ill *B 5^5 OQ? LIBRARY OF THE UNIVERSITY OF CALIFORNIA. Clms Digitized by tine Internet Archive in 2007 with funding from IVNcrosoft Co r|5o ration http://www.archive.org/details/commonsensemethoOOdYerrich A COMMON-SENSE METHOD OF DOUBLE-ENTRY BOOKKEEPING ON FIRST PRINCIPLES As Suggested by DE MORGAN PART II.— PRACTICAL S. DYER Univ. London LONDON GEORGE PHILIP & SON, 32, FLEET STREET, E.G. Liverpool: Philip, Son, & Nephew, 45 to 51, South Castle Street 1897 \^All rights reserved] GENERAL CONTENTS. PAGE Bookkeeping by Single Entry i Six Single-Entry Accounts balanced and. closed . . . i Four Double-Entry Accounts ditto — i.e. the Proprietor's Personal Accounts 14 Bookkeeping by Double Entry (Fifteen Complete Ledgers tested) 22 Ledger tested by Trial Balance ; Owner treated as Creditor of the Business 22 Ledger tested by closing ; Owner as before 27 Ledger tested by Trial Balance ; Capital Account opened . . 30 Ledger of Shopkeeper commencing Business with borrowed Capital 33 A Bankrupt's Ledger tested by Trial Balance .... 36 Another balanced and closed -39 Partnership Ledger closed 42 Ledger containing Consignment Outwards, Ship Accounts, Con- tracts, etc., closed 45 Ledger containing Consignment Inwards, Petty Cash, Pur- chasing on Commission Account, etc 52 Ledger with Bills, Joint Adventure, and Consignment Outwards and Inwards 55 Closing Entries passed through the Journal 6 1 Journal and Ledger illustrating the above 64 Private Ledger and Trade Ledger 68 iii 102184 IV CONTENTS. PAGE Ledger containing Joint Adventure, balanced and closed . . 76 Journal and Ledger with Dates and References, as in actual Business 81 Journal and Ledger with Profit and Loss Account omitted till Trial Balance has been struck 90 Classified and Compendious Journalising . . ... -91 Journal Entries explaining Difficulties 97 Errors : Rules for preventing them 107 Their Effect on Trial Balance 108 How to find where they are 1 1 1 Corrections in the Ledger 112 Corrections in the Journal by subsequent Journal Entries . -US Fraudulent Entries. Their Detection 118 Short and Simple Exercises, containing neither Bills nor Sub- sidiary Accounts . . . 121 More Difficult Exercises, containing Partnerships, Bills, Consign- ments, Joint Adventures, etc 129 Civil Service Examination Paper 137 Payments made indirectly by Booking. Bills of Exchange . 140 Answers to the Exercises. Balance Sheets . . . -141 Trial Balance of Civil Service Examination Paper . . • 15'^ Explanation of the Bill Transactions, with Ledger posted . 151 Specimens of Commercial Books and Forms .... I53 B < r. OF DOUBLE-ENTRY BOOKKEEPING. PRACTICAL PART, SINGLE-ENTRY BOOKKEEPING, AS AN INTRODUCTION TO DOUBLE-ENTRY. I. Accounts belonging to the Single-Entry Set, WHOSE Debit Excesses are* Assets of mine, and whose Credit Excesses are Liabilities of mine. (i) Personal Accounts. \Other people^ s accounts^ not my own?^ Exercise i. From the following Waste Book entries make separate accounts for Richards, Grover, and Prior, balance each, and state clearly whether the customer owes me, or I owe him anything. At the beginning of the quarter I owe Grover £^^ \ Prior owes me ;£'6, Richards ;^io. £1u^ Fold a sheet of paper lengthways down the middle. Make •^ ><2 out three accounts, one headed Grover, the second headed JS rt Prior, the third Richards. Write on the top of the left-hand g'g'-S half Dr., Receiving side ; on the top of the right-hand half Cr., ^Sjg Paying-away side. As I owe Grover ;^5, I write £^ on the 5 «H Cr. side of his account. The Cr. side is the side in his favour. •235 ^^ '^^^' ^°™^ 'iwcvQ previously, paid away £^ to me, or sent me ^ ^.S ;^5 worth of something, and is my Creditor for ;^5. As Prior O «5 and Richards owe me their amounts, they have received them i for he owes it to me. He pays me back only ;i^30, but I must close his account, and credit it with the whole £<^o, as though he paid away ;^90. Why? Because he legally owes me nothing after paying away £^0 j and if I credit his account with ;^30 only. PRACTICAL PART. there will be left in the account ^60 owing to me, which I shall never get, and must not consider owing to me. / tnust cancel the whole debt^ losing thereby £60. Later on, I received from Prior Goods invoiced at ;£"45. Prior has parted with £/^^ worth of Goods ; so I credit his account with £i,^. Practical Hint for Balancing. When it is obvious which is the excess side, cast up that side first, and ink it in at once. Then add up the deficient side, subtracting the unit of the total from the unit of the excess total, then the tens from the tens, and so on, as soon as each digit in the less total is obtained. Caution ! In making out a personal account, say Prior's, the only question I must ask is, " Does Prior receive this, or does Prior part with this value ? " It is Prior's account, not mine. DK RICHARDS'S Receiving side. £ To Balance 10 „ Goods 18 ACCOUNT. Paying-away side. By Cash „ Balance ACCOUNT. By Balance „ Goods £ • 15 . 13 £28 £28 Balance brought down, £13. [Richards owes me £13— an asset of mine.] GROVER'S To Bank 34 „ Discount I £ 5 • 30 £35 £35 [No Balance. I owe Grover nothing ; Grover owes me nothing.] DOUBLE-ENTRY BOOKKEEPING. Dr PRIOR'S ACCOUNT. cr £ A To Balance... 6 By Bank ... 29 ,, Goods ... 24 ,, Discount I „ Cash ... 90 „ Cash and Bad Debt ... 90 „ Balance 45 ,, Goods - 45 £165 £165 Balance brought down, £45. [A Liability of mine. I owe Prior £45.] (2) Cash Account — i.e. Cashier's Account. \Suppose every entry to be made by my cashier. It is NOT my account, but my cashier's personal account."] Exercise 2. From the foUajving statements compile a Cash account, balance and close it, and state what the balance means. At the beginning of the month my cash in hand was ;£l20. My cashier received this at some time or other, and put it on the Dr. or receiving side of his account. It was a debit excess in his last account, an asset of mine. It must go on the same side of this new account, viz., on the Dr. side. Gibson has received jQ2^ cash, Robins ^£'50 cash, Gough ;£'2o cash. Cashier has paid away ;i^95, and credits his account with £g$. Goods have been bought for £6$. Cashier paid away this, too, and credits his account £6$. jQZo has been drawn from Bank. Cashier received this and .*. debits his account ;^8o. PRACTICAL PART. 5 Landlord has been paid £2d>, rate collector £t, errand boy £i. Cashier paid away £2,6, and .*. credits his account £z^. Cash sales have yielded £^0, Cashier has received this, and .*. debits his account ;^7o. £1 was stolen from counter, and £42> sent to Bank. Both amounts have been parted with, and must go on Cr. side of Cashier's account. He will have to account for £^ less cash on account of these two transactions. Important Note. If no naine is mentioned when^ Goods are bought or sold, cash is paid or received. Dr CASH ACCOUNT. (Cashier's Person'al Account in my Books.] cr Receiving side. £ Paying-away side. £ To Balance ... 120 By Gibson, Robins, & Gough 95 ,, Bank ... 80 „ Goods ... 65 „ Goods ... ... 70 ,, Trade Expenses ... 36 / „ Loss I / „ Bank - 43 / ,, Balance ... 30 £270 £270 Balance brought down, £30. [An Asset of mine, a Debit Balance. Cashier owes me £30, or has £30 belonging to Caution ! As Cashier cannot possibly pay away more of my money than he first receives, the paying-away side of DOUBLE-ENTRY BOOKKEEPING. a Cash account can never exceed the receiving side. If there is any Balance at all, it must be a Debit Balance in my favour. Hence " Cash Balance jQ-^^ " can never mean anything but ;£3o in hand. (3) Bank Account. \My Banker's personal account in my books. Suppose every entry made by the Banker in my books.] Exercise 3. From the following details make out my Bank account, balance it, and explain what the balance means. On Saturday night, my Balance at the Bank was ^250. Banker has received this from me, and debited himself ;^250. It was a Debit Balance, an Asset due to me, and must go on the same side in the new Bank account. Sent to Bank Smith's cheque for ;^28, and Jones's for £^^- Banker gets these cashed at Smith's and Jones's Banks, and credits my account in his books, and debits his account in my books, for Banker has received ;^40 of my money, and owes it to me. Drew from Bank ;£8 for Petty Cash. Banker pays ;^8 away for me, and credits his account in my books. Paid Robinson his account, ;£"2o, less ;£"i discount, by cheque. Banker will pay away £^9 to Robinson when the latter presents my cheque. Banker credits his account, and debits my account in his books. PRACTICAL PART. Bank allowed me £^2 interest on my deposit. Banker owes me £2^ besides the other money he has of mine. It must be added to the other debits to increase Banker's in- debtedness to me. For, if he paid me the £2, it would come out of the Banker's own money, not out of what he has belonging to me. Banker's account in my books would not be altered. When I get the money, I pay it over to the Banker as a deposit, and he debits his own account with it, and credits mine in his books. Drew out of Bank ^200. Banker pays away and credits his account in my books ; debits my account in his books. Paid into Bank week's receipts, £,2^. Banker receives and debits his account in my books ; he credits my account in his books. IX BANK ACCOUNT. Cr (Banker's Account.) Receiving side. £ Paying-c iway side. £ To Balance ... 250 By Petty Cash .. 8 „ Smith & Jones ... ... 40 ,, Robinson .. 19 ,, Profit (Int.) ... 2 „ Cash ... .. . .. 200 M Cash 24 £316 ,, Balance * ' ■ .. 89 £316 Balance brought down, £89. [An Asset of mine. Banker owes me £89.] Caution ! As Banker cannot pay away out of the money he has of mine more than I have paid away to him — ? DOUBLE-ENTRY BOOKKEEPING. i.e. more than he has received from me — the Dr. side of Banker's account can never be less than the Cr. side, except in the rare case where a Banker obHgingly allows a good customer to overdraw his Bank account. Any balance in my Banker's account must be a Debit Excess, an Asset of mine, unless the Banker has paid away for me all my money at the Bank, and allowed me to get into his debt. A Bank Balance, like a Cash Balance, is assumed to be a Debit Balance. If it is a Credit Balance, a balance in favour of the Banker, a Liability or debt I owe him, it must be called an overdrawn Balance at the Bank. (4) Valuation Account. \The account of the Clerk in charge of my permanent assets, such as horses and vans, trade plant, machinery, etc.] Exercise 4. Compile a Valuation account from the following details, balance it, and explain what the balance means. At the commencement of the year I have horses and vans valued at ;£^3oo, implements and utensils at ;^4o, business premises at ;£"6oo, trade fixtures and ofiSce furni- ture at £60. The clerk in charge of my permanent assets or stock has received these, and debited his account with their value, ;^ 1,000. They are assets, and must go on the debit side of the new valuation account. PRACTICAL PART. During the year, a horse valued at ;;^6o died, and a van worth ;£^ was smashed up. These events lessen permanent assets by ^^65, for /^6^ worth has been parted with, just as much as Goods are when sold. Valuation clerk must credzi his account to lessen the Asset on the Dr. side. He has now only £93S worth of Stock to account for to me. A horse was bought for ;£8o. This adds to Stock, is received by Stock clerk, and entered on Dr. side of his account to increase the asset in his charge. The warehouse is burnt down, and £600 Insurance received from Fire Office. This lessens Stock, and increases Cash. Valuation account must be credited £(>QO. Its clerk has ;(^6oo worth less of Stock to account for to me ; Cash clerk £(iQO jfiore money. At the end of the year I allow 10 per cent, depreciation for wear and tear on all stock on hand. I consider that y\ of all my Stock has been parted with owing to its lessened value. Valuation clerk must credit his account with ;^48 to lessen the Asset. The effect is the same as if a horse worth ;^48 was killed, or ;^48 worth of implements destroyed by fire, or ;^48 worth stolen. I value Goods on hand, at close, at jQi2o. This is one of my Assets, though not a permanent one. The reason why we put it into Stock clerk's charge is given in the article on "Double- Entry Accounts." Stock clerk receives it and debits it to his account, as an Asset of mine, during stock- taking, but will hand it over to Goods clerk on reopening books. 10 DOUBLE-ENTRY BOOKKEEPING. IX VALUATION ACCOUNT. (Stock Clerk's Account.) C: Balance brought down, £487. [A Debit Balance, an Asset of mine. Stock clerk has Stock worth £487 in his charge.] Receiving side. £ Paying away side. £ To Balance (Horses, etc.) 300 By Loss (Horse, etc.) ... 65 ,, ,, (Implem.) ... 40 „ Cash (Fire Ins.) ... 600 „ ,, (Prem.) ... 600 ,, Depreciation ... 48 „ „ (Fixt.) ... 60 ,, Balance ... 487 „ Cash (Horse) 80 / ,, Goods on hand 120 / £1,200 £1,200 Caution! A Valuation Balance must always be a Debit Balance, an Asset, representing property belonging to me. (5) Bills Receivable Account. \The Bill Clerk's Account?^ Exercise 5. Draw up a Bills Receivable account from the following statement, balance it, and state what the balance means. At the end of the year the balance of my Bills Receivable account was ^380, being Bills numbered 10, 11, and 12 in my Bills Receivable Book, for ^£^200, ;£^ioo, and £io respectively. This was a Debit Balance, money owing to me, and must go on debit side of Bills Receivable account. The actual Bills are in my clerk's possession, having been received by him instead of money. Sold Goods ^£"75 to Ryan, and drew on him for that amount. Bill No. 13 in Bills Receivable Book. PRACTICAL PART. II Ryan's acceptance or stamped written promise of £'j^ has been received, and must be debited to Bills Receivable account. The Bill cancels the dobifor the present. Ryan owes nothing till the Bill is mature. The Bill is Paper Money meanwhile, and I can sell it. Rigby honours his Acceptance, Bill No. lo, paying £^200 into Bank. The honoured Bill my Clerk now gives back to Rigby, and he credits Bills Receivable account with £^oo^ because he has paid away or parted with a Bill for that amount. It was an asset before. That asset is now gone, and must be cancelled in that account because it is now at the Bank. My Draft on WilHs for ;^ioo (Bill No. 11 in Bills Book), sent to Bank to be collected, is returned dishonoured. Willis's written promise has been broken. The promised money is not paid. It becomes now a personal account. An account is opened for Willis and debited with ;^ioo. The debt being transferred to Willis's account, it must not continue to appear also in Bills Receivable account. I credit Bills Receivable account to cancel the asset on the other side, not because I have parted with the Bill. I retain the Bill to show Willis's dis- honour, but it is no longer an asset there, but a personal debt elsewhere. I send to Russell, in part payment of what I owe him, Bill No. 12, for ;^8o — King on Russell, mature to- morrow. The Bill is parted with, . *. Bills Receivable account must be credited. I no longer possess the asset down on the Dr. side, and it must be cancelled. Had I kept the Bill, Russell would have paid me ;!^8o on the morrow. By sending Russell's own acceptance back to him, cancelled, I really pay Russell ;^8o, for now he has no Bill to pay. 12 DOUBLE-ENTRY BOOKKEEPING. Z>r BILLS RECEIVABLE ACCOUNT. (Bill Clerk's Account.) a Bills received instead of cash. To Balance 380 ,, Goods ... 75 £455 Balance brought down, £75. [An Asset of mine. I hold a Bill entitling me to £75 when the Bill is mature.] Bills given back again when honourei ^- £ By Bank ... 2C0 „ Willis ... 100 ,, Russell ... 80 ,, Balance • • 75 £455 Caution ! A Bills Rec. Balance must always be a Debit Balance, an Assety Bills in my possession not yet mature for payment, but when mature payable to me. (6) Bills Payable Account. \^Bill Clerk's Account.'] Exercise 6. Make out a Bills Payable account from the following particulars, close it, and say what the balance means. On closing my Ledger, I find a Balance of ;^26o in Bills Payable account, being Bills 31, 32, and 33 in my Bills Payable Book, for ;^5o, ;^i5o, and ;£'6o respectively. Any balance in Bills Payable account must be a credit balance, a Liability. The Bills are in the hands of my creditors. I owe £^(iO to the holders of those Bills, but not till they fall due. Meanwhile I do not treat these as present debts by crediting the persons I owe them to, but credit them to Bills Payable account, because Bills promising £2(iO have been parted PRACTICAL PART. 1 3 with, and because entries on the credit side are against me in all the Single-Entry set of accounts, and show Liabilities or lessening of assets. Bought Goods ;^24o from Martin, and accepted his draft on me for that amount. I have paid away a Bill Payable instead of paying Cash. Instead of crediting Cash account, Bills Payable account must be credited, because (i) a Bill has been parted with, and (2) a Liability for £240 has been incurred. Martin must not be credited unless I dishonour my acceptance, but before mature Martin may have sold it, and the purchaser become my creditor. My Acceptance, No. 31, for £s^^ honoured at Bank to-day. Banker pays away £$0 I promised, and I get back the honoured Bill. A Bill being received, Bills Payable account is debited ;^5o, to cancel the Liability on the other side. I retired my Acceptance (No. 32, for ;^i5o), paying £iA^ cash, and getting £2 discount. I honour my Bill before the time is up, and am let off by paying ;!^I48 only. As, however, nothing more is due from me on this Bill, I cancel the whole Liability by debiting Bills Payable account with the whole ;^i5o. Gough sent me back his Draft on me for £60 (Bill No. 33), and ;^2o Cash in settlement of his account, ;£"8o. Gough holds a Bill drawn on me for £60. He returns it cancelled to me. I no longer owe the debt, and I receive back the Bill. Bills Payable account must be debited £60. Gough has, by returning my Acceptance, paid me ;{^6o towards the ;!^8o he owes me, for he has cancelled the Liability. 14 DOUBLE-ENTRY BOOKKEEPING. z>r BILLS PAYABLE ACCOUNT. (Bill Clerk's Account.) a My written promises received back again when honoured. £ To Bank 50 ,, Cash and Discount 150 ,, Gough 60 ,, Balance 240 ;^500 Caution ! A Bills Payable Balance must always be a Credit Balance, a Liability of mine re- presenting money I owe to my creditors on Bills now in their possession. My written promises paid away instead of cash. £ By Capital or Balance . . . 260 „ Goods 240 ;^500 Balance brought down, £240. [A Credit Balance, a Liability. My creditor holds a Bill against me for £240.] 11. The Double-Entry Set of Accounts, whose Debit Excesses are Losses or Deficits, and whose Credit Excesses are Gains or Capital. (Proprietor's own Personal Accounts.) Capital Account. \The Personal Account of the Owner of the Business^ Exercise 7. Make out a Capital account from the following, balance it, and explain what the balance means. At the beginning of the year I have ;£"5oo cash, £,\oo in Bank, Trade Plant worth ;^ioo. Flake owes me ;£"4o, and Williams £,(iO. I owe Abrams ;^8o and Isaacs ;£"2o. PRACTICAL PART. 1 5 This is my commencing Balance Sheet. The excess of Assets over Liabilities is ;!^i,ooo. This is in charge of various clerks ; Banker has been paid ^^400 of it, Cashier ;^500 of it, and so on. I have paid it away to them ; the business owes it to me. I credit my own personal account with ;^ 1,000, just as I should credit Smith's account, if ;[^i,ooo was borrowed from Smith. I withdraw from Capital, for private expenses, £60. I receive this from my business, and must debit my own Personal or Capital account, for it lessens the ;!^i,ooo credited to it. Debits are now against me. It is my own account, and debits are always against the person whose name heads the account. The Legacy (;£^3oo), left me by my uncle, I have invested in my business. An addition to my Capital, received by Cashier, and debited by him ; paid away by me to him, and credited to my Capital account. I have entered as a first charge upon profits 3 per cent, interest on ;^ 1,000 of my Capital. Having lent my business ;^i,ooo, I charge ;^30 interest, and credit my own account with £2P, just as I should credit the account of any other person who had lent the money, and had not been paid the interest. Net Profits cleared during the year, ;£24o. This is an addition to what the business owes me, an increase to Capital, to be credited to my Capital account. It is the excess of clear gains over dead losses, as set out in Profit and Loss account. It includes, of course, the gross profit made by Trade, as seen in the Credit excess of Goods account. i6 DOUBLE-ENTRY BOOKKEEPING. D": CAPITAL ACCOUNT. [My own Personal Account.] Myself in account with my Business. cr Against me. To Cash withdrawn ,, Balance Final Net Capital £ 60 £i»570 Caution ! The Balance in a Capital account must always be a credit Balance, in the Owner's favour, unless the losses and with- drawals have been so great as to swallow up gains and initial capital besides, and so make him insolvent. In my favour. By Sundries Initial Net Capital ,, Cash (Legacy)... ,, Int. on Capital... „ Net Profits £ ,000 300 30 240 £i»570 Final Net Capital, £1,510. [I began business with £1,000; I have now £1,510.] Profit and Loss Account. \_Fart of Owner's Personal Account.'] Exercise 8. From the following statement make out a Profit and Loss account, and show what is done with the Credit Excess, the excess of gains over losses. During the year, Brown became bankrupt and paid but 3J-. 