£" ° UC-NRLF t - Z-W 1 B 4 57^ 515 U j3o oj£)fe e P in g X ' GIFT OF fo^t\<\ ^VUl!* Viuu^ £i Errata Page 19, Section 61. After the transaction of May 4, insert the following: May 4. Sold to B. F. Parker, on account, 50 yds. Empress cloth at $1.35. Page 33. The transaction of May 18 should read: Bought from Marshall Field & Co., 400 yds. Silk Organdie at 22c. Page 90. After the transaction of September 5, insert the fol- lowing: September 6. Bought from C. R. Langley, on account, merchandise valued at $Sf>7. AN INTRODUCTORY COURSE S LOC KYEAR' BOOKKEEPING By M. H. LOCKYEAR President (1909-10) National Commercial Teachers' Federation President (1907-08) National Business Teachers' Association Script I /lustrations By F. B. COURTNEY THE GREGG PUBLISHING COMPANY NEW YORK CHICAGO H^ 3^ THE evolution through which the office methods of this country are passing is recognized by the leading publishers of text- books and requires constant change in our methods of teaching. There is a tendency to force upon the schools bookkeeping texts which are too advanced for beginners. Busi- ness teachers should insist on texts which furnish a thorough training in the principles of bookkeeping and which lay a firm and solid foundation in the elementary principles before taking up matters which properly be- long to advanced bookkeeping. When the foundations are secure, a limited amount of advanced bookkeeping may be added to the course, but this should be of secondary im- portance. _ M IL LOCKY EAR. In his Address as President of the National Business Tearr.ers' Association. 1908. Copyright. 1907. by M. H. Lockyear. Copyright, 1911. by The Gregg Publishing Company. CONTENTS PACK First Lesson The Object of Bookkeeping 1 The Cash Account 2 Fruit and Confectionery Transactions 4 Second Lesson The Merchandise Account 6 Merchandise Account with Inventory 7 Coal and Wood Transactions 9 Third Lesson Double Entry Bookkeeping. .• 11 Dress Goods Transactions 13 Statement Introduced 13 Fourth Lesson Personal Account Showing a Resource 15 Personal Account Showing a Liability 16 Grocery Transactions 18 Fifth Lesson Cash, Merchandise, Personal, and Proprietor's Stock Account 19 The Trial Balance 20 The Complete Statement 22 Dry Goods Transactions 23 Sixth Lesson Bills Receivable Account 25 Bills Payable Account 28 Seventh Lesson The Expense Account 31 Dry Goods Transactions 32 Rules of Debit and Credit 35 Eighth Lesson The Proprietor's Investment Account 37 Partnership Accounts 39 Interest and Discount Account 41 Rules of Debit and Credit 43 314609 CONTENTS— Continued PAGE Ninth Lesson Interest Bearing Notes 44 Compound Entries 46 Seed and Grain Transactions 49 Tenth Lesson Exercise in Closing the Ledger 51 Classification of Accounts 53 Closing the Ledger 53 The Second Trial Balance 56 Eleventh Lesson The Journal . 57 Posting 60 Exercise in Journalizing 62 Twelfth Lesson The Cash Book 65 Posting from the Cash Book 68 Jewelry Transactions 69 Thirteenth Lesson The Sales Book 70 The Purchase Book 72 Carpet and Furniture Transactions 73 Fourteenth Lesson The Cash Journal 77 Special Column Books 81 Controlling Accounts 81 Tea and Coffee Transactions 83 Fifteenth Lesson Shipment and Consignment Accounts 87 Commission Transactions : 90 Rules of Debit and Credit 91 Opening Entries 92 Merchandise Discount 93 Sixteenth Lesson Maturity of Notes 96 Discounting Promissory Notes 97 Drafts and Their Use 99 General Review Exercise 101 Hardware Transactions 103 iv First Lesson The Cash Account 1. Bookkeeping is a systematic method of recording business transactions. 2. The object of bookkeeping, or account keeping, is to furnish the proprietor with information about the business which will enable him to determine at any time who is owing him money and to whom he is indebted, the amount of property bought and sold, the expenditures and income of the business, cash on hand, and many other details of importance in the successful management of any enterprise. 3. As the results shown by a set of books are obtained from the various accounts, it follows that the first step in learning bookkeeping is to study the form and purpose of accounts. The form, or manner, of keeping all accounts is practi- cally the same ; but each has a purpose distinctly its own. 4. An account is a collection of debits and credits, under an appropriate title, relating to the same person or thing. 5. Accounts are kept in a book called the ledger, and it is necessary for you to study carefully the form of this book. The following illustration shows the form of the standard ledger account : Form of Ledger Account ^r*^rt~*&->&c*'e?ris - **~ -6^ se-^e- -0^€^-i-^^ I £srCZ* 2%wZi s^)a y £^di£cz*T-ei£*rris ■& m3i£- ^/JUc^a^^ L-e-rCZ^ Illustration No. 1 Observe that the account is divided in the center by the three-line ruling into two equal parts, similarly ruled, the left half being the debit side and the right half the credit side. 6. Reading the columns of the left half of the account from left to right, notice that the first two are used for the month and day ; the third is for explana- tions of the various transactions; the fourth is the folio column; while the fifth, which includes the space between the two-line ruling and the three-line ruling, is 1 2 LOCKYEAR'S .BOOKKEEPING the money column. Notice that it has a place for dollars and a place for cents. The uses of the explanation column and the folio column will be explained later. 7. By the term cash we mean everything that is considered as money ; such as gold, silver and coins, paper money of all kinds, bank drafts, checks, express and postofhce money orders, etc. 8. A business transaction is an exchange of value between persons. Study the method of entering these cash transactions in the model Cash account on this page. Transactions Illustrating Cash Account June 1 Amount of cash on hand $1,200.00 June 2 Paid cash for rent of warehouse for 1 month 20.00 June 3 Paid cash for invoice of goods bought from R. P. Sloan 255.00 June 3 Paid cash for merchandise 7.92 June 4 Sold merchandise for cash 180.00 June 4 Received cash for sale to A. G. Link 2.96 June 6 Paid cash for merchandise 105.41 June 7 Received cash for merchandise 138.00 June 7 Paid James Kinney one week's wages 8.00 June 8 Gave O. R. Johnson check for merchandise 13.44 June 9 Paid for repairs 3.75 June 10 Received check for merchandise 5.40 June 10 Sold for cash bill of goods amounting to 44.00 June 13 Paid cash for merchandise 230.85 June 14 Bought a horse and wagon for cash 175.00 / / 7-00 / #0 * J 7 > / 3 ? r 7 /J 3 4^/ /J~ A^tZ^CZ^l^SS ■ /*^kz^c 77 J-a ^7 y g^7 Illustration No. 3 6 r *J~ / 6 ? o /r /J £1 J ~£o j~a LOCKYEAR'S BOOKKEEPING 7 18. Observe the following: How many tons of coal were bought? How many tons were sold? Find the gain. 19. Deductions made from the foregoing transactions : (a) The account is debited for all merchandise bought. (b) The account is credited for all merchandise sold. (c) The amount of gain or loss is the difference between the two sides of the account — a gain if there be a credit excess, a loss if there be a debit excess. 20. When the Merchandise account shows a gain, it is closed by writing on the debit side, in red ink, the word "Gain" and the amount thereof. Illustra- tion No. 3 shows the manner of closing the Merchandise account when all goods have been sold and there is a gain. 21. If the coal had been sold for less than cost, the credit side of the account would be the smaller. In that case you would close the account by writing on the credit side in red ink the date and the amount of the loss. 22. Notice that the balancing amount, which would be the loss or the gain, is not carried below the double rulings. Its disposition will be explained in an- other lesson. Merchandise Inventory, Freight and Drayage 23. The purpose of the Merchandise account is to show the cost of goods purchased and the returns from sales, in order to ascertain the gain or loss on trading. The original cost of the goods is not the only item that must be con- sidered. There are incidental charges such as freight, drayage, expressage, etc., which increase the cost of the goods. These charges are often debited direct to the Merchandise account. If it is desired to know the exact amount paid for these additional charges, a separate account may be opened in the ledger for each. When this is done, these accounts should be transferred to the Merchandise account at the time of closing the books. 24. Merchandise Account with Freight and Drayage Charges and an Inventory. In the following exercise you will enter freight, drayage, ex- pressage, etc., in the Merchandise account. Merchandise Account with Inventory May 11 Bought of John Archibold Coal Co.. 8 T. coal at $1.70 $13.60 May 11 Paid freight on above 2.00 May 12 Sold 4 T. coal for cash at $3.00 12.00 8 LOCKYEAR'S BOOKKEEPING May 13 Sold 2 T. coal on account at $2.90 5.80 May 13 Bought 10 T. coal from Green River Coal Co. for cash at $1.75 17.50 May 13 Paid freight on above 2.25 May 14 Sold 8 T. coal for cash at $3.10 24.80 May 14 Paid for hauling 1.00 May 16 Bought from the S. W. Little Coal Co., for cash, 16 T. coal at $2.00 32.00 May 17 Sold on account 9 T. coal at $3.25 29.25 May 18 Sold for cash 2 T. coal at $3.25 6.50 T- 7 /fZcz^if // /-/ /J /J /r *1 6 f£ j~0 JjT Illustration No. 4 Note: The above illustration shows the account when not written at the top of the ledger page. 25. Observe the following: How many tons of coal were bought? How much was paid for it? What was the total cost? How many tons were sold? How much was received for it? How many tons are on hand? If the coal on hand should be sold at cost, $2.00 per ton, what would be the amount of profit on the coal already sold? 26. A merchandise inventory is a schedule of goods on hand ; the value being usually computed at cost price. 27. In order to determine the gain or loss on merchandise sold, it is neces- sary to take into account the inventory (the unsold goods) which in the above illustration is nine tons. It is assumed that this amount is sold for $2.00 a ton, which is the original cost. Adding the inventory value, $18.00, to the credit side of the Merchandise account is equal to selling the goods at cost. Now, the dif- ference between the two sides of the account will show the gain or loss on the merchandise actually sold. LOCK YEAR'S BOOKKEEPING 9 Another explanation for entering the inventory at cost on the credit side is that this amount offsets an equal amount entered on the debit side of the account when the goods were purchased, and thus the remaining entries in the account represent the cost and returns of the goods disposed of. 28. In closing the Merchandise account the inventory is brought down on the debit side under the double rulings. The account then shows the value of the goods on hand at that time. Subsequent purchases will be entered on the debit side of the account as before. Exercise No. 3 29. Prepare a Merchandise account from the following transactions, using a sheet of ledger paper, and hand to your teacher. Assume that you are dealing in coal and wood. Coal and Wood Transactions June 1 Buy from National Coal Co., on account, 8 T. coal at $1.70 $13.60 June 2 Buy from Helfrich Lumber Co., for cash, 10 cds. wood at $1.25 12.50 June 2 Sell at retail, for cash, 4 T. coal at $2.60 10.40 June 3 Buy 12 T. coal from St. Bernard Coal Co., on account, at $1.75 21.00 June 3 Pay freight on the above 4.00 June 3 Sell at retail, for cash, 6 cds. wood at $2.25 13.50 June 3 Pay yard rent 3.00 June 4 Buy from John A. Reitz & Sons, for cash, 15 cds. wood at $1.10 16.50 June 4 Sell at retail, for cash, 7 cds. wood at $2.50 17.50 June 4 Sell at retail, for cash, 4 T. coal at $3.00 12.00 June 6 Pay cash for hauling wood 2.00 June 6 Sell at retail, on account, 2 T. coal at $2.90 5.80 June 6 Sell at retail, for cash, 3 cds. wood at $2.85 8.55 June 7 Pay for repairs on shed 1.50 June 7 Buy from St. Bernard Coal Co., on your note, 10 T. coal at $1.80 18.00 June 7 Sell at retail, for cash, 4 T. coal at $3.10 12.40 June 8 Sell at retail, for cash, 4 cds. wood at $2.50 10.00 June 9 Sell at retail, for cash, 6 T. coal at $3.50 21.00 June 9 Sell at retail, for cash, 2 cds. wood at $2.75 5.50 June 10 Buy from the Helfrich Lumber Co., for cash, 12 cds. wood at $1.20 14.40 June 11 Sell at retail, for cash, 5 cds. wood at $2.60 13.00 30. When the account is completed carry out the following instructions : (a) Find the cost of the coal and the wood. (b) Find the total expense incurred in running the business. (c) Find the amount for which the coal and the wood were sold. (d) Find the number of tons of coal and the number of cords of wood on hand. 10 LOCKYEAR'S BOOKKEEPING (e) Inventory the coal on hand at $1.85 per ton, and the wood on hand at $1.20 per cord. (/) From these facts find the amount of gain or loss. (g) Close the account as shown in Illustration No. 3. Exercise No. 4 31. Take a sheet of ledger paper, rule it in ledger form, and prepare a Merchandise account from the transactions given below. When completed hand to your teacher. Do not lose sight of the important fact that clean, accurate work is imperative. Let this work represent your best efforts. Fruit Transactions June 1 Buy 15 bunches bananas at $1.25 $18.75 June 1 Buy 10 boxes oranges at $1.80 18.00 June 2 Sell 2 bunches bananas at $1.80 3.60 June 2 Buy 8 boxes lemons at $1.90 15.20 June 2 Sell 3 boxes oranges at $2.60 7.80 June 3 Sell 3 boxes lemons at $2.70 8.10 June 3 Pay rent 6.00 June 3 Sell 6 bunches bananas at $1.90 11.40 June 4 Sell 4 boxes oranges at $2.90 11.60 June 4 Pay freight bills 2.30 June 4 Buy 15 bunches bananas at $1.15 17.25 June 4 Pay cash for drayage 50 June 4 Sell 2 boxes lemons at $2.90 5.80 June 6 Buy 15 boxes lemons at $1.60 24.00 June 6 Pay freight bills 1.80 June 7 Sell 6 boxes lemons at $2.75 16.50 June 7 Sell 7 bunches bananas at $2.00 14.00 June 8 Sell 8 bunches bananas at $1 .85 14 80 June 8 Sell 4 boxes lemons at $2.80 11.20 32. Inventory the bananas on hand at $1.25 per bunch ; the oranges at $1.80 per box; and the lemons at $1.75. Close the account as shown in Illustration No. 4. 