a Trial Balance of totals. 
 *See note at the bottom of page 13. 
 
26 RECORDING TRANSACTIONS IN THE JOURNAL. 
 
 Exercise No. 8, Recording Transactions Direct in the Ledger. 
 
 Record on ledger paper the following transactions performed by F. B. Bellis, 
 a retail candy merchant, during the week beginning July 5. Allow space for the 
 accounts as follows: Cash, eleven lines; Purchases, ten lines; Sales, twelve lines; 
 Candy Kitchen, seven lines; Robert Farland, five lines; Norway Candy Co., six 
 lines; R. H. Hunter, five lines. Give each person a local street address. 
 July 5. Purchased from the Candy Kitchen, City, on account, $65.84. 
 Cash sales for the day, $62.48. 
 
 6. Paid cash for nuts purchased, $9.50. 
 Cash sales for the day, $55.80. 
 
 7. Sold Robert Farland, City, on account, six boxes of candy at *$2.75. 
 Purchased from the Norway Candy Co., City, on account, $32.75. 
 Cash sales for the day, $41.90. 
 
 8. Paid the Candy Kitchen $50.00 on account. 
 
 Paid a customer $1.00 for a box of candy which he had purchased for 
 
 cash and returned per agreement. 
 Cash sales for the day, $41.80. 
 
 9. Received $10.00 from Robert Farland on account. 
 
 Sold R. H. Hunter, City, on account, twelve boxes of candy at* $2.25. 
 Purchased from the Candy Kitchen, City, on account, $61.50. 
 Cash sales for the day, $52.80. 
 
 10. Paid cash for chew^ing gum, $5.00. 
 
 Paid the Candy Kitchen $25.00 on account. 
 
 Purchased from the Norway Candy Co., City, on account, $26.95. 
 . Returned to the Candy Kitchen six boxes of candy purchased on the 9th 
 and received credit for the same at $1.75 per box, the cost price. 
 Cash sales for the day, $101.19. 
 When these transactions have been recorded in the accounts, prove the equality 
 of the debits and credits by a Trial Balance of balances. 
 
 RECORDING TRANSACTIONS IN THE JOURNAL 
 
 § 30. Transactions with customers on account and with creditors may be 
 recorded in the journal in the same manner as cash transactions. When credit is 
 extended to a customer, his name is written in the journal as the account debited, 
 and the Sales account credited; when credit is extended to the business, the Pur- 
 chases account is debited, and the name of the creditor is written as the account 
 credited. Unless a copy of the items sold to a customer is retained, a description 
 of the articles should be given in the explanation of the transaction in the journal 
 because this information may be needed for reference. Usually a list of the mer- 
 chandise purchased is supplied by the creditor; hence it is not necessary to itemize 
 the articles purchased in the explanation of the transaction. 
 
 The following transactions affecting the purchases and sales of merchandise 
 for cash and on account, performed by J. H. Henderson, a retail furniture dealer, 
 during the month of November, are shown recorded in the journal in Illustration 
 No. II. These transactions are the same as those on page 21. 
 Nov. I. Purchased furniture from the Consolidated Furniture Co., Grand 
 Rapids, on sixty days' time, $215.75. 
 
 2. Sold C. H. Powers, Arlington, on account, one bedroom suite, $125.00. 
 
 6. Sold Walter Rogers, City, on account, one hatrack, $22.50. 
 
 {Concluded on page 28.) 
 *NOTE. The word "at," appearing before the price, indicates that this price is per unit; 
 if this word does not appear, the price given appHes to the quantity mentioned. "Six boxes candy 
 at $2.75" means that the amount of the sale is 5^16.50. "Six boxes candy, $2.75," means that the 
 amount of the sale is $2.75. 
 
RECORDING TRANSACTIONS IN THE JOURNAL. 
 
 27 
 
 
 ^^^ 
 
 
 
 
 
 *<<^ C-*;^ 
 
 r 
 
 ^7^- 
 
 / 
 
 
 >^ 
 
 cin^ ^ T-^r-^-^ 
 
 
 2- / .^ -7^ 
 
 / >. 
 
 / >^' 
 
 .;^^ 
 
 >• ?' 
 
 / 
 
 >^^ 
 / a 
 
 7^^ 
 
 
 v^.^-^, 
 
 
 
 
 >J>-^ 
 
 -J-o 
 
 
 
 Illustration No. 11, A Journal Page with Transactions Recorded on it. 
 
 EXPLANATION. The numbers in the foHo column indicate the'page of the ledger to which 
 each entry is posted. These numbers are not entered when the transactions__are recorded in the 
 journal, but at the time the amounts are posted to the ledger accounts. 
 
28 
 
 RECORDING TRANSACTIONS IN THE JOURNAL. 
 
 12. 
 
 14. 
 20. 
 
 25- 
 
 26. 
 29. 
 
 {Continued from page 26.) 
 Received cash for furniture sold today, $625.50. 
 Paid the Consolidated Furniture Co. $100.00 on account. 
 Received $22.50 from Walter Rogers in payment for the hatrack sold 
 
 him on the 6th. 
 Received $25.00 from C. H. Powers to apply on account. 
 Sold C. H. Powers on account three leather rockers at $25.50 each. 
 C. H. Powers returned one rocker and was allowed credit for $25.50. 
 
 Pf'i^-!^ y (^ a ^=6€t.yt<f 0-/ S-Z-J-'/ 
 
 
 
 
 
 "■" ■ -- 
 
 
 
 
 
 '\ 
 
 
 
 
 ^^ 
 
 4^cz^^L.^^ 
 
 
 
 
 
 
 
 
 
 
 
 .1. 
 
 
 ^^n/-. 
 
 / 
 
 
 0-' 
 
 >/j- 
 
 1 
 7-^ 
 
 
 
 
 
 1 
 
 
 
 
 If 
 
 
 ' 
 
 
 1 
 
 
 
 
 
 4^> 
 
 
 
 
 
 
 
 
 -— 
 
 ^ 
 
 V^ . 
 
 
 - 1 
 
 
 
 
 
 
 
 
 1 1 
 
 
 ^f 
 
 
 Q' 
 
 y,J- 
 
 
 >' 
 
 
 
 />v>- 
 
 
 A 
 
 
 C 
 
 i 
 
 ^ ?• J- <^ 
 
 
 
 
 
 ! • 
 
 
 ^ 
 
 />■ 
 
 ^ / ^ > .>- JT- ^ 
 
 
 
 
 
 
 
 ^^ 
 
 
 ?' 
 
 i. r/ 
 
 J- 
 
 Illustration No. 12, A Ledger with Six Accounts Resulting from Posting. 
 
 EXPLANATION. The transactions in' this ledger were not recorded direct in it, but were 
 recorded in the journal shown in Illustration No. 11 and posted to it, as indicated by the figures in 
 the folio column of each account. Compare with Illustration No. 9 and note the information in 
 column 4. A Trial Balance of totals taken from this ledger would be the same as Illustration No. 10. 
 
RECORDING TRANSACTIONS IN THE JOURNAL. 
 
 29 
 
 Exercise No. 9, Recording Transactions in the Journal and Posting. 
 
 Record on journal paper the following transactions performed by the Central 
 Paper Co. during the month of February. Give ea:h customer and creditor a 
 local address. 
 
 Feb. I. Purchased paper from the Whiting Paper Co. on account. $350.00. 
 
 2. Sold paper to the Federal Press on account, $126.50. 
 
 3. Received $352.10 for paper sold today. 
 
 5. Purchased envelopes from the U. S. Envelope Co. on account, $207.60. 
 
 6. Received S126.50 from the Federal Press in full of account. 
 
 7. Sold paper to C. J. Krehbiel & Co. on account, $200.25. 
 Q. Paid the Whiting Paper Co. $150.00 on account. 
 
 12. Purchased paper from the Whitaker Paper Co. on account, $409.37. 
 
 14. Paid $106.16 for freight and drayage bills to date. 
 
 16. Sold paper to C. VJ. Ogden on account, $98.66. 
 
 19. Received credit from the U. S. Envelope Co. for $36.50, \'alue of en- 
 
 velopes returned b\' us per agreement. 
 
 20. Received for cash sales of paper today, $191.96. 
 
 21. Received S200.25 from C. J. Krehbiel & Co. in full of account. 
 
 23. Sold paper and envelopes to the Federal Press on account, $161.52. 
 
 24. Allowed C. W. Ogden credit for paper returned, $12.50. 
 
 26. Paid the Herrlinger Paper Co. S76.60 for paper delivered today. 
 
 27. Sold paper and envelopes to C. J. Krehbiel & Co. on account, $112.60. 
 
 28. Paid the U. S. Envelope Co. balance due on account. $171.10. 
 Received $40.00 from C. W. Ogden on account. 
 
 When the above transactions have been recorded in the journal as instructed, 
 open accounts on a sheet of ledger paper with Cash (9). Purchases (9), Sales (11), 
 Federal Press (6), C. J. Krehbiel & Co. (6), C. W. Ogden (6), Whiting Paper Co. 
 (5), U. S. Envelope Co. (6), Whitaker Paper Co. (5), allowing for each account the 
 number of lines indicated ; post the transactions, and prove the posting by a Trial 
 Balance of totals. 
 
 Exercise No. 10, Recording Transactions in the Journal and Posting. 
 
 Record on journal paper the following transactions performed during the 
 month of May by J. O. Cutshaw, an automobile tire dealer: 
 
 iMc 
 
 I. 
 
 3- 
 5- 
 
 7- 
 10. 
 12. 
 
 14 
 16. 
 20. 
 
 Purchased from the Goodyear Tire Co., City, on account, $355.00. 
 Received cash for four Goodyear 33 x 4 cord tires, $215.60. 
 Purchased from the Goodrich Tire Co., Clt}^ on account, $525.50. 
 Sold the Central Grocery Co., City, on account, two Ford tires, $32.65. 
 Received cash for one 35 x 5 Silvertown cord tire, $67.50. 
 Paid the Goodyear Tire Co. $200.00 on account. 
 Sold I. W. Walker, City, on account, four Miller cord tires at $52.45 
 
 each. 
 Gave I. W. Walker credit for one of the tires sold him on the 12th and 
 
 returned by him today per agreement. 
 Received for cash sales of tires, $278.50. 
 
 Received S32.65 from the Central Grocery Co. in full of account. 
 Sold W. L. Watson, City, on account, two 33 x 4 Fisk cord tires at 
 
 $48.00; these tires are not carried in stock and were purchased from 
 
 the Fisk Tire Co., City, on account, at $36.00. 
 Record the sale and purchase as separate transactions. 
 
 (Concluded on page 30.) 
 
30 QUESTIONS ON RECORDING TRANSACTIONS. 
 
 {Exercise No. lo — Continued from page 2g.) 
 
 25. Sold David Jordan. City, on account, two 32 x 4 Silvertown cord tires 
 
 at $41.60 each. 
 
 26. Paid the Goodrich Tire Co. $200.00 on account. 
 
 27. Received $50.00 from W. L. Watson to apply on account. 
 
 28. Paid the Fisk Tire Co. $72.00 in full of account. 
 
 Returned to the Goodrich Tire Co. two 32 x 4 fabric tires and received 
 credit for $34.60. 
 31. Received for cash sales of tires, $315.50. 
 
 Purchased from the Goodyear Tire Co., City, on account, $452.40. 
 
 When the above transactions have been recorded in the journal as instructed, 
 open accounts on a sheet of ledger paper with Cash (10), Purchases (8), Sales (12), 
 Goodyear Tire Co. (6), Goodrich Tire Co. (6), Fisk Tire Co. (5), Central Grocery 
 Co. (5), I. W. Walker (5), W. L. Watson (5), David Jordan (5), allowing for each 
 account the number of lines indicated ; post the transactions, and prove the posting 
 by a Trial Balance of balances. 
 
 QUESTIONS 
 
 1. If a merchant buys merchandise on March 2, 1922, with the privilege of 
 
 paying for the same within sixty days, on what date will he be required to 
 pay the amount? 
 
 2. Why is it not necessary to keep an account with the person to whom the 
 
 business sells for cash? 
 