4^. in the ;^ on a debt o( £z^. I got but ;^5 instead of ;^30. The £2$ loss must go on the Dr. or Loss side, as a diminution of Capital. PRACTICAL PART. 1 7 I wrote off Harrison's account, ;^23, as a bad debt. A dead loss of £22, to be debited to Profit and Loss account. Was allowed 3 per cent, interest on my deposit, ;£"i,5oo, at the Bank. A clear gain of £^$f to be credited to Profit and Loss account. It increases Capital Bergmann has paid me ;£i6 commission on his con- signment. I have sold Goods for Bergmann, and get £\b without any expense. It is clear profit to be credited to Profit and Loss account. Have paid £,2\ fire insurance, jQ^ for advertisements, ;£"2o rent, £^^ rates, £^2 various Trade expenses. All outlay with nothing tangible in return. £'^^2 loss to be debited to Profit and Loss account. Hodges settled his account, ;£"i5o, I allowing him jQ-if discount. A loss of ;^3 ; for I have booked ;^i5o as owing, and get but £\\']. Debit Profit and Loss account with £1. Settled Lloyd's account, ;£'8o, being allowed by him £^2 discount. My Liability of £Zq is cancelled by paying £'j^. A clear gain to me. Credit Profit and Loss account £2. Have made on sales a gross profit of ;^ 120. Goods or Trade account shows a Credit Excess of ;[^i2o, ;^ 1 20 more got for Goods than spent on them. Credit Profit and Loss account £120. P.P. i8 DOUBLE-ENTRY BOOKKEEPING. Z>r PROFIT AND LOSS ACCOUNT. [Part of my own Account.] Losses. To Brown (Bankrupt) ,, Harrison (Bad Debt) ... ,, Trade Expenses „ Hodges (Disc.) Net Profit or Increase) to Capital ... ) 23 52 3 80 Caution! The excess in a Profit and Loss account must always be a Credit Excess, unless losses have swallowed up gains. Gains. By Bank (Int.) , , Cash (Bergman's ) Commission) j ,, Lloyd (Disc.) ... ,, Goods (Gross Profit) cr As 16 2 120 £183 Net Profit or Increase to Capital £80. To be taken to the Cr. side of Capital to increase it. Goods Account, Trade Account, Merchandise Account. \Part of my own Personal account^ in so far as its Credit Excess is my Profit and goes to increase my Capital ; but inasmuch as Goods on hand is an Asset for Final Balance Sheets it belongs also to the Single-Entry Set of accounts, Goods on hand being debited to Valuation account as one of the Final Assets ^\ Exercise 9. Make out a Goods account from the following statement, balance it, say what the balance means, what is done with it, and what becomes of Goods left unsold. Goods on hand at commencement of month, jQdo. This is an Asset to be debited like other assets — i.e, it must be put on the buying side, for the Goods have been bought and received by Stock clerk. PRACTICAL PART. 1 9 Cook sent me Goods invoiced at ^54. Goods bought by me. £$4 must go on Dr. or buying side of Goods account. Returned to Cook Goods invoiced at ;^5, as not equal to sample. £$ must go on the selling side, the Cr. side, because Goods have been parted with just the same as if sold to Cook at cost price. Sold Golding Goods ;^5o, Wright Goods £^2. £82 to go on Cr. or selling side of Goods account. Took out of stock, for trade samples, Goods worth j£i. They have been parted with, and j^^ in^st be credited to Goods account as if sold, but debited to Profit and Loss account instead of Cash. Sold for nil. Received over the counter during the month, ;^85. Sales ; credit Goods account £8^. Took for use at home Goods worth ;^8. They are parted with, so Goods must be credited as if sold for ;^8, but with this difference, that I debit my own (Capital) account with ^^8, and not my Cashier. I have drawn ;^8 out of the business, not in Cash, but in Goods, and must debit my own account. It has lessened what the business owes me by ;^8. Value Goods unsold at end of month at ;£^48. I must enter ;^48 on Cr. or selling side of Goods account as if these Goods on hand ivere sold at cost price. I must also debit them to valuation account, for they are an Asset of mine, to be reckoned in, when I find Final Net Capital from excess of Final Assets over Fipal Liabilities, 20 DOUBLE-ENTRY BOOKKEEPING. D'. GOODS OR TRADE ACCOUNT. a Buying Side. To Balance ,, Cook Credit Excess, Gross Profit £ 60 54 £226 Selling Side. By Cook ,, Golding & Wright ,, Loss (Samples) ,, Cash ,, Capital ,, Valuation Goods on hand £ 5 82 I 85 5 48 £226 Gross Profit to be credited to P. & L. Account £112 Caution! In a Trade account the Excess must be a Credit Excess, unless I have made no profit by trading. The Value of Goods on hand at close is an item for Final Balance Sheet, or for Balance account, for it is an Asset. It may be debited at once to Valuation account along with the permanent Assets. Some bookkeepers transfer it at once to Balance account ; if they open no Balance account, then to Final Balance Sheet. Final Balance Sheet. \Simply a statement of Assets on the rights and Liabilities on the left — i.e. the balances of the Single-Entry accounts written^ after the manner of the Double- Entry accounts^ as a Personal account^ the Cr. side being in my favour^ Exercise 10. Draw up a Final Balance Sheet from the following statement of my affairs on Dec. 31st. Compile from it a Capital account to open my new year's Ledger with, and state whether I am solvent or insolvent. My Ledger shows a Balance of ;£2 2o in Cash account. This must be a debit excess, an Asset, for Cash account can never have a Credit excess. PRACTICAL PART. 21 My Bank account is overdrawn by ;£4o. A Liability, I owe Banker ;!^40. Goods on hand and Trade Fixtures I value at ;£ioo and ;^3o respectively ; Shop at ;£"6oo. All Assets. There is a mortgage of ;^5oo on my shop, and ;£"io interest on it owing. Both Liabilities. I owe £$10. Jones's debit balance is ;£2o, Bryan's credit balance Jones owes me ;[^20 ; this is an Asset of mine. I owe Bryan ;^45o ; this is a Liability of mine. Bank Mortgage Bryan FINAL BALANCE SHEET Liabilities. cr £ 40 510 450 £1,000 Final Net Deficit I am insolvent. ••• £30 My Assets are less than my Liabilities. If I sold everything I have, and every debtor paid me all owing to me, I could not then pay all I owe. I am £30 in debt. Assets. Cash Goods, Fixtures, Shop Jones Balance, Final Net Deficit £ 220 730 20 30 £1,000 Caution ! In a Final Balance Sheet, the Asset side is always the heavier unless the Owner is insolvent. 22 DOUBLE-ENTRY BOOKKEEPING. JX CAPITAL ACCOUNT (In New Ledger). a Myself in account with my Business. Against me. £ To Sundries l,ooo „ Initial Net Deficit ... 30 In my favour. By Sundries £ . 970 [The ;i^30 debit is the resultant of ^970 credit and ;^i,ooo debit. We must not retain all three items, or we double the initial deficit. We can either retain ;i^30 debit and cancel the other two, or cancel ;i^30 debit and retain the first two items. My business has nothing belonging to me ; on the contrary, I owe it ;i^30.] DOUBLE-ENTRY BOOKKEEPING. Ledger tested by Trial Balance, and Owner treated as a Creditor lending his Capital to his Business. Exercise ii. Post the following into the Ledger, treat the owner as a customer lending money to the business, take out a Trial Balance, and from it draw up a Final Balance Sheet and a Profit and Loss account. Directions. — Open the Ledger with Profit and Loss account and Trade account. Rule these off from the rest by a bold double line all across the Ledger. T/ie excess of all the Credits in these accounts over all the Debits gives the excess of clear gains over dead losses, the Net Profit or increase made by the business. Beneath the double line open the Single-Entry accounts, Valuation, Cash, and the Personal accounts, placing last of all the Owner's Personal PRACTICAL PART. 23 account. In these accounts, on opening books, Assets and Liabilities are just equal : there is no excess, for net initial Capital is booked as a Liability which the business owes to the Owner. As, therefore, we begin with no excess of Assets, whatever excess there may be on closing books is Net Profit, or increase. The Net Profit, as found from the first set of accounts, must agree with that found from the Single-Entry Set — i.e., excess of Credits in the Double- Entry Set must equal excess of Debits in the Single-Entry Set. And as every item or transaction is booked both as a debit and as a credit, the grand total of the debits, taking both sets as one, must agree with the grand total of the credits. The Trial Balance simply collects the total debits and the total credits of each account in the Ledger, and applies these two tests to them. Brand began business with ;^3oo. Debit Cashier's account, credit Brand's. ;^300 is owing to the owner, Brand. Cashier has it. He bought pony and cart for ;^45 cash. Debit Valuation account, credit Cashier's account. Stock Clerk receives, Cashier pays away. Bought goods, invoiced at ;£"56, of Gough. Debit Goods account, credit Cough's account. ^^56 is owing to Gough. Sold goods to Davison, invoiced at £^2^. ^ Debit Davison, credit Goods account. Davison owes £2^. 24 DOUBLE-ENTRY BOOKKEEPING. Bought goods for cash ;£"44. Debit Goods account, credit Cash account. Paid jQio rent, ;^3 rates, ;£"; various trade expenses. ;^20 dead loss to go on Dr. side of Profit and Loss account ; credit Cash account ;^20. Pony killed by accident, valued at £2>^. £^o dead loss to be debited to Profit and Loss ; ;^30 credited to Valuation account because parted with. Davison settled his account, and Brand allowed him ^i discount. Debit Cash account ;i^24and debit Profit and Loss ;!^i, because I lose £i ; credit Davison with the whole £2$, because nothing more is owing to me of this debt- Cash sales during the month ;£"ioo. Debit Cash, credit Goods. _ Goods unsold, ^75. Debit Valuation account, for this is an asset ; credit Goods account just as if the goods on hand were sold at cost price. Has withdrawn during the month ^^ to live on. Debit Brand, credit Cashier. Brand receives what Cashier parts with. JVofe respecting goods on hand credited to Goods account and debited to Valuation account. If the Ledger is to remain open, these two entries must be pencilled in, for they will not be the same when the Ledger is closed later on, — some sold, more bought, perhaps. ^ PRACTICAL PART. 25 jy: PROFIT AND LOSS ACCOUNT. Losses. £ Gains. To Cash (Trade Expenses) ...20 , , Valuation ( Pony) 30 „ Davison (Discount) ... i C?" GOODS OR TRADE ACCOUNT. Buying side. £ ToGough 56 » Cash 44 Selling side. By Davison „ Cash „ Valuation, Goods on £ ... 25 ... 100 hand 75 z>r VALUATION ACCOUNT. C r Receiving side. £ Paying-away side. £ To Cash (Pony, etc .) .- 45 By Profit and Loss (Pony) .. 30 „ Goods on hand 75 CASH ACCOUNT. £ £ To Brand 300 By Valuation (Pony, etc.) ... 45 „ Davison ... 24 » Goods 44 „ Goods ... 100 „ Profit and Loss, Trade Expenses 20 „ Brand 5 To Goods GOUGH'S ACCOUNT. I By Goods ... DAVISON'S ACCOUNT. £2$ I By Sundries ... £se £2S BRAND'S ACCOUNT (Capital Account). To Cash (withdrawn) ... ;^5 | By Cash v^300 26 DOUBLE-ENTRY BOOKKEEPING. JX TRIAL BALANCE cr hi r £ 51 . 100 Profit and Loss Account Goods Account . . . 200, "S 11 H" II ;S wuiii^ 11^ I20 Valuation Account 30 ^S^i 424 Cash Account 114 &C0 o 11 1 oJ Gough's Account . . . 56 r§ 1/1 cr II &■ 25 5 Davison's Account Brand's Account \ (Capital) / Grand Total Debits. 25 300 'in .^725 £12S Grand Total Credits. FINAL BALANCE SHEET. Gough Brand Liabilities. £ ... 56 ... 344 ;^400 Valuation Cash Assets. £ 90 310 ;^400 Brand must be credited with the;^49 net profit ; ;^300 + ;i^49 — £$ drawn out = ;i^344. PROFIT AND LOSS ACCOUNT Losses. To Sundries . „ Brand, Net Gain £ SI 49 £100 Gains. By Goods, Gross Profit £ 100 Net Gain to be credited to Brand £49 PRACTICAL PART. 2/ The gross Gain on Trade account is got by finding the excess of the selling side over the buying side, jQ2oo — ;£lOO = ;^IOO. Books prove correct because — (i) The Grand Total of Debits = Grand Total of Credits, each being £']2^. (2) The Credit excess in the Double-Entry accounts = the Debit Excess in the Single-Entry Set — i.e. Net Profit = Excess of Final Assets over Final Liabilities, when Assets just balanced Liabilities at commencement. Ledger proved correct by closing every account in it, and Owner treated as a Creditor lending his capital to his business, and being Credited with Net Profit on Closing. Exercise 12. From the following particulars, post up the Ledger, treat the Owner as any other Creditor of the business, close every account, draw up a Final Balance Sheet, and show (i) Gross Profit on Trade, and (2) Net Profit. Curtis began business with ;^2oo cash and shop valued at ;^8oo (debit cash ;^2oo, debit valuation ;£"8oo ; credit Curtis ;£'i,ooo). — Bought goods of Graham, £,^0. — Sold goods, ^£'52, to Hill. — Paid £^ fire insurance (debit Profit and Loss £\ ; credit Cash £d^. — Hill settled his account, Curtis allowing him £2 discount (debit Cash £^0, debit Profit and Loss £2 ; credit Hill ;£52). — Curtis settled with Graham, being allowed £2> discount (debit Graham £Zo ; 28 DOUBLE-ENTRY BOOKKEEPING. credit Cash ^Tj, credit Profit and Loss ;£3, a clear gain to Curtis). — Paid rates £6, trade expenses jQ^ (debit Profit and Loss ;£"io ; credit Cash ;£^io). — Cash sales during month ;£"98 (debit Cash ; credit Goods). — Write off i per cent, depreciation on shop (debit Profit and Loss £?> ; credit Valuation £2>). — He values goods on hand at ;£"io (debit Valuation ^lo ; credit Goods ^lo, as if sold). Directions for closing the Ledger. (i) Balance Trade or Goods account. Its Credit Excess is Gross Profit. Carry it up to Credit side of Profit and Loss account with the other profits. ^ (2) Balance Profit and Loss account : its Credit Excess is Net Profit. Carry it to the Credit side of the Owner's account (Capital account), to increase the amount the business owes him. (3) Balance each of the Single-Entry Set of accounts, bring down each balance or excess on the excess side, collect all the Debit Balances on the right-hand side of Final Balance Sheet as Assets, collect all the Credit Balances as Liabilities^ and see if the Assets just equal the Liabilities. JCy: PROFIT AND LOSS ACCOUNT. Cr Gains. £ By Graham (Disc.) ... 3 Losses. £ To Cash (Insurance) ... 4 „ Hill (Discount) ... 2 ,, Cash (rates, etc.) ... 10 ,, Valuation (depreciation) 8 „ Curtis, Net Profit ... 59 Goods (Gross Profit) ... 80 £83 Net Profit £59 PRACTICAL PART. 29 Buying side. To Graham ,, Profit and Loss, \ Gross Profit / GOODS OR TRADE ACCOUNT. Selling side. £ 80 80 £160 By Hill ,, Cash , , Valuation Goods on hand £ 52 98 10 £160 Gross Profit £80 z>r VALUATION ACCOUNT. Receiving side. £ To Curtis (shop) 800 ,, Goods on hand... ... 10 £810 Balance brought down, £802 An Asset. Paying-azvay side. By P. & L. (depreciation). ,, Balance Cr £ 8 802 £810 CASH ACCOUNT. £ To Curtis 200 „ Hill 50 „ Goods 98 By P. & L. (Insurance) ,, Graham ,, P. & L. (rates, etc.) ,, Balance £ 4 •• 77 10 •• 257 £348 £348 Balance brought down, £257 An Asset. GRAHAM'S ACCOUNT. ^1 To Sundries 80 | By Goods £ .. 80 HILL'S ACCOUNT. £ To Goods 52 By Sundries £ ... 52 30 DOUBLE-ENTRY BOOKKEEPING. DK CURTIS'S ACCOUNT (CAPITAL ACCOUNT). CT To Balance 1,059 By Sundries „ P. & L. Net Profit £> r,ooo 59 £1,059 Balance due to Curtis, ^ brought down — a I Liability of the j ^''°59 business J FINAL BALANCE SHEET. Curtis Liabilities. £1,059 Assets. Valuation Cash ... ;^802 ... 257 £1,059 Gross Profit, Credit Excess of Trade account . . . Net Profit, Credit Excess of P. & L. account ... ... ;^80 - 59 Owner's Personal account (Capital account) coming first as one of the Double-Entry Set, and its credit Excess shown to agree with the excess of Assets over Liabilities in the Single-Entry Set. Exercise 13. Post the following into the Ledger, keep the Ledger open, but take out a Trial Balance to detect omissions and mispostings, and from it draw up a Final Balance Sheet, and show (i) Gross Profit on Trade, and (2) Clear Profit, without closing any account. Began business with ;£"i,ooo cash (debit Cash, and credit Capital account). — Buy horse and van, £(^0. — Ryan sends PRACTICAL PART. 3 1 me goods invoiced at ;^5o. — I buy goods for cash, ;^22o. — Send Harvey goods, ^£24. — Cash sales during month, ;^i85. — Pay Ryan, he allowing me ;£i discount. — Harvey absconds, and I write off his account as a bad debt (debit Profit and Loss ;£'24 ; credit Harvey ;£24). — I value goods on hand at ;£"i6i (debit Valuation ; credit Goods). — Sundry accounts owing: rent, ;^i6; rates, /^$; repairs, ^£2 (open a Sundry Debts account, and credit it with ;^2i — this is a Liability; debit Profit and Loss ;£"2i). Directions. — i. Adhere to the following order, omitting any account not required : — Double-Entry Set.— Capital, Profit and Loss, Trade. Single-Entry Set. — Valuation, Bank, Cash, Bills Receivable, Bills Payable, Personal accounts. 2. Place any subsidiary account immediately after its principal: e.g., Trade expenses immediately after Profit and Loss, Contract account immediately after Trade account. 3. In the Double-Entry Set carry the Goods credit excess up to Profit and Loss credit side just above it, and the credit excess of Profit and Loss uj> to credit side of Capital account just above it, if Ledger is to be closed. 4. Test to see (i) whether grand total of debits equals that of credits ; (2) whether the credit excess in the Double- Entry Set equals the debit excess in the Single-Entry Set, both being final Net Capital (Initial Capital -f Net Profit since commencement). n: CAPITAL ACCOUNT. Cf Against me. In my favour. (Initial Net Capital) . By Cash ) ,| ;^i,ooo 32 DOUBLE-ENTRY BOOKKEEPING. jy. PROFIT AND LOSS ACCOUNT. Losses. I Gains. To Harvey (Bad Debt) ... £2/^ ,, Outstanding Liabilities 21 c. GOODS OR TRADE ACCOUNT. Buying side. Selling side. To Ryan ... • £So By Harvey ;^24 „ Cash ... 220 „ Cash ... 185 ,, Valuation, Goods on' hand. 161 d: VALUATION ACCOUNT. a Receiving side. To Cash (Horse, etc.) ... £()o ,, Goods on hand ... 161 Paying-away side. CASH ACCOUNT. To Capital ...^1,000 By Valuation ... ;^90 „ Goods ... . ... 185 ,, Goods 220 M Ryan 49 To Sundries RYAN'S ACCOUNT. ... ;^50 I By Goods ... £so To Goods HARVEY'S ACCOUNT. ... £20, I By P. & L., Bad Debt ... £20, OUTSTANDING ACCOUNTS. I By P. & L. (Rent, etc.) ... ;^2i PRACTICAL PART. 33 jr. TRIAL BALANCE. r £ Capital 45 P. & L . 270 Goods [,000 I 370. Excess of Credits in Double- Entry Set = Initial Capital + rs Net Profits .>^ Final'Sfet Capital. Excess of Debits in Single-Entry Set = Excess of Assets over Lia- bilities = £x,osft Final Net Capital. ' 251 1,185 50 24 Valuation Cash ... Ryan ... Harvey ... Outstanding counts Ac- 359 50 24 21- - i :i,825 ^ .825 Final Net Capital FINAL BALANCE SHEET. Liabilities. Outstanding Accounts Balance, Final Net Capital 21 1,056 £1,077 Assets. Valuation Cash £1,056 £ 251 826 £1.077 Final Net Capital ... £1,056 Gross Profit on Trade = Credit Excess in Trade Account = £370 - £270 = £100. Net Profit = Credit Excess of P. & L. Account = £1 -f £100 - £45 = ;^56. Ledger of a Shopkeeper commencing Business with Borrowed Money. Exercise 14. Post up the Ledger from the following par- ticulars. Test by Trial Balance, and from it make out Final Balance Sheet and show Net Profit. Open a Capital account, 3 34 DOUBLE-ENTRY BOOKKEEPING. Healy begins business by borrowing ;^6oo from Tomkins (debit Cash and credit Tomkins : it would be wrong to debit Capital account with ;£"6oo, — that would mean that Healy began ;£6oo in debt, whereas his initial capital is nil\ his asset, ;^6oo, just equals his liability, ;£6oo). — He lays out ^35 on trade plant. — Draper sends him goods, ;£"35. — He buys goods for cash, ;^2oo. — Sells goods for cash, ;^35o. — Settles with Tomkins and Draper. — Pays rent, £^i^. — Takes out of business £^t^o to live on. — Has goods left unsold which he values at ;£"5o. D''. CAPITAL ACCOUNT. C. Against Healy. £ I In Healy' s favour. £ To Tomkins ... ... ... 600 I By Cask ... ... ... 600 „ Cash (withdrawn) ... 30 | ,, Initial Net Capital ... Nil, [The items in italics may be omitted.] PROFIT AND LOSS ACCOUNT. Losses. £ 1 Gains. To Cash (Rent) 15 | GOODS OR TRADE ACCOUNT. Buying side. J To Draper 45 ,, Cash 2CX) Selling side. By Cash „ Valuation, Goods on hand £ 350 50 VALUATION ACCOUNT. Receiving side. £ To Cash (Plant) 35 , , Goods (on hand) 50 Payin^-away side. PRACTICAL PART. 35 Dr CASH ACCOUNT. C. To Tomkins ^600 By Valuation ;^ 35 ,, Goods ... ... ... 350 „ Goods 200 ,, Tomkins & Draper ... 645 „ P. & L. (Rent) 15 1 „ Capital (private expenses) 30 TOMKINS'S ACCOUNT. To Cash ... ...;^6oo 1 ByCash ... £(iOQ To Cash DRAPER'S ACCOUNT. ••• As I By Goods ••• £\S jr. TRIAL BALANCE. £ 30 Capital 15 P. & L. .245 Trade Cr ! m.-SE aU.2 2 I ^ f) S *> -S J5 4) Valuation Cash ... Tomkins Draper . . . £1,970 £1,970 FINAL BALANCE SHEET. Liabilities. £ Assets. £ Balance, inal Net Capital ■ no Valuation Cash ... ... ... 85 ... 25 £110 Net Gain = £400 - £245 - £15 = £140, i.e. Trade Gain (£400 - £245) - £15 loss. The Journal corresponding to this Ledger is given in the article on Classified Journalising, p. 93. 36 DOUBLE-ENTRY BOOKKEEPING. A BANKRUPT'S LEDGER. Ledger left open but proved two ways : (i) By Trial Balance ; and (2) by the Journal Totals agreeing with the Ledger Totals in Trial Balance. Exercise 15. Journalise the following, then post into the Ledger, but do not close any account. Take out a Trial Balance, test it, and draw up a Final Balance Sheet from it. Mordan, on reopening his books, has an overdrawn balance of ;^5o at the bank (a Liability, to be credited to Bank account) ; there is a mortgage of ;£"8oo on his shop (another Liability ; open an account for Mortgagee and credit it with ;£"8oo) ; he owes Thrift £^0 and Workman ;^i3o. — He has goods worth ;^2o, trade plant worth £^0^ and shop worth ;£^9oo (debit every Asset ; credit every Liability ; the Liabilities being £<^o in excess, Mordan is insolvent to begin with; Capital account must be debited with £,^0. There is no initial capital, but an initial deficit of ;£^9o.) — Johns sells him goods invoiced at ;^2io. — He sells goods for ;£^i3o. — Spends on wages and trade expenses ;£75 (debit Profit and Loss ; credit Cash). — Has goods worth ;£"9o left unsold (debit Valuation account; credit Goods).— Takes ;£"3o from capital to live upon (debit Capital account; credit Cash account). PRACTICAL PART. 17 DK £ 20 940 90 210 130 90 75 30 JOURNAL. Goods, Dr. Valuation, Dr. Capital, Dr. To Bank, Cr. „ Mortgagee, „ Thrift, Cr. „ Workman, Cr. Cr. £ 50 800 70 130 Goods, Dr. To Johns, Cr. 210 Cash, Dr. To Goods, Cr. 130 Valuation, Dr. To Goods, Cr. 90 Profit and Loss, Dr. To Cash, Cr. 75 Capital, Dr. To Cash, Cr. Agreeing with the Ledger Totals in Trial Balance. ^i 30 Total Debits ;^i,585 '5^5 Credits LEDGER. CAPITAL ACCOUNT. In Mordan^ s favour. £ By Sundries 960 Against Mordan. £ To Sundries i)05o „ Sundries \ Initial Net Deficit j Cash (withdrawn) ... 30 [The first item both sides must be omitted.] PROFIT AND LOSS ACCOUNT. Losses. £ I Gains. To Cash (wages) 75 38 DOUBLE-ENTRY BOOKKEEPING. DX GOODS OR TRADE ACCOUNT. Cf Buying side. £, Selling side. £ To Capital 20 By Cash 130 ,, Johns 210 ,, Valuation, Goods on hand 90 VALUATION ACCOUNT. Receiving side. £ Paying-away side. To Capital (Plant) 40 „ (Shop) 900 „ Goods on hand 90 BANK ACCOUNT. By Capital Account 50 CASH ACCOUNT. ■"o Goods ... £ 130 By P. &L. (Wages, etc.) ... ,, Capital (withdrawn) ... £, 75 30 MORTGAGEE'S ACCOUNT. By Capital Account 800 THRIFT'S ACCOUNT. By Capital Account . 70 WORKMAN'S ACCOUNT. By Capital Account . 130 JOHNS'S ACCOUNT. By Goods . 210 PRACTICAL PART. 39 d: TRIAL BALANCE. Capital Profit and Loss Goods '1,030 Valuation Bank ... 130 Cash ... Mortgagee Thrift... Workman Johns... Debits. ^ 50 105 800 70 130 210; £1,585 Total Credits. Agreeing with the totals in the Journal. Final Net Capital, none ; a Deficit of £205. FINAL BALANCE SHEET. Liabilities. Bank Mortgagee Thrift Workman Johns £ ... 50 ... 800 ... 70 ... 130 ... 210 Assets. Valuation Cash Balance, Final Net Deficit £ ... 1,030 ... 25 ... 205 £1,260 £1,260 Final Net Deficit ... £205 Another Bankrupt's Ledger, proved by closing, and showing that the excess of Final Assets over Final Liabilities equals Initial Capital plus Net Profit, profit being negative. Exercise 16. Smith's affairs were' as follow on Jan. i : — He owed ;£^8oo to Jarvis, and there was a mortgage 40 DOUBLE-ENTRY BOOKKEEPING. on his shop of ;£"3oo; he had Goods worth ;£"8o, a shop valued at ;£"4oo, and horses and vans at ;£i2o; he had ;^ioo cash, but owed ;£ioo interest on mort- gage. (His Assets did not equal his Liabilities by ;^5oo ; debit Capital account with ;^5oo.) — He buys Goods for jQ6o cash. — The mortgagee forecloses, cancels loan and interest, and sells the shop. — (Credit Valuation account £a^o, the shop is no longer Smith's; debit Mortgagee's account because neither loan nor interest is now due.) — Smith sells Goods for cash, ;£"iio.— Pays ;^io rent, £s rates, £$ gas.