33. Answer the following questions in writing and hand to your teacher: (a) Write the rules for debiting and crediting Merchandise. (b) What facts are shown by the Merchandise account? (c) Why are freight and drayage items charged to Merchandise account ? (d) Under what conditions does the account show a gain? A loss? (e) How is the gain or loss ascertained when there is an inventory? Third Lesson Double Entry Bookkeeping 34. The work up to this point has dealt with but one account at a time, but this lesson will deal with two accounts. Its purpose is to develop the principle of Double Entry Bookkeeping. This principle is briefly stated as follows: when- ever an account is debited some other account is credited with an equal amount. 35. The following rules of debit and credit have been observed : (a) The Cash account is debited with amount of cash on hand at beginning of business and with all cash received, and credited with all cash paid out. (b) The Merchandise account is debited with the amounts of the various purchases and other items of cost, such as freight, drayage, etc., and for goods returned to us. It is credited with the amounts of the various sales, and with goods we return to others. 36. The illustrations on the next page show the manner of keeping a Cash and a Merchandise account. Read the several transactions and observe that cash and merchandise are involved in each and that the same amount is entered in each instance in both accounts, but on opposite sides. Apply the above rules to each transaction. Transactions Illustrating Cash and Merchandise Accounts June 1 Amount of cash on hand $425. (You will enter this item on the debit side of the cash account only. All other transactions will require a corresponding credit for every debit.) June 1 Bought for cash 130 yds. Black French Voile at 70c. June 1 Bought for cash 150 yds. German Broadcloth at $1.25. June 2 Sold for cash 45 yds. Black French Voile at 90c. June 2 Sold for cash 30 yds. German Broadcloth at $1.70. June 2 Sold for cash 25 yds. Black French Voile at 90c. June 3 Bought for cash 30 yds. Black French Voile at 70c. June 3 Sold for cash 50 yds. Black French Voile at 90c. June 3 Paid for freight on goods received on the 1st inst, $3.70. June 4 Received cash for 40 yds. German Broadcloth at $1.70. June 4 Paid cash for 5 yds. Black French Voile, returned by customer, at 90c. 11 12 LOCK YEAR'S BOOKKEEPING June 4 Received cash for 55 yds. German Broadcloth at $1.70. June 6 Sold for cash 10 yds. Black French Voile at 90c. June 6 Sold for cash 25 yds. German Broadcloth at $1.70. June 6 Received cash for 35 yds. Black French Voile at 90c. ■JT/ 6? -J / rxr J~a J~0 ^r~3-6 ,$■& Illustration No. 5 / r 7 >/ J r^r 4/ &3 J-0 4£<7J-0 6? 7 Illustration No. 6 Exercise No. 5 37. Take a sheet of ledger paper, and prepare a Cash and a Merchandise account from the transactions given on the next page. LOCKYEAR'S BOOKKEEPING 13 July 1 July 1 July 1 July 1 July 2 July 2 July 2 July 2 July 3 July 3 July 3 July July July July July Dress Goods Transactions Amount of cash on hand (Debit cash only), $300. Bought for cash 125 yds. Black Panama at 70c. Paid cash for drayage on above, 50c. Bought for cash 80 yds. Cashmere at 15c. Sold for cash 20 yds. Black Panama at 95c. Bought for cash 150 yds. Mohair Brilliantine at 60c. Sold for cash 10 yds. Cashmere at 25c. Received cash for 90 yds. Mohair Brilliantine at 90c. 3 Paid cash for freight and drayage on above, 3.60. 3 Sold for cash 18 yds. Mohair Brilliantine at 90c. 3 Sold for cash 25 yds. Black Panama at 95c. Balance and rule the Cash account. Do not close the Merchandise account. 5 Sold for cash 30 yds. Cashmere at 25c. Received cash for 22 yds. Mohair Brilliantine at 90c. Bought for cash 10 yds. Mohair Brilliantine at 60c. Sold for cash 40 yds. Black Panama at 95c. Sold for cash 20 yds. Cashmere at 25c. The resources of a business are everything of value belonging to the business, as money, merchandise, real estate, fixtures, or other property and amounts owed by others to the proprietor. 39. By gain is meant the profits obtained by selling goods for more than their cost, interest received on notes or other debts owed to the proprietor, discounts allowed to him by others, rents paid to him by others for the use of his prop- erty, etc. 40. Determine how many yards of each kind of dress goods you have on hand, and compute the value of the inventory at cost price. 41. Make out oh journal paper and fill in with the proper figures a form like the one below. Note: The amounts given in the model statement are simply for your guidance in writing the figures in their proper places. Illustration No. 7 ?^a a /^T^y <7 >6 >^ />J?ZZ^^S>^C-£s /> £ 7 < ^S^£ : ■2-7 ,£4 ?7\ 3 r // /r "7 A=?-iz^£-izsrL*!~c^ / Illustration No. 8 51. Observe the following: What is a resource? (See Section 38.) Why does the above account show a resource? Personal Account Showing a Liability 52. Liabilities are the debts of a person or a business. * Z^ZL 7 July 1 July 2 July 5 July 8 July 9 July 11 July 15 Transactions with Parsons & Scoville Co. Buy merchandise on account from the Parsons & Scoville Co $62.00 Buy from them, on account, merchandise amounting to 12.00 Sell them merchandise on account 48.00 Pay them cash on account 12.50 Buy from them, on account, invoice of goods amounting to 23 00 Pay them cash on account 20.00 Buy merchandise from them, on account 7.20 LOCKYEAR'S BOOKKEEPING 17 '%-*? 3%*&L^ r // / ZrXO ' )^7 /\^zz^-ezsrt-- >3 >jya Illustration No. 9 53. Deductions made from the foregoing transactions : (a) Debit Persons : 1. For any goods or property sold them on account. 2. For all cash paid them on account. (b) Credit Persons: 1. For all goods or property you buy of them on account. 2. For all payments received from them on account. (c) When the debit side of a personal account is the greater, the account represents a debt due the business. This is a resource. (d) When the credit side is the greater, the account represents a debt owing by the business. This is a liability. 54. Balancing the personal account. (a) When a personal account balances, that is, when both sides are equal, the account is ruled up. Then neither party owes the other and the account is said to be "closed." (b) As a rule personal accounts are not "balanced" and ruled up until they are settled in full, but it is often desirable to do so, especially when it becomes necessary to transfer the account to a new page or to a new ledger. 55. Observe the following : Who owes the $23.70? What is the purpose of the personal account? Which side of a personal account is the larger when a person owes you? When you owe him? 18 LOCK YEAR'S BOOKKEEPING Exercise No. 6 56. Prepare a personal account with John Smith from the following trans- actions. Grocery Transactions July 1 Sold him on account 30 boxes Jap Rose Soap at $1.00. July 2 Bought from him on account 5 boxes Ivory Soap at $4.50. July 5 Received from him on account 3 boxes American Family Soap at $1.90. July 5 Sold him on account 1 bag, 135 lbs. Santos Coffee at 18c. July 8 Received from him on account 10 cases Arm & Hammer Soda at $3.30. July 13 Sold him on account 4 cases Menier Cocoa at $3.25. July 15 Received from him on account 4 boxes Ivory Soap at $4.50. July 16 Pay cash in full of account. Rule the account. July 19 Sold him on account 2 bags Maracaibo Coffee, 140 lbs. at 22c. July 20 Received cash on account $12.00. July 22 Received on account one case Baker's Chocolate, $4.50. July 25 Sold him on account one barrel Granulated Sugar, $15.00. July 27 Sold him on account 120 lbs. English Breakfast Tea at 90c. 57. Directions for proceeding with the exercise : (a) Add both sides of the account. Who owes the balance? Is it a resource or a liability? Why? (b) Balance and rule the account as shown in illustration No. 8. (c) Hand your work in for inspection. 58. Answer the following questions in writing and hand to your teacher : (a) Write the rule for debiting and crediting a personal account. (&) If the debit side of a personal account is greater than the credit side, does it show a resource or a liability? Why? (c) What term is used to express buying or selling on credit? Fifth Lesson Cash, Merchandise, Personal and Proprietor's Stock Account 59. It is customary to keep a proprietor's stock account for the purpose of showing his present worth. At the beginning of business this account is credited with the amount of the investment and throughout the course of busi- ness is credited for any other amounts that may be invested ; it is debited with the various withdrawals that may be made by the proprietor. 60. It is also customary at various times to close the books for the purpose of determining the net gain or net loss of the business. If the business shows a net gain the proprietor's stock account is credited with the amount, and this, plus the amount of investment, is his Present Worth. On the other hand, if the business shows a net loss the proprietor's stock account is debited with the amount, and the investment, less this amount, is his Present Worth. 61. The illustration on the next page shows the manner of keeping a Mer- chandise, a Cash, a Personal, and a Proprietor's stock account. Observe that it is Double Entry work, every transaction affecting two accounts. The business was begun with a cash investment of $800. By this is meant that $800 was put into the business. J. D. Sims was the proprietor. Transactions Illustrating the Double Entry Principle May 1 Amount of cash on hand, $800.00. May 1 Bought for cash 50 yds. Empress cloth at $1.05. May 1 Bought from B. F. Parker, on account, 100 yds. Broadcloth at $2.10. May 2 Sold to Charles Johnson, on account, 25 yds. Empress cloth at $1.35. May 3 Paid B. F. Parker cash to apply on account, $150.00. May 4 Bought for cash 75 yds. Empress cloth at $1.05. May 6 Bought from Charles Johnson, on account, 10 yds. Broadcloth at $2.10. May 6 Sold for cash 50 yds. Broadcloth at $2.95. May 7 Sold Charles Johnson, on account, 20 yds. Empress cloth at $1.35. May 8 Sold for cash 15 yds. Broadcloth at $2.95. May 9 Received cash from Charles Johnson, on account, $10.00. May 9 Bought from B. F. Parker, on account, 50 yds. Empress cloth at $1.05. 19 20 LOCKYEAR'S BOOKKEEPING Jx^- a^JZ^fz^z^/ J<^7^?--^^/-^^£^--' & ~y 2^ SsZea^zY jfec^y /;/£> /a ., (£2, ?-./# J~~0 „ (*ls ACS' J~0-y^pCJ (£), y.Jj ^Z&^t-cA. z / y.J~X S3r^- «s *9v^£\'. 7*~ /7 ?- 2-< "? 7 7 7 ^£~KsZ/-£ r £/.>rr?. . r- / j-0 „ (^ >:0J~ >o 7 k 7~r~ 3 J s '/7 *7 J 2- Illustration No. 10 The Trial Balance 62. You have observed in a study of the foregoing illustrations, that the amount involved in each transaction is entered in two accounts, and in every instance on opposite sides. In other words, every debit has a credit. (See Third Lesson, Section 34.) This being true, it is obvious that the sum of the debits of all the accounts equals the sum of the credits of all the accounts, if the entries have been properly made. LOCKYEAR'S BOOKKEEPING 21 63. The Trial Balance is a test to ascertain if the total debits in the ledger equal the total credits. The trial balance does not prove that errors have not been made in computations, entering a debit or credit item on the proper side of the ledger but in the wrong account, etc. Method of Taking a Trial Balance 64. Learn to do your work systematically and in order. The force of this admonition will be more fully appreciated should you at any time have difficulty in getting your trial balance. In most instances, this difficulty may be traced to carelessness. 65. The following is the manner of taking the trial balance : (a) Foot both sides of each account and place pencil footings in small figures directly under the last posted item, as shown in the model accounts. Be sure that your pencil has a sharp point. On a sheet of journal paper place the titles of the accounts and their footings, as shown in the model trial balance. Be very careful not to transpose figures in transferring the foot- ings from the ledger to the trial balance. ~-^^z'~C^Z-^' y^^t^ffz^^t^^e^; ^yc-e^^ £7, / t? — (*) /CS^l^S^^^A— Illustration No. 11 66. If the item $78.75 of May 4 is entered properly in the Cash account, but is entered as $87.75 in the Merchandise account, what effect would it have on the trial balance? 67. Observe the transaction of May 7: "Sold Charles Johnson, on account, 20 yds. Empress cloth at $1.35." If the amount had been entered to the debit of B. F. Parker instead of Charles Johnson, would it affect the trial balance? Why? In case of the above error would the accounts with Charles Johnson and B. F. Parker show the correct results ? 22 LOCKYEAR'S BOOKKEEPING 68. If you have difficulty in getting your trial balance: (a) Verify the footings of the various accounts. (b) Verify the trial balance footing. (c) Determine whether a mistake has been made in transferring the footings to the trial balance. (d) Check the entries from the transactions to determine whether every debit has a credit. In doing this, place a small check mark (V) in the folio column of the ledger account. 69. If the Empress cloth on hand, 80 yds., be inventoried at cost, $1.05 a yd., and the Broadcloth, 40 yds., at $2.10 a yd., the following may be deduced from the business as it now stands : _ 5 ^4^2S^^^-^ 1 *% J-. ^/Lj ^^mj ' -??