 3. Is an amount due from a customer one of the assets of the business? 
 
 4. Would you consider the asset of the business described as "Accounts Receiv- 
 
 able" as valuable as the asset described as "Cash?" Give reasons for your 
 answer. 
 
 5. Distinguish between the meaning of the terms "creditor" and "customer.',' 
 
 6. Why is it necessary for the bookkeeper to indicate payments made to apply 
 on merchandise purchased or sold on a designated date? 
 
 Would it be possible for an account with a customer to show a credit balance? 
 
 Explain. 
 Would it be possible for an account with a creditor to show a debit balance? 
 
 Explain. 
 Why is it advisable to rule an account receivable or an account payable when 
 
 the two sides are equal? 
 
 10. Open an account with Robert Jones, a customer of the business, and record 
 
 the following transactions in it: 
 
 Jan. 10. Sold merchandise on account, $425.00. 
 
 15. Received $100.00 to apply on account. 
 
 20. Sold merchandise on account, $72.50. 
 
 31. Received $200.00 to apply on sale of the loth. 
 Feb. 10. Received $72.50 in full for sale of Jan. 20. 
 
 11. Why is it not necessary to show on the Trial Balance an account which is in 
 
 balance? 
 
 12. What effect would it have on the Trial Balance if an account which shows a 
 
 debit balance of $10.00 was omitted because it was ruled by mistake? 
 
 13. What accounts are affected when the business receives cash from a customer 
 
 in part payment of his account? 
 
 14. What accounts are affected when cash is i)aid to a creditor to apply on an 
 
 account owed him? 
 
QUESTIONS ON RECORDING TRANSACTIONS. 31 
 
 15. If a sale made to a customer on account should not be recorded, would this 
 
 affect the equality of the debits and credits on the Trial Balance? 
 
 16. Can you suggest a plan which would avoid the possibility of failing to record 
 
 transactions in which merchandise is sold on account? 
 
 17. If a sale is made to a customer for cash and the transaction is not recorded, 
 
 how would the bookkeeper detect the error? 
 
 18. If cash is received from a customer in payment of his account, and the trans- 
 
 action is not recorded how would the bookkeeper detect the error? 
 
 19. If merchandise is purchased from a creditor on account and the transaction 
 
 is not recorded, how would the bookkeeper detect the error? 
 
 20. If cash is paid for merchandise purchased and the transaction is not recorded, 
 
 how would the bookkeeper detect the error? 
 
 21 . If a sale is made to one customer and by mistake debited to another customer, 
 
 will this affect the equality of the debits and credits on the Trial Balance? 
 
 22. How would the bookkeeper detect the error mentioned in the preceding 
 
 question? 
 2T). If a customer's account, which is not in balance, is ruled by mistake, how 
 would the bookkeeper discover the error? 
 
 24. Why is it advisable to indicate the address of a customer on his account in 
 
 the ledger? 
 
 25. If the two sides of the Trial Balance are not equal, how would the bookkeeper 
 
 ascertain the error? 
 
Chapter IV 
 
 RECORDING TRANSACTIONS- Continued 
 
 § 31. Expense. Each business has a building or place in which to carry on 
 its operations; this building or place of business is provided with heat and light; 
 modern business requires the use of the telephone, telegraph, and other means of 
 rapid communication ; clerks are employed to assist with the purchasing and selling 
 of the merchandise or service which the business sells; bookkeepers and stenog- 
 raphers are required in connection with the ofhce operations; the owner recei\'es a 
 compensation for his services in connection with the operations of the business; 
 these and many other services must be purchased and paid for by the business. 
 Such services are usually referred to as the "operating cost" of the business, also 
 the "expenses" of the business. The term "expenses" also include any material 
 purchased by the business which will be consumed; this class of material includes 
 books of account for use in the ofifice, stationery, wrapping paper, twine, nails 
 for packing cases, etc. The cost of material regarded as expense is usually shown 
 in an account separate from the amounts paid for services; this will be discussed 
 later in more detail. 
 
 A record of the payments for operating cost (expenses) is made in one or more 
 accounts, depending on the extent of the business operations. When cash is given 
 in payment for services or property which is regarded as an expense item, the ac- 
 count which is to show a record of this operating cost is debited and the Cash 
 account credited ; should an asset other than cash be given, the account which shows 
 the value of the asset parted with is credited instead of the Cash account. 
 
 EXPENSE ACCOUNT 
 
 § 32. The Purpose of this Account is to show the cost of operating the 
 business, that is, its expenses. If all operating cost is debited to one account, the 
 total cost of the business operations will be shown in this account. The debits and 
 credits given below refer to only one Expense account; other expense accounts 
 will be discussed later. 
 
 Debit the Expense Account: Credit the Expense Account: 
 
 T[ I. For amounts paid for operating ^ 2. For any adjustments which re- 
 
 cost as outlined in § 31. duce the operating cost as 
 
 shown by the debit side. 
 
 \ 3. The Balance of this Account shows the operating cost of the business 
 for the period co\^ered by the debits and credits to the account. The total 
 expense is a deduction from the profit made by the operations of the business. 
 
 § 33. Capital. It is usually necessary for the owner of the business to have 
 cash or other property at the beginning of the business, because, if the business is 
 to supply a demand, it must have on hand those things which its customers wall 
 wish to purchase. The cash or other property which the owner assigns to the oper- 
 ations of the business at its beginning is regarded as an investment in the business 
 and referred to as the "capital of the business." 
 
 If, during the course of the business, additional capital is needed, the owner 
 may find it necessary to add to his capital. This he can do by one of three ways: 
 
 32 
 
CAPITAL ACCOUNT. 33 
 
 (a) by investing additional assets; (b) by purchasing merchandise on account; 
 (c) by borrowing from the bank. If the operations of the business are successful — 
 that is, if it is receiving more for the merchandise or service which it sells than the 
 cost of the same plus the operating cost of the business — the owner's interest 
 (proprietorship) will be increased by this profit; if the result of operating the 
 business is a loss, the owner's interest (proprietorship) will be decreased by this 
 loss. Usually once each year, the amount of the profit or loss for the year is ascer- 
 tained and the owner's Capital account credited or debited with the same; this 
 permits his account to show his present interest in the business. 
 
 The owner may, if he desires, withdraw a part of the capital which he has in- 
 \ested or a part of the profit resulting from the operations of the business. These 
 withdrawals from investment or profits do not include any amounts which the 
 owner receives from the business for the services he has rendered the business, 
 because such items are operating cost the same as salaries paid employees. When 
 the owner decides to withdraw amounts from the business in payment for his 
 services rendered to the business, these should be charged against a fixed salary. 
 When this plan is followed, it is customary to credit a Personal account with the 
 proprietor for the amount of his salary and debit this account with the withdrawals 
 against salary. Unless this plan is followed, the amounts paid by the business to 
 the owner for services he has rendered the business will not appear as an operating 
 cost of the business. The owner's Personal account will be discussed in detail later. 
 
 CAPITAL ACCOUNT 
 
 § 34. The Purpose of this Account is to show the result of transactions 
 which the business has with the owner of the business as they relate to investments 
 and withdrawals. 
 
 Debit the Capital Account: Credit the Capital Account: 
 
 If I. For any debts owed by the ^ 4. For cash or other assets in- 
 
 owner at the beginning of the vested at the beginning of the 
 
 business if they are assumed business. 
 
 by the business. ■ ^5. For subsequent investments. 
 
 Tf 2. For amounts withdrawn from ^1 6. For the net profit at the end of 
 
 the capital invested. This the business year if the results 
 
 does not include amounts of the operations of the busi- 
 
 withdrawn for services ren- ness have been a profit. 
 
 dered to the business. 
 ^ 3 For the net loss at the end of the 
 
 business year if the results of 
 
 the operations of the business 
 
 have been a loss. 
 
 ^ 7. The Balayice of this Account, before the debit or credit mentioned in 
 ^^3 and 6 have been made, shows the net investment of the owner,_ After the 
 profit or loss as described in ^^ 6 and 3 has been credited or debited to the account, 
 the balance will show the owner's interest in the business, that is, his proprietorship. 
 
 RECORDING TRANSACTIONS DIRECT IN THE LEDGER 
 
 § 35. The Complete Operations of a business include transactions which 
 relate to the investment at the beginning of the business, the purchases and sales 
 of merchandise, and the payment of operating expenses. All of these transactions 
 may be recorded direct in the ledger as explained in §§ 19 and 29. 
 
 The following transactions relative to the complete operations of a business 
 (including investment, operating cost, and purchases and sales of merchandise for 
 
 {Concluded on page 35.) 
 
34 RECORDING TRANSACTIONS IN THE LEDGER. 
 
 ^^cJ-. 
 
 / 
 
 
 
 
 ^-o o 
 
 
 o-U 
 
 /r 
 
 f "" — ^^ 
 ' 7 
 
 
 ^0^. 
 
 >/• 
 
 
 / >/ -^^ 
 
 ^i^^ 
 
 1 --«t<?^-«a^ 
 
 /(K^Z-tsc.-e.'y<t^-'f?d^ 
 
 C^_^c^-<:->^^.JZ^^-^>T-^ 
 
 Illustration No. 13, A Ledger with Eight Accounts. 
 
 EXPLANATION. This ledger contains a record of the transactions outlined in § 35, recorded 
 direct in the ledger. It is the same as Illustrations Nos. 3 and 9 with the addition of accounts with 
 the owner and Exjjcnse. Whether only a part or all of the transactions in connection with the oper- 
 ations of a business are recorded, each transaction affects two accounts, one showing the value 
 received recorded on the debit side and the other the value parted with recorded on the credit side. 
 The same amount in each transaction is recorded on the debit side of one account and on the credit 
 side of another account. 
 
RECORDING TRANSACTIONS IN THE LEDGER. 
 
 35 
 
 cash and on account), perlornied by M. E. Studebaker during the month of October, 
 are shown recorded direct in accounts with Cash, Purchases, Sales, Capital, Expense, 
 customers, and creditors, in Illustration No. 13. A Trial Balance of balances made 
 from these accounts is shown in Illustration No. 14. 
 
 Oct. I. M. E. Studebaker invested $1,000.00 in the office supplies business. 
 
 7. Purchased from A. R. King, Clinton, on account, merchandise, $317.65. 
 
 10. Received $75.50 for cash sales of merchandise. 
 
 18. Sold E. B. Moore, 305 Elm St., City, on account, one desk $75.00. 
 
 24. Paid A. R. King $200.00 on account. 
 
 28. .Sold J. W. Macon, 222 Main St., City, on account, three filing sections, 
 
 $127.50. 
 
 31. Paid rent of store, $50.00. 
 
 /y 
 
 
 
 ^[^'^a 
 
 ^ 
 
 s 
 
 V- 
 
 y^;2i.-7'^c-^Ctfz-«£-^-^ 
 
 3\/ 
 
 \5-'a 
 
 J~a 
 
 7- 
 
 /\a\a \o 
 
 \A 
 
 V- 
 
 / J^ jr-^^jj; /^ <f^ 
 
 ^ ^ 
 
 Illustration No. 14, i\ Trial Balance of Balances Made from the Ledger Accounts 
 
 in Illustration No. 13. 
 
 Exercise No. 11, Recording Transactions Direct in the Ledger. 
 
 Record on ledger paper the following transactions performed during the first 
 half of May by R. H. Gillespie, a retail clothing dealer. Allow space for the accounts 
 as follows: Cash, ten lines; Purchases, eleven lines; Sales, nine lines; Expense, 
 six lines; R. H. Gillespie, Capital, five lines; A. C. Dugan, six lines; A. R. Isaacs, 
 five lines; Charles Heane3^ five lines; Davis Bros., six lines; Globe Clothing Co.. 
 five lines; Pope Clothing Co., five lines. Give each customer and creditor a local 
 address. 
 May I. R. H. Gillespie invested $2,500,00 in the retail clothing business. 
 
 2. Bought of Davis Bros., on account, merchandise^ $318.67. 
 Bought of Brand Bros., for cash, merchandise, $362.55. 
 
 3. Bought of the Globe Clothing Co., on account, merchandise, $196.50. 
 Sold A. C. Dugan, on account, one suit of clothes, $65.00. 
 