— Has Goods on hand worth ;^io. — Writes off £^ deprecia- tion on horses (debit Profit and Loss account ; credit Valuation account). Post these facts into the Ledger, close every account, and take out a Final Balance Sheet. N.B. — What are generally credit excesses, showing gains, will here be debit excesses, showing losses in the Double- Entry Set. On the other hand, in the Single-Entry accounts, the Credits or Liabilities will be in excess. jy: CAPITAL ACCOUNT. cr Against Smith. £ To Sundries 500 Initial Net Deficit Profit and Loss, Net Loss 45 £545 Final Net Deficit £545 In Smith! s favour. £ By Balance Final Net Deficit 545 PRACTICAL PART. 41 IX PROFIT AND LOSS ACCOUNT. a Losses. £ To Cash (Trade Expenses) 20 ,, Valuation (depreciation) 5 „ Goods (Gross Profit) 20 ~£45 Net Loss, £45 Gains. By Capital, Net Loss ... £ £45 GOODS OR TRADE ACCOUNT. Buying side. To Capital „ Cash £ 80 60 £140 Gross Loss, £20 Selling side. By Cash ,, Valuation (Goods on" hand ... ,, Profit and Loss,' Gross Loss £ no 20 £140 VALUATION ACCOUNT. Receiving side. To Capital (Shop) ... ,, ,, (Horses, etc.) „ Goods on hand... £ 400 120 10 £530 Balance brought down, £125 Paying-away side. By Mortgagee ,, P. & L. (depreciation) ,, Balance £ 400 5 125 £530 CASH ACCOUNT. £ To Capital ,, Goods 100 no £210 Balance brought down, £130 By Goods „ P. & L. Trade Exp. Balance £ 60 20 130 £210 42 DOUBLE-ENTRY BOOKKEEPING. jy: JARVIS'S ACCOUNT. Q: Balance ... 800 £ By Capital 800 Balance brought down, £800 MORTGAGEE'S ACCOUNT. To Valuation £ 400 / £ By Capital (Loan) 300 » (Int.) 100 £400 FINAL BALANCE SHEET. Liabilities. Jarvis £ 800 Balance, Final Deficit Net I £545 Assets. Valuation Cash Balance, Final Net Deficit £ 125 130 545 £800 Books prove correct because the Assets are just as much less than the Liabilities in Final Balance Sheet as the Final Net Deficit seen in Capital account — viz. ;^545. Partnership. Exercise 17. Post the following into the Ledger, open a separate account for each partner, close every account, and make out Final Balance Sheet. Allen and Burton are partners having shares as 1:3. They have ;£5,ooo cash. (Credit Allen with \ of this; Burton with |.) They purchase stock {i.e. Goods) for PRACTICAL PART. 43 ;£8oo cash, and sell stock for ;£i,90o cash. During the year Allen has drawn out for private use ;£"6oo, Burton ;£3oo. They value their stock on hand at ;^5,9oo. a d: ALLEN'S CAPITAL ACCOUNT. Against Allen. In Allen's favour. To Cash (withdrawn) ... ;^6oo Balance Final\ Net Capital/ "■* '^ By Cash (^ Initial^ . Net Capital)-/ ,, Profit and Loss\ i Net Profits/ '" '^^ ^^^-^ £3,000 £3,000 Allen's Final Net Capital, £2,400 BURTON'S CAPI TAL ACCOUNT. Against Burton. £ To Cash (withdrawn) ... 300 „ Balance, Final Net^ Capital ... ) 8,700 For Burton. £ By Cash (| Initial Nefk Capital) ... ) 3.750 „ 1 Net Profit 5,250 £9,000 £9,000 Burton's Final Net^ ^^ Capital ... ]£^'^°'' PROFIT AND LOSS ACCOUNT. Losses. £ To Capital (Net Profit) . . . 7,000 Gains. £ By Goods (Gross Profit) ... 7,000 Net Profit, £7,000 GOODS OR TR ADE ACCOUNT. Buying side. £ To Cash 800 „ Profit and Loss,^ Gross Grain / 7>°°° Selling side. £ By Cash 1,900 ,, Valuation (Goods on^ hand) ... } 5'900 £7,800 £7,800 Gross Gain, £7,000 44 DOUBLE-ENTRY BOOKKEEPING. D"^ VALUATION ACCOUNT. Cf Receiving side. £ I Paying-away side. £ ... 5,900 I By Balance 5,900 To Goods on hand Balance brought down (Asset) }£5: 900 To Capital... „ Goods ... CASH ACCOUNT. 5,000 1,900 £6,900 Balance brought down (Asset) ■yys. 200 By Goods ... ,, Allen's Account ,, Burton's Account Balance . 800 600 • 300 . 5.200 £6,900 FINAL BALANCE SHEET. Liabilities. Balance, Final Net^ Capital ... / Allen's... Burton's £2,400 ^ £8,700/ Assets. By Valuation ,, Cash £ ... 5,900 •• • 5>2oo £11,100 Final Net Capital. Allen's 2,400 Burton's 8,700 Total ... £11,100 Books prove correct, because the excess of Final Assets over Final Liabilities in the Single-Entry accounts agrees with Final Net Capital obtained from Initial Capital plus Net Profits in the Double-Entry Set of accounts. PRACTICAL PART. 45 SUBSIDIARY ACCOUNTS IN DOUBLE- ENTRY SET. Ledger containing subdivisions of all the Double- Entry Set of Accounts, including Consign- ment Outwards and Contracts. Exercise 18. Post up the following, balance and close, and prepare Final Balance Sheet. Open a separate account for each of the two Partners, a separate account for Bad Debts, and another for Trade Expenses ; keep the Consignment Outwards apart, each Contract ac- count by itself, and open separate accounts for Ship Adelaide^ for Corn, and for Flour. May and Rose are partners, May owning four shares. Rose three ; profits or losses to be in the same ratio. On Jan. I St their affairs are as follow : — Drake owes them ;£"5oo, Francis ;£4oo, Gough ;£"ioo; they have ;£'i,ooo Cash, Ship Adelaide^ valued at ;^4,ooo, Grain worth ;^3oo. Flour ;£2oo ; they have spent on Contract No. i ;^45o, on Contract No. 2 ;^5o (all Assets, each to be debited to its own separate account ; credit May with ;£4,ooo. Rose with ;£3,ooo). — They buy Grain for ;^2oo Cash, and Flour for ;^3oo. — Spend ;£^30o on cargo for ship Adelaide^ ;£^4o on her Insurance, and ;£"6o for other Trade expenses connected with her (debit Ship Adelaide account ;£^3oo, debit Trade Expenses ;£'ioo ; credit Cash ;£"4oo). — They send a Con- signment of Grain to Rigby, invoiced at ;£"45o, also Flour invoiced at £^2^0 (debit Consignment Outwards ;£'7oo, credit Grain account ;^45o, credit Flour account £^2^0). — 46 DOUBLE-ENTRY BOOKKEEPING. They use on Contract No. i Flour invoiced at ;^38o, on Contract No. 2 Flour invoiced at ;^2o (credit Flour account ;£"4oo ; debit Contract No. i ;£"38o, debit Con- tract No. 2 ;^2o). — Ship Adelaide^ insured for ;£"4,ooo, founders at sea (debit the underwriters ;£4,ooo, credit Ship Adelaide account ;^4,ooo, as if sold to the Insurance Com- pany). — They received ;£"i,53o on account of Contract No. I, and ;^2io on account of Contract No. 2 (credit each account with its own amount ; debit Cash ;^i,74o). — Drake fails and pays but 45. in the jT^, Francis too, and pays \os. ; Gough absconds, and his account is written off as a bad debt (debit Bad Debts account with what is lost^ debit Cash account with what is received ; credit each with full amount of his debt because no more can be claimed). — Rigby sends his Account Sales showing Net Proceeds (after all charges and his commission), ;£"8oo (debit Rigby ;£"8oo, credit Consignment Outwards ;;^8oo). — They paid wages ;^2o, gas ;^5, advertisements £^1^ (debit Trade Expenses ;£"4o; credit Cash £,^o). — Flour worth ;£"2o damaged by water (credit Flour account ;£"2o, as if sold; debit Profit and Loss account £^20). — Grain on hand worth ;£'55o, Flour on hand ;£33o (debit Valuation account ;^88o; credit Grain account ;^550; credit Flour account ;^33o, as if sold). — Allow, as first charge on profits, 5 per cent, on each Partner's Capital, and a salary of ;^5o due to Rose as Manager of the Contracts, but not yet paid to him (credit May with ;£"2oo, and credit Rose with £^\^o interest + £,S^ salary; debit P. & L. ;£"4oo). — May has drawn out ;^5o, and Rose ;^3o (debit May ;£'5o, debit Rose ;^3o ; credit Cash ;^8o). PRACTICAL PART. 47 N.B. — Trade Expenses and Bad Debts are parts of P. & L. account; their debit excesses go to the Debit side of P. & L., as dead losses. Consignment Outwards, Contracts, Ship account. Grain account, Flour account, are all Goods or Trade accounts. Their credit excesses are clear gains^ to go to the Cr. side of P. & L. account. Should there be a Debit Excess, as there is here in Ship Adelaide account, it is a loss^ to go to the Dr. side of P. & L. account. IT. MAY'S CAPITAL ACCOUNT. CK Against May. £ s. d. To Cash (withdrawn) 50 o o „ Balance ^ May's Final \ 4,367 2 10 Net Capital) £4,417 2 10 In May's Favour. £ s. d. By Sundries ... 4,000 o o „ P. & L. (Int-i ^ . ^ V 200 o o on Cap.) j ,, P. & L. I Net^ ^ J- 217 2 10 Profit £4,417 2 10 May's Final \ „ Net Capital M4,367 210 ROSE'S CAPITAL ACCOUNT. Against Rose. £ s. d. To Cash (withdrawn) 30 o o To Balance, \ Rose's Final Net \ 3,332 17 2 Capital. ) £3,362 17 2 In Rose' s favour. £ s. d By Sundries ... 3,000 o o „ P. & L., Interest on Capital ... 150 o o „ P. & L., Salary .. . 50 o o „ P. & L., f Net Profit ... 162 17 £3,362 17 2 Rose's Final Net Capital }£3 332 17 2 48 DOUBLE-ENTRY BOOKKEEPING. D: profit and loss account (Summary). Cf Losses. £ Gains. £ To Flour Account (damage) 20 By Consignment Outwards ,, May and Rose, Interest (gross profit) 100 and Salary 400 „ Contract No. 2, ditto ... 140 „ Bad Debts Account ... 700 ,, Contract No. I, ditto... 700 ,, Trade Expenses Account 140 , , Flour Account, ditto . . . 500 ,, Ship Adelaide Account ,, Grain Account, ditto ... 500 (gross loss) 300 / „ Capital Account,) Net Profit j 380 / / £ 1,940 £1,940 Net Profit, £380 BAD DEBTS ACCOUNT. To Drake „ Francis „ Gough Losses. £ ... 400 ... 200 ... 100 £700 By Balance £ ... 700 / Loss, £700 TRADE EXPENSES ACCOUNT. Losses. To Cash (Insurance, etc.), „ „ (Wages) ... £ 100 40 £140 Loss, £140 By P. & L. £ 140 PRACTICAL PART. 49 n: CONSIGNMENT OUTWARDS ACCOUNT. (To RlGBY.) Buying side. £ To Grain Account and Flour Account 700 ,, Profit and Loss, Gross Profit 100 £800 Selling side. By Rigby £ 800 Gross Profit, £100 SHIP ADELAIDE ACCOUNT. Selling side. £ By Underwriters 4.000 „ Profit and Loss, ) Gross Loss... ) ^°° Buying side. £ To Capital . . 4,000 „ Cash (cargo) ... .. 300 £4,300 £4,300 Gross Loss, £300 GRAIN ACCOUNT. Buying side. To Capital ,, Cash ,, Profit and Loss, Gross Profit £ 300 200 500 £1,000 Selling side. £ By Consignment Outwards 450 ,, Valuation, Grain on hand 550 £1,000 Gross Profit, £500 FLOUR ACCOUNT. Buying side. £ To Capital 200 ,, Cash ... 300 „ Profit and Loss, Gross Profit 500 £1,000 P.P. Selling side. £ By Consignment Outwards 250 ,, Contracts i and 2 ... 400 ,, P. & L. (damage) ... 20 „ Valuation (Flour on hand) 330 £1,000 Gross Profit, £500 4 so DOUBLE-ENTRY BOOKKEEPING. Z^r CONTRACT No . I ACCOUNT. c: Buying side. £ To Capital 450 ,, Flour Account ... 380 Selling side. By Cash £ 1.530 ,, Profit and Losso Gross Profit / ^oo / / £1.530 / Gross Profit, £700 CONTRACT No 2 ACCOUNT. Buying side. £ To Capital 50 ,, Flour Account 20 Selling side. By Cash . 210 „ Profit and Loss,^ Gross Profit .:. | ^4° / £210 / Gross Profit »£i40 nr VALUATION ACCOUNT. cr Receiving side. £ To Grain and Flour on hand 880 Paying-away side. £ By Balance 880 Balance brought down, £880 An Asset. CASH ACCOUNT. To Capital 1,000 ,, Contracts Nos. i and 2 1,740 ,, Drake & Francis ... 300 £3,040 By Grain and Flour ,, Ship Account & P. & L. ,, Trade Expenses ,, May & Rose (with-:\ drawals) ... j ,, Balance £ 500 400 40 80 ,. 2,020 £3,040 Balance brought down, £2,020 An Asset. PRACTICAL PART. 51 z>r DRAKE'S ACCOUNT. Cr To Capital ;!^5oo 1 By Sundries FRANCIS'S ACCOUNT. • ;^500 To Capital... ;«^400 1 By Sundries • Aoo COUGH'S ACCOUNT. To Capital... ;^ioo 1 By Bad Debts Account . . ^100 UNDERWRITERS' ACCOUNT. To Ship Adelaide Account £ \ By Balance (Insurance) 4,000 Balance brought down, £4,000 An Asset. ... £4,000 RIGBY'S ACCOUNT. To Consignment Outwards ;^8oo I By Balance ... £800 Balance brought down, £800 An Asset. FINAL BALA Liabilities. £ Balance, Final Net^ Capital / 7.700 Viz.— May's, £4,367 2 10^ Rose's, 3,332 17 2/ NCE SHEET. Assets. £ Valuation 880 Cash 2,020 Underwriters 4,000 Rigby 800 £7,700 May's Finals Net Capital) ^4,367 2 10 Rose's ditto ... 3,332 17 2 £7,700 52 DOUBLE-ENTRY BOOKKEEPING. SUBSIDIARY SINGLE-ENTRY ACCOUNTS. Ledger containing Petty Cash account, Con- signment Inwards, Premises account. Trade Plant account, and Purchasing on Com- mission account. Exercise 19. Post the following, test by Trial Balance, and draw out Final Balance Sheet. Open separate accounts for Business Premises, Trade Plant, and Horses and Vans. Debit all Receipts, credit all Payments under ^^ to Petty Cash account. Began business with ;^2,ooo cash and business premises .;£"2,ooo (debit Cash ;^2, 000, debit Business Premises ;£"2,ooo; credit Capital account ;£"4,ooo). — Spent ;^8o on goods, ;£"i2o on trade plant, ;^ioo on horse and van (debit Goods ;£8o, debit Trade Plant ;£"i2o, debit Horse and Van account ;£"ioo ; credit Cash ;£"3oo). — Set aside ;£$o for petty cash (debit Petty Cash ;^5o ; credit Cash account ;^5o). — Paid for stamps, stationery, and office requisites ;^3 (debit Profit and Loss and credit Petty Cash). — Bought goods for Gilmore for cash, ;^8o, paid ;^2 carriage on them, and charged ;£"5 commission (debit Gilmore ;^S'j ; credit Cash ;^82, credit Profit and Loss ;^5). — Bought another horse for ;£"3o cash (debit Horse and Van account and credit Cash). — Richards sends me goods, invoiced by him at ;^8o, to sell on com- mission (no entry at all). — I pay ^4 trade expenses (debit Profit and Loss ; credit Petty Cash). — I sell Richards's consignment for ;^i2o cash, but have spent on it ;^4 and charge ;£"6 my commission (debit Cash ;£'i2o, credit Richards ;£"i2o; debit Richards ^10, credit Petty Cash PRACTICAL PART. S3 ;^4, credit Profit and Loss ^^6). — Gilmore settles his account and I settle with Richards. — Pay ;^3 wages (debit Profit and Loss ; credit Petty Cash). — Cash sales during the month ;^i6o. — Goods on hand ;£4o (debit Valuation ; credit Goods as if sold). — Write off i per cent, depreciation on premises (debit Profit and Loss ; credit Premises, each ;^2o). — Also £,2 depreciation on trad^ plant and £^2 on horses and vans. — Have taken jQ^o for private use (debit Capital ; credit Cash). Dr CAPITAL ACCOUNT. cr Against me. £ In my favour. To Cash (withdrawal) ... 40 By Sundries £ ... 4,000 PROFIT AND LOSS ACCOUNT. Losses. £ Gains. £ To Petty Cash (Trade Exp). 3 jj >> j> 3 ,, Business Premises (depreci.) 20 „ Trade Plant, ditto ... 2 By Gilmore (Comm.) „ Richards (Comm.) ... 5 ... 6 , , Horses and Vans, ditto ... 2 GOODS OR TRADE ACCOUNT. Buying Side. £ To Cash 80 Selling Side. By Cash £ ... 160 ,, Valuation(Goods on hand) 40 X>r VALUATION ACCOUNT. Cr Receiving side. £ I Paying-atuay side. To Goods on hand ... ... 40 | BUSINESS PREMISES ACCOUNT. To Capital ;!^2,ooo | By Profit and Loss (de- I preciation) ;^20 TRADE PLANT ACCOUNT. To Cash ;i^i20 I By Profit and Loss (de- preciation) £2 ( OF THE 54 DOUBLE-ENTRY BOOKKEEPING. Dr HORSES AND VANS ACCOUNT. Cr To Cash ;^ioo 1 By Profit and Loss (de- ,, ,, (Horse) 30 | preciation) £2. CASH ACCOUNT. To Capital ;^2,ooo By Sundries ;^30o ,, Richards 120 ,, Petty Cash 50 „ Gilmore 87 ,, Gilmore 82 „ Goods 160 ,, Horse Account ... 30 „ Richards no „ Capital 40 PETTY CASH ACCOUNT. To Cash ;^5o By Profit and Loss (Trade Expenses) £z „ Richards 4 ,, Profit and Loss (Trade Expenses) 3 GILMORE'S ACCOUNT. (My Purchases on Commission.) To Sundries ;^87 | By Cash ;^87 RICHARDS'S ACCOUNT. (My Sales on Commission.) To Sundries ,, Cash £ 10 no By Cash ;^I20 TRIAL BALANCE. 40 Capital ... £ ^ .. 4,000 riiiii 30 I 80 Profit and Loss Goods ... 200jW ft"^ w f 40 Valuation .. > rStn P » X 2,000 Premises 20 l^s 120 Plant ... 2 ill 130 2,367 50 Horses ... Cash ... Petty Cash 2 .. 612 10 ■ §•§? 87 Gilmore . . . .. 87 n V 120 Richards .. . 120^ Total Debits, £5,064 £5,064 Total Credits. PRACTICAL PART. 55 Books prove Correct, because (i) the two Totals agree, and (2) the two Excesses agree. D\ FINAL BALANCE SHEET. Liabilities. £ Balance, Final Net^ Capital I 4.061 a Assets. £ Valuation ... 40 Premises .. 1,980 Plant ... 118 Horses and Vans . . . ... 128 Cash - 1,755 Petty Cash 40 £4,061 Final Net Capital • • £4,061 BILLS. JOINT ADVENTURE. Consignment Outwards. Consignment Inwards. Exercise 20. Post, and test by Trial Balance, the follow- ing items and transactions; make out a Profit and Loss Sheet and show that it agrees with Final Balance Sheet. Caution ! Consignment Outwards is another Goods or Trade account ; its credit excess is profit or increase to Capital. Consignment Inwards is the Personal account of the consignor, a Single-Entry account, whose credit excess is a Liability of mine. Joint Adventure account is a Goods account as to my share in it ; but a Personal or Single-Entry account as between each of my co-adventurers and me. My affairs were as follow on Jan. ist : — Bank Balance, 56 DOUBLE-ENTRY BOOKKEEPING. ;^i,ooo ; Cash Balance, ;£'5oo. There was a Bill out for ;;^2oo, drawn on me by Roberts (a Liability of mine, a Bill payable which I have parted with, and so Bills Payable account must be credited ;£"2oo) ; I hold a Bill for ;^6oo, accepted by Holland (an Asset of mine ; I have received this Bill, hence Bills Receivable account must be debited ;^6oo). — There was due for rent and other trade charges ;^5o (a Liability, to be credited to Outstanding accounts). — I had spent on a consignment to Madras, per ship Fairy Queen , £,\2o (an Asset, like goods bought but not yet sold, to be debited to Consignment Outwards account). — My office furniture and trade plant I valued at ;^6o (debit Valuation account). — Goods on hand at ;^8oo. — I had advanced to Roberts of Jamaica, by means of my Acceptance above mentioned, ;^2oo against a consignment of goods he had sent me to sell for him, and invoiced by him at ;£"25o (take no notice of the £^2<^o ; debit Roberts's account with ;£"2oo for the Bill payable he has received). — I owed Gibson ;£"i3o. — Sold goods, £,2^0^ to Roan, and drew on him for that amount (debit Bills Receivable account ;£25o, because I receive the Bill ; credit G«ods account ; no account must be opened for Roan unless he dishonour his Acceptance). — Sold Rivers the consignment of goods from Roberts of Jamaica at ;^2 2o (debit Rivers; credit the Personal account of Roberts). — Charged ^6 commission for selling the same and ;£i4 dock dues and other charges paid by me (debit Roberts ;^2o ; credit cash ;^i4, credit Profit and Loss ;£"6). — In joint adventure with Prior I buy goods of Gibson of Madras, invoiced at;^42o (credit Gibson ;£"42o; debit my own Joint Adventure account ;£"2io. PRACTICAL PART. 57 debit Prior with the other half, £216). — Discounted Roan's Acceptance, getting ^246 cash (debit cash £2^6, debit Profit and Loss ;^4 ; credit Bills Receivable account ^250, because I part with the Bill when I sell it). — Received from Hughes of Madras his Account Sales, showing that he had realised, after deducting his commission and other charges, ;^55o (debit Hughes of Madras ;^55o ; credit Consignment Outwards £$$0). — I draw on Hughes of Madras, in favour of Gibson of Madras, for £^$0 (a Bill receivable, which does not come into my books ; Hughes will have to hand the Bill over to Gibson ; debit Gibson ^550 ; credit Hughes £SS^)' — I honoured my Acceptance at bank (my banker paid for me the money I promised to pay in Roberts's draft on me ; credit Bank ;^2oo ; debit Bills Payable ;£'2oo, because I receive back the honoured Bill). — Sold for ;^6oo cash the goods purchased in joint account with Prior ; I charged ;£'io commission and paid £6 sundry expenses (debit Cash ;£"6oo ; credit my own Joint Adventure account ;£"3oo and Prior's £2,^0 ; debit Prior £%, debit my own Joint Adventure £^ ; credit Cash £6, Profit and Loss ;^io). — Cash sales during month £750 — Holland meets his Acceptance at the bank (debit Bank £600; credit Bills Receivable account ;£^6oo, because, the Bill being honoured, I part with it). — Trade expenses, paid by cheque, ;^ioo. — Goods on hand ;^ioo (debit Valuation account ; credit Goods). — Rivers settles his account, receiving ;£io discount. — I have withdrawn ^200 for private expenses, have paid the outstanding accounts, and sent Prior his share of the profit on the joint adventure (credit cash £82 ; debit Prior £82). 58 DOUBLE-ENTRY BOOKKEEPING. rr, CAPITAL ACCOUNT. ^r Against me. £> \ ^^ my favour. £ To Cash (withdrawal) ... 200 | By Sundries 3,200 PROFIT AND LOSS ACCOUNT. Losses. To Bills Receivable ,, Bank ,, Rivers £ 4 100 10 Gains. £ By Roberts (Commission) 6 ,, Sundries (Commission) 10 GOODS OR TRADE ACCOUNT. Buying side. £ To Capital ... 800 Selling side. £ By Bills Receivable ... 250 „ Cash 750 ,, Valuation, Goods on hand 100 CONSIGNMENT OUTWARDS TO HUGHES OF MADRAS. Buying side. £ I Selling side. £ To Capital 420 I By Hughes MY JOINT ADVENTURE ACCOUNT. 550 Buying side. £ Selling side. £ To Gibson ... ... 210 By Cash .. 300 ,, Profit and Loss... 5 „ Cash 3 D": VALUATION ACCOUNT. a Receiving side. £ Paying-away side. To Capital (Plant)... ... 60 ,, Goods on hand... ... 100 CASH ACCOUNT. To Capital ...;^500 By Roberts .£ 14 ,, Bills Receivable ... 246 ,, Sundries 6 ,, Sundries ... 600 „ Capital . 200 ,, Goods ... 750 ,, Outstanding Accounts . • 50 ,, Rivers ... 210 » Prior . S2 PRACTICAL PART. 59 JX BANK ACCOUNT. Cf To Capital ... ...;[{^i,ooo ,, Bills Receivable ... 600 By Bills Payable £20Q ,, Profit and Loss (Trade Expenses) 100 BILLS RECEIVABLE ACCOUNT. To Capital ;^6oo I By Sundries £2