>> *Cc<£- jgs^z < ^rtS Illustration No. 12 7 2-0 r ?3 7* z_ 70. Observe in the above statement that the present worth is determined in two ways : (a) The resources minus the liabilities equal the present worth. (b) The net gain of the business plus the original investment equals the present worth. LOCKYEAR'S BOOKKEEPING 23 Exercise No. 7 71. In this exercise you are to keep an account with Cash, one with Mer- chandise, one with R. H. Brown, one with A. C. Hunt and a Proprietor's stock account. The title of this latter account will be written thus: (Student's name) Stock. Dry Goods Transactions May 1 Amount of cash on hand $25000 May 1 Buy from R. H. Brown, on account, 90 yds. Irish Dimity at 42c 37.80 May 1 Buy from A. C. Hunt, on account, 100 yds. Chambray at 36c 36.00 May 2 Buy for cash 40 yds. Messaline at 75c 30.00 May 5 Sell to R. H. Brown, on account, 50 yds. Chambray at 48c 24.00 May 6 Sell to R. H. Brown, on account, 20 yds. Messaline at $1.00 20.00 May 6 Pay to A. C. Hunt cash to apply on account 12.00 May 7 Buy from R. H. Brown, on account, 40 yds. Satin Duchesse at 80c 32.00 May 7 Sell for cash 6 yds. Satin Duchesse at $1.20 7.20 May 7 Sell to A. C. Hunt, on account, 45 yds. Irish Dimity at 60c 27.00 May 8 Sell for cash 10 yds. Satin Duchesse at $1.20 12.00 May 8 Sell to A. C. Hunt, on account, 20 yds. Satin Duchesse at $1.20 24.00 May 9 Buy from R. H. Brown, on account, 96 yds. Irish Dimity at 42c 40.32 May 9 Received cash from A. C. Hunt to apply on account 10.00 May 9 Pay R. H. Brown cash to apply on account 10.00 May 11 Sell to A. C. Hunt, on account, 60 yds. Irish Dimity at 60c 36.00 May 11 Pay cash for drayage 75 May 12 Buy from A. C. Hunt, on account, 55 yds. Chambray at 36c 19.80 May 12 Sell for cash 20 yds. Chambray at 48c 9.60 May 13 Buy from R. H. Brown, on account, 20 yds. Satin Duchesse at 80c 16.00 May 14 Sell to A. C. Hunt, on account, 7 yds. Satin Duchesse at $1.20 8.40 May 14 Receive from A. C. Hunt to apply on account 9.00 May 14 Pay cash to R. H. Brown to apply on account 15.00 72. Proceed with the work, following these directions : (a) Take a trial balance, as previously instructed, and hand to your teacher. (b) Find the number of yards of each kind of goods you have left on hand and figure the value of the inventory at the cost price. (c) Find your total resources. (d) Find your total liabilities. (e) From these facts find your present worth. (/) Find your gain. (g) Add this to your investment. (h) Make a statement of your business, using the form shown in Section 69, and hand to your teacher. 24 LOCKYEAR'S BOOKKEEPING 73. Answer the following questions in writing and hand to your teacher: (a) Mention in logical order, the steps to he followed in taking a trial balance. (b) What is the purpose of the trial balance? (c) Where may errors occur which would prevent a balance? (d) Indicate an error which would not prevent a balance. (c) What is meant by resource? Liability? (/) In what two ways may the proprietor's present worth be deter- mined? (g) What is meant by net gain? (A) Is your worth increased or diminished by adding your net gain to your investment? (/) How would a net loss affect your worth? Sixth Lesson Bills Receivable Account 74. A promissory note is the written promise of one person to pay to an- other or to his order a certain sum of money at a certain specified time. 75. The party who promises to pay is known as the maker; the party in whose favor the promise is made is called the payee. Form of Promissory Note « ^^ t ^!^Va*.ij^V^V^T^^*nljV^V^V:^V*^V^VV^^ JLS'. ^ j -^ ; Illustration No. 13 76. A draft is a written order of one party directing a second party to pay to a third party, or his order, a certain sum of money at a certain time. 77. There are three parties to a draft: the drawer, the drawee and the payee. 78. The drawer is the person who issues the draft. The drawee is the person who is directed to pay it. The payee is the one in whose favor it is made. 25 26 LOCKYEAR'S BOOKKEEPING Form of Accepted Time Draft r iV/f: %7 tfiaamwfamtfaAatM^ 9^<2^z^^— (e)J\ P/^A ^ ^ g^ J ^r^ ^f \?^6^.(Z^^ Illustration No. 14 79. A time draft is accepted when the drawee writes across the face of the draft "accepted," the date and his name. By this act he obligates himself to pay it when due and the draft is then called an "acceptance." 80. Notes and due bills signed by other persons and time drafts on other persons, after being accepted by them, are Bills Receivable to the person holding them. 81. The illustration on the next page shows the manner of keeping a Bills Receivable account and the purpose for which it is kept. Observe the entry for each transaction. Transactions with Bills Receivable May 2 Received Harvey Ellison's note in payment for merchandise $210.40 May 3 Received James Barnes' note for 80.00 May 7 Harvey Ellison paid his note due today, in cash 210.40 May 9 Received D. L. Hart's note for bill of goods 89.40 May 14 James Barnes paid on his note 50.00 May 16 Received J. L. Martin's acceptance for merchandise 160.00 May 17 James Barnes paid balance due on his note 30.00 May 19 Received from Chas. Adams his note in payment for merchandise 64.00 May 20 D. L. Hart paid his note, due today, in cash 89.40 LOCK YEAR'S BOOKKEEPING 27 ' '•V */6j 2S^?^-^-^£->5^" <^^z-t/' -2-^. ' <2 ■ \JzZ<>c£e^& Jj^-e^Le^z^- ^r^T^&^y Illustration No. 18 LOCKYEAR'S BOOKKEEPING 55 102. Answer the following questions in writing and hand to your teacher: (a) Write the rules for debiting and crediting Expense. (b) What is the purpose of the Expense account? (c) How is the Net Gain of a business determined? (d) When the Net Gain is known how is the Present Worth de- termined ? (e) In case one fails to get a trial balance what steps should be taken to locate the error? Rules of Debit and Credit 103. Up to this point your work has covered a study of the following ac- counts : Cash, Merchandise, Personal, Bills Receivable, Bills Payable and Ex- pense. Rules of Debit and Credit for these accounts are here given for reference. It is not advised that they be memorized at this time, but they should be remem- bered because they will be used and referred to hereafter. Cash 104. Debit Cash. (a) For amount of cash on hand at beginning of business. (b) For all cash received. 105. Credit Cash. For all cash paid out. Merchandise 106. Debit Merchandise. (a) For the inventory or stock of goods on hand at the beginning of business. (b) For all Merchandise bought. (c) For Merchandise which is returned to us after having been credited to Merchandise. (d) For all charges, such as freight, drayage, etc., unless separate accounts are kept. 107. Credit Merchandise. (a) For all Merchandise Sales. (&) For goods returned by us after having been charged to Mer- chandise. (c) For Merchandise used for private purposes. (d) For money received for Merchandise which has been damaged or destroyed. 36 LOCKYEAR'S BOOKKEEPING Expense 108. Debit Expense. (a) For what is bought to be consumed or used in carrying on the business. (b) For cost of rents, fuel, light, advertising, salaries, etc., when not charged to other accounts. 109. Credit Expense. For anything which is sold that has previously been charged to expense. Bills Receivable 110. Debit Bills Receivable. For notes, time drafts, or any other written obligations received from others. 111. Credit Bills Receivable. For notes, time drafts, or any other written obligations of others when they are paid, discounted or disposed of in any manner. Bills Payable 112. Debit Bills Payable. For our notes, acceptances, or any other written obligations when they are paid. 113. Credit Bills Payable. For our notes, acceptances, or any other written obligations when they are given. Personal Accounts 114. Debit Persons. (a) For what they owe you at the time of opening the account. (b) For any goods or property sold them on account. (c) For all cash paid them on account. 115. Credit Persons. (a) For what you owe them at the time of opening the account. (b) For all goods or property you buy of them on account. (c) For all payments received from them on account. Eighth Lesson The Proprietor's Investment Account 116. As was stated in the Fifth Lesson, Section 59, it is necessary to keep a proprietor's investment account with the person who owns the business, or with each partner, if it be a partnership business. At that point only the purpose of the account was stated ; at this time it is desired to deal with the account more fully, and the following illustrations, if carefully studied, will show the object and the manner of keeping it. Transactions Illustrating the Proprietor's Account 117. It is assumed that A. J. Harter is the proprietor and that his invest- ment amounts to $800. May 2 Amount of investment $800.00 May 5 He withdrew cash from business for personal use 10.00 June 7 He took from the business for family use merchandise amounting to 7.00 June 12 He took cash from the cash drawer to pay house rent 9.50 July 16 He invested in the business 200.00 July 20 He took from the business for family use merchandise amounting to 6.80 July 30 On this date it has been determined that the net gain of the business amounts to 120.00 118. After the net gain has been entered on the credit side of the proprie- tor's account, the account is closed so as to show in a single amount the present worth of the proprietor. Observe the following : The total investment is how much ? The total withdrawal is how much? The present worth is determined how ? Continue the account with the following transactions : August 6 A. J. Harter makes another cash investment $300.00 August 20 He takes cash from the drawer to pay house rent 12.00 Sept. 1 He pays a private debt amounting to 6.00 Sept. 27 He invests cash in the business 80.00 Oct. 12 He takes cash from the drawer for personal expenses 13.75 Oct. 30 At this time it has been found that the business shows a loss of 26.80 37 38 LOCK YEAR'S IK )( )KKEEPING 119. Observe the manner of entering the loss as illustrated in the model account. Note how this differs from the manner of entering a gain. Observe the following : Total of the investment, plus the present worth July 30, is how much ? The cash withdrawn is how much? The cash withdrawals, plus the net cost of goods withdrawn, is how much ? How is the present worth found? Illustration No. 19 120. Deductions made from the foregoing transactions: (a) The proprietor is credited in his account for all that he invests in the business. (b) He is debited for all withdrawals of cash or property for personal use. (c) He is credited for the net gain. (d) He is debited for the net loss. (e) His present worth is the difference between the two sides of the account after the net gain or the net loss has been properly entered. 121. Manner of closing the investment account: (a) The net gain is entered on the credit side by writing the date, net grain and the amount. Li ICKYEAR'S B< M IKKEEPING 39 (b) Next write in red ink on the debit side of the account the date, present worth and amount. (c) If there is a net loss it is entered on the debit side, after which the account is balanced as shown in the latter part of Illus- tration No. 19. (d) After footing and ruling the account the present worth is brought down on the opposite side of the account in black ink. Study carefully the model ledger form for A. J. Harter. Investment Account in a Partnership Business 122. If a business is conducted by two or more partners, separate accounts are kept, each partner being credited with his investments and with his share of the net gain, if the business shows a gain ; and debited with withdrawals and with his share of the net loss, if the business shows a loss. Each partner is also debited with all personal debts assumed or paid by the business. Transactions Illustrating Partnership Accounts May 2 J. W. Carter invests $1,800.00 May 2 M. C. Harmon invests 2,000.00 May 5 J. W. Carter took from the business for family use merchandise amount- ing to 12.85 May 19 M. C. Harmon took cash from the drawer to pay house rent 15.00 June 1 J. W. Carter invests in the business 200.00 June 20 M. C. Harmon took from the business for family use merchandise amount- ing to 13.70 June 27 Paid a personal bill for J. W. Carter 85.00 July 1 Paid premium on insurance policy for M. C. Harmon 35.45 July 30 On this date it is determined that the gain for the three months amounts to 278.00 J^.3/r<2«^^-j£L ■a^yz^cy #<*r • C^LtevJ-sfe/zA- / f* }~0 >yJ ro / > $■ o Illustration No. 22 Note: The explanations "Int. paid," "Disc, allowed," etc., are not a necessary part of the account, but are used to enable the student to understand the account. 42 LOCKYEAR'S BOOKKEEPING 131. Answer the following questions in writing and hand to your teacher: (a) Write the rules for debiting and crediting Interest and Dis- count. (b) What does the debit footing represent? (c) What does the credit footing represent? (d) Does the difference represent a resource, a liability, a loss or a gain? (e) Copy the account on a sheet of ledger paper, balance, and rule it, and hand to your teacher. 