 4. Bought of Brand Bros., for cash, merchandise, $318.62. 
 
 5. Sold for cash one suit of clothes, $65.00; one spring overcoat, $50.00. 
 
 6. Sold A. R. Isaacs, on account, one suit of clothes, $60.00; five shirts at 
 
 $2.50 each. 
 9. Paid the Globe Clothing Co. $196.50 in full of account. 
 
 Sold Charles Heaney, on account, one suit of clothes, $50.00; one vest, 
 $10.00. 
 
 {Concluded on page 36.) 
 
36 RECORDING TRANSACTIONS IN THE LEDGER. 
 
 {Exercise No. ii — Continued from page 35.) 
 
 Ma\- 10. Bouglit of the Pope Clothing Co., on account, merchandise, $269.96. 
 Sold A. C. Dugan, on account, one spring overcoat, $85.00; six ties at 
 $1.25 each. 
 
 11. Received $60.00 from Charles Heaney in full of account. 
 
 12. Bought of Brand Bros., for cash, merchandise, $327.16. 
 
 13. Paid $12.00 for telephone service. 
 
 14. Received $25.00 from A. R. Isaacs in part payment of the merchandise 
 
 sold him on the 6th. 
 
 15. Bought of Davis Bros., on account, merchandise, $105.81. 
 Paid rent, $80.00; salaries of clerks. $75.00. 
 
 When these transactions have been recorded in the accounts, prove the equality 
 of the debits and credits bv a Trial Balance of totals. 
 
 Exercise No. 12, Recording Transactions Direct in the Ledger. 
 
 Record on ledger paper the following transactions performed during the month 
 of May by W. L. Kirby, a retail paint merchant. Allow space for the accounts 
 as follows: Cash, eleven lines; Purchases, eleven lines; Sales, twelve lines; Ex- 
 pense, five lines; W. L. Kirby, Capital, five lines; Jones Bros., six lines; Cowan 
 Bros., six lines; W. L. Luttrell, six lines; W. H. Rowland, six lines; C. A. Norman, 
 seven lines; National Paint Co., five lines; Marcus Franklin, five lines. 
 
 May I. W. L. Kirby invested $2,500.00 in the retail paint business. 
 
 Bought of Jones Bros., Uniontown, on account, merchandise, $221.35. 
 Paid one month's rent in advance, $75.00. 
 2. Bought of Cowan Bros., City, ten days, merchandise, $86.49. 
 
 Sold W. L. Luttrell, City, on account, merchandise per Sale No. i. 
 $4.2.50. The sale number indicates that a copy of the items sold 
 has been retained. 
 
 4. Paid the National Paint Co., New York, cash for merchandise pur- 
 
 chased, $798.57. 
 
 5. Sold W. H. Howland, Middletown, on account, merchandise per Sale No. 
 
 2, $75.80. 
 Received for cash sales of merchandise, $110.00. 
 7. Paid Cowan Bros. $86.49 in full of account. 
 
 Sold C. A. Norman, Citv, on account, merchandise per Sale No. 3, 
 $87.50.. 
 9. Bought of National Paint Co., New York, twenty da\s, merchan- 
 dise, $i7i.58. 
 
 10. Sold W. L. Luttrell, Citv, on account, merchandise per Sale No. 4, 
 
 $78.75- 
 
 11. Received $50.00 from C. A. Norman to apply on account. 
 
 12. Bought of Cowan Bros., City, on account, merchandise, $93.25. 
 14. Received $75.80 from W. H. Howland in full of account. 
 
 16. Bought of Marcus Franklin, Ardmore, five days, merchandise, $218.32. 
 
 17. Bought of Jones Bros., Uniontown, on account, merchandise, $172.50. 
 
 18. Paid Marcus Franklin $218.32 in full of account. 
 
 Sold W. H. Howland, Middletown, on account, merchandise per Sale 
 No. 5, $88.-50. 
 
 19. Sold C. A. Norman, City, on account, merchandise per Sale No. 6, 
 
 $32.45- 
 21. Received $30.00 from W. L. Luttrell to apply on account. 
 
 (Conchided on page 37.) 
 
RECORDING TRAXSACTIOXS IN THE JOURXAL. 37 
 
 {Exercise No. 12 — Continued from page 36.) 
 
 Ma\ 21. Sold C. O. Baily, for cash, 20 gallons I. X. L. paint at $4.75, $95.00. 
 24. Paid Jones Bros. $100.00 to appK' on account. 
 
 C. A. Norman returned one gallon paint purchased from us on the 19th 
 and was granted credit for $3.00. He paid cash, $29.45, for the bal- 
 ance due on this sale. 
 Enter as two separate transactions. 
 26. Gave a customer $2.00 in payment for paint purchased from us for cash 
 
 and returned per agreement. 
 29. Paid the National Paint Co. S171.58.in full of account. 
 
 C. O. Bailey returned 2 gallons I. X. L. paint purchased on the 21st 
 
 and accepted in exchange for it 4 gallons varnish. 
 No entry is required. Why? 
 31. Received credit from Jones Bros, for $12.00, value of 3 gallons paint 
 purchased on the 17th and returned by us per agreement. 
 When these transactions have been recorded in the accounts, prove the equality 
 of the debits and credits by a Trial Balance of balances. 
 
 RECORDING TRANSACTIONS IN THE JOURNAL 
 
 § 36. Transactions with the owner and with operating expenses may be 
 recorded in the journal in the same manner as transactions in which merchandise 
 is purchased or sold for cash or on account. When the owner invests cash or other 
 assets in the business, the transaction is recorded in the journal by writing the date, 
 the name of the account debited and amount, the name of the account credited 
 and amount, and the explanation, in the same form as other transactions; each 
 asset invested is debited to the account which is to show its value, and the owner's 
 Capital account credited. When the owner withdraws a part of his capital, the 
 transaction is recorded in the journal in the same form as the entry for investment; 
 in this case, however, the owner's Capital account is debited with the amount of 
 the withdrawal, and the account which shows the value of the asset withdrawn 
 is credited. When operating costs are paid, the transaction is recorded in the 
 journal by writing the date, the name of the operating account affected (usuallv 
 Expense) and the amount of the payment, the name and amount of the asset parted 
 with, and the explanation. 
 
 Before recording transactions in the journal, the student should journalize 
 each one mentally; that is, he should determine from the nature of the transaction 
 the account to be debited and the account to be credited. Since the information 
 which the owner desires is obtained from the accounts, it is essential that the proper 
 accounts be debited and credited in each transaction. Should an amount be with- 
 drawn by the proprietor from his investment and be debited to the Expense account, 
 it would change the entire meaning of the reports which the owner would receive 
 from the bookkeeper. The same fact is true of any other transaction incorrectly 
 recorded. 
 
 The following transactions relative to the complete operations of a business 
 (including investment, operating cost, and the purchases and sales of merchandise 
 for cash and on account), performed by M. E. Studebaker during the month of 
 October, are shown recorded in the journal in Illustration No. 15. These trans- 
 actions are the same as those at the top of page 35. 
 Oct. I. M. E. Studebaker invested Si, 000. 00 in the office supplies business. 
 
 7. Purchased from A. R. King, Clinton, on account, merchandise, $317.65. 
 10. Received S75.50 for cash sales of merchandise. 
 18. Sold E. B. Moore, 305 Elm St., City, on account, one desk, $75.00. 
 
 {Concluded on page 38.) 
 
38 
 
 RECORDING TRANSACTIONS. 
 
 (Continued from page J y.) 
 
 24. Paid A. R. King $200.00 on account. 
 
 28. Sold J. W. Macon, 222 Main St., City, on account, three filing sections, 
 
 $127.50. 
 31. Paid rent of store, $50.00. 
 
 v~i^..^7^ / , / <^ 2— 
 
 yf 
 
 C 2JZ-c^>;*C^ 
 
 t|^>Z.-Z/^A;^^^«if .^<^<>2.<.^l!gy€<g/ 
 
 7 
 
 
 ff 
 
 as 
 
 3 / /\k^ ' 
 
 / A C.<«.<^^^Cr 
 
 ctz.-'^-A^ 
 
 :&.^2^. 
 
 /r 
 
 
 \{^ ^ P(^^€.:>-z^ 
 
 \.^-^^iP-' 
 
 -F 
 
 3 / 
 
 
 7? 
 
 7^- 
 
 'A 
 
 '^o 
 
 
 O-Zi- 
 
 /^ 
 
 y 2- 
 
 7- 
 
 /A.,j.r' 
 
 \sra\ 
 
 Illustration No. 15, A Journal Page with Transactions Recorded on It. 
 
 EXPLANATION The transactions recorded in this journal are outlined in § 36 which begins 
 on page 37 and is concluded at the top of this page. 
 
/6 
 
 (7-^ /r 
 
 O-^. >r 
 
 RECORDING TRANSACTIONS. 
 
 39 
 
 
 '^^ ^ ^?L<^-r?'y-^ 
 
 ~^l^>^. 
 
 -»^ 
 
 ^ 
 
 ^^l^ 
 
 -^^i%<t-e-:«-' AS^ 
 
 -/ ' / >-7 -^^ 
 
 
 
 
 9r' 
 
 r-r- -r— 
 
 ! : 
 
 1 i 1 i ! 
 
 
 
 V- 
 
 
 
 
 
 
 
 " 
 
 
 
 
 
 ! ' ' 
 
 
 
 L 
 
 
 
 1— 
 
 1- 
 
 
 J 
 
 Illustration No. i6, A Ledger with Eight Accounts Resulting from Posting. 
 EXPLANATION. This ledger shows the posting of the transactions recorded in the journal, 
 Illustration No. 15. The amounts entered in the first money column of the journal appear on the 
 debit side of the ledger accounts, and the amounts entered in the second money column of the journal, 
 on the credit side of the accounts. A comparison of Illustration No. 13 with this illustration will 
 show that the facts are the same, except in the latter the folio column is used. 
 
40 
 
 RECORDING TRANSACTIONS. 
 
 Exercise No. 13, Recording Transactions in the Journal and Posting. 
 
 Record on journal paper the following transactions performed during the 
 month of January by E. B. Taylor, a retail grocer: 
 
 Jan. I. E. B. Taylor invested $1,000.00 in the retail grocery business. 
 
 2. Bought of E. C. Cline, Chicago, on account, merchandise, $77.30. 
 
 3. Bought of Langley Bros., City, thirty days, merchandise, $134.95. 
 
 4. Paid $20.00, city and state license for one year. 
 
 6. Sold A. R. Manley, 106 Elm St., City, on account, 40 lbs. Arbuckle 
 coffee at 20c; i bbl. White Lily flour, $6.25. 
 
 When the sale Includes more than one item, the explanation in the journal should be as 
 follows: 
 
 "Sold on account: 
 
 40 lbs. Arbuckle Coffee at 40c $16.00 
 I bbl. White Lily Flour 6.25." 
 
 10. Paid J. F. Sherwood $192.00 for merchandise purchased today. 
 
 12. Received $30.50 for sundry cash sales. 
 
 13. Paid E. C. Cline $77.30 in full of account. 
 
 16. Sold Gibson Hotel, 12 E. 4th St., City, ten days, 6 bbls. Roller King 
 
 flour at $5.10; 3 bbls. White Lily 'flour at $6.25; 40 lbs. Arbuckle 
 coffee at 20c. 
 
 17. Sold T. L. Staples, Clinton, sixty days, 4 bbls. Roller King flour at $5.10; 
 
 4 cans, 200 lbs., lard at 15c. 
 20. Received $10.00 from A. R. Manley to apply on account. . 
 23. Bought of Logan & Moseley, Centerville, twenty days, merchandise, 
 . $228.60. 
 
 26. Sold A. R. Manley, 106 Elm St., City, on account, 5 bbls. White Lily 
 
 flour at $6.25; 115 lbs. Arbuckle coft'ee at 20c. 
 
 27. Received $30.50 from the Gibson Hotel to apply on account. 
 30. Received $41.85 for sundry cash sales. 
 
 When the above transactions have been recorded in the journal as instructed 
 open accounts in the ledger with Cash (q). Purchases (8), Sales (10), Expense (5), 
 E. B. Taylor, Capital (5), E. C. Cline (5), Langley Bros. (5), A. R. Manley (6), 
 Gibson Hotel (5), T. L. Staples (5), Logan & Moseley (5), allowing for each account 
 the number of lines indicated; post the transactions, and prove the posting by a 
 Trial Balance of totals. 
 
