diff --git "a/Accounting/20th_century_bookkeeping_and_accounting_1922.md" "b/Accounting/20th_century_bookkeeping_and_accounting_1922.md" new file mode 100644--- /dev/null +++ "b/Accounting/20th_century_bookkeeping_and_accounting_1922.md" @@ -0,0 +1,36178 @@ +A black and white image of a blank page. + +A white background with faint, vertical, black lines running down the center. + +UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA FUND OF CANADA +THE UJA + +. + +# 20th Century Bookkeeping and Accounting + +A TREATISE ON THE PRINCIPLES OF ACCOUNTING AND BOOKKEEPING PRACTICE APPLIED BY MODERN BOOKKEEPERS AND ACCOUNTANTS + +FIFTEENTH EDITION + +FOR USE IN ALL SCHOOLS THAT TEACH BOOKKEEPING AND ACCOUNTING + +BY JAMES W. BAKER +ASSISTED BY COMMERCIAL TEACHERS AND PRACTICING ACCOUNTANTS + +THE DISCUSSION IN THIS TEXT AND THE TRANSACTIONS IN THE PRACTICE SETS WHICH ACCOMPANY IT ARE THE RESULT OF SUGGESTIONS RECEIVED THROUGH PERSONAL INTERVIEWS AND CORRESPONDENCE WITH THOUSANDS OF TEACHERS, PRACTICING ACCOUNTANTS, AND BOOKKEEPERS, DURING TWENTY YEARS' ASSOCIATION WITH THOSE ENGAGED IN COMMERCIAL WORK. + +PUBLISHED BY SOUTH-WESTERN PUBLISHING CO. +CINCINNATI, O. +1922 + +COPYRIGHT, 1912 +COPYRIGHT, 1922 +SOUTH-WESTERN PUBLISHING COMPANY +CINCINNATI, OHIO + +P R E F A C E + +The successful business man should know that a profit will result from the transactions in connection with his business before they are completed. To determine this he should have such information as will show the detailed operating cost, the profit from trading or other operations, the net profit for each fiscal period, its source, and the probable future results. + +A report concerning the failure or suspension of a business, accompanied by the statement that the creditors will not know what percentage of their claim may be collected, is often published in the newspapers. This statement shows that the management did not have all the facts available in connection with the business. Such a statement is so common in the newspaper announcement of failures that it suggests a connection between accounting and success. + +If these limitations are to be overcome, it is necessary to teach the correct principles of accounting and the best practice in applying them. The bookkeeping student of today is the bookkeeper or business man of tomorrow. If he has a knowledge of the subject and can apply it correctly, he will apply them, or, as manager, he will see that they are applied by the bookkeepers. + +The purpose of this text is to present the correct principles of bookkeeping and accounting as taught by modern educators and exemplified by modern textbooks and accountants. The information upon which it is based was obtained from standard authorities on accounting and from consultations with practicing bookkeepers and accountants. + +The text is prepared primarily for the student and not for the practicing bookkeeper or accountant. The presentation permits the beginner to master first the simple principles of accounting as applied in a small business. When he understands these, he can appreciate more the complicated principles of accounting necessary for auditing large corporations and governmental agencies. + +A study of the text would result in only a theoretical knowledge of the subject. Practice is necessary in applying the principles. A correct knowledge of the principles is essential to good judgment in applying them. It is also necessary for proficiency. The student who has mastered the principles of bookkeeping and accounting should have also acquired accuracy, neatness and speed. For this reason the practical work requires that he make a complete transaction with sufficient number to impress upon his mind thoroughly importance of a correct record and to give him confidence and skill in applying his knowledge of the subject. + +That the student may learn to recognize a transaction from the paper that represents it, he should be furnished with sets of reproduced business papers sets from reproduced business papers. The transactions moreover, are practical, and identical with those that occur in business. Applying the correct principles and recording practical transactions in books in accordance with them are in themselves valuable to the student a knowledge of the subject which will make his services desirable to the business man, and valuable to himself. + +Not only should the student who has completed a course in bookkeeping and accounting understand the principles of the subject and the best practice in ap- + +PREFACE + +plying these principles, but he should also have some knowledge of the efficient methods employed in modern business. This knowledge, given in connection with the sets, includes special ruling in all books of original entry, carbon copy and loose leaf records, controlling accounts, and many other time-saving methods made popular by the bookkeepers. + +Efficiency in office routine means the greatest amount of work with the best results at the least cost. As applied to the work of the bookkeeper, this is the philosophy which has been followed in the preparation of this text. The bookkeeper who can make his transactions with perfect results in the least possible time. Throughout the text and sets, special attention is given to modern methods in recording transactions. + +The student who studies these principles in this text and completed the sets that accompany it, need not hesitate to accept a position as bookkeeper in any office. He can rest assured that the training received will have prepared him to make a good record in an efficient office. If the work of his predecessor has not been correctly done, he is prepared to improve the method. He can act with the assurance that the work he does will be approved by the accountant who audits his books. + +The student who practices bookkeeping will soon be receiving an income, hence should know the connection between the knowledge gained through the bookkeeping course and the income tax statement required by the Government. To provide this information, a form is included in each set of practice problems. Information regarding to the forms is given in an appendix because these forms will be changed from time to time by legislation. The student who understands the principles of accounting as explained in this text, and the bookkeeping practice illustrated in these practice sets, will find the preparation of an income tax statement a very simple problem. + +THE PUBLISHERS + +Part One + +Chapter I + +BUSINESS AND BOOKKEEPING + +The Purpose of this Chapter is to introduce the student to the subject of bookkeeping by showing him its purpose through an explanation of business. +There are many reasons why the student should understand bookkeeping. The business man will pay well for information which he needs; hence the one who can provide this information through knowledge of bookkeeping will command a good salary for himself. The student who is ambitious to become a business man should know bookkeeping because this knowledge will enable him to interpret the information obtained from his bookkeeping records and to use it as a basis for future operations of the business. + +§ 1. Each Individual requires food, clothing, education, amusement, and many other things necessary for his comfort and enjoyment. These necessities and luxuries can be obtained with money, which is a medium of exchange and the standard of value. An individual secures money (a) through income received as wages, salaries, interest, dividends, etc., (b) through the use by others of property which belongs to him, or (c) through the profit resulting from the operations of a business owned by him either in part or as a whole. + +James Brown is employed as salesman for the Citizens Motor Car Co.; his income is salary received from the sale of merchandise. William Winkler owns the Citizens Motor Car Co.; is operated; his income is the rent received for the use of the building. W. O. Winkler owns the Citizens Motor Car Co.; his income is the profit made by selling automobiles at a price greater than the cost. + +§ 2. A Business. The one who sells to the individual the food, clothing, education, amusement, or other things which the individual needs for his comfort and enjoyment may be engaged in buying and in the operations of production thereof are referred to as a business transaction. The operations which include the buying and selling of the commodities in which the business deals, at a place of business and under a name selected by the owner. There are many kinds of busi- +nesses. For example, there are many businesses of the same kind which undertake to supply the same demand. + +Robert Brown owns and operates a drug store at 405 Main St., known and advertised to the public as "Brown's Drug Store." His operations include buying and selling drugs and medicines. The operations of his business include the buying and selling of medicine and drugs, as well as other articles a drug store usually handles, and his business is referred to as a drug business. + +§ 3. Assets, Liabilities and Proprietorship. If the owner of a business is to have sufficient funds to purchase merchandise when he expects such will be must have cash with which to purchase this merchandise or service. The cash, merchandise, and other property needed to carry on the operations of a business are known as assets. When the owner of a business purchases merchandise, either orally or in writing at a later date, this merchandise or service purchased has incurred an obligation or debt; obligation is known as a liability, and all the obligations of the business are known as its liabilities. The liabilities are to be paid out of the assets of the business; hence the owner's interest in the busi- + +5 + +6 +BUSINESS AND BOOKKEEPING. + +ness is the excess of total assets over total liabilities; this interest is known as his proprietorship. Stated in equation form, assets = liabilities = proprietorship. + +John Jones, who has $3,000.00 in cash, wishes to purchase a drug store; Robert Brown, who owns and operates a drug store, offers him $2,500.00 for his stock. In exchange for this money, Mr. Jones pays Mr. Brown $2,000.00 for which he secures all the assets of the store; these include drugs, medicine, and other merchandise usually offered for sale by a drug store, and a soda fountain with its equipment and supplies. The balance of $500.00 is paid to Mr. Brown in cash. If this $500.00 is not sufficient to pay for the drugs purchased and these drugs are sold to him upon his promise to pay at a future date, then the value of the business is less than his interest in the business is the value of all the assets belonging to the business less the liabilities of the business. + +§ 4. The Name of an Asset or a Liability depends on its nature. Custom has fixed the names of the assets which usually belong to a business and the liabilities which are usually incurred. Money is referred to as "cash"; written promises (in negotiable form) of those who agree to pay money to the business, as "notes receivable," and promises of those who agree to pay goods or services to the business, as "notes payable." Goods are called "merchandise" or "stock," fixtures used in the business, such as "furniture and fixtures," written promises (in negotiable form) of the business to pay money at a future date, as "notes payable," and verbal promises, no accounts payable. + +§ 5. Cost and Income. When a business is organized, the owner expects to purchase the merchandise or other property which he sells, also to pay rent, salaries, advertising expenses, etc., and also expects to sell the merchandise or service which he offers for sale; the returns from sales are known as income. If the income be greater than the cost, the business has made a profit at a profit; if the income be less than the cost, it has been operated at a loss. + +When Mr. Jones bought the drug business, he knew there would be certain costs in connection with operating it; these costs included rent for building and equipment, supplies for the soda fountain, etc. However, he was willing to assume these costs because he expected an income from the sale of merchandise which he purchased and from the products of his soda fountain. At first he had difficulty in selling his goods; however, after he had invested $1,000.00, he would have made a profit of $1,000.00 through owning and operating the drug business. + +§ 6. The Name of Each Cost and Income depends on its nature. It is quite evident that cost for rent and cost for merchandise purchased are of an entirely different nature; also that the income from the sale of merchandise and the income from renting land are of an entirely different nature. This explains why we named the names of the costs and income which occur in the usual operations of the business. Rent and salary costs are known as "expenses;" merchandise purchased for sale, "purchases," income from the sale of merchandise is called "sales," income from rent is called "rent," income from service rendered by one person or firm is called that rendered by telephone and telegraph companies, as "tolls," and income from the sale of service rendered by a street railway company, as "passenger receipts." + +§ 7. A Business Transaction is theoretically an exchange of equivalent values; that is, the business receives an equivalent value for the material or service which it sells to others and gives an equivalent value for the material or service which it purchases. Because of this exchange of values, each transaction will result in a parting with values by the business with a resulting increase of liabilities or income; and a corresponding receipt of value with a resulting increase of assets or cost. + +Mary Davis pays John Jones, the owner of The Central Drug Store, 2/3 for a magazine; this is a transaction performed by John Jones because Mary Davis received 2/3 of what John Jones Doyle pays her; the street-car conductor a fare of 8c; this is a transaction performed by the street-car company because it receives 8c cash for service it has rendered. + +A bar graph showing data about different types of transactions. + +BUSINESS AND BOOKKEEPING. +7 + +§ 8. Bookkeeping is the systematic recording of the transactions of a busi- +ness, or of any changes which may affect the owner's interest in the business. This +record is made (1) by writing the date, explanation, and amount of each transac- +tion; (2) by classifying the items of the record to show values received (assets) +and costs incurred (liabilities); and (3) by summarizing the results of all transac- +tions into a statement showing the net effect on assets and liabilities. + +The term "accounting" in the title of this text is usually used with the same meaning as book- +keeping. However, there is a technical difference which will be explained later. No attempt is +made to explain how accounting began, because it would only result in confusion, and the student can better learn as he advances. + +§ 9. The Purpose of Bookkeeping for a Business is to provide a record +of all transactions performed by the business. The owner of the business needs +this information in order that he may know the value of the assets and liabilities +of the business, and also in order to avoid resulting from its operations. The in- +formation obtained from the operations of a business may be valuable to the owner in connection with the performance of future transactions only when +he has a complete record of the transactions performed. + +§ 10. The Purpose of Bookkeeping for an Individual whose income +results from a salary or an investment is the same as for a business—that is, to assist the individual to better control his income and expenditures. If, at the end of each month, he knows what his total income was during that month and what his expenses for the year, he will be in a far better position to control future expenditures than if he depends on the information obtained from an actual count of the assets +he has remaining at the end of each month. An individual who invests money +in property must record the cost of the property, such as land, buildings, insurance, +reparations, etc., and the income from rent; with this information he can determine +whether his investment is profitable. + +The student should remember that every one can better control his expenditures by making ap- +propriations for those expenditures which he knows will occur, such as rent, food, clothing, amuse- +ments, contributions, etc.; thus he enables him to avoid spending money unnecessarily. All these +items from time to time are called "expenditures," but they are referred to as a "budget system," +and the idea of appropriations is as a "budget." The budget system is not only applicable to the individual but also applies to large organizations such as cities, counties, states, and businesses. +City, county, state, and national governments are rapidly adopting the budget system for the purpose of controlling their expenditures for advertising, +salaries, improvements, etc., through a system of budgetary control. + +§ 11. Summary. The student needs to know bookkeeping because a +knowledge of the subject will increase the value of his services, whether sold to +others or used in connection with his own business. Income can be earned through +a salary received, an investment, or the operations of a business. A business man is one who makes use of his knowledge and skill so that something which he produces is de- +manded. Assets are needed in connection with the operations of a business, and +liabilities may be incurred. The proprietorship of a business is the value of the assets owned by it. In order to make purchases necessary for operating a business, +purchases made necessary in order that the business man may have an income through the +sales of merchandise or services. A business transaction is an exchange of equiva- +lent values; each value involves an asset, a liability, a cost, or an income. These +transactions are recorded in books so that they may be easily found and kept as a record of them. This record is made by writing the date of the transaction, the name +of the asset, liability, cost or income, and the value received and the value parted with. +Every transaction affects an asset or an income and a liability or a cost + +8 BUSINESS AND BOOKKEEPING. + +**QUESTIONS** + +1. What is the purpose of bookkeeping? +2. Is it advisable for a person who receives a salary for his services to keep a record of the transactions which he performs in connection with his affairs? +3. Name some of the transactions which the individual would perform in connection with his affairs. +4. Would you think it advisable for a person who receives a salary to appropriate money for his own living expenses, clothing, charity, and savings? State reasons for answer. +5. Would it be advisable for the owner of an apartment building with six apartments to keep a record of the transactions performed in connection with the operation of the apartment building? +6. Name some of the transactions which the owner of the apartment building would perform. +7. How would he ascertain whether the ownership of the apartments was a profit- or loss-making enterprise? +8. Would you consider a contractor who undertakes to build houses, roads, sidewalks, etc., a business man? Why? +9. Name some of the transactions which he would perform in connection with the operations of a city government. +10. Is the payment of street car fare by the individual who rides on the car a business transaction from the standpoint of the street car company? +11. Name some of the assets which would be needed and some of the liabilities which might be incurred in connection with the operation of a railroad. +12. Name some of the assets and liabilities in connection with the operation of a grocery business. +13. Would you consider it advisable for those in charge of a city government to maintain a record of the transactions completed in connection with its operations? Why? +14. Name some of the transactions which would be recorded in connection with the operations of a city government. +15. Is an automobile truck, owned and used by the grocer for delivering groceries, considered a business transaction? +16. Name some of the operating costs in connection with the operations of a steamer which carries freight and passengers. +17. Name some of the assets which would be needed and the liabilities incurred in connection with the operations of such a steamer. +18. Name some of the operating costs in connection with the publication of a daily newspaper. +19. Name some of the assets and liabilities in connection with the operations of a newspaper. +20. Is the farmer engaged in operating a business? +21. Name some of the transactions which would occur in connection with the operations of a farm. +22. Name some of the assets needed by the farmer and some of the liabilities he might incur in connection with the operations of his farm. +23. Name some of the operating expenses which it would be necessary for the farmer to pay in connection with the operations of his farm. +24. Name some of the transactions which a physician would perform in connection with his practice. +25. Name three businesses of the same kind. Name three businesses of different kinds. + +**Chapter II** + +RECORDING TRANSACTIONS + +The Purpose of this and the three succeeding Chapters is to explain (a) the method of recording transactions in accounts with Cash, Purchases, Sales, Persons, Expense, and the proprietor, (b) the use of the general journal, (c) the use of special journals, and (d) the Trial Balance. Exercises consisting of business transactions will be given throughout the text so that the student may obtain practice in applying the principles discussed in the text. + +§ 12. An Account is a systematic record of all the transactions with any one asset, liability, cost or income collected under a specific title; thus "Cash" is the name of an account which contains all the transactions with cash. The rule of accounting requires that an account should contain two sides (Illustration No. 1), one to show the date of the transaction and the value received, and the other side to show the transaction and its value parted with. When both sides of an account are equal, it is said to be "in balance," when the totals of the two sides are not equal, and "in balance" when the totals are equal. + +Illustrations Nos. 2 and 3 show how to prepare and explain the form of an account. Illustration No. 3 shows that at least two accounts are required to record each transaction. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
YearValues ReceivedYearValues Partial With
Month Day ExplanationPage Dollars CentsMonth Day ExplanationPage Dollars Cents
Illustration No. 1, The Account.
Debit and Credit:
Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.10 + +CASH, PURCHASES AND SALES ACCOUNTS. + +**CASH ACCOUNT** + +§ 15. The Purpose of this Account is to show the amount of cash belong- +ing to the business as a result of the transactions in which cash was received and paid. "Cash" is a term applied to money or any commercial paper which the bank will accept as payment for goods sold or services rendered. All commercial paper which are regarded as cash will be explained and illustrated below. +Debit the Cash Account: Credit the Cash Account: +* 1. For cash received. +* 2. For cash paid. + +§ 16. The Balance of the Cash Account shows the amount of cash which belongs to the business as a result of the transactions completed; it is one of the assets of the business (see § 3). This cash may be kept in the bank for safe- +keeping, or a part in each place. (See Illustration No. 5.) + +There are four important points relating to each account which the student should under- +stand: (a) The date on which the transaction took place, (b) the transactions +to be recorded on the credit side, and (d) the interpretation of its balance—that is, whether it repre- +sents an increase or decrease in cash. The discussion of each account in this text is +arranged so as to emphasize these four points. + +§ 17. The Purpose of this Account is to show the net cost of all the mer- +chandise purchased for sale during a period. It is a general term applied to goods +bought and sold in the trading business, such as groceries, clothing, shoes, hats, +hardware, drugs, musical instruments, jewelry, etc. +Debit the Purchases Account: Credit the Purchases Account: +* 1. For the cost of merchandise purchased by transportation +(freight, express, and post- +age), drayage, and storage +cost of merchandise. +* 2. For the cost price of merchan- +dise returned to the seller, +and allowances granted by him. + +§ 18. The Balance of the Purchases Account shows the net cost of merchandise +purchased during the period for which the record is kept; it is one of the costs of +the business. This balance will not, as a rule, represent the value of the merchandise +owned by the business because some of its purchases for sale and a part +of it has probably been sold. (See Illustration No. 3.) + +§ 19. The Purpose of this Account is to show the net returns from the sales of merchandise. It is a record of the transactions affecting the sales of those +articles purchased for sale, the cost of which is charged to the Purchases account. +Debit the Sales Account: Credit the Sales Account: +* 1. For the selling price of merchan- +dise sold to customer, +and allowances granted to him. +* 2. For the selling price of merchan- +dice sold. + +§ 20. The Balance of the Sales Account shows the net returns from the sales +of merchandise during the period for which the record is kept; it is one of the in- +comes of the business. (See Illustration No. 3.) + +RECORDING TRANSACTIONS IN THE LEDGER. +11 + +RECORDING TRANSACTIONS DIRECT IN THE LEDGER + +§ 19. Transactions are Recorded in the order in which they occur. The record may be made direct in the ledger or in a separate book and transferred to the ledger. Illustration No. 3 shows how this is done. The first page of the ledger is transactional, outlined below and at the top of page 12. The transactions are those relating to the sales and purchases of merchandise for cash performed by the soda fountain department of The Central Drug Company during the week beginning July 2. + +July 2. Cash sales for the day per cash register, $39.40. +Recorded in Illustration No. 3 on the debit side of the Cash account and credit side of +3. Bought syrups and extracts, $5.00; Coca-Cola, $12.75; ice cream, $19.20. +Recorded in Illustration No. 3 on the debit side of the Purchases account and credit +side of the Cash account. +Cash sales for the day per cash register, $30.30. +Recorded in Illustration No. 3 on the debit side of the Cash account and credit side of +the Sales account. +5. Returned one gallon of ice cream purchased on the 3d, and received $2.50, +thereby increasing for the same. +Recorded in Illustration No. 3 on the debit side of the Cash account and credit side +of the Purchases account. +Bought sandwiches, $12.50; flavoring, $16.40; ice cream, $20.00. +Recorded in Illustration No. 3 as explained in § 17, *1* and § 18, *2*. + +(Concluded on page 12) + +
YearMonth Day ExplanationPage Dollars CentsMonth Day ExplanationPage Dollars CentsValue ReceivedValue Parted WithBalance After TransactionBalance Before TransactionTotal Value ReceivedTotal Value Parted WithTotal Balance After TransactionTotal Balance Before TransactionTotal Value Received - Total Value Parted With = Balance After Transaction - Balance Before Transaction = Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.Difference Between Sides of Account.
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Cash
July 3$49July 4$245
5$0.30$170
6$49$159
7$245
Purchases
July 8$49July 9$245
5$0.30$170
Sales
July 15$49July 16$245
5$0.30$170
6$49$159
7$245$170*
+ +Illustration No. 3, A Ledger Containing Three Accounts. +EXPLANATION: The information given in connection with each transaction and the method of recording it is sufficient explanation of this illustration. + +12 +THE TRIAL BALANCE. + +(Continued from page 11.) + +July 6. Cash sales for the day per cash register, $21.50. +Recorded in Illustration No. 3 as explained in § 18, ¶ 2. +7. Gave James Smith $1.50 for one-half gallon of ice cream which he returned because it was received in bad condition. +Recorded in Illustration No. 3 as explained in § 18, ¶ 1 and § 15, ¶ 2. +Cash sales for the day per cash register, $02.50. +Recorded in Illustration No. 3 as explained in § 18, ¶ 1 and § 18, ¶ 2. + +29. A Trial Balance is a list of the accounts in the ledger with the balance or the total of debits and credits entered opposite the name of each account; its purpose is to test the equality of the debits and credits recorded in the ledger. +The Trial Balance is usually prepared on paper with two money columns ruled at the right-hand margin, one for the debit column and the other for the credit column, and the credit totals or credit balances in the other. The test is satisfactory when the total of the debit column on the Trial Balance equals the total of the credit column. Illustration No. 4 shows a Trial Balance of totals, and No. 5 a Trial Balance of balances prepared from the ledger as illustrated in No. 3. + +Illustration No. 4. A Trial Balance of Totals. + +EXPLANATION. This Trial Balance is prepared from the ledger in Illustration No. 3. +The page in the ledger and the name of each account are written at the left, and the total debits and totals of credits are written at the right-hand margin under each account. When this Trial Balance is footed before it is ruled, the totals are entered in small pencil figures in the same manner as the totals in Illustration No. 4, but they are not written down into the ledger until after it has been ruled. It is necessary that it is necessary to add the accounts in the ledger and write the totals in small pencil figures before preparing the Trial Balance. + +Illustration No. 5. A Trial Balance of Balances. + +EXPLANATION. It is customary, when taking a Trial Balance of balances, to write the balance in the explanation column on the larger side of the account in the ledger. These balances are not shown in Illustration No. 3 because they are not necessary in taking a Trial Balance of totals. + +Central Dairy Co. +Trial Balance July 7, 192 + + + + + + + + + + + + + + + + + + + + + + + + + + +
Cash17201735
Purchases858859
Sales15017379
Total Debit Column1735017359
+ +Central Dairy Co. +Trial Balance July 7, 192 + + + + + + + + + + + + + + + + + + + + + + +
Cash8725
Purchases858
Sales17329
Total Credit Column17329
+ +RECORDING TRANSACTIONS IN THE LEDGER. +13 + +Exercise No. 1, Recording Transactions Direct in the Ledger. + +Record on ledger paper* (paper with the same ruling as Illustration No. 2) the following transactions performed during the month of January by J. W. McCormick, a farmer, who has three accounts before recording the transactions; allow twelve lines for Cash, eight lines for Purchases and twelve lines for Sales. The space given for each account indicates the number of lines to be used for that account and one line for the name of the account. If one sheet of ledger paper is used for the three accounts, separate them by double red lines as in Illustration No. 3. + +In practice, transactions are recorded separately from the ledger and transferred to it, but for the purpose of this exercise, all transactions are recorded in the ledger. + +Jan. 1 +Sold for cash one piano, $45.00. +Recorded on the debit side of the Cash account and on the credit side of the Sales account $45.00, as shown in Illustration No. 3. +2. Bought for cash one hundred Victrola records, $100.00. +Recorded on the debit side of the Cash account and on the credit side of the Cash account in Illustration No. 3, as shown in Illustration No. 3. +3. Sold for cash one Victrola, $25.00; records, $40.00. +Record in one amount on the debit side of the Cash account and on the credit side of the Sales account in Illustration No. 3, as shown in Illustration No. 3. +4. Sold for cash one piano, $35.00; records, $60.00. +Recorded on the debit side of the Cash account and on the credit side of the Sales account in Illustration No. 3, as shown in Illustration No. 3. +5. Sold for cash one piano, $35.00; records, $60.00. +Recorded on the debit side of the Cash account and on the credit side of the Sales account in Illustration No. 3, as shown in Illustration No. 3. +6. Bought for cash one piano, $25.00; records, $45.00. +Recorded on the debit side of the Cash account and on the credit side of the Sales account in Illustration No. 3, as shown in Illustration No. 3. +7. Sold for cash one piano, $35.00; records, $60.00. +Recorded on the debit side of the Cash account and on the credit side of the Sales account in Illustration No. 3, as shown in Illustration No. 3. +8. Bought for cash three Victrolas, $25.00; paid freight on the same, $25.00. +Recorded on the debit side of the Cash account and on the credit side of the Cash account in Illustration No. 3, as shown in Illustration No. 3. +9. Sold for cash one Victrola, $25.00; records, $45.00. +Recorded on the debit side of the Cash account and on the credit side of the Sales account in Illustration No. 3, as shown in Illustration No. 3. +10. Bought for cash one piano, $25.00; records, $45.00. +Recorded on the debit side of the Cash account and on the credit side of the Sales account in Illustration No. 3, as shown in Illustration No. 3. +11. Sold for cash one piano, $25.00; records, $45.00. +Recorded on the debit side of the Cash account and on the credit side of the Sales account in Illustration No. 3, as shown in Illustration No. 3. +12. Bought for cash three Victrolas, $25.00; paid freight on the same, $25.00. +Recorded on the debit side of the Cash account and on the credit side of the Cash account in Illustration No. 3, as shown in Illustration No. 3. +13. Sold for cash one Victrola, $25.00; records, $45.00. +Recorded on the debit side of the Cash account and on the credit side of the Sales account in Illustration No. 3, as shown in Illustration No. 3. +14. Bought for cash one piano, $25.00; records, $45.00. +Recorded on the debit side of the Cash account and on the credit side of the Sales account in Illustration No. 3, as shown in Illustration No. 3. +15. Sold for cash one piano, $25.00; records, $45.00. +Recorded on the debit side of the Cash account and on the credit side of the Sales account in Illustration No. 3, as shown in Illustration No. 3. +16. Bought for cash one piano, $25.00; records, $45.00. +Recorded on the debit side of the Cash account and on the credit side of the Sales account in Illustration No. 3, as shown in Illustration No. 3. +17. Sold for cash one piano, $25.00; records, $45.00. +Recorded on the debit side of the Cash account and on the credit side of the Sales account in Illustration No. 3, as shown in Illustration No. 3. +18. Bought for cash one piano, $25.00; paid freight on same, $25. +Recorded on both sides of Cash Account and Credit Side of Sales Account in Illustration No., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown in illustration no., as shown + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
DebitCredit
$18$18
$18$18
$18$18
$18$18
$18$18
$18$18
$18$18
$18$18
$18$18
$18$18
$18$18
$18$18
$18$18
$18$18
$18$18
$18$18
$18$18
$18$18
$18$18
$18$18
$18$18
$18$18
$18$18
+ +These transactions have been recorded by Mr McCormick's accountant at his office under date January 29th. + +Exercise No. 2, Recording Transactions Direct In The Ledger. + +Record on ledger paper* (paper with same ruling) *the following transactions performed during week beginning May 29 by Charles Smith a butcher Allow space for accounts to follow: Cash ten lines Purchases eight lines Sales nine lines. + +May 29 +Cash sales for day per cash register: $24-5 + +*NOTE: The exercises are to be worked out according to instructions given at end of book or provided by instructor. + +(Continued on page 4) + + + + + + + + + + +
Exercise No. Description & Instructions: Illustrations: Answer: Note: Answer: Note: Answer: Note: Answer: Note: Answer: Note: Answer: Note: Answer: Note: Answer: Note: Answer: Note: Answer: Note: Answer: Note: Answer: Note: Answer: Note: Answer: Note: Answer: Note: Answer: Note: Answer: Note: Answer: Note: Answer: Note: Answer: Note:
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14 +BOOKS OF ORIGINAL ENTRY + +May 29. +Bought meat for cash, $22.30. +Cash sales for the day per cash register, $35.60. +Paid the express company $20.00, $18.75 of which was for a cash purchase of hard and $1.25 for express charges on the same. +Cash sales for the day per cash register, $43.25. + +31. +Gave $1.00 to Mrs. Smith for which she returned because it was not satisfactory. + +June 1. +Bought meat for cash, $57.30. +Cash sales for the day per cash register, $49.90. +Received $3.50 from the Central Provision Co. for land which we returned as per agreement. +Bought meat for cash, $36.40. +Cash sales for the day per cash register, $72.10. + +When these transactions have been recorded in the three accounts, add the debit side and the credit side of each account, enter the totals in small pencil figures, and prove the equality of the debits and credits by a Trial Balance of totals as in Illustration No. 4. + +Exercise No. 3, Recording Transactions Direct in the Ledger. + +Record on ledger page the following transactions performed during the week beginning September 15 by Stephen Voung, who conducts the Central Cafeteria. +Allow space for the accounts as follows: Cash, eleven lines; Purchases, nine lines; Sales, ten lines. + +Sept. 15. +Paid cash for meat, $22.90; bread, $4.75. +Received for cash sales, $37.55. +Paid cash for vegetables, $12.80. +Received for cash sales, $32.65. +Paid cash for meat, $37.75; meat, $15.00; bread, $5.50. +Received for cash sales, $29.90. +Received cash, $2.50, for canned goods returned by us as per agreement. +Received for cash sales, $31.85. +Paid cash for vegetables, $3.40. +Received for cash sales, $27.90. +Paid cash for vegetables, $13.90; bread, $5.60; butter, $7.55. +Received for cash sales, $44.30. + +Complete in the same manner as instructed at the conclusion of Exercises Nos. 1 and 2. + +§ 21. A Book of Original Entry is one ruled to contain a record of business transactions arranged chronologically, that is, in the order of their occurrence. The information given in connection with the record of such a book is sufficient to show that all transactions entered in it are those which may be transferred to the accounts in the ledger. The method of recording transactions in book of original entry is illustrated and explained in this and succeeding illustrations. + +The purpose of a book of original entry is to provide a basis for the information recorded in the ledger. When transactions are recorded direct in the ledger it is difficult to detect errors because there is no opportunity to compare them with what has been recorded in the bookkeeper's file so as to record a debit or a credit he might have difficulty in locating the error. + +§ 22. The Journal is a book of original entry. The ruling is shown in Illustration No. 6 and the method of recording transactions on this ruling in Illustration No. 7. A comparison of these two illustrations shows that space is provided for the name of the account debited and the amount (value received), the name + +THE JOURNAL. +15 + +Illustration No. 6, Ruling for a Page in the Journal. + +EXPLANATION. The purpose of the ruling in this journal can be understood better by comparing it with that in Illustration No. 7, which contains the same form of ruling with transactions recorded. The student will observe that debits and credits are indicated by the position of the writing and figures. + +of the account credited and the amount (value parted with), and the explanation of the transaction; this explanation should be so worded that one who is familiar with the subject matter of the entries received and the values parted with have been correctly expressed in the record. + +**Q 1. Journalizing** is the analysis of transactions to determine which accounts shall be debited and which credited; and the recording of the names of the accounts debited and credited with the amounts in a book of original entry. + +**§ 23. Posting from the Journal.** Transferring the amounts from the journal to the ledger requires care. Each amount in the money column is posted to the debit side of the account written on the same line with it, and each amount in the second money column is posted to the credit side of the account written on the same line with it. The page number of each entry is entered at the top left corner of each page, under "I" and the page of the journal in the folio column in the ledger, and the page of the account in the ledger in the folio column in the journal. The amounts recorded in these columns are posted to the ledger in such a manner as they appear in the journal; thus, for example, posting to provide in the ledger through two months, a complete history of all the transactions with each asset, liability, cost and income. + +The transactions recorded in Illustration No. 7, when posted to the ledger accounts will appear as illustrated in No. 8, and a Trial Balance from these ledger accounts will appear as in Illustration No. 4 or No. 5. + +RECORDING TRANSACTIONS IN THE JOURNAL + +**§ 24. Transactions Are Recorded in the Journal in the order in which they occur.** A complete record of a transaction in the journal shows the date of the transaction, the name of the account debited and the amount, the name of + +10 RECORDING TRANSACTIONS IN THE JOURNAL. + +the account credited and the amount, and the explanation. This explanation is for the information of the bookkeeper or any person who may have occasion to examine the record. The record should show a distinction between debits and credits to facilitate posting. + +The following transactions affecting the purchases and sales of merchandise for cash, performed by the soda fountain department of the Central Drug Co. during + +July 5, 19-- + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Cash39403940
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Purchases36953695
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Cash50805080
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Cash250250
Purchases Received for cash in connection with
Purchases47954795
Purchases on account and Cash sales for cash
Cash21502150
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Cash150150
Purchases for soda ice cream returned.
Cash12501250
Cash sales for the day
+ +Illustration No. 7, A Journal Page with Transactions Recorded on It. + +EXPLANATION. The transactions shown recorded here are outlined on pages 17 and 18. +The ledger accounts resulting from posting are shown in Illustration No. 8. + +POSTING FROM THE JOURNAL. +17 + +the week beginning July 2, are shown recorded in the journal in Illustration No. 6 and posted to the ledger in Illustration No. 8. These transactions are the same as those beginning on page 15. + +July 2. Cash sales for the day per cash register, $39.40. +Recorded in the first entry in Illustration No. 7. The position of the writing and figures shows that Cash is debited and Sales credited. +3. Beverage sold for cash, Pepsi-Cola $12.75; ice cream, $10.20. Recorded in the second entry in Illustration No. 7. The position of the writing and figures shows that Purchases is debited and Cash credited. +Cash sales for the day per cash register, $50.30. +Recorded in the third entry in Illustration No. 7. The position of the writing and figures shows that Cash is debited and Sales credited. +5. Returned one gallon of ice cream purchased on the 3d, and received $2.50, the credit figure, for it. +Recorded in the fourth entry in Illustration No. 7. § 15, * 1 is debited and § 17, * 2 is credited. +(Concluded on page 18.) + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +' +Illustration No. 8, A Ledger with Three Accounts Resulting from Posting. + +18 RECORDING TRANSACTIONS IN THE JOURNAL. +(Continued from page 17.) + +July 5. Bought sandwiches, $12.50; flavoring, $16.40; ice cream, $20.00. +Recorded in the fifth entry in Illustration No. 7. § 17. * is debited and § 15. * is credited. + +6. Cash sales for the day per cash register, $21.50. +Recorded in the sixth entry in Illustration No. 7. § 15. * is debited and § 18. * is credited. + +7. Gave James Smith $1.50 for one-half gallon of ice cream which he returned because it was received in bad condition. +Recorded in the seventh entry in Illustration No. 7. § 19. * is debited and § 15. * is credited. + +Cash sales for the day per cash register, $62.50. +Recorded in the eighth entry in Illustration No. 7. § 13. * is debited and § 18. * is credited. + +Exercise No. 4, Recording Transactions in the Journal and Posting. +Record on journal paper* (paper with the same ruling as Illustration No. 6) the following transactions performed during the month of March by Robert Smith, a dealer in used automobiles: + +March 1. Sold A. L. Lott a used Chandler for $360.00 cash. +2. Bought a used Ford from W. H., Roland for $250.00 cash. +3. Sold W. W. Jones a used 1920 Franklin for $950.00 cash. +4. Bought a used Buick from W. H., Roland for $960.00 cash. +5. Sold Davis Bros. the used Packard purchased on the 15th, for $1,200.00 cash. +6. Bought a used Hudson from David Browning at Danville for $950.00 cash; paid Charles Smith $25.00 for delivering this car. +7. Sold B. M., Morris the used Hudson purchased on the 25th, for $360.00 cash. + +When the above transactions have been recorded in the journal as instructed, open accounts on a sheet of ledger paper with Cash (8), Purchases (7), and Sales (8), allowing for each account the number of lines indicated by the number given in parenthesis after the name of the account; post the transactions, and prove the posting by a Trial Balance of balances. + +Exercise No. 5, Recording Transactions in the Journal and Posting. +Record on journal paper* the following cash transactions performed by the H. F. Ritter Electric Co. during the month of August: + +Aug. 1. Sold M. N. Stewart a No. 9 electric washer, $135.60. +2. Sold A. L., Graham three Solvay electric fans, $997.5. +3. Bought three electric lamps from the General Electric Co., $85.70. +4. Received $275.00 from the Dowell Construction Co., in payment for no No. 16 electric washer. +5. Bought two electric washers from the General Electric Co., $325.00. +6. Sold Mrs J.M.Taylor one electric iron, $135.0. +7. Sold Mrs A.L.Day one electric lamp, $42.50. +8. Gave H.L.Jones $5,50 for an electric iron which he purchased for cash and returned per agreement. + +*(See note at bottom of page 13.) + +QUESTIONS ON RECORDING TRANSACTIONS. +19 + +Aug. 25. Sold Dr. C. C. Doyle one No. 5 electric pad, $22.50; one No. 6 Violet Rechargeable, $35.00. + +26. Sold E. E. Erhling one No. to electric flashlight, $2.50; one extra battery for the same, $0c. + +28. Received $12.50 from the General Electric Co. for a lamp which we purchased and then on the 5th, but returned because it was not the kind ordered. + +31. Gave E. E. Erhling $3.00 for the flashlight and battery sold him on the 26th, and returned per agreement. + +When the above transactions have been recorded in the journal as instructed, open accounts on a sheet of ledger paper with Cash (12), Purchases (6), and Sales (11), allowing for each account the number of lines indicated: post the transactions, and prove the posting by a Trial Balance of totals. + +**Exercise No. 6, Recording Transactions in the Journal and Posting.** + +Record on journal paper the following transactions performed during the month of March by Martin R. Daley, a retail furniture dealer: + +March 1. Sold for cash one bedroom suite, $175.00; one dining room suite. + +5. Paid cash for furniture purchased, $209.60. + +10. Paid $18.75 cash, freight on furniture purchased. + +12. Received cash for six rugs sold, $205.75. + +14. Paid cash for furniture purchased, $172.50. + +15. Carried over from March 14, $53.00; all returned as per agreement. + +18. Paid cash for furniture purchased, $82.50. + +21. Received $447.50 cash for three small rugs returned by us to the seller as per agreement. + +25. Sold for cash one refrigerator, $35.00; one gas range, $47.50; one kitchen table, $63.00. + +30. Paid the American Railway Express Co. cash, $2.50, for express charges on furniture purchased. + +When the above transactions have been recorded in the journal as instructed, open accounts on a sheet of ledger paper with Cash (10), Purchases (6), and Sales (7), allowing for each account the number of lines indicated: post the transactions and prove the posting by a Trial Balance of balances. + +**QUESTIONS** + +1. What is the purpose of an account? +2. In what order are the transactions recorded? +3. State the two methods of reconting transactions. +4. How is a cash sale recorded (a) in the journal and (b) direct in the ledger? +5. Which is preferable, a bound book or a loose-leaf book? +6. If a merchant wishes to know the total sales of merchandise for any given name or description, which book of account would he obtain the information? from what account? +7. If a drug store has five departments, would it be necessary to maintain a Cash account for each department? Give reasons for your answer. +8. Would it be necessary to keep a separate record of the sales made by each of the five departments mentioned in Question No. 7? + +(Continued from page 18.) + +20 +QUESTIONS ON RECORDING TRANSACTIONS. + +9. If you were keeping books for a local merchant and, when you proved cash at the close of January 10, you found that you had $2.00 more cash than the amount shown by the Cash account, what entry would you make for the $2.00? +10. Why will the Sales account always show a credit balance? +11. Why will the Purchases account always show a debit balance? +12. Why will the Cash account always show a debit balance? +13. Why does the Trial Balance prove that the total debits equal the total credits in the ledger? +14. If $10.00 cash is received for a sale of merchandise and the amount is erroneously entered on the credit side of the Purchases account instead of the Sales account, how would it affect the Trial Balance? +15. How would the error mentioned in Question 14 affect the balance of the Purchases account? The Sales account? +16. If the debits and credits on the Trial Balance are not equal, how does the bookkeeper know he has recorded the transactions separate from the ledger ascertain the error? +17. Why is it advisable to give an explanation of each entry in the journal? +18. If $10.10 cash is received for merchandise sold and recorded in the journal as Cash, Dr., $10.00, and Sales, Cr., $10.10, what effect will this have on the Trial Balance if the entry is posted as recorded? +19. What does a telephone company sell? +20. Would these sales be recorded in a Sales account? +21. Would the bookkeeper for a city government have a Sales account in his ledger? +22. Would the farmer who keeps a record of the transactions he performs have a Sales account in his ledger? +23. If a merchant discontinues business and sells all the merchandise which he owns, what will be balance in the Sales account show? +24. And if this balance is shown in Question No. 23, what would be balance of the Purchases account show? +25. If a grocer buys an automobile truck to be used in delivering merchandise, would the value of this truck be debited to the Purchases account? Give reasons for your answer. + +Chapter III + +RECORDING TRANSACTIONS—Continued + +§ 25. Purchases and Sales of Merchandise on Account. When the owner of a business purchases merchandise with the agreement that it is to be paid for at a later date, he incurs an obligation or a liability. The transaction will be recorded in the same manner as if he had paid cash except the name of the person or business to whom the merchandise was sold is entered in place of Cash; when the obligation is paid as per agreement, the account with the person or business will be debited and Cash credited. The value received in the first transaction is the purchase price of the merchandise sold, and the value parted with, the promise to pay the liability incurred. The value received in the second transaction is the cancellation of the obligation, and the value parted with, the cash paid. + +When the owner of a business sells merchandise with the agreement that it is to be paid for at a later date, he extends credit to the one to whom he purchases the merchandise. A transaction of this nature will be recorded in the same manner as when cash is received, except that the name of the person who purchases the merchandise is entered in place of Cash; when the obligation is cancelled by cash received from the one to whom he has extended credit, he debits Cash and credits the account with the person. The value received in the first transaction is the purchase price of the merchandise sold, and the value parted with, the merchandise; the value received in the second transaction is part of the value parted with, the cancellation of the obligation of the one to whom the merchandise was sold. + +A sale of merchandise where cash is not involved are referred to as "on account," possibly because the account with the person takes the place of cash until the amount is paid. The owner of the business regards those who extend credit to him as his debtors, and those to whom he sells merchandise as his creditors. In this sense, "customer" also applies to those from whom cash is received at the time the sale is made. + +§ 26. Accounts with Persons are those required when credit is extended to the business through the purchase of merchandise, or when the business extends credit to its customers through the sale of merchandise. Accounts with persons are divided into two classes: one (accounts with customers) shows the result of transactions with those from whom merchandise is purchased on account, usually referred to as "accounts receivable;" and the other (accounts with creditors) shows the result of transactions with those from whom merchandise is purchased on account, usually referred to as "accounts payable." + +ACCOUNTS RECEIVABLE + +§ 27. The Purpose of an Account with a Customer is to show the balance due from the customer as a result of the transactions in which the business sells merchandise to him on account. When a customer pays cash for merchandise, it is not necessary to record the transactions in an account with him; but when he buys and does not pay cash, it is necessary to record the date and amount of the sale in an account with him so that the owner may know the amount he owes. + +21 + +22 +ACCOUNTS RECEIVABLE AND PAYABLE. + +Customer owes him when settlement is desired. A separate account is kept with each customer because the owner of the business should know the amount due from each customer to whom he sells on account as well as the total amount due from all customers. The owner of the business keeps a record of all transactions in connection with the title of his account; this includes street, number, city, and state. + +Debit the Account of Each Customer: Credit the Account of Each Customer: + +* 1. For the selling price of merchandise sold to him on account, and for prepaid transportation charges. +* 2. For the cash or other assets received from him to apply on account. +* 3. For any allowance or discount granted to him. Partial payments are indicated as explained below. +* 4. The Balance of an Account Receivable shows the amount the customer owes the business. It is one of the assets of the business. The debit side will be larger unless the customer should pay for more than he has purchased. When the two sides are equal, this indicates that he has paid for all the merchandise sold him on account. +* 5. Ruling an Account Receivable. When the account with a customer is in balance, it should be ruled with a single red line on each side, across the money columns only, as in the account with Walter Rogers in Illustration No. 9; the lines should be drawn so that they do not cross over each other. When there are a number of debits or credits, the two sides should be footed with small pencil figures to prove that they are equal before ruling as in the account with People's Hotel on page 71. The use of red ink for ruling is not arbitrary but it is customary for bookkeepers to use black ink. +* 6. Partial Payments. A debtor has the right, by law, to indicate on what item his payment shall be applied. Thus if he owes several amounts and wishes the payment to be applied to any one particular amount, and indicates this, the credit is made according to his request. In such cases, when a debtor's letter should indicate the amount on which the credit is applied by placing a letter at the left of the amount of the item on the debit side, and placing the same letter to the left of each item on which he claims credit. This system is illustrated with "a" and continue with many letters as may be required for payments on different debits. The letters are not necessary when an item is paid in full by one payment, and the account is ruled. If the payments are indicated by letter as explained, then the bookkeeper can make entries without referring to a book of original entry. The use of the letters as explained here is illustrated in the personal accounts on pages 70, 71 and 72. + +This rule applies when sales merchandise is referred to as "trade customers" and those from whom a buyer purchases are not considered as "trade creditors." Property other than merchandise may be bought or sold on account; such sales and purchases are recorded in personal accounts in the same manner as sales and purchases of merchandise. + +ACCOUNTS PAYABLE + +§ 28. The Purpose of an Account with a Creditor is to show the balance due from the creditor as a result of the transactions in which the business buys merchandise from him or receives services from him. When merchandise is purchased for cash, no account with the one from whom it is purchased is necessary because the transaction is completed; but when the business buys on account, it is necessary to keep a record of such transactions in order that the owner may know the amount he + +RECORDING TRANSACTIONS IN THE LEDGER. +23 + +owes at the time settlement is made. A separate account is kept with each creditor because the owner of the business should know the amount he owes each creditor as well as the total amount due all creditors. + +