132. There is a distinction between interest and discount on commercial paper, and discounts allowed for paying a bill of goods before the expiration of the term of credit and discounts allowed on personal accounts. The latter two properly belong to the Merchandise account. If it is desired to know the exact amount of loss or gain due to such allowances, an account may be opened under the title "Merchandise Discount." If this account is not kept, the discount may be entered direct to the Merchandise account. Exercise No. 12 133. Interest and the various kinds of discounts are often kept in one account under the title "Interest and Discount." You will observe this method in the preparation of an Interest and Discount account from the transactions given below. Transactions with Interest and Discount May 2 I owe the Parsons & Scoville Co., on account, $47.50, due June 1. I pay them $46 in full of account. Discount $1.50. May 3 I give my note at the Old National Bank for $97.50; the proceeds are $95, the interest $2.50. May 5 I pay my note favor J. A. Slocum, face $190, with interest amounting to $12.90. May 7 A. L. Ford owes me on account, due June 10, $28.95. I accept $26 in full of account. Discount $2.95. May 12 C. F. Jones pays his note in my favor, face $237, with interest amounting to $23.45. May 14 I discount Chas. Munford's note at the bank, face $180. Amount of discount $6.40. May 17 I owe the Mackey-Nisbet Co., on account, due June 1. $76.80. I pay them $72 in full of account. Discount $4.80. May 20 J. W. Stone pays his account, $38.75, which was due Feb. 15. Interest on same 90c. May 24 I hold C. W. Johnson's note for $400, due Aug. 1, without interest. I allow a dis- count of $18 and he pays it on this date. May 27 I buy a bill of goods from the Parsons & Scoville Co. amounting to $128.40, due in 30 days. I pay on this date and am allowed a discount of 3 per cent. Balance and rule the account. LOCKYEAR'S BOOKKEEPING 43 134. Answer the following questions in writing and hand to your teacher: (a) The interest paid by you and the discounts allowed by you amount to what? (b) The interest paid to you and the discounts allowed to you amount to what? (c) Is the difference between the two a gain or a loss? Rules of Debit and Credit 135. The following rules for debit and credit of the Proprietor's invest- ment account and Interest and Discount account are for reference. They should be remembered, but it is not necessary to memorize them. Proprietor's Investment Account 136. Debit the Proprietor. (a) For all amounts withdrawn from the business. ( b) For all debts assumed or paid by the business for him. (c) For the net loss of the business. 137. Credit the Proprietor. (a) For amounts invested. (b) For the net gain of the business. Interest and Discount 138. Debit Interest and Discount. (a) For interest paid. (b) For discount allowed by you. 139. Credit Interest and Discount. (a) For interest received. (b) For discount allowed to you. Ninth Lesson Interest Bearing Notes and Compound Entries 140. Promissory notes bear interest only when so stated or after they are due. 141. No entry is made for interest or discount until received or paid. 142. The following transactions illustrate the manner of entering Bills Payable and Bills Receivable when they bear interest. Read each transaction carefully and notice how it is entered in the model accounts. Jan. 2 Jan. 9 Feb. 4 Feb. 7 Feb. 9 Mar. Mar. Mar. Apr. Apr. June June Transactions Illustrating Interest Bearing Notes Give your note, favor Geo. Thomas, for three months, interest at 6 per cent, for $800. Receive from J. W. Wilson his note in your favor, for 1 mo., at 6 per cent, for $900. Give your note, favor Jas. Klein, for 2 mo., interest at 6 per cent, for $400. Receive from S. W. Harris his note, in your favor, for 1 mo., at 6 per cent, for $300. J. W. Wilson pays his note, $900, due this date, with interest $4.50. Note: Observe that Bills Receivable is credited with $900 and that Interest and Dis- count is credited with $4.50. 6 Give your note, favor Geo. Willis, for 3 mo., interest at 6 per cent, for $200. S. W. Harris pays his note, $300, due this date, with interest amounting to $1.50. Receive from J. A. Burns his note, in your favor, for 3 mo., at 6 per cent, for $700. Pay your note in favor of Geo. Thomas, $800, with interest amounting to $12. Pay your note in favor of Jas. Klein, $400, due this date, with interest amounting to $4. 6 Pay your note in favor of Geo. Willis, $200, due this date, with interest amounting to $3. 27 J. A. Burns pays his note $700, due this date, with interest amounting to $10.50. /2Z£/^2^«^ ,«=£- -z^i- i/- v >- Illustration No. 23 44 LOCKYEAR'S BOOKKEEPING 45 j ,. 7 o Illustration No. 24 J0 & o? a a 7° ^dk^z^2^7<-£^^- V^ ls*t*tf J^" V / 3 f / 0 / r0 j V fa J~0 7J- 4Z-4J 7 7 7 J I-- 2^& f £ 300 <& 7S- 7^ 6 o <3~0 / g* 300 *40 *40 Illustration No. 26 Jan. 2 Jan. 2 Jan. 6 Jan. 9 Jan. 11 Jan. 12 LOCKYEAR'S BOOKKEEPING 49 Exercise No. 14 151. In this exercise you are to keep the following accounts: Cash, Mer- chandise, Expense, Bills Payable, Bills Receivable, Interest and Discount, J. B. Reed, W. H. Small & Co., Investment account. The articles handled represent the Seed and Grain business. Your attention should be directed particularly to the transactions involving compound entries. Seed and Grain Transactions Jan. 2 Begin business with cash on hand, $800, and the following stock : 350 bu. wheat, 90 bu. clover seed, 250 bu. oats, 400 bu. corn, the total value being $825. Note: For proper entries for the above, see Section 137, Rule "a," for crediting Investment account; Section 104, Rule "a," for debiting Cash account; and Section 106, Rule "a," for debiting Merchandise account. Pay cash for rent of storeroom, 1 mo., $20. Buy from J. B. Regd, on account, 127 bu. wheat at 75c. Buy from A. P. Taylor, 800 bu. wheat at 80c for your 30-day note at 6 per cent. Sell to W. H. Small & Co., on account, 300 bu. corn at 60c. Sell to Jas. Harter for his 30-day note at 6 per cent, 60 bu. clover seed at $4. Pay J. B. Reed cash, $94, for wheat bought on Jan. 2, a discount of $1.25 being allowed. Note: J. B. Reed's account, being in balance, should be closed. There being but one item on either side, only the two-line ruling is required. It is not necessary to write the footings. Sell to Igleheart Bros, for their 30-day note at 6 per cent, 800 bu. wheat at 95c. W. H. Small & Co. pay cash, $178, in full of account, a discount of $2 being allowed. (Close the account.) Buy from Jas. Barnes 160 bu. clover seed at $3 for your 30-day note at 6 per cent. Pay drayage bills for mo., $12.40. Buy from J. B. Reed, on account, 600 bu. corn at 45c. Pay cash for rent of storeroom, 1 mo., $20. Pay cash for your note in favor of A. P. Taylor with interest. Sell to W. H. Small & Co., on account, 200 bu. oats at 35c. Jas. Harter pays cash for his note with accrued interest. Sell to E. L. Emerson for his 30-day note at 6 per cent, 100 bu. clover seed at $4. Igleheart Bros, pay cash for their note with accrued interest. Pay to J. B. Reed $265 in full of account, a discount of $5 being allowed. (Close the account.) Buy from John Martin 400 bu. wheat at 80c for your 30-day note at 5 per cent. Pay your note in favor of Jas. Barnes with accrued interest. Buy from J. B. Reed, on account, 100 bu. oats at 30c. Pay drayage for month $9.80. Sell to E. J. Lawrence, for his 30-day note at 6 per cent, 500 bu. wheat at 90c. Buy from W. J. Carter 300 bu. wheat at 70c, for your 30-day note at 6 per cent. Pay cash for rent of storeroom, 1 mo., $20. W. H. Small & Co. pay cash, $68, in full of account, a discount of $2 being allowed. (Close the account.) Jan. 20 Jan. 21 Jan. 25 Jan. 30 Feb. 1 Feb. 1 Feb. 6 Feb. 10 Feb. 11 Feb. 19 Feb. 20 Feb. 24 Feb. 24 Feb. 25 Feb. 29 Feb. 29 Mar. 1 Mar. 2 Mar. 2 Mar. 4 50 LOCKVEAR'S BOOKKEEPING Mar. 12 Sell W. II. Small & Co., on account, 400 bu. wheat at 92c. Mar. 19 E. L. Emerson pays cash for his note with accrued interest. 152. Carry out the following instructions: (a) Take a trial balance as previously instructed. (b) Inventory the stock on hand at the following values: wheat 80c per bu., oats 30c per bu., corn 50c per bu., clover seed $3.00 per bu. (c) Make a statement as previously instructed. Hand the work to your teacher. 153. Answer the following questions in writing and hand to your teacher: (a) When you pay a note with interest why should Rills Payable be debited for the face instead of for the amount of the note? (b) When a Rills Receivable, with interest, is paid, why should the account be credited for its face instead of for the amount ? (c) What is a Compound entry? (d) On May 1st you buy a bill of mdse. from A. J. Black amount- ing to $85, due in 30 days. On May 5 he accepts $80 in settlement of the account. Illustrate the account and explain why A. J. Rlack should be debited with $85 instead of the amount paid him. (e) Explain why the "balance" is not disturbed by such an entry as is required by the transaction under "d." Tenth Lesson Closing the Ledger 154. In this lesson, the method of closing the ledger will be explained and illustrated. Exercise No. 15 155. In this exercise, the following accounts are to be kept: Cash, Mer- chandise, Expense, Bills Payable, Bills Receivable, Interest and Discount, The Mackey-Nesbit Company, Parsons and Scoville Company, J. B. Reed, C. F. Packard, Proprietor's investment account. 156. In making the entries in the various ledger accounts, remember that for every amount debited, a corresponding amount is credited in some other account or accounts. If in doubt, as to the proper disposition of any item, refer to the rules of debit and credit given in previous lessons. Transactions for the Exercise in Closing the Ledger July 1 You are to begin business with a stock of general merchandise valued at $1,800, and cash $1,200. July 1 Pay cash for store rent in advance, 1 mo., $20. July 1 Buy invoice of groceries, on account 30 days, from the Parsons & Scoville Co., $36070. July 2 Buy from the Mackey-Nisbet Co., on account 30 days, invoice of dry goods and notions, $476.30. July 5 Cash sales for this day, $12.75. July 5 Buy from the Simmons Hardware Co., for your note, invoice of hardware amounting to $127.40. July 5 Sell to J. B. Reed, on account, groceries amounting to $18.45. July 6 Sell to Jas. Farley, for his note, dry goods and groceries amounting to $56.30. July 6 Cash sales for this day, $9.70. July 7 Pay cash, $470, for the bill of goods bought from the Mackey-Nisbet Co., on July 2, they allowing you a discount of $6.30. July 7 Buy for cash 3 tons coal at $2.80 for use in the business. July 8 Buy for your note an invoice of dry goods from Marshall Field & Co., amounting to $190. July 8 Sell to C. F. Packard, on account, dry goods and groceries amounting to $38.40. 51 52 LOCKYEAR'S BOOKKEEPING July 8 Pay the Parsons & Scoville Co., cash on account, $100. July 9 Buy from the Mackey-Nisbet Co., on account 30 days, an invoice of goods amount- ing to $75.80. July 9 Receive from J. B. Reed, cash to apply on account, $10. July 9 Cash sales for the day $11.80. July 11 Buy from the Parsons & Scoville Co., on account 30 days, an invoice of groceries amounting to $87.40. July 12 Pay the Parsons & Scoville Co., cash to apply on account, $260.70. July 12 Sell to C. A. Roberts, for his note, dry goods amounting to $27. July 12 Cash sales for this day, $25.40. July 12 Sell to J. B. Reed, on account, dry goods and groceries amounting to $27.40. July 13 C. F. Packard pays cash to apply on account, $20. July 14 Sell to C. F. Packard, on account, dry goods and groceries amounting to $36.90. July 14 Pay your note of July 5 for $127.40, in favor of the Simmons Hardware Co., with interest 90c. July 15 Buy from the Parsons & Scoville Co., on account 30 days, an invoice of groceries amounting to $39.30. July 15 Cash sales for the day, $40.75. July 16 Cash sales for the day, $28.75. July 18 Sell to A. L. Jones, for his note, dry goods and groceries amounting to $38.60. July 19 Pay cash, $85, for invoice of groceries bought from the Parsons & Scoville Co., on July 11, a discount of $2.40 being allowed. July 19 Sell for cash, merchandise amounting to $38.45. July 20 Jas. Farley pays his note of $56.30, dated July 6, interest $1.20. July 20 Pay cash, $7.80, for books and stationery for office use. July 20 Sell to J. B. Reed, on account, dry goods and merchandise amounting to $37.80. July 21 Sell for cash merchandise amounting to $17.80. July 22 C. F. Packard pays cash in full of account, you allowing a discount of $1.50. Rule the account. Balance and rule your Cash account. July 23 Sell to C. F. Packard, on account, merchandise amounting to $28.45. July 25 Buy for your note an invoice of hardware from the Clifford Hardware Co. to the amount of $70. July 25 Pay cash for your note of $190 in favor of Marshall Field & Co., with $1.80 interest. July 25 Buy from the Mackey-Nisbet Co., on account 30 days, an invoice of goods amount- ing to $74.20. July 26 Pay cash, $74, for the invoice of goods bought from the Mackey-Nisbet Co., on July 9, a discount of $1.80 being allowed. July 26 C. A. Roberts pays cash, $26, for his note, a discount of $1 being allowed. 157. Carry out the following instructions: (a) Take a trial balance. (b) Assuming that the inventory shows $3,200 worth of merchan- dise on hand, determine your resources. (c) Determine your liabilities. (d) From these facts determine your present worth. LOCKYEAR'S BOOKKEEPING 53 (A ~x&zz^cs?^y Illustration No. 28 ?& 3 6 >o Xo 6 J a % <^4 / 2-0 / / 7 " / / 7* JUy >jT' >-£ -x&z^l / f o o 7JTf 7" ^2 <^_3 7 *^>Z-li^l/{r-/ y _/ 6*f 4t yo Jo Jo /2-t /J /£ ?r 'f 76 \Jrr}^t^e^L^a-^^f ^32. o o Illustration No. 29 / r v. V Jo ?7< jr ^7 ro */o ■Jp <*7 *S0 o ^Z ^V^-^-^5; 2^t^L^ .-". - ' ■^ a a Illustration No. 30 . &^9fc*&& ^ Jt3 ft >~3j£j 3J<~J J J£J ^!-e/ -^Cdzz-cz^ns ■ ^C^Le/trCs-r^S 2?z*6*us "76 7 '? £> ^ o 767 v 7 / a >- ^s~ a ^^, Illustration No. 32 LOCKYEAR'S BOOKKEEPING 59 Feb. 2 Feb. 3 Feb. 4 Feb. 4 Feb. 8 Mar. Mar. Sold to J. B. Corwin, on account 30 days, one Oak Dresser, $47.50. Sold to Samuel Lee for cash, 2 China Closets at $21.25; 12 Oak Chairs at $1.25; 1 Colonial Dining Table at $45. Bought from the Tobey Furniture Co., Chicago, invoice dated Feb. 3, amounting to $640, and gave in payment a thirty-day note with interest at 6 per cent. Sold to Otis L. Matthews the following bill of goods and received in payment, cash, $100, and his note at one month with interest at 6 per cent for the balance : 3 Chiffoniers at $22; 3 Oak Dressers at $45; 18 Oak Chairs at $1.25. J. B. Corwin paid cash for goods bought on the 2d, but not due until March 4. He is allowed a discount of $1.50. Received cash from Otis L. Matthews for his note due to-day, also interest, 62c. Paid Tobey Furniture Co. cash for note given on Feb. 4, together with interest, $3.20. ^7 'f J ' >-J £s/J 60 LOCKYEAR'S BOOKKEEPING 181. In making entries in the Journal, the same process of reasoning is employed as in the case of detached accounts. You have learned when to debit and when to credit the various accounts. The same rules are applied in making the journal entries. The name of the account to be debited is written first with the amount in the debit column on the same line. The name of the account to be credited is written on the line below the debit item, but a little to the right, and the amount is entered in the credit column on the same line. The explanation of the transaction is written below, using the whole space for this purpose. Always write the name of the month and the date at the top of each page. In the middle of the page write only the date, except where the month changes. When several transactions occur on the same day, write the date above ihe first only and leave a blank line between each transaction. Posting 182. Posting is the process of transferring the amounts from the original book of entry to their respective accounts in the ledger. In business, posting should be done daily. 