Datasets:
5635
H6
UC-NRLF
0C 14 496
IE 027S
A rectangular stamp with a circular design at the top, featuring a shield with a scroll and a figure holding a book. Below the shield, "EX LIBRIS" is written. The border around the stamp has a floral pattern.
UNIVERSITATIS CALIFORNIAE MDCCCCLXVII
EX LIBRIS Simplified Bookkeeping Digitized by the Internet Archive in 2007 with funding from Microsoft Corporation
http://www.archive.org/details/simplifiedbookke00hoffrich Simplified Bookkeeping
BY
G. LAWRENCE HOFFMAN ACCOUNTANT AND HEAD OF COMMERCIAL DEPARTMENT OF McKEESPORT HIGH SCHOOL
Script Work by H. A. Roush
G. LAWRENCE HOFFMAN CO., Publishers HF 5635 .H6
COPYRIGHT, 196. BY G. LAWRENCE HOFFMAN
COPYRIGHT, CANADA, 196. BY G. LAWRENCE HOFFMAN
DO NOT REPRODUCE P R E F A C E
It has been my opportunity as a teacher and accountant for the past ten years, to make a personal study of the bookkeeping situation in general, to observe the defects in preparation shown by the average bookkeeper, to investigate the causes of these defects, and lastly to seek to remedy them. As a rule I have found the student, after pursuing the study of bookkeeping for from five to six months and in hundreds of cases a much longer period, immature in his knowledge, with no definite information on the subject and so crammed with a conglomeration of rules and theories and ambiguous explanations that he is unable to make practical use of them. He is quite unprepared to meet the every day transactions of actual business and must undergo a protracted period of what might well be termed apprenticeship before he actually becomes a competent bookkeeper.
The cause of this condition as evidenced by the statements of commercial teachers and former students and corroborated in my own experience, lies in the bookkeeping texts themselves. The main trouble with these texts lies in the fact that the student is not taught to think for himself. No attempt is made to explain logically the disposition of the various kinds of transactions and the student is expected to master the subject merely by memorizing and imitating the work set forth in the text. It is little wonder, considering how complicated and how filled with superfluous matter these works are, that the average mind is unable to grasp and retain those points which are truly essential.
Disatisfied with existing bookkeeping texts, I wrote Simplified Bookkeeping in order to meet the needs of my classes. Originally, my intention was to write merely for use in my own work but so successful have my methods proved, that I have been induced to put them in book form. The ideas embodied in Simplified Bookkeeping are thus not experimental but the proved results of my experience both as a teacher and an accountant.
SOME OF THE SALIENT FEATURES OF SIMPLIFIED BOOKKEEPING
- One simple rule of not more than fifteen words, which can be learned in ten minutes, decides and disposes of every different kind of transaction. This eliminates weeks and months of useless memorizing and at the same time gives the student something of infinitely greater value; for by means of this rule he is prepared for any kind of transaction which may arise.
- It can be mastered by any person of average intelligence in forty hours, without any assistance and in such a practical manner that the student can actually and intelligently keep books.
- All books including the Journal, Purchase, Sales, Cash, Notes Payable and Notes Receivable books are used from the very beginning. They are scientifically explained, thoroughly illustrated, and their use clearly defined.
- Drafts receive an entirely new and distinct method of treatment which enables the student to master the subject in from one to two hours.
- Notes, like drafts, are specially treated making them easily understood.
- Interest, Discount and Merchandise Discount are defined and treated under new and simple methods.
343629 7. Absolutely every different point is individually illustrated, giving the student the opportunity of visualizing every detail of the work in addition to his knowledge received through the written explanations. Individual illustrations remove every chance of ambiguity and make an easy and handy reference for entries, etc.
Posting for the first time is given an important place. It is thoroughly explained from an entirely new angle and in such a way that posting becomes a matter of absolute accuracy instead of a doubtful procedure.
The trial balance is clearly and progressively treated from its simplest form. A short cut trial balance is introduced which retains all of the information of other trial balances but consumes less time in constructing.
The balance sheet is logically and scientifically developed. Each step is pointed out and carefully expounded.
Every different kind of account is thoroughly explained so that the student is able to decide instantly under what class an account should be placed.
The subject of account closing receives special attention so that there will be no doubt as to how to close accounts having no inventory (both financial and working accounts); how to close accounts having a resource inventory; how to close accounts having a liability inventory; how to close accounts having both resource and liability inventories.
The creating, developing and disposing of the loss and gain account, a subject never thoroughly presented or understood, is scientifically handled.
The several different rulings are illustrated and explanations concerning their use set forth.
The different transactions have been taken from actual business, so that the student is prepared to meet the problems which will confront him in the business world.
The book is so arranged that it makes a handy reference in cases of immediate need.
A complete and accurate set of books may be constructed by taking the transactions from any text or work and applying to them the rule, instructions, etc., set forth in Simplified Bookkeeping.
THE AUTHOR. SIMPLIFIED BOOKKEEPING
- **Bookkeeping:**—The recording of business transactions according to prescribed rules and principles.