Cash
Sales$ 890Sales$ 890
8$ 3008$ 300
6$ 2006$ 200
7$ 1507$ 150
Purchases
Sales$ 600Sales$ 600
8$ 3008$ 300
SalesSales
Sales$ 150Sales$ 150
Purchases
Sales$ 150 Sales $ 150
Illustration No. 8, A Ledger with Three Accounts Resulting from Posting.
EXPLANATION. The accounts in this ledger are the result of posting the transactions recoded in the journal, Illustration No. 7. A comparison of the two illustrations shows that each amount entered in the first column of the journal is posted to the credit side of the account written on the same line with it, and each amount entered in the second column of the journal is posted to the credit side of the account written on the name line with it. The posting is indicated by writing the journal page (1) in the ledger, and the ledger page (1) in the journal.
+ + + + + + + + + + + + + + + + + + + + +
Debit the Account of Each Creditor:Credit the Account of Each Creditor:
§ 1. For cash or other assets of the business given him to apply on account, and for any allowance allowed him granted to the business by him. Partial payments are indicated as explained in § 5.§ 2. For the cost of merchandise purchased from him on account, and for prepaid transportation charges if the terms of purchase do not include delivery.
§ 3. The balance of an Account Payable shows the amount the business owes the creditor. The credit side will be larger unless the business should pay a creditor more than it owes him. The balance due a creditor is one of the verbal obligations of the business, hence a liability.
§ 4. Ruling an Account Payable. The account with a creditor is ruled in the same manner as an account with a customer, as described in § 27, T. 4.
§ 5. Partial Payments should be indicated by letter as explained in § 27, T. 5. This enables the bookkeeper to ascertain the balance due on any one purchase without referring to a book of original entry.
+ +RECORDING TRANSACTIONS DIRECT IN THE LEDGER + +§ 29. Transactions with customers and creditors on account may be recorded direct in the ledger in the same manner as cash transactions. When credit is extended to a customer of the business, his promise to pay the amount of the sale is recorded on the debit side of his account as the value received, and the value received is recorded on the credit side of his account as payment in the same manner as a cash sale. When credit is extended to the business, the cost of the merchandise purchased is recorded on the debit side of the Purchases account in the same manner as a cash purchase. The cost of merchandise sold is recorded on the credit side of the creditor's account because the promise of the owner of the merchandise to pay for the merchandise bought is regarded as the value parted with. The account with a customer remains on the ledger as an asset, and that with a creditor as a liability until paid. + +The following transactions affecting the purchases and sales of merchandise for cash and on account, performed by J. H. Henderson, a retail furniture dealer, during one year ending June 30th, are set forth in illustration No. 10. Cash, customers, creditors, Purchases, and Sales in Illustration No. 6 and a Trial Balance of totals made from the accounts, in Illustration No. 10. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Nov.DescriptionAmount
1. Purchased furniture from the Consolidated Furniture Co., Grand Rapids, on sixty days' time, $215.75.
2. Sold Walter Rogers $100 worth, one bedroom suite, $125.00.
3. Sold Walter Rogers, City, on account, one hatrack, $23.50.
4. Received cash for furniture sold today, $635.20.
5. Paid for Consolidated Furniture Co. $100.00 on account.
6. Received $23.50 from Walter Rogers in payment for the hatrack sold him on the 6th.
7. Received $550 from C. H. Powers to apply on account.
8. Sold C. H. Powers on account three leather rockers at $25.50 each.
9. C. H. Powers returned one rocker and was allowed credit for $25.50.
+ +RECORDING TRANSACTIONS IN THE LEDGER + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
+ Tax $ v + + + +Illustration No. 9, A Ledger with Six Accounts. + +EXPLANATION: This illustration is in the same form as Illustration No. 3, with the exception of three additional accounts, two with customers and one with a creditor. A comparison of the illustration with the explanation shows that the account "Cash" is on the debit side, and the value parted with on the credit side. The "60 days" in the explanation column of this illustration indicates that the payment of the purchase is to be made within sixty days. +Since the purchase is on November 1, payment will be expected on December 31. When no specific time of settlement is mentioned, the purchase or sale is sometimes referred to as "on account," and settlement is usually required on the first of the month following the purchase or sale. + +RECORDING TRANSACTIONS IN THE LEDGER. 25 + +A hand-drawn illustration of a ledger page with various accounts and balances. +S. W. Brandonson +Total Balance $0.00 + +
Cash
Jan 102000Jan 10100
Jan 20500
Feb 15350
C. H. Duvall, Cashier
Mar 1100Mar 125
Mar 24787.23787.23
Hollis Rogers, Cashier
Apr 6100Apr 630.59
Consolidated Furniture Co.
around Rapids,
May 14100Tax $ charge100.75
Purchases
Jun 1215.95
Sales:
Sep 291000.00
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Cash$78100
C. B. Thomas$11503000
Consolidated Ironmasters Co.100100.75
Tax Refunds21575
Sales-3650-10180
Total Sales164,575164,575
+ +Illustration No. 10, A Trial Balance of Totals. + +EXPLANATION. This Trial Balance, which is prepared from the ledger in Illustration No. +No. is the same form as Illustration No. 4 with the addition of two personal accounts. By com- +paring this trial balance with the statement of income and expenses, it will be seen that Walter +Rogers does not appear on the Trial Balance. The reason for this is that the amounts recorded +on the debit and credit sides are equal. This explains the statement in No. 26 that only the open +accounts in the ledger appear on the Trial Balance. + +Exercise No. 7, Recording Transactions Direct in the Ledger. + +Record on ledger paper* the following transactions performed during the month of October by J. J. Hammond, a retail shoe dealer. Allow space for the accounts as follows: +1. Cash $250. +2. Smith Shoe Company, account $293.36. +3. Walter Love, C. J. Miller, Robert Whiteacre, W. O. Crosswhite, Davis Bros., and +Smith Shoe Co., each four lines. Give each customer and creditor a local address. +Oct. +4. Bought shoes from W. O. Crosswhite on account, $187.65. +5. Sold shoes to Smith Shoe Company, $371.80. +6. Bought shoes from Davis Bros., on account $293.36. +7. Received for cash sales of shoes, $127.50. +8. Paid Smith Shoe Company $250 on account. +9. Sold W. O. Crosswhite $100 on account. +10. Sold Walter Love $60 on account. +11. Bought shoes from the Smith Shoe Company on sixty days' time, $211.83. +12. Received for cash sales of shoes, $97.30. +13. Paid Walter Love $25 on account. +14. Sold J. C. Miller on account two pairs of shoes, $25.25. +15. Received for cash sales of shoes, $106.95. +16. Allowed Walter Love one pair of shoes returned, $17.50. +17. Allowed Davis Bros., one pair of shoes returned, $25. +18. Bought shoes from W. O. Crosswhite on account, $321.85. +19. Paid $83.50 for shoes purchased and delivered today. +20. Paid Smith Shoe Company for a pair of shoes returned for which she +had paid cash worth sold to her customers, +21. Received $39 on account from Walter Love in full of account. +22. Paid the Smith Shoe Company $25 on account. +23. Received for cash sales of shoes, $97. +24. Paid the Santa Fe Railroad $63 on freight for shoes purchased. +25. Sold Robert Whiteacre one pair of shoes on account, $143. +26. Bought shoes from Davis Bros., on sixty days' time, $473-75. +27. Davis Bros., allowed us credit for $62 for shoes returned to them. + +When these transactions have been recorded in the accounts, prove the equality of the debits and credits by a Trial Balance of totals. + +*See note at the bottom of page 13. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
DescriptionAmount DebitAmount Credit
Cash$78100
C.B.Thomas$11503000
Consolidated Ironmasters Co.100100.75
Tax Refunds21575
Sales-3650-10180
Total Sales164,575164,575
DescriptionAmount Debit (Total)Amount Credit (Total)
Cash$78 +$293-36 -$293-36 -$83-50 = $-44-46$100 +$293-36 +$97-30 +$25 +$97 = $494-46
DescriptionAmount Debit (Total)Amount Credit (Total)
Cash Debit & Credit:
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Cash Debit & Credit: +
Cash sales for the day, $62.45
Cash sales for the day, $53.80
Paid cash for nuts purchased, $0.50.
Paid cash for nuts on account, six boxes of candy at $2.75.
Purchased from the Norway Candy Co., City, on account, $32.75.
Cash sales for the day, $41.90.
Paid cash for candy on account.
Paid a customer $1.00 for a box of candy which he had purchased for cash and returned per agreement.
Cash sales for the day, $31.90.
Received $10.00 from Robert Farland on account.
Sold R. H. Hunter, City, on account, twelve boxes of candy at $2.25.
Purchased from the Candy Kitchen, City, on account, $61.60.
Cash sales for the day, $31.90.
Paid cash for chewing gum, $5.00.
Paid the Candy Kitchen $25.00 on account.
Purchased from the Candy Kitchen, City, on account, $26.95.
Returned to the Candy Kitchen six boxes of candy purchased on the ninth and received credit for the same at $1.75 per box, the cost price.
Cash sales for the day, $171.90.
+ +When these transactions are recorded in the accounts, prove the equality of the debits and credits by a Trial Balance of balances. + +RECORDING TRANSACTIONS IN THE JOURNAL +§ 30. Transactions with customers and with creditors may be recorded in the journal in the same manner as cash transactions. When credit is extended to a customer, his name is written in the journal as the account debited, and the word "on account" is written as the account credited; when a purchase is made on account, the name of the creditor is written as the account credited. +The owner should have a record of the articles sold on account; this information may be obtained by entering in his journal all purchases made and furnishing the names of the articles in connection with the explanation in the journal. It is not necessary to itemize the articles purchased in the explanation of the transaction in this way. + +The following transactions affecting the purchases and sales of merchandise for cash and on account, performed by J. H. Henderson, a retail furniture dealer, during the month of November, are shown recorded in the journal in Illustration No. X-12 (see page xii). The entries in this journal are exactly alike to those on page xii. + +Nov. +1. Purchased furniture from Consolidated Furniture Co., Grand Rapids, Michigan, at $275. +2. Sold C. H. Powers, Arlington, on account, one bedroom suite, $125.00. +3. Sold Walter Rogers, City, on account, one hatrack, $25.00. + +Concluded on page xx + +NOTE: The word "on," means that this price is per unit; if this word does not appear, the price given applies to the quantity mentioned. "Six boxes candy at $2.75" means that the amount of the sale is $16.50. "Six boxes candy, $2.75" means that the amount of the sale is $27.50. + +A page from a book showing a table with columns labeled "Cash Sales for Day" and "Cash Sales for Day." The table contains numerical values representing cash sales amounts for different dates and categories such as "Candy Kitchen," "Robert Farland," "Norway Candy Co., Six Lines," "R.H. Hunter," "Cash Sales for Day," etc." + +RECORDING TRANSACTIONS IN THE JOURNAL. +27 + +November 10 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Purchases100.50
Consolidated transactions100.00
Received funds on account100.00
Cash Sales100.00
Cash sales of furniture100.00
Consolidated transactions to Cash100.00
Paid cash supply movement100.00
Cash Sales100.00
Received cash on hand & account100.00
Cash Sales100.00
Received cash to establish account100.00
Cash Sales100.00
Established account with local store100.00
Cash Sales100.00
Allowed credit for merchandise returned100.00
+ +Illustration No. 11, A Journal Page with Transactions Recorded on It. + +EXPLANATION: The numbers in the folio column indicate the page of the ledger to which each entry is posted. These numbers are not entered when the transactions are recorded in the journal, but at the time the amounts are posted to the ledger accounts. + +28 RECORDING TRANSACTIONS IN THE JOURNAL. +(Continued from page 26.) + +Nov. 12. Received cash for furniture sold today $25.30. +14. Paid the Consolidated Furniture Co. $100.00 on account. +20. Received $22.50 from Walter Rogers in payment for the hatrack sold him on the 6th. +25. Received $15.00 from C. H. Powers to apply on account. +20. Sold C. H. Powers on account three leather rockers at $25.50 each. +20. C. H. Powers returned one rocker and was allowed credit for $25.50. + + + + + + + + + + + + + + + + + + + + +
Nov 12$ 62.50Jan 14$ 100
20$ 22.50
25$ 15.00
+ + + + + + + + + + +
C. H. PowersWalter Rogers
Consolidated Furniture Co.Grand Rapids
+ + + + + + + + + + + + +
Purchases
Jan 14$ 100Jan 14$ 2175
+ + + + + + + + + + + + + + + + + + + + + + + + +
Sales
Jan 14$ 25.50Jan 14$ 125
$ 2250
$ 3375
+ +Illustration No. 12, A Ledger with Six Accounts Resulting from Posting. +EXPLANATION: The following transactions were not recorded direct in it, but were recorded in the journal shown in Illustration No. 11 and entered in this ledger by transferring the balance of the accounts in the folio column of each account. Compare with Illustration No. 9 and note the additional information. A Trial Balance of totals taken from this ledger would be the same as Illustration No. 19 + +RECORDING TRANSACTIONS IN THE JOURNAL. 29 + +Exercise No. 9, Recording Transactions in the Journal and Posting. +Record on journal paper the following transactions performed by the Central Paper Co. during the month of February. Give each customer and creditor a local account number. + +Feb. 1. Purchased paper from the Whiting Paper Co. on account, $150.00. +2. Sold paper to the Federal Press on account, $126.30. +3. Received $32.80 for paper sold today. +4. Purchased paper from the U.S. Envelope Co. on account, $207.60. +5. Received $126.30 from the Federal Press in full of account. +6. Sold paper to C.J. Krehbiel & Co. on account, $200.25. +7. Paid $150.00 for freight and drayage bills due to date. +8. Purchased paper from the Whittaker Paper Co. on account, $499.37. +9. Paid $166.16 for freight and drayage bills due to date. +10. Sold paper to W.A. Ogden on account, $89.66. +11. Returned checks from the U.S. Envelope Co. for $36.50, value of envelopes returned by us per agreement. +12. Received cash sales of paper today, $261.99. +13. Recorded sales of paper for $325 in full of account. +14. Sold paper and envelopes to the Federal Press on account, $514.52. +15. Allowed W.A. Ogden credit for paper returned, $125.30. +16. Paid the Federal Press bill due today. +17. Sold paper and envelopes to C.J. Krehbiel & Co. on account, $412.60. +18. Paid the U.S. Envelope Co.'s balance due on account, $717.10. +19. Received $2000 from W.A. Ogden on account. + +When entering transactions into the journal as instructed, open accounts on a sheet of ledger paper with Cash (q), Purchases (q), Sales (t), Federal Press (s), C.J. Krehbiel & Co., (c), W.A. Ogden (x), Whiting Paper Co., (y), U.S Envelope Co., (z), Whittaker Paper Co., (w), allowing for each account the number of lines indicated; post the transactions, and prove the posting by a Trial Balance of totals. + +Exercise No. 10, Recording Transactions in the Journal and Posting. +Record on journal paper the following transactions performed during the month of May by O.Cutshaw, an automobile tire dealer: + +May 1. Purchased from the Goodyear Tire Co., City, on account, $355.00. +2. Received cash for four Goodyear 33 x 4 cord tires, $215.60. +3. Purchased from the Goodyear Tire Co., City, on account, $325.00. +4. Sold cash for four Goodyear 33 x 4 cord tires, $325.60. +5. Received cash for one 35 x 8 Silverton cord tire, $67.50. +6. Paid the Goodyear Tire Co., $2000 on account. +7. Sold cash for four Miller cord tires at $325 each. +8. Gave I.W Walker credit for one of the tires sold him on the 12th and returned him today per agreement. +9. Received cash for sale of two Miller cord tires, $325. +10. Received cash for sale of two Silverton cord tires, $325. +11. Paid the Goodyear Tire Co., $2000 on account. +12. Sold cash for four Miller cord tires at $325 each. +13. Gave I.W Walker credit for one of the tires sold him on the 12th and returned him today per agreement. +14. Received cash for sale of two Miller cord tires, $325. +15. Received cash for sale of two Silverton cord tires, $325. +16. Received cash from the Central Grocery Co., in full of account. +17. Sold W.L Watson, City, on account, two 33 x 4 Ford cord tires at $4200; these tires are not carried in stock and were purchased from the Ford Tire Company in full payment thereof. +Record the sale and purchase as separate transactions. + +(Concluded on page 30) + +30 QUESTIONS ON RECORDING TRANSACTIONS +(Exercise No. 10—Continued from page 29.) + +May 25. Sold David Jordan, City, on account, two $32 x 4 Silvertown cord tires at $41.60 each. +26. Paid the Goodrich Tire Co., $200.00 on account. +27. Received $50.00 from W. L. Watson to apply on account. +28. Paid the Goodyear Tire Co., $150.00 on account. +Returned to the Goodrich Tire Co., two $32 x 4 fabric tires and received credit for $34.60. +31. Received three cases of tires, $115.50. +Purchased from the Goodyear Tire Co., City, on account, $452.40. + +When the above transactions have been recorded in the journal as instructed, open accounts on a sheet of ledger paper with Cash (10), Purchases (8), Sales (12), Goodyear Tire Co. (3), Goodrich Tire Co. (4), Fisk Tire Co. (4), Central Grocery Co. (5), and Watson (6). Allow for each account the number of lines indicated; post the transactions, and prove the posting by a Trial Balance of balances. + +QUESTIONS + +1. If a merchant buys merchandise on March 2, 1922, with the privilege of paying for the same within sixty days, on what date will he be required to pay the bill? +2. Why is it not necessary to keep an account with the person to whom the business sells for cash? +3. If an account is opened with a customer one of the assets of the business? +4. Would you consider the asset of the business described as "Accounts Receiv- able" as valuable as the asset described as "Cash"? Give reasons. +5. Distinguish between the meaning of the terms "creditor" and "customer." +6. When would it be possible for an account with a creditor to be made to apply on merchandise purchased or sold on a designated date? +7. Would it be possible for an account with a customer to show a credit balance? Explain. +8. Would it be possible for an account with a creditor to show a debit balance? Explain. +9. What is advisable to rule an account receivable or an account payable when the two sides are equal? +10. Open an account with Robert Jones, a customer of the business, and record the following: + Jan. 15. Sold merchandise on account, $245.00. + 15. Received $100.00 to apply on account. + 20. Sold merchandise on account, $72.50. + 31. Received $72.50 in full payment of the 10th. + Feb. 10. Received $72.50 in full sale of Jan. 20. +11. Why is it not necessary to show on the Trial Balance an account which is in balance? +12. What effect would it have on the Trial Balance if an account which shows a debit balance of $10.00 was omitted because it was ruled by mistake? +13. What effect would it have on the trial balance if the business receives cash from a customer in part payment of his account? +14. What accounts are affected when cash is paid to a creditor to apply on an account owed him? + +QUESTIONS ON RECORDING TRANSACTIONS. + +31 + +15. If a sale made to a customer on account should not be recorded, would this affect the equality of the debits and credits on the Trial Balance? +16. Can you suggest a plan which would avoid the possibility of failing to record transactions? +17. If a sale is made to a customer for cash and the transaction is not recorded, how would the bookkeeper detect the error? +18. If cash is paid for merchandise purchased by one of his account, and the transaction is not recorded, how would the bookkeeper detect the error? +19. If merchandise is purchased from a creditor on account and the transaction is not recorded, how would the bookkeeper detect the error? +20. If cash is paid for merchandise purchased and the transaction is not recorded, how would the bookkeeper detect the error? +21. If a sale is made to one customer and by mistake debited to another customer, will this affect the equality of the debits and credits on the Trial Balance? +22. How would the bookkeeper detect the error mentioned in the preceding question? +23. If a customer's account, which is not in balance, is ruled by mistake, how would the bookkeeper discover the error? +24. Why is it advisable to indicate the address of a customer on his account in the ledger? +25. If the two sides of the Trial Balance are not equal, how would the bookkeeper ascertain the error? + +Chapter IV + +§ 31. Expense. Each business has a building or place in which to carry on its operations: this building or place of business is provided with heat and light; modern businesses require the use of the telephone, telegraph, and other means of communication; the clerk must have a place in which to keep his books and records; the selling of the merchandise or service which the business sells; bookkeepers and stenographers are required in connection with the office operations; the owner receives a commission on sales made by the employees of the business; these many other services must be purchased and paid for by the business. Such services are usually referred to as the "operating cost" of the business, also as the "operating expense." + +The term "expense" also includes any material purchased by the business which will be consumed by it as used; this class of material includes books of account for use in the office, stationery, supplies for the office, and other materials necessary for conducting the business. This is usually shown in an account separate from the amounts paid for services; this will be discussed later in more detail. + +A record of the payments for operating cost (expenses) is made in one or more expense accounts, depending on the nature of the expenses and the extent of the business operations. When cash is given in payment for services or property which is regarded as an expense item, the account which is to show a record of this operating cost is debited with the amount paid, and Cash credited with that amount. When cash is given in payment, the account which shows the value of the asset parted with is credited instead of the Cash account. + +EXPENSE ACCOUNT + +§ 32. The Purpose of this Account is to show the cost of operating the business, that is, its expenses. If all operating cost is debited to one account, the total cost of all such operations will be shown in this account. The debit and credit given below refer to only one Expense Account. + +Debit the Expense Account: Credit the Expense Account: + +* 1. For amounts paid for operating cost as outlined in § 31. +* 2. For any adjustments which reduce the operating cost as shown by the debit side of this account. + +§ 33. Capital. It is usually necessary for the owner of the business to invest cash or other property at the beginning of the business, because, if the business is + +NOTE: The term "adjustment" used in connection with the credits to the Expense account refers either to an increase or decrease in cost. When stamps are debited to the Expense account, and a part of these stamps is sold, Cash or the asset received is debited, and Expense credited because the amount received reduces the expense cost. + +32 + +CAPITAL ACCOUNT. +33 + +to supply a demand; it must have on hand those things which its customers will wish to purchase. The cash or other property which the owner assigns to the operations of the business at its beginning or at any time subsequent thereto is regarded as an investment in the business and referred to as the "invested capital of the business." If the operations of the business are successful—that is, if the costs are less than the revenues—the profit is realized by the owner. This profit may be used for his own benefit, or it may be reinvested in the business. If the result of operating the business is a loss, the interest of the owner (proprietorship) will be decreased by this loss. Once each year it is necessary to determine whether there has been a gain or a loss from the operations of the business during the year because of governmental tax on income. If the business has been operated at a profit, the owner's capital is increased by that amount. If the business has been operated at a loss, the owner's capital is decreased the amount of the loss. + +The owner may, if he desires, withdraw part of his capital; the withdrawal of a part of his capital will decrease his proprietorship in the business. Should the owner desire to employ some person to perform services for him, compensation for his services in connection with the operations of the business, the value of these withdrawals is debited to Expense in the same manner as amounts paid for the salaries of employees. If an owner receives money from another person in consideration for the value of the property which he takes from the business and credited with the salary he is to receive as compensation; the title of this account would be the name of the owner with the word personal written after it. The owner's personal account is debited with withdrawals equal to what he withdraws from his capital. If a debit, will show the amount he has withdrawn in excess of his salary. And if a credit, the amount of salary yet to be withdrawn. Under no circumstances should withdrawals for services be debited to the Capital account. + +**CAPITAL ACCOUNT** + +§ 34. The Purpose of this Account is to show the result of transactions which the business has with the owner of the business as they relate to investments and withdrawals. + + + + + + + + + + + + + + + + + + + + + + +
Debit the Capital Account:Credit the Capital Account:
1. For debts of the owner assumed at the beginning of the business.4. For cash or other assets invested at the beginning of the business.
2. For amounts withdrawn from the capital invested.5. For subsequent investments.
3. For net loss at the end of the business year.6. For net profit at the end of the business year.
+ +§ 7. The Balance of this Account, shows the owner's interest in the business, that is, his proprietorship or net investment. + +RECORDING TRANSACTIONS DIRECT IN THE LEDGER + +§ 35. The Complete Operations of a business include transactions which relate to the investment at the beginning of the business, the purchases and sales of merchandise, and the payment of operating expenses. All of these transactions may be recorded directly in one or more accounts (§ 8). See Table 1. + +The following transactions relative to the complete operations of a business (including investment, operating cost, and purchases and sales of merchandise for +(Concluded on page 35.)) + +34 + +RECORDING TRANSACTIONS IN THE LEDGER. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Cash
Oct. 11000Oct. 24200
Oct. 18150051250
E.B. Monroeand Elmira City
Oct. 19
J.H. Marionand Muncie City
Oct. 281750
O.R. KingClinton
Oct. 24Oct. 731765
M.E. Sudebakker Capital
Oct. 11000
Sales
Oct. 157000
Oct. 18750
Oct. 2735000
Purchases
Oct. 71750
Expenses
Oct. 31500
+ +Illustration No. 13, A Ledger with Eight Accounts. + +EXPLANATION: This ledger contains a record of the transactions outlined in § 35, recorded direct in the ledger, and classified under eight accounts, two of which are additional accounts with the owner and Expense. Whether only a part or all of the transactions in connection with the operations of a business are recorded, each transaction affects two accounts, one showing the value received or paid by the business, and the other showing the effect on the capital or on another side. +The same amount in each transaction is recorded on the debit side of one account and on the credit side of another account. + +RECORDING TRANSACTIONS IN THE LEDGER. 35 + +cash and on account), performed by M. E. Studebaker during the month of October, are shown recorded direct in accounts with Cash, customers, creditors, Capital, Sales, Purchases, Expenses, and Income. The Trial Balance of balances made from these accounts is shown in Illustration No. 14. + +Oct. +7. M. F. Studebaker invested $1,000.00 in the office supplies business. +7. Purchased from A. R. King, Clinton, on account, merchandise, $317.65. +10. Received $100.00 in cash for sale of merchandise. +18. Sold to R. B. Meeker, 305 Elm St., City, on account, one desk, $75.00. +24. Paid A. R. King $200.00 on account. +28. Sold J. W. Macom, 222 Main St., City, on account, three files, $127.50. +31. Paid rent of store, $50.00. + +M.E.Studebaker +Trial Balance, October 31, 19-- + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Cash12500
Customers75
Purchases12750
Merchandise11765
Capital1003
Sales278
Purchases31765
Expenses50
Total129565
+ +Illustration No. 14, A Trial Balance of Balances Made from the Ledger Accounts in Illustration No. 13. + +Exercise No. 11, Recording Transactions Direct in the Ledger. + +Record on ledger paper the following transactions performed during the first half of May by R. H. Gillespie, a retail clothing dealer. Allow space for the accounts as follows: Cash, eight lines; Purchases, nine lines; Sales, eight lines; Expense: as listed under Cash; Income: as listed under Sales; Customers: as listed under Cash; Creditors: Heaney, Davis Bros., Globe Clothing Co., and Pope Clothing Co., each four lines. Give each customer and creditor a local address. + +May +1. R. H. Gillespie invested $2,500.00 in the retail clothing business. +2. Bought of Davis Bros., on account, merchandise $317.65; + expense $35. +3. Bought of the Globe Clothing Co., on account, merchandise $196.50. +4. Sold A.C. Dugan on account, one suit of clothes, $65.00. +5. Bought of Pope Clothing Co., on account, one coat and one shirt. +6. Sold for cash one suit of clothes, $65.00; one spring overcoat, $50.00. +7. Sold A.R.Issacs on account, one suit $60.00; five shirts at $25.00. +8. Paid the Globe Clothing Co., Expense in full of account. +9. Sold Charles Heaney on account, one suit, $50.00; one vest, $10.00. + +(Concluded on page 36) + +36 +RECORDING TRANSACTIONS IN THE LEDGER. + +(Exercise No. 11—Continued from page 35.) + +May 10. Bought of the Pope Clothing Co., on account, merchandise, $269.96. +Sold A. C. Dugan, on account, one spring overcoat, $85.00; six ties at $1.25 each. +Received $60.00 from Charles Heaney in full of account. +Bought of Brand Bros., for cash, merchandise, $327.16. +Paid $15.00 for telephone service. +Received $25.00 from A. R. Isaacs in part payment of the merchandise sold hereon on the 6th. +Bought of Davis Bros., on account, merchandise, $105.81. +Paid rent, $70.00; salaries of clerks, $75.00. + +When these transactions have been recorded in the accounts, prove the equality of the debits and credits to a Trial Balance of balances. + +**Exercise No. 12, Recording Transactions Direct in the Ledger.** + +Record on ledger paper the following transactions performed during the month of May by W. L. Kirby, a retail paint merchant: Allow space for the accounts as follows: W. L. Kirby, New York, four lines; W. L. Kirby, City, ten days, merchandise, $86.49; Sold C. A. Norman, City, five lines; C. A. Norman, City, five lines; National Paint Co., and Marcus Transylvania Co., New York, twenty days. + +May 1. W. L. Kirby invested $2,800.00 in the retail paint business. +Bought of Jones Bros., Untiontown, on account, merchandise, $221.35. +Paid one month's rent in advance, $75.00. +Bought of Cowan Bros., City, ten days, merchandise, $86.49. +Sold C. A. Norman, City, five days; merchandise per Sale No. 1, $42.40. The sale number indicates that a copy of the list of items sold has been retained. +Paid National Paint Co., New York, cash for merchandise delivered to day, $705-76. +Sold W. H. Howland, Middleton, on account, per Sale No. 2, $75.80. +Received rent for cash sales of merchandise, $110.00. +Paid Cowan Bros., City, on account. +Sold C. A. Norman, City, on account, merchandise per Sale No. 3, $87.39. +Bought of National Paint Co., New York, twenty days, merchandise per Sale No. 4, $712-58. +Sold W. L. Luttrell, City, on account, merchandise per Sale No. 4, $97-39. +Received $50.00 from C.A. Norman to apply on account. +Bought of Cowan Bros., City, on account, merchandise, $93-25. +Received rent for cash sales of merchandise per Sale No. 5, $128-32. +Bought of Marcus Franklin, Ardmore, five days; merchandise, $218-32. +Bought of Jones Bros., Untiontown, on account; merchandise per Sale No. 6, $172-50. +Paid Marcus Franklin $218-32 in full of account. +Sold W.H.Howland Middleton on account; merchandise per Sale No. 5,$88-50. +Sold C.A.Norman City on account; merchandise per Sale No. 6,$34-39. +Received $30.00 from W.L.Luttrell to apply on account. + +(Concluded on page 37.) + +RECORDING TRANSACTIONS IN THE JOURNAL. 37 + +(Exercise No. 12—Continued from page 36.) + +May 21. +Sold C. O. Bailey, for cash, 20 gallons I. X. L. paint at $4.75, $95.00. +24. +Paid Jones Bros. $100.00 to apply on account. +C. A. Norman returned one gallon paint purchased from us on the 19th and received a credit for $3.00. He paid cash, $59.45, for the balance due on this sale. +Enter as two separate transactions. + +26. +Gave a customer $2.00 in payment for paint purchased from us for cash and returned by him. + +29. +Paid the National Paint Co. $171.48 in full of account. +C. O. Bailey returned 2 gallons I. X. L. paint purchased on the 21st and accepted in exchange for it 4 gallons varnish. +No entry made with W.H. + +31. +Received credit from Jones Bros. for $12.00, value of 3 gallons paint purchased on the 17th and returned by us per agreement. +When these transactions are entered in the accounts, prove the equality of the debits and credits by a Trial Balance of balances. + +RECORDING TRANSACTIONS IN THE JOURNAL + +§ 36. Transactions with the owner and with operating expenses may be recorded in the journal in the same manner as transactions in which merchandise is purchased or sold for cash or on account. When the owner invests cash or other assets in the business, the transaction is recorded in the journal by writing the date, the name of the account debited and amount, the name of the account credited and amount of the transaction; each asset invested is debited to the account which it shows its value, and the owner's Capital account credited. When the owner withdraws a part of his capital from the business, he records such withdrawal in the journal by writing the date, the name of the account debited and amount of the withdrawal; in this case, however, the owner's Capital account is debited with the amount of the withdrawal, and the account which shows the value of the asset withdrawn is credited with that amount; when he pays himself wages or salaries, or draws dividends, he records such payment in the journal by writing the date, the name of the operating account affected (usually Expense) and the amount of the payment, the name and amount of the asset parted with, and the explanation. + +Before entering transactions in the journal, the student should journalize each one mentally: that is, he should determine from the nature of the transaction what account to be debited and what account to be credited; then write down in his notebook what he has written mentally; it is essential that the proper accounts be debited and credited in each transaction. Thus if M. E. Studehaker invests $1,000 in his business on October 1st, he debits Cash $1,000 and credits M. E. Studehaker Capital $1,000; if he receives a salary of $50 per month during October, he debits Salary Expense $50 per month and credits M. E. Studehaker Capital $50 per month; if he draws a dividend of $50 per month during October, he debits M. E. Studehaker Capital $50 per month and credits Cash $50 per month; if he pays his bookkeeper debts M. E. Studehaker Capital instead of Expense, the report which Mr. Studehaker receives from his bookkeeper at the end of the year would show $1,000.00 less expense than was actually incurred. + +The following transactions relative to the complete operations of a business (including investment, operating cost, and the purchases and sales of merchandise for cash) are shown in Illustration No. 15 on page 35 of October, are shown recorded in the journal in Illustration No. 15 and posted to the ledger in Illustration No. 16. These transactions are the same as those at top of page 35. + +Oct. 1. +M. E. Studehaker invested $1,000.00 in the office supplies business. +7. +Purchased from A. R. King, Clinton, on account, merchandise, $317.65. +10. +Received $75.35 for cash sales of merchandise. + +Concluded on page 38. +A small circular stamp with "A" and "E" crossed over each other. + +38 +RECORDING TRANSACTIONS. + +October 1, 19-- + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Cash10001000
$250250250
Mercedes-Benz Capital Limited, in the office of the treasurer.
Taxes317.65317.65
W.R. King
Dessert merchandise on account
Cash75.0075.00
Sales
Sold merchandise for cash
C.O.Moore7575
Sales
Sold one desk on account
C.O. King200200
Cash
Paid cash to W.R. King on account
J.H. Bacon127.50127.50
Sales
Sold three filing cabinets on account
Expenses:
+
DescriptionAmount (in dollars)Total Amount (in dollars)
Cash5050
Paid rent of store.
+ +Illustration No. 15, A Journal Page with Transactions Recorded on It. + +EXPLANATION: The transactions recorded in this illustration are given at the bottom of pages 37 and 38. The method of recording is the same as in Illustrations Nos. 7 and 11. The transactions are the same as those recorded direct in the ledger in Illustration No. 15. + +(Continued from page 37.) + +Oct. 18. Sold E.B. Moore, 305 Elm St., City, on account, one desk, $75.00. +24. Paid J.R. King $200.00 on account. +28. Sold J.W. Macon, 222 Main St., City, on account, three files, $127.50. +31. Paid rent of store, $30.00. + +RECORDING TRANSACTIONS 39 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Cash
Oct. 1$1,000Oct. 20$200
Oct. 10$1,500Oct. 21$50
C.B. Monroe
and Elmhurst City
Oct. 18$175
J.H. Mason
and Mainesville City
Oct. 28$1,070
A.R. King
Cincinnati
Oct. 24$1,000Oct. 7$1,965
M.E. Studebaker, Capital
Oct. 1$1,000
Sales
Oct. 10$1,950
Oct. 18
Oct. 28$1,975
Budgeted PurchasesPurchase DateDescription of PurchaseTotal Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)Total Amount of Purchase (in Dollars)Total Amount of Purchase (in Cents)
+ +Illustration No. 16. A Ledger with Eight Accounts Resulting from Posting. + +EXPLANATION. This ledger shows the posting of the transactions recorded in the journal, Illustration No. 15. A comparison of Illustration No. XX with this illustration will show that the facts are the same, except the folio columns are used in the illustration above. + +A ledger page showing cash receipts and disbursements. + +49 + +EXERCISES IN RECORDING TRANSACTIONS. + +Exercise No. 13, Recording Transactions in the Journal and Posting. +Record on journal paper the following transactions performed during the month of January by E. B. Taylor, a retail grocer: + +Jan. 1. E. B. Taylor invested $1,000.00 in the retail grocery business. +2. Bought from A. M. Manley, on account, merchandise, $77.30. +3. Bought of Langley Bros., City, thirty days' time, merchandise, $134.95. +4. Paid $200.00, city and state license for one year. +5. Sold A. M. Manley, 266 Elm St., City, on account, 40 lbs. Arubble coffee at $25 each. +When the sale includes more than one item, the explanation in the journal should be as follows: +Sold on account: +40 lbs. Arubble Coffee at 20c., $8.00. +1 lb. White Lily flour at 25c., $5.04. +10 +Paid J. F. Sherwood $100.00 for merchandise purchased today. +Received $30.50 for sundry cash sales. +Paid $25.00 for sundry cash sales. +Sold Gibson Hotel, 12 E. 4th St., City, ten days, 6 bbls. Roller King flour at $.51 each; 3 bbls. White Lily flour at $.625 each; 40 lbs. Arubble coffee at 20c. +Sold J. W. Staples, Clinton, sixty days, 4 bbls. Roller King flour at $.51 each; 4 cans, 20o lbs., lard at 15c. +Received $100.00 from A. R. Manley to apply on account. +Bought of Logan & Moseley, Centerville, twenty days' time, merchandise, +$238.68. +Sold A. R. Manley, 166 Elm St., City, on account, 5 bbls. White Lily flour at 25c.; 115 lbs. Black Jack coffee at 25c. +Received $30.50 for the Gibson Hotel to apply on account. +30 +Received $41.85 for sundry cash sales. + +When the above transactions have been recorded in the journal as instructed open accounts in the ledger with Cash (9), Purchases (8), Sales (10), Expense (5), Etc., Taylor's Account (6) and Manley's Account (7). See Jan. 4th, A.R. Manley (4); Gibson Hotel (4); J.W. Staples (4); Logan & Moseley (4), allowing for each account the number of lines indicated; post the transactions, and prove the posting by a Trial Balance of totals. + +Exercise No. 14, Recording Transactions in the Journal and Posting. +Record on journal paper the following transactions performed during the month of July by H. Weatherly, a retail grocer: + +July 1. H. Weatherly invested $1,276.60 in the retail grocery business. +2. Bought from Woodward Bros., Morgantown, on account, merchandise, +$127.60. +3. Bought from Waters & Gay, Batesville, on thirty days' time, merchandise, +$294.95. +Paid $200 cash for city and state license. +Sold J. A. Taylor, 226 Pigeon St., on account, 25 lbs. roasted coffee at 25c.; 337 lbs. White Lily flour at 25c.; 76 lbs. bacon at 25c. +Bought from Chaffin & Jones, City, for cash, merchandise, +$422.00. +6 +Received $25.50 for sundry cash sales to date. +Paid Woodward Bros., $127.60 in full of account. + +(Concluded on page 41.) + +EXERCISES IN RECORDING TRANSACTIONS. +41 + +(Exercise No. 14—Continued from page 30.) + +July 8. Sold the Colonial Hotel, Washington Ave., on account, 5 bbls. Blue Ribbon flour at $0.10; 3 bbls. White Rose flour at $0.75; 90 lbs. granulated sugar at 7c. + +9. Received $13.00 from J. A. Taylor to apply on account ____________. + +10. Bought from Winters & Gay, Batesville, on thirty days' time, merchandise; $29.58. + +12. Received $40.00 from the Colonial Hotel in part payment for merchandise due on the 8th. + +13. Paid Winters & Gay $100.00 to apply on purchase of the 3d. + +Sold M. J. Sanders, 227 Beech St., on account, 5 bbls. White Rose flour at $9.75; 10 hams, 191 lbs., at 26c. + +15. Bought from Woodward Bros., Morgantown, on account, merchandise; $216.37. + +16. Sold the Colonial Hotel, Washington Ave., on account, 7 doz cans peaches at $4.75 per doz.; 2,000 lbs. bran at $16.25 per 1,000 lbs. + +17. Bought from the Perfection Creamery, Rosedale, on twenty days' time, merchandise; $167.55. + +18. Received $30.00 from M. J. Sanders to apply on account. + +Bought from Chafin & Jones, City, for cash, merchandise; $116.60. + +19. Sold W. W. Johnston, 122 Elm St., on account, 2,000 lbs. bran at $16.25 per 1,000 lbs.; 200 lbs. lard at 22c; 3 doz cans peaches at $1.60 per doz. + +20. Paid Winters & Gay $149.05; balance due on purchase of the 3d. + +Received $52.50 for candy cash sales to date. + +22. Sold W. W. Johnston, 122 Elm St., on account, 100 lbs. granulated sugar at 7c; 5 bbls. White Rose flour at $9.75. + +23. Bought from the Perfection Creamery, Rosedale, on twenty days' time, merchandise; $167.55. + +24. Received $50.00 from the Colonial Hotel in full for balance due on sale of the 8th, and on account of sale of the 16th. + +Paid Winters & Gay $200.00 on account of purchase of the tenth. + +26. Received $15.55 from J. A. Taylor in payment for balance due on merchandise sold to date. + +Sold L. S. Lynn, 915 Jefferson Ave., on account, 5 bbls. White Rose flour at $9.75; 10 lbs. creamery butter at 42c. + +29. Received $48.00 from L. S. Lynn to apply on account. + +Paid Woodward Bros., $500.00 on account of purchase of the fifth. + +31. +Paid bookkeeper's salary; $60.00; rent; $50.00; telephone service; $10.00. + +When the above transactions have been recorded in the ledger as instructed, open accounts with customers as follows: The Colonial Hotel (8), M.J.Sanders (5), W.W.Johnston (6), L.S.Lynn (5), Woodward Bros.(6), Win- ters & Gay (8), Perfection Creamery (6), E.H.Weatherby, Capital (5), Sales (13), Purchases (12), Expense (6), allowing for each account the number of lines indicated; post the transactions, and prove the posting by a Trial Balance of balances. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
+
+
July8.Sold the Colonial Hotel, Washington Ave., on account, 5 bbls.
Blue Ribbon flour at $0.10;
3 bbls.
White Rose flour at
$0.75;
90 lbs.
granulated sugar at
7c.
9.Received $13.
10.from J.A.Taylor to apply on account ____________.
12.Bought from Winters & Gay,
Batesville,on thirty days'time,merchan-dise;$29..58......................
+
Batesville,on thirty days'time,
+		merchan-
+		dise;
+		$29.
+		.58.
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Description42 + +QUESTIONS ON RECORDING TRANSACTIONS. + +QUESTIONS + +1. Name some of the necessary expenses of a grocery business. +2. Can you suggest a plan which would permit the grocer to know the cost of delivering merchandise? +3. What accounts are affected when cash is paid for telephone service? +4. What effect would it have on the operating cost of the business if the salary paid to telephone service is connected with the business were debited to his Cai'tal account? +5. Name the account debited and the account credited when merchandise is invested at the beginning of business. +6. What accounts are affected when cash and merchandise are invested at the beginning of business? +7. What must the owner of a business take into consideration when he fixes the selling price of the merchandise which the business offers for sale? +8. Name some of the expenses in connection with the operation of a railroad. +9. If a merchant pays $25.00 for a new engine, will this be some of the expenses which would be debited to this account? +10. If a merchant pays $25.00 for drayage on merchandise he has purchased, would this be debited to the Expense or the Purchases account? Give reasons for your answer. +11. What accounts are affected when the owner withdraws a part of his capital? +12. Name the account debited and the account credited when the owner invests cash in a business. +13. If a telephone company pays $2,000.00 for wire used in connection with the service rendered its customers, will this be debited to the Expense account? +14. If a railroad company pays $8,000.00 for a new engine, will this be debited to this account? +15. What accounts are affected when stamps, debited to Expense when purchased, are used for parcel post on a package containing merchandise sold a customer or delivered to him by parcel post. +16. Name the account debited and the account credited if the sale mentioned in the preceding question had been made for cash and the customer had given the balance due immediately after purchase. +17. If Robert A. Clark, the owner of a business, is to receive a salary of $200.00 a month for his services rendered to the business and this is withdrawn at different times, what would be the name of the account kept with the trans- acting party executing this salary? +18. What accounts would be affected when the entry was made at the end of the month for $200.00 salary, 31st July, 19--. +19. Name some amount debited to an account credited if Mr. Clark accepted merchandise from stock at cost price in payment for a part of his salary. +20. What accounts would be affected if Mr. Clark accepted merchandise from stock at cost price in payment for a part of his salary. +21. What entry would be required if one customer was debited with merchandise purchased by another customer? +22. Name some transactions which might occur in connection with the complete operations of a hardware business. +23. Name some of the transactions which might occur in connection with the complete operations of a plumbing business. +24. Under what circumstances would it be advisable to keep of more than one account with the expenses of a business? +25. Name some of the transactions which might be performed in connection with the operations of a dairy. + +Chapter V + +RECORDING TRANSACTIONS—Concluded + +§ 37. Special Journals. While all transactions may be recorded in the journal as explained in § 22, yet it is not customary to do this because efficiency in book-keeping means the greatest amount of work with the least result and the least cost. When numerous transactions affect one account, such time can be saved by recording in special journals. Fifty purchases during one month recorded in the journal would require writing "Purchases" fifty times and posting fifty lines to the ledger. In the special journal, however, only one entry would be necessary to record these transactions and posting required in recording the transactions and posting, fifty lines would be needed in the ledger for the Purchases account. If these transactions were recorded in a journal, it would be necessary to write "Purchases" in each transaction and the total could be posted to the Purchases account in one amount at the end of the month, thus saving practically all time and effort in posting and posting of these transactions. In addition to the time saved in posting forty-five purchases, it would save a good deal of time as a result of posting the total purchases in one amount. + +In a mercantile business the transactions which are of the most frequent occurrence are those connected with the sale of merchandise and the receipt and payment of cash. If these transactions are recorded in special journals, the work in the accounting department will be much more efficient, and, when a large mercantile business is large and more than one bookkeeper is needed, several bookkeepers can use the different journals without interfering with the work of each other. + +The special journal showing the total of the account affected by all sales at the total at the end of the month is known as the sales journal and is usually referred to as the purchases journal because the Purchases account will be debited with the total, and the Purchases account will be credited as reference because the Sales account will be credited with the total. + +§ 38. The Purchases Journal is a book of original entry in which all pur- chases of merchandise are recorded and no other transactions are recorded in it. The page on which each purchase is entered contains four columns which include: (1) date of entry, (2) name and address of the person or firm from whom merchandise is purchased, (3) terms, the number of the purchase and (4) amount of purchase. The date of entry is written at once after each purchase is made, so that all this information can be recorded on one line. When arranged in this manner, each person or firm from whom merchandise is purchased can be credited in his account in this journal at any time that he makes a purchase at any time during the end of the month. + +Illustration No. 17 shows one form of the purchases journal. + +If cash purchases are recorded in the cash book (§ 43), it is not necessary to record them in this journal. This is especially further in connection with small stores where cash books are used. + +The following purchases of merchandise made by E. B. Taylor, a retail grocer, during the month of January, are shown recorded in the purchases journal in Illustration No. 17: + +Jan. 2 - Bought of E. C. Cline, Chicago, on account, merchandise, $73.00. +Jan. 3 - Bought of Langley Bros., City, on thirty days' time, merchandise, +$134.95. +23 - Bought of Logan & Moseley, Centerville, on twenty days' time, mer- +chandise, $228.60. + +43 + +44 RECORDING TRANSACTIONS IN THE PURCHASES JOURNAL. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Date L.F.Account CreditedAddressTermPur.Amount
January, 1971 E.C. ClingChicagoOn acct. 30 days778013495
1 Langley Bros.City30 days27666
25 Logan-MadleyCenterville30 days-44005
31 Purchases Dr. - Total-44005
+ +Illustration No. 17, Purchases Journal. +EXPLANATION. Each transaction is recorded on one horizontal line. The information in the "Pur. No." column refers to the list of merchandise (invoice) sent by the seller to the purchaser; that is, each purchase is recorded only once, regardless of how many purchases are made to one journal entry in which the Purchases account is debited and three personal accounts credited. +§ 39. Posting from the Purchases Journal. The accounts affected by each transaction recorded in the purchases journal are Purchases (debit) and the account of the person or firm (credit); for this reason, each amount entered in the (Concluded on page 45.) + +E.C Cling Chicago Jan's Current P. 7780 Langley Bros City Jan's 30 days P. 13495 Logan-Madley Centerville Jan's 30 days P. 27666 Purchases Jan's P. -44005 + +Illustration No. 18, Ledger Resulting from Posting Illustration No. 17. +EXPLANATION: A Trial Balance from this ledger will show that the debit amount is equal to the credit amounts even though the record in the accounts does not represent all of the transactions that the business would perform. One purpose of this illustration is to show that the ledger is in balance when all the transactions from any one journal have been posted. + +RECORDING TRANSACTIONS IN THE PURCHASES JOURNAL. 45 + +money column is posted to the credit of the account written on the same line with it, and the Purchases account is debited at the end of the month with the total. +The purchases journal is used in the journal, except that the amounts debited to Purchases are grouped and posted at one time; the posting to the accounts with creditors should be daily, and the posting of the total to the Purchases account, monthly. The date of each purchase is entered in the left margin of the page, and are entered in the ledger; the letter "P" indicates the title of the book of original entry. If a specific time of payment is stated, this should be written in the explanation column of ledger as explained in Illustration No. 1. The page of the ledger is written in thefolio column of the purchases journal to indicate where the entry has been posted. + +The posting of the transactions recorded in the purchases journal, Illustration No. 17, is shown in Illustration No. 18. + +**Exercise No. 15, Recording Transactions in the Purchases Journal.** + +Record in the purchases journal (paper ruled similar to Illustration No. 17) the following transactions relative to the purchase of merchandise during the month of February by W. G. Gardner, who is engaged in a hardware business. + +Feb. 1. B. A. Ames, Toledo, 30 days' Purchase No. 1, $35.00. +Feb. 5. S. H. Hagerman, Chicago, 30 days', Purchase No. 2, $235.00. + +In this purchase the merchandise was shipped Feb. 1 and received Feb. 5; the amount is due in 30 days from Feb. 6. + +Feb. 7. T. H. Thomas, Rochester, 20 days', Purchase No. 3, $86.00. +Feb. 9. J. T. Goodrich, City, Feb. 10, 90 days', Purchase No. 4, $852.00. +Feb. 11. J. P. Benson, Cleveland, Feb. 17, 60 days', Purchase No. 5, $641.00. +Feb. 12. C. L. Smith, Detroit, Feb. 22, 30 days', Purchase No. 6, $422.00. +Feb. 18. H. L. Simpson, Dayton, Feb. 26, 30 days', Purchase No. 7, $424.00. + +When the above transactions have been recorded in the purchases journal as instructed, and the purchases journal ruled as in Illustration No. 17; open accounts on a sheet of ledger paper with Purchases and each of the seven creditors, allowing four lines for each of these accounts; when all postings have been completed, prove the equality of the debits and credits by a Trial Balance. + +**Exercise No. 16, Recording Transactions in the Purchases Journal** + +Record in the purchases journal the following transactions relative to the purchase of merchandise during the month of January by H. H. Goodman, a retail grocer. + +Jan. 2. Brown & Co., Elmwood, on account, Purchase No. 1, $373.00. +Jan. 4. Knob Bros., City, on account; Purchase No., $17436. +Jan. 8. Harris & Co., Detroit on account; Purchase No., $22860. +Jan. 15. Brown & Co., Elmwood, on account; Purchase No., $28260. +Jan. 26 Lake View Creamery, Lake View, Jan. 14; 20 days', Purchase No., $35. +Jan. 29 J . Allen Smith & Co., Rockford; for sales; Purchase No., $6797. +Jan. 30 Donaldson Bros., City; Jan., 24; on account; Purchase No., $71725. + +When the above transactions have been recorded in the purchases journal as instructed and posted to ledger paper with Purchases and each of the six creditors, allowing five lines for Brown & Co., and four lines for each of the other accounts; When the posting has been completed prove equality of the debits and credits by a Trial Balance. + +After the instructor has approved this exercise, retain this purchases journal only for use in connection with Exercise No. 23. + + + + + + + + + + + + + + +