300 £ 3,414 £3,414 PROFIT AND Losses. £ To Sundries ... 114 „ Capital, Net Profit ... 414 Final Net Capital, £3,414. LOSS ACCOUNT. £528 Gains. By Sundries ,, Goods (Gross Profit) ... , , Consignment Outwards ^ (ditto) I ,, Joint Adventure (ditto) £ 16 300 130 82 £528 Net Profit, £414. PRACTICAL PART. 6 1 Our books prove correct. For, Initial Capital, ;^3,2oo, plus Net Profit, £414, less ;£2oo withdrawn from Capital, shows Final Net Capital ;^3,4i4. And the excess of Assets over Liabilities is also ;^3,4i4, as seen in the Single- Entry Set of accounts. CLOSING ENTRIES PASSED THROUGH THE JOURNAL. When closing entries have to be journalised, a Balance account must be opened at the end of the Single-Entry Set of Accounts. By Closing Entries we mean those Equalising entries which we add to the deficient side in balancing and closing the accounts in the Ledger. By the rule of Double- Entry, each of these also must have its double on the oppo- site side of some other account. In the Single-Entry Set of Accounts, every equalising entry made on the Cr. side is transferred to the Dr. side of Balance account ; every equalising entry made on the Dr. side is taken to the Cr. side of Balance account. So also the equalising entry on the Dr. side of the Capital account is taken to the Cr. side of Balance account. Now, this is only another way of saying that Debit excesses are all collected together on the Debit side of Balance account, and Credit excesses collected together on the Credit side. For an equalising entry on the credit side always shows a debit excess, and vice versd. It is very important to remember this, because the language of Book- keeping is misleading, and suggestive to beginners of what 62 DOUBLE-ENTRY BOOKKEEPING. is untrue. If in Johnson's account there is a debit balance of;£"45, there will be a credit equalising entry of ;^45 to be transferred to the debit side of Balance account. This posting would appear in the Journal thus : — Johnson Cr. ;^45 to Balance account Dr. ;^45. But it cannot mean that Johnson is my creditor for ^45, for he owes me ;£^45, and must be my debtor. If in Taylor's account there is a credit balance of ;^45, there will be a debit equalising entry which will be transferred to the credit side of Balance account, and the Journal entry will be Taylor Dr. ;^4$ ; To Balance account Cr. /^4S' The expression "Taylor Dr. ;^45 " cannot mean that Taylor is my debtor, for I am his debtor. It simply means that the equalising entry of ;£45 on the debit side of Taylor's account has its double in the entry of ^£45 on the credit side of Balance account. This is explained fully in the Theoretical Part, in the article on "Transferring." As Balance Account is Final Balance Sheet reversed, showing the same facts but on opposite sides, bookkeepers often omit it. It is not wanted unless we are to extend the Double-Entry theory to the closing entries. In the Double-Entry Set of accounts, the excesses are not all collected together, as in the Single-Entry Set, in one summary account — the Balance account. In an ordinary Trade or Goods account there is a credit excess or profit, and a debit equalising entry. This debit equalising entry is transferred to the credit side of the Profit and Loss account. But this is only another way of saying that the profit from Goods account is put along with other profits on the profit side of Profit and Loss account. In an ordinary PRACTICAL PART. 63 Profit and Loss account there is a credit excess, an excess of gains over losses, and a debit equalising entry. This debit equaHsing entry is transferred to the credit side of Capital account. But this is only another way of saying that Net Profit is put along with Initial Net Capital to increase it and form Final Net Capital. In an ordinary Capital account there is a credit excess, an excess of Initial Net Capital plus profits over losses. There is, therefore, a debit equalising entry, which finds its double on the credit side of Balance account. This is but another way of saying that the excess of Initial Net Capital, plus profits made since, over losses incurred since, is the same as the excess of Final Assets over Final Liabilities, as set out in Balance account. In the following Ledger, in the Trade account, the Debit equalising entry is ;£^2oo, because the Credit Excess or Profit is ;£"2oo. Hence the Journal entry is ;i^2oo Goods Account Dr. To Profit and Loss Cr. ;^200. In the Profit and Loss account, the Debit equalising entry is ^171, because the Credit Excess or Excess of gains over losses is £1^1. Hence, the Journal entry is ^171 Profit and Loss Dr. To Capital Account Cr. ;^i7i. In the Capital account the Debit equalising entry is ;^i,o5i, because the Credit Excess, the Excess of Initial Net Capital plus Net Profit over what has been taken from Capital, is ;^i,o5i. As this must be Final Net Capital, or 64 DOUBLE-ENTRY BOOKKEEPING. the Excess of Final Assets over Final Liabilities as shown in Balance Account, it is thus journalised : — ;^ 1,05 1 Capital Account Dr. To Balance Account Cr. ;^i,05i. Journal and Ledger with the Closing Entries passed through the Journal. Exercise 21. Journalise and post the following, test by Trial Balance, draw up Final Balance Sheet, and pass the Closing Entries through the Journal without actually balancing and closing the Ledger. Make out Balance Account also. Marsden begins business with ;£"9oo cash. — Buys horse and van for £^0. — Buys Goods for ;£8o cash. — Sells Goods ;£'45 to Johnson, and draws on him for that amount (open no account for Johnson ; debit Bills Receivable, because a Bill has come in ; credit Goods). — Buys Goods jQ']2> of Taylor, and sends him Johnson's acceptance and £2>2> cash. (No account wanted for Taylor ; debit Goods j credit Cash and Bills Receivable.) — Cash sales to date £2^2>' — ^Johnson dishonours his Bill (debit Johnson, he owes Marsden £4$ ; credit Taylor, I owe him jQ^^ for selling him a worthless piece of paper.) — Trade expenses;^ 12 paid. — Taken Goods value ;£2o for private use (debit Capital; credit Goods; Goods are sold to the owner, Marsden, and debited to his personal account, as to a customer's account if sold to one). — Wrote off 10 per cent, depreciation on horse and van. — Value goods on hand at £^0 (debit Valuation account; credit Goods as if sold). — ;^io rent due. PRACTICAL PART. 65 JOURNAL. Cr £ £ 900 Cash, Dr. To Capital, Cr. 900 70 Valuation, Dr. To Cash, Cr. (Horse and Van.) 70 80 Goods, Dr. To Cash, Cr. 80 45 Bills Receivable, Dr. To Goods, Cr. 45 78 Goods, Dr. To Bills Receivable, Cr. 45 ,, Cash, Cr. 33 243 Cash, Dr. To Goods, Cr. 243 45 Johnson, Dr. To Taylor, Cr. 45 (Bill dishonoured.) 12 Profit and Loss, Dr. To Cash, Cr. 12 20 Capital, Dr. To Goods, Cr. 20 7 Profit and Loss, Dr. To Valuation, Cr. 7 (Depreciation.) 50 Valuation, Dr. To Goods, Cr. 50 (Stock in hand.) 10 Profit and Loss, Dr. To Landlord, Cr. 10 (Rent unpaid.) Total 77^60 Totals agree with those in r^ ^qq Total Debits. ' Ledger Trial Balance. * Credits. 5 ^ DOUBLE-ENTRY BOOKKEEPING. The explanations given in the Journal within brackets are called Narrations. LEDGER. JDr MARSDEN'S ACCOUNT (CAPITAL ACCOUNT). C Against Marsden. £ I In Marsderi s favour. £ To Goods 20 I 900 PROFIT AND LOSS ACCOUNT. Losses. £ Gains. To Cash (Trade Expenses) 12 ,, Valuation (depreciation) 7 „ Landlord (rent) 10 GOODS OR TRADE ACCOUNT. Buying side. £ To Cash 80 „ Sundries 78 Selling side. £ By Bills Receivable • 45 ,, Cash • 243 „ Capital 20 ,, Valuation (on hand) .. . 50 Z^r VALUATION ACCOUNT. Cr Receiving side. £ I Paying-away side. £ To Cash (Horse, etc.) ... 70 I By Profit and Loss (depreci.) 7 ,, Goods on hand 50 CASH ACCOUNT. To Capital £f^QO „ Goods 243 By Valuation (Horse, etc.)... £*JQ „ Goods 80 „ Goods 33 ,, Profit and Loss (Trader Expenses) ... J BILLS RECEIVABLE ACCOUNT. To Goods ;^45 I By Goods £^^ PRACTICAL PART. 67 IT. TAYLOR'S ACCOUNT. I By Johnson ... C: To Taylor JOHNSON'S ACCOUNT. A5 I LANDLORD'S ACCOUNT. I By Profit and Loss •.;£-io TRIAL BALANCE. £ £ 20 Capital ... . 900 si? \ 29 Profit and Loss . : 353/1^^ 1 I 158 Goods ... m 120 Valuation • A S 1,143 Cash • 195 ^S 45 Bills Receivable . • 45 §5 Taylor ... • 45 ■ n 45 Johnson ... u Landlord... 10 Total Debits, £1,560 £1,560 Total Credits. Totals agree with those in the Journal. FINAL BALANCE SHEET. Liabilities. £ Taylor 45 T,a,ndlord 10 Balance, Final Net-k Capital } ^'°5i Valuation .. Cash Johnson .. £1,106 Assets. £ "3 948 45 £1,106 Final Net Capital, £1,651 68 DOUBLE-ENTRY BOOKKEEPING. D^. BALANCE ACCOUNT. Debit Balances or Credit Equalising Entries. To Valuation ;!^ii3 „ Cash 948 „ Johnson 45 £1,106 Excess of Assets over) Liabilities ... p^'051 Credit Balances or Debit Equalising Entries. By Taylor £^^ ,, Landlord 10 ,, Capital Account, }. Final Net Capital j ^'°5i £1,106 I' o Q I, CLOSING JOURNAL ENTRIES. £ 200 Goods Account Dr. To Profit and Loss Cr. £ 200 Total of inliig £3,634 (Debits). - 171 Profit and Loss Dr. To Capital Account Cr. 171 1 ,05 1 Capital Account Dr. To Balance Account Cr. 1,051 1 , 1 06 Balance Account Dr. To Valuation Acct. Cr. 113 ,, Cash Account Cr. 948 ,, Johnson Cr. 45 45 Taylor Dr. 10 Landlord Dr. 1 ,05 1 Capital Account Dr. To Balance Account Cr. 1,106 Total of Closing r^ f-^. Entries £3,034 (Credits). PRIVATE LEDGER AND TRADE LEDGER. Sometimes it is desirable that the profits cleared in a business, the Capital contributed by each Partner, and the PRACTICAL PART. 69 drawings by each from Capital, should not be known to the servants of the Firm. This is another way of saying that the Double-Entry Set of accounts must be kept private^ in a special book, by one of the Partners, or their Manager. This special book is called the Private Ledger^ and is kept under lock and key. The Single-Entry Set of accounts go in another book called the Trade Ledger^ open to the clerks. Each book is complete in itself; each is kept by Double Entry. But in the Private Ledger details are given of transactions which in the Trade Ledger are spoken of in a general way, simply as Private-Ledger affairs. When one of the Partners, A, draws out ;£"5o, and another, B, ;£3o, the Cashier, in crediting his account in the Trade Ledger, enters " By Private Ledger ;£"8o," and debits another account opened in the Ledger called Private Ledger account^ which answers to all the Double- Entry Set of accounts combined. But in the Private Ledger Book, Partner A.'s account will be debited ;^5o, and Partner B.'s account debited ;^3o; and if a Trade Ledger account be opened in it, that account will be credited ;£"8o. For in the Trade Ledger, as the Double-Entry Set of accounts is entirely absent, a general account, representing all of them, is opened, and headed Private Ledger account. This comes first of all. Whenever any entry would, in an ordinary Ledger, come into Capital account, any Partner's account, Profit and Loss account, or Trade account, that entry must come into Private Ledger account instead. If a Partner named Harvey draws out ;£"3o for private use. Private Ledger account is debited, and Cash account ^0 DOUBLE-ENTRY BOOKKEEPING. credited ; if a Partner named Roby advances ;^5oo to the Firm as additional Capital, Cash is debited, and Private Ledger account credited ; if jQ^o was paid for rent. Private Ledger account would be debited, and Cash credited; Cash sales ;£6o would be debited to Cash, and credited to Private Ledger account. But in the Private Ledger Book Harvey's account is debited, Roby's credited. Profit and Loss debited, Trade account credited, each with its own amount. The Private Ledger Book opens with a separate account for each Partner, sometimes with two accounts for each (a Capital account, and a Current account) ; then follows Profit and Loss with any of its subdivisions, then Trade account with any of its subsidiary accounts. Into one or other of these is posted every item entered in the Trade Ledger under the heading Private Ledger account; and they appear on the same side in both Ledgers. The accounts are balanced in the ordinary way, and Final Net Balance, as collected from all the Partners' accounts, must agree with the Excess of Assets over Liabilities in the Trade Ledger. But if it is desired to make the Private Ledger Book complete in itself, so that it can be proved correct without looking at the Trade Ledger, an account is opened at the end of the Private Ledger Book, and headed Trade Ledger account^ because its items are copied from the Trade Ledger. It is the Private Ledger account reversed. It represents in the Private Ledger Book the Single-Entry accounts, and might very properly be headed Trade Ledger Clerks^ summary. The double of every item credited to Private Ledger account appears on its Dr. side ; all that has PRACTICAL PART. 7 1 been parted with to Partners or as losses appears on the Cr. side. The Private Ledger account in the Trade Ledger Book is copied into the Private Ledger Book, but debits there are made credits here, and credits there debits here. Roby's advance of ;^5oo goes on the Cr. side of Private Ledger account, but on the Dr. side of Trade Ledger account. In Private Ledger Book it is credited to Roby, and debited to Trade Ledger account. The £^/\fO paid for rent is debited in Private Ledger account, but credited in Trade Ledger account; so that in Private Ledger Book it is debited to Profit and Loss, and credited to Trade Ledger account. A double entry is thus provided for every item, and each of the Ledgers is complete in itself, and can be tested independently. Variations in Private Ledgers. — The above is one of many ways. Some bring into Private Ledger Book not the Double-Entry Set only, but all the Property accounts, leaving only the subsidiary books and the Ledger Personal accounts for the clerks. Others do not bring in the Trade account even. A specimen is given of the simplest plan, by which debits in the Private Ledger account are merely distributed in various accounts on the Dr. side of the Private Ledger Book, and similarly credits, without re- versing them in another account, and then reversing them a second time. By the more complex method a Private Ledger Book contains — 1. A Capital account for every Partner. 2. A current account for every Partner. 3. Profit and Loss account with subdivisions. 4. Trade account with subsidiary accounts. 72 DOUBLE-ENTRY BOOKKEEPING. 5. Trade Ledger account (Private Ledger account reversed). 6. Balance account showing that the total of all the Partners' Final Net Capital agrees with the excess of Final Assets over Final Liabilities. Exercise 22. Brown and Eagle enter into Partnership — Brown contributing ^2,000, Eagle a warehouse, valued at ;^8oo, and ;£^2oo cash. They agree to share Profits or Losses in the ratio of their Capitals, and to charge on Capital and withdrawals 5 per cent, per annum interest. During the year they sell Goods for ;£"4,2oo, and buy Goods for ;^3,5oo, cash. Sell Goods ;£"4oo to Thompson, and Goods £600 to Rigby. Pay ^40 wages, ;j£i2 rates, ;£^ various other Trade Expenses. Thompson fails, and pays 10^. in the jQ. Rigby settles his account, being allowed ;£ 11 discount. At the end of six months Brown withdraws £s^^ ^^^"^ his Capital, and Eagle increases his by ;£"2oo. At the close of the year they value Goods left unsold at ;^9oo. They write off 10 per cent, depreciation on warehouse, and put aside ;£^ioo as Reserve Fund for future bad debts. Post the above partly in Private Ledger, partly in Trade Ledger; balance and close every account, and show that books prove correct. PRACTICAL PART. n IX TRADE LEDGER BOOK. PRIVATE LEDGER ACCOUNT. a Lessening capital. £ To Cash 3,500 V „ 55 „ Thompson .. 200 „ Rigby II „ Cash 500 „ Valuation 80 „ Provision for Futures Bad- Debt ... / ^°° Balance ... 4,854 Capital and additions By Sundries „ Cash ,, Thompson „ Rigby „ Cash ,, Valuation (Goods hand) to it. £ ... 3,000 ... 4,200 ... 400 ... 600 200 "} 900 y^ £9,300 £9,300 Balance, £4,854 Z>r VALUATION Receiving side. £ To Private Ledger ... 800 „ , , (Goods, on hand) ... j ACCOUNT. Paying-away side By Private Ledge (depreciation) Balance £ ... 1,620 £1,700 £1,700 Balance brought down, £1,620 CASH AC To Private Ledger ... ^2,200 ... 4,200 ,, Thompson ... ... 200 „ Rigby 589 ,, Private Ledger ... 200 :COUNT. By Private Ledger ,, »j ,» ,, Balance ACCOUNT. By Sundries . ;^3,500 55 500 • 3,334 £7,389 £7,389 Balance brought down, £3,334 THOMPSON'S To Private Ledger ... ;^40O 1 ... ^400 74 DOUBLE-ENTRY BOOKKEEPING. D: RIGBY'S ACCOUNT. Cr To Private Ledger ... ;^6oo 1 By Sundries ;^6oo RESERVE FUND FOR BAD DEBTS ACCOUNT. To Balance £ioo By Private Ledger ... ;^ioo Balance brought down, £100 Future Liability. FINAL BALA Liabilities. £ Reserve Fund for Bad^ Debts ... 1 ^°° Balance, Final Net^ Capital ... 1 4,854 NCE SHEET. Assets. £ Valuation 1,620 Cash 3,334 £4,954 £4,954 Final Net Capital, £4,854 Trade Ledger proves correct, because the excess of Assets over Liabilities in Final Balance Sheet is just the same as the excess of Capital plus additions to Capital over diminutions of Capital in Private Ledger Account. PRIVATE LEDGER BOOK. B''. BROWN'S CAPITAL ACCOUNT. C Against Brown, £ s. d. To Cash (withdrawal) 500 o o ,, Profit and Loss (Int. on ditto.) 12 10 o ,, Balance, \ Brown's I Final Net f ^'^^^ ^° ° Capital J £3,441 o o In Brown's favour. £ By Cash Initial Capital ... 2,000 ,, Profit and Loss (Int. on Capital) lOO ,, Profit and Loss, | Net Profit 1,341 £3,441 Brown's Final Net Capital }£2,928 PRACTICAL PART. 75 Z)*: EAGLE'S CAPITAL ACCOUNT. a Against Eagle. £ s. d. Balance Eagle's Final Net Capital 1,9125 lo o ;^i,925 10 o In Eagle s favour. £ s. d. By Sundries, Initial Capital ... 1,000 o o ,, Cash (advance) 200 o o „ P. & L. (Int. on Capital) ... 50 o o „ P. & L. (Int. on advance) ... 500 „ P. & L. {\ Net Profit ... 670 10 o £1,925 10 o Eagle's Final \ ^ Net Capital M^'S^S 10 o PROFIT AND LOSS ACCOUNT. Losses. £ s. d. 55 o o To Cash (Trade Ex. penses) ,, Thompson (Bankrupt) 200 o o „ Rigby( Discount) ii 00 ,, Valuation (De- preciation) ... 80 o o „ Bad Debts (Re- serve) ... 100 o o „ Brown (Interest on Capital) ... 100 o o ,, Eagle (ditto) ... 50 o o ,, Eagle (Interest on Advance) 500 „ To Capital, -I Net Profit) ^'°" ^° ° £2,612 10 o Gains. £ s. d. By Brown (Interest onwithdrawal) I2 10 o ,, Goods (Gross Profit) ... 2,600 o o £2,612 10 o Net Profit, £2,011 10 o 76 DOUBLE-ENTRY BOOKKEEPING. GOODS OR TR Buying side. £ To Cash 3,500 ,, Profit and Lo5s, ) Gross Profit J ^'^°° ADE ACCOUNT. Selling side. By Cash „ Thompson 5» Rigby ,, Valuation (Goods hand) £ ... 4,200 400 ... / ... 600 on ... 900 £6,100 £6,100 Gross Profit, £2,600 Brown's Final Net Capital is ;^2,928 10 o Eagle's „ „ „ 1,925 10 o Total, ;^4,854 o o This agrees with the Excess of Assets over Liabilities in Trade Ledger Book. Hence Books prove correct. A Ledger showing Joint Adventure posted. (Set by Civil Service Examiners.) Exercise 23. Post the following so as to show the double of every entry, and test the correctness of the posting. As you are not told what Capital Bryan has to trade with, you may assume that all payments are made by cheque, and that the Banker has engaged to advance whatever money may be wanted for this adventure. Feb. I. Bryan agrees with Carr to make a shipment to San Francisco of about a thousand pounds worth of Goods — § on Carr's account, | on Bryan's ; the Ad- venture to be managed by Bryan. (No entry.) PRACTICAL PART. TJ Feb. 3. Bought of Smith, on account of the Adventure, Goods, ;£"5o6. Feb. 5. Bought of Brown, on account of Joint Shipment with Carr, Goods, ^^450. Feb. 20. Accepted draft of Smith at one month for ;^5o6. (Smith, Dr. ; Bills Payable Cr.) Invoice of Goods shipped to Cameron of San Francisco, ^tr Jabez Webster^ on account and risk of shippers : — £ S' d. Goods 956 o o Freight 42 12 2 Insurance ... 28 13 4 Dock dues, etc 711 3 Total ; gi,o34 16 9 (Debit Joint Adventure account with f of this outlay, debit Carr with \\ credit Goods ;£"956, credit Outstanding accounts £,iZ i6j. 9^.) Paid Brown, by cheque, ;£45o; Insurance £2% 13^. 4^. March 23. Smith's Bill, due this day, paid at Bank. (Debit Bills Payable, credit Bank.) April I. Paid Freight on Goods shipped to San Francisco. (Debit Outstanding accounts, credit Bank.) Sept. I. Received from Cameron account Sales of Goods T^QX fabez Webster — £ s. d. Gross proceeds i)52o 10 o Charges 47 3 9 Commission .... . ... 38 o 3 78 DOUBLE-ENTRY BOOKKEEPING. (Debit Cameron ;^ 1,43 5 6s. ; credit Joint Adventure f of this, credit Carr with J.) Oct. I. Received from Cameron draft on Baring & Co., at seven days' sight, on account of Goods per /adez Webster^ for ;£"i,435 6^- (Debit Bills Receivable, credit Cameron.) N.B. — The Goods bought Feb. 3rd and 5th need not be brought into Goods account, but debited at once to Joint Adventure, and to Carr in the ratio of 2 to i. Goods account would not then appear. Bryan's Ledger. J): PROFIT AND LOSS ACCOUNT Losses. £ s. d. To Capital, Net\ ^^ Profit 1^66^9 ^ Gains. £ s. a. By Joint Adventure... 266 19 6 (Bryan's share of profit) Net Profit, £266 19 6 GOODS ACCOUNT. To Smith „ Brown Buying side. £ ... 506 ... 450 £956 Selling side. £ By Joint Adventure, and Carr 956 This account may be omitted. PRACTICAL PART. 79 X)r JOINT ADVENTURE ACCOUNT. a (Consignment to Cameron of San Francisco.) Buying side. £ s. d. To f cost of Goods from Smith & Brown 637 6 8 ,, I Charges on this Speculation ... 52 II 2 „ Profit and Loss^ (Bryan'sGain 1- 266 19 6 on Advent.) J £956 17 4 Selling side. £ s. d. By Cameron, f Netj 9^5 j 7 ^ Proceeds £956 17 4 Bryan's Gain on\ the Adventure/^^^^ '9 ^ D^. BANK ACCOUNT. Received. £ s. d To Balance due\ g to Bank / ' ' 3 £1,027 5 6 Paid away. By Brown ,, Outstanding Ac counts „ Bills Payable .. ,, Outstanding Ac counts £ s. d. 450 o o 28 13 4 506 o o 42 12 2 £1,027 5 6 Balance due to Bank BILLS RECEIVABLE. } £1.027 5 6 To Cameron ... ;^i,435 6 o Balance ) brought down! ^''435 6 o By Balance ... £i,435 6 o By Bank BILLS PAYABLE. ... ;^5o6 I To Smith .. ... £So6 8o DOUBLE-ENTRY BOOKKEEPING. z?r OUTSTANDING ACCOUNTS. a To Bank „ Balance £ s. d. 42 12 2 28 13 4 7 " 3 £ s. d. By Joint Adventure \ 42 12 2 Account, and |- 28 13 4 Carr ... J 7 " 3 £78 16 9 £78 16 9 Balance brought \ down £7 " 3 CARR'S ACCOUNT (Co-Speculator's). £ s. d To ^ cost of Goods from Smith & Brown 218 13 4 ,, J Charges on specu- lation 26 5 7 Balance due to \ Carr, Carr's j- 133 9 9 Profit ... J £478 8 8 £ s. d. By Cameron, \ Net\ g g g Proceeds J Balance brought^ down, due |- £133 9 9 to Carr To Bills Payable SMITH'S ACCOUNT. ...;^5o6 I By Goods ...;^5o6 To Bank BROWN'S ACCOUNT. ... ;^45o I By Goods . ^450 I ... A50 CAMERON'S ACCOUNT (Consignee's). To Joint Specula- tion Account, and Carr ... £\AZ^ 6 o By Bill Receivable v^i, 435 6 o PRACTICAL PART. 8l Proof of Books. — Profit and Loss account shows that Bryan has cleared ;^266 igs. 6d. by the adventure. As he had no Assets and no Liabilities to begin with, and he has made ;£"266 igs. 6d. Net Profit or increase, his Final Assets ought to exceed his Final LiabiHties by ^£266 igs. 6d. The Final Balance Sheet shows that they do. IX FINAL BALANCE SgEET. cr Liabilities. Assets. £ Bank 1,027 Carr 133 Outstanding Ac- counts ... 7 Balance, Excess" of Final As- sets over Final j ^^^ s. 5 9 II 19 d. 6 9 3 6 £ s. d. Bill Receivable ... 1,435 6 Liabilities j £1,435 6 £1,435 6 Excess of Finar Assets over Final Lia-r ^^^^ ^9 ^ bilities ... BILLS. PARTNERSHIP. Journal and Ledger with Dates, as required i Business, and in Examinations. Exercise 24. Journalise and post the following; enter all dates both in Journal and Ledger, and give references from one book to the other by numbering each Ledger account and each page of the Journal ; P.p. g 82 DOUBLE-ENTRY BOOKKEEPING. test by Trial Balance, draw out Final Balance Sheet, Profit and Loss Sheet, and each Partner's Capital accour\ Roper and Driver are partners, Driver owning |, Roper J of the Capital, and sharing profits in the same ratio. Roper is to be paid ;^8 a month salary as Manager, this being a first charge against profits. On May 31, their Ledger shows the following balances : — Cash ;£'3oo. Premises ;^7oo, Plant ;£2oo. Goods on Hand ;^4oo, Bank ;^i,ooo. Bills Receivable ;^3oo (No. 18 in Bills Book, Firm on Moses for ;£"25o; No. 19, Duke on Hanford for ;£5o)j Bills Payable ;£"5oo (No. i, Rogers on Firm, due June 15, for ;£"4oo; No. 2, Dukie on Firm for ;£ioo); Johnson's debit Balance is ;£ioo; there is a Mortgage on the premises of ;£'5oo at 4 per cent. (Note that Bills Payable Balance and Mortgage are Liabilities to be credited.) June I. Driver drew by Cheque ;£"5o for private expenses. Moses took up {i.e, paid before due) his Acceptance, paying into Bank ^£"245 (debit Bank £24^^ debit P. & L. ;^5 ; Credit Bills Receivable ;£"25o, because they part with the honoured bill). June 10. Johnson sent them his Acceptance for £<^o and a cheque for £$0 (debit Bank ;^5o, debit Bills Receivable £$0 because a Bill has been received by the Firm; credit Johnson ;^ioo). Hanford's Acceptance returned from Bank dishonoured. Notary's charges £1 paid (debit Hanford ^^51; credit Cash £1, credit Bills Receivable £$0 because the Asset PRACTICAL PART. 83 on the Dr. side must be cancelled, as the Bill is now useless). June 12. Sold Goods ;£"8o to Marston, and received /^^o cash, and a Bill for ^30 at 3 months (debit Bills Receivable ;£'3o because Firm has received a Bill). June 18. Our Acceptance honoured at Bank to-day, ;^4oo (debit Bills Payable ;^4oo, because Firm receive back their honoured Bill). They retired (paid before due) Duke's draft on them by a Cheque for ;£gS (debit Bills Payable ;£ioo, because they receive back an honoured Bill). June 20. Learning that Hanford is declared Bankrupt, they claim from Duke, the Drawer and Endorser, the amount of Hanford's Acceptance, and Costs (debit Duke, credit Hanford). June 24. Paid ;^io interest on Mortgage, ;£"2o salaries, ;£'4 rates, ^^ insurance, ;£s advertisements ; also paid off by cheque the whole Mortgage. June 25. Roper drew out ;£^2o by Cheque on private account. June 30. Cash Sales during the month ;£^52o. Goods on hand valued at ;£"3oo (debit Valuation ; credit Goods). They wrote off i per cent, depreciation on Premises and Plant (debit P. & L. ; credit Valuation) ; and allowed £4 interest on Driver's Capital, ;£"2 on Roper's (debit P. & L. j£6; credit Driver ^^4, Roper ^2). Roper's month's salary has not been paid, nor Gas Bill, ;£2, just come in (debit P. & L. ;£"io ; credit Roper ^S, credit Gas Company ^^2). 84 DOUBLE-ENTRY BOOKKEEPING. bed Journal of Roper & Driver. June ist, 1896. — Dr. 300 900 400 ,000 300 100 SO 245 5 Cash, Dr. Valuation, Dr. Goods, Dr. Bank, Dr. Bills Rec, Dr. Johnson, Dr. To Bills Pay., Cr. ,, Mortgage, Cr. ,, Roper, Cr. ,, Driver, Cr. Driver, Dr. To Bank, Cr. Bank, Dr. Profit and Loss, Dr. To Bills Rec, Cr. -June loth.