183. As a means of avoiding errors it is advisable to post all debit items first, and in the order in which they appear in the Journal ; next post all credit items, and in the order in which they appear in the Journal. 184. The following details, if carefully studied, will make clear the manner of posting. A Cash account being opened in the ledger, these steps were taken in posting the first debit item : (a) The item, $4,000 was transferred to the debit side of the account. (b) The date of the journal entry was transferred to the ledger. (c) The journal page was transferred to the folio column in the ledger. (d) The ledger page was transferred to the folio column in the Journal. Note: In posting, be sure to follow the above directions in the order in which they are stated. 185. The illustrations on the next page show the result of Posting the journal entries to their proper accounts in the ledger. Examine them care- fully to make certain that you understand the four steps necessary hi posting an item. Checking the Posting 186. The careful bookkeeper checks his posting to guard against possible errors. While it will require a little extra work to do this, it is better than worrying many extra hours at the end of the month in trying to find mistakes in LOCKVKAR'S BOOKKEEPING 61 Csf • C -. J»C>»V«t<^«^ -[<£%£-&--£. J£*J^ %w- J&^JL- ~^2/r / J r >- */ ?-■ ---' is' Lc^-oA-izt^ *ef&t (— St-s2 ^ ^7 *7 /CL^/J^ / Zd 1 tf^-f ^-z^/- -^W' £ Jj^£- 6?&^J%Lw£Z %-(?<*. ^1 ^Jr 4& ^ >- -- \~ / 2-3 '7 r£ AzJZzc^-Ct^rz^C-^-s ^eir?i^ZivicJ/n<£Z£s 1 ' /n-o-CLs /Jo / 6 7b At 7 J~ 7^ Illustration No. 34 (Continued) 199. Deductions made from the foregoing transactions : (a) Making the entries on the left-hand side of the Cash Book as shown in Illustration No. 34 has the same effect as a journal entry debiting cash and crediting the person or thing producing the money. 68 LOCKYEAR'S BOOKKEEPING (b) The entries on the right-hand side equal a journal entry debiting the person to whom or the thing for which the cash was paid, and crediting "Cash." (c) The use of the Cash Book saves the time and labor which would otherwise be required in writing the word "Cash" in every transaction if made in the Journal, and it also does away with the work of posting to a Cash account in the ledger. (d) The difference between the two sides of the Cash Book will show the amount of cash on hand. Posting from the Cash Book 200. You are now to post the work of your Cash Book, using sheets of ledger paper for this purpose. 201. First, post the items found on the left-hand side of the Cash Book. Open an account with "L. H. Burke, Proprietor," at the top of the first page of your ledger sheet, numbering the page 1. 202. Observe the following order of procedure in posting : (a) Write the amount, $3,000, in the money column on the credit side of L. H. Burke's account. (b) Write the date of the Cash Book transaction in the date column. (c) Write the page of the Cash Book in the ledger folio column; also write the letter "C* immediately to the left of the folio column to indicate that this item is posted from the Cash Book. (d) Next, write the page of the ledger account in the folio column of the Cash Book, to show that the item has been posted, and also where it may be found in the ledger. Complete the posting of the items on the debit side of the Cash Book. Then post from the credit side, remembering that each item will be posted to the debit side of the proper ledger account. 203. To prove your posting, take a trial balance of your ledger and arrange it in proper form on a sheet of journal paper. Hand your Cash Book, Ledger accounts, and Trial Balance to your teacher for approval. Exercise No. 17 204. Record the following transactions in proper Cash Book form. LOCKYEAR'S BOOKKEEPING 69 Jewelry Transactions Mar. 1 H. C. Tilton began business with $1,500, cash. Mar. 1 Paid rent for March, $35. Mar. 2 Bought merchandise for cash, $1,000. Mar. 3 Sold for cash 6 sets Individual Salad Forks at $5.40. In this and similar transactions, make the entry in the explanation column, as follows: "Mdse. 6 sets I. S. F. at $5.40." Mar. 4 Paid R. C. Brown cash to apply on account, $150. Mar. 6 Sold for cash 3 Stag Handle Carving Sets at $18.90. Mar. 6 Received $250 cash from James A. Monroe on account. Mar. 7 Paid $5.40 cash to City Express Co. for hauling. Mar. 8 Samuel Lathrop paid cash for his note in our favor, due to-day, $375. Mar. 9 Paid cash for repairs on furniture, $3. Balance and rule the Cash Book. Mar. 10 Sold one Oak Hall Clock for cash, $114.75. Mar. 11 Paid cash for my note due to-day favor of Bernhard & Co., $450.00, together with interest, $3.25. Mar. 14 Bought for cash invoice of goods amounting to $165. Mar. 15 Sold for cash ^ gross Gold Filled Fobs, at $5.90 a doz. Mar. 16 Paid freight on goods bought on the 16th, $9.83. Mar. 17 Arthur Lee paid $5.70 cash for interest due to-day on a note we hold against him. Mar. 20 Sold for cash 2 Gold Filled Watches, at $40.70. Mar. 24 Paid wages to clerks, $70. Mar. 26 Sold for cash 3 sets Bouillon Spoons, at $6. 205. Directions for proceeding with the work : (a) Have the entries verified by the teacher. (b) Balance the Cash Book. (c) Post to the proper ledger accounts. (d) Take a trial balance. (e) Hand your work to the teacher for inspection. 206. Answer the following questions in writing and hand to your teacher : (a) For what purpose is the Cash Book kept? (d) How is the balance of cash on hand determined? (c) Explain in what way the use of the Cash Book reduces the work of the bookkeper. (d) Explain how the books are kept in balance when the debit and credit items in the Cash Book are posted to opposite sides in the ledger from those on which they appear in the Cash Book. Thirteenth Lesson The Sales and the Purchase Books 207. The Sales Book contains a record of all sales of merchandise which are billed to the customer, whether paid for at the time, or sold on credit. It is a book of original entry and the items are posted from it direct to the ledger. 208. The idea illustrated by the Sales Book, as explained in this lesson, finds expression in many different ways. If you thoroughly understand the work of this lesson, you will have no difficulty in applying any one of the different applications of the Sales Book idea. 209. Study carefully the following transactions and the manner of entering them in the Sales Book. Transactions Illustrating the Use of the Sales Book July 5 Sold to O. H. Harlan, Pontiac, 111., on account 30 days, 10 bbls. XX Salt at 95c. July 6 Sold to Arthur Bennett, 619 Main street, Beloit, Wis., on account 60 days, 2 per cent 10 days, 3 bags Rio Coffee, 135 lbs. each, at 15c. July 8 Sold to the Ames Mercantile Co., Ames, Iowa, terms 90 days net, 1 per cent 30 days, 3 per cent 10 days: 20 bbls. Patent Flour at $4.10; 3 bbls. Pearl Hominy. 660 lbs., at 2c; 2 sacks White German Sago, 250 lbs., at 4 l / 2 c; 10 cases Malta Vita at $2.75. They are allowed a special discount of 5 per cent from regular list price. July 10 Sold to Wellington Bros., Aurora, 111., and received in payment their 60-day note with interest at 6 per cent: 3 bbls. Corn Syrup, 150 gals, at 21c; 7 cases Edu- cator Wafers, 1 lb. tins, at $2.90; 10 cases Quaker Oats at $1.65 70 LOCKYEAR'S BOOKKEEPING 71 jT /c? — f J 1 /a / Jo j je ro Illustration No. 35 Posting From the Sales Book 210. Each person is debited in the ledger for the amount sold to him. At the end of the month, or whenever desired, the total of the merchandise sales is posted to the credit side of the Merchandise account in the ledger. The amounts entered in the right-hand column of the Sales Book are footed at the bottom of each page and carried forward to the top of the following page. 211. The sales column is footed and ruled as shown in Illustration No. 35, at the time when the total sales are posted to the Merchandise account. 212. Posting from the Sales Book is indicated by writing the letter "S" immediately to the left of the folio column in the ledger. In all future exercises 72 LOCKYEAR'S BOOKKEEPING in which more than one book of original entry is used, you will indicate the book from which the posting is done by writing the initial of the name of the book as explained in this paragraph. It is apparent that the Sales Book saves much labor, not only in making the original entries, but especially in the work of posting to the Merchandise account. 213. In the sale to Wellington Bros., you will observe that they are debited, although they paid by giving their note. In a complete set of books, they would be given credit through the Journal. The journal entry would be a debit to Bills Receivable, and a credit to Wellington Bros. The entry of July 10, could have been made in the Sales Book by debiting Bills Receivable account in place of Wellington Bros., but that entry would not show on the ledger that Wellington Bros, had purchased anything. The method illustrated here is preferable as it gives the proprietor a complete record of all transactions with each customer. The Purchase Book 214. The Purchase Book is a book of original entry, containing a record of all merchandise bought on account. 215. Each entry in the Purchase Book should show the name and the ad- dress of the person from whom the goods were bought, the date, terms, and the amount of the purchase. The items bought are not recorded as they are shown on the invoice, which is filed for reference. Just as in the case of the Sales Book, there are many different ways in which the Purchase Book idea may be applied. 216. Each person from whom goods are bought is credited in his account in the ledger for the amount of the invoice, and at the end of the month, or when- ever desired, the Merchandise account is debited for the total purchases. 217. Study carefully the following transactions and the method of making the entries in the Purchase Book. Transactions Illustrating the Use of the Purchase Book April 10 Bought from Hibbard, Spencer, Bartlett & Co., Chicago, invoice of hardware dated April 4, amounting to $376.90. Terms: 60 days, net; 2 per cent, 30 days; 3 per cent, 10 days. April 11 Received invoice of cutlery from the McVoy-Wessling Hardware Co., Chicago, dated April 3, $225. Terms : 30 days, net ; 2 per cent. 10 days. April 15 Bought from the Simmons Hardware Co., St. Louis, Mo., invoice, dated April 9, $267.80. Terms : $100 cash, balance by 30-day note at 6 per cent. April 20 Bought invoice dated April IS, amounting to $348.50, from George W. Trout Co., St. Paul, Minn. Terms: 60 days, net; 2 per cent, 10 days. LOCKYEAR'S BOOKKEEPING 73 ^L^ -fy£ >■&■/ '^/S~ f Illustration No. 36 Exercise No. 18 218. This exercise is a brief test of your knowledge of the proper use of the Journal, Cash Book, Sales Book, and Purchase Book. The work will be posted to the ledger, after which a trial balance will be taken, the statement made out, and the ledger closed, giving you a further opportunity to demonstrate your knowledge of the previous lessons. 219. The articles bought and sold illustrate the Carpet and Furniture busi- ness. Exercise care in making the computations. Check your figures before entering them in the books. Take four sheets of journal paper and indicate the purpose for which they are to be used, by writing at the top of each sheet. Journal, Cash Book, Sales Book, and Purchase Book, respectively. If in doubt as to how to proceed, consult your teacher. Carpet and Furniture Transactions May 2 Henry Brown and Alfred Munson engaged in the Carpet and Furniture business, each investing $2,000 cash. May 3 Bought from the Carpen Furniture Co., Chicago, invoice dated May 2, $510. Terms : 30 days ; 2 per cent, 10 days. May 3 Paid store rent for one month, $75. May 4 Bought from the Richardson Carpet Co., Chicago, invoice dated May 3, $393, on account, 30 days. May 4 Sold to William Watson, 1047 N. Dearborn Ave., on account, 1 Oak Dresser, $47. 74 LOCKYEAR'S BOOKKEEPING May 4 Sold to Neil Jenkins, Harvey, 111., on account: 12 Oak Chairs at $1.50; 1 Oak Dresser, $47; 2 Chiffoniers at $25. May 5 Paid cash, $125, for desks and fixtures for office use. 219a. Debit this amount to an account called, "Furniture and Fixtures." This account shows the cost of all furniture and appliances bought for use in the office or the store. At the time of closing the books, the property charged to this account should be inventoried at less than the original cost to allow for depreciation on account of wear. May 5 Sold to James Harvey, Evanston, 111., on account : 30 yds. Brussels Stair Carpet at 65c; SO yds. Domestic Ingrain Carpet at $1.20; 40 yds. Oil Cloth at 85c. May 5 Sold to Mrs. Charles Farnsworth, Oak Park, 111., and received cash $100, balance on account, 30 days: 20 yds. Cork Linoleum at $1.10; 40 yds. Wilton Carpet at $2.40 ; 2 Oak Dressers at $47. Note: In the Sales Book, debit Mrs. Charles Farnsworth for the whole amount. In the Cash Book, credit her on the debit side for the $100 paid in cash. May 7 Sold Adam Volker, 1962 Lake Ave., on account: 3 Dining Tables at $40; 2 Oak Dressers at $47; 24 Oak Chairs at $1.50; 45 yds. Brussels Stair Carpet at 65c. Received in payment note at 15 days with interest at 6 per cent. May 9 Paid cash for stamps and stationery, $12. May 9 Bought from Alexander H. Revell & Co., Chicago, 111., invoice dated May 8, $285, and gave in payment 30-day note with interest at 6 per cent. May 9 Henry Brown took $30 cash from drawer for his personal use. May 10 William Watson paid cash for bill of the 4th, $47. May 10 Sold William Watson, on account: 100 yds. Oil Cloth at 50c; 25 yds. Wilton Carpet at $2.40; 3 Oak Dressers at $47; 2 China Closets at $30; 2 Tables at $40. As Mr. Watson will be a liberal buyer he is allowed a special trade dis- count of 10 per cent on the regular price. 