+ +46 RECORDING TRANSACTIONS IN THE SALES JOURNAL. + +**Exercise No. 17. Recording Transactions in the Purchases Journal.** + +Record in the purchases journal the following transactions relative to the purchase of merchandise during the month of March by C. U. Steele, a retail shoe dealer: + +March 2. Bay State Shoe Co., Boston, Feb. 28, 10 days, Purchase No. 1, $356.81. +Haynes, Henson & Co., Newark, N. J., Mar. 2, 10 days, Purchase No. 3, $375.62. +4. M. B. Lang, City, Mar. 3, 30 days, Purchase No. 3, $1,691.42. +5. Christie & Co., Pittsburgh, Mar. 10, 30 days, Purchase No. 4, $165.42. +18. Bay State Shoe Co., Boston, Mar. 15, 30 days, Purchase No. 5, $838.35. +Haynes, Henson & Co., Newark, N. J., Mar. 20, 30 days, Purchase No. 6, $350. +Nov. 29th. +26. Christie & Co., Pittsburgh, Mar. 20, 30 days, Purchase No. 7, $755.00. +M. B. Lang, City, Mar. 22, 60 days, Purchase No. 8, $433.50. +M. B. Lang, City, Mar. 22, 30 days, Purchase No. 9, $336.00. + +When the above transactions have been recorded in the purchases journal as instructed and the purchases journal ruled open an account with Purchases at the top page of t a double sheet of ledger paper and an account with each of the five creditors on page 2 of the same sheet allowing equal space for each personal account and for the amount of the debits and credits for each transaction. + +If double ledger paper ruled with thirty to forty horizontal lines on each page can not be obtained use any ledger paper available and allow five lines for each account. + +After the instructor has approved this exercise retain the ledger sheet only for use in Exercise No. 18. + +§ **40 The Sales Journal** is a book of original entry in which all sales of merchandise on account are recorded and no other transactions are recorded in it. + +The complete record of a transaction in which merchandise is sold on account includes the date of sale (the day when the sale was made), the name of the customer who bought the merchandise is sold, the term, a list of the items sold and the amount of the sale. + +It is necessary for the seller to retain a record of the items sold a customer on account because this information will be needed in case adjustments are required. + +If a customer does not pay his bill within the time allowed by the terms of sale and the seller has no record of the items sold to this customer he might be imposed on by allowing credit for merchandise which was not purchased from him. + +Illustration No. 1 shows a form of sales journal containing a list of the items sold and a place for recording each sale including date of sale and number with the list of items indicated by the sale number. + +The method shown in Illustration No. 2 is more efficient because it requires less time to record a number than a list of articles. + +Illustration No. 3 shows how cash sales are recorded in this journal. + +If cash sales are recorded in the cash book (p. 43) it is not necessary to record them in the sales journal This is explained further in connection with the discussion of the cash book. + +The following sales made by E. B Taylor, a retail grocer during the month of January are recorded in two pages of sales journals in Illustrations Nos. 19 and 20. + +Jan. 6 Sale A R Manley, 106 Elm St., City on account, 40 lbs Arubackle coffee at 2c; t bbl White Lily flour at $0.25. +10 Sold Gibson Hotel, 12 Etth St City on ten days' time; 6 bbls Roller King flour at $0.10; 3 bbls White Lily flour at $0.25; 40 lbs Arubackle coffee at 2c. +17 Sold T L Staples Clinton on sixty days' time; 4 bbls Roller King flour at $0.15. +26 Sold A R Manley, 106 Elm St City on account; 5 bbls White Lily flour at $0.25; 115 lbs Arubackle coffee at 2c. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
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DatePurchase No.Purchase DatePurchase AmountPurchase TermPurchase DescriptionPurchase Price per UnitPurchase UnitsPurchase Total AmountPurchase Total TermPurchase Total DescriptionPurchase Total Price per UnitPurchase Total UnitsPurchase Total AmountPurchase Total TermPurchase Total DescriptionPurchase Total Price per UnitPurchase Total UnitsPurchase Total AmountPurchase Total TermPurchase Total DescriptionPurchase Total Price per UnitPurchase Total UnitsPurchase Total AmountPurchase Total TermPurchase Total DescriptionPurchase Total Price per UnitPurchase Total UnitsPurchase Total AmountPurchase Total TermPurchase Total DescriptionPurchase Total Price per UnitPurchase Total UnitsPurchase Total AmountPurchase Total TermPurchase Total DescriptionPurchase Total Price per UnitPurchase Total UnitsPurchase Total AmountPurchase Total TermPurchase Total DescriptionPurchase Total Price per UnitPurchase Total UnitsPurchase Total Amount
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Date +No. +Date +Amt +Term +Description +Price per Unit +Units +Total Amt +Total Term +Total Description +Total Price per Unit +Total Units +Total Amt +Total Term +Total Description +Total Price per Unit +Total Units +Total Amt +Total Term +Total Description +Total Price per Unit +Total Units +Total Amt + +
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1 A.R. Ramsey, Inc.,1080
1080, Whiteley, Texas1
1 Sales Hotel, Inc.,605
Whiteley, Texas1
1 Sales Hotel, Inc.,3735
Whiteley, Texas3060
2 Sales Hotel, Inc.1875
Whiteley, Texas20
1 Sales Hotel, Inc.,3040
Whiteley, Texas2049
4 cans, 200 lbs. Lard39
1 A.R. Ramsey, Inc.,5425
Whiteley, Texas
1 Sales Hotel, Inc.,3125
Whiteley, Texas
1 Sales Hotel, Inc.,7225
Sales On Total17625
+ +Illustration No. 19, Sales Journal Containing a List of Items Sold. +EXPLANATION. The transactions recorded in this sales journal are equivalent to a journal entry in which four accounts are debited, each for the amount written on the same line with it, and the Sales account credited for the total of all such amounts. In addition to the date, the name and address of the customer, the total amount of the sale, and a list of the items sold. + + + + +
Date
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Sales On Total.		DescriptionTotal AmountTotal Amount PaidTotal Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance)Total Amount Paid (Balance).
+ +January, 1925 + + + + +
Date L.F.Description Acceptor Sold Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total.
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Date L.F.Description Acceptor Sold Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total.
+ +Illustration No. 20, Sales Journal Without a List of Items Sold. +EXPLANATION. The above facts are the same as those in Illustration No. 19, except the articles are not itemized. Information concerning these is obtained from a copy of the sale ticket. + +48 + +**RECORDING TRANSACTIONS IN THE SALES JOURNAL** + +**No. 41. Posting from the Sales Journal.** The accounts affected by each transaction recorded in the sales journal are the customer (debit) and Sales (credit); for this reason each amount written on the line with the name of the customer is posted to the debit of his account, and the Sales account is credited with the total at the end of the month. The posting of the amounts to accounts with cus- +tomers is made by entering them in the ledger under their names, with the letter "S" and the page of the sales journal are entered in the ledger; the letter "S" in- +dicates the title of the book of original entry. A specific time of payment is stated when it can be determined from column D of the ledger as explained in Illustration No. 20. The page of the ledger is written in the folio columns of the sales journal to indicate where the entry has been posted. + +The posting of the transactions recorded in the sales journal, Illustration No. +19 or No. 20, is shown in Illustration No. 21. + +Illustration No. 21, Ledger Resulting from Posting Illustration No. 19 or No. 20. + +EXPLANATION. The same explanation applies here as that given in connection with the ledger resulting from posting the transactions from the purchases journal, Illustration No. 18. + +**Exercise No. 18, Recording Transactions in the Sales Journal.** + +Record in the sales journal (paper ruled similar to Illustration No. 20) the following transactions relative to the sale of merchandise on account during the month of February by W. J. Wheeler, a retail merchant: + +Feb. 3, William A. Wallace, Evanston, Sale No. 1, $50. +8. William A. Wallace, Evanston, Sale No. 2, $14.50. +(Concluded on page 49.) + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
A.R.Mansley16 Elm St., City.
Jan 6 Cashed $1Jan 6 Cashed $1
Salesman's NameSalesman's Name
Jan 6 Cashed $1Jan 6 Cashed $1
T.L.SchaefflerT.L.Schaeffler
Jan 7 Cashed $1Jan 7 Cashed $1
Salesman's NameSalesman's Name
Salesman's NameSalesman's Name
+ +RECORDING TRANSACTIONS IN THE SALES JOURNAL. 49 + +(Exercise No. x8—Continued from page 48.) + +Feb. 12. +B. T. Hart & Co., Marville, Sale No. 3, $32.50; +14. +D. T. Sinton, Uniontown, Sale No. 4, $41.65; +18. +G. L. Frye, 29 Main St., Sale No. 5, $127.75; +20. +The Long Construction Co., Uniontown, Sale No. 6, $142.50; +23. +Eugene Mather, 107 Main St., Sale No. 7, $24.55; +27. +D. P. Lewis, 310 Chestnut St., Sale No. 8, $0.75; +Maynard Fritchett, Brookville, 30 days sale, Sale No. 9, $05.25. + +When the sales journal has been completed, take a Trial Balance. + +Exercise No. 19, Recording Transactions in the Sales Journal. + +Record in the sales journal (journal paper ruled similar to Illustration No. 19) the following transactions relative to the sale of merchandise during the month of January and February: + +Jan. 4. +A. R. Jennings, 105 Main St., 20 lbs. roasted coffee at $3¢: 100 lbs. +granulated sugar at $c: 50 lbs. bacon at 2¢: +8. +Central Hotel, 22 Walnut St., 3 lbs. Blue Ribbon flour at $.25: 4 hams, +100 lbs.; 1 lb. butter at .c: 10 lbs. +A. R. Jennings, 105 Main St., 1 doz. cans tomatoes, $.200: 1 can; 250 +lbs., hard at .c: +M. A. Hensley, Kingston, 5 lbs. White Rose flour at $.75: 6 hams, 141 +lbs., at .c: +Imperial Hotel, 20 Locust St., 5 bbls. Blue Ribbon flour at $.25: 100 +lbs.; 1 lb. butter at .c: 1 lb. +A. C. Williams, 121 Elm St., 12 doz. cans peaches at $.80 per doz.; +2,000 lbs. bran at $.625 per 1,000 lbs. +C. M. Martin, 336 Main St., $300 bu.: meal at $.10: 3 bu.; beans at +$.375: 1 doz. cans peaches at $.75: 4 lbs.; butter at .c: 4 lbs. +Imperial Hotel, 20 Locust St., 5 bbls. White Rose flour at $.75: 25 +lbs.; creamery butter at .c: +J. C. Johnson & Co., Inc., 2,000 lbs. bran at $.625 per 1,000 lbs.; +5 cans, .24 lbs., hard at .c: +C. L. Lloyd, 1604 Vine St., 100 lbs.; brown sugar at .675: 100 lbs.; gran- +ulated sugar at .c: White Rose flour at $.75: $9. + +When the above transactions have been recorded in the sales journal as instructed, and the sales journal ruled as in Illustration No. 19, open accounts on a sheet of ledger paper with Sales and each of the nine customers, allowing five lines each for R. L. Watson and Imperial Hotel and five lines each for the other accounts. + +After the posting has been completed, take a Trial Balance. + +Exercise No. 20, Recording Transactions in the Sales Journal. + +Record in the sales journal (journal paper ruled similar to Illustration No. 19) the following transactions relative to the sale of merchandise during the month of March by C. U. Steele, a retail shoe dealer: + +March +R. L. Watson, 207 Mason St., Jr Queen City shoes, $10.50; +A. R. Jennings, Jr Queen City shoes, $8; Jr Queen City shoes, $8; +J. C. Wilson & Co., Hamilton, Jr Men's Cali' shoes at $.50; Jr Men's Cali' shoes at $.75; Jr Men's Jefferson shoes at $.75. + +*(Concluded on page 50.)* + +50 RECORDING TRANSACTIONS IN THE CASH BOOK. + +(Exercise No. 29—Continuation from page 49.) + +March 12 A. R. King, Boston, 1 pr. Ladies' Hat at $4.50. +15 W. E. Peters, Clinton, 1 pr. Men's Vici Autorcat shoes, $14.00. +18 W. K. Love, 207 Main St., 1 pr. Men's Vici Red Kid shoes, $11.50. +21 2 pr. Men's Vici Red Kid shoes, $23.00. +26 C. A. Sheppard, Canton, 1 pr. Men's Cong. Calf, $9.00. +30 R. L. Watson, 207 Mason St., 6 prs. Children's Satin Calt at $2.75. + +When the above transactions have been recorded in the sales journal as instructed, and the sales journal ruled as in Illustration No. 10, open an account with the Salesman's Ledger on page 3 of this same ledger sheet, allowing equal space for each personal account; take a Trial Balance. When approved, retain the ledger sheet for use in Exercise No. 23. + +§ 42. The Cash Record. There are two classes of cash transactions: those in which cash is received, and those in which cash is paid. These transactions may be recorded in one bookkeeper's cash book or in two books kept by different bookkeepers; and the payments in a cash payments journal, or they may be recorded in a cash book which is a combination of the two journals. When one bookkeeper records all the transactions that can be received and paid, it is better to use the cash book; when recording of all such transactions requires more than one bookkeeper, it is better to use separate cash receipts and cash payments journals. + +Illustration No. 22 Receipts Side of Cash Book. + +EXPLANATION: The transactions recorded on the receipts side of the cash book in the illustration are equal to those recorded on the payments side of the cash book for the total, and each of the four accounts credited for the amount written on the same line with it. The ruling across the top line of each account shows that these amounts are to be added together to find the total amount of receipts for the month which is carried down below the ruling because it will be needed in subsequent proving of cash. + +§ 43. The Cash Book is a book of original entry in which all receipts and payments of cash are recorded and no other transactions are recorded in it. Receipts and payments are usually recorded on separate pages opposite each other, receipts on one side and payments on the other; but where there is only one transaction in which cash is received or paid consists of the date, the name of the account affected, explanation, and the amount received or paid. The ruling in the cash book should be so arranged that all this information can be recorded on the one line. When ar... + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
CashReceipts
Jan.1 C.B.Durham Capital Investment1000
12W.C.WilsonCash Sales3050
20W.R.HardingCash Receipts10
27S.A.FrancisCash Sales3050
30A.SalmonCash Sales7465
31Cash SalesTotal receipts111215
Totals.111215
12355
+ +Illustration No. 22 Receipts Side of Cash Book. + +EXPLANATION: The transactions recorded on the receipts side of the cash book in the illustration are equal to those recorded on the payments side of the cash book for the total, and each of the four accounts credited for the amount written on the same line with it. The ruling across the top line of each account shows that these amounts are to be added together to find the total amount of receipts for the month which is carried down below the ruling because it will be needed in subsequent proving of cash. + +§ 43. The Cash Book is a book of original entry in which all receipts and payments of cash are recorded and no other transactions are recorded in it. Receipts and payments are usually recorded on separate pages opposite each other, receipts on one side and payments on the other; but where there is only one transaction in which cash is received or paid consists of the date, the name of the account affected, explanation, and the amount received or paid. The ruling in the cash book should be so arranged that all this information can be recorded on the one line. When ar... + +RECORDING TRANSACTIONS IN THE CASH BOOK. 51 + +Ranged in this manner, each account affected by a cash receipt can be credited for the amount and the Cash account debited for the total at the end of the month; each account affected by a cash payment can be debited for the amount and the Cash account credited for the total at the end of the month. One form of the cash book is shown in Illustrations Nos. 22 and 23; other forms will be illustrated and explained later. + +When a sale is recorded in the cash book only, the Sales account is credited; if recorded in the sales journal and cash book, the customer's account is debited by the sales journal entry and credited by the cash book entry. When a purchase is recorded in the cash book only, the Purchases account is debited; if recorded in the purchases journal and cash book, the vendor's account is debited by the purchases journal entry and credited by the cash book entry. + +The following receipts and payments of cash made during the month of Jan- +uary by E. B. Taylor, a retail grocer, are shown recorded in the cash book in Illus- +trations Nos. 22 and 23: + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
CashTax Returns
Jan. 4ReceiptsAccounts Receivable70
10 PurchasesCash Purchase175
13 EC LineReceipts from Customer5289
31 Cash Car.Total Receipts28730
11265
+ +Illustration No. 23, Payments Side of Cash Book. + +EXPLANATION. The transactions recorded on this side of the cash book are equivalent to a journal entry showing credit for the amount written off the sales line with it, and the Cash account credited for the total. The term "red ink" is used here because it is customary to use red ink when an amount is entered in a book of account or a ledger account in order to make two sides equal. This ruling separates the cash payments for two different months. + +§ 44. Proving Cash. The difference between the two sides of the cash book should at all times equal the amount of cash belonging to the business; the proof is effected by counting the cash and comparing it with the balance shown by this method at the end of each month. When no error has been made in proving at the end of the month, the cash book is ruled; Illustrations Nos. 22 and 23 show the method of footing and ruling the cash book at the end of the month. + +52 RECORDING TRANSACTIONS IN THE CASH BOOK. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
E. B. Taylor Capital
Jan.Co 1000
Sales
Fom 18Co 3000
Co 185
A.R. Manley
Fom 30Co 10
Lubicon Hotel
Fom 77Co 1050
Cash
Fom 31Co 11125 Fom 31Co 21930
Expenses
Fom 4Co 40
Purchases
Fom 10Co 195
E.C. Cline
Fom 13Co 7750
+ +Illustration No. 24, Ledger Resulting from Posting Illustrations Nos. 22 and 23. + +EXPLANATION: This illustration is given to show that the ledger is in balance when all the transactions recorded in the cash book have been posted, and not to show the true meaning of the accounts resulting from the posting of transactions recorded in the cash book only because these accounts will not show their true meaning because of the connection between the record of receipts and payments side, the payment side, and both sides of the cash book may each be proved by a separate Trial Balance. + +RECORDING TRANSACTIONS IN THE CASH BOOK. 53 + +§ 45. Posting from the Cash Book. The accounts affected by each transaction recorded on the receipts side of the cash book are Cash debited and some account credited. The amount of the credit is written on the line with the name of the account, and is posted to the credit of the account and Cash debited with the total at the end of the month. The accounts affected by each transaction recorded on the payments side of the cash book are some account debited and Cash credited. The amount of the debit is posted to the debit of the account, and Cash is credited with the total at the end of the month. The posting to the accounts debited and credited is daily, and is made in the ledger. The letter "C" indicates that the page of the cash book is entered in the ledger; the letter "C" indicates the title of the book of original entry. The page of the ledger is written in the folio column of the cash book, indicating that this page has been posted. + +The posting to the transactions recorded in the cash book, Illustrations Nos. 22 and 23, is shown in Illustration No. 24. + +Some bookkeepers advise a Cash account in the ledger, where others keep the record in the cash book. This method is used when there are many receipts and payments, and total payments of cash for a period longer than a month, while the record in the cash book shows the total receipts and total payments for each month only. If it is desired to know the cash receipts and cash paid out during any particular month, it will be necessary to add together all entries from the total debits and total credits to the Cash account in the ledger; if the cash book is only kept one month, it will be necessary to add the totals for each of the six months in order to ascertain the desired information. + +Exercise No. 21, Recording Transactions in the Cash Book. +Record in the cash book (the two inside pages of a double sheet of journal paper) ruled similar to Illustrations Nos. 22 and 23), receipts on the left and payments on the right, the following cash transactions performed during the month of February: + +Feb. Student invested $750.80 in the retail grocery business. +1. Received $450.00 from E. H. White to apply on account. +2. Paid office rent for the month of February, $40.00. +3. Received $50.00 for cash sales. +4. Paid A. B. Hill $60.50 to apply on account. +5. Received $120.00 for cash sales. +6. Paid A. B. Hill $90.50 to apply on account. +7. Received $60.75 from J. K. Lachman in payment for merchandise sold him on the 4th. +8. Paid drayage on merchandise purchased, $22.50. +9. Paid A. B. Hill $60.50 to apply on account. +10. Received $6075 for cash sales. +11. Received $170.00 from P. B. S. Peters in payment for merchandise sold him on the 1st. +12. Paid freight for office supplies. +13. Paid J.T., Ludlow $146.00 to apply on account. +14. Purchased merchandise for cash from H.P., King, $128.00. +15. Received $120.00 for cash sales. +16. Received $210.00 from H.M., Lovert to apply on account. +17. Paid salesman's expenses, $76.00. +18. Received $325.00 for cash sales. + +(Concluded on page 54.) + +*If double journal paper side by side contain forty lines each, cash receipts should be recorded on one sheet of paper and payments on another, as the proper ruling of the cash book cannot be shown when receipts are entered on one side and payments on the other side of same sheet.* + + + + + + + + + + + + + + +
+ +54 + +RECORDING TRANSACTIONS IN THE CASH BOOK. +(Exercise No. 21--Continued from page 53.) + +Feb. 27. +Paid $32.80 for freight on merchandise purchased. +Paid clerk hire, $40.00. +Paid rent, $122.80. +Cash balance, $1,439.60. + +When the above transactions have been recorded in the cash book as instructed, +prove cash and rule the cash book as in Illustrations Nos. 22 and 23. Open accounts on a sheet of ledger paper as follows: H. H. Goodwin n. Capital (6), Sales (6), purchases (4), Sales (6), E. White (3), J. K. L. Johnson (4), P. B. S. Peters (4), H. M. Lovett (4), H. R. Swanson (4), A. B. Hill (4), J. G. Pipkin (4), J. T. Ludlow (4), +allowing for each account the number of lines indicated. Post the transactions, +and prove the equality of the debits and credits by a Trial Balance of balances. + +Exercise No. 22, Recording Transactions in the Cash Book. +Record in the cash book, receipts on the left and payments on the right, the following cash transactions performed during the month of January by H. H. Goodwin n., as shown in Illustration No. 22. + +Jan. +H. H. Goodwin invested $2,000.00 in the retail grocery business. +Paid $20.00 for city license. +Paid City Milling Co. $102.00 for cash purchase. +Received $150 from Central Hotel to apply on account. +Paid Brown & Co. $77.30 in full of account. +Received $100 from A. R. Jennings to apply on account. +Received $50 from Central Hotel to apply on account. +Received $50 from Central Hotel to apply on account. +Paid Knox Bros., $100.00 to apply on account. +Received $35 from M. A. Johnson to apply on account. +Paid Central Hotel, $150 to apply on account. +Received $50 for sundry cash sales. +Received $50 for sundry cash sales. +Received $50 from Central Hotel to apply on account. +Paid Central Hotel, $150 to apply on account. +Paid bookkeeper's salary, $35.00; rent, $25.00. +Cash balance, $1,355.35. + +When the above transactions have been recorded in the cash book as instructed, +prove cash and rule the cash book; then proceed as follows: +1. Open accounts on ledger paper with H. H. Goodwin n. Capital (4), Cash (4), Purchases (4), Sales (6), Expense (4), A. R. Jennings (4), Central Hotel (4), M. A. Johnson (4), Central Hotel (4), Central Hotel (4), J. K. L. Johnson (4), Lockhart & Company allowing for each account the number of lines indicated; post the transactions, and prove the equality of the debits and credits by a Trial Balance of balances. + +2. After the instructor has approved the work required in the first paragraph, +graph a sheet to a sheet of ledger paper the transactions in the purchases journal for Exercise No. 22, and record them in your own journal as you have instruct- +ed to retain, and the cash book in this exercise. Arrange the accounts as follows: +Cash (6), customers each 4 lines, creditors each 4 lines, H. H. Goodwin n. Capital (3), Sales (7). For each transaction indicate: post the transactions; for each line indicated, take a Trial Balance of balances from this ledger. + +(Concluded on page 55.) + +THE GENERAL JOURNAL. +55 + +(Exercise No. 22—Continued from page 54.) + +The purpose of the second division of this exercise is to show that the ledger is in balance when all the transactions from all the special journals have been posted, the same as it is when all the transactions from each special journal have been posted. + +Present the purchases journal, sales journal, cash book, ledger resulting from posting the transactions from the three books, and Trial Balance to the instructor for approval. + +**Exercise No. 23, Recording Transactions in the Cash Book.** + +Record in the cash book the following cash transactions performed during the month of March by C. U. Steele, a retail shoe dealer: + +March +- C. U. Steele invested $2,500 in the retail shoe business. +- Bought from M. B. Armstrong, for cash, stock of shoes, $1,691.42. +- Paid telegraph bill for telephone service for three months, $20.00. +- Received $60.34 for cash sales. +- Paid clerk's salary, $25.00. +- Received $75.80 from W. H. Watson in full of account. +- Paid Bay State Shoe Co., $496.81 in full of account. +- Received $275.40 for cash sales. +- Paid clerk's salary, $25.00. +- Paid insurance policy, $15.00. +- Paid Haynes, Henson & Co., $397.65 in full of account. +- Received $12.00 from C. A. Shepard in full of account. +- Paid clerk's salary for stationery, $25.00. +- Paid clerk's salary, $25.00. +- Received $72.80 from J. C. Wilson & Co. in full of account. +- Received $115.80 from W. K. Love in full of account. +- Received $115.80 from W. K. Love in full of account. +- Paid clerk's salary, $25.00. +- Received $45.00 from A. R. King for merchandise sold him on the 12th. +- Paid Cline Shoe Co., $163.42 for merchandise purchased on the 6th. +- Received $316.92 for cash sales. + +Cash balance, 9925.53 + +When the above transactions have been recorded in the cash book as instructed, prove cash and rule the cash book. Open an account on page r of the double sheet ledger paper used in Exercises Nos. 17 and 20 with C. U. Steele, Capital, eleven hundred dollars; Cash, zero; Expense Account, zero; and Income Account, zero; and enter lines below the heading of the account with C. U. S e d c e d., Capital, and an account with Cash fourteen lines below the heading of the Expense account. Post the entries in the cash book to the accounts on pages 7, 8 and 3 of the ledger sheet, and take a Trial Balance. + +Retain the ledger and Trial Balance for use in Exercise No. 37. + +§ 46 The General Journal is a book of original entry in which all transactions are entered except those records in which one transaction is recorded at a time; such journal is the same as the journal containing No. 22 and the ruling is the same as the various illustrations of the journal given in preceding chapters. When purchases are recorded in the purchases journal, sales in the sales journal, and cash receipts and payments in their respective journals, these may be classified into four groups: (1) opening entries; (2) current entries; (3) correcting entries; (4) adjusting and closing entries. + +\textsuperscript{c} 1 Opening Entries are those necessary to record assets other than cash invested by the owner at the beginning of the business. If the business is owned + +56 RECORDING TRANSACTIONS IN THE GENERAL JOURNAL. + +by one person and his investment is cash, the opening entry will be made in the cash book. If assets other than cash are invested, the accounts which are to show the value of these assets must be opened in the general journal and credited for the total of the assets in the opening entry in the journal. If the owner wishes to have the business assume liabilities, two entries are necessary to open the books, one to record the liabilities and the other to record the amount of the owner's capital account is debited for the total liabilities, and the accounts which are to show the liabilities, credited. + +ILLUSTRATION. January 1, S. J. Shock began the retail shoe business. He invested $2,500 in cash and an account due him from W. H. Barton for $273.28, and an account due him from the Haynes Shoe Co. $75.85. The cash investment was recorded by entering $2,500 in the cash book as shown at left in illustration No. 22, as well as in the first entry in Illustration No. 22; the other entries were made in the general journal as is illustrated at the right. + +If desired, the entry for the cash invested may be made in connection with the entry in the general journal for the other assets. When this plan is followed, cash and each asset is debited and then credited for its full value. In this case, when Mr. Shock received $273.28 from Mr. Barton, he entered this cash in the cash book in the same manner as though the entry for the cash had not been made in the general journal. The entry for Mr. Barton's account was made in connection with the entry in the general journal at left of the proprietor's name in the cash book to avoid double posting. + +\textbf{1. Current Entries are those necessary to record transactions in the regular operations of the business.} When the nature of these transactions is such that they can be recorded without delay, they are recorded immediately to record them in the general journal. Current entries include those for transactions in which merchandise is returned to a creditor, a customer returns merchandise, assets are sold on credit or accepted from customers in payment of their obligations, and assets other than cash are given to creditors in payment of debts they owed him. + +ILLUSTRATION. On April 16, C. A. Moore purchased from Daws Bros., retail trade dealers two pairs shoes at $9.80, with the privilege of returning one pair within five days. This transaction was recorded in the sales journal, his account showing sales of $9.80 and receivables of $9.80; and his account with Daws Bros., showing one pair and received credit for $8.50 as per agreement between them. The entry for this transaction in the general journal is shown in illustration at the right. + +\textbf{2. Correcting Entries are those made necessary because of errors in recording transactions. These errors may occur in the calculations necessary to ascertain the amount of a sale, a purchase, merchandise returned by a customer, merchandise ordered but not received, etc., or because of mistakes made in recording transactions.} + +ILLUSTRATION. April 16, C. A. Moore purchased from Daws Bros., retail trade dealers two pairs $35 cloth tires at $37.74 each. The transaction was recorded in the sales journal showing sales of $75.48 and receivables of $75.48; and his account with Daws Bros., showing two pairs at $37.74 each and received credit for $37.74 from Mr. Moore in full payment for the two tires. + +When this error was discovered, it was found that only one tire had been paid for; therefore, since Mr. Moore had reported only one tire as having been sold, there was a balance owing to Mr. Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37.74 less than he had reported. + +The amount to Mr. Moore's account was thereupon increased by $37.74; and since Mr. +Mr Moore had reported only one tire as having been sold, there was a balance owing to Mr. +Mr Moore's account of $37 + +EXERCISE IN RECORDING TRANSACTIONS. 57 + +**Exercise No. 24, Purchases Journal, Sales Journal, General Journal, and Cash Book.** + +Record in the purchases, sales (Illustration No. 19), and general journals and the cash book, the following transactions performed during the month of February by Donald D. Sells, a retail hardware merchant: + +Feb. +1. Donald D. Sells invested $3,000.00 in the hardware business. +2. Sold Walter Love, Riverside, on account, merchandise, $187.65. +Enter in the purchase journal as Purchase No. 1, all entries in this journal regular order. +3. Sold Walter Love, on account, four legs nails at $4.50 each. +4. Paid Davis Bros., City, $281.36 for a cash purchase of merchandise. +Enter on the payments side of the cash book as a debit to the Purchases account. +5. Paid $150.00 for cash sales. +6. Bought from the Pickering Hardware Co., Danville, on fifteen days' time merchandise, $521.07. +Paid Moore & Moore $165.00 on account. +Received $116.50 for cash sales. +9. Sold Walter Love, Riverside, on account, one saw, $5.00; one corn sheeler sold for $25.00. +10. Bought from Johnson Bros., Dayton, on fifteen days' time merchandise $291.50. +Received $18.00 from J. C. Mason in full of account. +11. Paid Moore & Moore $87.65 in full of account. +12. Sold J. C. Miller, City, on account, 100 lbs. lead at 8c; 4 doz. picks at $4.50 per doz. +Received $250.00 for cash sales. +Gave Walter Love credit for $50.00, value of the saw sold him on the 9th and returned by him per agreement. +13. Received $250.00 from Walter Love to apply on account. +14. Paid clerk's salary, $30.00. +15. Bought from Donaldson Bros., Mooresville, on account, merchandise, $291.50. +18. Sold Central Construction Co., Arlington, on account, 3 doz. shovels at $9.00 per doz.; 5 doz. picks at $41.00 per doz.; 6 scrapers at $38.50 each. +19. Paid Pickering Hardware Co., $321.97 in full of account. +20. Received $15.60 cash from Davis Bros., for three legs of nails purchased from them on the 4th and returned by us per agreement. +21. Paid Johnson Bros., $165.00 on account. +22. Received $125.25 for cash sales. +23. Donaldson Bros., have allowed us credit for $326.00; cutlery purchased from them on the 17th and returned by us per agreement. +Sold Walter Love, Riverside, a new hand truck and hand mower wagon, $125.00. +Paid Johnson Bros., $165.00 to apply on account. +24. Purchased from the Pickering Hardware Co., Danville, on fifteen days' time merchandise, $717.25. +Received $717.25 from Walter Love in full for the corn sheiler sold him on the 9th. +25. Received $717.85 for cash sales. +26. Paid rent, $50.00; clerk's salary, $30.00. + +When the above transactions have been recorded in the four books of original entry, prove cash balance (balance), ($2,945.42) and rule the cash book as in Illustrations Nos. 22 and 23. + + + + + + + + + + + + + + + + + + +
andandandand
Open accounts on a sheet of ledger paper with Cash (8), J.C.Mason (9), Walter Love (7), J.C.Miller (3), Central Construction Co.(3), Moore &
+ +EXERCISE IN RECORDING TRANSACTIONS. + +58 + +Moore (6), Pickering Hardware Co. (6), Johnson Bros. (6), Donaldson Bros. (5), Donald Sells, Capital (8), Sales (10), Purchases (10), Expense (8), allowing for net accounts receivable indicated; post from the books of original entry, and take a Trial Balance of total. +Retain the ledger and Trial Balance for use in Exercise No. 38. + +Exercise No. 25, Purchases Journal, Sales Journal, General Journal and Cash Book. + +Record in the purchases, sales (Illustration No. 20), and general journals and the cash book, the following transactions performed during the month of October by H. A. Popp, a retail coal dealer: + +Oct. +1. H. A. Popp invested $1,000.00 in the capital business. +2. Received $100.00 from Jerrycity on ten days' time $250.00. +3. Enter in the purchases journal as Purchase No. 1 and number succeeding entries in this journal in regular order. +4. Sold J. P. Miller, City, on account, coal per Sale No. 1, $52.50. +5. Bought from Davis Coal Co., Covington, on account, $175.50. +6. Paid $100.00 for one month's telephone service. +7. Bought from Central Coal Co., $100.00 on fifteen days' time $362.75. +8. Paid the Central Coal Co. $100.00 on account. +Received $82.80 for cash sales of coal. +9. Sold J. P. Miller, City, on account, coal per Sale No. 2, $20.50. +10. Paid the Murray Drayage Co., for freight and drayage bills on coal purchased and delivered. +Received $175.45 for cash sales of coal. +11. Sold J. P. Miller, City, on account, coal per Sale No. 3, $242.50. +12. Paid the Central Coal Co. $150.00 in full of account. +13. Sold J. C., Miller, City, on account, coal per Sale No. 4, $163.50. +14. Paid the Central Coal Co., for the month, $498.00. +Received $122.00 for cash sales of coal. +15. Received $299.00 from M. B. Wallace on account. +Paid the Jellico Coal Co., for coal delivered today. +Paid the Jellico Coal Co. $150.00 on account. +The Jellico Coal Co. has allowed us credit for $150 overcharge on coal purchased on the 6th. +16. Received $163 from M. B. Wallace in full of account. +17. Sold the Central Hotel, City, on account, coal per Sale No. 5, $275.00. +18. Bought from Davis Coal Co., Covington, on account, $593.35. +19. Received $498 from M.B.Wallace on account. +Allowed the Central Hotel credit for $25 error in weight of coal sold them on the 2nd. +Sold M.B.Wallace, City, on account, coal per Sale No. 6, $176. +27. Received $299 from the Central Hotel to apply on account. +28. Sold J.C., Miller, City, on account, coal per Sale No 7, $498. +29 Received $498 from M.B.Wallace on account. +31 Paid rent: $65; clerk's salary for the latter half of the month, $498. + +When the above transactions have been recorded in the four books of original entry, prove cash balance ($344) and rule the cash book Open accounts on a sheet of paper as follows: +Central Hotel (6), Central Coal Co (6), Davis Coal Co (6), Jellico Coal Co (6), H.A.Popp, +Capital (8), Sales (2), Purchases (10), Expense (8), allowing for net accounts receivable indicated; post from the books of original entry, and take a Trial Balance of total balance. + +Retain the ledger and Trial Balance for use in Exercise No 39. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Oct.H.A.Popp invested $1,000 in the capital business.
Oct.Jerrycity received $100 on ten days' time.
Oct.Enter in the purchases journal as Purchase No 1 and number succeeding entries in this journal in regular order.
Oct.Sold J.P.Miller City on account per Sale No 1 at $52 ½.
Oct.Bought from Davis Coal Co Covington at cost per Sale No 1 at $175 ½.
Oct.Paid $100 for one month's telephone service.
Oct.Bought from Central Coal Co at cost per Sale No 2 at $362 ¾.
Oct.Paid Central Coal Co at cost per Sale No 2 at $362 ¾.
Oct.Received $82 ⅞ for cash sales of coal.
Oct.Sold J.P.Miller City on account per Sale No 3 at cost per Sale No 3 at $242 ½.
Oct.Paid Central Coal Co at cost per Sale No 3 at cost per Sale No 3 at $242 ½.
Oct.Bought from Central Coal Co at cost per Sale No 4 at cost per Sale No 4 at $163 ½.
Oct.Paid Central Coal Co at cost per Sale No 4 at cost per Sale No 4 at $163 ½.
Oct.Received $498 for cash sales of coal.
Oct.Paid Jellico Coal Co at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No 5 at cost per Sale No + +QUESTIONS ON RECORDING TRANSACTIONS. 59 + +**Summary of Chapters II, III, IV and V.** Transactions may be recorded directly in the ledger, in one journal and posted to the ledger, or in special journals and posted to the ledger. The correctness of the Trial Balance, if in balance, proves that the total of the debit amounts recorded in the ledger equals the total of the credit amounts recorded in the ledger; also that the additions and subtractions on the debit side of each account equal the additions and subtractions on the debit or credit side is correct. The Trial Balance may be made by using the total debits and total credits of each account, or the balance of each account; the final results are the same with either method. + +Each account is debited or credited through the recording of business transactions. All money received is recorded on the debit side of the Cash account, and all money paid on the credit side. The value of merchandise purchased is recorded on the debit side of the Purchases account, and the value of merchandise returned is recorded on the credit side of this account. The value of merchandise sold is recorded on the credit side of the Sales account and the value of merchandise which customers return is recorded on the debit side of this account. When a customer pays his bill, he records it on his account with you. When you receive payment from him, your account is debited for the amount: when he pays this obligation to the business, his account is credited. When a business buys merchandise and does not pay for it at the time it purchases it, a purchase credit is credited to you from the business paying this obligation, the account with the creditor being credited. When a cus- +tomer has paid all he owes, his account will be in balance: when the business has paid creditors all it owes him, his account will be in balance. The expenses of the business are debited to its accounts; when they are paid, they are credited. The owner of the business is credited in his Capital account with the investment, and debited with any amount which he withdraws from the investment. + +The purpose of special journals is to save time in recording transactions and posting them to ledgers. In some cases, when several transactions affect the same account, the amounts debited or credited to this account may be posted in one amount if all these transactions are in one journal. The purchases journal contains a record of all transactions in which merchandise is purchased on account; the sales journal contains a record of all transactions in which merchandise is sold on account; the cash book contains a record of all transactions in which cash is re- +ceived and paid. + +**QUESTIONS** + +1. Describe in detail the labor saved in recording one hundred sales of merchan- +dise on account in the sales journal instead of the journal. +2. Describe in detail the labor saved in recording fifty purchases of merchandise +on account in the purchases journal instead of the journal. +3. Can you suggest some method of obtaining a copy of a sale made to a customer +on account without writing twice the description of the articles sold? +4. Describe in detail the labor saved in recording one hundred sales in the sales +journal instead of in cash instead of in cash instead of in cash instead of in cash instead +of in cash instead of in cash instead of in cash instead of in cash instead of in cash instead +of in cash instead of in cash instead of in cash instead of in cash instead of in cash instead +of in cash instead of in cash instead of in cash instead of in cash instead of in cash instead +of in cash instead of in cash instead of in cash instead of in cash instead of in cash instead +of in cash instead of in cash instead of in cash instead of in cash instead of in cash instead +of in cash instead of in cash instead of in cash instead of in cash instead of in cash instead +of in cash instead of in cash instead of in cash instead of in cash instead of in cash instead +of in cash instead of in cash instead of in cash instead of in cash instead of in cash instead +of in cash instead of in现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代���在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在现金代替在cash book contains a record + +5. When is it advisable to record transactions in a cash receipts journal and +a special sales journal? + +6. Is it necessary to enter receipts on the left and payments on the right pages +of a cash book? + +60 QUESTIONS ON RECORDING TRANSACTIONS. + +7. Describe in detail the method of proving cash. +8. Would you consider it advisable to prove cash before posting? Give reason for your answer. +9. Describe in detail the method of recording a purchase of merchandise for cash in the cash book and the purchases journal. +10. Describe in detail the method of entering a cash purchase in the cash book and the sales journal. +11. What account is debited and credited when the total cash receipts and cash payments are posted at the end of the month? +12. Name the account debited when the total of the purchases journal is posted at the end of the month. What accounts show the credits? +13. When accounts are affected when the total of the sales journal is posted at the end of the month. How? +14. Why is it necessary to post the total of the purchases journal and the total of the sales journal at the end of the month? +15. If at any time during the month, the balance of the cash book is greater than the cash on hand, what does this indicate? +16. If the difference between the two sides of the cash book is less than the cash on hand, what does this indicate? +17. If you were keeping books for a retail drug store and the difference between the total of your cash book and your cash on hand was $10.00 more than the cash on hand, what entry would you make for this $10.00? +18. Have you seen a cash register in operation? If so, can you explain its construction and how it works? +19. What does the total of the debit side of the cash book show? +20. What does the total of credit side of the cash book show? +21. What does the total of the debit side of the Cash account in the ledger show? +22. What does the total of credit side of the Cash account in the ledger show? +23. Will the balance of cash on hand, as shown by your cash book on December 31, 1921, agree with that shown in your record of transactions in your ledger which shows a record of cash transactions from January 1, 1921 to December 31, 1921? +24. What additional information, which is not shown in the cash book, does this offer to help you obtain from totals of both sides of Cash account in ledger? +25. Name some of the transactions which a bookkeeper for a retail jewelry business might enter in general journal. + +Chapter VI + +A MODEL SET + +The Purpose of this Model Set is to illustrate the recording of transactions for a period of two months and to serve as a basis for completing the two practice sets which are separate from the text. The illustrations show how the accounting activities continue for the remaining months of the preceding chapters with the recording of the transactions. Illustrations Nos. 25-38 show the method of recording the transactions for September and October, ruling the books of account, posting, forming the trial balance, and preparing the financial statements. The student is not required to record the transactions for September and October, but he should check them with the entries in the illustrations before he begins the first practice set, or as he proceeds with it. + +MEMORANDA OF TRANSACTIONS FOR MODEL SET + +September + +I. W. A. Gordon invested $1,000.00 cash and $500.00 merchandise in the retail grocery business. (Recorded as in the first entry in Illustration No. 29 and the first entry in Illustration No. 30.) Two accounts are debited, $175 and 17, and one account credited, 175. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
+
+                                                                                                                                                                          
DateL.F.Account ControlAddressTimesPur.Amount
2 Brown RoadCityaccount177.00
3 King's KingingCitycash216.95
4 Brown HomeCityaccount3190
5 Brown HomeCityaccount4230
10 Brown HomeCitycash5240
17 Lakeview Creamery DaytonCitycash6200
23 Brown HomeCity-7
+ +December, '19 + + +
DateL.F.Description of Account ControlAddressTimesPur.Amount
October, '19:
1 S. Decker's Mercantile, Jeffersonfield:
18 Lakeview Creamery Dayton:
2 Brown Home:
3 King's Kinging:
4 Brown Home:
5 Brown Home:
17 Lakeview Creamery Dayton:
23 Brown Home:
37 Decker's Mercantile Co., Jeffersonfield:
38 King's Kinging:
44 Purchases, Inc.: Total:
+ +Illustration No. 25, Purchases Journal for Model Set +61 + +62 +A MODEL SET. + +2. Bought from Brown Bros., City, on account, merchandise per Purchase No. 1, $79.30. (Recorded as in the first entry, Illustration No. 25: § 28.) + +3. Bought from King & King, City, on account, merchandise, per Purchase No. 2, $146.95. (References same as for above transaction.) + +4. Paid $25.00 cash for city and state license. (Debit § 32; credit § 15.) + +5. Sold A.Y. Jordan, 115 Main St., City, on account, merchandise per Sale No. 1, $16.25. (Recorded as in the first entry, Illustration No. 26: § 40.) + +Bought from Brown Bros., City, for cash, merchandise per Purchase No. 3, $104.00. (Recorded as in the third entry in Illustration No. 25 and in the second entry in Illustration No. 26.) + +6. Received $32.00 for sundry cash sales to date. (Debit § 15; credit § 18.) Paid Brown Bros $79.30 in full for merchandise purchased on the 2d. (Recorded as in the third entry, Illustration No. 30: § 28.) + +7. Sold People's Hotel, 165 Willis St., City, on account, merchandise per Sale No. 2, $59.35. (Debit § 27; credit § 18.) (Illustration No. 26.) + +September 19 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +October 19 + +
DateL.F.Account DebitedAmountTermsDateAmount
1 A.G.SwansonInt'l Consol Cityaccounted11625
1 B.Brook HotelInt'l Consol City-17935
1 C.G.SwansonInt'l Consol City-38025
1 W.O.RobertsKingsston-15040
12 B.Brook HotelInt'l Consol City-58140
13 J.James O'CallahyInt'l Consol City-64930
21 S.James O'CallahyInt'l Consol City-72280
24 B.Brook HotelInt'l Consol City-74930
34 J.James O'CallahyInt'l Consol City-96930
39 R.James O'CallahyInt'l Consol City-108040
+
Date L.F.Description of Account Debit Amount Terms Date Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amount Total Amo...
+ +Illustration No. 26, Page 1 of the Sales Journal for Model Set. + +A MODEL SET. +63 + +October 19 + +| Part | L.F. | Amount Debited | Address | Terms | Date | Account | +|---|---|---|---|---|---|---| +| 10 | 2. | $15.00 | $15.00 | $15.00 | 10.10.20 | $15.00 | +| 22 | Samuels Hotel | $25.00 | $25.00 | $25.00 | 12.18.20 | $25.00 | +| 23 | People's Hotel | $75.00 | $75.00 | $75.00 | 12.18.20 | $75.00 | +| 24 | People's Hotel | $75.00 | $75.00 | $75.00 | 12.18.20 | $75.00 | +| 27 | H.O.B. Hotel | $35.00 | $35.00 | $35.00 | 12.18.20 | $35.00 | +| 29 | James O'Wells | $35.00 | $35.00 | $35.00 | 12.18.20 | $35.00 | +| 32 | Robert F. Corwin, optometristy | $35.00 | $35.00 | $35.00 | 12.18.20 | $35.00 | + +Illustration No 27, Page 2 of the Sales Journal for Model Set. + +9. Received $1,599 from A.Y. Jordan to apply on merchandise sold him on the 8th (Debit § 15; credit § 27, Illustration No. 29.) +10. Bought from Brown Bros., City, on account, merchandise per Purchase No. 4, $29,999. +(Debit § 17; credit § 28, Illustration No. 25.) +11. Sold A.Y. Jordan, 115 Main St., City, on account, merchandise per Sale No. 3, $666-25. +(Debit § 27; credit § 18, Illustration No. 26.) +Received $33,999 from People's Hotel to apply on account. +13. Received from People's Hotel on cash sales date (Debit § 15; credit § 18). +Paid King & King, $1,666 to apply on account. +(Debit § 28; credit § 15) +Sold W.O.Burns, Kingston, on account, merchandise per Sale No. 4, $344-9. +(Debit § 27; credit § 18, Illustration No. 26.) +Bought from Brown Bros., City, on account, merchandise per Purchase No. 4, S$44-9. +(Debit § 17; credit § 28, Illustration No. 25.) +Proved cash (balance, S$74-24) and posted. +(§ 44; § 39; § 41; § 46; § 4.) +Illustrations Nos. 33, 34, and 36.) +Sold People's Hotel, I65 Willis St., City, on account, merchandise per Sale No., S$44-9. +Bought from Lake View Creamery, Dayton, on days' time, merchandise per Purchase No.6., S$39-9. +Received S$33-9 from W.O.Burns to apply on merchandise sold him on the 13th (Illustration No. 29.) +Sold James O.Wells, I66 Broad St., City, on account, merchandise per Sale No., S$44-9. +Allowed People's Hotel credit for S$6-9 to one barrel flour purchased on the thirteenth because it had been damaged by coming in contact with kerosene. +(§ 18; § 14; § 27; § 2; § 46; § 4.) +Illustration No. 29.) +Paid King & King, S$6-9 to apply on account. +Received S$6-9 for laundry cash sales to date. +(Illustration No. 29.) +Sold James C.Wells, I66 High St., City, on account, merchandise per Sale No., S$7, S$26-9. +(Illustration No. 26.) + +(Continued on page 65) + +A MODEL SET. + +September 1, 19 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
4. Handbills500500
5. G. C. C. Capital
Mandarin on hand at the beginning of business.
6. Sales910910
Naples Hotel
18th floor returned to damaged condition.
7. Brown Bros.12601260
8. Handbills
3 cases canned beans at $0.50 per case.
closed for return due agreement.
October's
James O. Halds37.5437.54
James O. Halds
To cancel money account debited for sale of $0.
9. Brown Bros.1010
10. Handbills
To cancel money extension for fundless of $0.
11. Sales
+
A.J. Gordon375375
Sales sold to customers.3737
H.O. Burns6060
Cashiers stamp used to send merchandise sold this date by Frank Frost.
+ +Illustration No. 28, Page I of the General Journal for Model Set + +A MODEL SET. +65 + +23. Bought from Brown Bros., City, on 10 days' time, merchandise per Purchase No. 7, $199.10. (Illustration No. 25.) +Received credit from Brown Bros. for $12.60, three cases of canned peaches at $4.20, purchased on the 10th, returned per agreement. ($ 28, § 1: § 17, § 2: § 46, § 2. Illustration No. 25.) + +24. Received $15.00 from People's Hotel to apply on account. + +25. Sold merchandise to People's Hotel, on account, merchandise per Sale No. 8, $82.50. (Illustration No. 26.) + +26. Received $0.25 from A.Y. Jordan in full for merchandise sold him on the 3th. (Illustration No. 29.) +Sold James C. Wells, 765 E. 9th St., City, on account, merchandise per Sale No. 9, $37.50. (Illustration No. 26.) + +27. Sold People's Hotel, 165 Willia St., City, on account, merchandise per Sale No. 10, $80.25. (Illustration No. 26.) +Received $44.50 for sundry cash sales to date. (Illustration No. 29.) + +29. Bought from King & King, City, on 10 days' time, merchandise per Purchase No. 8, $174.75. (Illustration No. 35.) +Received $100 from People's Hotel to apply on account. + +30. Paid Brown Bros., $1900 to apply on merchandise purchased on the 15th. (Illustration No. 30.) +Sold James O. Wills, 416 Broad St., City, on account, merchandise per Sale No. 11, $37.56. +Paid bookkeeper's salary for September, $75.00; rent for September, $65.00. +($ 32: § 1: § 4: § 2. Illustration No. 30.) + +Proved cash (balance), $618.00, and ruled the cash book. +Posted* from the purchases, sales and general journals, and the cash book. +Footed and ruled the trial balance of accounts receivable. +Signed the statement of total sales, +sales, cash receipts and cash payments. +Took a Trial Balance of balances; +checked the Trial Balance because it did not balance due to an error in posting. +(Illustration No. 37.) + +The accountant should mark the amount of each entry in the books of original entry indicate that the September Trial Balance did not balance and it was necessary for the bookkeeper to post corrections to ascertain the error. +These check marks should be made on the double face to avoid confusion with those which are used to show the exact position of these check marks in the illustrations due to the variation in printing. + +October + +W.A.Gordon withdrew $200 cash from his capital. +Bought from Dick, McMillan & Co., Springfield, on 15 days' time, merchandise per Purchase No. 9, $318.78. + +Received $50.00 from James C. Wells to apply on account. +He called attention to this transaction with him with the sale of September 3rd; made a correcting entry to adjust this. +Paid the Central Transfer Co., $25.25 cash for freight and drayage on merchandise purchased on September 17. + +Received $100.00 from People's Hotel to apply on account. + +*The arrangement of the accounts is shown on pages 70-73. +The arrangement of the accounts in these illustrations is in the same order as the information will be needed in the preparation of the report to be provided the owner. +The reports to be prepared will be these accounts as explained in Chapter VII. + +A page from a ledger or accounting book. +8 + +66 +A MODEL SET. + +3. Paid Brown Bros. $199.10 in full for merchandise purchased on Sept. 23. +4. Sold J. C. Taylor, 3752 Crescent Ave., City, on account, merchandise per Sale No. 14, $23.50. +Received $87.65 for laundry cash sales to date. +6. Paid Mrs. W. B. Scott $2.50 for two brooms which she bought and paid for on the 4th and returned to us per agreement. +Sold People's Hotel, 165 Willis St., City, on account, merchandise per Sale No. 13, $147.50. +7. Received $50.00 from James O. Wills to apply on account. +Paid Lake View Creamery $30.00 in full for merchandise purchased Sept. 17. +8. Sold A. Y. Jordan, 115 Main St., City, on account, merchandise per Sale No. 14, $58.50. +9. Paid King & King $174.75 in full of account. +Paid Brown Bros. $200.00 to apply on merchandise purchased September 10. +10. Sold A. Y. Jordan, 115 Main St., City, on account, merchandise per Sale No. 15, $42.80. + +Cash Receipt + +Sept. +Sep 1 - H.H. Jordan Cashful Settlements +Cash sales +Cash accounts +Oct 1 - A.Y. Jordan +Cash sales +Cash accounts +Oct 2 - Ray's Hotel +Cash sales +Cash accounts +Oct 3 - W.O.Turner +Cash sales +Cash accounts +Oct 4 - Ray's Hotel +Cash sales +Cash accounts +Oct 5 - Ray's Hotel +Cash sales +Cash accounts +Oct 6 - Ray's Hotel +Cash sales +Cash accounts +Oct 7 - Ray's Hotel +Cash sales +Cash accounts +Oct 8 - Ray's Hotel +Cash sales +Cash accounts + +Oct. +Oct 9 - James C. Wells +On hand +On account +Oct 10 - Ray's Hotel +In transit +Oct 11 - James O'Wells +Cash sales +Cash accounts +Oct 12 - W.O.Turner +Total freight +Oct 13 - Ray's Hotel +Cash sales +Cash accounts + +Illustration No. 29, Page 2, Receipts Side of Cash Book for Model Set. + +A MODEL SET. +67 + +11. Received $19.40 from W. O. Burns in full for merchandise sold him Sept. 13, Received $100.80 for sundry cash sales to date. + +13. Paid $18.50 for repairs in the office. + +15. Bought from Lake View Creamery, Dayton, on 20 days' time, merchandise per Purchase No. 692, $35.00. + +16. Bought from Brown Bros., City, on 30 days' time, merchandise per Purchase No. 693, $35.00. + +17. Sold W. O. Burns, Kingston, on account, merchandise per Sale No. 17, $45.75. Proved cash balance ($35.75) and posted. + +18. Paid Brown Bros., $93.00, balance due on merchandise purchased Sept. 15. Received $129.50 for sundry cash sales to date. + +Cash Payments + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +






















































