- Bills Rec, Dr. Bank, Dr. To Johnson, Cr. Hanford, Dr. To Bills Rec, Cr. „ Cash, Cr. -June 12th.- Cash, Dr. Bills Rec, Dr. To Goods, Cr. 3,531 Carried forward Cr. 500 500 500 1,500 50 250 50 80 3.531 10 PRACTICAL PART. 85 7.^ 13 No. I. June 20. Dr. 3,531 500 June i8th. 40 500 20 520 300 25 Brought forward Bills Pay., Dr. To Bank, Cr. Profit and Loss, Cr. June 20tli. Duke, Dr. To Hanford, Cr. ■June 24th. Profit and Loss, Dr. Mortgagee, Dr. To Cash, Cr. June 25th. Roper, Dr. To Bank, Cr. -June 30th. Cash, Dr. Valuation, Dr. To Goods, Cr. 5,487 Profit and Loss, Dr. To Valuation, Cr. ,, Driver, Cr. ,, Roper, Cr. ,, Gas Co., Cr. Agreeing with each other, and with Ledger Totals. 3,531 498 2 540 820 9 4 10 2 5,487 Ledger of Roper & Driver. ROPER'S CAPITAL ACCOUNT. To Bank (Priv. Exp.) 20 14 No. I. c\ £ June I. By Sundries 500 „ 30. „ P. & L. (Int.) ... 2 „ „ „ „ (Salary) 8 86 DOUBLE-ENTRY BOOKKEEPING. No. 2. DRIVER'S CAPITAL ACCOUNT. No. 2. June 30. ToBank(Priv. Exp.) 50 I June i. By Sundries ... 1,500 I „ 30. ^ P. & L. (Int.) 4 No. 3. PROFIT AND LOSS ACCOUNT. No. 3. June I. To Bills Rec. (Disc.) 5 ,,24. ,, Sundries (Trade Exp.) 50 ,,30. ,, Valuation (depr.) 9 ,, ,, ,, Roper & Driver (Int.) 6 ,, ,, ,, Roper (Salary) ... 8 „ ,, ,, Gas Co. ... ... 2 £ June 18. By Bills Payable ... 2 No. 4. GOODS OR TRADE ACCOUNT. No. 4. £ June I. To Capital 400 June I. By Sundries „ 30. ,, Cash ,, ,, ,, Valuation £ ... 80 ... 520 ... 300 No. 5. jr £ June I. To Capital (Prem.) 700 „ „ „ „ (Plant) 200 „ 30. „ „ (Goods on hand) ... 300 VALUATION ACCOUNT. No. 5. Cr £ June 30. By P. & L. (depreci.) 9 No. 6. June I. To Capital ,, ,, ,, Bills Rec. ,, 10. ,, Johnson BANK ACCOUNT. £ No. 6. 1,000 245 SO £ June I. By Driver (Priv. Exp.) 50 „ 18. ,, Bills Pay. ... 400 j> jj n >> ••• 98 ,,20. ,, Roper (Priv. Exp.) 20 ,,24. „ Mortgage ... 500 PRACTICAL PART. 87 No. 7. CASH ACCOUNT. No. 7. June I. To Capital ... ,, 12. „ Goods ... £ ... 300 ... 50 ... 530 c: £ June 10. By Hanford (Notary) i „ 24. P. &L. (Trade Exp.) 40 No. 8. BILLS RECEIVABLE ACCOUNT. No. 8. June I. To Capital ... „ 10. „ Johnson... „ 12. „ Goods ... £ ... 300 ... 50 ... 30 June I. By Bank „ 10. „ Hanford £ ... 250 ... SO No. 9. BILLS PAYABLE ACCOUNT. No. 9. June 18. To Bank ... „ „ „ Sundries £ ... 400 ... 100 June I. By Capital ... £ ... 500 No. 10. JOHNSON'S ACCOUNT. No. 10. June I. To Capital ... £ ... 100 June 10. By Sundries £ ... TOO No. II. MORTGAGEE'S ACCOUNT. No. II. I 1 £ No. 12. HANFORD'S ACCOiUNT. No. 12. £ I £ June 10. To Bills Rec. ... 50 I June 20. By Duke .51 ,, „ „ Cash (Notary) ... i | No. 13. DUKE'S ACCOUNT. No. 13. ^ I Ju^e 20. To Hanford ... 51 I as DOUBLE-ENTRY BOOKKEEPING. No. 14. GAS COMPANY'S ACCOUNT. No. 14. X>r 1,. a £ ne 30. By Profit and Loss 2 ^ TRIAL BALANCE. c: ' £ £\ ^^« . 20 Roper ... 510 - 50 Driver ... 1,504 70 . 400 Profit and Loss Goods 2 ... 900. C: /I,2CX) Valuation 9\ P>W 1,295 B^nk ... 1,068 870 Cash 41 Fs= 380 Bills Receivable ... 300 ^=? 500 Bills Payable ... ... 500 > 1 I(X) Johnson 100 500 Mortgagee ... 500 ff^ 51 Hanford 51 1^ SI Duke t V — Gas Company 2^ Total Debits Total Credits in Ledger, * -5,487 £5,487 in Ledger. Agreeing with Totals in Journal. FINAL BALANCE SHEET. Liabilities. £ Assets £ Gas Company ... 2 Valuation ... 1,191 Balance, Final Net-k Capital ... / Bank ... 227 2,376 Cash ... 829 Roper's, £ 598^ Driver's, 1,778/ Bills Receivable ... 80 Duke 51 £2,378 £2,378 Roper's Capital, £ 598)^^ Driver's „ 1,778/* '^"Q PRACTICAL PART. 89 IX PROFIT AND LOSS SHEET. a Losses. £ Gains. £ To Sundries 70 By Sundries 2 „ Capital, Net Profit ... 432 ,, Goods (Gross Profit) ... 500 £502 £502 Net Profit, £432 ROPER'S ACCOUNT (CAPITAL). £ Ju. 25. To Bank (priv. exp.) 20 „ Balance, Ro-^ per's Final |- 598 Net CapitalJ Net Capital, £618 Ju. I. By Sundries (I Initial Capital) ... 500 „ 30. „ Profit and Loss (Int.) 2 „ „ „ Profit and Loss (Salary) ... 8 „ „ ,, Profit and Loss (i Net Profit) 108 £6^ Roper's Final Net 1 ^ „ Capital I ^598 DRIVER'S ACCOUNT (CAPITAL). £ Ju. I. To Bank (priv. exp.) 50 „ 30. „ Balance,Dri-^ ver's Final I 1,778 Net CapitalJ £1,828 Ju. I. By Sundries (| In- itial Capital) 1,500 ,,30. ,, Profit and Loss (Int.) ... 4 ,, ,, ,, Profit and Loss (f Net Profit) 324 £1,828 Driver's Final Net Capital,.. } £1,778 90 DOUBLE-ENTRY BOOKKEEPING. Books prove correct because (i) Journal Totals agree with Ledger Totals in Trial Balance ; (2) the excess of Assets over Liabilities in Final Balance Sheet just equals the two Partners' joint Initial Capital plus Net Profit, as seen in the two Capital accounts. Profit and Loss account OMITTED until after Trial Balance has been struck. Examiners sometimes instruct Candidates to open no Profit and Loss account in the Ledger, and leave out in the Journal also the Profit and Loss debits and credits. When Trial Balance is struck the totals will not then agree, debits with credits, except in the rare case in which losses just equal gains ; — i.e.^ such losses and gains as appear in Profit and Loss account when Trial Balance is taken out, which is before any profits or losses from Trade account, or any of its subdivisions, have been added to it. Suppose the credits both in Journal and Ledger are £^^0 in excess of the debits when Profit and Loss entries are omitted, then the debit excess of Profit and Loss must be ;£^5o. If the total debits exceed the total credits by ;£2o, the credit excess of Profit and Loss must be ;£'2o, for the omitted items must make both sides equal. After Trial Balance has been struck, the various amounts that ought to have been debited or credited to Profit and Loss are collected together in a Profit and Loss account, and if its excess is found to agree with the difference between the two sides in Ledger and Journal, books are proved correct. Then the Profit and Loss account is posted in detail and the PRACTICAL PART. Journal made to agree with Ledger by a single entry, or two if preferred ; — e.g.^ Profit and Loss Dr. ^^50, to Sundries Cr. ;£"5o; Sundries Dr. jQ^jOy to Profit and Loss Cr. ;^7o, which would accord with the Trial Balance showing an excess of ^20 on Dr. side, ;^2o more being required on Cr. side to make both sides equal. A specimen Journal and Ledger follow, proved in this way, but the Journal is drawn up more compendiously than in the example before given. Classified and Compendious Journalising. In journalising we can often group together like trans- actions and post totals instead of many separate items. Examiners forbid posting straight from Waste Book, and require every entry made in the Ledger to have first appeared in the Journal. This, done in the ordinary way, posting every day's transactions separately, takes so much time that none is left for getting out the final results. Time may be saved by journalising in the ex amination hall, as may be done in the counting house at the end of the month, not from Waste Book but from the various subsidiary books — Cash Book, Bank Book, Sales Book, Purchases Book, etc. Suppose we have a month's transactions to journalise. Beginning with Bank Book, we find ^£"3,000 paid into bank during the month at six different times : — ;£"i,5oo for Goods, ^500 by Jones, ;^2oo from Bills Receivable, ^600 by Cashier, ^150 by Robinson, and ^50 by Smith. This posted day by day would be twelve entries; we can reduce them to seven by the entry — 92 DOUBLE-ENTRY BOOKKEEPING. ;^3.ooo Bank, Dr To Goods, Cr. ... £i ,500 Jones, Cr. 500 Bills Receivable, Cr. 200 Cash, Cr. Robinson, Cr. 600 150 Smith, Cr. ... SO The total must be dated the last of the month ; each separate item must have its own proper date ; every item a reference to Ledger showing where recorded there. The Credit side of Bank account may be similarly dealt with as one total credit corresponding to a large number of debits. Cash Book may have its total monthly debits treated as one ; its credits also as one credit. Purchases Book (Invoice Book) being the Dr. side of Goods account, and Sales Book (Day Book) its Cr. side, these two books, together with Cash Book, will give totals for both sides of Goods account. This kind of journalising cannot be done from an examination paper, in which all the required items are scattered about, so easily as from the subsidiary books in actual business, where the totals are ready for transference. A still briefer and commoner form of journalising sum- marises on dofA sides, and makes of the monthly total of each subsidiary book a single debit and a single credit, one of the two representing many items in several different accounts. The subsidiary books and the Ledger give the details. Thus the entry for the above would be ;^3,ooo Bank Dr. To Sundries Cr. ^£'3,000, as per Cash and Bank Book for the month, each separate item having been separately credited to its own account in the Ledger. The accounts posted in Ex. 14, those of a trader beginning PRACTICAL PART. 93 business with borrowed money, are here journalised after the classified method, but by the briefer method would require only three debits and three credits. D^. £ £ cr 950 Cash, Dr. To Tomkins, Cr. 600 ; ■ ,, Goods, Cr. 350 35 Valuation, Dr. 200 Goods, Dr. 600 Tomkins, Dr. 45 15 Draper, Dr. Profit and Loss, Dr. 30 Capital, Dr. To Cash, Cr. 925 50 Valuation, Dr. To Goods, Cr. 50 '^°*^^ /•io2«; Agreeing with Ledger /i Qor '^0*^1 Debits * '^ ^ Totals in Trial Balance. ^ '^ ^ Credits Journal Classified and Ledger with no Profit and Loss account opened until after Trial Balance has been struck. Exercise 25. Monson has, at the beginning of the month, ;£5oo cash, horses and carts worth ;^i5o, goods ;£25o, warehouse ;£8oo, shop ;^3oo. — He sells goods, ;£^i8o, to Oliver. — Buys of Gregory goods, £t,So. — Buys for cash goods, ;£'6oo. — Oliver becomes bankrupt and pays 6s. Sd. in the ;£". — Monson mortgages his ware- house for ;£40o at 5 per cent. — Has a horse, valued at ;£4o, killed. — Buys another for ;^6o. — Pays Gregory, 94 DOUBLE-ENTRY BOOKKEEPING. being allowed ^lo discount. — Cash sales during month ;£'92o. — Goods on hand ;^35o. — Pays trade expenses ;£"io. — Has withdrawn ;£'2o for private expenses. — Make out Journal and Ledger without opening Profit and Loss account till after striking Trial Balance. d: JOURNAL. Made out at End of Month. a £ £ :,88o Cash, Dr. To Capital, Cr. 500 „ Oliver, Cr. 60 ,, Mortgagee, Cr. 400 „ Goods, Cr. 920 600 Goods, Dr. 340 Gregory, Dr. 20 Capital, Dr. To Cash, Cr. 970 350 Goods, Dr. To Gregory, Cr. 350 180 Oliver, Dr. 350 Valuation, Dr. To Goods, Cr. 530 1,560 Valuation, Dr. To Capital, Cr. 1,500 ,, Cash, Cr. 60 Dr. To Oliver, Cr., 120 ,, Valuation, Cr. 40 10 Gregory, Dr. To £5,290 /^^'.^"i^.^^i'f^'' ;C5,450 Totals in Trial Balance. ■ PRACTICAL PART. 95 The omitted Profit and Loss items are indicated by a cross X and broken lines. The Credit Total is ;^i6o in excess of the Debit Total ; to make both totals equal the omitted Profit and Loss Debits must be ;£i6o more than the Profit and Loss Credits. Ledger with Profit and Loss Account Omitted. jDr CAPITAL ACCOUNT. CT £ £ To Cash (withdrawn) ... 20 By Sundries, Initial Net Capital 2,000 GOODS OR TRADE ACCOUNT. £ £ To Capital 250 By Oliver 180 ,, Gregory 350 » Cash 920 „ Cash 600 ,, Valuation (Goods on hand) 350 ]y, VALUATION ACCOUNT. C £ £ To Capital (Horses, etc.) ... 150 By Profit and Loss (depre ,, „ (Warehouse) ... 800 ciation) 40 „ (Shop) 300 ,, Cash (Horse) 60 „ Goods on hand 350 CASH ACCOUNT. £ £ To Capital 500 By Goods 600 „ Oliver ■... 60 ,, Valuation (Horse) 60 „ Mortgagee 400 „ Gregory 340 ,, Goods 920 „ Profit and Loss (Trade Expenses) ID ,, Capital (withdrawn) ».. 20 96 DOUBLE-ENTRY BOOKKEEPING. £>: OLIVER'S ACCOUNT. a To Goods ... ^ 1 i8o 1 By Sundries GREGORY'S ACCOUNT. ... 4 To Sundries ^ 1 350 1 By Goods . MORTGAGEE'S ACCOUNT. £ ... 350 1 By Cash £ ... 4CX) TRIAL BALANCE. £ £ 20 Capital 2,(X)0 i,20o Goods Ij45o ,660 Valuation.., ,880 Cash 180 Oliver ... 350 Gregory ... Mortgagee 40 1,030 180 350 400 Total r^ ^^ Agreeing with Totals r^ Total Debits ^^'''^^ in Journal. ^^'^^° Credits The Excess of Credits, £160, shows there must be a Debit Excess in Profit and Loss omitted, for this addition would make the two sides equal. THE OMITTED PROFIT AND LOSS ACCOUNT. Gains. £ By Gregory (Discount) ... 10 Losses. To Oliver (Bankrupt) „ Valuation (Horse) „ Cash (Trade Expenses) £ 120 40 10 Debit Excess, £x6o PRACTICAL PART. 97 B: full profit and loss ACCOUNT, a After Profit from Goods Account has been taken into it. Losses. £ Gains. £ To Sundries 170 By Gregory (Discount) .. ID „ Capital, Net Profit 90 „ Goods, Gross Profit .. • 250 £260 £260 Net Profit, £90 FINAL BALANCE SHEET. Liabilities. £ Assets. £ Mortgagee 400 Valuation 1,620 Balance, Final Netj Capital i Cash 850 £2,470 £2,470 Final Net Capital, £2,070 When the whole Profit and Loss account is to be omitted, the Profit and Loss account proper with all its subdivisions, and the Goods account with all its subdivisions, we are really required to open two Ledgers^ a Private Ledger for the Profit and Loss accounts including the Trade accounts, and the Trade Ledger containing all other accounts. An example of this is given in Exercise 22, fully worked out. JOURNAL ENTRIES, Selected with a view to explain more difficult Postings, including Bill Transactions. March i. Digby's cheque for ^\o refused payment at his Bank to-day. I have already credited Digby and debited Bank ; I must cancel both entries by an equal entry on the opposite side. 7 98 DOUBLE-ENTRY BOOKKEEPING. Digby owes me ;^io and must be debited. Bank is re- presented as paying back again ;£"io just received. I owe Banker ;^io for the worthless ;^io debited to him. Digby's account and Bank account remain as they were before I received the cheque. ;^io Digby, Dr. To Bank, Cr. ^lo March 5. Bought lease of shop for ^100, built warehouse adjoining at an expense of ;£8oo, bought horse and van for ;^6o, the whole paid for by cash to-day. p^96o Valuation account, Dr. To Cash, Cr. £960 Viz. ;^ioo Lease. 800 Warehouse. 60 Horse, etc. April 6. Smith's Acceptance for ;£^ioo due to-day returned from his Banker's dishonoured. Smith has given me his stamped written promise to pay me ;^ioo at his Bank. His Banker has not enough money belonging to Smith to pay me. The Bill is now dishonoured, and the debt becomes a personal one. Smith owes me £100 f and must be debited. My draft on Smith, Smith's Acceptance or stamped written promise, was debited to Bills Receivable account when I received it, as an Asset. That Asset must now be cancelled, for it has been removed to Smith's personal account, and must not appear twice over. I credit Bills Receivable account ;£"ioo just as I should do if the Bill had been honoured, but instead of writing By Bank, or By Cash, I write By Smith, meaning PRACTICAL PART. 99 that Smith owes me ;£"ioo, not my Banker, nor my Cashier. ;^I00 Smith, Dr. To Bills Receivable, Cr. ;^ioo. ;£S note stolen this week ; at all events mislaid and not to be found. A dead loss, or diminution of initial Capital, just as much as if I had taken out ^^ for private expenses. ;^5 Profit and Loss, Dr. To Cash, Cr. ;^5. June lo. The Consignment of Goods I received from Jones, invoiced by him at ;^i8o, I have sold to-day for ;^22o, cash; I charge ;£i8 Commission, and ^4 which I paid for carriage. A Consignment Inwards, Jones's personal account in my books. Take no notice of the ;£"i8o Jones values his Goods at. I owe him what I get for them, whether more than ;£"i8o, or less. He owes me my Commission for selling, and out-of-pocket costs. ;^220 Cash, Dr. To Jones, Cr. ;^220. ;^22 Jones, Dr. „ Profit and Loss (Commission), Cr. ;^i8. „ Cash, Cr. £4. July 3. Found on counting my cash to-night loj-. short of what Cash Balance shows I ought to have. A loss; for I am 10^. worse off than my Cash Book declares. I must debit Profit and Loss loj., and credit lOO DOUBLE-ENTRY BOOKKEEPING. Cash los., as though I had paid away los. and got back nothing for it. los. Profit and Loss, Dr. To Cash, Cr. lo^. July 5. I send home for private use Goods from stock invoiced at ^^5. This is taking from Capital in Goods instead of Cash. Goods are sold and debited to Owner's personal account. ;^5 Capital Account, Dr. To Goods Account, Cr. £$, August 3. Thompson, whose account I wrote oflf last year as a bad debt, paid me in full to-day, ^2^. An unexpected piece of good luck to be credited to P. & L. as clear gain, or to Capital account as increase to Capital, rather than ordinary business profit. £2$ Cash, Dr. To Capital, Cr. £25. or To P. & L., Cr. £2$. Sept. I. Make a Consignment of Sugar to Jones, value ;£"200. Oct. 29. Receive from Jones his Account Sales^ showing a Net Receipt of ;£^2 73, after charging on it his Com- mission and all his Expenses. Nov. 20. Jones sends me his Acceptance for ^273. A Consignment Outwards, another Goods account ; debit what is spent on it, credit what is reahsed from it. Goods are sold by Goods account clerk to Consignment clerk. PRACTICAL PART. ;^20o Consignment Outwards, Dr. To Goods Account, Cr. ;^200. ;^273 Jones, Dr. To Consignment Outwards, Cr. ^^273. ;,^273 Bills Receivable, Dr. To Jones, Cr. ;^273. Dec. I. Set aside ;£"i2o as a reserve fund for future bad debts. This Reserve Fund is to be considered as a future Liability^ and a dead loss. ;^I20 Profit and Loss, Dr. To Reserve Fund Account, Cr. £120, Dec. 30. Bank charges me £^ interest on my overdrawn account. A loss for the debit side of Profit and Loss account. I credit my Banker's account because I have now ^4 less still at the Bank. The Banker debits my account in his books, I credit his account in my books, for I owe him this besides what I owed him before. £^ Profit and Loss, Dr. To Bank Account, Cr. £<\. ' Watson, of London, pays by Cheque on Bank of England to Jones, for the honour of Robinson, of Calcutta, a Bill drawn and sold by the latter, in S 'I / Calcutta, on Brown, and protested by Jones for non-payment. Bill and Costs £2>2,o, Watson's brokerage ;^2o 15^. Give the Journal entry which Watson would make in his books. Brown has given his Acceptance to Robinson ; Robinson I02 DOUBLE-ENTRY BOOKKEEPING. has endorsed this Bill and sold it to some one else. In the end it is bought by Jones. When Jones presents it to Brown for payment, Brown cannot pay. Jones then comes on Robinson, the Drawer and one of the Endorsers of the Bill, and expects him to pay. Watson pays for Robinson, and debits Robinson. He does not debit Jones, though Jones receives the money. Jones receives what he has already paid for, £^z^. Robinson receives the credit of having paid Jones, and must be debited not only with what Jones gets, but also with what Watson charges for lending his money to save Robinson's good name. The brokerage is clear gain to Watson. The Bank of England is Watson's Bank. ;^85o 15^. Robinson, Dr. To Bank, Cr. ;^830. „ P. & L., Cr. ;^20 iSs. Jan. 5. I find that Gas account jQ6 was debited to Profit and Loss last month, when due, and has been again debited to Profit and Loss when paid. What correc- tion must I make without cancelling or erasing ? The proper entry last month would have been £6 P.&L., Dr. To Gas Co., Cr. £6. Supposing this month's entry to be £6 P. & L., Dr. To Cash, Cr. £6, as we have credited Gas Co., we must debit them when our Liability ceases. And as we have put on the Dr. or PRACTICAL PART. IO3 Loss side of Profit & Loss ;^6 too much, we must neutralise the erroneous second entry by crediting Profit and Loss ;£"6. The correcting Journal entry, then, is £6 Gas Co., Dr. To P. & L., Cr. £6. March 25. Paid ;£"i5o by cheque for permanent improve- ments in business premises. Being permanenfj they add to the value of my permanent assets, and must be debited to Valuation account, or to a separate Business Premises account. The Bank Asset exists, but in another form. ;i^i5o Valuation (or Business Premises account), Dr. To Bank, Cr. ;^i5o. March 30. I have set aside ;£$o as a Repairs Reserve Fund. July I. I pay bill for repairs ^45, cash. Ordinary repairs are debited to Profit and Loss. Setting aside ;£s^ ^s a Repairs Reserve Fund means entering it beforehand as a future but certain Liability by crediting it to that Fund account as if owing to a creditor. When the repairs are done, I find I must debit Profit and Loss /^i^ more. ;^30 Profit and Loss, Dr. To Repairs Reserve Fund account, Cr. /^;^o jC30 Repairs Reserve Fund, Dr. ^15 Profit and Loss account, Dr. To Cash, Cr. ;^45 Notice that the builder's Personal account does not enter my books if his account is paid at once; if it is not, his 104 DOUBLE-ENTRY BOOKKEEPING. Personal account must be credited ;^45 instead of Cash account, and debited when the cash goes out to pay him. Aug. 3. Paid ;^3oo for Goodwill of Business in Cork Street, which I mean to carry on by a manager. If Goodwill be treated as a permanent saleable Asset, it must be debited to Valuation account, or a separate account of its own. If considered too uncertain for that, it must be debited to Profit and Loss as a dead loss. £yyo Valuation account, Dr. , or Profit and Loss account, Dr. To Cash, Cr. ;^300. Oct. I. Scott's Acceptance, due yesterday, returned from Bank dishonoured (Bill for ;^ 1,3 00). Oct. 30. Received from Scott Promissory Note at 60 days, being in renewal of his dishonoured Acceptance. Bill, ;^i,3oo ; interest on renewal and noting, £^1^ ^s. ;^i,30o Scott, Dr. To Bills Receivable, Cr. £\,'}fio ;^i,325 5J-. Bills Receivable, Dr. To Scott, Cr. ;^i,300 „ Profit and Loss, Cr. 25 5^. /Jan. 2. Consigned to Abel & Co., of Ceylon, Wine, value ^£"300. Jan. 10. Paid Dock Dues on Consignment, jQ^ i \s. 6d. Jan. II. Received from Abel & Co., on account of our Consignment, a Bill of Exchange for ^185 10s. Jan. 12. Paid Insurance on Consignment, jQi 5^. 6d. Jan. 29. Received of Abel & Co. final Account Sales of Consignment to Ceylon. Net Proceeds ;£"32o. O t/3 O rt ^ (73 PRACTICAL PART. IO5 A Consignment Outwards ; another Goods account in my Books. ;^300 Oi'. od. Consignment Outwards, Dr. To Goods account, Cr. £yK> os. od. £<) lis. 6d. Consignment Outwards, Dr. To Cash, Cr. ;^5 i is. dd. £i^$ los. od. Bills Receivable, Dr. To Abel & Co., Cr. ;^i85 10^. od. £1 5 J. 6d. Consignment Outwards, Dr. To Cash, Cr. £1 5^. 6d. ;^320 OS. od. Abel & Co., Dr. To Consignment Outwards, Cr. ^^320 os. od. Jan. I. Sharp drew on me for ;£^o at one month. Jan. 20. Sharp buys of me Brown's Consignment of Wine for ;£"i2o, returning to me my Acceptance, and giving me his own Acceptance for ;^2o, a cheque for ;£"3o, and ^20 cash. ;^5o Sharp, Dr. To Bills Payable, Cr. ;^5o. ;^50 Bills Payable, Dr. ;,^20 Bills Receivable, Dr. ;,^30 Bank, Dr. ;^20 Cash, Dr. To Brown, Cr. ;i^i20. Railway Co. paid ;£"2o for damage during transit done to my Consignment of Cigars to Moore of Liverpool. ;^20 Cash, Dr. To Consignment Outwards, Cr. ;^20. (A Goods account.) Borrowed of British Bank, on security of the title deeds, ;^5oo at 5 per cent. ;^Soo Cash, Dr. To British Bank, Cr. ;^5oo. I06 DOUBLE-ENTRY BOOKKEEPING. A Joint Adventure Journalised. I Lee, Watson, and Wills agree to speculate together in equal shares in a shipment of Goods to Hong Kong; Watson to be Manager. The following transactions 'Z S I take place, and are thus journalised in Watson's books : — Jan. 5. Watson buys of Smith, in his own name, and on his own responsibility, Goods invoiced at ^ ;£990, and charges ;^49 10s. commission. ;^346 10s. Joint Adventure, Dr. £T)^(> los. Lee, Dr. ^346 los. Wills, Dr. To Smith, Cr. ;^990. To Profit and Loss, Cr. ^49 los. Jan. 17. Lee ships the above Goods, per Vesta, consigned to order of Sayle of Hong Kong, on account and risk of Consignees, and pays freight, insurance, etc., £iSA i8^-> ^J^d charges ;£i id>s. 8/. commission. £^2 5^. *jd. Joint Adventure, Dr. £S2 $s. Td. Lee, Dr. £S2 Ss. 6d. Wills, Dr. To Lee, Cr. ;^I56 16^. ?