 Exercise No. 14, Recording Transactions in the Journal and Posting. 
 
 Record on journal paper the following transactions performed during the 
 month of July by E. H. Weatherby, a retail grocer: 
 
 July I. E. H. Weatherby invested $1,500.00 in the retail grocery business. 
 
 2. Bought from Woodward Bros., Morgantown, on account, merchandise, 
 
 $127.60. 
 
 3. Bought from Winters & Gay, Batesville, on thirty days' time, mer- 
 
 chandise, $204.05. 
 Paid $20.00 cash for city and state license. 
 
 5. Sold J. A. Taylor, 22 Poplar St., on account, 25 lbs. roasted coft'ee at 
 
 33c; 50 lbs. granulated sugar at 7c; 60 lbs. bacon at 23c. 
 Bought from Chafin & Jones, City, for cash, merchandise, $242.00. 
 
 6. Received $22.50 for sundry cash sales to date. 
 Paid Woodward Bros. $127.60 in full of account. 
 
 {Concluded on page 41.) 
 
RECORDING TRANSACTIONS. 
 
 41 
 
 (Exercise No. 14 — Contifiued from page 40.) 
 Sold the Colonial Hotel, Washington Ave., on account, 5 bhh 
 
 Blue 
 
 9- 
 10. 
 
 12. 
 
 13- 
 
 15 
 16 
 
 17 
 
 18 
 
 19 
 20. 
 
 Ribbon Hour at $9.10; 3 bbls. White Rose flour at $9.75; 90 lbs. 
 granulated sugar at 7c. 
 
 Received $15.00 from J. A. Taylor to apply on account. 
 
 Bought from Winters & Gay, Batesville, on thirty days' time, merchan- 
 dise, $209.58. 
 
 Received $40.00 from the Colonial Hotel in part payment for merchan- 
 dise sold on the 8th. 
 
 Paid Winters & Gav $100.00 to applv on merchandise purchased on the 
 
 3d. 
 Sold M. J. Sanders, 227 Beech St., on account, 5 bbls. White Rose flour 
 
 at $9.75; 10 hams, 191 lbs., at 26c. 
 Bought from Woodward Bros., Morgantown, on account, merchandise, 
 
 $216.37. 
 Sold the Colonial Hotel, Washington Ave., on account, 7 doz. cans 
 
 peaches at $1.75 per doz.; 2,000 lbs. bran at $16.25 per 1,000 lbs. 
 Bought from the Perfection Creamery, Rosedale, on twenty days' time, 
 
 merchandise, $34.45. 
 Received $30.00 from M. J. Sanders to apply on account. 
 Bought from Chafin & Jones, City, for cash, merchandise, $116.60. 
 Sold W. W. Johnston, 122 1 Elm St., on account, 2,000 lbs. bran at $16.25 
 
 per 1,000 lbs.; 200 lbs. lard at 22c; 3 doz. cans peaches at $1.60 per 
 
 doz. cans. 
 Paid Winters & Gay $104.05, balance due on merchandise purchased 
 
 on the 3d. 
 Received $52.50 for sundry cash sales to date. 
 Sold W. W. Johnston, 122 1 Elm St., on account, 100 lbs. granulated 
 
 sugar at 7c; 10 bbls. White Rose flour at $9.75. 
 Bought from the Perfection Creamery, Rosedale, on twenty days' time, 
 
 merchandise, $167.55. 
 
 Received $50.00 from the Colonial Hotel in full for balance due on 
 merchandise sold them on the 8th, and on account of that sold on the 
 i6th. 
 
 Paid Winters & Gay $200.00 on account of merchandise purchased on 
 the loth. 
 
 Received $10.55 from J. A. Taylor in pa\ment for balance due on mer- 
 chandise sold him on the 5th. 
 
 Sold L. S. Lynn, 915 Jefi'erson Ave., on account, 5 bbls. White Rose flour 
 at $9.75; 10 lbs. creamery butter at 42c. 
 
 Received $40.00 from L. S. Lynn to apply on account. 
 Paid Woodward Bros. $200.00 on account of merchandise purchased on 
 the 15th. 
 
 31. Paid bookkeeper's salary, $60.00; rent, $50.00; telephone service, $10.00. 
 
 When the above transactions have been recorded in the journal as instructed, 
 open accounts in the ledger with Cash (13), J. A. Tavlor (6), Colonial Hotel (8), 
 M. J. Sanders (5), W. W. Johnston (6), L. S. Lynn (5), W^oodward Bros. (6), Win- 
 ters & Gay (8), Perfection Creamery (6), E. H. Weatherby, Capital (5), Sales (13), 
 Purchases (12), Expense (6), allowing for each account the number of lines indicated; 
 post the transactions, and prove the posting by a Trial Balance of balances. 
 
 24. 
 
 26. 
 
 29. 
 
42 RECORDING TRANSACTIONS. 
 
 QUESTIONS 
 
 1 . Name some of the necessary expenses of a grocery business. 
 
 2. Can you suggest a plan which would permit the grocer to know the cost of 
 
 delivering merchandise? 
 
 3. What accounts are affected when cash is paid for telephone service? 
 
 4. What effect would it have on the operating cost of the business if the salary 
 
 paid the owner for his services in connection with the business were charged 
 
 to his Capital account? 
 Name the account debited and the account credited when merchandise is 
 
 invested at the beginning of business. 
 What accounts are affected when cash and merchandise are in\ested at the 
 
 beginning of business? 
 What must the owner of a business take into consideration when he fixes the 
 
 selling price of the merchandise which the business offers for sale? 
 
 8. Name some of the expenses in connection with the operation of a railroad. 
 
 9. If a farmer shows all of his operating cost in one account, name some of the 
 
 expenses which would be debited to this account. 
 
 10. If a merchant pays $25.00 for dra^^age on merchandise he has purchased, 
 
 would this be debited to the Expense or the Purchases account? Cii\e 
 reasons for your answer. 
 
 11. What accounts are affected when the owner withdraws a part of his capital? 
 
 12. Name the account debited and the account credited when the owner invests 
 
 cash in the business at a time other than the beginning of the business. 
 
 13. If a telephone company pays $2,000.00 for wire used in connection with the 
 
 service rendered its customers, will this be debited to the Expense account? 
 
 14. If a railroad company pays $8,000.00 for a new engine, will this be debited to 
 
 the Expense account? 
 
 15. What accounts are affected when stamps, the cost of which is charged to the 
 
 Expense account, are used for parcel post on a package containing merchan- 
 dise sold a customer on account? 
 
 16. Name the account debited and the account credited if the sale mentioned in 
 
 the preceding question had been made for cash and the customer had given 
 the business cash for the merchandise and stamps. 
 
 17. If Robert A. Clark, the owner of a business, is to receive a salary of $200.00 
 
 a month for his services rendered to the business and this is withdrawn at 
 different times, what would be the name of the account kept with the trans- 
 actions affecting this salary? 
 
 18. What accounts would be affected when the entry was made at the end of the 
 
 month for the $200.00 salary (?33, page 33?) 
 
 19. Name the account debited and the account credited if Mr. Clark accepted 
 
 merchandise from stock at cost price in payment for a part of his salary. 
 
 20. What accounts would be affected if Mr. Clark accepted merchandise from 
 
 stock at the selling price in payment for a part of his salary? 
 
 21. What entry would be required if one customer was debited with merchandise 
 
 purchased by another customer? 
 
 22. Name some of the transactions which might occur in connection with the 
 
 complete operations of a hardware business. 
 
 23. Name some of the transactions which might occur in connection with the 
 
 complete operations of a plumbing business. 
 
 24. Under what circumstances would you advise the keeping of more than one 
 
 account with the expenses of a business? 
 
 25. Name some of the transactions which might be performed in connection with 
 
 the operations of a dair\'. 
 
Chapter V 
 
 RECORDING TRANSACTIONS— Concluded 
 
 § 37. Special Journals. While all transactions may be recorded in the 
 journal as explained in § 22, >et it is not customary to do this because efficiency in 
 bookkeeping means the greatest amount of work with the best results at the least 
 cost. When a number of transactions affect the same account, much time can be 
 saved by recording them in special journals. Fifty purchases during one month 
 recorded in the journal would require writing "Purchases" fifty times and posting 
 fifty separate amounts to the Purchases account. If these transactions were re- 
 corded in a journal and no other transactions were recorded in this journal, it would 
 not be necessary to write "Purchases" in each transaction and the total could be 
 posted to the Purchases account in one amount at the end of the month, thus sa\'ing 
 practically half the time in the recording and posting of these transactions. 
 
 In a mercantile business the transactions which are of the most frequent 
 occurrence are those in connection with the purchase and sale of merchandise and 
 the receipt and payment of cash. If these transactions are recorded in special 
 journals, the work in the accounting department will be much more efficient, and, 
 where the volume of business is large and more than one bookkeeper is needed, the 
 several bookkeepers can use the different journals without interfering with the 
 work of each other. 
 
 § 38. The Purchases Journal is a book of original entry in which all pur- 
 chases of merchandise are recorded and no other transactions are recorded in it. 
 The complete record of a transaction in w^hich merchandise is purchased includes 
 the date of entry, the name and address of the person or firm from whom the mer- 
 chandise is purchased, the terms, the items purchased, and the amount of the pur- 
 chase. The ruling in the purchases journal should be so arranged that all this 
 information can be recorded on one line. When arranged in this manner, each 
 person or firm from whom merchandise is purchased can be credited in his account 
 in the ledger, and the Purchases account debited for the total at the end of the 
 month. One form of the purchases journal is shown in Illustration No. 17; other 
 forms will be illustrated and explained later. 
 
 Transactions in which cash is paid for merchandise at the time it is pur- 
 chased may be entered direct in the cash record, or may be entered in the purcha.ses 
 journal in the same manner as a purchase on account and the person from whom 
 it is purchased debited with the cash paid in the cash record. There is no es- 
 tablished rule in regard to the method of recording these transactions, but it is 
 customary to record all purchases in the purchases journal except the miscellaneous 
 items that may be purchased for cash as they are needed. The final results are the 
 same whether the record is made in both the purchases journal and cash record or 
 in the cash record only. 
 
 The following purchases of merchandise made by E. B. Taylor, a retail grocer, 
 during the month of January, are shown recorded in the purchases journal in 
 Illustration No. 17: 
 
 Jan. 2. Bought of E. C. Cline, Chicago, on account, merchandise, $77.30. 
 
 3. Bought of Langley Bros., City, on thirty days' time, merchandise. 
 
 SI34-95- 
 23. Bought of Logan & Mosele}-, Centerville, on twenty days' time, mer- 
 
 chandise, $228.60. 
 
 43 
 
44 RECORDING TRANSACTIONS IN THE PURCHASES JOURNAL. 
 
 i/gZ-^7--Z,.i:yC'Ct--7*-^, / '^ 
 
 •>-- 
 
 Date 
 
 
 L.F. 
 
 Account Credited 
 
 ^.AS^c:^.^ 
 
 ^^^>i^■^^^^Ce^ /^h''-7P^^. 
 
 
 Address 
 
 
 -V j'-^^:-^^' 
 
 Terms 
 
 
 Pur. 
 No. 
 
 Amount 
 
 
 j/^ors 
 
 Illustration No. 17, Purchases Journal. 
 EXPLANATION. Each transaction is recorded on one horizontal line. The information 
 in the "Pur. No." column refers to the list of merchandise sent by the seller to the purchaser; this 
 list is filed for future reference. The entire record in this purchases journal is equivalent to one 
 journal entry in which the Purchases account is debited and three personal accounts credited. 
 
 § 39. Posting from the Purchases Journal. Each amount entered in 
 the money column is posted to the credit of the account written on the same line 
 
 {Concluded on page 45.) 
 