<
A small image of a hand holding a piece of paper with "Illustration No. 30" written on it./s/ Illustration No. 30, Page 3, Payments Side of Cash Book for Model Set. +14325 + +68 +A MODEL SET. + +
DescriptionCash and StatementsTotal Payments
Ship to Expenses28
5 x Brown's Farm,Capital Fund Balance1948
5 x Brown's Farm,Total Fund Balance1948
13 x King's King,Capital Fund Balance1948
20 x King's King,Total Fund Balance1948
30 x Brown's Farm,Capital Fund Balance1948
30 x ExpensesTotal Fund Balance1948
30 x Cash Co.
Och 7 x Holderson Capital Holdings for Capital Co.Cash and Statements282
4 x Brown's Farm,
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
CashReceipts
Brought Forward46453
Oct. 10 SalesCash sales179.50
21 CashiersTax stamps50
33 Hotel HotelToll receipts4.05
34 J. B. BrownWages4.00
35 J. F. WallsInstallment20.00
37 SalesCash sales124.05
38 Hotel Hotel.Cash account50
10 C. Y. GordonToll stamps56.95
31 J. C. TarragonaCash account150
31 SalesCash sales.7379
31 Cashier(s)Total receipts112549
No. 1 BalanceCash handl.1749.69
291.61
+ +Illustration No. 31, Page 4. Receipts Side of Cash Book for Model Set. +20. Bought from King & King, City, on 30 days' time, merchandise per Purchase No. $127.60. +Discovered a balance of $10.00 in the calculations for the purchase from Brown Bros. on September 23, and received instructions from them to debit their account with this amount. +21. Sold J.C. Taylor, 3752 Crescent Ave., City, on account, merchandise per Sale No. 19, $55.40. +Sold a customer stamps for cash, $0c. +22. Received $3.5 from People's Hotel in full for all merchandise sold them in September, all credits to date. +Sold James O. Willis, 416 Broad St., City, on account, merchandise per Sale No. 20, $51.40. +23. Received $25.00 from W.O. Burns to apply on account. +Sold People's Hotel, 165 Willis St., City, on account, merchandise per Sale No. 21, $162.35. +24. Gave A.Y. Jordan credit for $3.75, two hams sold him on the roth and returned to stock. +Bought from Dick, McMillan & Co., Springfield, on 15 days' time, merchandise per Purchase No. 13, $117.90. +25. Sold People's Hotel, 165 Willis St., City, on account, merchandise per Sale No. 22, $186.65. +Received $20.30 from James C.Wells in full of account. +26. Received $184.45 for sundry each sales to date. +Bought from Dixon Bros.& Co., Lebanon, on 30 days' time, merchandise per Purchase No. 14: $397.55. + + +
DescriptionSalesCash SalesTax StampToll ReceiptsInstallmentsCash AccountCash SalesTotal ReceiptsCash HandledTotal +
Oak Oct.2 Sales$66453$79.50$4.05$20.00$124.05$50$7379$112549$1749.69$291.61 +
J.C.Taylor Oct.2 Sales$5540$0C                                                                                                                                                              &nb... +
J.O.Brown Oct.3 Sales$4.00&nb... +
J.F.Walls Oct.4 Sales$4.00&nb... +
Hotel Hotel Oct.5 Sales$20.00&nb... +
J.Y.Gordon Oct.6 Sales$50&nb... +
J.C.Tarragona Oct.7 Sales$7379&nb... +
People's Hotel Oct.8 Sales$112549&nb... +
J.C.Taylor Oct.9 Sales$1749.69&nb... +
J.O.Brown Oct.10 Sales$291.61&nb... +
J.O.Brown Oct.11 Sales&nb... +
J.F.Walls Oct.12 Sales&nb... +
Hotel Hotel Oct.13 Sales&nb... +
J.Y.Gordon Oct.14 Sales&nb... +
J.C.Tarragona Oct.15 Sales&nb... +
People's Hotel Oct.16 Sales&nb... +
J.O.Brown Oct.17 Sales&nb... +
J.F.Walls Oct.18 Sales&nb... +
Hotel Hotel Oct.19 Sales&nb... +
J.Y.Gordon Oct.20 Sales&nb... +
J.C.Tarragona Oct.21 Sales&nb... +
People's Hotel Oct.22 Sales&nb... +
J.O.Brown Oct.23 Sales&nb... +
J.F.Walls Oct.24 Sales&nb... +
Hotel Hotel Oct.25 Sales&nb... +
J.Y.Gordon Oct.26 Sales&nb... +
J.C.Tarragona Oct.27 Sales&nb... +
People's Hotel Oct.28 Sales&nb... +
J.O.Brown Oct.29 Sales&nb... +
J.F.Walls Oct.30 Sales&nb... + +A MODEL SET. +69 + + + + + + + + + + +
CashTotal Payments
10
Forrester & Forward
Oak 16 3 Dick McWilliam & Co. Retailer's
17 & Exchange
18 & Roswell Davis
31 & Ceballos
31 & Cashier Corp.		137.0
51.75
200.00
7.7
1,000.00
145.75
+ +Illustration No. 32, Page 5, Payments Side of Cash Book for Model Set. + +27. Sold W. O. Burns, Kingston, on account, merchandise per Sale No. 23, $12.50. + Shipped package to him by parcel post and debited his account with 60c, + the required amount of postage. + +28. Sold James O. Wells, 416 Broad St., City, on account, merchandise per Sale No. 24, $3.50. + Bought from King & King, City, on 30 days' time, merchandise per Purchase No. 15, $141.37. + +29. Received $5.00 from People's Hotel to apply on account. + Sold Robert E. Cowan, 3175 Burnet Ave., City, on account, merchandise per Sale No. 25, $61.83. + +30. Received $6.25 from A. Y. Jordan for balance due on merchandise sold him September 11. + +31. Received $15.00 from J. C. Taylor to apply on account. + Received $25.00 from J. C. Taylor to apply on account. + Paid bookkeeper's salary for October, $75.00; rent for October, $65.00. + Proved cash (balance, $291.61) and ruled the cash book. + Took stock of the merchandise at the end of the month so that the bookkeeper might prepare the monthly reports showing the assets, liabilities, income, costs and net income for the two months during which the business has been operated. + The usual monthly Trial Balance was taken including the information necessary in the preparation of the reports showing the results of operations. + +The foregoing transactions include past due entries, ruling the purchases and sales journal, +and the posting of the total purchases, sales, cash receipts and cash payments. The results of the +transactions are shown in Table No. 32 on page 79 of this book. + +It will be observed that in preparing the reports of the operations of this business showing the facts which Mr. Gordon desires are explained in Chapter VII, + +A MODEL SET. + +A MODEL SET. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +






























































