>d. Watson draws upon Sayle for $6,550!, and sells the Bill to Hong Kong Bank at 3^. 8^. per dollar for ;^i,2oo i2>s. 6d. ;^i,200 i8.y. 6d. Cash, Dr. To Sayle, Cr. ;^i,2cx) i8j. 6d. Watson pays Lee by cheque £1^^ 16s. Zd. £\l(i i6j, %d. Lee, Dr. To Bank, Cr. £\tJo i6j. 8^. PRACTICAL PART. 10/ June 7. Account Sales of shipment, per Vesta, received by Watson from Sayle : Gross proceeds $8,750, charges $375, commission $456. Watson renders account to Lee and to Wills at current exchange of 3^. lod. per dollar: Gross proceeds ;^i,677 ij-. 8^., charges in Hong Kong jQ^i I'js. 6d., Sayle's commis- sion ;£"87 Ss. ;^I,5I7 i6s. 2d. Sayle, Dr. . To Joint Adventure, Cr. ^505 i8s. 8^^. „ Lee, Cr. ;^5o5 iSs. gd. „ Wills, Cr. ^505 185. gd. Feb. I. Took wine from stock, and paid for it at cost price, ;£io. ;^io Cash, Dr. To Trade account, Cr. ;^io. I have paid ;z^io out of my private purse to Cashier. If I took it from Cashier's money, and paid it back to Cashier, I did not pay at all, and must debit my own Personal or Capital account ;£"io. ERRORS. Rules for Preventing Errors. 1. Never leave oif in the midst of an entry, or an item may be debited without being credited, or vice versa, 2. Compare entries by calling over and ticking. One should read the Ledger, the other the Journal or the subsidiary Books, and dot every item found correct. 3. Balance Cash Book every night to see if cash in box agrees with debit balance in Cash Book. I08 DOUBLE-ENTRY BOOKKEEPING. 4. Compare frequently the counterfoils of the Cheque Book and the Bank Pass Book with the Bank account in the Ledger; also with that in the Cash Book, if entered there. 5. Require an invoice with all goods purchased, and preserve it in Inward Invoice Book or Purchases Book. 6. Never send out Goods on credit without an invoice, nor without debiting them to the receiver in the Day Book (Credit Sales Book). 7. Correct every error immediately on discovery. Then one enemy at a time has to be grappled with. 8. Never let posting be a mere mechanical copying from the Journal. When posting is done straight from the Waste Book, or the subsidiary books, an error in the Journal is not blindly reproduced, but is much more likely to be discovered. Common Mistakes in making Entries, and their Effect on the Trial Balance. 1. Omitting one of the two entries ; entering a debit without its corresponding credit, or vice versa. Omitting a credit of ;£3o must make the Total Credits ^30 less than the Total Debits. 2. Reversing an entry; debiting Jones when I ought to credit him. Jones pays me ;^5o, and I thoughtlessly debit Jones and credit Cash. These entries, being confined to the Single-Entry Set of accounts, will not affect Final Balance at all. An asset of ^^50 is booked as due to me "VI PRACTICAL PART. I09 from Jones instead of from my Cashier. There is the same debit and the same credit, but in a different place in the same set of accounts. This error will not prevent the two totals and the two excesses of Final Balance from agreeing. But my Cash account will show fwi'ce ;£$o less cash in hand than I have in cash box. Jones's account, on the contrary, will represent him as owing me twice £$0 more than he actually owes. For the difference between taking ;^5o out, and putting ;^5o more in, is ^100. 3. Entering twice on the same side ; two debits or two credits instead of a debit and its corresponding credit. Smith sends me a cheque for ;£'io, and I debit both Bank and Smith jQio each. As I have debited Smith instead of crediting him, and the corresponding debit entry is correct, the Total Debits in Trial Balance must be twice ;^io more than truth requires, i.e. ^20 in excess of Total Credits ; and the Debit excess in the Single-Entry Set must be ;^2o more than the Credit excess in the Double-Entry Set. My assets show ;^"2o increase which my Profits do not show. 4. Reversing figures : writing 6s. Sd. for 8i-. 6d., or j£$ 2s. od. for ^2 5J-. od. When shiUings and pence are reversed, a deficiency or increase of iid. or some multiple of lid. results, i.e. iid.j is. lod., 2s. gd., ^s. Sd., 4s. jd., etc. When pounds and shillings are reversed, the difference between the true and the false amounts is some multiple of igs. But if the same mistake is made both sides of the Ledger, the Dr. Total and Cr. Total will be equally remote from truth, and Trial Balance will not show up the mis- posting. no DOUBLE-ENTRY BOOKKEEPING. A Lost Cheque. A Cheque for ;£2o, paid me by Simms, falls into the waste-paper basket and is lost. How ought my books to reveal the loss ? The Cheque should have been sent to Bank, and debited to Bank account the very day it came in. As Bank does not receive it, it is not entered in Bank Pass Book. But in the Ledger, when it was credited to Simms, it ought to have been debited to Bank account. On comparing Bank Pass Book with Bank account in Ledger, it will be seen that the Cheque has not been paid into Bank ; and as it is not in cash box, it must have been lost or stolen. Its receipt is recorded in Cash Book, if it has a Bank Column. Mistaking Names. On receiving ;£"i6 from Rock, I debit Cash ;^i6, but credit Locke instead of Rock. When will this error be discovered ? Not by Trial Balance, for the amount is correct, and on the right side, but in the wrong account. If not discovered on " calling over," it may not be known till either Locke or Rock receives his account from me, or sends in my account to me. Credit side of Cash Book found to be in Excess of Debit side. On balancing Cash Book, I find the Credit Total ;^2o in excess of the Debit Total. What conclusion must I draw ? / PRACTICAL PART. Ill I cannot have paid away more than I have received. So I must either have put down too much on the Credit side, or omitted some entry on the Debit side. If, how- ever, my Cash Book includes Bank account as well as money at office, my Banker may have allowed me the privilege of overdrawing my Bank account by ^20. I may have made out a Cheque for ^50, and the Banker cashed it, though I had but ^^^o in the Bank. The overdrawn Balance is a Liability of mine ; I owe the Banker ;£^2o. How to find in What Accounts wrong entries have been made, when Errors somewhere have been discovered by Trial Balance or Closing the Ledger. 1. Find the difference between the two Totals in Trial Balance. Say this is ,:£"3oo. Look out every item and transaction where ;^3oo appears. It may be entered on one side only. 2. Look for half the dfference. Look out every item of £,\^o. One of them debited instead of being credited will make ;£"3oo difference. 3. See if the difference is a multiple of 11^. or of 19^. : e.g. Zs. 3^., which is nine times \\d. ; ;^9 lo^-., which is ten times 1 9 J. If so, it may be due to a reversal of figures, writing 2s. iid. for iij-. 2d., or vice versd; or ^8 iSs. for y^i8 Si-., or m'ce versd. As, however, this mistake may have occurred in a good many items, it may be difficult to trace except by " calling over." 112 DOUBLE-ENTRY BOOKKEEPING. CORRECTIONS IN THE LEDGER. 1. Omissions must be indicated by a cross, x, placed twice in the margin, first where the entry should have been made, and again where it is made. 2. Wrong entries must be cancelled by a light line drawn through them with red ink. But the old entry must be left perfectly legible, and no erasures whatsoever are allowed. 3. When cancelling, too, is forbidden, every error must be rectified by subsequent entries made, both in Journal and Ledger, to make both agree. Correction of Mispostings when the Journal is correct, by subsequent entries in both books. The Ledger is found wrong by its totals not agreeing with those in the Journal. To make both Ledger and Journal correct, and agree with each other, not in total only, but in the balance of each separate account, without cancelling or erasing^ all omissions must first be supplied in the Ledger. Generally two entries must be made both in Journal and Ledger, so that (i) both may have the erroneous Ledger entry; (2) both the compensating entry to cancel the error ; (3) both the correct entry. In the Journal — 1. Journalise the erroneous posting to make Journal equally wrong with the Ledger. 2. Make a compensating Journal entry correcting the discrepancy caused by the erroneous posting. Journal is now correct again. PRACTICAL PART. II3 In the Ledger — 1. Post correctly what was misposted. 2. Post the compensating Journal entry. Both Ledger and Journal now have (i) misposting; (2) compensating entry; (3) correct posting. Error i. I have posted ;£"8 on Dr. side of Goods and Cr. side of Smith, instead of vice versa. Correction — 1. Journalise Goods, Dr. ;^8. To Smith, Cr. £%. 2. Journalise Smith, Dr. £i(i. To Goods, Cr. £1^. 1. Post ;^8 to Smith's debit and ;^8 to Goods credit. 2. Post £l^\.o Smith's debit and ;^i6 to Goods credit. Error 2. I have entered j[^2o on Credit side of Bank account, but have not debited Jones with ;£"2o. Correction. — An omission. The Journal being correct, the Ledger is made like it by simply inserting the omitted debit in Jones's account. Error 3. I have correctly debited £^\2 to Goods, but debited Fussell instead of crediting Russell. Correction. — Two omissions. I first credit Russell ;^I2 in the Ledger. Ledger and Journal are alike correct now, so far as Russell is concerned. Now complete the erroneous posting, one-half of which is £\2 debited to Fussell. As this, if true, would be clear gain, post ^12 to credit of Profit and Loss ; and journalise Fussell, Dr. £\2. To P. & L., Cr. £\2. Then correct this by a compensating entry in Journal and Ledger, cancelling the false gain. P. & L., Dr. £12. To Fussell, Cr. £\2. P.P. 8 114 DOUBLE-ENTRY BOOKKEEPING. Error 4. I have posted ^30 to the debit of Brown instead of to the debit of Town. Correction — 1. Journalise Brown, Dr. ;^30. To Cash, Cr. ;^30. 2, Journalise Cash, Dr. ^^30. To Brown, Cr. ;^30. 1 . Post ;^30 to Town's debit and ;^30 to credit of Cash account. 2. Post ^30 to debit of Cash and ;^30 to credit of Brown. Error 5. On the Dr. side of Watson's account, I have posted To Bills Payable ;£"8o instead of ^800, and have made the same mistake in Bills Payable account. Correction — 1. Journalise Watson, Dr. ;^8o. To Bills Payable, Cr. ;^8o. 2. Journalise Bills Payable, Dr. ;^8o. To Watson, Cr. ;^8o. 1. Post Watson, Dr. ;^8oo ; Bills Payable, Cr. ;^8oo. 2. Post Bills Payable, Dr. £%o ; Watson, Cr. £Zo. Why not add ^720 to the debit side of Watson's Ledger account, and ;^72o to the credit side of Bills Payable account? Because we should be posting without first passing the entries through the Journal, We cannot make the Journal entry Watson Dr. ;£'72o to Bills Payable ^£"720, because the Journal has already the correct full amount. Error 6. I have posted ;£"io on Dr. side of Goods account, and Cr. side of Russell's account, instead of posting it to the debit of Valuation account. Correction — 1. Journalise Goods, Dr. ;!^io. To Russell, Cr. ;^io. 2. Journalise Valuation, Dr. ;^io. To Goods, Cr. ;^io. PRACTICAL PART. II5 Post— 1. Valuation, Dr. ;i^io ; Russell, Cr. ;^io. 2. Valuation, Dr. ;^io ; Goods, Cr. ;^io. Correction of Errors in Journalising by subse- quent Journal Entries. Error i. I have journalised — Bank, Dr. ;^20. To Cash, Cr. £20. instead of — Cash, Dr. £^0. To Bank, Cr. £^0. Consider Bank account. It is debited ;£'2o instead of being credited jQ-^o. I must credit Bank ^20 to cancel the erroneous debit of ^20, and with another ;^3o. The compensating Journal entry is — Cash, Dr. ;^5o. To Bank, Cr ^50. Error 2. I have journalised — Flowers, Dr. ;^io. To Goods, Cr. ;^io. instead of — Cash, Dr. ;i^io. To Goods, Cr. ;^io. Flowers has bought Goods worth ;£io, and paid for them. His account is closed at once, and need not have been opened. As I have debited him ^£"10, I must credit him ;£"io to cancel the error. I must debit Cashier because he receives the money. Il6 DOUBLE-ENTRY BOOKKEEPING. Compensating entry — Cash, Dr. ;^io. To Flowers, Cr. ;^io. Error 3. I have journalised — Lord, Dr. £^(). To Bank, Cr. £z^(^. instead of — Lord, Dr. £<)$' To Bank, Cr. ^95. I have not debited Lord enough by ;£36, nor credited Bank enough by ^£'36. Compensating entry — Lord, Dr. ^^36. To Bank, Cr.;^36. Error 4. Instead of journaHsing — Bills Receivable, Dr. £()0. To Routh, Cr. £^0. I have entered — Bills Receivable, Dr. £()o. To South, Cr. £^0. South must be debited £,<^o to cancel the wrong credit given him, and Routh credited £,^0. Compensating entry — South, Dr. £<^. To Routh, Cr. £()q. Error 5. I have journalised — Rush, Dr. £^. To Cash, Cr. £(iO. instead of — Cash, Dr. £(>. To Rush, Cr. £6. PRACTICAL PART. II7 Consider Rush's account. We must credit him with jQ6o to cancel the debit of ;£"6o, and then credit him with £,6 more. So Cash must be debited £66. Compensating entry — Cash, Dr. £66. To Rush, Cr. ;^66. Error 6. I have journaHsed — Goods, Dr. ;!^5o. To W. Clive, Cr. ;^5o. instead of — Goods, Dr. ;^i5o. To Clive & Co., Cr. ;^5o. „ W. Clive, Cr. ;^ioo. I must debit Goods ;£'ioo more, credit Clive & Co. with ^50 of it, and W. Clive with the other ;^5o. Compensating entry — Goods, Dr. ;[^ioo. To Clive & Co., Cr. ^50. „ W. Clive, Cr. ;^50. Error"]. Cash over m Daily Balance. — I find £,\ more in Cash Box than my Cash Book shows in its Debit Balance. Supposing this entered in Journal, what correcting Journal entry must I make when the error is discovered ? I must put j[^\ more on the Dr. side of Cash, as though £\ had been given me, and credit Profit and Loss j[^i. Compensating entry — Cash, Dr. ;^i. To Profit and Loss, Cr. £1. Cash short. — I find ;^5 less in box than Cash Debit Balance shows ought to be there. I am ^5 worse off, Il8 DOUBLE-ENTRY BOOKKEEPING. have lost ;^5 somehow. I must consider ;£^ paid away, and nothing back for it. Compensating entry — Profit and Loss, Dr. £^. To Cash, Cr. ;^5. Fraudulent Entries, and the Detection of Defalcations. I. A clerk receives from Pointer ;!^i5o, appropriates ;£"ioo, and enters in Cash Book, Journal, and Ledger ^50 only. After these entries have been checked by his master, he alters the ^50 to ^150 in Journal and Ledger on both sides, so that a true account may be sent out to Pointer. How may his fraud be discovered by the books ? The Cash Book has still the false entry, ;^5o, so its debit balance will be ;^ioo less than that of Cash account in the Ledger. 2. A clerk, when paid ^15 by Smith, steals ^10, and enters in Cash Book, Journal, and Ledger ^5 only. As soon as all three books have been checked, and marked correct, he adds a figure i to the left of the 5 on the credit side of Smith's account, changing 5 to 15, fearing Smith's account will be sent in, and Smith's complaint lead to his detection. When will the embezzlement be discovered ? When the first Trial Balance is struck. The Total Credits will exceed the Total Debits by;^io. 3. A dishonest bookkeeper, in league with Robinson, a customer of the bookkeeper's employer, from the Journal entry "Goods, Dr. £Zo ; to Prior, Cr. ;£"8o," posts ;^8o PRACTICAL PART. II9 to the credit of Robinson to enable the latter to get ;^8o dishonestly. Prior's account comes in. The bookkeeper then credits Prior's account ;^8o, and debits Goods account ^So over again, entering in Inward Invoice or Purchases Book a Hst of goods from Robinson never sent. When will this fraud come to light ? Trial Balance will not reveal it, for both totals will be equal. "Calling over" and checking may not, for the thief may chance to have the Ledger to read, and will read it as it ought to be and not as he has falsified it. But Valuation at Stock-taking ought to awaken suspicion, for where are the ;^8o worth of goods from Robinson ? 4. A clerk receives ;^i35 i^s. iid. from Baxter and keeps back ;£"ioo loi-. lod. To conceal his theft he enters in Cash Book, Journal, and Ledger ^2>S S^- i^- ^s the amount received. After his books have been checked and marked correct, before Baxter's account is sent out, he makes Baxter's credit in the Ledger correct by placing a figure i to the left of the ;^35, another i to the left of the 5^., and a third i to the left of the id. To increase the debits equally, he alters an item on the Dr. side of goods ^24 2s. id. to ^124 12s. I id. How may his embezzlement be detected ? (i) The Journal has, on both sides, ;^3S $s. id. where the Ledger has ;i^i35 15^. lid. Hence the Journal Totals will not agree with the Ledger Totals. This shows the value of the Journal as a second check. (2) A careful comparison of Cash account with Baxter's account, taking the same date, would show that Baxter paid Cashier ;i^i35 15^. lid., but cashier put down as received ;^35 S^' ^^' only. Such comparison would naturally be made supposing suspicion aroused by cash on hand being short after a heavy payment credited to Baxcer. I20 DOUBLE-ENTRY BOOKKEEPING. 5. A cashier receives from Taylor ;£^i6o. Wishing to keep back for the present ;£'ioo of it, but to restore it later on, he enters only ^60 in Cash Book, Journal, and Ledger. Immediately after the entries have been checked and marked correct, he provides against a false account being sent out to Taylor, or a correct one from Taylor coming in too soon. He alters Taylor's credit from ;£"6o to ;£"i6o by prefixing figure I. Later on, but before the next periodical balance, he puts back the ;£"ioo into the Cash Box, crediting it to Taylor in all three Books — Cash, Journal, and Ledger. He then either erases or runs his pen through the figure i placed to the left of the ;^6o in Taylor's account, credit side. Will the Cashier's trick escape detection ? It may, unless all cancelling is peremptorily forbidden. When it is insisted upon that errors of every kind are to be set right in no other way but by subsequent Journal entries, this tampering with books is impracticable. 6. A clerk receives ;^348 from Stephens, but debits Cash account, and credits Stephens's account with ^4^ only, misappropriating ;^3oo. After his Cash Book and Ledger have been checked and passed as correct, he alters both debit and credit to ^348 by prefixing a figure 3. And to remove suspicion arising from his having so little cash in hand, he debits Roberts with ^300 cash, and refers to a certain page in his Cash Book, where, however, no such credit is recorded, for no such payment was in fact made. When may his defalcations be discovered ? (i) If Roberts' account should be sent out, or if Roberts sends in his account before taking out Trial Balance, an error of ;i^300 against Roberts will appear, and there will be found no credit corresponding to this debit. PRACTICAL PART. 121 (2) If Trial Balance be taken out first, the Debit Total will exceed the Credit Total by ;i^3O0, for the amount debited to Roberts has no corresponding credit entry. SHORT SIMPLE EXERCISES, Containing neither Bills nor Subsidiary Accounts. Full Final Balance Sheets are given at the end OF THE Book, and Brief Hints at end of Exercise, when required. Post the following into the Ledger, test by Trial Balance, and from it draw up a Final Balance Sheet, and Profit and Loss account, without closing any account in the Ledger. Then close the Ledger, and show the same final results. N.B. — In every case the value of Goods remaining unsold must be credited to Goods account as if sold, and debited to Valuation account as a Final Asset, before taking out Trial Balance. But this Double Entry must be pencilled in, because it must be rubbed out, if additions are made to the Ledger account, and the Ledger not then closed. Caution ! Buying does not imply paying cash ; selling does not imply being paid cash. In recording my purchases, if I mention no creditor's name, I pay cash. In recording my sales, if I mention no debtor's name, I am paid cash. But if I give a name in either case, no money changes hands unless I expressly say so. Exercise i. Began business with ;^7oo. — Bought horse and van for ^80. — Purchased Goods for ^£'65. — Pur- chased from Andrews Goods invoiced at ^'50. — Sold Watts Goods ^15. — Cash sales during month ^200. — Paid rent ^20. — Goods left unsold ^10. 122 DOUBLE-ENTRY BOOKKEEPING. Exercise 2. Commenced trading with Cash ;^3oo, horse and van ;j^8o, business premises ;£"42o, at Bank ;^4oo. — Bought of Richards, /^ for rent, pay Roberts his account less ;£^ discount ; PhilHps pays his account less ;£2 discount ; James is declared bankrupt and pays 6^. M. in the ^. I have Goods on hand worth £^$- I owe my clerk £1$, and some sundry trade charges ;£^. Exercise 16. My affairs were thus on Jan. ist : Bank Balance ;£"2oo, Cash £60, Goods £^0; Roberts's Credit Balance was ^30, Jones's debit balance ^50, Smith's debit balance ;£"8o. Spent on Goods £30. Received £d>o for Goods. Goods left now unsold ;£ioo. Jones's debt written off as bad. Smith fails and pays 5^. in the £. I pay ^10 rent. Take out ;£2o for private expenses. Pay Roberts, receiving £1 discount for prompt payment. Exercise 17. Began the month with ;£"5oo in Bank, ;^2o at office, horse and cart worth £30, Goods ;^ioo; Jones owed me ;^io, I owed James ^5. Cash sales during month £^0. Cash purchases ^18. Jones's debt is written off as worthless. 