 CZ^ CjV ( _-i^: U.<?'z .,^^ 
 
 C •^d.-^C'ez^-'a-'^^ 
 
 Illustration No. 18, Ledger Resulting from Posting Illustration No. 17. 
 EXPLANATION. A Trial Balance from this ledger will show that the debit amount is 
 equal to the credit amounts even though the record in the accounts does not represent all of the 
 transactions that the business would perform. One purpose of this illustration is to show that the 
 ledger is in balance when all the transactions from any one journal have been posted. 
 
RECORDING TRANSACTIONS IN THE PURCHASES JOURNAL. 45 
 
 with it. The date, the letter "[*" and the page of the purchases journal, are entered 
 in the ledger the same as in posting from another journal (§ 24); the letter "P" 
 indicates the title of the book of original entry. If a specific time of payment is 
 stated, this should be written in the explanation column of the ledger as explained 
 under Illustration No. i. The page of the ledger is written in the folio column of 
 the purchases journal to indicate that the transaction has been posted. The Pur- 
 chases account is not debited with the amount of each purchase, but with the total 
 purchases at the end of the month. 
 
 The posting of the transactions recorded in the purchases journal, Illustration 
 No. 17, is shown in Illustration No. 18. 
 
 Exercise No. 15, Recording Transactions in the Purchases Journal. 
 
 Record in the purchases journal (paper ruled similar to Illustration No. 17) 
 the following transactions relative to the purchase of merchandise during the month 
 of February by W. O. Gardner, who is engaged in the hardware business: 
 
 Feb I. B. A. Ames, Toledo. 30 days, Purchase No. i, $350.00. 
 
 5. H. M. Lowe, Nashville, Feb. 3, 30 days. Purchase No. 2, $325.00. 
 
 In this purchase the merchandise was shipped Feb. 3 and received Feb. 5; the amount is 
 due 30 days from Feb. 3. 
 
 9. H. T. Harris, Rochester, 20 days, Purchase No. 3, $486.00. 
 
 12. J. T. Goodrich, City, Feb. 10, 90 days. Purchase No. 4, $825.00. 
 
 18. J. P. Benson, Cleveland, Feb. 17, 60 days. Purchase No. 5, $64.00. 
 
 23. C. O. Parsons, City, 30 days. Purchase No. 6, $128.00. 
 
 28. H. L. Simpson, Dayton, Feb. 26, 30 days, Purchase No. 7, $242.00. 
 
 When the above transactions have been recorded in the purchases journal as 
 instructed, and the purchases journal ruled as in Illustration No. 17, open accounts 
 on a sheet of ledger paper with Purchases and each of the seven creditors, allowing 
 four lines for each account. When the posting has been completed, prove the 
 equality of the debits and credits by a Trial Balance. 
 
 Exercise No. 16, Recording Transactions in the Purchases Journal. 
 
 Record in the purchases journal the following transactions relative to the 
 purchase of merchandise during the month of January by W. H. Goodwin, a retail 
 grocer : 
 
 Jan. 2. Brown & Co., Elmwood, on account, Purchase No. i, $77.30. 
 
 3. Knox Bros., City, on account, Purchase No. 2, $134.95. 
 
 10. Hazen & Lockhart, Danville, on account. Purchase No. 3, $228.60. 
 
 15. Brown & Co., Elmwood, on account. Purchase No. 4, $226.00. 
 
 17. Lake View Creamery, Lake View, Jan. 14, 20 days. Purchase No. 5, 
 
 $28.00. 
 
 23. J. Allen Smith & Co., Rockford, 10 days, Purchase No. 6, $197.10. 
 
 27. Donaldson Bros., City, Jan. 24, account, Purchase No. 7, $172.75. 
 
 When the above transactions have been recorded in the purchases journal as 
 instructed, and the purchases journal ruled, open accounts on a sheet of" ledger 
 paper with Purchases and each of the six creditors, allowing five lines for Brown 
 & Co. and four lines for each of the other accounts. When the posting has been 
 completed, prove the equality of the debits and credits by a Trial Balance. 
 
 After the instructor has approved this exercise, retain the purchases journal 
 for use in connection with Exercise No. 22. 
 
46 RECORDING TRANSACTIONS L\ THE SALES JOURNAL. 
 
 Exercise No. 17, Recording Transactions in the Purchases Journal. 
 
 Record in the purchases journal the following transactions relative to the 
 purchase of merchandise during the month of March by C. U. Steele, a retail shoe 
 dealer: 
 
 March 2. Bay State Shoe Co., Boston, Feb. 28, 10 days. Purchase No. i, $496.81. 
 V Havnes, Henson & Co., Newark, N. J., Mar. 2, 10 days, Purchase No. 
 
 2, $387-65- 
 4. M. B. Lang, City, Mar. 3, 30 days, Purchase No. 3, $1,691.42. 
 6. Cline Shoe Co., Pittsburgh, Mar. 4, 30 days. Purchase No. 4, $168.42. 
 18. Bay State Shoe Co., Boston, Mar. 15, 30 days, Purchase No. 5, $987.35. 
 
 25. Haynes, Henson & Co., Newark, N. J., Mar. 20, 30 days, Purchase 
 
 No. 6, $462.85. 
 
 26. Cline Shoe Co., Pittsburgh, Mar. 20, 30 days. Purchase No. 7, $785.00. 
 31. A. O. Haines, Albany, Mar. 21, 60 days. Purchase No. 8, $432.50; 
 
 M. B. Lang, City, Mar. 22, 30 days. Purchase No. 9, $356.00. 
 
 When the above transactions have been recorded in the purchases journal as 
 instructed, and the purchases journal ruled, open an account with Purchases at 
 the top of page i of a double sheet of ledger paper, and an account with each of 
 the five creditors on page 2 of the same sheet, allowing equal space for each personal 
 account; prove the equality of the debits and credits by a Trial Balance. 
 
 If double ledger paper ruled with from thirty to forty horizontal lines on each page can nor 
 be obtained, use any ledger paper available and allow five lines for each account. 
 
 After the instructor has approved this exercise, retain the ledger sheet for use 
 i n Exercises Nos. 20 and 23. 
 
 § 40. The Sales Journal is a book of original entry in which all sales of 
 merchandise on account are recorded and no other transactions are recorded in it. 
 The complete record of a transaction in which merchandise is sold on account 
 includes the date of the sale, the name and address of the person or firm to whom 
 the merchandise is sold, the terms, the items sold, and the amount of the sale. If 
 the seller does not retain a copy of the items sold, the ruling in the sales journal 
 should be so arranged that these items may be recorded in connection with the 
 other information in regard to the transaction. If the seller does retain a list of 
 the items sold, this can be numbered and filed for reference and the number re- 
 corded in the sales journal. It is necessary for the seller to retain a record of the 
 items sold a customer on account because this information will be needed in case 
 adjustments are required. If a customer returns items which he claims were 
 purchased from the seller and the seller had no record of the items sold to this cus- 
 tomer, he might be imposed upon by allowing credit for merchandise which was 
 not {)urchased from him. 
 
 Illustration No. 19 shows the form of sales journal with the items recorded in 
 it, and Illustration No. 20 the same items recorded in a sales journal wnth the items 
 indicated by the sale number. The method shown in Illustration No. 20 is more 
 efficient because it requires less time to record a number than it does a list of 
 articles sold. The other form is shown because it is used by some business concerns. 
 No matter which method of recording sales is used, the arrangement of the sales 
 journal should be such that the account with each customer may be debited with 
 the amount of his purchase and the Sales account credited at the end of the 
 month with the total sales. 
 
 Cash sales are not recorded in the sales journal, but the total cash sales for 
 each day are entered in the cash record. The nature of cash sales is different from 
 that of cash purchases in that it is customar>- for the customer to pay cash for the 
 
RECORDING TRANSACTIONS IN THE SALES JOURNAL. 
 
 47 
 
 merchandise he purchases and either take it with him or have it delivered. On the 
 other hand, the owner of a business usually orders his merchandise in advance and 
 records the purchase when it is received and pays for it according to the terms. In 
 a business where only occasional cash sales are made, these may be recorded in the 
 sales journal. The nature of the business and desires of the management will 
 determine the practice to be followed in recording cash sales. 
 
 The following sales made by E. B. Taylor, a retail grocer, during the month 
 of January, are shown recorded in the sales journal in Illustrations Nos. 19 and 20. 
 Jan. 6. Sold A. R. Manley, 106 Elm St., City, on account, 40 lbs. Arbuckle coffee 
 at 20c; I bbl. White Lily flour, $6.25. 
 Sold Gibson Hotel, 12 E. 4th St., City, on ten days' time, 6 bbls. Roller 
 King flour at $5.10; 3 bbls. White Lily flour at $6.25; 40 lbs. Ar- 
 buckle coft'ee at 20c. 
 Sold T. L. Staples, Clinton, on sixty days' time, 4 bbls. Roller King flour 
 
 at $5.10; 4 cans, 200 lbs., lard at 15c. 
 Sold A. R. Manley, 106 Elm St., City, on account, 5 bbls. White Lily 
 flour at $6.25; 115 lbs. Arbuckle coffee at 20c. 
 
 16. 
 
 17- 
 
 26. 
 
 /f_ 
 
 ^, /f > 
 
 (^^^a.<>^ ^ /^/ T^y^i^. d^^ 
 
 
 .2-.^ 
 
 / . 
 
 ■r-f-p^iy. 
 
 ^4^z^ /^^.^^i^ ( 3^ 
 
 6> ^//t^.^^^^^'^^^J^*^^^ : ^:/tr'i.c^ sj-./o 
 
 ^^ /-/ — 
 
 ^^--t^^.V^^^'T^/i;^^^^^:^:^^^^^^^^^ ^/<^ 
 
 3\o 
 
 /jI^Z<L 
 
 6>o 
 
 7-0 
 
 ^a 
 
 'J-\- 3 
 
 
 >2-^ 
 
 -^ 
 
 SKS 
 
 o, ^ 
 
 I I 
 
 I ! 
 
 ^,0 
 
 JAt-J 
 
 ^^^^' 
 
 Jlj .. 
 
 / 7 6 
 
 z^zAiA ^^. 
 
 Illustration No. 19, Sales Journal with Items Sold Recorded in It. 
 
 EXPLANATION. Each transaction recorded shows the date, the name and address of the 
 customer, the total amount of the sale, and the items sold; if the terms are to be indicated, they 
 should be written on the line with the name of the account or the line below. The amount of each 
 sale is written on the same line with the name of the customer to facilitate posting. 
 
48 RECORDING TRANSACTIONS IN THE SALES JOURNAL. 
 
 Account Debited 
 
 S<l» 
 Wn. 
 
 -lA- 
 
 j- 
 
 
 »^^,^j^^li^ 
 
 '7- 
 
 jL 
 
 -^^,/ 
 
 ..U- 
 
 
 
 
 
 ^^fe 
 
 Illustration No. 20, Form of Sales Journal when a Copy of Items Sold is Retained. 
 
 EXPLANATION. All the information in regard to each transaction is recorded on one line 
 the same as a transaction recorded in the purchases journal. The copy of the items in each sale is 
 numbered and filed for future reference. The record in thig illustration is equivalent to a journal 
 entry in which three personal accounts are debited and the Sales account credited for the total. 
 
 § 41. Posting from the Sales Journal. Each amount entered in the 
 money column is posted to the debit of the account written on the same line with 
 it. The date, the letter "S" and the page of the sales journal are entered in the 
 
 {Continued on page 4Q.) 
 
 r ^ 
 
 ^ ^2^Z..:z.^2^^ 
 
 C ^^U^.^^C^:^ 
 
 ./ ^ 
 
 j-^ 
 
 
 Illustration No. 21, Ledger Resulting from Posting Illustration No. 19 or No. 20. 
 EXPLANATION. The same explanation applies here as that given in connection with the 
 ledger resulting from posting the transactions from the purchases journal, Illustration No. 18. 
 
RECORDING TRANSACTIONS IN THE SALES JOURNAL. 
 
 49 
 
 12 
 
 H 
 
 i8 
 
 20 
 
 -'/ 
 
 ledger the same as in posting from another journal; the letter "S" indicates the 
 title of the book of original entry. If a speqific time of pa}'ment is stated, this 
 should be written in the explanation column of the ledger as explained under 
 Illustration No. i. The page of the ledger is written in the folio column of the 
 sales journal to indicate that the transaction has been posted. The Sales account 
 is not credited with the amount of each sale, but with the total sales at the end of 
 the month. 
 