219&. For method of entering this transaction in the Sales Book, see sale to Ames Mercantile Co., in Illustration No. 35. Trade discount is a deduction made from the list price. As it is deducted at the time of the sale, it does not appear in any account in the ledger. May 13 Miscellaneous cash sales to date, $310.50. May 13 Paid Carpen Furniture Co. cash for invoice of the 3d inst., less 2 per cent discount. 219c. Enter the above as follows: On the credit side of the Cash Book debit Carpen Furniture Co. for the whole amount, $510. On the debit side of the Cash Book, credit discount for $10.20, which is the 2% allowed for payment in 10 days. The difference between these two entries is the exact amount of cash paid to Carpen Furniture Co. If the entry is not clear to you, ask your teacher for further explanation. May 16 Paid freight on goods bought from Alexander H. Revell & Co., on the 9th inst., $23.75. May 20 Buy from Carpen Furniture Co., on account, invoice dated May 18, $343.50. LOCKYEAR'S BOOKKEEPING 75 May 20 Sold to Adam Volker and received $230 cash to apply on the sale, balance on ac- count : 4 Chiffoniers at $25; 3 China Closets at $30; 75 yds. Cork Linoleum at $1.10; 75 yds. Domestic Ingrain Carpet at $1.20. May 23 Adam Volker paid his note due to-day with interest. The interest for 15 days is 70c. May 25 Alfred Munson takes from stock for personal use, 1 Oak Dresser at %27. Note: He is charged at cost price. Make the entry in the Sales Book. May 31 James Harvey pays cash to apply on account, $75. May 31 Paid salaries to date, $230. Before going on with the work have all the entries verified by the teacher. 220. Directions for proceeding: (a) Post from the books in the following order : (1) Purchase Book. (2) Sales Book. (3) Cash Book. (4) Journal. (b) Check the posting carefully. Remember to use a check mark (V)» otherwise the checking is valueless. (c) Take a Trial Balance. (d) Take Inventories. (1) Merchandise on hand is as follows, and is valued at cost. 20 yds. Brussels Stair Carpet, at 45c. 75 yds. Domestic Ingrain Carpet, at 75c. 35 yds. Wilton Carpet, at $1.05. 10 yds. Oil Cloth, at 50c. 5 yds. Cork Linoleum, at 75c. 28 Chairs, at 85c. 3 Dressers, at $30. 7 Chiffoniers, at $12.50. 2 China Closets, at $15. 2 Tables, at $27. (2) Furniture and Fixtures. Deduct 10 per cent from original cost. (e) Make out a statement showing the condition of the business. (See Seventh Lesson, Section 101.) (/) Close the ledger. (g) Take a second trial balance. (See Section 173.) (h) Hand all your work to the teacher for examination. 221. Prepare written answers to the following and hand to your teacher: (a) What is a Sales Book? (b) What is a Purchase Book? 76 LOCKYEAR'S BOOKKEEPING (c) What advantages are there in the use of these books? (d) Why do you not enter the items in the Purchase Book? (c) Explain the method of posting from the Sales Book? (/) What items are charged to the Furniture and Fixtures account? (g) Explain how to enter the following transaction in the Cash Book : James Brown owes us $600.00. He is allowed a discount of $20.00, and pays $580.00 cash to settle in full. (h) What is the reason that no entry is made for a discount de- ducted from the list price of goods at the time of sale? Fourteenth Lesson The Cash Journal 222. The Cash Journal is a book of original entry and, as the name implies, is a combination of the Journal and the Cash Book. The form given on the next pages has a column for Miscellaneous items and columns for Cash, Merchandise. Accounts Receivable and Accounts Payable. 223. Read all the transactions and observe carefully the entry for each. Transactions Illustrating the Use of the Cash Journal May 1 Evans Bros, commenced the Grain, Feed & Fuel business May 1. with a cash capital of S3.000.00. Observe that cash is debited with $3,000.00 and Evans Bros, are credited in the Miscellaneous column. Their name is written over against the date column followed by a brief explanation. This item will later be posted to the credit of their account in the ledger. May 2 Bought from R. G. Davis for cash, 600 bu Wheat at 80c. May 3 Paid cash for rent, $30.00. May 4 Bought from A. W. Allen, on account, 400 bu. Oats at 40c. Observe that Merchandise is debited with $160.00 and A. W. Allen is credited in the Accounts Payable column with the same amount. His name is written over against the date column followed by a short explanation and the $160.00 will later be posted to the credit of his account. May 4 Bought from J. G. Evans, on account, 500 bu. Corn at 50c. May 5 Sold Frank Case, on account, 100 bu. Corn at 60c. Observe that Merchandise is credited with $60.00 and Frank Case is charged with the same amount in the Accounts Receivable column. His name is written over against the date column followed by an explanation and later the $60.00 will be posted to the debit side of his account. May 6 Sold Geo. Horn for his 30-day note, 200 bu. Wheat at 90c. 78 LOCKYEAR'S BOOKKEEPING Observe that Bills Receivable is debited with $180.00 in the Miscellaneous column and Merchandise is credited with the same amount. This item will later be posted to the debit side of Bills Receivable in the ledger. May 6 Bought from Frank Case for cash, 40 tons Coal at $2.00. May 8 Bought from Geo. Cates, 50 cords Wood at $2, and gave in payment my 60-day note with interest at 6%. May 9 Paid cash for labor, $4. May 10 Bought from A. W. Allen, on account, 30 bales Hay at 90c, and 100 bu. Corn at 60c. May 11 Bought from J. G. Evans, on account, 200 bu. Oats at 40c. May 11 Sold Geo. Lee for cash 6 tons Coal at $3. May 12 Sold Harry Norman for cash 10 tons Coal at $3.50. May 13 Sold A. Birdsell 200 bu. Oats at 50c for his 30-day note. MISCELLANEOUS NAME OF ACCOUNT EXPLANATION C e^-^-^z-^ <&- / 3 » o -^7^t^ £ o ^ /3j££j^y~f^ <^Lz£>^^^ ^^-e/^J-f / fo // // />\ /J >4 .^T^tZ^uA- I V?^^ a^aJ^L ■yi/o •f 6 to 4 J~a 7<- w ^ >> >^ >; y^r^y t ■^ 377.30 have been remitted by check. August 1 August 2 August 14 August 16 August 19 LOCKYEAR'S BOOKKEEPING 89 /, /f 2U- (&~ffa g L^t^d^fL' /£ a^^t Illustration No. 39 >/• /- ?■ 7^ >7 7- >o '7- 2- ro 90 LOCK YEAR'S BOOKKEEPING &C*c-<& y "3^3. -<^c- "7- C 6 ?-* 'C<*<*<9 f ^ ? J S"£> /£ /S(? £> / 261. Illustration No. 41 Exercise No. 20 Journalize the shipment and consignment transactions given below. Commission Transactions September 5 Commenced the Commission business and invested cash, $500.00. September 5 Received consignment of goods from Jos. Lewin, Springdale, Mo., and paid cash for freight, $7.00. September 6 Shipped a car of produce, valued at $340.00, to Walter Fair, Peoria. 111. Paid cash for boxing, $24.00, and hauling to freight house, $16.00. September 7 Received a consignment of watermelons from Arthur Mann, Macon, Ga., to be sold on his account and risk. Paid cash for freight charges, $18.00. September 7 Sold on account to Olmsted & Wahl, 342 Center St., goods valued at $75.00, belonging to Lewin's Cons. No. 1. September 8 Received a consignment of potatoes from Jos. Lewin, and paid cash for freight and hauling, $19.00. September 8 Sold from Arthur Mann's consignment goods valued at $150.00. and received cash. September 11 Drew a sight draft on Walter Fair for $150.00 on account of shipment made him on the 6th, and left it at the bank for collection. Note: No entry is made for this until the bank notifies you that the sight draft has been paid. September 11 Sold for cash, $200.00, balance of goods from Lewin's Cons. No. 1. September 12 Shipped Marvin & Hart, Kenosha, Wis., to be sold on our account and risk, goods valued at $237.00. Paid cash for crating, $8.00; drayage, $10.00. September 13 Sold to O. R. Brown, on account, goods valued at $150.00 belonging to Lewin's Cons. No. 3. September 16 Bank notifies you that draft on Walter Fair has been collected. The charge for collection is 30 cents. Make the proper entry in the Journal, debiting Expense account for the collection charge. September 18 Closed Cons. No. 1, and gave Jos. Lewin credit for the net proceeds. Deduct these additional charges: commission 3%; boxing, $4.00; drayage, $3.50; insurance, $1.50. Note: All items such as boxing, crating, sacks, etc., should be entered in an account called "Boxing and Crating." September 20 Received account sales from Walter Fair for shipment sent him September 6. He inclosed check for $275.00, the net proceeds. LOCKYEAR'S BOOKKEEPING 91 September 21 Paid sight draft on us drawn by Arthur Mann, on account of Consignment No. 2, $150.00. September 25 Received account sales from Mar win & Hart, account of Shipment No. 2, showing the net proceeds to be $248.50. New York draft was in- closed. September 25 Shipped a lot of goods valued at $290.00 to C. E. King, Elkhart, Ind., to be sold on our account and risk. Paid cash for hauling to the freight house, $5.80. 262. When the above transactions are properly entered, have your work verified by the teacher, after which carry out the following instructions : (a) Post to ledger paper, opening accounts as required. (b) Take a trial balance. (c) Determine what accounts show inventories. (See Section 259.) (d) Make out a financial statement. (e) Close the Ledger. 263. Answer the following questions in writing and hand to your teacher: (a) What is a commission business? (b) What is a shipment? (c) What is a consignment? (d) Why is property on hand, belonging to a consignment, not considered a resource when the financial statement is made out? (e) The debit side of a Consignment account is $47.00, the credit side is $253.00. Make the required Journal entry for closing the account after deducting the following charges: Commission 2% ; boxing $4.00 ; insurance $3.50 ; storage $5.00, and remitting the proceeds in cash. Rules of Debit and Credit 264. The following summary of the rules for debiting and crediting Ship- ment and Consignment accounts will be convenient for reference. Shipment Accounts 265. Debit the Shipment. (a) For the value of the goods (usually cost) at the time they were sent. (&) For all expenses incurred in making the shipment. 266. Credit the Shipment. (a) For all payments received on account of it. (b) For the net proceeds when the account sales is received. 92 LOCKYEAR'S BOOKKEEPING Consignment Accounts 267. Debit the Consignment. (a) For all charges paid at the time of receiving the goods. (b) For all subsequent charges. (c) For the net proceeds. 268. Credit the Consignment. (a) For all sales of goods belonging to it. (b) For rebates on overcharges previously debited to the account. Opening Entries 269. At the commencement of business a proprietor often invests something besides cash. He may have various kinds of property on hand, or debts due him, either in the form of open accounts or promissory notes. He may also be in- debted to others and these liabilities are to be assumed by the business. 270. When the proprietor begins business with resources and liabilities, it is customary to make the opening entry in the Journal, debiting the resources and crediting the liabilities and giving the proprietor credit for their difference. This difference is called the net investment. 271. The following illustration will make this matter clear and enable you to make the opening entry in similar cases. J. B. Carter begins business with the following resources and liabilities: cash on hand, $2,350; stock of goods valued at $1,200; office furniture, $125; bills receivable on hand, $600. Due from John James, $150; from Alfred Peats. $260. He owes on account, Sanborn & Wilder, S360; M. O. Hansen, $75.00. There is one outstanding note for $490.00 on which there is six months' accrued interest amounting to $14.70. The Journal entry for the above would be made in the following form : Cash 2350.00 Mdse 1200.00 Furniture & Fixtures 125.00 John James 150.00 Alfred Peats 260.00 Bills Receivable 600.00 Sanborn & Wilder 360.00 Bills Payable 490.00 M. O. Hansen 75.00 Interest & Discount 14.70 /. B. Carter, Net Inv 3745.30 LOCKYEAR'S BOOKKEEPING 93 Cash is checked (V) to indicate that it is also entered on the debit side of the Cash Book, and therefore is not to be posted. 272. When two or more persons engage in business as partners, separate opening entries should be made for the resources and liabilities of each partner. Exercise No. 21 273. Arrange the following opening entries in Journal form: (a) Adrian K. Lambert began business investing tbe following resources and liabili- ties: cash on hand, $3,000; J. E. Baker's 90-day note for $870; accrued interest on Baker's note, $8.70; Brown & Lodrich owe him on account $500; B. J. Tanner owes him $240.00. His liabilities consist of a note for $600 in favor of George Bemis and accrued interest on it amounting to $27.00. (b) Jerome Vanna and Leon Caxton commenced business as partners. Vanna invested the following: cash, $1,390; merchandise, $600; his personal note for $300, and a debt of $361 due him on account by Otis Bennings. He owes on account: P. O. Hogue, $60; Mendell & Laird, $125. Caxton invested: cash, $260; merchandise, $1,457; K. B. Perry ones him on account $430 ; C. R. Vance owes him $650. He owes Blaine Thomas on a personal note, $250; accrued interest thereon, $5.00; he owes Simmons Bros., on account, $70. Merchandise Discount 274. This subject was mentioned briefly in the Eighth Lesson, Section 132. Keeping a separate account with merchandise discount enables the proprietor to determine the actual amount of discounts allowed to others for paying bills within the discount period, also the amount that he gains by discounting his own purchases. 