10 per cent, deprecia- tion on horse and cart is written off. Stock on hand valued at ;£'i2o. Exercise 18. My affairs are as follows on reopening books: Goods on hand ;£85, Cash at home ^15, at Bank ;£'24o; Peters owes me ;^28, Roberts £16; PRACTICAL PART. 1 27 I owe French ;£"64 ; trade plant is valued at ^120. During the year I pay away for Goods ;£"3i2, and receive for Goods ^518. I buy of French Goods ;£So, and sell Peters Goods ;^26. Roberts's debt is written oif as bad. I withdraw from Bank my whole deposit, and borrow ;^6o from the Bank, for which I am charged ^^^ interest. I write off 5 per cent, depreciation on trade plant, and charge 5 per cent, interest on Capital as a first charge against profits. Exercise 19. On Dec. 31st I had ^^25 Cash, ;^3oo at Bank, Goods ;£"35, horse and van ^55 ; Smith owes me ;^85 ; I owe ;£"2o for rent, ^1^ to clerk, ^^ to Gas Co. During the year I have taken for Goods cash ^260, and have paid for Goods cash ;£"i28. For household expenses I have taken out of Capital only ;£"24. Bank allowed me ;£g interest on my deposit. I paid clerk and landlord; also paid ;£"io repairs, ^s ^^^ ''^tes falls due, but is still owing. Smith, being bankrupt, pays only 45. in the ;£. ^$ fire assurance is paid. Goods on hand I value at ^jo. Write off 20 per cent, depreciation on horse and van. Charge upon profits 5 per cent, interest on Capital. Another gas bill comes in, ^£4. Exercise 20. These are my balances on reopening books: Bank ;£45o. Cash ;£i5o. Machinery ^250, Ship Zucy ^^ 1,2 00, Goods ;^5o ; Charles's debit balance is ;£^8o ; there are sundry Liabilities amount- ing to ;£'28o. I receive ;£'986 for Goods sold, and lay out on Goods ;£"725 ; pay ;^48 insurance, j^io for dock dues, etc. The vessel is lost at sea, and I am 128 DOUBLE-ENTRY BOOKKEEPING. paid the amount assured for, ;2^i,35o. I pay ;£i25 in wages and salaries, allow lo per cent, depreciation of machinery, and charge 5 per cent, interest on net Capital. Charles fails, and pays but is. in the ^. Rent falls due, £28; also clerk's salary, ;£"i8; and rates and taxes, ^^4. Bank allows me ;£"3 interest on my deposit. Value Goods on hand at ;£i2o. Exercise 21. Began with Cash ;£"2oo, Goods ;^ioo; Jones owed me ;£"6o, I owed Smith ^40. — Sold Goods for ;£22o. — Bought Goods for ;£^i5o. — Have, at close of books. Goods worth ;£"i3o. — Paid Smith ;^io. — Received from Jones ;£"3o. — Pay ;^2o rent. — Take out ^i^ for private expenses. Exercise 22. At the opening of books, I had Cash ;£ioo, at Bank ;£^5oo. Goods ;^5o; Roberts owes me ;£'2o, I owe James ^£"30. I draw ;£^4oo from Bank, sell Goods for ;^3oo, pay ;£"6oo for Goods, and have Goods on hand worth ;£"45o. Roberts's debt is written off as worthless ; I pay James ;£"io, and my clerk ;£^2o, and take ^£2^ out of the business for private expenses. Exercise 23. The Balances in my last month's Ledger were these : — Cash ;^8o ; horses ;^2oo ; Edwards's Debit Balance was ;^5o ; George's Credit Balance was ;£"io. During this month I have bought horses for ;£6o, sold horses for ;^9o, and have on hand horses worth ;^5o. Edwards failed, and paid me but los. in the ^. I have taken out of Capital for private use ;£"io, and paid ^5 trade expenses. (Horse account is Goods account.) PRACTICAL PART. 1 29 Exercise 24. Began business with ;£"2oo cash. — Bought goods for ;£"ioo and horse and van for ;£8o. — Sold Hume goods, ;^ioo. — Bought goods of Duncan, ;£"2o. — Hume's debt has to be written off as bad. — Paid ;^2o rent. — Cash sales ;£"6o. — Sold goods to Drew, ;£'4o. — Paid ;£^To trade expenses. — Borrowed of Loan Bank ;£"ioo at 5 per cent. — Took ^£70 out of Capital to live upon. — Goods left unsold, £10. — Wrote off ;^io depreciation on horse and van. (Notice the debit excesses where credit excesses usually are in the Double-Entry Set of Accounts.) MORE DIFFICULT EXERCISES, Containing Bills, Partnerships, Consignments, etc. Exercise 25. — Bills. On Dec. 31st my Ledger showed the following Balances: — Cash, ;£i5o; Bank, ;^45o; Valuation, ;£"3oo ; Bills Receivable, £4^0 ; Bills Payable (a Credit Balance), ^560 ; Gibbs' Credit Balance is j£^o ; Robson's, ;£'6o ; Silver's, ^yo ; Haines' Debit Balance is ^120; Goods on hand, ;^48. Haines sends me his Acceptance for ;^i2o. I buy of Rush Goods, ;^2oo, and he draws on me for ;^2oo (open no account for Rush). Gibbs draws on me for £50. I buy Goods, ;£"6o, of Robson, and send him my Draft on Haines for ;£"i2o. Watts dis- honours his Acceptance for ;£"48o, and I am put to j^i expense — travelling and lawyer's charges. Cash sales ;£232. Send Goods, ^yo, to Silver. Put ;£'36o 9 130 DOUBLE-ENTRY BOOKKEEPING. in Bank and take up all my Acceptances there {ue., pay the sums named on the Bills Payable). Bridge buys Goods, ;£8o, and I draw on him for that amount. I sell Bridge's Acceptance at the Bank for ;£"79. Bridge dishonours his Bill, and I pay £,1 travelling and legal expenses owing to this. Value Goods on hand at ;^ 150. Exercise 26. — Bills. On opening Books I have Cash ;^6oo ; Goods, ;£'25o ; trade plant, ;^i8o; business premises, ;^i,4oo ; I hold Levy's Acceptance for ;£"25o j I owe George ;^73o ; and have myself given two Acceptances, one £01^^150, the other for;^5o ; Morris owes me ;£25o. Morris sends me a Bill in his favour, accepted by George, for ;^25o. I endorse this Accept- ance of George's and send it to George in part payment of what I owe him, and send him at the same time Levy's Acceptance, also endorsed. I buy Goods for ;£"3oo and sell Goods for jQg^o. I retire my two Acceptances and am allowed £d> discount. Sell Goods, ;£"23o, to Morris, and draw on him for that sum (no account to be opened for Morris). ;£2o rent falls due, ;^5 rates, clerk's salary ;^i5 (credit Outstanding accounts). Goods remaining unsold £140. Morris dishonours his Acceptance (debit Morris). Write off 5 per cent, depreciation on premises and trade plant. Reckon 2 per cent, interest on Capital as a first charge against Profits. I have withdrawn jQi^o for private uses, Exercise 27. — Partnership and Bills. Pratt and Drew are partners, the former contributing one-fourth, the latter three-fourths of the Capital, and sharing Profits PRACTICAL PART. I3I or Losses in the same ratio. In addition to their ordinary business they have a Ship account, and for attending to this Pratt is to receive a salary of ;^ioo a year as the first charge on Profits. On Jan. ist this is the position they are in : — Gregory owes them ;£'5oo, they owe Graham ;^2 5o ; they have Goods ;£"720, Cash ;^578, at Bank ^950 ; they hold a Bill drawn on Gough for ;£'2ooj they have given Acceptances for ;£"25o (a Liability) ; their trade plant is valued at ;£"24o. They spend on Goods ;£"225 and sell Goods for ;£i,o5o ; they have Goods worth ^^650 at close of books. Gough dishonours his Bill and they pay ^i expenses on it. They retire their own Acceptances, paying ^£24^. Gregory sends them a cheque for ;^ioo, ;^2oo cash, and they draw on him for the rest of his account. They send Graham Gregory's Accept- ance, a cheque for ^46, and are allowed ;£'4 discount. They buy a vessel for ;^i,ooo and pay by cheque, lay out on cargo ^£"450, and pay for wages and dues ;£i5o. They insure vessel and cargo for ^^1,400, paying ;£"i5 premium. They receive for freight and passengers' fares ;£"6o. The vessel founders and the insurance is paid. They write off Gough's account as a bad debt and 10 per cent, depreciation on trade plant. Pratt draws his salary (debit Profit and Loss, credit Cash; does not come into Pratt's account). Treat Ship account as a second Goods account. Exercise 28. — Partnership. Hughes and White enter into partnership, Hughes having ;£"i,ooo. White ;^2,ooo. Profits to be shared in the same ratio. They 132 DOUBLE-ENTRY BOOKKEEPING. spend on Goods ;£"i,85o, and receive for Goods ;£i, 950; at close of books they have Goods on hand valued at ;£3oo. Hughes withdraws for private expenses ;£'ioo, and is charged £2> interest ; White withdraws ;^2oo, and is charged £6 interest. They charge against profits 3 per cent, on their Capital. Exercise 29. — Partnership. Driver and Berry own equal shares in a business. Their opening assets are Goods ;^5oo, Cash ;£'6oo, Roberts ;£"2oo, horses and trade plant ;£"7oo. Their receipts for Goods are ;^2,ooo, their outlay on Goods ;£8oo ; their stock remaining unsold at close of books is worth ;£"3oo. Roberts fails, and pays los. in the £. They lend ;^ioo to Smith ; he absconds, and his debt is written off as bad. Their trade plant, insured for ;£^ioo only, is damaged by fire to the extent of 40 per cent, of its value ; the Insurance Office pays the amount insured for. There is owing jQ2o rent, ;£"io rates, ;^3o wages. One of their horses, valued at ;£6o, dies. Exercise 30. — Partnership. Ayres has jQi^ooo cash, and Goods ;£i,ooo ; Dobson has Goods ;£^5oo, premises £S^o. They become partners, and agree to share profits in the ratio of 4 to i. They pay ;^2o premium to insure their Goods and premises for ;^8oo. They lay out on Goods ;£^i20, and receive ;£"9oo for Goods sold. They buy of Gough Goods invoiced at ;£"2oo, and are allowed jQio discount for prompt payment. Ayres draws out ;£"3o for private expenses, and is charged ^^5 interest. Goods on hand on closing books valued at ;^i,ioo. PRACTICAL PART. 1 33 Exercise 31. — Partnership. Two Goods accounts^ Consign- ment Outwards (a third Goods account). Brown, Green, and Olive are partners, sharing profits in the same ratio as capitals. Brown has Cash ^2,000 ; Green business premises worth ;£"3,ooo, and wine ;;^i,ooo ; Olive has a ship worth ;^4,ooo, and spirits worth ;^2,ooo. They keep separately their Wine account, and their Spirits account. On wine they spend Cash ;^i,2oo, and receive for sales Cash ;^i,8oo. They purchase spirits for Cash ;£"i,4oo, and sell for Cash ;£'3,ooo. To Lane they sell wine ;£"5oo, and draw on him for that amount at one month. They put on board the vessel, from their own stock, wine;£'8oo, and pay ;£'2o premium to insure vessel and cargo for jQ^poo ; pay also ^80 trade expenses. The ship is lost, and the sum insured for paid, but agent charges ;^io commission. From their own stock they consign spirits ;£"8oo to Bird of Liverpool, and receive ;£^92o as net proceeds. Lane dishonours his acceptance, and puts them to ^i legal and traveUing expenses, paid at the time. At close they have on hand wine worth ;£'5oo, spirits jQ6oo. Allow 10 per cent, depreciation on premises, 5 per cent, interest on Capital, and credit Brown with ;£'ioo salary as acting manager, before sharing profits. Exercise 32. — Partnership. Contracts. Rice, Jevons, and Mason enter into partnership, and agree to divide profits or losses equally. At the outset, Rice has ;£'9oo cash; Jevons ;£ioo cash and business premises worth ;£'i,ooo; Mason has building materials ;£5oo, and trade plant £,^00. They contract to build a 134 DOUBLE-ENTRY BOOKKEEPING. bridge for ;^ 1,500, spend ;£'4oo on wages, ;£"85o on material, and ^^o on miscellaneous requirements, and receive the sum agreed upon. On a second contract they spend ;£'8oo, and receive ;^i,3oo. To Robins they sell building materials ;£"4oo ; he fails, and pays only ij-. in the ^. They have building materials on hand worth ;^3oo. A portion of the premises, valued at ;^3oo, but uninsured, is burnt down. They borrow ;£"i,ooo of the Union Bank, but repay it with 5 per cent, interest. They write off i per cent, for deprecia- tion of premises and trade plant. Exercise 33. — Partnership. Three Trade accounts. In posting the following, treat each Partner as a customer lending his money to the Firm, credit each with his own share of profits, and show Final Liabilities just equal to Final Assets ; Capital and Profits being booked as Liabilities which the Firm owes to the Partners on closing books. — Burton, Chard, and Duke are a Firm of shipowners. Burton holds two shares, Chard three, Duke seven. They share profits or losses in the same ratio ; but Burton is paid ;^ioo salary as acting manager before profits are shared. At the beginning of the year, they own three vessels, Fairy^ Princes s^ and Elf, worth respectively ;£35 0oo> ;£^4jOOo> and ;£"5,ooo, each insured at ;£"2oo above the value of the ship, as no cargo is insured ; they have Cash ;^2,4oo. They lay out on cargo, wages, food, etc., for Fairy ;^45o, and receive in fares and freight;^: 20, and proceeds of sale of cargo ;£8oo. On Princess they spend ;^7oo, and receive £9^0-, on the Elf PRACTICAL PART. 135 ;^8oo, and ;^i,42o is received. On the homeward voyage Fairy is wrecked; the insurance is paid promptly. They write off 5 per cent, depreciation on their other two vessels ; pay £,\oo trade charges ; credit each partner with 5 per cent, interest on his Capital, and pay Burton's salary. (Burton's account need neither be credited nor debited ; debit Profit and Loss, and credit Cash, just as when a clerk is paid.) Exercise 34. — Partnerships Contract^ Consignment Out- wards^ ditto Inwards^ Bills. Bryant, May, and Rose are partners, owning equal shares and dividing profits equally. On reopening books, they have Goods ;£'5oo, business premises ;^2,ooo. Cash ^900, and Reeves's Acceptance for ;£^6oo ; they have spent £,"2.00 on an Open Contract, and ^£"500 on an Open Con- signment to Odessa (these last two items are Assets, like Goods bought but not sold); their sole Liability is their acceptance for ;^2oo. They spend ;£8oo on Goods, and receive for Goods ;£"t,3oo. Reeves dishonours his Bill, and later on is declared bankrupt, and pays 35-. 4^. in the jT^. On the Contract they lay out ;£i5o more, and receive on account of it ;£"5oo. Their agent in Odessa forwards them an "Account Sales" showing net proceeds, after paying his com- mission, etc., on the Consignment, ;£"6oo. Roberts of Cardiff consigns to them Goods which he invoices at ;£i6o, but they sell for ;£"i5o gross; they spend ;;^2o for dock dues, cartage, etc., and charge ;£6 commission. They settle with Roberts by their Acceptance for the amount due to him at one month. 136 DOUBLE-ENTRY BOOKKEEPING. Their warehouse is burnt down, and all the Goods on hand, just valued at ;£"9oo, totally destroyed; nothing insured. Each Partner has drawn out ;^3o to live upon during the month. Exercise 35. — Partnerships Subsidiary accounts. In posting the following, open separate accounts for Tea and Coffee ; give Trade Expenses a separate account, keep Bad Debts and Discounts each apart, and separate from other profits and losses; open an account for Business Premises, and another for horses and vans apart from other items of Valuation account ; open also a Petty Cash account from which to pay all amounts under £^^. — Brown and Green are partners. Brown owning |, Green \ of the Capital, and sharing profits in the same ratio. On January ist, their affairs were as follow : — Addison owes them ;£"2oo, Bence ;£'3oo. Creed ^£'400; they owe Drake ;^8o, Engel ;^ioo. Friar ;£i2o. They have Cash ;^2,ooo, horses and vans ;3{^2oo. Business Premises ;£8oo, Plant and Fixtures ;£"8o. Tea ;£"i5o, Coffee ;£"25o. During the year, on Tea they lay out ;£"65o, on Coffee £,1^0. Their receipts for Tea are ^1,200, for Coffee ;^i,6oo. On closing books, they have on hand Coffee ;^25o, Tea ;£i5o. They settle Drake's account, being allowed £^2 discount ; Engel's, and are allowed £2, discount ; Friar's, and are allowed ^^4 discount. Addison fails and pays but 5^. in the £\ Bence too, and pays ds. M. in the £. Creed absconds, and his debt is written off as bad. They pay ;^2o rent, ;^io rates and taxes, £^ gas, £^ wages ; buy a horse for PRACTICAL PART. 1 37 ^60; write off 10 per cent, depreciation on business premises and on horses and vans. ;^io has been advanced to Petty Cash, and ^S spent on stamps, stationery, and sundries. Brown has withdrawn on private account ^£'120, Green ;£"6o. Exercise 36. — Auctioneer's Ledger. Consignments Inwards {Consignors' personal accounts in Consignees books). Tewson begins business as an Auctioneer and House Agent with jQs^o Cash, office furniture ^^50, Horse and trap ;£*5o. He receives Goods from Adams, spends £/\. on them, charges ;£"io Commission, and the gross proceeds of sale are ;£^2oo. Barrow sends him Goods which he sells for £^$0 gross ; on these he spends jQ2^y and charges ;^2o Commission. Cameron consigns Goods to him which fetch ;£"6o at the auction; he charges 5 per cent, commission on sales. He sells houses for Duke for ;^4,8oo, on which he gets 10 per cent, commission. He settles with Adams, Barrow, Cameron, and Duke, and pays ;!^2o rent and other trade expenses on his own account. (No Goods account need be opened ; commission goes on Cr. side of Profit and Loss account, Tewson's own expenses on Dr. side.) Civil Service Examination Paper. Trial Balance and Final Balance Sheet are given at the end of answers to exercises. On Jan. i, 1890, the affairs of Dale & Co. stand as follows : — They are debtors on their own Acceptances jQiy2i()6s.6d.; 138 DOUBLE-ENTRY BOOKKEEPING. to Bird ;£"i28 14s. -, to Aveling ;£"435 15^. 3^. ; to Seymour ;£'5oo. [Liabilities.] They are Creditors to the Bank ;£'82o 45., and to Newman ;£"32o. They hold Acceptances amounting to ;£i,o25, their Goods on hand are worth ;£'2,5oo, and there is Cash in the office j^sS- A shipment of Goods, £S33i has been made to Sheppard of Calcutta, for Dale & Co.'s sole account. (Debit Shipment account.) Take out a Trial Balance, and from it find Net Capital at close, taking Goods then on hand as worth ^^1,300. All cheques pass through the Bank the day they are written or received by Dale & Co. TRANSACTIONS. 1890 £ s. d. Jan. 2. Bank paid our Acceptance 219 6 6 „ 5. Accepted Seymour's Draft for 250 o o ,, 5. Bought Goods from Bird ... 340 o o ,, 8. Shipped to Mayor of Bombay, per Ship Clive^ on Joint account, Goods i,cmx) o o ,, 8. Paid Freight of Goods £\(i, and Insurance Pre- mium ;^ 10, insuring them for ;i^ 1,200 ... 26 o o The Profits or Loss on this Venture to be shared between us and Mayor in the ratio 2 to i. „ 13. Received from Newman cheque for 100 o o „ 15. Sold Goods to Aveling 232 18 4 ,, 18. Letter received from Seymour asking us to remit them ;^200 in Bills at 10 days' sight, and to transfer the Balance of their account, under advice, to Newman, This we do, purchasing Bills from Bank. ,, 22. Bank collected Oliphant's Acceptance .. . ... 425 o o ,, 24. Paid by cheque for office repairs 34 16 2 Received from Sheppard of Calcutta advice of sale of our Shipment on sole account, together with Bill for Net Proceeds 584 14 2 £ s. d. 3 17 8 7CXD 30O PRACTICAL PART. 1 39 Jan. 25. Discounted at Bank the Bill received from Sheppard, Discount ,, 26. Bank paid our Acceptance, No. 44 M 30. Sold Goods to Aveling Feb. 5. A portion of the Goods sold to Aveling on Jan. 15 being damaged when received, we admit their claim for £2;^ lys. 2d., and claim for the amount on Bird, from whom the Goods were bought. Claim allowed, and entries made at same time 23 17 2 , , 6. Received advice of the loss of the Ship Cltve. ,, 10. Bought Goods from Newman ... 150 o o ,, II. Received from Newman cheque to close his account 17 17 6 Discount allowed him ... 226 J, 12. Bank returned to us Fox's Acceptance, due this day, which was not honoured, debiting us with the amount, as the Bill had been discounted 300 o o Protested the Bill. Paid notarial and other charges in cash 2 10 o „ 13. Received from Fox for his dishonoured Bill his Acceptance at three months for And cheque (including £2 ^^^- interest) ,, 15. Received from the Underwriters the Insurance on the Shipment per Ch've, cheque for ,, 18. Sold Goods to Aveling ,, 23. Bank paid our Acceptance, No. 45 And collected Armitage's Acceptance due to-day ,, 27. Paid Bird by cheque ... ,, 28. Drew cheque for office expenses for two months [Three Goods accounts, Shipment to Sheppard, Joint Venture, Trade account. On Jan. 18 debit Seymour ;;£'25o, credit Bank ;£"2oo, credit Newman ^£"50. On Feb. 5 debit Bird, credit AveHng. On Feb. 6 debit Underwriters, credit Joint Venture. On Feb. 12 debit Fox; credit Bank, credit Cash.] 200 106 1,200 213 12 3 250 300 200 33 14 9 140 DOUBLE-ENTRY BOOKKEEPING. Payments made indirectly by Booking. Bills of Exchange. (Set by Civil Service Examiners.) The following letter is written by a firm at Lyons to their London correspondents, Messrs. Todd : — Gentlemen, We are in receipt of yours of the 15 th inst. with Account Sales of our shipment of silk, showing net proceeds ;£^3)645j for which we are obliged. We beg to advise our Drafts on you at 10 days' sight, favour Messrs. Lisle : — Against the Silk Shipment ;^3,ooo Against our General account ... 1,000 The Balance of the Silk Shipment please transfer to our No. 2 account. In accordance with your request we have paid to Dupuis the equivalent, at exchange 25-40, of ;^5oo, which we charge to your Dr. in General account. Kindly credit Messrs. Allen, under advice, ;£'2oo for our No. 2 account ; and note that we have requested Mr. Meyer of Hamburg to credit you with the equivalent of ;^5oo on General account. Yours faithfully, BAPTISTE & CO. Explain the whole of the transactions indicated above. Give the Ledger entries in Todd's books, and state what is still owing to Baptiste by Todd so far as can be learnt from the above letter. PRACTICAL PART. 141 (A full solution is given in the answers.) Beginners will find the above simpler if they think over the following statements : — If I have an account in my Ledger headed Allen, and I credit it ;^2oo, I book Allen as having paid me ^200, as being owed that sum, and when I settle with Allen / shall have to pay him £,'200 more^ or Allen will have to pay me ;^2oo less, because of this entry. So debiting Baptiste's account ;£'5oo will make Baptiste owe me ;£^5oo more, and when I settle with him / shall be paid £,^00 inore^ or have ;^5oo less to pay Baptiste, because of this entry. ANSWERS. SHORT SIMPLE EXERCISES. Final Balance Sheets. Exercise i. Liabilities. Andrews £ 50 Balance, Final Net\ Capital ... / ^^ £840 Assets. Valuation Cash Watts Final Net Cap ... £ 90 ■•• 735 15 £840 ital, £790 Exercise 2. Balance, Final Net^ ^ Capital ... |£'-368 Valuation Bank Cash ... £^^9 ... 427 ... 312 £1,368 / Final Net Capits il, £1,368 142 DOUBLE-ENTRY BOOKKEEPING. Exercise 3. Norton . ... £ 56 Valuation ;^i62 Balance, Final . } 522 Cash 416 Capital £578 £578 Final Net Capital, £522 Exercise 4. Andrews ... ... £ 70 Valuation £ %q Balance, Final Net^ Bank 250 Capital Cash 30 ^ Samuels 50 £410 £410 Final Net Capital, £340 Exercise 5. Balance, Final '^"}£.036 Valuation £^0't^ Capital Cash 331 ^ £1,036 Final Net Capital, £1,036 Exercise 6. Balance, Final ""} £6.: Valuation ;^i2o Capital Cash 571 ^.-^-^ £691 Final Net Capital, £691 Exercise 7. Balance, Final Net^ ^ „ |£2,928 Cash ;^2,928 Capital Final Net Capital, £2,928 PRACTICAL PART. 143 Exercise 8. Bank (overdrawn) £ 20 Valuation £ 30 Balance, Final Net\ 215 Cash 182 Capital Morgan 8 ^ Swift 15 £235 £235 Final Net Balance, £215 Exercise 9. Goodwin ... ;^IS Valuation £ 70 May 400 Cash ... 205 / Balance, Net Deficit^ at Close ... / £415 £415 Balance, Net Deficit) at Close ... J £140 -■v Owner Insolvent. Exercise id. Balance, Final Capital Net|^ Ci,696 Valuation ;^924 Cash ... 772 ^ £1,696 Final Net Capital, £1,696 Exercise ii. Daniels ... £ 250 Valuation ;^i88 Balance, Final Capital Nety 441 Cash 503 £691 £691 Final Net Capital, £441 Exercise 12. Balance, Final Net\ £711 Valuation £^S'^ Capital Cash 255 / £711 Final Net Capital, £711 144 DOUBLE-ENTRY BOOKKEEPING. Exercise 13. Balance, Final Net\ Capital ... / £345 / Valuation £ 84 Cash 231 Bank 30 / £345 1 Final Net Capital, £345 Exercise 14. Outstanding Account ;^30 Valuation £466 Balance, Final Net\ Capital ... / £804 Bank 20 Cash 298 /- Brown 50 £834 £834 Final Net Capital, £804 Exercise 15. Outstanding Accounts . . . ;^20 Valuation £ 85 Balance, Final Net-k Capital ... J Bank 30 286 Cash 191 £306 £306 Final Net Capital, £286 Exercise 16. Balance, Final Net^ Capital ... J Valuation ;^ioo £371 Bank 200 / Cash .: 71 £371 Final Net Capital, £371 PRACTICAL PART. AS Exercise 17. James Balance, Final Capital Net| £ 5 684 Valuation ... ... ... ^^147 Bank 500 Cash 42 £689 £689 Final Net Capital, £684 Exercise 18. Bank French ... .. Balance, Final Capital Net^ £^z 144 607 Valuation ... ;^239 Cash 521 Peters ... 54 £814 £814 Final Net Capital, £607 Exercise 19. Sundry Accounts Balance, Net Capital - at close ... j £ 14 511 Valuation ^^114 Bank 309 Gash 102 £525 £525 Final Net Capital, £511 Exercise 20. Sundry Accounts . . Balance, Final Capital Net^ i C 330 2,050 Cash ;^i,582 Bank 453 Valuation 345 - ?2,38o £2,380 P.P. Balance, Final Net^ Capital ... |^^'°50 10 146 DOUBLE-ENTRY BOOKKEEPING. Exercise 21. Smith . ... £ 30 Valuation ;^i3o Balance, Final Net^ } 385 Cash 255 Capital Jones 30 £415 £415 „ Balance, Final Net-k Capital ... ) ^385 Exercise 22. James ... £ 20 Valuation ... ^^450 Balance, Final } 675 Bank 100 Capital Cash ... 145 £695 £695 Final Net Capital, £675 Exercise 23. George ... £ 10 Valuation £ 50 Balance, Final Net. } ''' Cash 120 Capital ^ £170 £170 Final Net Capital, £160 Exercise 24. Loan Office ... ;^I0O Valuation ;^8o Duncan 120 Cash 80 / Drew 40 Balance, Final Net-k Deficit ... / ^° /.. £220 £220 Final Net Deficit, £20 Owner Insolvent. | PRACTICAL PART. 147 MORE DIFFICULT EXERCISES. Exercise 25. Bank ...;^ Balance, Final Net^ Capital ... / ''°3' £1,032 Valuation ... Mso Cash 20 Watts 481 Bridge 81 £1,032 Final Net Capital, £1,031 Exercise 26. George ... ;^230 Outstanding Accounts ... 40 Balance, Final Net^ Capital ... I ^'549 £2,819 Valuation ... ;^i,64l Cash ... ... 