 The posting of the transactions recorded in the sales journal, Illustration No. 
 19 or No. 20, is shown in Illustration No. 21. 
 
 Exercise No. 18, Recording Transactions in the Sales Journal. 
 
 Record in the sales journal (paper ruled similiar to Illustration No. 20) the 
 following transactions relative to the sale of merchandise on account during the 
 month of February by W. J. Wheeler, a retail merchant: 
 Feb. 3. E. M. Miller, 507 Gay St., Sale No. i. $25.50. 
 
 William A. Wallace, Evanston, Sale No. 2, $14.50. 
 
 B. T. Hart & Co., Maryville, Sale No. 3, $32.50. 
 
 D. T. Sinton, Uniontown, Sale No. 4, $41.65. 
 
 G. L. Frye, 29 Main St., Sale No. 5, $12.75. 
 
 The Long Construction Co., Uniontown, 30 days, Sale No. 6, $142.50. 
 
 Henry Mason, 64 Union St., Sale No. 7, $21.55. 
 
 D. P. Lewis, 310 Chestnut St., Sale No. 8, $9.75. 
 
 Maynard Pritchett, Brookville, 30 days, Sale No. 9, $65.25. 
 When the above transactions have been recorded in the sales journal as in- 
 structed, and the sales journal ruled as in Illustration No. 20, open accounts on a 
 sheet of ledger paper with Sales and each of the nine customers, allowing four 
 lines for each. When the posting has been completed, take a Trial Balance. 
 
 Exercise No. 19, Recording Transactions in the Sales Journal. 
 
 Record in the sales journal (journal paper ruled similar to Illustration No. 19) 
 the following transactions relative to the sale of merchandise during the month of 
 January by W. H. Goodwin, a retail grocer: 
 
 Jan. 4. A. R. Jennings, 105 Main St., 20 lbs. roasted coffee at 33c; 100 lbs. 
 granulated sugar at 7c; 50 lbs. bacon at 23c. 
 8. Central Hotel, 22 Walnut St., 5 bbls. Blue Ribbon flour at $9.25 ; 4 hams, 
 
 100 lbs., at 26c; 100 lbs. granulated sugar at 7c. 
 II. A. R. Jennings, 105 Main St., i doz. cans tomatoes, $2.00; 4 cans, 216 
 
 lbs., lard at 26c. 
 13. M. A. Johnson, Kingston, 5 bbls. White Rose flour at $9-75; 6 hams, 141 
 
 lbs., at 26c. 
 16. Imperial Hotel, 200 Locust St., 5 bbls. Blue Ribbon flour at $9.25; 100 
 
 lbs. granulated sugar at 7c. 
 19. A. C. Williams, 1221 Elm St., 12 doz. cans peaches at $1.80 per doz.; 
 
 2,000 lbs. bran at $16.25 per 1,000 lbs. 
 22. R. G. Mathews, 25 E. Fourth St., 10 bu. meal at $1.10; 5 bu. beans at 
 $3.20; 3 doz. cans peaches at $1.80 per doz. 
 
 25. Imperial Hotel, 200 Locust St., 5 bbls. White Rose flour at $9.75; 25 
 
 lbs. creamery butter at 41c. 
 
 26. J. C. Wilson, 270 Central Ave., 2,000 lbs. bran at $16.25 per 1,000 lbs.; 
 
 5 cans, 248 lbs., lard at 26c. 
 
 27. C. L. Loyd, 1604 Vine St., 100 lbs. brown sugar at 63^c; 100 lbs. gran- 
 
 ulated sugar at 7c; 5 bbls. White Rose flour at $9.75. 
 When the above transactions have been recorded in the sales journal as in- 
 structed, and the sales journal ruled as in Illustration No. 19, open accounts on a 
 
50 
 
 RECORDING TRANSACTIONS IN THE SALES JOURNAL. 
 
 sheet of ledger paper wiih Sales and each of the eight customers, allowing five 
 lines each for A. R. Jennings and Imperial Hotel and four lines for each of the 
 other accounts. When the posting has been completed, take a Trial Balance. 
 
 After the instructor has approved this exercise, retain the sales journal for 
 use in connection with Exercise No. 22. 
 
 Exercise No. 20, Recording Transactions in the Sales Journal. 
 
 Record in the sales journal (journal paper ruled similar to Illustration No. 19) 
 the following transactions relative to the sale of merchandise during the month of 
 March by C. U. Steele, a retail shoe dealer: 
 
 March i. R. L. Watson, 207 Mason St., i pr. Queen City shoes, $10.50. 
 4. C. A. Sheppard, Canton, 3 prs. Ladies' shoes at $4.00. 
 9. J. C. Wilson & Co., Hamilton, 8 prs. Men's Calf shoes at $2.50; 14 
 
 prs. Men's Jefferson shoes at $3.75. 
 12. A. R. King, Boston, i pr. Ladies' Bal. at $4.50. 
 15. W. E. Peters, Clinton, i pr. Men's V'ici Autocrat shoes, $14.00. 
 18. W^ K. Love, 207 Main St., i pr. Men's Vici Kid shoes, $11.50. 
 21. A. R. King, Boston, 2 prs. Women's Box Calf at $4.00. 
 26. C. A. Sheppard, Canton, i pr. Men's Cong. Calf, $9.00. 
 30. R. L. Watson, 207 Mason St., 6 prs. Children's Satin Calf at $2.75. 
 When the above transactions have been recorded in the sales journal as in- 
 structed, and the sales journal ruled as in Illustration No. 19, open an account 
 with Sales eight lines from the top of page i of the double sheet of ledger paper used 
 in Exercise No. 17; open an account with each of the six customers on page 3 of 
 this same ledger sheet, allowing equal space for each personal account; take a 
 Trial Balance. When approved, retain the ledger sheet for use in Exercise No. 23. 
 
 §42. The Cash Record. There are two classes of cash transactions: those 
 in which cash is received, and those in which cash is paid. These transactions ma>- 
 be recorded in two separate journals, the receipts in a cash receipts journal and the 
 
 (Concluded on page 57.) 
 
 a 
 
 (?^r^uJ^ 
 
 /fek.a.^^l^^^ZS' 
 
 Illustration No. 22, Receipts Side of Cash Book. 
 
 EXPLANATION. The transactions recorded on the receipts side of the cash book in the 
 illustration are equivalent to a journal entry in which the Cash account is debited for the total, 
 and each of the four accounts credited for the amount written on the same line with it. The ruling 
 separates the cash receipts for two different months; the balance at the beginning of the month 
 is carried down below the ruling because it will be needed in subsequent proving of cash. 
 
RECORDING TRANSACTIONS IN THE CASH BOOK. 
 
 51 
 
 {Continued from page 50.) 
 
 pa\"ments in a cash payments journal, or they may be recorded in a cash Ijook 
 which is a combination of the two journals. When one bookkeeper records all the 
 transactions with cash received and paid, it is better to use the cash book; when 
 the recording of cash transactions requires more than one bookkeeper, it is better 
 to use separate cash receipts and cash payments journals. 
 
 § 43. The Cash Book is a book of original entry in which all receipts and 
 payments of cash are recorded and no other transactions are recorded in it. Receipts 
 and pa\-ments are usually recorded on separate pages opposite each other, receipts 
 on the left and payments on the right. The complete record of a transaction in 
 which cash is received or paid consists of the date, the name of the account affected, 
 explanation, and the amount received or paid. The ruling in the cash book should 
 be so arranged that all this information can be recorded on one line. When ar- 
 ranged in this manner, each account affected by a cash receipt can be credited 
 for the amount and the Cash account debited for the total at the end of the month ; 
 each account affected by a cash payment can be debited for the amount and the 
 Cash account credited for the total at the end of the month. One form of the 
 cash book is shown in Illustrations Nos. 22 and 23: other forms will be illustrated 
 and explained later. \» 
 
 The following receipts and payments of cash made during the month of Jan- 
 uary by E. B. Taylor, a retail grocer, are shown recorded in the cash book in Illus- 
 trations Nos. 22 and 23: 
 
 Jan. 
 
 I 
 
 4 
 10 
 12 
 
 13 
 20 
 
 27 
 30 
 
 E. B. Taylor invested $1,000.00 in the retail grocery business. 
 
 Paid $20.00, city and state license for one year. 
 
 Paid J. F. Sherwood $192.00 for a cash purchase of merchandise. 
 
 Received $30.50 for sundry cash sales. 
 
 Paid E. C. Cline $77.30 in full of account. 
 
 Received $10.00 from A. R. Manley to apply on account. 
 
 Received $30.50 from the Gibson Hotel to apply on account. 
 
 Recei\'ed $41.85 for sundry cash sales. 
 
 z3 
 
 Udyyty. 
 
 V 
 
 / 
 
 
 /^ 
 
 / 
 
 
 /J 
 
 / 
 
 
 3/ 
 
 / 
 
 - 
 
 -3/ 
 
 — 
 
 
 — 
 
 
 
 
 ^J. 
 
 '..^U^ 
 
 '—^^^ £i^^z^^i^e^.^c-c^ 
 
 
 
 7r 3 y 
 
 z. r ■<7 \3 o 
 
 Zjr^ j: 
 
 f 
 
 / / / Z\f 6 
 
 Illustration No. 23, Payments Side of Cash Book. 
 
 EXPLANATION. The transactions recorded on this side of the cash book are equivalent 
 to a journal entry in which three accounts are debited, each for the amount written on the same 
 line with it, and the Cash account credited for the total. The balance is entered in red ink because 
 it is customary to use red ink when an amount is entered in a book of account or a ledger account in 
 order to make the two sides equal. The ruling separates the cash payments for two different months. 
 
52 
 
 RECORDING TRANSACTIONS IN TIIH CASH BOOK. 
 
 r i¥ 
 
 ~£ 7^.^^^^.^.^ ^2^^.:-2Sz^ 
 
 Illustration No. 24, Ledger Resulting from Posting Illustrations Nos. 22 and 23. 
 
 EXPLANATION. This illustration is given to show that the ledger is in balance when all 
 the transactions recorded in the cash book have been posted, and not to show the true meaning of 
 the accounts. Accounts resulting from the posting of transactions recorded in the cash book only 
 will not show their true meaning because of the connection between the record in the cash book 
 and that in the purchases and sales journals. If desired, the posting from the receipts side, the pay- 
 ments side, and both sides of the cash book may each be proved by a separate Trial Balance. 
 
RECORDING TRANSACTIONS IN THE CASH BOOK. 53 
 
 § 44. Proving Cash. The difference between the two sides of the cash 
 book should, at all times, equal the amount of cash belonging to the business. 
 When all cash transactions are recorded in the journal, it is necessary to post these 
 to the Cash account before proving cash; when the cash transactions are entered 
 in the cash book, the proof can be made before posting. At the time of proving, 
 the total receipts and total payments are entered in small pencil figures as in Illus- 
 trations Nos. 22 and 23. 
 
 After cash is proved at the close of a month, it is customary to enter the bal- 
 ance in red ink on the paj^ments side, rule the cash book, and carry the balance 
 down on the receipts side below the ruling as in the illustrations. The balance 
 carried down on the receipts side is entered in the second money column; otherwise 
 it would be included with the total receipts for the month and again posted to the 
 Cash account when the total is posted. If the ruling in the cash book does not 
 provide a column in which to enter this balance and it is entered in the column 
 with receipts for the month, the amount of the balance must be subtracted from the 
 total of the receipts side before posting the total receipts at the close of the month. 
 
 When ruling the cash book, it is customary to draw the double red lines on the same blue line 
 on each side of the cash book even though the number of entries on one side may be greater than 
 that on the other side. 
 
 § 45. Posting from the Cash Book. Each amount in the money column on 
 the receipts side is posted to the credit of the account written on the same line 
 with it; each amount in the money column on the payments side is posted to the 
 debit of the account written on the same line with it; the total of the money column 
 on the receipts side is posted to the debit of the Cash account at the end of the 
 month, and the total of the money column on the payments side is posted to the 
 credit of the Cash account at the end of the month. The date, the letter "C" and 
 the page of the cash book are entered in the ledger in the same manner as when 
 posting from another journal; the letter "C" indicates the title of the book of 
 original entry. The page of the ledger is written in the folio column of the cash 
 book to indicate that the entries have been posted. 
 