- **Business Transaction:**—The exchanging of values between two or more parties.
- **Kinds of Business Transactions:**—(a) Complete—where the values are exchanged by both parties at the same time. (b) Incomplete—where the value is given by one party and its equivalent value not received until some future time.
- **Object:**—To show the cost of purchases, the return from sales, the loss or gain, the resources and liabilities, and the present worth of the business.
- **Kinds:**—(a) Single Entry—the keeping of personal accounts only. (b) Double Entry—the keeping of personal, property, and expense accounts.
- **A Debtor:**—One who has received value, and has made no equivalent return.
- **A Creditor:**—One who has given value, and has received no equivalent return.
- **A Debit:**—The value or debt which is owed by the debtor.
- **A Credit:**—The value or credit which is owed to the creditor.
- **An Account:**—The grouping together of all debits and all credits which affect a particular person, firm, corporation or thing, and placing them under their proper title.
- **Kinds of Accounts:**—(a) Personal—one which affects a person, firm or corporation. (b) Property—one which affects that which is purchased to be sold. (c) Expense—one which affects that which is purchased to be used in carrying on the business, and not for the purpose of selling.
Note: The property account will be known as Merchandise. This account may be subdivided.
Example of Subdivided Merchandise Account.—A firm may be dealing in feed and coal. It would be more convenient under such conditions to keep separate merchandise accounts known as Feed account and Coal account. The Merchandise account may be further divided into a Purchase account and into a Sale account. This further division is made for the purpose of showing the True amount of Net Purchases and Net Sales.
Note: The Expense account includes things such as rent, stamps, fuel, light, heat, clerk hire, etc. This account may be subdivided.
Example of Subdivided Expense Account.—It is preferable, where more detailed work is required, to open special accounts with such items as rent, light, fuel, etc. These special accounts will be known as Rent account, Light and Fuel account, etc.
- **RULE FOR DETERMINING WHETHER AN ITEM SHALL BE DEBITED OR CREDITED:**—THE RESULT OF A SERVICE IS DEBITED AND THE SERVICE ITSELF IS CREDITED.
Note: Every transaction consists of a service and a result.
Important: Always apply the rule from the point of view of the Business in which you are engaged or in which you are about to engage.
Important: Before applying the rule for debit and credit, ascertain what the thing which is received and the thing which is given, are, that is, whether they come under the headings of merchandise, expense, cash, or personal accounts, etc. After this has been ascertained, apply the rule calling these things by their proper names.
3 Application of the Rule for Debiting and Crediting
- I begin business by investing the following:---Merchandise, Cash, Horse and Wagon, and Real Estate.
I perform the service for the business in that I bring into it the merchandise, cash, horse and wagon, and real estate; therefore the merchandise, cash, horse and wagon, and real estate are the results to the business. According to the rule, the service is credited. Since the service is credited and since the performance of the service is complete, the result must be credited. Again, according to the rule, the result is debited. Since the result is debited and since merchandise, cash, horse and wagon, and real estate are the results, it must follow that they must be debited. For entries see illustration No. 1.
Illustration No. 1.
| JOURNAL | ||||
| Aug. 12 | Horse & Wagon Investment | 400 | ||
| 3 | Real Estate Investment | 1050 | ||
| Your name | 1050 | |||
| CASH DEBIT SIDE | ||||
| Aug. 12 | Your name Investment | 2000 | ||
Illustration No. 2.
| PURCHASE BOOK | ||||
| Aug. 12 | Your name Investment | 1000 | ||
- I buy merchandise on account from Adam Wise.
Note---On account means that the equivalent value was not given for the merchandise at the time of purchase.
Adam Wise performs the service in that he brings into my business merchandise, therefore merchandise is the result. According to the rule, the service is credited. Since the service is credited and since Adam Wise performed the service, it must follow that Adam Wise must be credited. Again, according to the rule, the result is debited. Since the result is debited, and since merchandise is the result, it must follow that merchandise must be debited. For entry see illustration No. 2.
Illustration No. 2.
| PURCHASE BOOK | ||||
| Aug. 12 | Your name Adam Wise. | Investment | 2000 | |
- I buy merchandise for spot cash.
Note---For Spot Cash means that the money is paid for the merchandise at the time of purchase.
The cash performs the service in that it brings into my business merchandise, therefore merchandise is the result. According to the rule the service is credited. Since the service is credited, and since cash has performed the service, it must follow that cash must be credited. Again, according to the rule, the result is debited. Since the result is
4 debited, and since merchandise is the result, it must follow that merchandise must be de- bited. For entry see illustration No. 3.
Illustration No. 1.
PURCHASE BOOK
| Aug. 2 | Samuel Minor | For cash | $150 |
Note---A check mark indicates that the item opposite it is not posted to the ledger.
| CASH | CREDIT SIDE | ||
| Aug. 2 | Samuel Minor | For cash | $150 |
Note---it should be remembered that wherever a check mark appears the item opposite it is never posted to the ledger. The total of all debits or credits always receives its debit or credit in the posting of the total of the book in which it appears. This is true except in the case of the cash book when the cash bal- ance will show the debit or credit.