948 Morris 230 £2,819 Final Net Capital, £2,549 Exercise 27, . Balance, Final Net^ . ^„ Capital ... }£^'968 Valuation ... ;^ 866 Bank 4 / Cash 2,098 £2,968 Pratt's ... £ 742^ Drew's... 2,226j Pratt's Capital £742^ Drew's „ 2,226/^^'9^^ Exercise 28. Balance, Final Net Capital }£3, VIZ. — Hughes £2,066 13 4' White 1,033 6 8. Valuation ... Cash £ 300 . 2,800 Joint Final Net Capital £3,100 White's Capital £2,066 13 4 Hughes's „ 1,033 6 8 148 DOUBLE-ENTRY BOOKKEEPING. Exercise 29. Outstanding Accounts .../^ Balance, Final Net\ Capital ... / VIZ. — Driver Berry 60 2,500 £2,560 1,250/ Valuation ... Cash ..£ 660 ,. 1,900 £2,560 Final Net Capital ..,£2,500 /Driver£ i,25o\ iBerry 1,250/ Exercise 30. Balance, Final Net"! r. ,.^ Capital ... J viz. — ■ Ay res Dobson £3,i05\ 1,035 J Valuation Cash Ayres's Capital Dobson's ,, ;^i,6oo 2,540 £4,140 £3,105 1?* 1,035 i^ Exercise 31. Balance, Joint Final\ Net Capital J Brown £2,468 Green 4,736 Olive 7,105 £14,310 6 8^ 13 4 [ o o) Valuation ... ... £ 3,800 Cash ... 10,009 Lane SOI £14,310 Brown's Cap. £2,468 6 Green's „ 4,736 Olive's ,, 7,105 6 8^^ o oj S Exercise 32. Balance, Joint Final Net Capital ,.. }£3. 155 VIZ. — Rice Jevons Mason : 951 13 41 1,151 13 4 [ 1,051 13 4J Valuation Cash ^1,485 1,670 £3,155 Rice's Cap.£95i 13 4^ Jevons's,, 1,151 13 4 [£3,^55 Mason's „ 1,051 13 4J PRACTICAL PART. 149 Exercise 33. Burton Chard Duke ;^2,57o 3,855 8,995 £15,420 Valuation Cash ...£6^0 ... 8,770 £15,420 Exercise 34. Bills Payable Balance, Net £ 324 C^Pi*^l}£2,i66 Cash Agent in Odessa ... ...;^1.890 600 at close ^^^ £2,490 £2,490 Bryant's Capital £722^ May's „ 722 V£2,i66 Rose's „ 722J Exercise 35. Balance, Final Net Capital }£4,405 Brown's Capital £2,936 13 4\ Green's „ 1,468 6 s/ Exercise 36. ^ Balance, Final Net\ Capital ... / £686 Goods ;^48o Business Premises 720 Horses, etc. 234 Cash 2,969 Petty Cash 2 ;^4,405 Valuation ' . . ;^IOO Cash . 586 £686 Final Net Capital, £686 ISO DOUBLE- ENTRY BOOKKEEPING. /x Civil Service Examination Paper. TRIAL BALANCE. C \ ^ s. d. £ s. ^•1 i^t-^ — — Capital 2,949 8 3 r4^oi 74 II I Profit and Loss 3 ID - os3^| 684 - - Joint Advent. 800 - - ^° = «| u 2,990 - - Trade 3.046 10 7 [ 533 - - Shipment . . . 584 14 2 J 18 - Valuation ... Bank ?s 3.549 1.937 17 5 1 Cfl 35 - - Cash 28 10 - ^2. 1,809 14 2 Bills Receiv. 1.309 14 2 ■ go 1,169 6 6 Bills Payable 1,469 6 6 223 746 17 10 2 7 Bird Aveling 468 459 14 12 5 ) 500 - - Seymour 500 - - 82. 320 - - Newman 320 - - H> 342 - - Mayor 400 - - ?l 1,200 - - Underwriters 1,200 - - "* \ 302 10 - Fox 302 10 -1 Tnfal Tntfll Debits, i ^15,780 7 6 £15,780 7 6 Credits. FINAL BALANCE SHEET. Liabilities. £ s. d Bills Payable ... 300 - - Bird 244 16 10 Mayor 58 - - inal Net Capital 3,102 11 11 £3.705 8 9 Assets. Bank Cash Valuation . . . Bills Receivable Aveling £ s. d. .. 1,612 7 6 10 ... 1,300 - - ... 500 - - ... 286 18 2 £3,705 8 9 Final Net Capita ^ }£3.i02 II II PRACTICAL PART. I51 Bills of Exchange. Payments made indirectly by Booking. Baptiste of Lyons has sent Todd of London silk goods to sell for him. Todd clears £3,645 by the sale, after taking out his own commission and the other charges against it. This is Baptiste^ s money ; Todd therefore credits Baptiste's No. I Account with ;£"3,645. To get paid, Baptiste makes out, on stamped paper, an order to Todd, bidding him pay Lisle ;^4,ooo in ten days' time, and acknowledge this obligation by signing the Acceptance and giving it to Lisle to keep mean- while. When Lisle gets it, he credits Baptiste^ s account in his books. Todd reckons Baptiste as receiving ;£4,ooo from him as a Bill, and debits his No. i Account with a Bill Payable for ;£"3,ooo, and his General Account with a Bill Payable for ;£i,ooo, as desired. The No. i Account balance of ;£"645 in favour of Baptiste is placed in No. 2 Account, here, as there, on the Cr. side. It is a Credit Balance. When Baptiste pays Dupuis ;£"5oo at Todd's wish, Dupuis credits Todd's account in his books, and Todd debits Dupuis and credits Baptiste's General Account in his books. When Todd has credited Allen's account in his books with ;£"2oo, at Baptiste's request, Allen owes Todd ;£"2oo less than before, and is indebted for this to Baptiste. Todd being ;^2oo worse off, debits Baptiste's account, because Baptiste really has received it through Allen; and Todd now owes Baptiste ;£2oo less, and has ;£2oo less owing to him from Allen. When Meyer has credited Todd with ;^5oo, Todd will 152 DOUBLE-ENTRY BOOKKEEPINCx. owe Meyer ;£"5oo less, and will debit Meyer's account in his books. But Todd will owe Baptiste £s^^ more ; so he credits Baptiste ;£"5oo. The expression " at exchange 25.40 " means that, at that particular date, ;£i of English money was reckoned equal to 25! French francs. Br Todd's Ledger. BAPTISTE'S NO. i ACCOUNT. To Bills Payable... ,, Balance due Baptiste ... ... 3,000 ^°} 645 By Net Proceeds of con- signment from Baptiste 3,645 £3,645 / BAPTISTE'S NO. 2 ACCOUNT. £ I £ To Allen & Co 200 I By Balance transferred from I No. I Account BAPTISTE'S GENERAL ACCOUNT. £ . To Bills Payable 1,000 j By Dupuis Meyer 645 £ 500 500 To Baptiste. To Baptiste . DUPUIS' ACCOUNT. ^ I ... 500 I MEYER'S ACCOUNT. ^ I ALLEN'S ACCOUNT. I By Baptiste.. £ 200 PRACTICAL PART. 1 53 BILLS PAYABLE ACCOUNT. I ^ I By No. I and General I Account of Baptiste... 4,000 On looking at No. 2 Account, Baptiste's, we see that Todd owes Baptiste ;£445 after these entries have been made. SPECIMENS OF COMMERCIAL BOOKS AND FORMS. Cash Book. The simplest form contains (i) date, (2) from whom received or to whorrt paid, (3) sum actually received or actually paid away. The more complex form contains, in addition to the above, (4) cash at Bank, and (5) discount allowed to me, or by me. A cash folio is generally double-paged, Dr. page and Cr. page being numbered alike. 154 DOUBLE-ENTRY BOOKKEEPING. >i O vO VO o o \ o k • \ o •A O «1 o to \ 00 ^ a 1-4 o . /— *— . : • • M 1 < : : : •5 Q I : Pk •1 . 1 ■2 1 1 O Wages P Month Balance .. >> n •V •> n v—.,-^ CO \fi N _ i •> - ro -Q VO o VO O O o o lO • \r> o o rl- O m in M „ o vn t^ CSl N 00 S^ 00 -"t IH l^ : : : 1 : • • \ 1 CO ^P & . . . Cash Sa h, as p 8 eter ale oods ( Mont Book ?i 1 o 1 o O ^. Pk > O c4 H " " I ^~ I &l" ^ (1 Tt- 00 o >■* M i. c N CO ^ § K •N •^ av •^ ►^ b PRACTICAL PART. 155 4 s? 1 a K g, 1 s ^ s? §. 1 1 1 5 p > U PhHP^; rt ^ :: :: . -> " i J 2 <2 ^ a 1, ' ' ' ' ^1 s? S. 1 1 S 1 I ^ s Or(^r or Bearer^ Five Pounds, JAMES BALL. [Not Negotiable.] £250 Bills (a Promissory Note). Dundee^ Aug. 3, 1896. One month after date^ I promise to pay to Mr. Charles Dawson, or order, the sum of Two Hundred and Fifty Pounds, value received. Stamp. FREDERIC RYLE. £250 A Draft, Bill, or Acceptance. 3, 1896. to jfie, or On Dundee, Aug tnonfks a^r <^te^ay .V» » ^ ^. to Me^rs.B) and, or to their order. Five Thousand Founds : tef^^nSvaliieVcceived. -^ T ju "-^ 1^ 31, 1896. Stamp. f^ g^ rjOHN WRIGHT. Robert Harris owes ;^5,ooo to John Wright. Wright owes Messrs. Brand ;£'5,ooo, and pays them by sending them Harris's acceptance. At the end of six months, Harris will pay Messrs. Brand, unless they have meantime PRACTICAL PART. l6l sold the Bill to another merchant. In. that case, Harris will pay that merchant, the holder of the Bill at the time it falls due, the money named on the Bill. An Account Sales. Account Sales of 300 Bags of Sugar, per ship Juno^ on account of Louis & Co. of Mauritius. [896. Aug. I. 150 Bags at 30s. . Sep. 30. 50 Bags at 20s. . Oct. 18. 100 Bags at 15s. . 300 Charges : — Freight, etc. Our Commission Net Proceeds London, Nov. i, 1896. Briggs & Co. £ s. 225 — 50 — 75 60 17 10 ... ... £ 350 77 272 d. Bills Receivable Book. d ^^3 < 11 c n 5-° 3 (L) ^ 1896. £ 1896. 30 Dec. I Smith 315 £ Brown Jones Jan. 4 Dec. 3 Discounted with Williams for;^3io. 31 Dec. 30 Driver 120 Driver Ford March 2 March 2 Collected by Bank. P.P. 1 1 1 62 DOUBLE-ENTRY BOOKKEEPING. Bills Payable Book. 1 dS-S e fl 6 d . ^ • fefe 1 « 3 < d 1^ -2| ;^ s Jan. I Bryant 310 March 4 March 4 At Bank Folio 16 1897 1897 1897 Folio 17 Z>' Two Forms of Journal. I._GOVERNMENT OFFICE FORM. Dates Over, Debits to Left. C Ledger Folio. 50 250 150 450 80 -Jan. I, 1897- Cash, Dr. Valuation. Dr. Goods, Dr. To Jones, Cr. To Capital, Cr. Total of Balances from last year's Ledger. -Jan. 2- Goods, Dr. To Johnson, Cr. £ 400 450 s. ao — PRACTICAL PART. 163 II.— ORDINARY JOURNAL. Dates to Left; Debits and Credits Side by Side. Date. Ledger Folio. s. d. £ 400 50 35 s. 1897 Jan. I „ 2 „ 3 2 2 I I 8 2 2 Bank, Dr. Cash, Dr. To Capital Account, Cr. £ 300 100 50 35 d. Goods, Dr. To Budget, Cr. - Valuation, Dr. To Bank, Cr. - Final Balance Sheet. BALANCE SHEET OF BYLES & GLEGG, ON March 31ST, 1896. Liabilities. s. d. Assets. £ £ s. d. Bills Payable 720 - - Cash at Bank... 324 i6|8 Mortgage on Premises . . . 2CX) - - „ in Hand 128 3 4 Budget & Co 700 - - Stock in Trade 450 - Outstanding Accounts . . . 78 - - Fixtures 120 - - Balance, Net Capital 400 - - Premises 400 - - - Horses and Vans Bills Receivable 150 500 "■ ~ R. Bums 25 2,098 - 2,098 -i- ~" _,_ 164 DOUBLE-ENTRY BOOKKEEPING. Account State ; Current Account. BRODIE & CO. IN ACCOUNT WITH WM. GREEN. (A Customer's Account.) 1896 £ s. d. 1896 £ s. d. June I To Goods IS 2 6 June 2 ByBillRec. ... 60 - - „ 4 )> >» 120 - - ,, „ Cash 15 2 6 ,,20 )j ?> 65 - - ,,30 „ Bank ... 185 - - July 6 To Bill Rec.\ July 30 By Cash for^ dishonoured 60 6 8 dishonoured l 60 6 8 and expenses j Bill & Costs J paid J n 31 By Net Pro-> Aug. I To Cash paid^ ceeds of to Harvey Consignment V 300 - - at request of [ 35 - - sold for Brodie & Co. J Brodie & Co. >' Balance due\ £ 620 — — to Brodie >• 265 _ - 9 2 &Co. ) Aug. I Balance in> £ — — favour of 620 9 2 Brodie & Co. J 265 - This is simply Brodie & Co.'s personal account in the Books of Wm. Green. PRACTICAL PART. 165 Wm. Ashton in account with the Firm of Ashton, Briggs, & Conley. [A Partner's Account.] Wm. Ashton's Capital Account. 1896. 1896. Dec. 31 Balance, ^ r Jan. I By Sundries (his^ ^ Wm. Ashton's j-2,200 share of Initial U,ooo FinalNetCapitalJ Dec. 31 Net Capital) J / By Balance from-j 1 Current Ac- 1- 200 1 count ... J £2,200 Wm. Ashton's Current Account. 1896. £ 1896. £ Dec. 25. To Cash withdrawn 650 Mar. I. By advance of fur- Dec. 30. , , Goods taken from ther Capital... 500 stock for private Dec. 31. „ interest on Capi- use 40 tal 75 Dec. 31. „ Balance car-^j >> j> ,, Ashton's share ried to Ash- 1 of Net Profit 315 ton's Capital j ^°° / Account ...J £890 £890 These accounts are also the personal accounts of Wm. Ashton in the Firm's Books. If his Current account had been entered in his Capital account, debits here being debits there, and credits here credits there, the result would of course be the same. The only advantage of opening a Current account is keeping Capital^^caunJ, clear of detail. OF THE UNIVERSITY SELECT LIST BOOKS FOR PUPIL TEACHERS AND SCHOLAR- SHIP STUDENTS. ATLASES. AN ATLAS FOR A LIFETIME. ADOPTED BY THE LEADING TRAINING COLLEGES. Philips' Systematic Atlas. School Edition. A Series of 41 Plates illustrating Physical and Political Geography. By E. G. Ravenstein, F.R.G.S. With complete Index. Imp. 8vo, strongly bound in cloth. lOs. 6d. 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Containing Seventy- two New and Specially Engraved Plates, with Statistical Notes and Complete Index. By E. G. Ravenstein, F.R.G.S. Neatly bound in cloth, with rounded corners. Size, when closed, 6\ by 4 inches. 5S. GEORGE PHILIP & SON, 32, Fleet Street, LONDON, E.C. T-ivERPooL : Philip, Son & Nephew, 45-51, South Castle Street. I GEOGRAPHY. Manuals of Commerce. By John Yeats, LL.D., F.G.S., F.S S., etc. Per Vol., 6s. 1. The Natural History of the Raw Materials of Commerce. 2. The Technical History of Commerce. 3. The Growth and Vicissitudes of Commerce in all Ages. 4. Recent and Existing Commerce. The Golden Gates of Trade. By John Yeats, LL.D. With Map. 4s. 6d. ^ » F Map Studies of the Mercantile World. With Six Charts. 4s. 6d. Applied Geography. By J. Scott-Keltie, Assistant Secretary to the Royal Geographical Society. 2S. 6d. The British Colonies and their Industries. By the Rev. William Parr Greswell. Is. 6d. The Advanced Class-Book of Modern Geography. By W. 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MUSIC. Works by John Taylor, Organist (by Appointment) to H.M. the Queen. 1. Musical Theory Course for Pupil Teachers and Training College Students^ containing a Collection of Recent Government Examination Questions. Second Edition. Crown 8vo, cloth, Is. 6d. 2. The New Code Sight Singing Book. A Complete and Easy Course of Instruction for Teaching the Code Divisions I. to IV., and containing Specially Graded Sight Tests in Time and Tune combined. Ear and Voice Training, and the Complete Minor Scales, etc., as required by the Code. 40, cloth, 3S. 3. Original Sight Singing Exercises. Being the Actual Singing Tests from the foregoing. Divisions I. and II. 4to, stiff cover, 3d. Divisions III. and IV. 4to, stiff cover, 4d. 4. The Stave Modulator for Teaching Staff Sight Singing. Applies all the Uses and Capabilities of the T. S. Fa Modulator at once to the Staff Notation. Printed in two colours. Mounted on canvas and rollers. 5S. GEORGE PHILIP & SON, 32, Fleet Street, LONDON, E.C. Liverpool: Philip, Son & Nephew, 45-51. South Castle Street. 2 PHILIPS' "SEMI-UPRIGHT" COPY BOOKS. Have been expressly designed to produce BOLD, CLEAR AND RAPID WRITING. IN TWELVE BOOKS. Price 2d. each. 1. Large Hand. 2. Large and Half-Text Hand. 3. Large, Text and Half-Text Hand. 4. Large, Text and Half-Text Hand. 5. Large and First Small Hand. 6. Large and First Small Hand. 7. Medium Small Hand. 8. Medium Small Hand. 9. Small Hand. 10. Small Hand. 11. Advanced Small Hand. 12. Advanced Small Hand. DISTINCTIVE FEATURES. G olden mean successfully achieved. O blique and natural movement of hand retained. L egibility and Rapidity combined. D istances between letters carefully spaced. E lements and Initiatory Combinations methodically arranged. |\| atural slope of the hand and position of the body secured. M edium course between 0° of upright and 30° of sloped writing. E very word can be written continuously. A 11 the advantages of upright writing. N one of the defects of sloped writing. Specimen Book containing pages of the whole series will be forwarded gratis on application. OBJECT LESSON FOR THE NEW CODE. Simple Object Lessons from Nature. For the Upper Classes in Infant Schools, and for Standards I., II., and III. With Outline Illustrations foi the Blackboard, and for use as Kindergarten Occupations. By Jane B. Dickens, 4to, cloth, 2S. 6d. Part I.— Botany. Part JI.— Insects. Part III.— Sea Animals. "The illustrations for reproduction by the Teacher are very true to life, and provide an occupation for the children, who can be set to copy them in Brush Work, or outline them in Embroidery. The work is one of the best of the Kindergarten Publications of the Season." — School Board Chronicle. Botany Lessons for Young Children. By Dora Pearce, Author of "Clay Modelling for Little Ones." With Illustrations, specially suited for reproduction on the Blackboard. Crown 8vo, cloth, Is. "A series of simple lessons which ought to be very suggestive and helpful to young tea.ch.eYS."— Schoolmaster. SIMPLE AND ATTRACTIVE OCCUPATIONS. 1. Embroidery Without Outline. A perfect Eye-training and varied Occupation. By M. E. Hughes. Crown 8vo, boards, nelt. Is. "An ideal occupation for giving eye-training to the very little ones. The Author points out that the training of the eye to correct observation helps the reading, and that teaching to count at sight — as required by this occupation — helps the Arith- metic." — School Board Chronicle. 2. Form Building. A System of Kindergarten Drawing from Copy and Dictation. Arranged in regular sequence, with full instructions, by a London Head Mistress. Over scx) Illustrations (60 in colours). 4to, boards, 2s. 6(1. " A well arranged series of delightful and instructive lessons in a subject peculiarly calculated to appeal to the children's natural instincts, to imitate, construct, combine, and describe ; and to instil a sense of creative power. The scheme is carefully graduated." — School Board Chronicle. GEORGE PHILIP & SON, 32, Fleet Street, LONDON, E.G. Liverpool : Philip, Son & Nephew, 45-51, South Gastle Street. 3 SIMPLE AND ATTRACTIVE OCCUPATIONS— Co«^m«^^. 3. Child Life Varied Occupations. By Several Authors. Con- taining carefully graded Exercises in Paper Folding, Weaving in Paper, Straw, and Felt, Clay Modelling, Knotting and Looping, etc. With 248 Illustrations. Fcap. 8vo, cloth, nett, 3s. ALTERNATIVE DRAWING SCHEME. Brushwork. By E. C. Yeats. With an Introduction by T. R. Ablett. A series of 23 Plates of Exercises in Brush Drawing, beautifully printed in colours, with practical directions and instructions for Teachers. Oblong 4to, cloth, nett, 5s. ■ "A series of graduated exercises such as would satisfy the requirements for Standards I. to III. in this subject under the New Drawing Syllabus for Elementary Schools. Teachers who take up this subject in their classes will do well to obtain the book." — School Guardian. NEW CODE, 1896.— Arithmetic for Scheme B and Pupil Teachers. "Arithmetic often becomes a mere abstract or mechanical exercise, and is not made to rest upon simple questions of common life."— Extract from Instructions to Her Majesty's Inspectors. VISUAL ARITHMETIC. The chief feature of the method is its gradual progress, step by step, the successive steps being : — 1. Introduction, or reference to facts already known by the children. 2. Visual Representation. 3. Association (of sign and fact). 4. Recapitulation. 5. Application. 1. Visual Arithmetic for Juniors. Arranged for the use of English Schools by Johanna Wulfson, from the Original Work by Dr. Fr. Ritter von MocNiK. Demy 8vo, boards. Is. THE SPECIAL FEATURES OF THIS BOOK ARE:- 1. It contains only exercises, and no explanations which are of little use to pupils. 2. The method is so gradually and systematically developed that it cannot fail to be understood. 3. It leads to independent work, both at home and at school. 4. The vital connexion of the four simple rules is shown, by which means pupils are enabled to add and subtract correctly and quickly, to learn the tables thoroughly and with ease, and to grasp their application to division. 5. The continuous repetition of exercises in varied form ; for to acquire fluency and correctness it is necessary to reproduce and repeat until the pupils are able to answer without the least hesitation. 6. It contains a great number of exercises in mental arithmetic, to precede those to be written. 2. Hints and Suggestions on the Teaching of Visual Arith- metic. By Johanna Wulfson. Demy 8vo, boards, Is. These "Hints and Directions" are the outcome oj the Authors own long experience as a Teacher. The novelty of the method employed in " Visual Arithmetic FOR Juniors " seemed to necessitate detailed explanations. '"Time spent is not time wasted' in arithmetic, and a glance at this little book, showing how the child is helped from the concrete idea of number to the abstract, proves how fully the author realises a child's dif&culties."— Extract from "Journal of Education." GEORGE PHILIP & SON, 32, Fleet Street, LONDON, E.G. Liverpool: Philip, Son & Nephew, 45-51, South Castle Street. 4 DRAWING IN COLOURED CHALKS. and the Lower Philips' Practical Drawing Sheets for Infants Standards. Set D.— Common Objects in Colours. A Series of 20 Demonstration Sheets. By H. WitcocKS. Printed in Colours. 5s. Philips' Scholars' Aid to Drawing in Coloured Chalks. For use with the above. With suggested Outlines for tracing over, and In- structions for colouring in chalk. 2d. CLASS-WORK AND PROGRESS REGISTERS. 1. Philips' Class-Work Register. Arranged by R. Procter Wright, Head-Master, Board School, Harrow-on-the-Hill. 34 pp. Fcap. folio, stiff cover, Is. 4d. Contents. 1. List of Subjects. 2. Syllabus of Work and Reports. 3. Progress Register for 120 Names. 4- Time Table and Analysis. 5. Promotion List. List of Object Lessons. List of Songs and the Recitation for the Year. Specimens filled in. Outline Scheme of Instruction. Philips' Record Book of Periodical Class Examinations. Con- taining a brief Syllabus of Work, Time Table, Detailed Syllabus, Scheduled Register of Results, Brief Notes of Oral Lessons. 20 pp. Large 4to, stiff cover, Is. 4d. Specimen Pages on application. TIME TABLES, Etc. I. Outline Scheme of Instructions. To be filled in at the beginning of the School Year, and submitted to H.M. Inspector at his visit. Neatly printed on card, size 13^ x 17, eye letted for hanging up, 6d. 2. Philips' Class Time Table for the Standards, in 2 forms. 1. Printed on Stout Cardboard 2. „ Manilla Paper With Analysis 4d. 3d. GEOMETRY FOR THE NEW CODE. Philips' Code Geometry. By Harry C. Wilcocks. I. Practical Geometry. For Standard V 2d. VL VII. ... 2d. ... 3d. The above have been thoroughly revised to meet the requirements of the latest Drawing Syllabus. GEORGE PHILIP & SON, 32, Fleet Street, LONDON, E.C. Liverpool: Philip, Son & Nephew, 45-51, South Castle Street. 5 RECITATIONS AND STORIES. 1. Ne-w Recitations for Infants and Babies. Comprising Lessons on Animate Nature, Natural Phenomena, Colour, the Seasons, etc. Arranged with Suitable Actions. By Annie Pickering. 4to, cloth, 2s. 2. Fables for Little Folk. A Series of Nature Stories Specially . Written for Young Children. Crown 8vo, cloth, Is. 6d. SUITABLE PHYSICAL EXERCISES. All Requirements of the Code fully met by Drill for the Standards, containing a varied Selection of Physical Exercises, adapted for use in Elementary Schools as required by the Code. By A. Alexander, F.R.G.S., Principal of the Southport Physical Training College ; Director of the Liverpool Gymnasium. Containing 2i6 Illustrations, and specially adapted Musical accompaniments. Crown 8vo, cloth, 2s 6d. ATTRACTIVE DRILLS FOR ELEMENTARY SCHOOLS. 1. Scarf Drill for Girls in Standards III. and IV. Nett, Is. 2. Maypole Exercise and Dance for Standards III. and IV. Nett, Is. 3. Military Gun Drill. Specially suitable for Boys. Nett, 6d. 4. Flag Exercise for Boys and G-irls. By Edward Alexander. Nett, Is. 6d. 5. Bandage Drill with Music, for Children from 5 years of age. By Mrs. Frances Stenithal. Nett, Is. In Preparation. Crown ?>vo, limp cloth, Is. 6d. How to Teach Swimming in Class. Together with Directions, Diagrams, etc., for the guidance of those who are teaching themselves. By Rev. C. W. A. Brooke, M.A. Contents. Regulations of the Code. Regulations of the London School Board. Arrangements necessary to he made. Hints for a Teacher. Swimming DriU. Vertical— An Arm and Leg. Swimming DriU. Arms. Legs. With Illustrations Swimming Drill. Horizontal— Arms and Legs. Management in the Bath. Variations— Floating on the Back. Treading Water. Swimming on the Back. The Side Stroke. Appendix— Register, etc GEORGE PHILIP & SON, 32, Fleet Street, LONDON, E.C. Liverpool : Philip, Son & Nephew, 45 - 5i^^- '§QSI tt;jCASTLE Street. 6 jT'^ U^ '^ ^^>K TT-\TT-ITT7IT»OITrr.-rT ^-r- -«. . — , 1 RETURN CIRCULATION DEPARTMENT TO^^- 202 Main Library LOAN PERIOD 1 - HOME USE 2 3 4 5 6 ALL BOOKS MAY BE RECALLED AFTER 7 DAYS Renewols and Recharges may be made 4 doys prior to the due dale. Books may be Renewed by calling 642-3405. DUE AS STAMPED BEL ow JUL 2 6 1989 RECEIVED BIB . uiJ Z 1 1989J aRCUlATIAN D3f*tl UNIVERSITY OF CALIFORNIA, BERKELEY FORM NO. DD6 BERKELEY, CA 94720 (©$ U.C. BERKELEY LIBRARI CQD7D5t,ab3 i - iozifii/ HP siis- 3)96- > \I.Z