275. When our customers discount their bills, the net amount of our sales is reduced; when we discount our invoices, the net cost of our purchases is re- duced. The Merchandise Discount account is transferred to the Merchandise account before the latter is closed. 276. It is a common practice in business to allow a discount, usually 2%, for paying cash in ten days. The person or firm having capital enough to dis- count all bills has a decided advantage, as such discounts constitute a big saving. If the cash on hand is not sufficient to discount a bill, it would pay to borrow the money on short time notes in order to save the discount. 277. An example will show clearly the gain to be derived from such a loan. Suppose an invoice amounting to $600.00 is purchased on account thirty days, or two per cent discount for cash in 10 days. Two per cent on $600.00 is $12.00. It will take $588.00 to pay the invoice. If the proprietor has not this 94 LOCKYEAR'S BOOKKEEPING sum on hand, he can give the bank his 30-day note for such an amount that when discounted, the proceeds will be $588.00. A note for $590.95, discounted for 30 days at 6% will give $588.00 as proceeds. The difference between $12.00, the discount of 2% on the invoice, and $2.95, the interest on the loan of $588.00, is $9.05. The latter amount is gained by taking advantage of the cash discount. Examples in Merchandise Discount 278. An invoice from Bowen & Co., dated January 3, 1911, amounting to $937.80, was purchased on the following terms: 60 days, net; 30 days, 1%; 10 days, 2%. The above invoice will be used as the basis for several transactions illustrating the necessary entries to be made by the bookkeeper. 279. Pay cash for the invoice, less 2% for paying within 10 days from date. The discount at 2%, would be $18.76. Enter in the Cash Book and debit Bowen & Co. on the credit side for $937.80 and credit Merchandise Discount on the debit side for $19.76. 280. Not having the ready cash to discount the invoice, borrow at the bank on your 30-day note, the exact amount required to pay the invoice, less 2' ', . After deducting the 2% the net amount is $919.04. This represents the proceeds to be derived from a 30-day note when discounted at 6% . The face of such a note will be $923.66. The Cash Book entry for the transaction will be as follows : credit Bills Payable on the debit side for $923.66, and debit Interest and Discount on the credit side for $4.62. You would next issue your check to Bowen & Co. for $919.04 and make the following entry in the Cash Book : on the credit side, debit Bowen & Co. for $937.80 and on the debit side, credit Merchandise Discount for $18.76. By taking advantage of the cash discount you have gained $14.14 by borrowing the money. 281. Assuming that you had $600.00 cash on hand which you could apply as a part payment on the invoice within the 10-day discount period, you would be entitled to a credit of such a sum, which, if discounted at 2%, would give $600.00, net. Every dollar of an invoice, subject to 2% discount, will be canceled by a payment of 98 cents. Therefore, a payment of $600.00 will cancel a debt of as many dollars as 98 cents is contained in $600.00, or $612.24. The proof of this is found by deducting 2% from $612.24, which leaves $600.00. The Cash Book entry for the above would be as follows : Debit Bowen & Co. on the credit side for $612.24, and credit Merchandise Discount on the debit side for $12.24. LOCKYEAR'S BOOKKEEPING 95 282. Answer the following questions in writing and hand to your teacher : (a) What is Merchandise Discount? (b) What advantage is derived from keeping a Merchandise Dis- count account? (c) How would this account he disposed of when the hooks are closed for the year? (d) In the example given in Section 281, why would it not be correct to deduct 2% from $600.00 and then debit Bowen & Co. for $612.00? Explain as fully as possible the reason for your answer. (e) What is the difference, if any, between an invoice and a bill? Sixteenth Lesson Commercial Paper and General Review 283. By maturity of a note, is meant the day upon which it is due and payable. 284. When a commercial paper is payable a given number of days from date, count ahead the exact number of days in finding the due date ; when payable a given number of months after date, calendar months are counted. 285. If the day of maturity falls upon a Sunday or a legal holiday, the note is legally due on the next business day according to the laws of most states. Examples in Finding Date of Maturity 286. A note dated December 31, 1911, and payable thirty days from date would be due January 30, 1912. If payable one month from date, it would be due January 31. If payable sixty days from date, it would be due February 29. If payable two months from date, it would be due February 29. A note or time draft dated March 18, 1911, if payable in ninety days would be due June 16, 1911. If payable in three months, the date of maturity would be June 18, 1911. Exercise No. 22 287. Below are given the dates of several notes; also the time they have to run. Find the dates of maturity and hand to the teacher for verification. Date of Note Time to run. April 7, 1911 3 Days July 31, 1909 60 Days July 1, 1911 3 Months July 1, 1911 90 Days January 28, 1911 1 Month January 28, 1911 30 Days April 29, 1910 1 Month May 31, 1911 1 Month June 17, 1911 45 Days October 25, 1910 90 Days 96 LOCKYEAR'S BOOKKEEPING 97 Discounting Promissory Notes 288. The advantage of a promissory note over an open account is that the note may be discounted and money realized on it before it is due. Banks will discount commercial paper where the parties are known to be responsible, or where satisfactory collateral security is given. 289. By collateral security is meant corporate stocks, negotiable instruments and other written obligations which are deposited as a pledge to secure the pay- ment of a debt. 290. Promissory notes are also transfered in the regular course of busi- ness in settlement of account. When notes are transferred from one party to another as a payment, the present value of the note constitutes the amount to be applied on account. 291. The present value of a note is the amount which would be due at maturity, less the interest on this amount for the actual number of days from the day it is transferred or discounted to the day of maturity. The amount due at maturity is the face of the note and the interest for the whole time, if the note bears interest. The rate of discount is fixed by the parties, and is usually that at which money is loaned at the time of the transaction. 292. There is a difference between discounting another's promissory note and one's own written promise to pay. Another's promissory note is considered, in law, as personal property, and therefore may be sold at any price that the parties may agree upon, the same as any other chattel. When a person discounts his own promissory note, it is done for the purpose of raising funds. This is a loan of money, hence the law only allows the legal rate of discount. Examples in Discounting and Transferring Commercial Paper 293. The following promissory note will form the basis for two trans- actions involving bank discount with the proper entries in the books. $672.90. St. Paul, Minn., May 3, 1911. Two months after date, I promise to pay to the order of James Buchanan, Six Hundred Seventy-two and 90/100 Dollars. Value received. ALBERT LUTRELLE. 294. James Buchanan having received' the above note and wishing to realize on it without waiting until July 3, the day it is due, has the note discounted at the bank at 6%, on May 31. The actual number of days from May 31 to July 3 is 33. The discount is the interest on $672.90 for 33 days at 6%, or $3.70. By this transaction the bank makes $3.70 for advancing $669.20 on the note. In other words, James Buchanan pays $3.70 interest for the use of $669.20 for 33 days. 98 LOCKYEAR'S BOOKKEEPING James Buchanan would enter this transaction in his Cash Book. On the debit side, Bills Receivable account would be credited for the face of the note, $672.90, and on the credit side, Interest and Discount account would be debited for $3.70. The difference between these two entries represents the actual amount of cash received from discounting the note. 295. The promissory note given below illustrates a transaction in which an interest bearing note is discounted. $983.75. Rochester, N. Y., March 4, 1911. Ninety days from date I promise to pay Charles Brown, or order, Nine Hundred Eighty- three and 75/100 Dollars, with interest at 8% per annum. D. E. MEYERS. 296. Charles Brown discounted the above note at the bank on April 16, at the rate of 6%. The interest on $983.75 for the whole time, ninety days, is $19.67. The amount to be discounted is the sum of the face and the interest, or $1,003.42. The note is due June 2. The time from April 16 to June 2 is 47 days. The interest on $1,003.42 for 47 days, at 6%, is $7.86. The proceeds, or amount realized, is the difference between $1,003.42 and $7.86, or $995.56. This transaction will require two entries on the debit side of the Cash Book and one on the credit side. The first entry on the debit side would be "Bills Receivable, Dis., at bank, D. E. Meyers' note, $983.75." The second entry would be "Int. & Dis., 90 ds., Int. on above at 8%, $19.67." On the credit side of the Cash Book you would write, "Int. & Dis., 47 ds., Dis., at 6% on Meyers' note, $7.86." 297. Let us assume that James Buchanan transferred the note in Section 293 to Samuel Warren to apply on account. The note will not be worth its face value until July 3. Therefore, Samuel Warren should be debited only with the present value (see Section 291) of the note, and we have found that to be $669.20. James Buchanan would enter this transaction in the Journal by debiting Samuel Warren for $669.20, Interest and Discount for $3.70, and crediting Bills Receivable for $672.90. 298. If the promissory note in Section 295 had been transferred by Charles Brown to Dillard & Garrick to apply on account on the day it was discounted at the bank, then the following entries would be made in the Journal by the book- keeper for Charles Brown : Dillard & Garrick $995.56 Discount 7.86 Bills Receivable $983.75 Interest 19.67 LOCKYEAR'S BOOKKEEPING 99 You will observe that Dillard & Garrick are debited with the cash value of the note at the time it was transferred to them. 229. Answer the following questions in writing and hand to your teacher : (a) Did Charles Brown lose by the transaction? If so, how much? (b) Assuming that Dillard & Garrick held the note until it was due, would they gain or lose, and how much? (c) In interest bearing notes, why is the interest for the whole time added to the face before discounting? (d) Why should the person receiving a note on account before it is due be debited with the proceeds only? (e) Write the Journal entry Dillard & Garrick would make when they receive the note from Charles Brown to apply on account. Drafts and Their Use 300. The definition of a draft was given in the Sixth Lesson, Section 76. With reference to time of payment, drafts are either sight or time drafts. A sight draft is one payable upon presentation. Time drafts are payable after sight or after date. In the former the time runs from the date of acceptance, and in the latter from the date of the draft. 301. Sight drafts are treated as cash by the person receiving them. Refer to Illustration No. 14 for the form of an acceptance, also read Section 79. 302. By means of a draft it is possible for parties living in places distant from each other to cancel an indebtedness without sending the cash. To illus- trate: A in Chicago, owes B in San Francisco, $100.00, and C in San Francisco, owes A a like amount. A can draw a draft on C ordering him to pay B $100.00, and then send the draft to B. When B receives the draft from A, he presents it to C for payment. You will observe that when C pays the draft two debts have been canceled without sending money back and forth from Chicago to San Francisco. 303. Personal drafts originated in the early days of commerce when it was extremely risky for business men going to far away countries to carry money with them, owing to the prevalence of bands of robbers on the highways and pirates on the seas. With the establishment of banks, postoffices and other financial agencies in all parts of the world, methods of transmitting money have been changed until now the personal draft is rarely used as a means of paying a debt. 304. A check is a written order upon a bank or banker directing the pay- ment of a certain sum of money, on demand, to a third party. Aside from its 100 LOCKYEAR'S BOOKKEEPING form, a check differs from a sight draft mainly in that it is drawn upon a bank, whereas the drawee in a sight draft is an individual or a firm. 305. A bank draft is a written order of one bank directing another bank to pay to a third party, or order, a certain sum of money on demand. All banks have money on deposit in the nearest financial center against which they issue drafts. Nearly all banks have money on deposit in New York and Chicago. Drafts on these cities are payable at face value in all parts of the United States. 306. A bank draft forms a convenient and inexpensive method of re- mitting money. The draft is usually made payable to the purchaser who in- dorses it in full before sending it to the person who is to receive the money. 