<
Cash
Sept 10Jan CashOct 11Oct 11
Oct 11Jan CashOct 11Oct 11
250.74250.74
Kona & Bannock
C. Y. Jardine
no Manalapan City.
Sept 1Jan CashOct 11Oct 10
Oct 11Jan CashOct 11Oct 85
Jan CashOct 11Oct 85
250.74250.74
Bannock Hotel
no Manalapan City.
Sept 1Jan CashOct 11Oct. $300.
Oct 11Jan CashOct. $300.Oct. $300.
+ + + +
25 C. Bannock
Kennettown
                                            
+ + + +
Sept. $300. + +
Jan Cash
     Oct. $300. + +
Jan Cash
     Oct. $300. + +
Jan Cash
     Oct. $300. + +
Jan Cash
     Oct. $300. + +
Jan Cash
     Oct. $300. + +
Jan Cash
     Oct. $300. + +
Jan Cash
     Oct. $300. + +
Jan Cash
     Oct. $300. + +
Jan Cash
     Oct. $300. + +
Jan Cash
     Oct. $300. + +
Jan Cash
     Oct. $300. + +
Jan Cash
& + + +A MODEL SET. +71 + +James C. Hille +no 60th Ave. + +
+ + + + + + + + + + + + + + + + + + + + + + + + +
Sep 25Oct 28Oct 31Nov 1
Oct 25Oct 28Oct 31Nov 1
Oct 25Oct 28Oct 31Nov 1
Oct 25Oct 28Oct 31Nov 1
+ +G. C. Taylor +100 Crescent Ave + + + + + + + + + + + + + + + + + + + + + + + + + + +
Sep 25Oct 28Oct 31Nov 1
Sep 25Oct 28Oct 31Nov 1
Sep 25Oct 28Oct 31Nov 1
Sep 25Oct 28Oct 31Nov 1
+ +Robert E. Cowan +377 Bannock St., City + + + + + + + + + + + + + + + + + + + + + + + + + + +
Sep 25Oct 28Oct 31Nov 1
Sep 25Oct 28Oct 31Nov 1
Sep 25Oct 28Oct 31Nov 1
Sep 25Oct 28Oct 31Nov 1
+ +Popcorn Bros. +Ctn + + +
Sep. o
Oct. yu
Oct. y
Oct. y
Oct. y
Oct. y
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Oct.		P.
Sep.y.P.P.
Sep.y.P.P.
Sep.y.P.P.
Sep.y.P.P.
Sep.y.P.P.
Sep.y.P.P.
Sep.y.P.P.
Sep.y.P.P.
Sep.y.P.P.
Sep.y.P.P.
Sep.y.P.P.
Sep.y.P.P.
+ +Illustration No. 34, Page 2 of the Ledger for Model Set. +A ledger page with handwritten entries and totals for a model set inventory, including items like "James C Hille," "G.C Taylor," "Robert E Cowan," and "Popcorn Bros." with quantities and prices listed under each item." + +A MODEL SET. + + + + + + + + + + +
Page No.Page No.
7273
+ + + + + + + + + + + + + + + + + + + + + + +
Kang King City
Oct. 11Oct. 11
Oct. 12Oct. 12
Oct. 13Oct. 13
Oct. 14Oct. 14
+ + + + + + + + + + + + + + + + + + + + + + +
Kang King City
Oct. 15Oct. 15
Oct. 16Oct. 16
Oct. 17Oct. 17
Oct. 18Oct. 18
+ + + + + + + + + + + + + + + + + + + + + + +
Kang King City
Oct. 19Oct. 19
Oct. 20Oct. 20
Oct. 21Oct. 21
Oct. 22Oct. 22
+ + + + + +
Illustration No. ____________ Page ____________ of the Ledger for Model Set.
+ + +
DescriptionCash Inflow (in $)Cash Outflow (in $)Total Cash Flow (in $)
Kang King City
Oct. 11
Oct. 12
Oct. 13
Oct. 14
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
Kang King City
Oct. 15
Oct. 16
Oct. 17
Oct. 18
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
Kang King City
Oct. 19
Oct. 20
Oct. 21
Oct. 22
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
-0.00
DescriptionCash Inflow (in $)Cash Outflow (in $)Total Cash Flow (in $)
Kang King City
Oct. 23
Oct. 24
Oct. 25
Oct. 26
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
DescriptionCash Inflow (in $)Cash Outflow (in $)Total Cash Flow (in $)
Kang King City
Oct. 27
Oct. 28
Oct. 29
Oct. 31
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
DescriptionCash Inflow (in $)Cash Outflow (in $)Total Cash Flow (in $)
Kang King City
Nov. 1
Nov. 2
Nov. 3
Nov. 4
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
-35,878.
+ + + +
+ + + +
+ + + +
+ + + +
+ + + +
+ + + +
+ + + +
+ + + +
+ + + +
+ + + +
+ + + +
+ + + +
+ + + +
+ + + +
+ + + +
+ + + +
+ +
Description
+ +
Description
+ +
Description
+ +
Description
+ +
Description
+ +
Description
+ +
Description
+ +
Description
+ +
Description
+ +
Description
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +A model set diagram showing various buildings and streets in a city. + +A MODEL SET. +73 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
+ + + + + + +
Sales
Sept 1980100Co.
Oct 650500Co.
3rd80350Co.
30300Co.
30300Co.
30300Co.
30300Co.
30300Co.
30300Co.
30300Co.
30300Co.
30300Co.
Purchases
+ +
Sales & Administration $1,500
Oct. 19
Oct. 6
Oct. & Transfer Accounts $2,500
Oct. 19
$1,549,72
+ + + +
Purchases & Transfer Accounts $1,549,72
Oct. 19
Oct. 6
Oct. & Transfer Accounts $2,500
Oct. 19
+ + + +
Expenses & Transfer Accounts $1,549,72
Oct. 19
Oct. 6
Oct. & Transfer Accounts $2,500
Oct. 19
+ + + +
Sales & Administration $1,549,72
Oct. 19
Oct. 6
Oct. & Transfer Accounts $2,500
Oct. 19
+ + + +
Purchases & Transfer Accounts $1,549,72
Oct. 19
Oct. 6
Oct. & Transfer Accounts $2,500
Oct. 19
+ + + +
Expenses & Transfer Accounts $1,549,72
Oct. 19
Oct. 6
Oct. & Transfer Accounts $2,500
Oct. 19
+ +Illustration No. 36, Page 4 of the Ledger for Model Set. + +74 + +A MODEL SET. + +H. A. Anderson +Trial Balance, September 30, 19 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Cash1618
Q. W. Gordon5025
J. H. Brown5
G. G. O. Halls10400
G. G. O. Halls10976
Banks Hotel15945
R. Brown Bros.51450
Kenny King17475
Tobacco Creamery30
H. A. Anderson Capital1500
Sales73451
Purchase777950
Capital16658-29-37-3
294376-24-93-76
+ +Illustration No. 37, Trial Balance of Balances for First Month of Model Set. + +H. A. Anderson +Trial Balance October 31, 19 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
(Sales less taxes) (less taxes)
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(less taxes) + +A MODEL SET 75 + +**Exercise No. 26. Recording Transactions, Posting and Trial Balance.** + +Record the transactions given below in the purchases, sales and general journals, and the cash book. All purchases and sales except those for $ charge "on account" with the customer, and all cash receipts and disbursements on both sides of the Sales and Purchases accounts; number the entries in each of these journals in regular order, beginning with one. + +April 1. J. N. Fulton invests $1,500.00 in the radio supply business. + 1. Bought from Standard Radio Co., Chicago, supplies, $683.70. + 2. Paid freight charges on telephone service, $14.00. + 3. Sold Davis Bros., City, 100 ft. No. 10 wire, $1.00; 1 Willard storage battery, $12.00. + 4. Paid $365.87 for purchase of radio supplies. + 5. Bought from the Radio Service Co., Dayton, supplies, $962.48. + 6. Paid $57.50 insurance on stock. (Debit Expense.) + 7. Received for cash sales to date: $360.60. + 8. Paid $250.00 freight charges on radio equipment. + 9. Paid Standard Radio Co. $38.70, on account. + 10. Received credit from Radio Service Co. for supplies returned, $20.15. + 11. Sold a new model 1-1/2 watterson amplifying transformer, $450. + 1 Remitter detector panel, $80.00. + 12. Sold Jacob Dollittle, City, 200 ft. 7-strand aerial wire, $1.50; 1 doz. + serpentine insulators, $30.00; 2 test receivers, $3.75; $30.25 Willard storage batteries, $25.00; 2 doz. switch posts, $25.00. + 13. Sold Joe Smith, for cash, 200 ft. aerial wire which he returned. + 14. Gave Joe Smith $45 for 100 ft., aerial wire which he returned. + 15. Received for cash sales to date: $369.65. + 16. Sold A.J. Bowen, Columbus, a mounted crystal detector, $95.00; debit his account with $75; postage required on this shipment. + 17. Sold a new model 1-1/2 watterson amplifier to Mr. Smith; it was installed under our inspection, installation cost to be paid by him. + 18. Received for cash sales to date: $414.85. + 19. Paid clerk's salary, $80.00. + +Prove cash balance ($3698), rule the cash book and purchases and sales journals, and post all entries including the totals. Arrange the accounts in the ledger as in Fig., page No., and prepare a trial balance of the accounts at hand and eight lines for each of the other accounts. + +May 1. Sold Davis Bros., City, "6" B" Batteries, 2½ volt, $147.0; I loud speaker, $156.0; filament rheostat, $425. + 2. Bought from Standard Radio Co., Chicago, supplies, $443.60. + 3. Received for cash sales to date: $157.81. + 4. Gave the Radio Service Co.$600 to apply on account. + 5. Sold a new model "V" New Howard Electric Receiver, V-16; V-6; V-8; V-10; V-24; V-36; V-48; V-64; V-96; V-192; V-384; V-768; V-1536; V-3072; V-6144; V-12288; V-24576; V-49152; V-98304; V-196608; V-393216; V-786432; V-1572864; V-3145728; V-6291456; V-12582912; V-25165824; V-50331648; V-100663296; V-201326592; V-402653184; V-805306368; V-1610612736; V-3221225472; V-6442450944; V-12884901888; V-25769803776; V-51539607552; V-1 + Received check from A.J Bowen in full of account. + Received bill for installation of receiver on April 3rd, installation cost of the radio outfit sold A.F Shaw on April 3rd. + Debit A.F Shaw and credit Kelly Electric Co in the general journal. + 6. Paid Lawton Express Co.$2547 freight and drayage on purchases. + Gave Caleb Fall credit for $3c because one of the porcelain "V" t.sockets sold in error was returned. + Sold the entire stock of merchandise for $2,000.oо cash. + +Prove cash balance ($3,268).7), rule the cash book and purchases and sales journals and post all entries including the totals on both sides of the Sales and Purchases accounts and the balance of the other accounts. + +Retain the ledger and Trial Balance for use in Exercise No. 4o + +76 + +QUESTIONS ON THE MODEL SET. + +QUESTIONS ON THE MODEL SET + +These questions refer to Illustrations Nos. 25-38. + +1. What do the check marks (v) at the left of the amounts in the books of original entry, ledger, and Trial Balance for the month of September, indicate? +2. Why are there no check marks at the left of the amounts for the month of October 27? +3. Why did the Trial Balance September 30 balance when there was an error in one of the accounts as indicated by the adjusting entry in the general journal October 27? +4. Explain the transactions recorded in the account of A. Y. Jordan without reference to a book of original entry. +5. Why is the Expense account credited in the general journal entry of October 27? +6. Does the general journal entry of October 2 change the value of the assets or liabilities of the business? +7. Why is the People's Hotel account not ruled on the same blue line on each side as October 27? +8. Explain the transactions in the account of Brown Bros., without referring to a book of original entry. +9. When is payment due for the merchandise purchased from Brown Bros. October 27? +10. Why are both sides of the account with Brown Bros. carried forward and the balance of the account with the People's Hotel carried forward? +11. What indicates that the People's Hotel account is that of a customer and Brown Bros. is that of a creditor? +12. What is the balance due on the merchandise sold A. Y. Jordan October 10? +13. Why not forward the totals of both columns of the general journal in the same manner as the totals of the purchases journal and sales journal? +14. Why is the total of each side of the cash book forwarded and not the balance? +15. When is it necessary to forward the totals of a book of original entry? +16. What information is shown in the Cash account which is not shown in the cash book? +17. Why is the double ruling in the cash book on the same blue line on each side? +18. Why is it necessary to write in the cash book the date of the purchase or sale when it has been entered in another book, such as a journal or a purchase or sale. +19. Why is the cash balance carried down below the double ruling on the debit side of the cash book and entered in the second column? +20. What information of value does the owner of the business obtain from these entries on the debit side of the Sales account? +21. Why are Purchases account credited in the general journal entry of September 23? +22. Why is the Sales account debited in the general journal entry of October 24? +23. If Sales had been credited for the first transaction of October 23, (a) what accounts could have been credited for this transaction? (b) What accounts could have been debited for this transaction? +24. If the owner wished to know the value of merchandise in stock, from what accounts could he ascertain this information? +25. Why is W. O. Burns debited in the general journal entry of October 27? + +Chapter VII + +BALANCE SHEET AND STATEMENT OF PROFIT AND LOSS + +The Purpose of this Chapter is to explain the Balance Sheet and Statement of Profit and Loss—two reports prepared by the bookkeeper for the information of the owner. The illustrations are applicable to the business of W. A. Gordon in the Model Set, Chapter 30. The income tax return for an individual is explained and illustrated in Appendix C. + +§ 47. Fiscal Period. The owner of a business will want to know from time to time the results of his operations because he has invested cash or other assets in the business with the expectation that they will bring him profit. In order to determine requires a report of the results of the operations of the business for one year in order to ascertain the amount of income tax the business is to pay, the owner usually must wait until the end of the fiscal period before he can obtain information as to whether or not he has made a profit. If the nature of the business is such that the profit should be ascertained more often, the owner can obtain this information at such times as he desires, but this does not release him from the yearly report required by the Federal Government. The period during which he reports his profit as a taxpayer is referred to as the fiscal period, which, as explained, may be for one year or much less than a year if the owner may designate. + +§ 48. Method of Ascertaining the Profit or Loss. The profit or loss resulting from any operation of a business is determined by (1) subtracting from the proprietorship at the beginning and the proprietorship at the end of a fiscal period, and (2) the difference between the income and the cost for the period. If the value received and the value paid for each transaction recorded, the proprietorship at the beginning of each fiscal period would be $15,000. When determining the profit or loss by subtracting the proprietorship at the beginning and end of the period, it is necessary to take into consideration withdrawals from capital and additions to capital. + +The proprietorship of W. O. Crowwhite, a retail grocery, January 1, is $8,000.00, and on Decem- ber 31 of the same year, $17,500.00. If he has no withdrawal from his invested capital or income from his business during this period, his net profit would have been $9,500.00. If he had withdrawn $2,500.00 from his capital during this year, his net profit would have been $7,500.00. If he had invested another $2,500.00 in his business during this period, his net profit would have been $12,500.00. During this same year, the income resulting from the operations of the grocery business conducted by Mr. Crowwhite was $16,500.00. It is necessary for Mr. Crowwhite to know how much money he has invested in his business so that he may submit this information on his income tax return as explained in Appendix C. + +§ 49. A Merchandise Inventory is the value of all merchandise in stock at the time when it is sold or used up in selling merchandise. The information on this list includes the quantity and description of each kind of merchandise and its value at cost or present market price whichever is lower. + +It is necessary to ascertain the value of the merchandise owned by the business through an inventory taken at regular intervals throughout each fiscal period. Its value is not shown in either the Purchases or Sales account. The Pur- 77 + +78 + +MERCHANDISE INVENTORY. + +Chases account shows the cost of the merchandise bought, and the Sales account the returns from sales, but the value of the merchandise in stock is not shown as a result of this record because the selling price is greater than the cost price. + +A unit record of the merchandise purchased and sold may be kept in certain lines of business, such as mercantile establishments, where the cost of goods is known. For groceries, and dry goods, it is not practicable to keep a record of each unit purchased and sold. It becomes necessary to make a general record of all purchases and sales during the fiscal period whether or not a record of the units purchased and sold is kept, because of shifts, errors in billing orders, and other causes which result in the number of units shown by the record not corresponding with those actually received. + +An inventory of the following merchandise owned by W. A. Gordon and in stock by actual count at the close of the fiscal period ending October 31st, would appear as follows: + +Granulated sugar, 1216 lbs., cost $4.50 per 100 lbs.; 1183 lbs. bacon, sugar, cost $1.10 per 100 lbs.; 256 lbs. roasted coffee, cost 22 cents per lb.; 1802 lbs. bacon, sugar, cost 15c per lb.; 8 lbs. ham, 183 lbs. butter, cost 17c per lb.; 5 cans 264 oz. hard, cast iron per lb.; 25 lbs. flour, 25 lbs. potatoes, 25 lbs. corn meal, 25 lbs. corn pinto beans, cost $2.00 per doz.; 18 doz. cans peaches, cost $3.03 per doz.; 20 doz. cans corn, cost $4.50 per doz.; 205 lbs. creamy butter, cost 33c per lb.; 60 bobs. Blue Ribbon flour, cost $6.00 per box; 34 lbs. White Rose flour, cost $2.50 per lb.; 34 lbs. Fancy flour, cost $6.00 per box; 23 lbs. beans, cost $1.00 per lb.; 20 bxs. Werk's soap, cost $4.00 per box. + +W.A. Gordon +Merchandise Inventory, October 31st + +Illustration No. 39. Inventory of Groceries, Model Set. + +EXPLANATION: The quantities indicated by the figures at the left were obtained by weighing or measuring; the prices on the right were ascertained from the invoice. This price includes not only the invoice cost but also the freight cost. The figures at the right were ascertained by multiplying the quantity by the price. + +
Cash2426
Q. W. Gordon9725
J. H. Brown3180
G. G. O. Halls21910
G. G. O. Halls24057
R. Brown Bros.6183
Banks Hotel16480
Kenny King24900
Tobacco Creamery48
H. A. Anderson Capital17790
Sales20750
Purchase23490
Sales
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
ItemQuantityCost
1183 lbs. Bacon Sugar1183$4.50
256 lbs Roasted Coffee256$63
8 lbs Ham8$17
183 lbs Butter183$17
5 Cans Hard Cast Iron5$46
25 lbs Potatoes25$46
25 lbs Corn Meal25$46
25 lbs Corn Pinto Beans25$46
20 Doz Cans Peaches20$46
205 lbs Creamy Butter205$46
60 Bobs Blue Ribbon Flour60$46
34 lbs White Rose Flour34$79.50
34 lbs Fancy Flour34$79.50
23 lbs Beans (Werk's Soap)23$79.50
Total Merchandise on Hand.$797.15
+ +Illustration No. 39. + +Marchandise Inventory. + +OCTOBER 31ST. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND. + +TOTAL MERCHANDISE ON HAND.79 + +Exercise No. 27, Merchandise Inventory. + +Prepare on journal paper an inventory for the following merchandise owned by the Fred B. Jenkins Hardware Co. and in stock December 31: + +Nails, 10 kgs 8-d., cost $4.30 per kg; 15 kgs 10-d. nails, cost $4.25 per kg; 12 doz. No. 9 hammer, cost $0.60 each; 12 doz. No. 6 hammers, cost $1.00 per doz.; No. 6 hammers, cost $0.90 per doz.; 5 doz. No. 3 hatchets, cost $8.50 per doz.; present market price $7.00 per doz.; 5 gal. Lucas paint, cost $1.75 per gal.; present market price $1.60 per gal.; 25 gal. varnish, cost $2.00 per gal.; 159 lbs. white lead, cost $2.50 per lb.; 159 lbs. black lead, cost $2.50 per lb. + +Exercise No. 28, Merchandise Inventory. + +Prepare on journal paper an inventory for the following merchandise owned by U. R. Underhill Stationery Co., and in stock June 30: + +Typewriter desks, 8 cost $65.00 each; 5 used typewriters, cost $62.50 each; 7 chairs, cost $15.00 each; 4 house-leaf ledger cases, cost $16.50 each; 27 sections No. 9 filing cases, cost $6.50 each; 5 filing cases, cost $6.50 each; 500 reams typing paper, cost $35 per ream, present market price, 3% per ream; present market price of legal paper, present market price of printing ink, present market price of pasteboard, present market price of envelopes, present market price of stationery items (150 doz.), present market price of stationery items (150 doz.), present market price of stationery items (150 doz.). + +THE BALANCE SHEET + +§ 50. The Balance Sheet is a written report of the assets, liabilities, and proprietorship of a business prepared at the close of a fiscal period. The information is obtained from the asset and liability accounts in the ledger (Trial Balance) and the merchandise inventory at the close of the fiscal period. The information includes all of the following: assets (what the business possesses to pay money to the business), accounts with customers, and merchandise inventory. The liabilities are usually listed as follows: notes payable (written promises signed by the debtor to pay a certain sum of money at a specified time); accounts payable (debts due to creditors); and other liabilities (debts due to employees). The assets and liabilities must be arranged in the ledger in the order in which they appear on the Balance Sheet. + +The Balance Sheet may be prepared in "account" form (Illustration No. 39) or "report" form (Illustration No. 40). In account form it shows what is owed to whom and how much is owed because it shows assets opposite liabilities; this information is of value to the balance between assets and financial condition because the liabilities must be paid out of the assets. + +The assets and liabilities of W.A. Gordon as shown by the accounts in his ledger on pages 70, 71 and 72, October 31, are as follows: + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Assets:
Cash:$291.64
Accounts Receivable:A.Y. Jordan...
W.O.Burns...
Jasper...
J.C.Taylor...
Robt.E.Cowan...
People's Hotel...		77-25
33-85
39-91
124-37
61-83
494-39
Liabilities:
Accounts Payable:King & King...
Lakeview Creamery...
Dick, McMillan & Co...
Dawson Bros.& Co...
Brown Bros...		269-02
48-00
147-99
397-55
494-99
+ +Merchandise Inventory, October 31 (Illustration No. 30), $1477-45 + +A Balance Sheet prepared in account form from this information will appear as in Illustration No. 40, and in report form, as in Illustration No. 41. + +A page from a ledger showing assets and liabilities. + +80 + +BALANCE SHEET. + + + + + + + + +
H. A. London
Balance Sheet October 31, 19
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
AccountsLiquidityValue
Cash57.657.6
Mfg. Jour.224224
Stocks & Shares111.9111.9
Paper & Bonds15.915.9
Cashier's Checks100.0100.0
Bankers Checks6.06.0
Total Cash & Liquidities240.4240.4
Rogers' Stock41.041.0
Total Stocks & Securities41.041.0
Total Liquidity281.4281.4
Taxation & Insurance Premiums Due - $373.55
Total Liabilities & Taxes Due - $373.55
Total Liabilities & Taxes Due - $373.55
Illustration No. 40, Balance Sheet for Model Set, "Account" Form.
EXPLANATION: This illustration shows the Balance Sheet for W.A. Gordon, prepared in "account" form, that is, the balance sheet on pages 70, 71 and 72 (Trial Balance page 74) and the inventory of merchandise, page 78. The same information is shown in "report" form in the illustration below.
H. A. LondonBalance Sheet October 31, 19
Cash:240.4
Mfg. Jour.224
Stocks & Shares:111.9
Paper & Bonds:15.9
Cashier's Checks:100.0
Cashier's Checks:6.0
Total Cash & Liquidities:240.4
Rogers' Stock:41.0
Rogers' Stock:6.0
Total Stocks & Securities:41.0
Total Liquidity:281.4
Taxation & Insurance Premiums Due - $373.55:
+ + + + + + +
388.70
Cold Net Profit.1277.20
+ +Illustration No. 42, Statement of Profit and Loss for Model Set, "Report" Form. + +EXPLANATION: This illustration shows the Statement of Profit and Loss (income and cost) for W. A. Hazen, a retail grocer, for the fiscal year ended December 31, page 73 (Trial Balance, page 74) and the inventory of merchandise, page 78. The same information may be shown in "account form" in the same manner as in the Balance Sheet, Illustration No. 40, Subsequent to the close of the fiscal period, the net profit or loss will be determined by net purchases; net purchases minus inventory at the close of the fiscal period equals cost of mer- +chandise sold; net sales less cost of merchandise sold equals gross profit; gross profit minus selling +merchandise; profit made by selling merchandise minus Expense Dr. equals net profit. +The "Proof" shown on this statement is explained in § 32. + +Exercise No. 32, Statement of Profit and Loss. + +Prepare a Statement of Profit and Loss for L. M. Hazen, a retail grocer, from +the following information obtained from the accounts in his ledger at the close of +the fiscal period, December 31: + +Income: +Sales of merchandise $685.29 +Less merchandise returned by customers $37.10 + +Costs: +Inventory, July 1 (beginning) $801.25 +Purchases of merchandise during the period $489.50 +Less merchandise returned to creditors $24.35 +Expense (operating cost) for the period $79.80 + +The inventory of merchandise, December 31, is $862.43. + +84 + +**RELATION BETWEEN THE TWO REPORTS** + +**Exercise No. 33, Statement of Profit and Loss.** + +Prepare a Statement of Profit and Loss for A. Reagan, a retail jeweler, from the following information obtained from the accounts in his ledger at the close of the fiscal period, March 31: + +| Income | $1,016.68 | +|---|---| +| Sales of merchandise | | +| Less merchandise returned by customers | 20.10 | +| Costs: | | +| Inventory, January 1 (beginning) | 1,216.31 | +| Purchases of merchandise during the period | 458.90 | +| Less merchandise returned to creditors | 21.11 | +| Expense (operating cost) for the period | 154.70 | +| The inventory of merchandise, March 31, is $1,127.36 | + +**Exercise No. 34, Statement of Profit and Loss.** + +Prepare a Statement of Profit and Loss for C. H. Shelter, an automobile dealer, from the following information obtained from the accounts in his ledger at the close of the fiscal period, July 31: + +| Income | $4,907.54 | +|---|---| +| Sales of merchandise | | +| Less merchandise returned by customers | 101.32 | +| Costs: | | +| Inventory, January 1 (beginning) | 5,000.00 | +| Purchases of merchandise during the period | 4,505.96 | +| Less merchandise returned to creditors | 210.11 | +| Expense (operating cost) for the period | 405.07 | +| The inventory of merchandise, July 31, is $6,181.75 | + +§ **52. Relation Between the Two Reports.** The Balance Sheet and Statement of Profit and Loss have been discussed independent of each other because the purpose of the discussion was to explain the nature of each report. However, there is a relation between these two reports because the information is obtained from the same source and consists largely of recording business transactions completed by a business during a fiscal period. + +If all the accounts on pages 70, 71, 72 and 73 are checked with their accounts used in preparing the Balance Sheet and Statement of Profit and Loss (Illustration No. 42), it will be observed that the only account not appearing on either of the two reports is that with W. A. Gordon; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. B. Smith; Capital; also that with J. +Because of this relation between the two reports, the bookkeeper can prove the correctness of each report before submitting it to the owner of the business. +A proof of the reports in Illustrations Nos 40 and 42 is given below the Statement of Profit and Loss for Exercise No 34. +It desired, this same proof may be shown in connection with the Balance Sheet. + +It is customary to show assets, liabilities, and proprietorship on the Balance Sheet, and income, costs, and the net profit on the Statement of Profit and Loss: hence the proof of the two reports may be made separate from the reports or in connection with one of them. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
DescriptionAmount
Sales of merchandise$4,907,54
Less merchandise returned by customers101,32
Inventory, January 1 (beginning)5,000,00
Purchases of merchandise during the period4,505,96
Less merchandise returned to creditors210,11
Expense (operating cost) for the period405,07
The inventory of merchandise, July 31,$6,181,75
+ +QUESTIONS +85 + +**Exercise No. 35, Balance Sheet and Statement of Profit and Loss.** + +Prepare a Balance Sheet in report form and a Statement of Profit and Loss from the following Trial Balance and inventory of merchandise, May 31: + +| Cash | $2,192.35 | +|---|---| +| Novelty Gift Shop | 764.50 | +| Wharton | 810.30 | +| Timmich Art Co. | $ 743.90 | +| Sadler Printing Co. | 936.30 | +| American Paper Mills | 374.05 | +| Courts Inc. | 75.99 | +| T. B. Stone, Capital | 2,000.00 | +| Sales | 2610.17 | +| Purchases (Inventory, May 1, $1,012.75) | 2612.45 | +| Expense | 26.30 | +| Merchandise Inventory, May 31, $826.80 | $6,578.70 | + +**Exercise No. 36, Balance Sheet and Statement of Profit and Loss.** + +Prepare a Balance Sheet in report form and a Statement of Profit and Loss from the following Trial Balance and inventory of merchandise, June 30: + +| Cash | $2,330.51 | +|---|---| +| Rogers Seed Market | 345.46 | +| Terry Grocery Co. | 1,136.20 | +| Farmers Exchange | 250.49 | +| Evergreen Seed Shop | 255.90 | +| A. R. Trimble | 661.76 | +| Brookville Nurseries | $2,364.09 | +| Emprise | 1,327.84 | +| L. D. R. Howland, Capital | $1,990.00 | +| Sales | 2595.29 | +| Purchases (Inventory, June 1, $906.75) | 613.13 | +| Expense | 282.79 | +| Merchandise Inventory, June 30, $740.22 | $8,848.26 | + +QUESTIONS + +1. If Robert Brown pays $5,000.00 cash for a grocery business on January 1, 1920, and sells it for $6,000.00 cash on December 31, 1921, does this indicate that the net result resulting from the operations of the business is $1,500.00? + On July 19, 1921, George A. Clark, who owns and operates a gasoline service station, wishes to borrow $2,000.00 from the bank and is requested to make a report to the bank of the financial condition of his business. Would the bank require a Balance Sheet or a Statement of Profit and Loss? What information would it require? + + What is A.L Day's profit or loss for the year 1924 if his proprietorship at the beginning of the year is $3,000.00; investments during the year, $1,500.00; withdrawals during the year, $800.00; and his proprietorship at the end of the year is $8,500.00? + +86 + +**QUESTIONS** + +4. October 31, 1921, the profit and loss accounts of J. B. Sullivan as shown by the Trial Balance taken on that date are as follows: General Expense $857.90; Selling Expense $2,536.00; Delivery Expense $500.75; Sales, Drs. $165.60; Cost of Goods Sold $1,250.00; Merchandise Inventory $561.12. Has his business been operated at a profit or a loss? State the amount of the profit or loss. + +5. L. J. Strong has been offered the grocery business at 762 Main St. He wishes to make a careful investigation before accepting this offer. The present owner is correct and asks you to verify it. How would you proceed in making the verification? Why is it necessary to know the value of the merchandise in stock at the close of each period? What is the difference between Victoria and Victrola records, could you devise a plan whereby a record could be kept of each article purchased and sold? + +If such a plan were effected, would the number of units of each kind on hand, as stated in the record, agree with the number of units in stock, as shown by actual count, at the close of the fiscal period? + +8. Name some conditions that might cause a discrepancy between the record and the actual stock on hand. + +9. If merchandise costing $200.00 is inventoried at $600.00, the present market price, what effect will this have on the net profit for the period? + +10. If merchandise is inventoried at present market value when this is less than the cost value, why is it not inventorized at present market value when this is greater than the cost value? + +11. Can you name a condition under which it would be advisable to use the present market value even though this should be greater than the cost? + +12. What information does the owner of a business obtain from the Balance Sheet that he cannot obtain from his Profit and Loss Account? + +13. What information does the owner of a business obtain from the Statement of Profit and Loss which he can not obtain from the accounts in the ledger? + +Why is "Cash" listed first on the Balance Sheet? + +How does the owner of a business expect to pay its liabilities? + +Narrowing down two alternatives for Business Plans may be prepared. + +Which is considered the better of the two forms? State reasons for answer. + +If the Sales account shows a debit of $1,500.00 and a credit of $6,000.00, what does this indicate? + +If the net returns from sales are $4,363.50 and the expense of operating the business is $4,500.00, what does this indicate? + +If the total assets are $7,682.50 and the total liabilities $6,552.90, what does this indicate? + +If the total assets are $10,500.00 and the total liabilities $4,500.00, what does this indicate? + +Would it be practicable for a department store to make a Balance Sheet and Statement of Profit and Loss at the close of each month? Why? + +Why is it necessary for each business concern in the United States to have a Balance Sheet and a Statement of Profit and Loss prepared at least once each year? + +What information can the owner obtain from his Balance Sheet which will be of assistance to him in securing credit from other business concerns? + +Why is it that the difference between the total assets and total liabilities equals the net investment plus the net profit? + +Chapter VIII + +CLOSING THE LEDGER + +The Purpose of this Chapter is to explain and illustrate the process of closing the ledger at the end of a fiscal period. It is customary to close the ledger at the end of a fiscal period in order that the profit or loss resulting from the operations of the business may be shown on the Statement of Profit and Loss. This will show the net result of the business during the fiscal period, and in order that the income and cost accounts may be in balance at the beginning of the next period. The illustrations are applicable to the business of W. H. Smith & Co., Chicago. + +§ 53. Closing the Ledger is an accounting term applied to the process of transferring the net profit or net loss to the owner's Capital account at the close of a fiscal period. This process requires the closing of all income and cost accounts which have been opened during the fiscal period, so that their balances represent the owner's interest in the business consists of the assets invested at the beginning of the business, subsequent investments, and the net profit resulting from the operations of the business. The net loss from the investment, and the net loss, if the business has been operated at a loss, will be shown on the Statement of Profit and Loss. The owner's Capital account will show the investments and withdrawals, but will not show the profit or loss resulting from the operations of the business until the ledger has been closed. The owner's Capital account will show his total investment, and he will close all accounts shown on the Statement of Profit and Loss at the close of a fiscal period in order to debit or credit the owner's Capital account with either a profit or a loss reported to him on the Statement of Profit and Loss. + +§ 54. Accounts Required for Closing the Ledger. Two accounts in addition to those discussed in the preceding chapters are required in closing the ledger: one to show the value of merchandise inventory and the other to show the operating cost, special sales, gross profit on sales, special profits, and net profit; these four accounts are usually given the titles "Merchandise Inventory," "Special Sales," "Gross Profit on Sales," "Special Profits," and "Profit and Loss." Other accounts may be required; these will be explained and illustrated as they are needed in connection with the discussion of the adjusting entries. + +INVENTORY ACCOUNT + +§ 55. The Purpose of this Account is to show the value of the merchandise on hand at the close of each fiscal period as indicated by merchandise inventory. It is necessary to show the value of inventory in an account in the ledger because it is shown as one of the assets on Balance Sheet. + +Debit Inventory Account + +At the close of each fiscal period, with the value of merchandise inventory at close of period. + +Credit Inventory Account + +At the beginning or close of each fiscal period, with value of merchandise inventory at close of period. + +\section*{The Balance of this Account shows value of merchandise inventory at close of fiscal period} + +87 + +88 + +CLOSING THE LEDGER. + +PROFIT AND LOSS ACCOUNT + +§ 56. The Purpose of this Account is to show the operating cost, special losses, principal income, and special profits for the fiscal period as shown by the Statement of Profit and Loss. No transactions are recorded in this account, the debits and credits being formed by transferring to it the balances of the profit and loss accounts at the close of each fiscal period. When this account is closed, the balances of these accounts could be closed directly into the owner's Capital account, but it is considered the better practice to have one account in the ledger which summarizes all of the profit and loss accounts. This account is called the Profit and Loss Account. It is opened only at the close of the fiscal period, and when the balances of all the profit and loss accounts have been transferred to it and its balance transferred to the owner's Capital account, it is ruled and remains in balance until the close of the next fiscal period. + +Direct profits or losses that occur during the fiscal period should not be credited or debited to the Profit and Loss Account, but to a special account, the name of which should indicate the nature of the profit or loss. For example, "Profit on Sale of Real Estate," "Loss on Stolen Typewriter," "Loss on Delivery Truck," etc. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Debit the Profit and Loss Account:Credit the Profit and Loss Account:
1.At the close of each fiscal period,At the close of each fiscal period,
with the balance of each ac-with the balance of each ac-
count which shows a profit.count which shows a profit.
2.At the close of each fiscal period,
with the balance of each ac-
count which shows a loss.
3.
4.
5.The Balance of the Profit and Loss Account shows the net profit or net loss for the fiscal period, which is the same as the "Net Profit" or "Net Loss" shown on the Statement of Profit and Loss. This balance is debited or credited to the owner's Capital account at closing time. + +The student may wonder why the account is not named "Less Profit," or "Loss and Gain," because the losses are recorded on the debit side and the gains or profits on the credit side. The title "Profit and Loss" is used because it includes both gains and losses. However, the title "Profit and Loss" is preferred by accountants because the account is a summary of those accounts used in connection with the preparation of the Statement of Profit and Loss. + +CLOSING ENTRIES + +§ 57. Entries to Close the Ledger. Five or more entries are necessary to close the ledger as follows: (1) to record the merchandise inventory at the close of the fiscal period; (2) to close the Purchases account; (3) to close the Sales account; (4) to close the Expense account; (5) to close the Profit and Loss account. + +A separate entry is made for each item in these five accounts. The number of entries required will depend upon how many items are included in each account. Hence, the number of entries will depend upon how many accounts are to be closed. + +The information for these entries is obtained from the Statement of Profit and Loss, hence this statement is used as a guide in closing the ledger. + +The value of an asset used in preparing this statement must be determined before entering it in any ledger. The value of an asset used in preparation of this statement may be found in one of two ways: + +(1) by determining its cost; + +(2) by determining its market value. + +§ 58. Methods of Closing the Ledger. The five or more closing entries are of the same nature as entries for transactions which occur in the regular operations of business in that each entry requires an amount debited and an amount credited, the values being alike. These entries may be made either in the ledger accounts or in general journal and posted to ledger in the same manner as transactions. When entries are made in general journal and posted + +METHODS OF CLOSING THE LEDGER. 89 + +to the ledger, the process is known as the "journal entry method" of closing the ledger; when the adjusting entries are made direct in the ledger, the process of closing is referred to as the "direct method" of closing the ledger. Both methods of closing the ledger may be used without emphasizing the fact that the final results are the same no matter which method is used. + +The student might conclude from the foregoing discussion that the direct method of closing is used when all transactions are recorded in books of original entry and posted to the ledger. How- ever, this conclusion would be incorrect because many transactions are recorded in books of original entry even though the transactions are recorded in books of original entry and posted. It is quite evident that the direct method is not always used because it facilitates auditing by providing a record of the closing entries in a book of original entry. + +§ 59. Journal Entry Method. When the closing entries are made in the journal, they are recorded in the same manner as those necessary to record transactions. All the entries are made under date of the last day of the fiscal period. The five journal entries required to close the ledger of W. A. Gordon (Model Set) on page 70 are shown in Illustration B on pages 91 and 92. The closing entries for these closing entries is shown in the illustration on pages 91 and 92; pages 70 and 71 are not repeated because none of the accounts on these two pages are affected by the closing entries. An analysis of the closing entries is given on pages 94, 95 and 96. + +§ 60. Direct Method of Closing. When the closing entries are made direct in the ledger and not in the journal, they are recorded in the same manner as transactions requiring journal entries except that one entry is made for each account which balances an account. The ledger page is given in each entry for reference. The entries are made under date of the last day of the fiscal period. The process of closing is explained and illustrated on pages 70-73 by the direct method is explained and illustrated in Appendix B. + +The direct method of closing is illustrated in Appendix B, separate from the journal entry method to show how it differs from that method. In order to understand both methods, a knowledge of both is necessary to a thorough understanding of each. The final results are the same with either method, but preference is given to the journal entry method in this test because it provides a more complete record than does the direct method. This test shows why it is necessary to have each entry posted before auditing a ledger which has been closed by the journal entry method so that the auditor can prepare journal entries so that he may know that each entry has been posted. + +§ 61. Balancing an Account. When it is desired to rule an account which does not balance and carry the balance down below the ruling on the same page or forward it to a new page, the process is referred to as balancing an account. This is done by bringing down black ink on one side of an account and red ink on the other side until the account is balanced and ruling the account. It is customary to use red ink for the date, figures and the ruling, but its use is not arbitrary. The balance is brought down with black ink on the opposite side of the account below the ruling or under the title "Balance." The balance sheet for W. A. Gordon's Cash account is shown on page 70 and the proprietor's Capital account on page 91. + +§ 62. A Post-Closing Trial Balance is a list of the open accounts in the ledger with the balance set opposite the name of each account, prepared after all the adjusting and closing entries have been made in the accounts. The facts shown on this Trial Balance are the same as those shown on the Balance Sheet and will be found identical with those shown on page 91 except for differences caused by posting for his approval. This Trial Balance is necessary in order that the bookkeeper may know that the accounts in the ledger agree with the facts shown on the Balance Sheet, and that the ledger is in balance before transactions performed in the next fiscal period are recorded. + +JOURNAL ENTRIES TO CLOSE THE LEDGER + +October 31, 19 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Inventory147715
Purchases147715
Wages, etc., at the close of the fiscal period.
Sales163535
Purchases163535
To transfer the cash from the purchases account to the sales account.
Sales71500
Wages and taxes71500
To transfer the gross profit on sales from the sales account to the Profit and Loss account.
Profit and Loss12740
Cash12740
To close the Cash account to the Profit and Loss account.
Profit and Loss32590
Capital32590
To transfer the net profit from the Profit and Loss account to the Capital account.
+ +Illustration No. 43, Page 2 of the General Journal for Model Set + +EXPLANATION: This illustration shows the five entries ($2) to close the ledger for W. A. Gordon & Co., as made in Journal form ($39). The information is obtained from the Statement of Profit and Loss, Illustration No. 42. These entries are analyzed and further explained on pages 93, 95 and 96. + +CLOSING ENTRIES POSTED 91 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Tong King Co.
Oct. 15Cir. 100Cir. 10678
Oct. 23Cir. 3225Cir. 17978
Oct. 7Cir. 700 to Oct. 23Cir. 100 to Oct. 23
Lodge Elder Creamery, Deptam
Oct. 7Cir. 20Cir. 10 to Dec. 15Cir. 10
Oct. 18Cir. 20 to Dec. 15Cir. 10 to Jan.46
Deek McMillan & Co., Springfield
Oct. 16Cir. 1078 to Oct. 23Cir. 1078 to Dec.1078
Dawson Bros's Co., Lebanon
Oct. 27Cir. to Dec.Cir.20788
+ + + + + + + + + + + +
+ "Cir. to Dec."
+ "Cir.
to Dec." +
Braun Bros., City,
"Cir. to Dec." Cir. to Dec.Cir.Cir.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec.
to Dec."























