 The posting of the transactions recorded in the cash book, Illustrations Nos. 
 22 and 23, is shown in Illustration No. 24. 
 
 Exercise No. 21, Recording Transactions in the Cash Book. 
 
 Record in the cash book (the two inside pages of a double sheet of journal 
 paper* ruled similar to Illustrations Nos. 22 and 23), receipts on the left and pay- 
 ments on the right, the following cash transactions performed during the month of 
 February: 
 Feb. I. Student invested $1,276.80 in the retail grocery business. 
 
 2. Received $150.00 from E. H. Whfte to apply on account. 
 
 3. Paid office rent for the month of February, $40.00. 
 
 4. Received $80.00 for cash sales. 
 
 Paid H. R. Swanson $60.00 to apply on account. 
 6. Received $120.00 for cash sales. 
 
 8. Paid A. B. Hill $90.50 to apply on account. 
 
 9. Received $90.00 from J. K. Lachman in payment for merchandise sold 
 
 him on the 4th. 
 
 10. Paid drayage on merchandise purchased, $22.50. 
 
 11. Paid J. G. Pipkin $124.00 to apply on account. 
 14. Received $69.75 for cash sales. 
 
 16. Received $170.00 from P. B. S. Peters in payment for merchandise sold 
 him on the loth. 
 
 {Concluded on page 54.) 
 
 *If double journal paper with from thirty to forty lines on each page is not available, 
 cash receipts should be recorded on one sheet of paper and payments on another, as the proper 
 ruling of the cash book cannot be shown when receipts are entered on one side and payments on 
 the other side of the same sheet. 
 
54 
 
 RECORDING TRANSACTIONS IN THE CASH BOOK. 
 
 i8. 
 
 20. 
 22. 
 
 23- 
 24. 
 
 25- 
 
 28. 
 
 {Exercise No. 21 — Continued from page jj.) 
 
 Paid $45.00 for office supplies. 
 Paid J. T. Ludlow $146.00 to apply on account. 
 Purchased merchandise for cash from H. P. King, $128.00. 
 Received $47.85 for cash sales. 
 
 Received $210.00 from H. M. Lovert to apply on account. 
 Paid salesman's exf^enses, $76.00. 
 Received $52.50 for cash sales. 
 Paid $32.80 for freight on merchandise purchased. 
 Paid clerk hire, $40.00. 
 Paid for advertising, $22.50. 
 Cash balance, $1,439.60. 
 
 When the above transactions have been recorded in the cash book as instructed, 
 prove cash and rule the cash book as in Illustrations Nos. 22 and 23. Open ac- 
 counts on a sheet of ledger paper with Student, Capital (5), Cash (8), Purchases (7), 
 Sales (9), Expense (9), E. H. White (5), J. K. Lachman (5), P. B. S. Peters (5), H. M. 
 Lovert (5), H. R. Swanson (5), A. B. Hill (5), J. G. Pipkin (5), J. T. Ludlow^ (5), 
 allowing for each account the number of lines indicated. Post the transactions, 
 and prove the equality of the debits and credits by a Trial Balance of balances. 
 
 Exercise No. 22, Recording Transactions in the Cash Book. 
 
 Record in the cash book, receipts on the left and payments on the right, the 
 following cash transactions performed during the month of January by W. H. 
 Goodwin, a retail grocer: 
 
 Jan. 
 
 I 
 4 
 
 5 
 6 
 
 9 
 12 
 
 13 
 
 18 
 20 
 
 26 
 27 
 29 
 30 
 31 
 
 W. H. Goodwin invested $2,000.00 in the retail grocery business. 
 Paid $20.00 for city license. 
 
 Paid City Milling Co. $192.00 for a cash purchase. 
 Received $30.00 for sundry cash sales. 
 Paid Brown & Co. $77.30 in full of account. 
 Received $10.00 from A. R. Jennings to apply on account. 
 Received $30.00 from Central Hotel to apply on account. 
 Received $40.00 for sundry cash sales. 
 Paid Knox Bros. $100.00 to apply on account. 
 Received $35.00 from M. A. Johnson to apply on account. 
 Paid Knox Bros. $34.95 in full of account. 
 Received $50.00 for sundry cash sales. 
 Received $15.00 from Central Hotel to apply on account. 
 Paid Hazen & Lockhart $125.00 to apply on account. 
 Received $15.10 from A. R. Jennings to apply on account. 
 Received $42.50 for sundry cash sales. 
 Received $50.00 from C. L. Loyd to apply on account. 
 Paid Brown & Co. $150.00 to apply on account. 
 Paid bookkeeper's salary, $35.00; rent, $25.00. 
 Cash balance, $1,558.35. 
 
 When the above transactions have been recorded in the cash book as instructed, 
 prove cash and rule the cash book; then proceed as follows: 
 
 I. Open accounts on ledger paper with W. H. Goodwin, Capital (4), Cash 
 (4), Purchases (4), Sales (6), Expense (4), A. R. Jennings (4), Central Hotel (4), 
 M. A. Johnson (4), C. L. Loyd (4), Brown & Co. (4), Knox Bros. (4), Hazen & 
 Lockhart (4), allowing for each account the space indicated; post the transactions, 
 and prove the equalit\' of the debits and credits by a Trial Balance of balances. 
 
 {Concluded on page 55.) 
 
RECORDING TRANSACTIONS IN THE CASH BOOK. 
 
 55 
 
 {Exercise No. 22 — Continued from page 54.) 
 
 2. Alter the instructor has approved the work required in the first para- 
 graph, post to a sheet of ledger paper the transactions in the purchases journal for 
 Exercise No. 16 and the sales journal for Exercise No. 19, which you were instruct- 
 ed to retain, and the cash book in this exercise. Arrange the accounts as follows: 
 Cash (6), customers (each 4 lines), creditors (each 4 lines), W. H. Goodwin. Capital 
 (5), Sales (7), Purchases (4), Expense (4), allowing for each the number of lines 
 indicated; take a Trial Balance of balances from this ledger. 
 
 The purpose of the second division of this exercise is to show that the ledger is 
 in balance when all the transactions from all the special journals have been posted, 
 the same as it is when all the transactions from each special journal have been 
 posted. 
 
 Present the purchases journal, sales journals, cash book, ledger resulting from 
 posting the transactions from the three books, and Trial Balance to the instructor 
 for approval. 
 
 Exercise No. 23, Recording Transactions in the Cash Book. 
 
 Record in the cash book the following cash transactions performed during the 
 month of March by C. U. Steele, a retail shoe dealer: 
 
 March i. C. U. Steele invested $2,500.00 in the retail shoe business. 
 
 2. Bought from M. B. Arnstine, for cash, stock of shoes, $1,691.42. 
 
 3. Paid telephone service in advance for three months, $20.00. 
 Received $69.85 for cash sales. 
 
 5. Paid clerk's salary, $25.00. 
 
 6. Received $10.50 from R. L. Watson in full of account. 
 
 8. Paid Bay State Shoe Co. $496.81 in full of account. 
 
 9. Received $275.40 for cash sales. 
 
 12. Paid clerk's salary, $25.00. 
 
 13. Paid $75.00, premium on insurance policy. 
 
 15. Paid Haynes, Henson &. Co. $387.65 in full of account. 
 
 16. Received $12.00 from C. A. Sheppard in full of account. 
 
 18. Paid $8.25 for stamps and stationery. 
 
 19. Paid clerk's salary, $25.00. 
 
 22. Received $72.50 from J. C. Wilson & Co. in full of account. 
 24. Received $11.50 from W. K. Love in full of account. 
 26. Received $581.92 for cash sales. 
 
 Paid clerk's salary, $25.00. 
 29. Received $4.50 from A. R. King for merchandise sold him on the 12th. 
 31. Paid rent, $50.00. 
 
 Paid Cline Shoe Co. $168.42 for merchandise purchased on the 6th. 
 
 Received $361.92. for cash sales. 
 Cash balance, $902.54. 
 
 When the abo\e transactions have been recorded in the cash book as instructed, 
 prove cash and rule the cash book. Open an account on page i of the double sheet 
 of ledger paper used in Exercises Nos. 17 and 20 with C. U. Steele, Capital, eleven 
 lines below the heading of the Sales account, an account with Expense seven lines 
 below the heading of the account with C. U. Steele, Capital, and an account with 
 Cash fourteen lines below the heading of the Expense account. Post the entries 
 in the cash book to the accounts on pages i, 2 and 3 of the ledger sheet, and take a 
 Trial Balance of balances. 
 
56 RECORDING TRAXSACTIONS I\ THE GENERAL JOURNAL. | 
 
 § 46. The General Journal is a book of original entrx- in wiiich all transac-j 
 tions are recorded except those recorded in special journals. The general journal i 
 is the same as the journal explained in § 22, and the ruling is the same as the various; 
 illustrations of the journal gi\en in preceding chapters. The term "general journal", 
 is applied to the journal to distinguish it from the special journals used for record-: 
 ing transactions affecting the same account. 
 
 When purchases are recorded in the purchases journal, sales in the sales journal,! 
 and cash receipts and payments in the cash book, all other transactions are re- 1 
 corded in the general journal. These transactions may be classified into five groups:! 
 (i) opening entries; (2) current entries; (3) correcting entries; (4) adjusting 
 entries; (5) closing entries. i 
 
 ^ I. Opening entries are those necessary to open accounts with the proprietor 
 for his investment and the assets invested or liabilities assumed by the business. 
 If cash is the only asset invested, the opening entry may be made in the cash book; I 
 but if assets other than cash are invested, it will be made in the general journal. 
 The opening entry in the journal requires a debit to the account with each asset: 
 invested and a credit to the owner's Capital account for the total; also a debit j 
 to the owner's Capital account for any liabilities assumed and a credit to the' 
 account with each liability. j 
 
 Illustration. January 1st J. C. Shook began the retail shoe business. He invested cash, $500.00, 
 merchandise, $425.65, and an account due him from W. H. Barton for $221.75. His Capital account 
 will be credited with the cash in the cash book, but it will be necessary to enter the value of the I 
 merchandise and account in the general journal. The general journal entry is Purchases, Dr., $425.65;! 
 W. H. Barton, Dr., $221.75; and J. C. Shook, Capital, Cr., $647.40, with the appropriate explana-j 
 tion. 
 
 ^2. Current entries are those necessary to record transactions which occur! 
 in the regular operations of the business. When the nature of these is such that! 
 they can not be recorded in the special journals, it is necessary to record them in 
 the general journal. Current entries which may be recorded in the general journal 
 include returned sales, returned purchases, credits to customers when assets other] 
 than cash are received in payment of accounts, and debits to creditors when assets.; 
 other than cash are given in payment of accounts. 
 
 Illustration. May 12th George A. Douglas purchased from the Potter Shoe Co. two pairs 
 shoes at $8.50, with the privilege of returning one pair within five days. His account was debited 
 in the sales journal with $17.00, the value of the shoes. May 15th he returned one pair and asked 
 for credit for $8.50. The entry required in the general journal is Sales, Dr., $8.50, and George A. j 
 Douglas, Cr., $8.50, with the appropriate explanation. 
 
 ^ 3. Correcting entries are those which are necessary because of errors in ' 
 recording or posting transactions. If an error is made in the calculations of a salei 
 and the customer is charged $10.00 in excess of the amount ot the sale, the correct- j 
 ing entry in the journal will require a debit to the Sales account and a credit to the] 
 account with the customer. If a sale is recorded correctly, but posted to the ! 
 account with a customer other than the one who made the purchase, the correcting : 
 entry in the journal will require a debit to the account with the customer who ' 
 made the purchase and a credit to the account with the customer who was debited ] 
 in error. 
 