- I buy merchandise for a note. Note---For a Note means that at the time the merchandise is purchased a note is given. Definition of Note---An unconditional written promise made by one party to another to pay him or to his order or bearer a certain sum of money at a definite time.
For form of note see illustration No. 4.
Illustration No. 4.
A handwritten note dated September 2, 19... Your Name.
Notes are divided into two general classes—Notes Payable and Notes Receivable. A Note Payable---A note becomes a Note Payable to the party issuing it or to the party who has to pay it. A Note Receivable---A note becomes a Note Receivable to the party who receives it or to the party who collects the money on it and does not eventually have to pay the note. In the case I buy merchandise for a note, the note becomes a Note Payable to me, as I have issued it and will have to pay it.
In this case the Note Payable performs the service in that it brings merchandise into my business and thereby produces the result. According to the rule the service is cred- ited. Since the service is credited and since the Note Payable performed the service it must follow that Note Payable must be credited. Again, according to the rule, the result is debi- ted. Since the result is debited and since merchandise is the result, it must follow that merchandise must be debited. For entry see illustration No. 3.
5 Illustration No. 5.
PURCHASE BOOK
Aug. 3 Edward Jackson June 15, 10 210.25
Note - His account is kept with Edw. Jackson. The check mark in the folio columns of the Purchase Book and Notes Payable Book indicate that Jackson's account is not to be posted. The Note Payable will receive its charge against the Merchandise Account, and the Merchandise Account will receive its debit in the sum total of the Merchandiser of the Purchase Book posted to the debit side of the Merchandise account in the ledger.
NOTES
| NO. | WHEN | DRAWER (Draft) | IN WHOSE FAVOR | DRAWEE (Draft) | FOR WHAT | WHERE PAYABLE |
|---|---|---|---|---|---|---|
| 1 | Aug. 3 | |||||
| Payable to: | ||||||
| Eam Jackson Your Name June 15, 10 210.25 | ||||||
PAYABLE
- I sell merchandise on account to B. C. Wells. Merchandise performs the service in that it brings into my business the account of B. C. Wells, therefore B. C. Wells' account is the result. According to the rule the service is credited, and since merchandise must be credited according to the rule, the result is debited. Since the result is debited, and since B. C. Wells' account is the result, it must follow that B. C. Wells' account must be debited. For entry see illustration No. 6.
Illustration No. 6.
SALES BOOK
| DATE | WHEN DUE | F. | AMOUNT | DISPOSITION |
|---|---|---|---|---|
| YEAR MONTH DAY TIME | YEAR (Jan.) Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. | |||
| 19- Aug. 3 210.25 | ||||
| L.P. | Aug 4 S G C Wellello Walnuths Lk. | York La. | Fernson sack. | @284 | 21 | 2810 | 2810 |
|---|---|---|---|---|---|---|---|
| 754 C Ritter | @25p @15p 3 bunches Bananas | 510 | 2810 | ||||
| 1 day m Eggz. | |||||||
| 3 bunches Bananas | @15p | 510 | 2810 | 2810 | |||
- I sell merchandise for spot Cash. Merchandise performs the service in that it brings into my business cash, therefore cash is the result. According to the rule the service is credited. Since the service is credited, and since merchandise has performed the service it must follow that merchandise must be credited. Again, according to the rule, the result is debited. Since the result is debited, 6
and since cash is the result, it must follow that cash must be debited. For entry see illustration No. 7.
Illustration No. 7.