+ + + +
Illustration No.44,Page3 of the Ledger for Model Set.EXPLANATION: This page is the same as page
72 except the Capital account has been
credited with the net profit and is balanced as explained on page
93. Pages
70 and
71 are not
repeated here because they are not affected by the closing entries.Page No.3 of the Ledger for Model Set.EXPLANATION: This page is the same as page
72 except the Capital account has been
credited with the net profit and is balanced as explained on page
93. Pages
70 and
71 are not
repeated here because they are not affected by the closing entries.Page No.3 of the Ledger for Model Set.EXPLANATION: This page is the same as page
72 except the Capital account has been
credited with the net profit and is balanced as explained on page
93. Pages
70 and
71 are not
repeated here because they are not affected by the closing entries.Page No.3 of the Ledger for Model Set.EXPLANATION: This page is the same as page
72 except the Capital account has been
credited with the net profit and is balanced as explained on page
93. Pages
70 and
71 are not
repeated here because they are not affected by the closing entries.Page No.3 of the Ledger for Model Set.EXPLANATION: This page is the same as page
72 except the Capital account has been
credited with the net profit and is balanced as explained on page
93. Pages
70 and
71 are not
repeated here because they are not affected by the closing entries.Page No.3 of the Ledger for Model Set.EXPLANATION: This page is the same as page
72 except the Capital account has been
credited with the net profit and is balanced as explained on page
93. Pages
70 and
71 are not
repeated here because they are not affected by the closing entries.Page No.3 of the Ledger for Model Set.EXPLANATION: This page is the same as page
72 except the Capital account has been
credited with the net profit and is balanced as explained on page
93. Pages
70 and
71 are not
repeated here because they are not affected by the closing entries.Page No.3 of the Ledger for Model Set.EXPLANATION: This page is the same as page
72 except the Capital account has been
credited with the net profit and is balanced as explained on page
93. Pages
70 and
71 are not
repeated here because they are not affected by the closing entries.Page No.3 of the Ledger for Model Set.EXPLANATION: This page is the same as page
72 except the Capital account has been
credited with the net profit and is balanced as explained on page
93. Pages
70 and
71 are not
repeated here because they are not affected by the closing entries.Page No.3 of the Ledger for Model Set.EXPLANATION: This page is the same as page
72 except the Capital account has been
credited with the net profit and is balanced as explained on page
93. Pages
70 and
71 are not
repeated here because they are not affected by the closing entries.Page No.3 of the Ledger for Model Set.EXPLANATION: This page is the same as page
72 except the Capital account has been
credited with the net profit and is balanced as explained on page
93. Pages
70 and
71 are not
repeated here because they are not affected by the closing entries.Page No.3 of the Ledger for Model Set.EXPLANATION: This page is the same as page
72 except the Capital account has been
credited with the net profit and is balanced as explained on page
93. Pages
70 and
71 are not
repeated here because they are not affected by the closing entries.Page No.3 of the Ledger for Model Set.EXPLANATION: This page is the same as page
72 except the Capital account has been
credited with the net profit and is balanced as explained on page
93. Pages
70 and
71 are not
repeated here because they are not affected by the closing entries.Page No.3 of the Ledger for Model Set.EXPLANATION: This page is the same as page