 Illustration. April i6th C. A. IMoore purchased from Dawes Bros., retail tire dealers, two 
 32 X 33H Fisk cord tires at $22.75. The transaction was recorded in the sales journal by the book- 
 keeper for Dawes Bros, but, through an error, was extended as $47.50 instead of $45.50; hence Mr. 
 Moore's account is charged with an amount in excess of the agreed purchase price of the tires. Later 
 Mr. Moore reported the error and asked the bookkeeper to credit his account with the amount of 
 the excess charge. The entry can not be made in the purchases journal because nothing was pur- 
 chased; it can not be made in the sales journal because the Sales account is credited for the total of 
 the amounts entered in it; it can not be made in the cash book because no cash was received or paid. 
 The general journal entry will be Sales, Dr., $2.00, and C. A. Moore, Cr., $2.00, with the appropriate 
 explanation. 
 
RECORDL\G TRANSACTIONS. 57 
 
 % 4. Adjusting entries are those necessary to transfer the balance of one 
 account to another, and to place in the ledger assets belonging to the business 
 but not shown in the ledger, and liabilities owed by the business but not shown 
 in the ledger. These will be explained and illustrated in subsequent chapters. 
 
 TI 5. Closing entries are those necessary to transfer the balance of those 
 accounts showing the profits and losses to the owner's Capital account in order 
 that it will show the net profit or loss. These will be explained and illustrated in 
 subsequent chapters. 
 
 TI 6. Posting from the General Journal. Each amount entered in the debit 
 column is posted to the debit side of the account written on the same line with it. 
 Each amount entered in the credit column is posted to the credit side of the account 
 written on the same line with it. The process is the same as that given in §24. 
 
 Exercise No. 24, Purchases Journal, Sales Journal, General Journal, and 
 
 Cash Book. 
 
 Record in the purchases, sales (Illustration No. 19), and general journals and 
 the cash book, the following transactions performed during the month of February 
 by Donald D. Sells, a retail hardware merchant: 
 
 Feb. I. Donald D. Sells invested $3,000.00 in the hardware business. 
 
 2. Bought from Moore & Moore, City, on account, merchandise, $187.65. 
 
 Enter in the purchases journal as Purchase No. I and number succeeding entries in this 
 journal in regular order. 
 
 3. Sold J. C. Mason, City, on account, four kegs nails at $4.50 each. 
 
 4. Paid Davis Bros., City, $281.36 for a cash purchase of merchandise. 
 Enter on the payments side of the cash book as a debit to the Purchases account. 
 
 5. Paid $25.00 telephone rent for three months in advance. 
 
 6. Bought from the Pickering Hardware Co., Dan^'ille, on fifteen days' 
 
 time, merchandise, $321.97. 
 Paid Moore & Moore $100.00 on account. 
 
 8. Received $116.50 for cash sales. 
 
 9. Sold Walter Love, Riverside, on account, one saw, $5.00; one corn 
 sheller, $37.25. 
 
 10. Bought from Johnson Bros., Dayton, on fifteen da\'s' time, merchandise 
 
 $261.85.^ 
 Received $18.00 from J. C. Mason in full of account. 
 
 1 1. Paid Moore & Moore $87.65 in full of account. 
 
 12. Sold J. C. Miller, City, on account, 100 lbs. lead at 8c; 4 doz. picks at 
 
 $14.50 per doz. 
 
 13. Received $106.95 for cash sales. 
 
 Gave Walter Love credit for $5.00, value of the saw sold him on the 9th 
 and returned by him per agreement. 
 
 15. Received $20.00 from Walter Love to apph- on account. 
 
 16. Paid clerk's salary, $30.00. 
 
 17. Bought from Donaldson Bros., Mooresville, on account, merchandise, 
 
 $321.85. 
 
 18. Sold Central Construction Co., Arlington, on account, 3 doz, shovels 
 
 at $9.00 per doz. ; 5 doz. picks at $14.00 per doz. ; 6 scrapers at $38.50 
 each. 
 
 {Concluded on page 58.) 
 
58 RECORDING TRANSACTIONS. 
 
 {Exercise No. 24 — Contmued from page 57.) ■ 
 
 19. Paid Pickering Hardware Co. $321.97 in full of account. 
 
 20. Received $15.60 cash from Davis Bros, for three kegs of nails purchased 
 
 from them on the 4th and returned by us per agreement. 
 Paid Johnson Bros. $150.00 on account. 
 22 Received $125.25 for cash sales. 
 
 24. Donaldson Bros, have allowed us credit for $32.60, cutlery purchased 
 
 from them on the 17th and returned by us per agreement. 
 Sold Walter Love, Riverside, on account, i Studebaker wagon, $125.00. 
 Paid Johnson Bros. $100.00 to apply on account. 
 
 25. Purchased from the Pickering Hardware Co., Danville, on fifteen days' 
 
 time, merchandise, $127.50. 
 
 26. Received $17.25 from Walter Love in full for the corn sheller sold him 
 
 on the 9th. 
 
 27. Received $121.85 for cash sales. 
 
 28. Paid rent, $50.00; clerk's salary, $30.00. 
 
 When the above transactions have been recorded in the four books of original 
 entry, prove cash (balance, $2,365.42) and rule the cash book as in Illustrations Nos. 
 22 and 23. Open accounts on a sheet of ledger paper with Cash (8), J. C. Mason 
 (5), Walter Love (7), J. C. Miller (5), Central Construction Co. (5), Moore & 
 Moore (6), Pickering Hardware Co. (6), Johnson Bros. (6), Donaldson Bros. (5), 
 Donald D. Sells, Capital (8), Sales (10), Purchases (10), Expense (8), allowing for 
 each account the number of lines indicated ; post from the books of original entry, 
 and take a Trial Balance of totals. 
 
 Retain the ledger and Trial Balance for use in Exercise No. 38. 
 
 Exercise No. 25, Purchases Journal, Sales Journal, General Journal and 
 
 Cash Book. 
 
 Record in the purchases, sales (Illustration No. 20), and general journals an "I 
 the cash book, the following transactions performed during the month of October 
 by H. A. Popp, a retail coal dealer: 
 
 Oct. I. H. A. Popp invested $1,000.00 in the retail coal business. 
 
 3. Bought from the Central Coal Co., Jerseyville, on ten days' time, $250.00. 
 Enter in the purchases journal as Purchase No. i and number succeeding entries in this 
 
 journal in reejular order. 
 
 Sold J. C. Miller, City, on account, coal per Sale No. i, $52.50. 
 
 4. Bought from Davis Coal Co., Covington, on account, $175.50. 
 
 5. Paid $10.00 for one month's telephone service. 
 
 6. Bought from Jellico Coal Co., Jellico, on fifteen days' time, $362.75. 
 
 8. Paid the Central Coal Co. $100.00 on account. 
 Received $62.80 for cash sales of coal. 
 
 9. Sold M. B. Wallace, City, on account, coal per Sale No. 2, $30.50. 
 
 10. Paid the Murray Drayage Co. $104.90, freight and drayage bills on coal 
 
 purchased and delivered. 
 Received $151.05 for cash sales of coal. 
 
 11. Sold the Central Hotel, City, on account, coal per Sale No. 3, $242.50. 
 
 12. Paid the Central Coal Co. $150.00 in full of account. 
 
 13. Sold J. C. Miller, City, on account, coal per Sale No. 4, $16.50. 
 
 15. Paid clerk's salary for the first half of the month, $40.00. 
 Received $122.00 for cash sales of coal. 
 
 16. Received $20.00 from M. B. W'allace on account. 
 
 18. Paid the Donaldson Coal Co. $400.00 for coal delivered today. 
 
 {Concluded on page 5Q.) 
 
RECORDING TRANSACTIONS. 59 
 
 {Exercise No. 25 — Continued from page =iH.) 
 
 20. Paid the Jellico Coal Co. $150.00 on account. 
 
 The Jellico Coal Co. has allowed us credit for $10.00 overcharge on coal 
 purchased on the 6th. 
 
 22. Received $10.50 from IM. B. Wallace in full of account. 
 
 23. Sold the Central Hotel, City, on account, coal per Sale No. 5, $27.50. 
 
 24. Bought from the Da\'is Coal Co., Covington, on account, $209.38. 
 
 25. Received $135.65 for cash sales of coal. 
 
 26. Allowed the Central Hotel credit for $2.50, error in weight of coal .sold 
 
 them on the 23d. 
 Sold M. B. Wallace, Cit>-, on account, coal per Sale No. 6, $10.00. 
 
 27. Recei\ed $200.00 from the Central Hotel to apply on account. 
 
 29. Sold J. C. Miller, City, on account, coal per Sale No. 7, $40.00. 
 
 30. Received $192.80 for cash sales of coal. 
 
 31. Paid rent, $65.00; clerk's salary for the latter half of the month, $40.00. 
 
 When the above transactions have been recorded in the four books of original 
 entry, prove cash (balance, $834.90) and rule the cash book. Open accounts on a 
 sheet of ledger paper with Cash (8), J. C. Miller (7). M. B. Wallace (7), Central 
 Hotel (6), Central Coal Co. (6), Davis Coal Co. (6), Jellico Coal Co. (6), H. A. Popp, 
 Capital (8), Sales (12), Purchases (10), Expense (8), allowing for each account the 
 number of lines indicated; post from the books of original entry, and take a Trial 
 Balance of balances. 
 
 Retain the ledger and Trial Balance for use in Exercise No. 39. 
 
 QUESTIONS 
 
 1. Describe in detail the labor saved in recording one hundred sales of merchan- 
 
 dise on account in the sales journal instead of the journal. 
 
 2. Describe in detail the labor saved in recording fifty purchases of merchandise 
 
 on account in the purchases journal instead of the journal. 
 
 3. Can you suggest some method of obtaining a copy of a sale made to a customer 
 
 on account w^ithout writing twice the description of the articles sold? 
 
 4. Describe in detail the labor saved in recording one hundred sales in the sales 
 
 journal. Illustration No. 20, instead of the sales journal, Illustration No. 19, 
 provided you have suggested a means of retaining a copy of the items sold 
 without writing them twice. 
 
 5. When is it advisable to record the transactions in a cash receipts journal and 
 
 a cash payments journal? 
 
 6. Is it necessary to enter receipts on the left and payments on the right pages 
 
 of a cash book? 
 
 7. Describe in detail the method of proving cash. 
 
 8. Would you consider it advisable to pro\e cash before posting? Give reason 
 
 for your answer. 
 
 9. Describe in detail the method of recording a purchase of merchandise for 
 
 cash in the cash book and the purchases journal. 
 
 10. Describe in detail the method of entering a cash purchase in the cash book 
 
 only. 
 
 11. What account is debited and credited when the total cash receipts and cash 
 
 pa^-ments are posted at the end of the month? 
 
 12. Name the account debited when the total of the purchases journal is posted 
 
 at the end of the month. What accounts show the credits? 
 
 13. What account is affected when the total of the sales journal is posted at the 
 
 end of the month? How? 
 
6o RECORDING TRANSACTIONS. 
 
 14. Why is it necessary to post the total of the purchases journal and the total ot 
 
 the sales journal at the end of the month? 
 
 15. If the difference between the two sides of the cash book is greater than the 
 
 cash on hand, what does this indicate? 
 
 16. If the difference between the two sides of the cash book is less than the cash 
 
 on hand, what does this indicate? 
 
 17. If you were keeping books for a retail drug store and the difference between 
 
 the two sides of the cash book was $10.00 more than the cash on hand, 
 what entry would you make for this $10.00? 
 
 i(S. Have you seen a cash register in operation? If so, can you explain its con- 
 nection with the entries in the cash book? 
 
 iq. What does the total of the debit side of the cash book show? 
 
 20. What does the total of the credit side of the cash book show? 
 
 21. W'hat does the total of the debit side of the Cash account in the ledger show? 
 
 22. What does the total of the credit side of the Cash account in the ledger show? 
 
 23. Will the balance of cash on hand, as shown by the cash book on December 31, 
 
 1 92 1, show the same amount as the balance of the Cash account in the 
 ledger which shows a record of cash transactions from January i, 1921 to 
 December 31, 1921? 
 
 24. What additional information, which is not shown in the cash book, does the 
 
 ow'ner of a business obtain from the totals of the two sides of the Cash 
 account in the ledger? 
 
 25. Name some of the transactions which the bookkeeper for a retail jewelry- 
 
 business might enter in the general journal. 
 
 * 
 
Vx