SALES BOOK
| Aug. 4 | 10 | J.B. Harris City | |||||
| Terms: spot cash | |||||||
| 10 pairs ofiapaduas @ 63¢ | 9.45 | ||||||
| 1 box Oranges @ 52¢ | 3.12 | ||||||
| 12 Grapes Limonita @ 12¢ | 1.44 | 14.01 |
CASH DEBIT SIDE
| Cash | Debit Side | Cash Debit Side | 14.01 | Cash Debit Side | 14.01 | Cash Debit Side | 14.01 | Cash Debit Side | 14.01 | Cash Debit Side | 14.01 | Cash Debit Side | 14.01 | Cash Debit Side | 14.01 | Cash Debit Side | 14.01 | Cash Debit Side | 14.01 | Cash Debit Side | 14.01 | Cash Debit Side | 14.01 | Cash Debit Side | 14.01 | Cash Debit Side | 14.01 | Cash Debit Side | 14.01 | Cash Debit Side | 14.01 | Cash Debit Side | 14.01 | Cash Debit Side | 14.01 | Cash Debit Side | 14.01 | Cash Debit Side | 14.01Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Debit Side | Cash Deit
RECEIVABLE
Cash performs the service in that it liquidates or closes Adam Wise's account, therefore the closing of Adam Wise's account is the result. According to the rule the service is credited, since the service is credited, and since cash has performed the service, it must follow that cash must be credited. Again, according to the rule, the result is debited. Since the result is debited, and since the liquidation of closing of Adam Wise's account is the result, it must follow that Adam Wise's account must be debited. For entry see illustration No. 9. Illustration No. 9. CASH CREDIT SIDE Gang S. Seda 1978-12-13 2610
Note—When a note is paid, it is returned to the payer cancelled or receipted. Note—if I am paying this note it must be a Note Payable to me. Cash performs the service in that it brings into my business my cancelled or receipted note or Note Payable, therefore Note Payable is the result. According to the rule the service is credited, since the service is credited, and since cash has performed the service, it must follow that cash must be credited. Again, according to the rule, the result is debited. Since the result is debited, and since the Note Payable is the result, it must follow that Note Payable must be debited. For entry see illustration No. 10. Illustration No. 10. CASH CREDIT SIDE Cash 2 Note Payable Favor Edna Jackson 21025
B. C. Wells performs the service in that he brings into my business cash, which liquidates or closes his account on my books, therefore cash is the result. According to the rule, the service is credited. Since the service is credited, and since B. C. Wells has performed the service, it must follow that B. C. Wells must be credited. Again, according to the rule, the result is debited. Since the result is debited, and since cash is the result, it must follow that cash must be debited. For entry see illustration No. 11. Illustration No. 11. CASH DEBIT SIDE Gang S B.C.Wells Favor Edna Jackson 21025 8 23. I collect the money for the note which I received sometime ago for merchandise. (See paragraph 19 for original transaction.) Note—When a note is paid, the party receiving the money cancels or receipts the note and returns it to me. Note—If I am collecting the money on this note it must be a Note Receivable to me. The Note Receivable performs the service in that it brings cash into my business, therefore cash is the result. According to the rule, the service is credited. Since the service is credit- ed, and since the Note Receivable has performed the service, it must follow that Note Receivable must be credited. Again, according to the rule, the result is debited. Since the result is debited, and since cash is the result, it must follow that cash must be debited. For entry see illustration No. 12. Illustration No. 12.
Definition for Merchandise Discount—A certain percentage on each dollar or fraction thereof allowed to the purchaser for paying his bills within a certain time. Of course this discount is allowed by the seller. IMPORTANT: The presumption is that the purchaser pays to the seller the full amount of the bill on which he is to be allowed a merchandise discount and that the seller then re-turns to the purchaser the amount of the merchandise discount. This makes two transactions or two debits and two credits. First transaction: I pay my bill, due James Hecker, for merchandise which I purchased from him sometime ago. Cash performs the service in that it liquidates or closes James Hecker's account on my books, therefore James Hecker's account is the result. According to the rule, the service is credited. Since the service is credited, and since cash has performed the service, it must follow that Cash must be credited. Again, according to the rule, the result is debited. Since the result is debited, and since cash is the result, Cash must be debited. For entry see illustration No. 13. Illustration No. 13.
Second transaction: For paying the bill at this time James Hecker allows me a dis-count. Remember the presumption is that the full amount of the bill is paid by the purchaser after which the seller returns to him the amount of the Merchandise Discount. Merchandise Discount performs the service in that it brings into my business cash, (had it not been for Merchandise Discount I would not have received this cash) therefore cash is the result of this service. Since Merchandise Discount has performed this service, it must follow that Merchandise Discount must be credited. Again, according to the rule, the result is debited. Since the re-sult is debited, and since cash is the result, it must follow that cash must be debited. For entry see illustration No. 14. 9 Illustration No. 14.
Illustration No. 15.
Second transaction. I allow John Watson a discount. Note.—If I allow John Watson a discount, then cash goes out of my business and it re- sults in discharging my obligation known as Merchandise Discount. Cash performs the service in that it discharges my obligation known as Merchandise Dis- count, therefore Merchandise Discount is the result. (Had it not been for Merchandise Dis- count I would not have had to pay our cash.) According to the rule the service is credited. Since the service is credited, and since cash has performed the service it must follow that cash must be credited. Since the result is credited, and since Merchandise Discount is the result, it must be debited, and since Merchandise Discount is the result, it must follow that Merchandise Dis- count must be debited. For entry see illustration No. 16. Illustration No. 16.
ed. Since the result is debited, and since Note Payable is the result, it must follow that Note Payable must be debited. For entry see illustration No. 17. Illustration No. 17.
Second transaction. I receive the amount of the discount in cash. Discount performs the service in that it brings into my business cash. (Had it not been for Discount we would not have received this cash), therefore Cash is the result. Ac- cording to the rule, the service is credited, and since Discount has performed the service, it must follow that Discount must be credited. Again, according to the rule, the result is debited. Since the result is debited, and since cash is the result, it must follow that cash must be debited. For entry see illustration No. 18. Illustration No. 18.