A small image showing a ledger entry form, possibly from a vintage ledger set, with fields for date, description, amount, etc., but no specific details visible due to blurring or distortion. + +The text surrounding this image appears to be instructions or explanations about how to use this particular ledger set, mentioning that some pages may have repeated information due to closing entries. + + + + +
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+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Stale
Oct 198/19/1Oct 198/1
Cash30303030
Oct 28/18/1Oct 28/1
Cash of sales $500.0037Cash $500.00
Cash of sales $500.0037Cash $500.00
Cash of sales $500.0037Cash $500.00
Cash of sales $500.0037Cash $500.00
Cash of sales $500.0037Cash $500.00
Inventory
Dollars &c.$1,266.24$1,266.24$1,266.24$1,266.24
Purchase:
Sep 1 Inventory $1,500 Cash $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,777.98 Cash of Sales $1,266.24$333333$333333$333333$333333$333333$333333$333333$333333$333333$333333$333333$333333$333333$222222$222222$222222$222222$222222$222222$222222$222222$222222$222222$222222$222222$444444$444444$444444$444444$444444$444444$444444$444444$444444$444444$444444$666666$666666$666666$666666$666666$666666$666666$666666$666666$666666$666666$888888$888888$888888$888888$888888$888888$888888$888888$888888$55555555555555555555555555555555555555555555555555555555555555555555555555 + +POST-CLOSING TRIAL BALANCE. +93 + + + + + + + + + + + + + + + + +
Profit and Loss
Oct. 31 Balance. $3740 Oct. 31 Balance less $7150$3240$7150
W. A. Gordon Capital$7150$7150
+ +Illustration No. 46, Profit and Loss Account, Model Set + +The above account would be opened on page 5 of the ledger for the Model Set, the first four pages being filled as shown on pages 70, 71, 91 and 92. This account is the result of closing the Pur- +chases, Sales and Expenses accounts to the Profit and Loss account after they have been transferred to W. A. Gordon, Capital, +as shown in the illustration at the bottom of page 91. + +BALANCING THE CAPITAL ACCOUNT +If desired, the owner's capital account may be ruled and his present capital (proprietary interest in the business) carried down under date of the beginning of the next fiscal period. If this rule is made, it will appear on page 8 of the ledger as shown in Illustration No. 46. The balance of this account is carried +down on the credit side under date of the beginning of the next fiscal period as in the illustration +at the bottom of page 91. + +POST-CLOSING TRIAL BALANCE +W. A. Gordon +Post Closing Trial Balance, October 31, 19-- + + + + + + + + + + + + + + + + + + + + + + +
Cash2916
Accounts Receivable88350
Accounts Payable96657
W. A. Gordon's Capital18850
Inventory262527
+ +Illustration No. 47, Post-Closing Trial Balance for Model Set + +This Trial Balance is made from the ledger accounts on pages 70, 71, 91 and 92, the Accounts +Receivable and Accounts Payable are shown in one amount because these were not affected by the closing entries. The accounts are listed in the same order as the accounts appear in the +ledger. The facts on this Trial Balance are as shown on page 92 of this book. +The post-closing Trial Balance proves that the ledger is in balance after the closing entries are posted. + +Combined Journal Entry + +If desired, the accounts used in making the Statement of Profit and Loss may be closed with +their balances by means of a combined journal entry. The journal entry at the right shows this method of +closing the accounts which are listed on page 90. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
CashSalesInventory34147713
This form of closing is not recommended.PurchasesPurchases Expense218505311250
The reason for closing these accounts is that they do not show a profit or loss but rather a change in + assets because the Profit and Loss account has been closed out.32740
It is desirable to have in the + ledger all accounts showing a profit or loss such as that provided by the Profit + and Loss account, because this information is very valuable for statistical purposes. The student + will understand this better after he is more familiar with the accounting procedure developed later + in the course.36580
+ + +
DescriptionAmount
Cash2916
Accounts Receivable88350
Accounts Payable96657
W. A. Gordon's Capital18850
Inventory262527
This form of closing is not recommended.
Sales147713
Purchases Expense311250
Purchases Expense32740
Purchases Expense - W. A. Gordon, Capital36580
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
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+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + +
POST-CLOSING TRIAL BALANCE.
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, 1977.October 29, + +**ANALYSIS OF CLOSING ENTRIES.** 95 + +The Third Entry is that required to transfer the balance of the Sales account to the Profit and Loss account. This entry is necessary because it is customary to show in the ledger a summary of the facts shown by the Statement of Profit and Loss. The reason why this account shows the profit on sales, and the loss on sales, is that the account is credited because the profit has been earned and debited because the loss has been incurred. When this entry is posted, the Sales account will show only its cost, and the Profit and Loss account will show only its net profit or loss. +It is customary to write "Profit and Loss" in the explanation column of each of these accounts. + +The illustration at the right shows the Sales account after this entry has been posted, the journal entry being shown below. The Sales account will show only its cost, and the Profit and Loss accounts will show only their net profit or loss. +After this journal entry has been posted, all sales revenue and losses can be closed direct to the Cash account instead of Profit and Loss as explained in §6. + +The Fourth Entry is that required to transfer the balance of the Expense account to the Profit and Loss account. This entry is necessary because the net profit is ascertained in the Statement of Profit and Loss by subtracting from sales revenue, the profit on sales. The Profit and Loss account is debited so that when it is posted, the net profit will be recorded; the Expense account is credited because this account shows expenses during the period. When this entry is posted, both accounts will have a balance which will balance and be ruled, and the balance of Sales revenue and Loss account will show the net profit or loss as customary to write "Profit and Loss" in the explanation column of these accounts. + +The illustration at the right shows the Profit and Loss account after this fourth entry has been posted, the journal entry being shown below. The Expense account will show only its cost, and the Profit and Loss accounts will show only their net profit or loss. +When this journal entry has been posted, all expense revenue and losses can be closed direct to the Cash account instead of Profit and Loss as explained in §6. + +
October 31, 19$350$350$350
Oct. 31$350$350$350
Oct. 31$350$350$350
Oct. 31$350$350$350
Oct. 31$350$350$350
Oct. 31$350$350$350
Oct. 31$350$350$350
Oct. 31$350$350$350
Oct. 31$350$350$350
Oct. 31$350$350$350
Oct. 31$350$350$350
Oct. 31$350$350$350
Oct. 31$350$350$350
Oct. 31$350$350$350
October 29, 1977.
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
SalesOct. 30Oct. 30Oct. 30Oct. 30
CashOct. 30CashCashCash
Profit and LossOct. 30Oct. 30Oct. 30Oct. 30
CashOct. 30CashCashCash
ExpenseOct. 30Oct. 30Oct. 30Oct. 30
CashOct. 30CashCashCash
Profit and LossOct. 30Oct. 30Oct. 30Oct. 30
CashOct. 30CashCashCash
ExpenseOct. 30Oct. 30Oct. 30Oct. 30
CashOct. 30CashCashCash
Cash Account Summary:
Description:Cash Inflow:Cash Outflow:Cash Balance:
Sales Revenue:$1250.$1250.
Expenses:$1250.
Total:$1250.$1250.
+ +October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, 19XX - October 31, + +96 +**ANALYSIS OF CLOSING ENTRIES** + +The Fifth Entry is that required to transfer the balance of the Profit and Loss account to the proprietor's Capital account. This entry is necessary because the purpose of closing the ledger is to transfer the net profit to the proprietor's Capital account. The Profit and Loss account is debited because this account shows the net profit which has been earned by the proprietor. The proprietor's Capital account is credited because this account shows the amount of capital invested by the proprietor. The profit is equivalent to an additional investment in the business. + +If a profit has been posted, the Profit and Loss account will show a debit balance as shown by the Balance Sheet. If no profit has been posted, the name of the proprietor's Capital account will appear in the explanation column of the Profit and Loss account, and the Profit and Loss account will show a credit balance as shown by the Balance Sheet. + +The illustration at the top of page 93 shows how the Profit and Loss account and the account for the proprietor's Capital account are closed before the fifth entry has been posted, the journal entry being as follows: + +| Date | Description | +|---|---| +| Oct. 11 | Transfer from Profit and Loss account to proprietor's Capital account. | + +If desired, the proprietor's Capital account may be bal- +anced on November 1st, as illustrated on page 93 and illustrated at the bottom of page 94; this plan is usually followed. + +**Closing the Inventory Account** + +If desired, the inventory of merchandise at the close of the fiscal period may be transferred to the Purchases account at the beginning of the next fiscal period. If it is not transferred to the Purchases account at the beginning of the next fiscal period, it must be added to this account at the close of the period because the cost of merchandise purchased during this period plus any new purchases must be added to the cost of merchandise purchased during this period plus any new purchases must be added to all merchandise. The form of entry for transferring inventory from one fiscal period to another is shown below: + + + + + + + + + + + + + + + + + + +
Purchases1477 15To close Inventoryaccount at beginning
Taxation1477 15of next fiscal period.
+ +The entry necessary to transfer the inventory to the Purchases account for V. A. Gordon, Model 80, is shown at right. The date, November 1, at top, indicates that this entry was made on November 1st. After this entry has been made, there will be a debit balance in this account and a credit balance in "Inventory" in the explanation column of the ledger. + +Exercise No. 37, Closing the Ledger, Journal Entry Method. +Prepare a Balance Sheet and Statement of Profit and Loss, each in report form, from the Trial Balance of C. U. Steele, resulting from recording the trans- + +SUMMARY—CHAPTERS VI, VII AND VIII 97 + +actions in Exercises Nos. 17, 20 and 23 (merchandise inventory, $6,127.50). Close the ledger by the journal entry method and take a post-closing Trial Balance. + +The student was instructed to retain the Trial Balance and ledger sheets at the conclusion of Exercise No. 23. + +**Exercise No. 38, Closing the Ledger, Direct Method.** + +Prepare a Balance Sheet in account form and a Statement of Profit and Loss in report form from the Trial Balance of Donald D. Wells, resulting from recording the transactions in Exercise No. 25 (merchandise inventory, $360.44). Close the ledger by the direct method, and take a post-closing Trial Balance. + +The student was instructed to retain the Trial Balance and ledger at the conclusion of Exercise No. 38. + +**Exercise No. 39, Closing the Ledger, Journal Entry Method.** + +Prepare a Balance Sheet in account form and a Statement of Profit and Loss in report form from the Trial Balance of H. A. Popp, resulting from recording the transactions in Exercise No. 25 (merchandise inventory, $360.44). Close the ledger by the journal entry method, and take a post-closing Trial Balance. + +The student was instructed to retain the Trial Balance and ledger at the conclusion of Exercise No. 39. + +**Exercise No. 40, Closing the Ledger, Combined Journal Entry.** + +Prepare a Balance Sheet and Statement of Profit and Loss, each in report form, from the Trial Balance of J. N. Fulton, resulting from recording the transactions in Exercise No. 26. Close the ledger by a combined journal entry as explained at the bottom of page 93, resulting in a post-closing Trial Balance. + +The student was instructed to retain the Trial Balance and ledger at the conclusion of Exercise No. 40. + +**Summary of Chapters VI, VII and VIII.** The Model Set in Chapter VI illustrates the method of recording transactions, posting and taking a Trial Balance. Illustrations are provided so that the student may see the connection between the transactions and the Trial Balance at the end of the month. + +The profit or loss account is used to record all gains and losses on sales activities and proprietorship. The Statement of Profit and Loss is a report showing a list of the income, costs and net profit. The proprietorship as shown by the Balance Sheet less the net profit or loss is called capital stock or capital investment. The balance of Profit and Loss equals the proprietorship at the beginning of the fiscal period. + +"Closing the ledger" is a term used to describe the method of transferring the profit or loss to another Capital account. Certain entries are required to make this transfer possible. These entries may be made directly in the ledger or they may be recorded in the general journal and posted to the ledger. The accounts closed are those which have been used up during the fiscal period. Profit and Loss include cost and income accounts. The Profit and Loss account is used in the process of closing; when all accounts have been closed, the balance of Profit and Loss account is transferred to the owner's Capital account. The post-closing Trial Balance shows that there is equality of debits and credits has been maintained throughout the closing process. + +QUESTIONS + +1. Explain the meaning of the term "closing the ledger." +2. Is it necessary to close the ledger? Why? +3- When is the ledger closed? +4- Name two methods of closing the ledger. +* + +98 + +QUESTIONS ON CLOSING THE LEDGER + +5. What is the purpose of the Profit and Loss account? +6. Why is the account not named "Loss and Gain" since losses appear on the debit side and gains on the credit side? +7. What is the purpose of the post-closing Trial Balance? +8. Why are accounts ruled when the two sides are equal? How? +9. Why is it necessary to open an account with Inventory at the close of the fiscal period? +10. Name the five entries usually required in connection with closing the ledger. +11. If the business had made a profit other than that shown by the Purchases, Sales and Inventory accounts, would a separate entry be required to close this profit into the Profit and Loss account? If the profit is credited to a Profit on Sales of Real Estate account, what entry would be made and credited in the closing entry. +12. A business owned a horse which it used in connection with the delivery of its merchandise. The horse died and the loss was debited to a "Loss on Dead Horse" account. Would a special entry be required to close the balance of this account into the Profit and Loss account? Name the accounts debited and credited in making this entry. +13. After the ledger is closed, what accounts remain open? +14. What relation does the credit to the owner's Capital account after it is closed have to the assets and liabilities shown by the accounts that remain open after the ledger is closed? +15. Describe two methods of closing the ledger by the direct method. +16. Describe the process of closing the ledger by the journal entry method. +17. Which method of closing the ledger is considered the better? Why? +18. Are the debits and credits equal in each closing entry? Why is this necessary? +19. If an account is closed with an incorrect amount, what effect will this have on the total balance of the first month of the next fiscal period? +20. Mention an error in the closing of the ledger which would effect future Trial Balances. +21. Why is the Cash account balanced at the close of the fiscal period? +22. Describe the entry necessary to close the balance of the Inventory account into either a Cost or Gross Profit account. When was this entry made? +23. Is it necessary to balance each customer's account and each creditor's account in the ledger at the close of the fiscal period? Give reasons for your answer. +24. Is it necessary to balance the Capital account after the net profit or net loss for a period has been recorded in relation to it? +25. Why is it desirable to close the Capital account even though the other accounts may be closed by journal entries? + +Chapter IX + +BUSINESS FORMS AND VOUCHERS + +The Purpose of this and the two Succeeding Chapters is to explain and illustrate these business forms and vouchers, which are used with the performance of business transactions. A printed statement of the business transac- +tion which has been completed is sufficient for determining the debits and credits in connection with the transaction, but a knowledge of business forms is necessary because they are used. + +§ 63. A Business Form or Voucher is a written statement concerning a business transaction to be performed or one that has been completed. The two terms are used with the same meaning. A voucher is a written statement to a business person which is an evidence of a cash payment. Business forms prepared for a specific purpose are usually printed with blank space for the information desired in connection with a transaction. These forms are referred to by name, as purchase order, bill of lading, receipt, deposit ticket, check, note, sight draft, time draft, trade acceptance, etc. The various business forms will be explained and illustrated as they are needed in the remainder of this chapter. The methods by which the information which relate to the purchases and sales of merchandise are explained and illustrated. + +§ 64. Use of Business Forms. A business form serves two purposes: (1) it provides written information in regard to a business transaction, thus avoiding the necessity of oral communication between parties involved; (2) it pro- +vides information for the basis of the entry made by the bookkeeper when he re- +counts the transaction. From the standpoint of the bookkeeper, business forms are very useful because they make possible the maintenance of records in recording transactions and also support his records when these are verified by the auditor. + +In preceding chapters, the transactions have been recorded from a printed statement of the facts. In this chapter, the bookkeeper would make his record from business forms because no printed record of the transactions would be available. The usual process is (a) transactions performed as evidenced by bills, receipts, checks, notes, drafts, etc., are entered in the accounts in the ledger resulting from posting; (d) the Trial Balance at the end of the month to prove the equality of debits and credits; (e) a report of the assets and liabilities, and profits and losses to the owner at the close of the final period. + +§ 65. A Purchase Order, or "order" as it is sometimes termed, is the written authority from the purchaser, authorizing the seller to make shipment of the mer- +chandise ordered. It is usually prepared on preprinted paper which should be made in duplicate, the original and duplicate printed on different-colored paper, and each original and duplicate numbered the same, the numbers being arranged so that when they are filed together they can be identified on both copies on the duplicate as on the original and the duplicate is filed for reference. When this plan is followed, the purchaser has available all the information given in each order until it has been filled. The purchaser received with this to determine whether or not the order has been filled as directed. + +Merchandise may be ordered by letter, by telegram, or by telephone; when the order is placed by letter, it should be typed on preprinted stationery bearing your name and address in large letters at top center of page and your signature below your name; when it is placed by telegram or telephone call, an order accompanied by a telegram or telephone call should be filed numerically before any other order; when it is placed by telegram or telephone call, an order accompanied by a telegram or telephone call should be filed numerically, and when they have been filed, they should be placed in another file in the same order. +Illustration No. 48 shows one form of purchase order; others will be discussed and illustrated later. + +99 + +100 +BUSINESS FORMS AND VOUCHERS. + +**SOUTH-WESTERN PUBLISHING CO.** +Publishers of Commercial Text Books + +309 WEST THIRD ST., CINCINNATI, OHIO + +Yawnan & Erbe Manufacturing Co. +Rochester, E. Y. + +Order No. ____________ April 21, 1921 +Terms 30 days net + +Ship via Freight - prepaid + +MARK ORDER NO. ON OUTSIDE OF ALL PACKAGES AND CASES + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
QUANTITYDESCRIPTIONPRICE PER
2106 Bases10.00 ea.
4Sections30.00 ea.
260 Finishes35.00 ea.
282 Finishes35.00 ea.
+ +South Western Publishing Co. +Deliver no goods without a written Order on this form. +By L.M.A. + +Illustration No. 48, Purchase Order. + +EXPLANATION. This illustration shows a purchase order issued by the South-Western Publishing Co., Cincinnati, O., for filing devices manufactured by the Yawnan & Erbe Mfg. Co., Rochester, N. Y. The order is issued in triplicate; the original is mailed to the Yawnan & Erbe Mfg. Co., Rochester, N. Y., and the duplicate is filed with the receiving department. The instructions in the upper right hand corner are for information in checking the invoice; the instruc- +tions in regard to marking the cases are for the receiving department. + +§ 66. An Invoice is a written list of merchandise purchased or sold. The +purchaser usually refers to the invoice he receives as a "purchase invoice," and +the seller to one which he issues as a "sales invoice." It is the principal form upon which +the buyer or purchaser pays for his purchases; the seller can use it as a bill of exchange, +paper, retain a copy of the list of items sold each customer; the method of doing +this will be explained later. An invoice is authorized by a purchase order and +should contain all of its requisition, including name of buyer, date of order, price and +number of the purchase order, method of making shipment, detailed description +of the merchandise shipped, prices and extensions of each item, and the total. +In addition to these requirements, it should state what kind of payment was made, +when it was received, when it was paid, who received it, how much was paid, +whether it was accepted or rejected, whether it was returned or not, and why it was +not shipped, should be the date of the invoice; the terms which the seller allows; +the name and address of the seller; and any other information which the seller may require, including any explanation of any omission on his part. In case an order is not shipped or an explanation of this omission should be given on the invoice, +because the purchaser, in checking the information on the invoice with his order, +will want to know the reason it has not been filled as specified. Illustrations Nos. +49 and 50 show two forms of invoices; other forms will be explained and illus- +trated later. + +A scanned page from a business manual showing a purchase order form. + +BUSINESS FORMS AND VOUCHERS. +101 + +**Buyer's—** + +YAWMAN AND ERBE MFG. CO. +Wood and Steel +Furn. Divisions + +Office Systems +and Equipment + +**Main Office and Factories, Rochester, N. Y.** + +Date: 5/31/21. + +Sold To +South Western Publishing Co. +309 West Third St. +Cincinnati, Ohio + +Your Order No.: 234573 + +Branch No.: ____________ + +Shipper Via: U Y C + +Territory: ____________ + +TERMS—Thirty Days Net—Payable in New York Exchange—Pay No Money to Representatives. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
QuantityDescriptionPriceAmountTotal
2-168 Bases10.00 ea20.00
4-35 Sections31.00 ea124.00
6-4833.00 ea207.00289.00
+ +Illustration No. 49, Purchase Invoice. + +EXPLANATION. This invoice is an acknowledgment of the purchase order, Illustration No. The order has been filled complete. Space is provided on the invoice for information relative to the date of shipment, the number of items shipped, the number of extensions, the amount of extensions and territory. The "66" after "territory" indicates that there are a number of territories and that the merchandise mentioned in this invoice was shipped into territory No. 66. The check marks indicate that the extensions have been verified, that the prices agree with the order, and that the extensions and the total have been verified. + +W. H. GOODWIN +DEALER IN + +Fancy Groceries,Provisions and Country Produce. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on the purchase invoice except that it is rendered by a retail merchant and he does not need the information shown on the purchase invoice. + +Illustration No. 50, Sales Invoice. + +EXPLANATION. The information on this sales invoice is practically the same as that on + +102 +BUSINESS FORMS AND VOUCHERS. + +§ 67. A Sales Ticket is a form of sales invoice used by some retail mer- +chants. Sales tickets are usually printed in duplicate and bound in a book. Each clerk is provided with a book, and, when he makes a sale, either on account or for cash, he signs the ticket and hands it to the merchandise sold on the sales ticket. By the use of carbon paper, the two copies can be made at one time; one copy is given to the customer and the other to the wrapping department to be wrapped with the merchandise sold; additional copies may be made at any time if they are needed in connection with the accounting records. There are many different forms of sales tickets, but no attempt will be made here to discuss all of these. The merchant should study carefully the various forms available so as to deter- +ment to understand the meaning and purpose of the sales ticket and its use in connection with the sales invoice. +Illustration No. 50, Sales Ticket. The student is advised to inquire from local merchants for other forms of sales tickets used by their pack- +ing, accounting departments. + +EXPLANATION. The information on this sheet shows that the person who made the sale was the same person who wrote out the sales ticket. In this case, the seller was also responsible for packing, billing, and accounting. + +Illustration No. 51, Sales Ticket. + +§ 68. A Bill is a business form given as evidence of service rendered. The terms "bill" and "invoice" are sometimes used interchangeably, but the general understanding is that an invoice is a list of merchandise or material purchased + +A bill form titled "LAST DAY OF PAYMENT OCTOBER 10th". It includes fields for date, amount due, payment received, and total paid. + +CASHIER'S STUB +Please return this stub with your +RECEIPT +DATE +AMOUNT DUE +PAYMENT RECEIVED +TOTAL PAID + +Illustration No. 52, A Bill. + +EXPLANATION. This bill is rendered for telephone service as stated therein. In addition to regular service, there is a charge for toll or long-distance calls; this charge is usually supported by a separate bill. The bill is sent to the subscriber's home address unless requested otherwise by the bookkeeper of the telephone company so that, when a remittance is received, he may know whether the subscriber desires the toll to be received and returned. + +A bill form titled "THE CINCINNATI & SUBURBAN BELL TELEPHONE COMPANY". It includes fields for date, amount due, payment received, and total paid. + +Illustration No. 53, A Bill. + +EXPLANATION. This bill is rendered for telephone service as stated therein. In addition to regular service, there is a charge for toll or long-distance calls; this charge is usually supported by a separate bill. The bill is sent to the subscriber's home address unless requested otherwise by the bookkeeper of the telephone company so that, when a remittance is received, he may know whether the subscriber desires the toll to be received and returned. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
No.ITEMPRICEAMOUNT
13 Boxes Coffee$1.00$3.00
21 Box Butter$1.00$1.00
31 Box Milk Bottles$2.00$2.00
42 Doz Oranges$0.50$1.00
Total Amount Due:$15.25
+ +Illustration No. 54, A Bill. + +EXPLANATION. This bill is rendered for telephone service as stated therein. In addition to regular service, there is a charge for toll or long-distance calls; this charge is usually supported by a separate bill. The bill is sent to the subscriber's home address unless requested otherwise by the bookkeeper of the telephone company so that, when a remittance is received, he may know whether the subscriber desires the toll to be received and returned. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +Illustration No. 55, A Bill. + +EXPLANATION. This bill is rendered for telephone service as stated therein. In addition to regular service, there is a charge for toll or long-distance calls; this charge is usually supported by a separate bill. The bill is sent to the subscriber's home address unless requested otherwise by the bookkeeper of the telephone company so that, when a remittance is received, he may know whether the subscriber desires the toll to be received and returned. + +
No.ITEMPRICEAMOUNT
13 Boxes Coffee$1.00$3.00
21 Box Butter$1.00$1.00
31 Box Milk Bottles$2.00$2.00
42 Doz Oranges$0.50$1.00
Total Amount Due:$15.25
Total:$15.25
Total:$15.25
+ + + + + +
No.ITEM
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Amount Due:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:Total Paid:
Sales Ticket Date: ____________
+ +Illustration No. 56, A Bill. + +EXPLANATION. This bill is rendered for telephone service as stated therein. In addition to regular service, there is a charge for toll or long-distance calls; this charge is usually supported by a separate bill. The bill is sent to the subscriber's home address unless requested otherwise by the bookkeeper of the telephone company so that, when a remittance is received, he may know whether the subscriber desires the toll to be received and returned. + + + + +
No.ITEM Description Date Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paid Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye Paye 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alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alives alivesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesalvesaloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveseloveselove + +BUSINESS FORMS AND VOUCHERS. 103 + +or sold, and a bill is a statement of service rendered. Bills are rendered by at- +torneys, physicians, gas, electric, and telephone companies, and other individuals +or concerns which render service for which payment is to be made after the ser- +vice is rendered. Illustration No. 52 shows one form of bill. The arrangement +is usually the same as that of an invoice, but this depends largely on the purpose +for which the bill is rendered. + +§ 69. A Receipt is a written acknowledgment from the receiver to the giver, +of money or other property received in payment for some form of indebted- +ness. Receipts are used with bills issued for merchandise or cash purchase or sale of merchandise or transactions in which service has been rendered. A receipt may be written on a receipt form as in Illustration No. 53; it may be a + +No. +Date January 3, 19-- + +To California + +For Account + +Amount $10 + +Illustration No. 53, Receipt Book with Stub. + +EXPLANATION. The illustration shows the receipt book and stub. The information on +the stub is arranged in the order in which it appears on the face of the receipt to the convenience of the bookkeeper. +The purpose of a receipt should always be stated on the stub for the information of the bookkeeper +who will record the transaction (§ 27, § 4), and on the receipt for the information of the holder. + +THE PHILIP CAREY COMPANY +LOCOLAND, CINCINNATI, OHIO OCT. 31, 192 + +Order No. +Car No. +F.O.B DEL' D +To H. C. HAZER CONSTRUCTION CO. +FROM HAZER TRUCK +TO YOTO HEADQUARTERS +CINCINNATI, O. + +Terms Cash +Illustration No. 54, Received Invoice. + +EXPLANATION. The blue stamp indicates payment. When an invoice is received this is +sufficient evidence of payment, hence a receipt in receipt form is not necessary. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Order No.Car No.F.O.B DEL' DTo H. C. HAZER CONSTRUCTION CO.From HAZER TRUCKTo YOTO HEADQUARTERSCINCINNATI, O.
Terms Cash
Illustration No. 54, Received Invoice.
EXPLANATION.The blue stamp indicates payment.When an invoice is received this is sufficient evidence of payment,hence a receipt in receipt form is not necessary.
+ +104 + +BUSINESS FORMS AND VOUCHERS. + +receiveded invoice or bill as in Illustrations Nos. 54 and 55; or it may be prepared in any form which suits the convenience of the giver. Each business concern which issues receipts should have these bound in a book with stubs as in Illustration No. 53, as this provides a permanent record of all receipts issued. When issuing a receipt, the name of the person to whom the receipt is given should always fill out the stub first because this is his record of the receipt. + + + + + + + + + + + + + + + +
SEPT. 10, 1921SEPT. 10, 1921
3J.W.BAKERJWB
3261 DELAWARE AVE.172-21
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
TO THE UNION GAS AND ELECTRIC CO. DR.
For National Gas Company
SEP T.8870002.40
AUG8810002.10
Amount Consumed:2.10
6.00 Cu. Ft.
+ +At the rate of $40 per M cubic foot, subject to discount of by per cent on bills paid within days of discount. +Maximum Bill $24 net per month. + +Illustration No. 55. Receipted Bill. + +EXPLANATION. The illustration shows a receipted bill from the gas company. The cashier of the gas company would remove the right-hand end at the line and retain this for his record. Both ends are then folded over and inserted in the book of receipts. + +§ 70. Filing Business Forms and Vouchers. All business forms and vouchers should be properly filed because they are evidence of transactions either completed or to be completed, and, unless properly filed, might not be available when needed. The bookkeeper should pay particular attention to the filing of business forms and vouchers which support sales so that he may have satisfactory evidence of their correctness. No attempt will be made here to discuss the method of filing business forms and vouchers, the purpose of the discussion being to impress on the student of bookkeeping the importance of filing those business forms and vouchers which support the bookkeeping records. + +Exercise No. 41. Sales Tickets. + +Prepare sales tickets for the sales made July 5, 8, 13, 16, 19, 22, and 26 in Exercise No. 14 on page 40. You may use the sales tickets of a local grocer, blank sales tickets, or forms ruled similar to Illustration No. 51. + +Exercise No. 42. Sales Invoices. + +Prepare sales invoices for the ten sales in Exercise No. 19, page 49. You may use invoices of a local grocer, blank invoices for sale by stationery stores, or forms ruled similar to Illustration No. 50. + +BUSINESS FORMS AND VOUCHERS. +105 + +Exercise No. 43, Purchase Order, Sales Invoice, and Receipt. + +As purchasing agent for the Johnson Paint Co., Chicago, place an order, under date of May 19, with the Globe-Wernicke Co., Cincinnati, manufacturers of office furniture, for the following: 3 No. 503 Filing Cases at $12.00; 6 No. 67 Sections at $2.00; 3 No. 60 Sections at $12.00; 12 No. 37 Sections at $36.25. Terms, cash in advance to be made by Pennsylvania freight. + +As bill clerk for the Globe-Wernicke Co., render an invoice for this material under date of May 19. + +As receiving cashier for the Globe-Wernicke Co., prepare a receipt for the remittance received from the Johnson Paint Co. in payment for this invoice. + +If you can obtain an order blank and an invoice form for local business concerns, please send used instructions and forms given. If you do not have blank forms, rule writing paper similar to Illustrations Nos. 48, 49, and 53. + +QUESTIONS + +1. What business form supports the record of each transaction in the purchases journal? +2. What business form supports the record of each transaction in the sales journal? +3. Explain the check marks in Illustration No. 49. +4. Explain the meaning of the words "30 days net" after "Terms" in Illustration No. 48. +5. Explain the meaning of the terms "Date," "Your Order No.," "Rochester No.," "Branch No.," "Shipped via," and "Territory," and the information given on a line with these in Illustration No. 49. +6. What is the purpose of indicating the territory number? +7. Explain "Mark order number on outside of all packages and cases" in Illustration No. 48. +8. Explain "Deliver no goods without a written order on this form" in Illustration No. 48. +9. When is the due date of the invoice in Illustration No. 49? +10. Why should a purchase order be made in duplicate? +11. Why should duplicate purchase orders be filed? +12. Can you suggest a method of filing duplicate orders so that the information will be readily available when needed? +13. Why should a sales invoice be made in duplicate? +14. Could the duplicate sales invoices be used as a sales journal? +15. Suppose you are filing the duplicate sales invoices if they are to be used as a sales journal. +16. Distinguish between a purchases invoice and a sales invoice. +Robert Crouch made a number of purchases on account from a local grocery store, paying them in cash, and received a statement from the merchant showing that he owed the merchant $28.60. How may Mr. Crouch know that this amount is correct without asking the merchant for additional information? + +17. If you receive sales tickets with each sale on account, is it necessary for him to render a sales invoice? +18. If you purchase a pair of shoes from a local merchant and wish to return them, what evidence will he require in addition to the shoes? Why? + +A page from a book or manual containing questions about business forms. + +106 +BUSINESS FORMS AND VOUCHERS. + +20. Could the sales tickets be used by the merchant as the account with a cus- +tomer? +21. Distinguish between a bill and an invoice. +22. If a merchant has a purchase invoice receipted when he pays it, is a receipt in receipt form necessary? +23. If a receipt for $21.50 is issued to a customer for this amount of cash received from him on account, and the entry on the stub shows only $21.00, how will the bookkeeper detect the error? +24. If a receipt is issued and the bookkeeper fails to record it on the stub, state two ways by which he can determine the amount of the receipt. +25. If the bookkeeper issues receipts for all money received, what business forms support his record of the transactions on the receipts side of the cash book? + +Chapter X + +BUSINESS FORMS AND VOUCHERS—Continued + +§ 71. A Bank is a business organized for the purpose of making a profit through dealing in money and securities. The capital investment, together with the money deposited by its customers, forms the basis of the other business enterprises. The principal income is the interest earned by these loans. Banks are of great value to the community in which they are located because they provide a medium of exchange, a place where people can deposit their money, the "deposit and check" method of making payments, thus eliminating, to a great extent, the use of money as a medium of exchange. + +§ 72. Opening an Account with the Bank. An account is opened with a bank by depositing currency or cash items; the receiving teller will not accept the first deposit until he has been acquainted with the cashier, president of the bank. It is necessary for the officials of the bank to become acquainted with each depositor so as to avoid the possibility of the use of the bank account for a fraudulent transaction. The depositor must fill out a deposit ticket showing the amount of his deposit; this receipt is in the form of an entry in the pass book ($ 73), showing the date of the deposit and the amount. The depositor is provided with a blank deposit ticket on which he may write his name and signature; these blank checks are necessary because no money can be withdrawn from a bank except by check. The depositor is required to sign his name on a signature card that accompanies each deposit ticket. See illustration No. 56, Signature Card. + +EXPLANATION. The illustration indicates that T. L. Staples has opened an account with the National Bank, and that his checks will be signed as indicated by his signature on the deposit ticket. The information given includes: name of depositor, telephone number, and date of opening the account are given on the pass book; this book is punched to fit a filing device in which it will be filed alphabetically. + +Illustration No. 56, Signature Card. + +§ 73. A Deposit Ticket is a printed form supplied the depositors by the bank, on which to list the currency or cash items which he wishes to deposit. Space is provided for the date, name and address of the depositor, various kinds of currency and cash items deposited, and the total amount of the deposit. Illustration No. 57 shows two deposit tickets, one on which the depositor has listed his deposits alphabetically, and another on which he has listed his items numerically. + +§ 74. Method of Making a Deposit. The depositor should consult with the receiving teller in regard to the preparation of his deposit ticket that he may know the teller's desires in this matter and thus prepare his deposit to suit the convenience of the clerks in the bank. Currency and cash items should be listed + +107 + +105 +BUSINESS FORMS AND VOUCHERS. + +ALWAYS BRING YOUR PASS BOOK. +**Merchants National Bank** +Deposited by +W.H. Bowman +By student +R. Baker +191 + +ALWAYS BRING YOUR PASS BOOK. +**Merchants National Bank** +Deposited by +W.H. Bowman +By student +R. Baker +191 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
CurrencySilverChecksTotalCurrencySilverChecks City NationalCity NationalChicagBankersMerchants TrustFirst NationalNew York BankMerchants Bank
1500123.60123.65118.6584.55
100.00
83.16
TOTALTOTAL
+
CurrencySilverChecks City NationalCity NationalChicagBankersMerchants TrustFirst NationalNew York BankMerchants BankTOTAL CASH ITEMS DEPOSITED (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)TOTAL CHECKS (DOLLARS)
+ +
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
+ + Total Cash Items Deposited: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + Total Checks: $75.00 + +Illustration No. 57, Deposit Tickets. + +EXPLANATION. +The deposit ticket at the left shows a deposit of currency only, and that in the pass book on the right is a deposit of currency and checks, all of which are payable to the Merchants National Bank, and that this bank is located in the same city as the Merchants National Bank; thus statement also applies to the first, fifth, and seventh items listed on the left side of the deposit ticket, and to the second item listed on the right side of the deposit ticket, since this check is payable on a bank in Chicago; this same statement applies to the third and sixth checks. +Some banks have a separate pass book for each depositor, but this is not common practice in this country at present time. +It is suggested in § 74 that the depositor learn the bank's rules as to listing the checks deposited. +As instructed by the teller, the receiving teller has many deposits to enter each day and will appreciate the cooperation of the depositor in complying with his suggestions regarding proper arrangement of his deposits. +All of the items listed on the left side of the deposit ticket and all of the deposit appear on the deposit ticket, also that the currency and cash items are arranged in the order listed. +The depositor should retain a copy of the items deposited for his records, and he may do so by listing them on the back of the stub from which the last check was removed. + +§ 74 The Pass Book is a small bound book ruled with columns for the date, nature of the entry (deposit, discount, or collection), and the amount. +As explained in § 74, the receiving teller enters the date and amount of each deposit in this pass book immediately after it is made; therefore, when making deposits, should always present the pass book with the deposit so that the teller can give him a receipt for it; in case he should forget to bring the pass book, the teller will give him a receipt for it immediately after he makes his deposit; however, if in the next deposit is made and the amount entered in the pass book at that time. +Illustration No. 59 (left side) shows deposits entered in a pass book; further reference is given to this illustration in § 79. + +A diagram showing a deposit ticket and a pass book. + +BUSINESS FORMS AND VOUCHERS. +109 + +§ 76. A Check is a written order by a depositor on his bank, designating to whom he wishes the bank to pay a part or all of the money he has on deposit. It is customary for banks to issue blank checks to their depositors for the same reason that blank deposit tickets are provided. Checks supplied to depositors by a bank are usually bound in book form, each check having attached to it a stub for recording its record. Illustration No. §5 shows a check book with two checks to a page, and also shows the blank stubs for recording the checks. + +A Check is not money, but, since it is used in the place of money, it is accepted as such in busi- +ness. Custom has established the term "cash" as one which includes money and checks (§ 13). The use of checks instead of cash saves the business man money because it pre- +vides a receipt and avoids errors in making change, and losses through thefts. + +A check book with two checks per page and blank stubs. +Illustration No. §5, Check Book. + +EXPLANATION. The information on the stub is arranged in the same order as that on the +check for the convenience of the depositor. The information after "For" is needed by the bookkeeper +in recording the transaction (§ 25, § 3). The ruled column at the right of the stub shows the de- +positor's name and address, and indicates that he has had the checks prepared for his individual use. The dotted lines show perforations for removing each check. + +§ 77. Instructions for Writing Checks. The check book provided by the bank contains printed forms for use in writing checks, each of which is attached to a stub containing space for all the information written in the check. The stub +is for the depositor's record of the check, hence the information to be written +on it must be arranged in such a way that it can be read easily. The number on the stub includes the number, the date of issue, the person or business concern to whom +the check is written, the reason for writing, the amount, and if desired, the name +of the account to be deducted from the cash balance. Each check stub is numbered +to facilitate reference thereto when with "t" these checks are received at +the time the check book is received from the bank. + +The information on the check is written in the following order: (1) the name +(2) the date of issue (3) the person or business concern to whom the check is to be paid, +(3) the amount in writing and in figures and (4) the signature of the depositor, +which should be the same as that on the signature card. If desired, the reason +for writing may be stated on the stub as well as on the stub. The information +on the stub and on the check should be arranged in the same order so that the + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
MERCHANTS NATIONAL BANKFeb. 194
W.H. Goodwin
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank
Merchants National Bank110 +BUSINESS FORMS AND VOUCHERS. + +check can be written from the information given on the stub. Illustration No. 58 shows a check book with two checks to the page and the two stubs at check proper positions. The stubs are ruled with lines which show the perforations which make the checks more easily removed. The information in the ruled column at the right of the stub in illustration No. 58 is for the depository's convenience in keeping a record of his transactions with the bank, as explained below. + +§ 78. Depositor's Record of His Transactions with the Bank. Each depositor should keep a record of the transactions which he performs with the bank. This record may be kept in a special blank, on the front or back of the check stub, or in an account book. The depositor should keep along his side of the stub balance due to the bank, so that he is able to write, on the front of the stub is the best place to keep the account with the bank. A column is usually ruled for this in the check book provided by the bank. Reference to Illustration No. 58 will show how this is done. In addition to this method of keeping a check stub, other methods mentioned will be explained and illustrated later. + +§ 79. The Bank's Record of Transactions with Depositors. The depositor is credited with each deposit and debited with each check paid by the bank. The entry in his account is made from the deposit tickets and the checks which the bank has received from him. On the pass book there is a separate depository statement showing the date and amount of each deposit, the date paid and amount of each check, the daily balance, and the balance due the depositor at the end of the month. The checks listed on this statement are returned to the depositor at the end of each month, either in a separate pass book or in a pass book. Formerly it was the custom of banks to render this statement by listing the checks in the pass book and ruling it at the end of the month as in illustration No. 59. With modern banking machinery, however, it is customary to render this statement sepa rate from the pass book, as in illustration No. 60. When the separate statement is rendered, both sides of the pass book are usually used for listing deposits, though some banks enter total of all total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total of total + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
IN ACCOUNTS WITH
MERCHANTS NATIONAL BANK
W.H. Goodwin
Tax - Deposits1000Sat's Check28
13 -433505 -125
21 -245001 -19710
17 -10360150
29 -
Total Balance:218115218115
100245
+ +Illustration No. 59, Bank Statement in the Pass Book. + +EXPLANATION. The illustration shows the opposite pages of a pass book. The information on the left page shows three deposits entered by the teller. The entries on the right show the checks listed on these deposits and their dates and amounts paid by them during one month. The ruling is similar to receipts and payments sides cash book. As explained in § 79, deposits are usually entered on both sides pass book and canceled checks listed on a separate state ment as in illustration No. 60. + +A sample illustration showing a passbook with deposits and checks recorded. + +BUSINESS FORMS AND VOUCHERS. +111 + +Statement of +W. H. Goodwin +An account with + +Merchants National Bank + +6 Vouchers Returned + +PLEASE EXAMINE AT ONCE IF NO ERRORS ARE REPORTED WITHIN 30 DAYS THE ACCOUNT WILL BE CONSIDERED CORRECT AND VOUCHERS CANCELLED. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
DepositCheckCheckCheck
1500.0028.00125.00197.10
435.55150.00103.60175.00
245.60
+ +Illustration No. 60, Bank Statement Separate from Pass Book. + +EXPLANATION. This statement was prepared on a special machine manufactured for making bank statements. The information contained in this statement is derived from the account which the bank keeps with the depositor; the statement is rendered monthly. The canceled checks accompany the statement when it is delivered to the depositor. + +§ 80. Reconciliation of Depositor's Account with the Bank Statement. + +The balance of the deposit account as shown by the bank statement will be the same as that shown by the depositor's record. If all checks issued by the depositor have been paid by the bank, if there have been no alterations and no errors in addition or subtraction, and if there has been no error in recording, then both balances will be the same; but if any checks issued have not been paid by the bank; or if there have been errors or alterations, the two balances will not agree. The depositor should audit the bank statement with his record and reconcile the two balances when they do not agree. If there is a discrepancy between the two balances, it should be re- ceived because alterations of checks should be reported to the bank immediately. + +The calculations in this reconciliation should be shown on the back of the stub from which the check was removed, and on the stub from which the stub was removed, was removed. As a rule, only discrepancy between the two balances will be the amount of the check or checks issued by the depositor but not paid by the bank. The reconciliation should be made in the following manner: + +1. Check each deposit with the stub for its date and amount of check. If there is a discrepancy between the check stub entry with the entry in the pass book, and this entry with that on the statement. If there is a discrepancy in a deposit ticket which can not be accounted for, it should be audited with the copy on file in this office. + +2. Compare each canceled check received from the bank with the stub from which it was removed; any discrepancy between the amount on the stub and that on the statement should be reported to the bank immediately. Place a check mark at the left of the number on the stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number on stub as each check is compared with its corresponding stub. + +If any discrepancies are found, place a check mark at left of number onstub + +112 +BUSINESS FORMS AND VOUCHERS. + +3. On the back of the stub from which the last check written during the month was removed, list the number and amount of each stub which does not have a check mark at the right of the number; add these amounts to ascertain the total of the checks issued but not paid by the bank. Write the balance shown by the bank statement below the total unpaid checks, and subtract the amount of the unused funds from the bank balance; the result should be the same as the check stub balance. + +Southern States Phosphate & Fertilizer Co. +Illustration No. 61, Personal Check. + +**EXPLANATION.** This illustration shows a check prepared by the depositor. It includes the usual information and the name and trade mark of the business. + +§ 81. A Bank Draft is a check drawn by one bank on funds deposited with another bank. Bank drafts are sometimes referred to as "exchange," a draft payable by any bank of "New York Exchange," one payable by a Chicago bank, as "Chicago Exchange," etc. Bank drafts are used by banks in payment of checks received for collection, sold to depositors for remitting to the correspondent banks, and sent to other banks for payment by mail. Illustration No. 62 shows a bank draft payable by the Chase National Bank of New York, hence might be referred to as "New York Exchange." The use of bank drafts is discussed again in a subsequent chapter. + +First National Bank +Illustration No. 62, New York Bank Draft. + +**EXPLANATION.** This illustration shows a check drawn by the First National Bank, Turlock, California, on funds which it has deposited with the Chase National Bank, New York. + +BUSINESS FORMS AND VOUCHERS. +113 + +§ 52. A Cashier's Check is a check drawn on a bank by its cashier. It is used in the payment of the operating expenses of the bank, in payment of the proceeds of collections, in payment of dividends, interest, and other obligations of the bank. Cashier's checks are sold to those who wish to use them as a means of sending cash through the mails in the same manner as bank drafts. Illustration No. 63 shows one form of cashier's check. + +A scanned image of a Security State Bank cashier's check. +SECURITY STATE BANK +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State Bank +Security State BankA scanned image of an American Express Company money order. + +WHEN COUNTERSIGNED BY AGENT AT TIME OF ISSUE + +EXPRESS MONEY ORDER + +American Express Company + +AGREES TO TRANSMIT AND + +PAY TO THE ORDER OF + +THE SUM OF + +DOLLARS + +Issued at + +Carlo Davidson + +Agent + +State of + +Date + +Illustration No. 64, Express Money Order. + +EXPLANATION: This illustration shows a money order issued by the American Express Company, Carlo Davidson, who wished to send money to Harold A. Waltham, presented $8.50 and the amount was paid to him at the office of the American Express Company for it. The purpose of money orders is to provide a means of transferring money from one locality to another with safety and convenience. + +* + +114 +BUSINESS FORMS AND VOUCHERS. + +Postal money orders are for sale by each postmaster to those who wish to send money through the mail; they are also used by postmasters in connection for col- +lect on delivery payments. Postal money orders for cash are for sale to those +who wish to send money through the mail and, in this respect, are used for the +same purpose as post-office money orders. Express money orders are arranged +in connection with express companies which deliver their goods by air, sea, +or land, and do not wish to carry currency; they are also used by express company +agents for remitting on "collect on delivery" express shipments. Bank drafts are +used in the same way as express money orders--that is, to send money through +the mail without carrying currency. The convenience of those who wish to have available at all times but +cash without carrying currency. A detailed discussion of "collect on delivery" +shipments and a further discussion of the use of express money orders in con- +nection with express companies will be found in subsequent chapters. + +§ 84. Endorsements. An endorsement is any writing on the back of a +check or other commercial paper, placed there for the purpose of transferring the +title, receipts for part payment, or for the accommodation of one or more +of the parties named therein. The endorsement should be made by writing it +about one inch from the left-hand end of the paper, as in Illustration No. 65. +The endorsing of commercial paper should be well understood, as it trans- +fers the title to the holder and holds the endorse liable in case default is made +in payment. It is not necessary that the endorsement be written on the paper as it does +to money, and unless it is properly endorsed, if lost, the finder may dispose of it +to an innocent holder, in which case the loser can not recover it. + +E. N. Nurre + +21-19 +No + +ONAL BANK + +Led Com $324 75 + +ty four $200 DOLLARS + +Lehman + +Illustration No. 65, Position of Endorsement. + +EXPLANATION. This check is payable to The National Lead Co. and endorsed by it for +deposit with the Third National Bank. The endorsement is placed on the left-hand end of the check +for convenience. + +BUSINESS FORMS AND VOUCHERS. +115 + +§ 85. Endorsement for Transfer. There are a number of ways in which the holder of a commercial paper may write his name in order to transfer the title, but the four most frequently used are "in blank," "in full," "for deposit" and "for collection." + +1. "In Blank." An endorsement in blank is the name of the payee or holder only, written across the back. It has the same effect as making the paper payable to bearer, and it may be transferred by any subsequent holder, without any further endorsement, but the endorser's name, which holder is generally required, for identification. See illustration at the left. + +2. "In Full." This endorsement is effected by writing on the face of the instrument the name of the person or firm to whom it is transferred, and signing the name of the payee or holder. The person to whom it is transferred must endorse it before being successful holder thereof. All endorsements through mail or to be held for some time should be endorsed in full. See illustration at the left. + +3. "For Deposit." These words should be written above the name of the depositor on checks and other cash items to be deposited in the bank. This qualifies the endorsement and prevents the depositing party from exercising any right of payment. A stamp with the words of the illustration at the left may be used for this purpose. If a stamp is used, the one who makes the endorsement should indicate his name in connection with the endorsement. + +4. "For Collection." Commercial paper left at a bank or other collection agency for collection, should have "For Collection" endorsed on it, as in the illustration at the left. Unless the endorsement is qualified in this manner, the owner might be held responsible for payment of the paper in case of bankruptcy of the bank or collection agency. This is a condition that might not occur often, but it should be avoided by the qualified endorser, then the holder would protect his interests through the endorsement. + +The result of improper endorsements for collection may be illustrated by the following incident, which took place in Cincinnati, Ohio. Mr. Smith had a bill due him from Globe-Wernicke Co., Cincinnati, for $100, which he paid by check, with his bank for collection. Mr. Smith did not file this note until after he had received a bill from Globe-Wernicke Co., Cincinnati, in Exercise No. 43, for $100, which could submit no evidence to show that the note endorsed by him was left for collection, hence the receiver of the bank assumed that it was dishonored, and held the entire responsible on account of Smith's endorsement. + +Exercise No. 44. Personal Check. + +As paying cashier for the Johnson Paint Co., Chicago, write the stub and check required to pay for the merchandise purchased from the Globe-Wernicke Co., Cincinnati, in Exercise No. 43. Use the first check and stub in Illustration No. 58 as a model. + + + + + + + + + + + + + + + + + + +
John Jones
Pay to the order of
C. W. King
John Jones
+ + + + + + + + + + + + + + + + + + +
Pay to the order of
Union Bank
For deposit
W. H. Goodwin
+ + + + + + + + + + + + + + + + + + +
Pay to the order of
Union Bank
For collection
W. H. Goodwin
+ + + + + + + + + + + + + + + + + + +
Pay to the order of
Union Bank
For deposit
W. H. Goodwin
+ + + + + + + + + + + + + + + + + + +
Pay to the order of
Union Bank
For collection
W. H. Goodwin
+ + + +
$100
Pay to
the order
of
C.W.King
John Jones