307. A charge known as exchange may be made by the bank for issuing a draft. 308. Sight drafts are most commonly used for collection purposes. A in Chicago has $100.00 due him from B in Denver. A may draw a sight draft in his own favor on B for this amount, and after indorsing it, leave it at his bank for collection. This means that A's bank in Chicago will forward the draft to its correspondent bank in Denver. The Denver bank will present the draft to B for payment. If paid, it will remit the $100.00, less a small charge for the service, to the Chicago bank who will notify its customer, A, that the draft has been collected and the amount placed to his credit. In case B refuses payment the draft would go to protest, and a business man who values his credit standing will pay the draft rather than let it be pro- tested. 309. By protest is meant the presentation of the draft by a Notary Fublic to the drawee for payment. The purpose of a protest is to furnish legal evidence of the fact of presentation within the proper time. The notary makes out a formal statement called the Protest which is sent to the holder of the paper. He also sends notice of the protest to all parties to whom the holder may look for payment. 310. The charge made by a bank for collecting a sum of money is called "Collection." 311. If it is desired to know how much is paid for collection and exchange items, an account may be opened under the title of "Collection and Exchange." 312. Indorsement as applied to commercial paper means writing one's name on the back of the paper with the intent to incur a liability under certain condi- tions. There are several kinds of indorsement, but only the ones most frequently used will be defined here. LOCK YEAR'S BOOKKEEPING 101 313. A full indorsement is one in which the party transferring the paper writes the words "Pay to the order of" and then names the person to whom the transfer is made and signs his own name. The effect of such an indorsement is that only the indorsee (the party to whom transferred) has a legal title, and in order to sell the paper he must indorse it again either in full or in blank. 314. A blank indorsement is simply writing one's name on the back. The effect is that thereafter the paper is payable to the bearer, that is, whoever has possession of it. 315. An indorscr of commercial paper makes himself liable for payment, in case the paper is not paid when due, or if for any other reason it is "No Good." Exercise No. 23 316. Write the answers and prepare the work called for in the following exercises and hand to the teacher for examination : (a) Write a draft on Jones & Martin, Elgin, 111., in favor of C. J. Linden, payable 30 days after sight, for $392.65. Use the current date. (&) Write across the face of the draft Jones & Martin's acceptance made four days later. (c) A. D. Howe in Buffalo owes M. W. Miller in Chicago $430 and the account is considerably past due. Prepare for Miller the proper draft for collection through his bank. (d) What is the difference between a draft payable 5 days after date and one payable 5 days after sight? (e) Write the journal entries which would be made for the draft in exercise (a) : (1) by the drawer; (2) by the drawees when they accepted it; (3) by the payee when he received the draft. (/) C. K. Linden wishes to give Jones & Martin's acceptance to William S. Wall to apply on account. Write the full indorsement necessary to make the transfer. (g) What is a blank indorsement? (li) What liability, if any attaches to the signing of your name on the back of a note, draft or any other negotiable paper? (i) What is the day of maturity in Jones & Martin's acceptance referred to in (&) above ? (/) If the above draft had been drawn at 30 days from date, when would it be due? Exercise No. 24 317. In this exercise the student takes charge of a set of books already opened. It is assumed that the books were closed December 31, and that new ledgers are to be opened for the accounts shown by the last trial balance. The business is conducted as a partnership ; each partner having a one-half interest and sharing equally in the losses and gains. The partners are Eugene Gardner and David Lange. The books used are the Journal, Sales Book, Pur- chase Book, Cash Book, a General and an Accounts Receivable ledger. 102 LO-CKYEAR'S BOOKKEEPING The articles handled represent the hardware business and will be bought and sold in wholesale quantities. 318. Open the General ledger by entering the accounts given in the trial balance. Give each account one-third of a page, and open them in the order in which they are found in the trial balance. The cash balance will be entered later in the cash book. TRIAL BALANCE, GARDNER & LANGE, DEC. 31, 19 Eugene Gardner $7,146.24 David Lange 7,146.23 Bills Receivable $ 897.50 Bills Payable 1,465 75 Accounts Receivable 5,283.40 Brown, Lee & Co 1,962.70 Morton Hardware Co 848.50 Edwin Barger 472.75 Lemont & Ganey 736.08 Chas. Herring 491.00 Merchandise 8,549.75 Furniture and Fixtures 1,240.00 Cash 4,298.60 $20,269.25 $20,269.25 319. Open accounts in the Accounts Receivable ledger with the following personal accounts due the firm, entering three on each page : Jackson, Ward & Co., $378.90; J. B. Mansfield, $243.00; A. W. Quinn, $682.58; A. R. Mangold, $872.15; Bloom & Berger, $387.90; Simonton Hardware Co., $140.86; Maxwell Hardware Co., $1783.97; B. K. Terry, $116.80; E. E. Hunt, $456.14; Edmund S. Hewitt, $221.10. 320. Prepare the Cash Book by ruling an extra money column on the debit side. Head each column as follows: first column, "Mdse. Dis.," second column, "Accts. Rec," third column, "General." The first column will receive all entries for merchandise discount allowed to us. The second column is for money re- ceived on account from our customers. The third column is for all other cash receipts. 321. The first column on the credit side will be headed Merchandise Dis- count, and will receive the entries for discounts allowed to others. The second column is for all other payments of cash. Open your Cash Book by entering the cash balance in the General column on the debit side. 322. If you have carefully followed the directions given above, you are now ready to proceed with the regular business transactions. LOCKYKAR'S HOOKKKEPING 103 January 3 Hardware Transactions Paid telephone bill for month, $15.70. Received New York draft from A. W. Quinn in full of account, less 2%. Received 30-day note, dated December 30, interest 6%, from E. E. Hunt, to balance account. Received invoice of goods from the Baird Tool Co., $980.40. Terms, 60 days; 2%, 30 days; 3%, 10 days. Paid cash for postage, $35.00. January 4 Sold to Armstrong & Co., Clinton, Iowa, on account 60 days, 2% in 10 days : 10 doz. Hatchets at $5.50 a doz. ; 2 doz. Drawing Knives at $9.00 a doz. ; 20 doz. Rules at $1.70 a doz.; 5 Heating Stoves at $15.00 ea. ; 5 Steel Ranges at $47.50 ea. Paid cash for 20 tons coal at $4.00 a ton, for furnace use. Sold to A. R. Mangold, Batavia, 111., and received in payment his 60-day note with interest at 7%: 12 Refrigerators at $24.75 ea. ; 15 Heating Stoves at $15.00 ea. Note: Make two entries for this and similar transactions as explained in Section 213. Bought from Chas. Herring, and gave our 30-day note in payment, invoice amounting to $607.00. January 5 Paid cash for outstanding note, favor of Lennox & Co., $703.25. Sold to B. K. Terry on account: 30 doz. Screwdrivers at $1.05 a doz.; 5 doz. Clothes Wringers at $57.00 a doz. With his order he inclosed check for $116.80 to balance his old account. Sold to G. S. Lathrop, Elgin, 111., 30 days net, 2% 10 days: 10 doz. Hand Saws at $25.00 a doz.; 20 doz. Hammers at $6.20 a doz.; 10 doz. Rules at $1.70 a doz. ; 5 Refrigerators at $24.75 ea. Sold to Edmund S. Hewitt, and received cash, $200.00, balance on account, 30 days: 8 Steel Ranges at $47.50 ea. ; 20 Heating Stoves at $15.00 ea. A special discount of 3% was allowed from the whole bill. January 6 Gave Morton Hardware Co. check for balance of their account, $848.50, less 2%. Gave Brown, Lee & Co., 10-day note, with interest, for $962.70, to apply on account. Sold to J. B. Savage, Aurora, 111., 2 doz. Clothes Wringers at $57.00 a doz. ; 10 doz. Hatchets at $5.50 a doz.; 5 doz. Drawing Knives at $9.00 a doz.; 6 Steel Ranges at $47.50 ea. A special discount of 5% was allowed. Received in payment his 30-day note for $240.00, bearing interest at 6%, and cash for the balance. Bought from Edwin Barger invoice amounting to $800.00, and gave check for $350 to apply on account. January 7 Gave Lemont & Ganey, to apply on account, note for $360.00, due February 6, less discount at 6% for the unexpired time. For explanation of this trans- action see Section 297. January 9 Paid cash for sundry freight bills, $27.00. January 12 The Maxwell Hardware Co. gave us J. B. Scott's 60-day note for $976.50, due February 28, less the discount at 6% for the unexpired time. Sold to A. W. Quinn on account : 4 doz. Hand Saws at $25.00 a doz. ; 5 doz. Hammers at $6.20 a doz. 104 LOCKYEAR'S BOOKKEEPING January 13 Paid Baird Tool Co., cash for invoice of the 3d inst., less 3%. January 14 Sold to Mayer Bros., on account, 10 Steel Ranges at $47.50 ea. January 16 Paid our note, with interest, given to Brown, Lee & Co., on the 6th. Sold to Simonton Hardware Co., subject to sight draft in three days : 10 doz. Hatchets at $5.50 a doz.; 20 Heating Stoves at $15.00 ea. January 17 Received New York draft from Armstrong & Co. for bill of the 4th inst., less 2% Gave cash to bank for sight draft drawn on us by Edwin Barger for balance of his account, January 2, $472.75, less 2%. Received invoice amounting to $165.00 from Morton Hardware Co. Received invoice, $649.50, from Lemont & Ganey, on account 30 days; 2% in 10 days. 18 Bought four horses and two delivery wagons, paying cash, $980.00. Note: Open an account with "Horse and Wagon." January January 19 Insured stock of goods and other personal property for $10,000 and paid the premium of V/2% in cash. Open an account with "Insurance." Received cash from J. B. Mansfield in full of account. Sold to Walter Spry, on account : 20 doz. Screwdrivers at $1.05 a doz. ; 3 Refrigerators at $24.75 ea. ; 5 Steel Ranges at $47.50 ea. Drew sight draft on Simonton Hardware Co., for bill of January 16, and left at bank for collection. January 20 Discounted at bank, at 6%, A. R. Mangold's note for $522.00 received on the 4th. Remember that the note bears interest at 7%. The bank credits our account for the proceeds, which is the same as receiving cash. January 21 Paid our note for $862.50, with 90 days' interest at 6%. Received cash from Mayer Bros, for bill of the 14th, less 2%. January 24 Paid cash, $156, to pay a personal bill against David Lange. January 26 Sold to G. S. Lathrop, 5 doz. Hand Saws at $25.00 a doz., 10 doz. Hammers at $6.20 a doz. Received from him $75 cash, balance on account, 30 days. Having more coal than we will need, we have sold for cash 5 tons at $5 a ton. January 28 Our bank notifies us that the sight draft on the Simonton Hardware Co. has been collected and the amount, less 60c, placed to our credit. Make the proper entries, debiting Expense account with the charge for collection. Paid cash for adding machine, $250. January 30 Paid cash, $25, for hay and feed for horses. Debit "Horse and wagon" account for this. Received cash from Bloom & Berger in full of account. Gave Lemont & Ganey $500 cash to apply on invoice of January 17. Remember that this payment will entitle us to a credit of more than $500. For an explanation of this transaction see Section 281. 323. Directions for completing the exercise: (a) Have all the entries in the various books verified before posting. (b) Post from the Purchase Book, Sales Book, Cash Book and Journal in the order named. LOCK YEAR'S BOOKKEEPING 105 ( 1 ) The total of the sales column in the Sales Book- will be debited to the Accounts Receivable account and credited to the Meichandise account in the General ledger. Each person to whom goods were sold will be debited in the Accounts Re- ceivable ledger. (2) Prepare the Cash Book for balancing by footing each column in pencil. Draw a single red line across the special columns. In the explanation column on the debit side write, Accts. Rec, and Mdse. Dis. and enter the footings of these columns in the General column. On the credit side write Mdse. Dis. and enter the footing of that column in the General column. The Cash Book is now ready to balance as shown in Illus- tration No. 34, Twelfth Lesson. (c) Take a trial balance of the General ledger. (d) The inventories are as follows: (1) Merchandise $8652.25 (2) Furniture and Fixtures 1475.00 (3) Insurance, unexpired 137.50 (4) Horse and Wagon 960.00 (5) Expense, unused coal 48.00 (e) Close the ledger. The Merchandise Discount account should be closed into the Merchandise account before the latter is closed to the Loss & Gain account. (/) Prove the correctness of the Accounts Receivable account by taking an abstract of the Accounts Receivable ledger. (g) Take a second trial balance. (h) Hand all your books to the teacher for examination. 324. Answer the following questions in writing and hand to your teacher : (a) Name several accounts with property that you have studied. (b) Name at least three Speculative accounts which you have had in your work. (c) What two ways are there for finding the proprietor's present worth ? (d) What facts about the business are shown by the Statement? (e) What is the fundamental principle of double entry book- keeping ? THIS BOOK IS DUE ON THE LAST DATE STAMPED BELOW AN INITIAL FINE OF 25 CENTS WILL BE ASSESSED FOR FAILURE TO RETURN THIS BOOK ON THE DATE DUE. THE PENALTY WILL INCREASE TO SO CENTS ON THE FOURTH DAY AND TO $1.00 ON THE SEVENTH DAY OVERDUE. rt AT ox.lQ'VZ OCl <<£«-> i73 ° - LD 21-96*n-7, , 87 YLJ 23700 / 314609 UNIVERSITY OF CALIFORNIA LIBRARY