Definition of Discount from the RECEIVER'S or HOLDER'S view point.--A sum of money allowed by the receiver or holder of a negotiable instrument (note, draft, etc.) for the privilege of collecting it before it is due. Important. The presumption is that the receiver or holder collects the full amount of the instrument after which he returns the amount of the discount. Remember that the instrument is received or cancelled by the receiver or holder at the time of collection, and returned to the payer. First transaction. I collect money on a note. Note Payable performs the service in that it brings into my business cash, therefore cash is the result. According to the rule, the service is credited. Since the service is cred- ited, and since Note Receivable has performed the service, it must follow that Note Re- ceivable must be credited. Again, according to the rule, the result is debited. Since the re- sult is debited, and since cash is the result, it must follow that cash must be debited. For entry see illustration No. 19. Illustration No. 19.
Second transaction. I pay the amount of the discount in cash. Note.--If I pay the amount of the discount, then cash goes out of my business and it results in discharging my obligation known as Discount. Cash performs the service in that it discharges my obligation known as Discount, therefore Discount is the result. According to the rule, the service is credited. Since the service is credited, and since cash has performed the service, it must follow that cash must be credited. Again, according to the rule, the result is debited. Since the result is 11 debited and since Discount is the result, it must follow that Discount must be debited. For entry see Illustration No. 20. Illustration No. 20.
Illustration No. 21.
First transaction. I pay my note. (For a similar transaction, see paragraph 26, First transaction.) Second transaction. I pay the interest due on my note. Definition of Interest from the BORROWER'S or PAYER'S view point—A certain sum which must be paid by one who has borrowed money for the use of the amount borrowed. Note.—The borrower is also the payer. Important. Interest is an obligation which can be liquidated by payment only. In this case, cash performs the service in that it liquidates or clears the obligation known as Interest, and since cash has performed the service according to the rule, the service is credited. Since the service is credited, and since cash has performed the service, it must follow that cash must be credited. Again, according to the rule, the result is debited. Since the result is debited, and since Interest is the result, it must follow that Interest must be debited. Third transaction. I receive the amount of the discount in cash. (For a similar transaction, see paragraph 26, Second transaction.) For the three entries in this case see illustration No. 22. Illustration No. 22.
12 CASH DEBIT SIDE
Illustration No. 23.
CASH CREDIT SIDE
Illustration No. 24.
13 31. I pay cash for one month's rent of store room. Rent is an expense. (See paragraph 11 (C).) (See Note under paragraph 11.) Cash performs the service in that it brings into our business the use of a store room which is known as rent, and which, in turn, is known as expense, therefore Expense is the result. According to the rule, the service is credited. Since the service is credited, and since cash has performed the service, it must follow that cash must be credited. Again, according to the rule, the result is debited. Since the result is debited, and since Expense is the result, it must follow that Expense must be debited. For entry see illustration No. 25. Illustration No. 25.
Note:—A separate account may be kept for rent. In this event, instead of calling the use of the store room expense, call it Rent. In applying the rule, the thing that will be debited, in this case, will be Rent instead of Expense. (See "Example of Subdivided Expense Account," paragraph 11.) DRAFTS
Note:—The first party is known as the Drawer, the second party, Drawee, and the third party, Payee. Kinds of Drafts:—Sight and Time. Sight Draft:—A draft payable on demand. For form see illustration No. 26. Illustration No. 26. DRAFT AT SIGHT
Baltimore, MD., Signature $19 At sight Pay to the Order of Raymond Morris One hundred twenty-seven and 7/10 Dollars Value received and charge the same to account of To William Gibbs Signature Signature 14 Time Draft—A draft payable so many days "after date" or "after sight." For forms see illustrations No. 27 a b c. Illustration No. 17a. DRAFT AFTER DATE
Illustration No. 17b. DRAFT AFTER SIGHT
Note—"After sight" means after the date of acceptance. Acceptance—The word "Accepted," together with the date of acceptance and the name of the Drawee, written across the face of the draft. Important—As soon as the acceptance is written across the face of the draft, it (the draft) becomes a written promise to pay. The party who has made the promise and who must pay the instrument is the acceptor or Drawee. A written promise to pay a certain sum of money, is known as a note. (See definition for a note, paragraph 16). Therefore, to the Drawee, the accepted draft becomes a Note Payable, while to the Payee, who receives the accepted draft it becomes a Note Receivable. 15 Illustration No. 37a. DRAFT AFTER DATE SHOWING ACCEPTANCE
BE SURE to look up illustrations Nos. 26 and 27. You will find additional valuable information. Important. The Drawer is owed by the Drawee and the Drawee owes the Payee. I draw a time draft on Sam'l Marks in favor of Wm. Mason. Sam'l Marks accepts the draft. Note.—In this case, Marks owes the Drawer and the Drawer owes Mason. Marks performs the service in that he liquidates my indebtedness with Wm. Mason (on my books, Mason is credited, Marks' acceptance of the draft offsets my credit). Therefore, the result is that official credit has been given to Wm. Mason's account is the result. According to the rule the service is credited. Since the service is credited and since Marks has performed the service, it must follow that Marks must be credited. Again, according to the rule, the result is debited. Since the result is debited and since the liquidation of Mason's account is the result, it must follow that Mason's account must be debited. For entry see illustration No. 28. Illustration No. 28. JOURNAL
16 is debited. Since the result is debited, and since the liquidation of Wright's account is the result, it must follow that H. B. Wright's account must be debited. For entry see illustration No. 29. Illustration No. 29. NOTES
PAYABLE
Note: This accepted draft becomes a note. I receive it, hence it is a Note Receivable to me. Wm. Oliver performs the service in that he brings into my business a Note Receivable, therefore Note Receivable is the result. Remember that while John Perry really gives me the note he does not owe me anything. Perry gives me the note at the request of Wm. Oliver, who owes me money. According to the rule, the service is credited. Since the service is credited and since Wm. Oliver has performed the service, it must follow that Wm. Oliver must be credited. Again, according to the rule the result is debited. Since the result is debited, and since Note Receivable is the result, it must follow that Note Receivable must be debited. For entry see illustration No. 30. Illustration No. 30. NOTES
RECEIVABLE :17:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: 35. I draw a time draft on Jacob Klein in favor of Myself. Klein accepts the draft. Note:- In this case, the accepted draft or note comes to me as I am both Drawer and Payee. The instrument is always given to the Payee. Jacob Klein performs the service in that he brings into my business a Note Receivable, therefore Note Receivable is the result.For application of the rule, see paragraph 34. For entry see illustration No. 31. NOTES Illustration No. 31.
RECEIVABLE
For application of the rule, see paragraph 32. For entry see illustration No. 32. Illustration No. 32. JOURNAL
18 ing to the rule, the result is debited. Since the result is debited, and since the liquidation or closing of Howard Ort's account is the result, it must follow that Howard Ort's account must be debited. For entry see illustration No. 33. Illustration No. 33.
Remember that the sight draft is the same as a check. Edward Park performs the service in that he brings into my business cash, which liquidates or closes my account with my books, therefore cash is the result. Remember that I had no business relations with Morris Town and that, while Morris Town has actually given to me the money, he has done it only as a favor to Edward Park and for the purpose of liquidating or closing Park's account on my books. The Reason why Town did this favor for Park was because Town owed Park money. According to the rule the service is credited. Since the service is credited and since Edward Park has performed the service, it must follow that Edward Park must be credited. Again, according to the rule, the result is debited. Since the result is debited, and since cash is the result, it must follow that cash must be debited. For entry see illustration No. 34. Illustration No. 34.
E. R. Burr performs the service in that he brings into my business cash, therefore cash is the result. According to the rule, the service is credited. Since the service is credited, and since E. R. Burr has performed the service, it must follow that E. R. Burr must be credited. Again, according to the rule the result is debited. Since the result is debited, and since cash is the result, it must follow that cash must be debited. For entry see illustration No. 35. Illustration No. 35.
19 Payment and Collection of Time Drafts Maturity means that the time given in which to fulfill a promise, has expired, and that the promise, represented in the instrument (Note or Accepted Draft), must now be fulfilled.
20 Merchandise performs the service in that it liquidates or closes my former indebtedness to Adam Wise, therefore the liquidation or closing of Adam Wise's account is the result. According to the rule the service is credited. Since the service is credited and since merchandise has performed the service, it must follow that merchandise must be credited. Again, according to the rule the result is debited. Since the result is debited and since the liquidation or closing of Adam Wise's account is the result, it must follow that Adam Wise's account must be debited. For entry see illustration No. 36. Illustration No. 36. JOURNAL
Note.—When merchandise is returned to you, consider it the same as if it were purchased. B. C. Wells performs the service in that he brings into my business merchandise, therefore merchandise is the result. For application of the rule see paragraph 14. For entry see illustration No. 37. Illustration No. 37. JOURNAL
Note.—It is deemed more advisable, in the last two cases cited (45-46), not to place the merchandise returned under the merchandise account, as it may be that account appears as though it had been charged with $40 instead of $50 (46) or sold more goods, in the other case (45), than you really did. It would be better to place merchandise returned, therefore to an account known as Merchandise Returned and carry the balance, shown by this account, to the regular merchandise account, when the ledger is closed. This will have no effect on the application of the rule. For entry showing cases 45-46 placed to Merchandise Returned account see illustration No. 38 a and b. Illustration No. 38a. JOURNAL
Illustration No. 38b. JOURNAL
21 Important. Shortages, damages, overcharges, etc., may be kept under the same head- ing, that is, Merchandise Returned account. It will be helpful to remember that in the case of merchandise returned, refunds or rebates if a special account is made an entry exactly opposite to the original entry is always made. For example see illustration No. 39 a b c d. Illustration No. 39a. PURCHASE BOOK
Illustration No. 39b. JOURNAL
Illustration No. 39c. SALES BOOK
Illustration No. 39d. JOURNAL
22 (b) Note:—A transaction is disposed of in this manner for the purpose of ascertain- ing at any time the entire amount of business done with a person, firm or corporation. It will be noticed that while two transactions are made out of this case, as shown in this rule, only one transaction is recorded in the personal account. The ultimate result will be the same. The personal account will have the same amount on each side thus liquidating or closing it. This leaves a debit in the merchandise account and a credit in the cash account. The method of handling this case, as shown in paragraph 15, only pro- duces a debit in the merchandise account that is created in the cash account. For compara- tive illustrations of these methods and for the purpose of showing the similar ultimate re- sults, see illustration No. 40. Also illustration No. 3. Important. In buying merchandise for a note from a person, firm or corporation, pro- ceed in the same way as shown in paragraph 47, providing you wish to keep a record of the transaction in the personal account. If the record in the personal account is not de- sired, proceed as in paragraph 16. Illustration No. 40. PURCHASE BOOK
For application of the rule see paragraph 18. For entry see illustration No. 7. See Note (a) paragraph 47. Be sure to read this note. First transaction. I sell merchandise to Arthur Owens. Note.—The presumption is that you sell it on account. For application of the rule see paragraph 17. For a similar entry see illustration No. 6. Second transaction. I receive cash from Arthur Owens. (For the merchandise sold to him in the first transaction). For application of the rule see paragraph 22. For a similar entry see illustration No. 11. See note (b) paragraph 47. Be sure to read this note. It will be noticed that while two transactions are made out of this case, as shown in this paragraph, and only one transaction as shown in paragraph 18, the ultimate result will be the same. The personal account will have the same amount on each side thus liquidating or closing it. This leaves a debit in the merchandise account and a credit in the cash account. The method of handling this case, as shown in paragraph 18, only pro- duces a debit in the cash account and a credit in the merchandise account. For compara- tive illustrations of these methods and for the purpose of showing the similar ultimate re- sults, see illustrations Nos. 41 and 7. Illustration No. 41. SALES BOOK CASH CREDIT SIDEAug 24 L.F.
23 CASH DEBIT SIDE
Important. In selling merchandise to a person, firm or corporation for a note, proceed in the same way as shown in paragraph 48, providing you wish to keep a record of the transaction in the personal account. If the record in the personal account is not desired, proceed as in paragraph 18.
Commercial paper (notes, drafts, checks, etc.) which do not contain the words "or order" or "or bearer" are said to be non-negotiable. Note—In most states non-negotiable paper may, by statute, be transferred by assignment. Illustration No. 43. CHECK No. 1 THE UNION NATIONAL BANK YORK, PA. April 4, 19 PAY TO THE ORDER OF George B. Williams $105.00 One hundred five and ____________ Dollars Charles W. Waters
Kinds of Endorsements and their definitions. (a) Blank—Where the holder transfers the paper by writing his name across the back. See illustration No. 43. (b) Full—Where the holder writes his name across the back of the paper together with the directions to pay a certain party. See illustration No. 44. 24 (c) Restrictive:--Where the holder writes his name across the back of the paper together with the directions to pay a certain party and indicating for what purpose it shall be paid. See illustration No. 45. Note: The restrictive endorsement does not transfer the paper to the endorsee, but indicates that the endorser is acting in the capacity of agent for the endorser. (d) Without Recourse:--Where the holder writes his name across the back of the paper together with the directions to pay a certain party and the words "without recourse". See illustration No. 46. ENDORSEMENTS Illustration No. 43. Illustration No. 44. Illustration No. 45. BLANK FULL RESTRICTIVE John Wiseman Pay to the order of E. P. Rice John Wiseman Pay to E. P. Rice John WisemanNote: The words "without recourse" are said to relieve the endorser from all liability in case the maker does not pay. (e) Conditional:--Where the holder writes his name across the back of the paper together with the directions to pay a certain party, and stipulating a certain condition to be fulfilled before the endorsement shall be effective. See illustration No. 47. Illustration No. 46. Illustration No. 47. WITHOUT RECIOURSE Pay to the order of E. P. Rice without recourse John Wiseman Pay to E. P. Rice April 2, 19-xxx. which he becomes my factor-in-the manufacture of new products hereunder. John WisemanCONDITIONAL
Information:--This note was received sometime ago by me for selling merchandise. Remember when this note came in, it was a note receivable (to me). It will have to remain a note receivable even though you give it to another party in payment of your business, therefore merchandise is the result of this transaction, since merchandise must receive the service it is credited and since Note Receivable performed the service, it must follow that Note Receivable must be credited. Again, according to the rule, the result is debited. Since the result is debited and since merchandise is the result, it must follow that merchandise must be debited. For entry see illustration No. 48. 25 Illustration No. 48. PURCHASE BOOK
Note—in this case no account is kept with L. C. White. By posting directly from this book to the credit side of Notes Receivable account in the ledger, it will liquidate this particular note's original entry.
Illustration No. 49. SALES BOOK
Note—in this case the personal account is not kept. By posting directly from this book to the debit side of Notes Payable account in the ledger, it will liquidate this particular note's original entry. Explanation of the Different Books to be Kept
26 The difference between the Debit and Credit sides of the Cash Book will show the cash on hand or Cash Balance. This cash balance must always equal the amount of cash in your cash drawer plus the amount of cash left in bank, as shown on stub of your check book. The Cash Balance should be formally recorded at the end of each month and cannot be held over until the end of the month. For illustration of cash book showing entries see illustration No. 50. Illustration No. 50.
27 Note.—Journal and ledger paper is very cheap, but if you do not care to invest in it you may draw a form of the cash book on blank paper using one of the illustrations as a model. May 1, 1915. A. B. Fowler pays you his bill in full to date $468.20. May 2, 1915. C. H. Carroll pays you his bill of April 20, 1915 for $268.75. May 3, 1915. You have in your possession a note for $721.80 which is due today. You collect it immediately. May 5, 1915. A. R. Free pays you his account in full to date $209.70. May 7, 1915. D. B. Hill pays you his bill of May 1, 1915 for $176.00. May 8, 1915. Dean & Co. give you $925.00 in part payment of their account. May 9, 1915. J. Trainer gives you $200.00 in part payment of his account. May 2, 1915. You pay him $100.00. Note.—See paragraph 11 before making this entry. May 2, 1915. You give M. A. Ellis $210.00 in payment of your invoice of May 4, 1915. May 4, 1915. You give to A. M. Dennis $250.00 in part payment of your account. May 6, 1915. You give to L. C. Merritt $644.00 in payment of your account to date. May 7, 1915. You give to W. H. Smith $320.00 in part payment of his account. May 9, 1915. You pay $330 freight on goods which you purchased sometime ago. Note.—Call this account Freight when you make the entry for the $330.00 in the cash book, place the word Freight directly opposite the amount. Find the cash balance and rule the cash book as per illustration No. 50.
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INDEX OF ILLUSTRATIVE TRANSACTIONS
| Page | |
|---|---|
| Merchandise bought on account | 4 |
| Merchandise bought for spot cash | 4 |
| Merchandise bought for a note | 5 |
| Merchandise sold on account | 6 |
| Merchandise sold for spot cash | 6 |
| Merchandise sold for a note | 7 |
| I pay outstanding debt in cash | 8 |
| I pay outstanding debt by note | 8 |
| Outstanding debt paid in cash to me... | 8 |
| I collect money on notes... | 9 |
| I pay outstanding debt in cash, dis- count allowed... | 9 |
| Outstanding debt paid in cash to me... | 10 |
| discount allowed... | 10 |
| discount received by me... | 10 |
| I discount note received by me... | 11 |
| I discount my interest bearing note... | 12 |
| I discount interest bearing note received... | 13 |
| Stamp(s) bought for cash... | 13 |
| Cash paid for rent... | 14 |
Drafts
I draw a time draft on Samuel Marks in favor of Wm. Mason. Samuel Marks accepts the draft... 16 H. B. Wright draws a time draft on Me in favor of John Wood. I ac- cept the draft... 16 Wm. Oliver draws a time draft on John Perry in favor of Me. John Perry accepts the draft... 17 I draw a time draft on Jacob Klein in favor of Myself. Klein accepts the draft... 18 I draw a sight draft on Oliver Myers in favor of Edw. Martin... 18
Howard Ort draws a sight draft on Me in favor of Wm. Wentz. The draft is presented to Me for pay- ment... 18 Edward Park draws a sight draft on Morris Town in favor of Me. The draft is presented by Me for pay- ment... 19 I draw a sight draft on E. R. Barr in favor of Myself. The draft is pre- sented by Me for payment... 19
Payment and Collection of Time Drafts.
I pay a time draft, which was drawn on Me by Wm. Simpson in favor of Samuel Keller... 20 I discount a time draft, which was drawn on Me by John Hoe in fav- or of Wm. Johnson... 20 I collect the money for a time draft, which was drawn by C. H. Short on Clyde Hoke in favor of Me... 20 I discount a time draft, which was drawn by H. B. Scott on E. C. Eckle... 20
Merchandise Returned.
I return merchandise bought on account... 20 Merchandise sold on account returned- ed to me... 21
Personal Account Kept. Merchandise bought for cash... 22 Merchandise sold for cash... 23
Payment by Notes Received from other Parties. Merchandise bought for a note... 25 Merchandise sold for a note... 26 jgl UNIVERSITY OF CALIFORNIA LIBRARY, BERKELEY
THIS BOOK IS DUE ON THE LAST DATE STAMPED BELOW
Books not returned on time are subject to a fine of 50c per volume, or the third day's fine, whichever is greater per volume, per week, each year. Books overdue demand a renewal card if application is made before expiration of loan period.
AUG 31 1921 AUG 22 1930 NOV 10 1942
Image of a library card with handwritten dates.
Page 117
YE 027A9
H F365C PG
UNIVERSITY OF CALIFORNIA LIBRARY
A black and white photograph of a person's face, possibly a man, with a dark background.