For deposit
W.H.Goodwin

For collection
W.H.Goodwin
+ + + +
$100
Pay to
the order
of
C.W.King
John Jones

For deposit
W.H.Goodwin

For collection
W.H.Goodwin
+ + + +
$100
Pay to
the order
of
C.W.King
John Jones

For deposit
W.H.Goodwin

For collection
W.H.Goodwin
+ + + +
$100
Pay to
the order
of
C.W.King
John Jones

For deposit
W.H.Goodwin

For collection
W.H.Goodwin
+ + + +
$100
Pay to
the order
of
C.W.King
John Jones

For deposit
W.H.Goodwin

For collection
W.H.Goodwin
+ + + +
$100
Pay to
the order
of
C.W.King
John Jones

For deposit
W.H.Goodwin

For collection
W.H.Goodwin
+ + + +
$100
Pay to
the order
of
C.W.King
John Jones

For deposit
W.H.Goodwin

For collection
W.H.Goodwin,
+ + + +
$100.
+ + + +
$100.
+ + + +
$100.
+ + + +
$100.
+ + + +
$100.
+ + + +
$100.
+ + + +
$100.
+ + + +
$100.
+ + + +
$100.
+ + + +
$100.
+ + + +
$100.
+ + + +
$100.
+ + + + + + + + + + + + + + + + + + + + + + + +
48.10
4."20.0015."273.42
5."430.0016.Deposit No. 15347.38
6."101.0017.Check No. 16150.00
7."150.0018."256.01
8."75.0019."94.75
9."163.9020.Deposit No. 19733.00
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Deposits:Amount:No.Description:Balance:
"'"'"'"'"'
"'"'"'"'"'
"'"'"'"'"'
"'"'"'"'"'
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"'"'"'"'"'
"'"'"'"'"'
+ +                                                               +  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
&  +                                                                                             +  sp;
+ + Check No. 19 + + Check No. 16 + + Check No. 15 + + Deposit No. 15 + + Deposit No. 19 + + Deposit No. 16 + + Deposit No. 13 + + Deposit No. 12 + + Deposit No. 11 + + Deposit No. 10 + + Deposit No. 9 + + Deposit No. 8 + + Deposit No. 7 + + Deposit No. 6 + + Deposit No. 5 + + Deposit No. 4 + + Deposit No. 3 + + Deposit No. 2 + + Deposit No. 1 + + Check No. 2 + + Check No. 3 + + Check No. 4 + + Check No. 5 + + Check No. 6 + + Check No. 7 + + Check No. 8 + + Check No. 9 + + Check No. 10 + + Check No. 11 + + Check No. 12 + + Check No. 13 + + Check No. 14 + + Check No. 15 + + Check No. 16 + + Check No. 17 + + Check No. 18 + + Check No. 19 +
+ +On a slip of paper, write "Bank Account on Check Stub," and below this write the date and amount of each deposit, the date, number, and amount of each check, showing the balance in the bank after each deposit has been added and each check subtracted. + +2. +On a slip of paper, write "Reconciliation of Bank Account," and below this show the reconciliation of Mr. Gill's bank account with the statement received from the bank, which shows a balance of $3,667,37 and is accompanied by all canceled checks except Nos. 9, 19, 22, and 23. + +**Exercise No. 46, Reconciliation of Bank Account** + +Show the bank account on the front of the check stub for W. A. Gordon (Model Set beginning on page 6) for the month of September and on the back of the check stub for the month of October, assuming that all payments were made at the time cash was deposited and that no deposits were made until after October first, and other deposits were made each time cash was deposited, showing that each check contained two checks to the page. + +Show the reconciliation of Mr. Gordon's bank account on October i with the statement received from the bank, which shows a balance of $768.00 and is accompanied by all canceled checks except Nos. o. + +Show the reconciliation of the bank account on November i with the statement received from the bank, which shows a balance of $703.39 and is accompanied by all canceled checks except Nos. t2 and I6. + +When the bank account is kept on the front of the check stub, each check is subtracted as it is written off against the deposit, and when it is kept on the back of the check stub, each check is added to the deposit before it is written off against the deposit, listed, added, and subtracted from the sum of the preceding balance and the deposit that is to be made. + +In both cases, all checks are dated as they are written off against the deposit or added to it before being listed, added, and subtracted from the sum of the preceding balance and the deposit that is to be made. + +The total of all deposits made up to October first is subtracted from the balance left after subtracting the last check, and succeeding checks will be subtracted as they are issued, showing in each case whether there is a balance in favor of or against the bank. + +All deposits made at any time after October first are added together together with all checks issued between October first and November first, showing whether there is a balance in favor of or against the bank. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +The total of all deposits made up to November first is subtracted from this total. + +Thetotal + +BUSINESS FORMS AND VOUCHERS. +117 + +3. What evidence does the bank have that it has paid a part or all of the money which the depositor has deposited? +4. Why should the bookkeeper retain a copy of each deposit ticket? +5. Name two ways of retaining this copy? +6. What additional information is contained in the copy of the deposit ticket that is not shown by the entry in the pass book? +7. If you were auditing the entries on the receipts side of the cash book, what need would you have for the copies of the deposit tickets and the entries in the pass book? +8. If you were to find a check signed by a local merchant, payable to Robert Jones, and "Robert Jones" was written on the back, how could you obtain the money on this check? +9. If the bookkeeper writes a check and fails to fill out the stub, how will he detect the error? +10. If you were keeping books for a local merchant and he withdrew $100.00 from the bank by check, using one of the blanks on the counter in the bank, and then told you that he had used the check, when and how would you learn about it? +11. Name two means of ascertaining the amount of a check if it is removed from a check stub without the stub being used out. +12. If you were making a deposit of $100.00 by subtracting the amount of a check on the check stub, how will he detect the error? +13. If you were keeping books, would you prove cash before making a deposit? Give reasons for your answer. +14. If there is an error of $10.00 in the addition of a deposit ticket and a correction is made, what effect will this addition in the cash book have, when and how will the bookkeeper discover the error? +15. How is a check used in the place of money? +16. Explain why a check which has been paid by the bank may be regarded as a receipt. +17. If you were making a trip in an automobile from New York City to San Francisco, would you prefer your expense funds to be in money, to be deposited at a Chicago bank subject to check, or in money orders? Give reasons for your answer. +18. John Anderson in Atlanta, Georgia, wishes to send $53.00 to Henry Smith in St. Louis, Missouri. Name four ways by which he can send this, and state what would be his advantage in each method. +19. What is better for the bookkeeper--to keep the bank account on the front of the check stub? +20. Name three reasons why the statement rendered by the bank on the first of the month might be different from the depositor's record on the check stub. +21. If R. W. Sanderson leaves a check payable to himself at the bank for collection, how will he endorse it? +22. If you were paying bills for a local merchant and received a check from a customer for $112.50 marked "In full of account," and his account showed a balance of $117.50, what would you do? +23. Name some ways in which the bookkeeper keeps cash payments as checks instead of with currency. +24. Why does the bank return the paid checks when it sends the monthly statement? +25. Why is the endorsement written on the left instead of the right end? + +Chapter XI + +BUSINESS FORMS AND VOUCHERS—(Concluded) + +§ 86. A Note is an unconditional written promise to pay a fixed amount of money at a stated time, and is signed by the person or persons agreeing to pay it. If desired, the place at which the note is to be paid may be stated in it. A note has thus original parties, one party being the maker who signs the note and thereby agrees to pay the amount stated in it; the payee is the one in whose favor the note is made, that is, the one to whom the money is to be paid. A note indicates that the maker is indebted to the payee and acknowledges that the payee is indebted to the maker. + +1. The face of a note is the amount stated in it. This amount is shown as its value in the account with notes (§ 102, § 1, or § 103, § 2). + +2. The maturity value of a note is the amount to be collected at maturity. If a note reads "with interest after maturity," the face is the maturity value; if it reads "with interest from date," the maturity value is the face plus interest at the legal rate from date to maturity. + +Illustration No. 66, Note with Stub Attached. + +EXPLANATION. This note indicates that A. C. Williams owes W. H. Goodwin the amount mentioned and has promised to pay it at the time and place specified. + +§ 87. Use of Notes. Notes are used as written evidence of indebtedness resulting (a) from sale of merchandise or other property, (b) from a loan, or (c) from an extension of time for the payment of a past-due obligation as shown by an account. With the advantages of the trade acceptance, notes are not often given in payment for merchandise purchased; but when it is put into use, a bank will accept them as evidence of transaction received from money loaned; the business man may give his own note as evidence of the loan, or he may sell to the bank notes which he has received from his customers. When an account is paid by giving a note, it is called paying by note; when an account is paid by accepting a draft or by giving his note: the results are the same in that he secures an + +118 + +**BUSINESS FORMS AND VOUCHERS** + +119 + +extension of time by giving a written promise to pay it at the time specified in the note or draft. + +(a) James Brown buys a piano from the Starr Piano Co. for $500.00. He pays $100.00 cash and gives four notes for $100.00 each, due in three, six, nine, and twelve months respectively, in payment of the purchase price. + +(b) The Starr Piano Co. wishes to borrow $3,000.00 from the bank with which it does business. A note is issued for this amount, bearing interest at 6% from date, payable in ninety days, and endorsed "payable on demand." The Starr Piano Co. will receive credit for the $3,000.00 in its pass book in the same manner as for a deposit. + +(c) The Acme Assurance Co. purchased an electric player piano from the Starr Piano Co. for $1,500.00, and paid $800.00 cash, balance to be paid in thirty days. At the end of the thirty day period, the Acme Assurance Co. will receive credit for the $700.00 in its pass book by endorsement of its note for $700.00, with interest, payable to the Starr Piano Co. + +§ 88. Endorsement of Notes. There are three reasons for the endorse- +ment of a note: (a) accommodation (security), (b) transfer of ownership, and (c) receipt for part payment.. Endorsement for accommodation is usually made as explained in § 85. 1; endorsement for transfer of ownership is usually made as explained in § 85. 2; endorsement for receipt for part payment of this note is made as follows: "Jan. 10, Received $1,500.00 in part payment of this note." The holder will endorse the part payment on the note but should not sign his name because this transfers ownership in case the note gets out of his possession. + +Banks sometimes require security in addition to the signature of the business concerns borrowing money. Should this have been required of the Starr Piano Co., the loan of $1,500.00 mentioned in clause (c) would have been secured by endorsement of the note on the back as explained in § 85. 1; should this be required of the Acme Assurance Co., endorsement on the back would be required as explained in § 85. 2; if endorsement on the back was not required, then endorsement on the back would be required as explained in § 85. 3. + +§ 89. Effect of Notes on the Bookkeeping Records. When a note is issued by the business, full information in regard to it is retained on the stub from which it was removed. An entry is required in a book of original entry because the value received might be an obligation canceled or a new obligation created. If the note cancels a liability, the value received is the discharge of that obligation or liability; hence there is no change in assets or liabilities; hence no entry is made except that an asset of equal value is received, hence the value received is this asset and the account with it is debited; hence the account with either party to this transaction and with which it is debited; hence the value parted with in either case is the obligation created by the note; hence the account with notes issued by this business (§ 163.) is credited; hence there is no change in assets or liabilities; hence no entry is made except that an asset of equal value is received, hence the value received is this asset and the account with it is debited; hence the account with either party to this transaction and with which it is debited; hence the value parted with in either case is the obligation created by this note; hence there is no change in assets or liabilities; hence no entry is made except that an asset of equal value is received, hence the value received is this asset and the account with it is debited; hence there is no change in assets or liabilities; hence no entry is made except that an asset of equal value is received, hence the value received is this asset and the account with it is debited; hence there is no change in assets or liabilities; hence no entry is made except that an asset of equal value is received, hence the value received is this asset and the account with it is debited; hence there is no change in assets or liabilities; hence no entry is made except that an asset of equal value is received, hence the value received is this asset and the account with it is debited; hence there is no change in assets or liabilities; hence no entry is made except that an asset of equal value is received, hence the value received is this asset and the account with it is debited; hence there is no change in assets or liabilities; hence no entry is made except that an asset of equal value is received, hence the value received + +120 + +BUSINESS FORMS AND VOUCHERS. + +Transactions in which notes are issued or received by the business are usu- +ally recorded in the general journal unless cash is received for a note issued or paid +for a note received, in which case the entry is made in the cash book. Special +journals are used to record notes issued and received by the business; these are +explained and illustrated in a subsequent chapter. + +Referring to the illustrations in § 87: + +(a) The sale would be recorded in the sales journal, thus debiting James Brown and credit- +ing Sales $500.00. The note would be recorded in the notes receivable account, debiting James +Brown; and the notes would be recorded in the general journal, debiting the account with notes +received (§ 103, 2). + +(b) The entry would be made on the receipts side of the cash book, thus debiting Cash +and crediting the account with the note issued by the business (§ 103, 2). + +(c) The sale would be recorded in the sales journal, thus debiting Sales $500.00 and crediting +the Acme Amountment Co.; and the notes would be recorded in the cash book, thus debiting (Cash and crediting +the Acme Amountment Co.; note would be recorded in the general journal, debiting the account with notes received (§ 103, 2). + +§ 96 A Note Should Be Signed by the person or persons responsible for its payment. If an agent is authorized to execute a note for another, he signs +the name of his principal and his name below, either preceded by "per" or "by," +or followed by "agent;" the omission of the word before or alter the agent's name +might cause confusion. If an agent is authorized to sign a note for another, that note +for another is regarded as the agent, and the one responsible for the payment, as +the principal; the agent should have a written statement from the principal author- +izing him to sign his name. The person who issues a note expects payment from the per- +son on whose signature it is signed; he himself is responsible for the payment. +Each party to a note must sign his name on its face and must be responsible for +paying each individual whose name appears on the back of the note. + +Referring to the illustrations in § 87: + +(a) The notes issued by James Brown who purchased the piano. + +(b) The notes would be signed "Starr Piano Co." by the individual authorized to sign, +usually the president or secretary if it is a corporation, or one of the partners if it is a partnership. + +(1) The draft shown in illustration No. 67 is drawn on Starr Piano Co., but no name of +the company is notated at its face. This draft is not accepted unless accompanied +by the name of the individual authorized to sign. + +§ 91 A Draft is a written order from one party to another, directing him +to pay a certain sum of money to another party. A draft has three original par- +ties: the drawer, the drawee, and the payee. The one signing the draft is the +drawer: the one who is asked to pay the amount is the drawee; and the one to whom +the money is due is called payee. The drawer directs that he will pay to the drawee +the indicated amount of money, and that he (the drawer) wishes the amount paid to +the payee. Drafts are usually drawn on blank forms bound in a book, each draft being provided with a stub for a record of the facts shown by the draft. There are three kinds of drafts: time drafts, sight drafts, trade drafts, and trade acceptances. + +§ 92 A Time Draft is one payable a certain number of days after pre- +sentation. It may also be payable at any time within a specified period after drawee additional time to make payment of indebtedness due under the draft. This additional time is indicated by stating in the draft that the amount is to be paid by the designated number of days after presentation. If this draft is presented for acceptance without indication as to when it is presented by the payee. If he does accept it, this acceptance is indicated by writing across the face of the draft "the word "Accepted," followed by date of acceptance, and then "drawer's signature" placed over "accepted," indicating that he has accepted it for payment at his place of business. If he does not accept it draft when presented to him by payee, payee should im- +mediately return it to drawee so that he may know that drawee has not complied with his request. Illustration No. 67 shows one form of time draft. + +A black-and-white illustration showing a time draft. + +BUSINESS FORMS AND VOUCHERS. +124 + +1. An acceptance is a time draft after it has been accepted. It is the same as a note because the acceptance is the written promise of the person who accepts it to pay the amount mentioned within the number of days stated in the draft. The account which shows a record of notes should also contain a record of accepted drafts. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Drawer:S. H. Anderson
Date:June 10
On Whom:Mr. W. H. Goodwin
Place:San Antonio
Time:3:00 p.m.
Inferior of payment:$500.00
Acct. No.:123456789
+ +Signature + +St. Louis, Mo., June 10, 19-- + +Clerk's Receipts and Payments Office, St. Louis, Mo. + +Clerk's Receipts and Payments Office, St. Louis, Mo. + +Clerk's Receipts and Payments Office, St. Louis, Mo. + +Clerk's Receipts and Payments Office, St. Louis, Mo. + +Clerk's Receipts and Payments Office, St. Louis, Mo. + +Clerk's Receipts and Payments Office, St. Louis, Mo. + +Clerk's Receipts and Payments Office, St. Louis, Mo. + +Clerk's Receipts and Payments Office, St. Louis, Mo. + +Illustration No. 67, Time Draft Accepted and Returned. + +EXPLANATION. The draft in this illustration was drawn June 10, sent to the bank for presentation and acceptance, presented to the drawer and accepted by him on June 15, and returned to the drawer on July 15. The acceptance was made by the drawer himself; the acceptance was entered on the stub by the bookkeeper for Donaldson & Joy after the draft was accepted and returned. + +The bookkeeper should indicate on the stub the final disposition of each sight and time draft drawn by him. If he accepts on the stub as "paid" (as illustrated), or if he rejects it outright by entering "Paid" or "Not Paid," he should enter "Presented" or "Received" and the date of the stub either if the sight or time draft is not paid or accepted. The acceptance of a time draft and receipt of cash may be made with red or black ink; the use of red ink is optional with the bookkeeper. + +§ 93. A Sight Draft is one which is payable upon presentation; it indicates that the indebtedness of the drawer to the drawer is due at past due, and that the drawer desires it to be paid immediately. The drawer of a sight draft does not have to pay his own obligation but may pay any other person who shall demand payment; if he will not pay it, he will hold the draft as his receipt for the payment; if he refuses payment, the payee should return the draft to the drawer at once. + +Illustration No. 68 shows one form of sight draft. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Drawer:S. H. Anderson
Date:June 10
On Whom:Mr. W. H. Goodwin
Place:San Antonio
Time:3:00 p.m.
Inferior of payment:$500.00
Acct. No.:123456789
+ +Signature + +Chicago, Ill., June 10, 19-- + +Clerk's Receipts and Payments Office, Chicago, Ill., June 10, 19-- + +Clerk's Receipts and Payments Office, Chicago, Ill., June 10, 19-- + +Clerk's Receipts and Payments Office, Chicago, Ill., June 10, 19-- + +Clerk's Receipts and Payments Office, Chicago, Ill., June 10, 19-- + +Clerk's Receipts and Payments Office, Chicago, Ill., June 10, 19-- + +Clerk's Receipts and Payments Office, Chicago, Ill., June 10, 19-- + +Illustration No. 68, Sight Draft with Stub Attached. + +EXPLANATION. The draft in this illustration indicates that W. H. Goodwin of San Antonio, Texas, owes Anderson Bros., of Chicago, the amount mentioned in the draft; Anderson Bros. have asked him to pay them $500 on or before June 15 in San Antonio, Texas. This draft will be sent to the First National Bank with instructions to present it for collection. If W. H. Goodwin pays this debt before June 15 he will receive a check from Anderson Bros.; if he does not pay it before June 15 he will receive a bank draft or cashier's check for the amount collected; less a small collection charge. If the draft is not paid upon presentation, it will be returned to Anderson Bros. + +Description: Illustration showing a sight draft with stub attached. + +122 + +**BUSINESS FORMS AND VOUCHERS.** + +§ 94. A **Trade Acceptance** is defined by the Federal Reserve Board as "a bill of exchange (time draft) drawn by the seller on the purchaser of goods sold, and accepted by him at the time of making payment or within a few days thereafter." The trade acceptance is a form of a draft, but it differs from a draft in that it is accepted by the drawee at the time of the sale, rather than after the sale. It is used to secure payment of a debt due after the debt is due, as shown by the drawer's account with the drawee. Trade acceptances and the accounting procedure in connection therewith are discussed more fully in a subsequent chapter. + +§ 95. Use of Drafts. Sight drafts are used for collecting past-due debts from out-of-town customers, and for collecting "collect on delivery" freight shipments. They are also used for collecting past-due debts from out-of-town customers, and for changing an account to a written promise to pay at a designated time. Trade acceptances are used to secure written evidence of a sale at the time that it is made. + +September 1 Robert Anderson & Co., Chicago, sell merchandise to James Cowan, Louisville, on thirty days' time. Mr. Cowan fails to send remittance when the debt is due October 10, and Robert Anderson & Co., Louisville, sends a sight draft for $300 to the First National Bank of Chicago, payable to the First National Bank in Louisville. When this draft is presented, the payee, Mr. Cowan either will pay the draft or will accept the draft. If it is accepted, he will pay his obligation to the National Bank which will deliver the proceeds of the bank draft to Robert Anderson & Co., Louisville. If it is time draft and accepted, the bank will follow the company's instructions in regard to retaining it for collection. + +September 15 Robert Anderson & Co. sell Albert Baker, Springfield, merchandise on ninety days' time. Mr. Baker does not pay his obligation until November 15. He then borrows money from the bank. They write Albert Baker for the privilege of drawing a sixty-day draft for $300 on October 15, payable to them at their office in Louisville. The bank draws the draft because it does not change the time of paying his obligation. If he accepts the draft, Rob- ert Anderson & Co. will have a written agreement of the amount he owes and can collect this at any time during the next sixty days. + +§ 96. Endorsement of Drafts. The only reason for any writing on the back of a draft is to transfer title or to authorize collection. If the payee is a bank located in the same city as the drawer, the endorsement shall be for collection as explained in § 85, § 4, to transfer it to a bank in the city where the drawee is located or to endorse it so that it may be collected by another bank which sends it through banks with which it does business; the form of endorsement in each case would be the same as that described in § 85, § 4. In case the holder of a draft wishes to sell it, the endorsement would be "in full" as explained in § 84. + +In the first illustration given in § 95, no endorsement would be required on the sight or time draft if Robert Anderson & Co., Louisville, had sent Albert Baker's check directly to the Corn Exchange National Bank of Chicago; it would have been necessary for this bank to send it to Louisville bank for collection. The endorsement would be as illustrated in § 85, § 4. + +When Robert Anderson & Co., Louisville, sells merchandise on credit terms as shown in the second illustration given in § 95, the endorsement would be "in full" as explained in § 95, § 2. + +§ 97. Effect of Drafts on Bookkeeping Records. When an owner of business draws a draft on an out-of-town customer, he retains a record of the date of sale and other information concerning this transaction before he knows that the customer will pay the (eight) draft or accept (the time) draft upon pre- presentation; no additional record is needed in regard to the draft. When the payee advises him of the drawee's action in regard to his draft, he indicates the result on his books by debiting "Accounts Receivable" and crediting "Cash." When he receives payment after time draft a record of this is made in the general journal because the indebtedness is now in the form of a written agreement (the acceptance indicating this) and the open account is canceled thereby. The value received at this draft, hence the ac- count with accepted drafts (§ 102, c) is debited; the value parted with is this + + + + + + + + + + + + + + +
+ +BUSINESS FORMS AND VOUCHERS. +123 + +account with the customer (§ 27, 4), hence it is credited. When the drawer pays a sight draft upon presentation, the payee will send the drawer a cashier's check or bank draft in payment of the amount of the draft, which is then treated as a receipt. When this remittance is received by the drawer, the customer is given credit on the receipts side of the cash book in the same manner as if he had sent his cashier's check. + +When the business pays a sight draft drawn on it by a creditor, the same entry is made in the cash book as if a check had been sent direct to the creditor in payment of his account. When the business accepts a draft drawn on it by a creditor, the entry required is general journal entry (§ 25, 1) because the creditor is debited because it is canceled, and the account which is to show a record of written promises to pay (§ 103, 4, 2) is credited because this account will remain indelible until it is paid. + +§ 98. Protest. Each person or business concern whose name appears as an endorser on any paper (for instance, check, note, or draft) guaranty anteentes payment provided the holder will first present the paper to the one who is responsible for payment and thus endeavor to make collection. The law pro- vides that no person shall be held liable for any debt unless he has been notified of such debt. This notice is the protest by a notary public. This protest is a form which the notary public sends to each endorser after he has presented the paper to the one respon- sible for its payment and payment has been refused. + +The following is an example of protest letter from American Savings Co. (Illustration "c" in § 87) to the First National Bank, endorsing the note as evidence of transfer. On the date she endorsed her note on this order, she was informed that Ault & Wilberg had not paid this invoice June 15 and Ault & Wilberg drew a draft at ten days' sight, payable to the Mellon National Bank in Pittsburgh, and sent the draft to it for acceptance and collection. The Mellon National Bank accepted this draft on May 25. The Davis Printing Company accepted this draft. May 25 the bank notified the Davis Printing Company that the draft was due May 27. The Davis Printing Company paid the draft by check on the Mellon National Bank but did not receive $1.00 interest on this check until July 28. + +Prepare the purchase order which the purchasing agent for the Davis Printing Company would issue, the sales invoice which the bookkeeper for Ault & Wilberg would prepare and send to Ault & Wilberg, and a bill which would show that acceptance which the bookkeeper for the Davis Printing Company would make on this draft, and the cashier's check which the cashier of the Mellon National Bank would send to Ault & Wilberg. + +Exercise No. 40, Order Sales Invoice, Acceptance, and Cashier's Check. +May to do Davis Printing Company. Pittsburgh, placed an order with Ault & Wilberg for 100 copies of their new catalog at $1.00 per copy. Ault & Wilberg printed ink (black) at $1.25, and 75 lbs. of printer's ink (blue) at $1.50. May 15 Ault & Wilberg acknowledged receipt of this order by an invoice. The merchandise was billed net seven days after receipt of order. The bill was sent to Ault & Wilberg on June 15 and they had not paid this invoice June 15 and Ault & Wilberg drew a draft at ten days' sight, payable to the Mellon National Bank in Pittsburgh, and sent the draft to it for acceptance and collection. The Mellon National Bank accepted this draft on May 25. The Davis Printing Company accepted this draft. May 25 the bank notified the Davis Printing Company that the draft was due May 27. The Davis Printing Company paid the draft by check on the Mellon National Bank but did not receive $1.00 interest on this check until July 28. + +Prepare the purchase order which the purchasing agent for the Davis Printing Company would issue, the sales invoice which the bookkeeper for Ault & Wilberg would prepare and send to Ault & Wilberg, and a bill which would show that acceptance which the bookkeeper for the Davis Printing Company would make on this draft, and the cashier's check which the cashier of the Mellon National Bank would send to Ault & Wilberg. + +Exercise No. 48, Order Sales Invoice, Sight Draft, and Cashier's Check. +September 25 the Starr Piano Co., Chicago, sold the Jones Piano Co., Milwaukee, 100 Victoria records at $1.00 per item; shipment was made via Ameri- can Railway Express; charges collected October 28; bookkeeper for Starr Piano Co., drew a sight draft on Jones Piano Co. for the amount of this invoice + +124 +BUSINESS FORMS AND VOUCHERS. + +payable to the First National Bank in Chicago, and left it with the bank for col- +lection. The bank sent the draft to the Second National Bank in Milwaukee with instructions to present it to the Jones Piano Co., for payment at sight, and paid +it [by] order. The entire amount of the Jones Piano Co., upon presentation by a clerk of the Milwaukee bank, and the Milwaukee bank sent the Chicago bank a cashier's check for $50.75, retaining 25c for collecting the draft. The Chicago bank notified the Smith Piano Co. that it had received the draft, and collected with $50.75, the proceeds of the draft. + +Prepare the purchase order which the purchasing agent for the Jones Piano +Co. would make, the bill which the clerk for the Starr Piano Co. would make, +the draft which the bookkeeper for the Starr Piano Co. would draw, and the +cashier's check which the First National Bank of Chicago would receive from the +Second National Bank of Milwaukee. Show on each entry which the Chicago bank makes before date, and after date, and show how much money would make up the draft. +The entry the Chicago bank makes before date shows at what time of day the +entry the Chicago bank would make in payment of the draft. + +Exercise No. 49. Notes, Time Drafts, Sight Drafts, Bank Drafts, and Checks. + +The following transactions in connection with notes and drafts were completed by the Central Hardware Company of Buffalo during July and August: + +July 1. Received from Trowe Bros., Watertown, in full of account a note for $386.63, due June 26, bearing interest at 6%. +July 28. Accepted a draft drawn July 26 by the Harding Mfg. Co., Little Falls, for $1,214.60, payable at thirty days' sight. This draft was drawn in favor of the Citizens National Bank, Little Falls, and sent by this bank to the Third National Bank of Buffalo, which presented it for acceptance. + +Aug. 17. Paid by check on the Third National Bank of Buffalo a sight draft for $275.60, drawn by Rand & Co., Cleveland, Ohio, August 15. + +Aug. 27. Gave the Third National Bank of Buffalo a note for $1,214.60, pay- +able at thirty days' sight to this bank on August 28; gave this bank a note on New York City, for the same amount, and sent this draft to the Harding Mfg. +Co., Little Falls, in payment for the acceptance of July 28. + +Aug. 31. Received from Trowe Bros. a new note, dated July 29, with interest at +6%, from this bank on August 31; gave this bank a note on the First National +Bank of Watertown, and a cashier's check for $300.00 drawn on the +First National Bank of Watertown by M. A. Rand, cashier, in our favor, +in payment for their note due today. + +Prepare the following business forms: +1. The note required in transaction of July 1. +2. The draft required in the transaction of July 28, with all endorsements. +3- The draft and check required in the transaction of August 17. +4- The check and bank draft required in the transaction of August 27. +5- The note and cashier's check required in the transaction of August 31; the new note should be made payable at the same bank as the one renewed. + +QUESTIONS + +1. Would the Horne Department Store, Pittsburgh, draw a sight draft on C. A. +Eades, 1262 Penn Ave., Pittsburgh, to collect a debt due from him? Why? + +A page from a business form manual. + +QUESTIONS ON BUSINESS FORMS AND VOUCHERS. 125 + +2. Would this concern accept a note in settlement of the account? +3. U. B. Sweet owes the Candy Kitchen an account of $100.00 and secures an extension of sixty days by giving his note for this amount, due at the ex- piration of that time. (a) Have his liabilities decreased? (b) Have the assets of the Candy Kitchen increased? (c) To whom will the note be paid? +4. Why would a draft be made payable to the bank at which the drawee does business? +5. Would you consider it fair for one of your creditors to draw a sight or time draft on you for an amount you owed without first notifying you? +6. Is it necessary for the drawee of a draft to pay or accept it when presented? Why? +7. In what respects is a sight draft similar to a check? +8. In what respects is an accepted time draft similar to a note? +9. If you sell merchandise to a customer in another city, how will you expect him to pay for the merchandise? +10. Would you consider it fair for this customer to send you a draft drawn on one of his customers in your city, asking you to collect your debt from this cus- tomer? +11. How does the drawee of a time draft indicate that he will pay the amount of the draft? +12. How does the drawee of a sight draft indicate that he will pay the amount of the draft? +13. Explain the use of notes and drafts in business. +14. If the drawee pays a sight draft, what accounts are debited and credited? +15. If the drawee accepts a time draft, what account shows the value received? The value parted with? +16. What accounts are affected when the owner of the business accepts a note from a customer in full of account? +17. Name the accounts debited and credited when the business issues a note (a) to itself, (b) to its creditor. +18. What accounts represent the value received and the value parted with to the drawee of an accepted draft? To the drawer? +19. Why is a draft endorsed? A note? A check? +20. Distinguish between the face value and maturity value of a note. +21. If John Smith transfers a check to you by endorsement and the bank refuses payment of the check because the one who drew it did not have sufficient funds deposited with it, what action should you take? What is the bank's action so as to hold him responsible for the amount of the check? +22. Why is it advisable to have the receipt of part payment for a note endorsed on the back instead of acknowledged by a separate receipt? +23. Why is it advisable for the holder of the note not to write his name in con- currence with his signature on his receipt of payment. +24. Explain the difference between a note and a check. +25. Whom does the holder of a note hold responsible for its payment? + +**Chapter XII** + +ACCOUNTS WITH FIXED ASSETS, NOTES, AND INTEREST + +The Purpose of this Chapter is to explain accounts with fixed assets, notes and interest. A knowledge of these accounts is necessary because they are needed in the recording of business transactions. Equipment and furniture, which are frequently involved with the operation of a business, transactions frequently occur involving the use of notes and drafts; and interest cost and interest income must be recorded. + +§ 99. Fixed Assets. The building or place in which the business conducts its operations usually requires certain fixtures necessary in connection with the operation of the business. These fixtures may include desks, filing cabinets, typewriters, show cases, scales, etc. A permanent record of each article purchased should be kept, either in the explanation column of the account or in a separate account called Furniture and Fixtures. + +FURNITURE AND FIXTURES ACCOUNT + +§ 100. The Purpose of this Account is to show the cost value of property purchased for use in the office and store room, which includes desks, filing cabinets, typewriters, show cases, scales, etc. A permanent record of each article purchased should be kept, either in the explanation column of the account or in a separate account called Furniture and Fixtures. + + + + + + + + + + + + + + + + + + + + + +
Debit the Furniture and Fixtures Acct.Credit the Furniture and Fixtures Acct.
1. For the value of furniture and fixtures on hand at the beginning of business, and for the cost value of such property purchased.2. For the cost value of furniture or fixtures sold, the cost of which was debited to this account when purchased.
The Balance of the Furniture and Fixtures Account shows the net cost value of the furniture and fixtures owned by the business at the time of transactions in which furniture and fixtures were purchased or sold. It is shown on the Balance Sheet as one of the "Fixed Assets."
+ +§ 101. Transactions with Notes and Accepted Drafts require accounts in which to record them. The reason for this is that a note is a written agreement, while a draft is a promise to pay money on demand, though it may be supported by business forms. Thus the account with James Atkin may show a debit balance of $250.00, but this does not mean that Mr. Atkin will pay $250.00 because he might not have enough money available to pay this amount. On demand at hand James Atkin has given the business a written promise to pay $250.00 on a definite date, this is not subject to dispute as he will be required to pay this amount. + +*(Continued on page 127)* + +*The nature of the property used determines the method of taking care of the decrease in value due to wear and tear resulting from use. This is explained in a subsequent chapter under the subject of "Depreciation."* + +126 + +ACCOUNTS WITH NOTES. 127 + +Should the written promise remain in possession of the business and errors develop which change the amount, credit might be allowed for these errors; but, if the business has sold the note, the holder will expect Mr. Atkin to pay the full amount due on the note. The business may then have to make payment of each written promise (note or acceptance) in which money is to be paid to the business, in a "Notes Receivable" account, and each written promise (note or acceptance) in which the business promises to pay money, in a "Notes Payable" account. + +**NOTES RECEIVABLE ACCOUNT** + +§ 102. The Purpose of this Account is to show the amount due to the business as evidenced by written obligations; these include notes ($ 86) signed by others and time drafts ($ 92) accepted by the business. + +Debit the Notes Receivable Account. +Credit the Notes Receivable Account: + + + + + + + + + + + + + + + + + +
$\uparrow$$\downarrow$
For the face of each note or acceptance* owned by the business at the beginning, and for the face of each note or acceptance* received during the operations of the business.For the face of each note or acceptance* when collected, discounted*, or transferred.
Partial payments are indicated as in § 27, $ 5.
+ +§ 103. The Balance of the Notes Receivable Account shows the value of the notes and acceptances belonging to the business as the result of transactions completed with notes and drafts receivable. It is shown on the Balance Sheet as a current asset, and is usually listed before "Accounts Receivable." + +**NOTES PAYABLE ACCOUNT** + +§ 103. The Purpose of this Account is to show the amount owed by the business as evidenced by written obligations; these include notes ($ 86) signed by the business and time drafts ($ 92) accepted by the business. + +Debit the Notes Payable Account. +Credit the Notes Payable Account: + + + + + + + + + + + + + + + + + +
$\uparrow$$\downarrow$
For the face of each note or acceptance when paid. Partial payments are indicated as in § 28, $ 5.For the face of each note or acceptance owned by the business at the beginning, and for the face of each note signed or time draft accepted by the business during its operations.
Partial payments are indicated as in § 28, $ 5.
+ +§ 104. The Balance of the Notes Payable Account shows the value of the notes and acceptances owed by the business as the result of transactions completed with notes and drafts payable. It is shown on the Balance Sheet as a current liability, and is usually listed before "Accounts Payable." + +§ 104. Interest is the use of money. To illustrate: A borrowed $100.00 from B on two years' terms at an interest rate of 6% per year. $160.00, the principal and the interest. A paid $6.00 for the use of the money borrowed, hence this amount is an interest cost to him; B received $6.00 for the use of the money loaned, hence this amount is interest earned for him. + +*Trade acceptances are usually shown in an account with Trade Acceptances Receivable; this is discussed in a subsequent chapter. + +†Trade acceptances are usually shown in an account with Trade Acceptances Payable; this is discussed in a subsequent chapter. + +125 + +ACCOUNTS WITH INTEREST + +**§ 1. Discount is interest paid in advance, that is, the one who borrows the money pays interest before the time at which the loan is made and not at its maturity. It is customary to deduct the interest from the face of notes received as evidence of loans; the borrower receives cash or credit in his p.s.b. book for the proceeds. The borrower may, if he desires, give the bank his check for the interest, or the cash or credit received for the face of the note. + +To illustrate: A loan of $500.00 from his bank requires payment on June 30, as evidenced by the obligation. The bank charges him eight per cent interest. When he pre- +pays this interest, he will receive $40.00 (8% of $500) as cash or credit in his p.s.b. book, and receive credit for $460.00. In either case the $500 is regarded as interest. Interest paid in advance may be termed "discount." + +It is customary to charge the amounts are paid at the time the debt is created or at the time it is paid. + +**§ 2. Legal Rate.** To prevent unreasonable charges for the use of money, the various states have enacted laws fixing the rate that may be collected; this is termed the legal rate. Some states provide that a higher rate may be collected if it is shown that a lower rate would have been charged under similar circumstances. Both the legal and the contract rate are based on a fixed charge for one year; thus 6% indicates that $6.00 may be collected for each $100.00 for one year. + +**§ 3. Time.** The time is the number of days, months or years for which interest is to be calculated. In the case of a note the time is stated. A noted March 12, due in 90 days, would be due June 8. The same note if payable in three months would be due June 8. + +**§ 4. Method of Calculating Interest.** A business year is regarded as 360 days—12 months, 30 days in each month. Since 6% is the legal rate in the majority of states, and it is an aliquot part of 60, there are many rules for calculating interest under different systems of reckoning time and date. One such rule is as follows: If more than 180 days have passed since January 1st, then subtract from 360 days the number of days passed; if less than 180 days have passed since January 1st, then add to 360 days the number of days passed; if exactly 180 days have passed since January 1st, then divide by six and take one-third of the result obtained by dividing the number of days by six. + +The result is the interest at 6%. + +For example: Calculate interest on $521.75 for 48 days, at six per cent. Move the decimal point three places to the left, multiply this amount by 8 (divided by 6). The result is $744.30. +As there are five decimal places in the multiplicand, there must be five decimal places in the product; therefore move five places to the right and write $744.30. +If it had been one-half or more, the interest would have been $755. +Do not drop the fraction until after moving all decimal places. + +When the rate of interest is not 6%, calculate the amount of interest at 6% by this: gives +the interest on $100 for one year at six per cent; then multiply this amount by +the given rate to calculate interest on any sum at any rate. +To illustrate: Calculate the interest on $586.65 for 48 days, at 8%. $586.65 x .08 x .33 = $179.99 +$586.65 x .08 x .33 = $179.99 +(Interest at 8%). $2934.1 x .29 x .33 = $2934.1 +(Interest at 29%). $2934.1 x .29 x .33 = $2934.1 +(Interest at 29%). $2934.1 x .29 x .33 = $2934.1 +(Interest at 29%). + +**§ 105. Accounts with Interest.** Interest cost and interest earned should be recorded in separate accounts While all transactions with interest could be recorded in one account, it has been found advisable to keep two accounts with interest earned, yet it is better to keep two accounts because the balance of one account would not mean anything to the owner of the business. Where the transactions are numerous enough to warrant recording them separately, it is given to the owner on Statement of Profit and Loss will show the net interest cost to him separate from the net interest earned; if the transactions had all been recorded in one account, there would be no difference between these two accounts only a difference between total interest cost and total interest earned. +For this reason stated it is customary to record interest transactions in which the business gives cash or other property for interest, in an account with "Interest Cost," and those transactions in which the business receives cash or other property for interest, in an account with "Interest Earned." + +GENERAL RULE FOR DEBITS AND CREDITS 129 + +**INTEREST COST ACCOUNT** + +§ 106. The Purpose of this Account is to show the cost of interest to the business, made necessary by the business having to pay for the use of money. + +Debit the Interest Cost Account: +1. For interest on accounts and notes payable which have been properly credited, but some other asset might be given in payment of interest. +Credit the Interest Cost Account: +2. For any deductions which reduce the cost of interest as shown by the debit side. + +§ 3. The Balance of the Interest Cost Account shows the net cost of interest to the business. It is shown on the Statement of Profit and Loss as Interest Cost under the caption "Deductions from Income." + +**INTEREST EARNED ACCOUNT** + +§ 107. The Purpose of this Account is to show the returns from interest to the business, resulting from others paying for the use of money which belongs to the business. + +Debit the Interest Earned Account: +1. For any deductions which reduce the income from interest as shown by the credit side. +Credit the Interest Earned Account: +2. For interest income from accounts and notes receivable. Cash may be debited, but some other asset might be received for interest earned. + +§ 3. The Balance of the Interest Earned Account shows the net return from interest to the business. It is shown on the Statement of Profit and Loss as Interest Earned under the caption "Other Income." + +SUMMARY + +§ 108. General Rule for Debits and Credits. Debit the account which represents the value received and credit the account which represents the value parted with. This rule may be more explicitly expressed as follows: + +Debit the Account which represents: +(a) The cash received or property purchased. +(b) The service to whom cash is paid or property is sold on account. +(c) The service for which cash or other property is given in payment. + +Credit the Account which represents: +(d) The cash paid or property sold. +(e) The person from whom cash is received or property is purchased on account. +(f) The service for which cash or other property is received. + +The above rule was not given at the beginning because the student might have felt obliged to memorize it, and this is no desirable thing. It is given at this time in order that the student may understand how much he has gained by his attention and his knowledge of the principles gained from the exercises and practice set. + +In the formula given, (a) applies to §1 under the discussion of the Cash, Purchases, Notes Receivable, and Accounts Receivable figures; (b) to §1 under the discussion of the Accounts Payable and Accounts Receivable accounts. + +(Concluded on page 130.) + +*Accrued interest on accounts payable, notes payable, and bonds payable will be discussed later. +*Accrued interest on accounts receivable, notes receivable, and bonds owned by the business will be discussed later. + +130 + +OUTLINE OF ACCOUNTS. + +and to § 2 of the Capital account; (c) to § 1 of the Expense, Interest Cost, and Interest Earned accounts; (d) to § 2 of the Cash, Sales, and Furniture and Fixtures accounts; and (e) to the Accounts Receivable and Accounts Payable accounts; and to § 4 of the Capital account; and to § 5 of the Interest Earned and Interest Earned accounts. + +The student should learn to record transactions with the same ease that the driver operates an automobile by means of constant practice. The purpose of the exercises in connection with the discussion and the practice set was to afford this practice. The first thought is the mind of the student when he makes a transaction. First, what is the nature of the transaction; second, the accounts that represent these values; third, the book of account in which to make the record; and fourth, the process of recording so as to show these facts. + +**OUTLINE OF ACCOUNTS** + +§ 109. The Outline below includes those accounts which have been discussed in the preceding chapters. These are classified as current assets, fixed assets, current liabilities, capital income, operating, and special profits and losses. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
CashMerchandise InventoryLotes ReceivableAccounts ReceivableUsed in the preparation of
The Balance Sheet
Current Assets
Fixed AssetsFurniture and Fixtures
Current LiabilitiesNotes PayableAccounts Payable
CapitalProprietor, Capital
Trading (Income)SalesPurchasesMerchandise InventoryUsed in the preparation of
The Statement of Profit and Loss
Operating (Cost)Expense
Special Profit and Loss.Interest EarnedInterest Cost
+ +Current Assets are those assets which are in the form of cash or which will be converted into cash in the regular operations of the business; they are usually the result of transactions in connection with the purchase and sale of the commodities in which the business deals. + +Fixed Assets are those property purchased for use in the business. + +Current Liabilities are those liabilities which will have to be paid within a short time after they are incurred; they usually represent debts incurred in connection with the purchase of merchandise. + +Capital refers to the investment of the proprietor. + +Trading Income refers to those accounts which show the profit resulting from the operations of the business. Each business is organized to make a profit through certain specific operations, as selling merchandise (mercantile business), selling securities (securities business), etc. + +Operating Expenses refer to the cost of operating the business, which includes rent, heat, light, telephone service, salaries, etc. + +Special Profits and Losses refer to those profits and losses which occur outside of the regular operations of the business and may occur in one fiscal period but not in another. + +EXERCISES IN NOTES AND DRAFTS. +131 + +**Exercise No. 50, Notes and Drafts.** + +Record in journal form the following transactions in regard to notes and drafts completed during the months of January-June by James Whitcomb, a dealer in farm implements. + +Jan. 5. Sold Jonathan Rigden, Centertown, one tractor, $850.00. Received in payment his check for $250.00 and three notes for $200.00 each, due in three, six, and nine months respectively, with interest at 6% from date. + +10. Purchased from the Orrville Mfg. Co., Mansfield, on 90 days' time, merchandise per purchase invoice dated January 7, $1,295.05. + +15. Sold Robert Shook, Scottdale, on 30 days' time, farm implements per sales invoice rendered, $225.00. + +22. Accepted from the Orrville Mfg. Co.'s 60-day draft for $1,000.00 on account of purchase of the total. + +28. Borrowed $800.00 from the bank on Mr. Whitcomb's 60-day note, bearing interest at 6%. Received credit in the pass book for the face of the note. + +31. Sold S. W. Walker, Clinton, on 30 days' time, farm implements per sales invoice rendered, $209.75. + +Feb. 1. Discounted at the bank the three-months note received from Jonathan January 5. Received credit in the pass book for the face of the note. + +14. Received from Robert Shook in settlement for the merchandise sold him January 15, his note for $300.00, due in three months, with interest, and his note for $300.00 on account plus three months' interest on the note at 8%. + +18. Sold W. H. Miller, City, one tractor, $1,050.00. Received in payment his check for $150.00 and three notes for $300.00 each due in three, six, and nine months respectively, with interest at 6% from date. + +Mar. 8. Drew a 30-day draft through the Union Bank at Clinton on S.W. Walker for the merchandise sold him January 31st. Sent the draft to the bank for acceptance, with instructions to return it for collection if accepted. + +15. Discounted at the bank three-six-months notes received from W. H. Miller February 28th. Received credit in the pass book for $858.00, the proceeds of these notes after the bank deducted interest. + +16. Received notice from the Union Bank at Clinton that the draft drawn on us by W.H.Miller was due at maturity and that they would hold the draft for collection at maturity per our instructions. + +24. Gave the bank in payment for the note discounted January 25 a new 60-day note for $300.00, with interest from date, bearing interest for the balance of six months at 6%, and interest at 6% for sixty days. + +25. Purchased from the Orrville Mfg. Co., Mansfield, on 90 days' time, merchandise per purchase invoice dated March 20, $2,546.52. + +April 1. Received from Jonathan Rigden a check for $203.00 in payment for merchandise sold him January 5 and interest, the bank transaction failed to send him a notice. + +31. Sold M.J.B Adams, Uniontown, one thresher with full equipment for $1,599.88. Received in payment his check for purchase invoice note for $299.88 and two notes for $899.88 each with interest at 6%. + +Received a cashier's check from the Union Bank at Clinton for $293.50 in payment for the draft accepted by S.W.Walker less $125.32 their charges for collection. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
DescriptionAmount
Purchased from Orrville Mfg.$850
Sold Robert Shook$225
Sold Jonathan Rigden$1,295.5
Borrowed from bank$800
Sold S.W.Walker$209.75
Discounted at bank$374
Sold W.H.Miller$1,448
Drew on Union Bank$858
Gave to Union Bank$374
Purchased from Orrville Mfg.$2,546.52
Received from Jonathan Rigden$293.5
Sold M.J.B Adams$1,599.88
+ +132 + +EXERCISES IN NOTES AND DRAFTS + +Apr. 20. Gave our bank a check for $498.58 and the 60-day note received from M. B. Adams April 3, in settlement for the 90-day draft drawn by the Orrville Mfg. Co., accepted by us January 22; the bank accepted the Adams note at face value, $500.00, plus interest to date ($1.42). +25. Received a check from W. H. Miller in payment for the nine-months note due on June 1, with the face of the note and interest from the date of the note up to and including April 24. +May 1. Gave the Orrville Mfg. Co. the 90-day note received from M. B. Adams April 3, in settlement for the 90-day draft drawn by them for our note for $1,000.00 due in four months, and our check for $374.79 in payment for balance due on the purchase invoice of January 10 and in full of purchases made from February 25 to March 15, at 6% from date; the Orrville Mfg. Co. accepted the Adams note at face value, $500.00 (face value), $500.00, plus interest to date ($2.33). +10. Sold C. H. Becker, Lexington, one threadless and outfit, $1,800.00; Re- ceived a check from W. H. Miller in payment for $500.00 each, due in 30, 60, and 90 days respectively, with interest at 6%. +15. Purchased from the Orrville Mfg. Co., Mansfield, on 90 days' time, material valued at $1,875.00. +18. Sold Robert Shook, Scottsboro, one tractor, $850.00. Received on account of this sale his check for $150.00 and a note for $600.00 in his favor signed by him as evidence of his indebtedness to us in ninety days. Allowed him credit for the proceeds of the note, which include the face and interest at 6% from date of the note to May 18. +June 1. The balance due on our account with Robert Shook has been received from W. H. Miller February 28 and later discounted, has not been paid. Gave the bank our check for $4,50 interest and our note for $3600.00 due on June 14, with interest at 6% from date of maturity. +Debt the account with W. H. Miller for the face of the note plus the interest, and credit Notes Payable and Cash. +3. Received from Robert Shook a 3-months note for $200.00, dated January 2, and a check for $142.69 in payment for three-months note dated February 14, and interest on the new note at 8% from date to maturity. +12. Received from C. H. Becker his check for $925.26 in payment for 30-day note due May 1 to interest at 6% on the same from date of the note up to and including June 9. + +Exercise No. 51, Sight Draft. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +

































































John C. Franklin of Scranton, Pa., owns Dean & Dean of Salt Lake City as shown by the account (in the ledger C.J.C.) in the illustration above. +Dean & Dean have drawn the draft at the top of page 133 in settlement + +EXERCISES IN NOTES AND DRAFTS. +133 + +of the past due items of August 5 and September 9, with interest at 6% from the due date up to and including the date of the draft. + +A note dated August 5, 1872, from Salt Lake City, Utah, to Atta. eight, Payee, The order of Joseph Gallant, bearer of Eight Hundred Ninety-two Dollars. Value received and charge the same to account of To John C. Franklin. Drawn by D. Ernst. +Note: 34 + +The student is required to show the following: +(1) Interest calculations made to approve the amount of the draft. +(2) The entry in journal form that the drawee would make when he paid the draft. + +Exercise No. 52, Note Transferred. + +
ItemDescriptionAmountDateDue DateNote Value
Jan.Shook's Note$498.58Mar.Apr.$498.58
Feb.Shook's Note$374.79Mar.Apr.$374.79
Mar.Shook's Note$500Mar.Jun.$502.33
Apr.Shook's Note$500Apr.May.$505
May.Shook's Note$500May.Jun.$512
Sep.C.H.Beker's Note$1875Sep.Sep.$1875
Sep.C.H.Beker's Check$450Sep.Sep.$456
Sep.C.H.Beker's Check$667.59Sep.Sep.$674.59
Sep.C.H.Beker's Check$925.26Sep.Sep.$934.65
Sep.
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PayeeAmountDateInterestTotal
Atta. eight$0.00Aug. 5$0.00$0.00
Atta. eight$0.00Sep. 9$0.00$0.00
May 15$6.00May 15$6.00$6.00
June 15$2.00June 15$2.00$2.00
Sep. 15$2.00Sep. 15$2.00$2.00
Sep. 15$2.00Sep. 15$2.00$2.00
Sep. 15$2.00Sep. 15$2.00$2.00
Sep. 15$2.00Sep. 15$2.00$2.00
Sep. 15$2.00Sep. 15$2.00$2.00
Sep. 15$2.00Sep. 15$2.00$2.00
Sep. 15$2.00Sep. 15$2.00$2.00
Sep. 15$2.00Sep. 15$2.00$2.00
Sep. 15$2.00Sep. 15$2.00Total $488.
+ +The check in the illustration below and the note at the top of page 134 were received in full payment for the account shown in the illustration above. +The customer pays interest on the past-due items from their due date to the date of settlement. +The Central Trust Company of Cincinnati, August 1, 1872, No. +The Central Trust Company of Cincinnati, Payee, The order of John C Franklin, Sgost. +Ninety-eight dollars +Full of account +Charles Langan. + +134 + +EXERCISES IN NOTES AND DRAFTS. + +A handwritten note with a checkered border. The top line reads "50.5000 - Columbus, O. January 192." Below that, "Notice, please, after date of promise to pay to the order of Charles Lomax Two Thousand Dollars of said National Bankers' Columbian." At the bottom, "The above note is made payable to the order of the National Bankers' Columbian at its office in this city." A signature appears below, followed by "Arthur Phillips." + +The student is required to show the following: +(1) Interest calculations made to approve the amount of the check. +(2) Endorsement to transfer the note. +(3) The interest due on the note for periods to close the account and show a record of the interest and note. + +Exercise No. 53, Time Draft. + +A handwritten draft. The top line reads "50.5000 - Columbus, O. February 192." Below that, "Notice, please, after date of promise to pay to the order of Charles Lomax Two Thousand Dollars of said National Bankers' Columbian." At the bottom, "The above note is made payable to the order of the National Bankers' Columbian at its office in this city." A signature appears below, followed by "Arthur Phillips." + +The draft in the illustration below was drawn in settlement for the balance of the sale made March 10 as shown by the debit to the account with the customer in the illustration above. Interest at 6% for thirty days on the balance due was included in the face of the draft. + +A handwritten draft. The top line reads "50.5000 - Columbus, O. February 192." Below that, "Notice, please, after date of promise to pay to the order of Charles Lomax Two Thousand Dollars of said National Bankers' Columbian." At the bottom, "The above note is made payable to the order of the National Bankers' Columbian at its office in this city." A signature appears below, followed by "Arthur Phillips." + +The student is required to show the following: +(1) Interest calculations made by the bookkeeper when he ascertains the amount of the draft. + +(Concluded on page 135.) + +EXERCISES IN NOTES AND DRAFTS. +135 + +(2) The stub from which the draft was detached. +(3) The entry in journal form made by the bookkeeper who drew the draft. + +**Exercise No. 54, Sight Draft, Note, and Check.** + +The illustration below shows three ledger accounts which appear in the ledger of the Cochran Mfg. Co., Toledo, Ohio. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Jan.30 days224 daysJan. 18Co.100
Feb.301717 daysFeb. 16Co.100
Feb.30---Co.50
Mar.30--24 daysMarch 14Co.100
A Strange Case
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$2,000.00 - Toledo, Ohio. May 1-12, 1941
Six months after date a promise to pay to the order of The R. H. Donnell Company One Thousand & Quarters of a Dollar at Second National Bank, Toledo received with interest from date.
No. 44
Due Nov. 1-192
B. B. Mattiglingy












































































(Concluded on page 136.)
$2,000.00 - Toledo, Ohio. May 1-12, 1941
$2,000.00 - Toledo, Ohio. May 1-12, 1941
$2,000.00 - Toledo, Ohio. May 1-12, 1941
$2,000.00 - Toledo, Ohio. May 1-12, 1941
$2,000.00 - Toledo, Ohio. May 1-12, 1941
$2,000.00 - Toledo, Ohio. May 1-12, 1941
$2,000.00 - Toledo, Ohio. May 1-12, 1941
$2,000.00 - Toledo, Ohio. May 1-12, 1941
$2,000.00 - Toledo, Ohio. May 1-12, 1941
$2,000.00 - Toledo, Ohio. May 1-12, 1941
$2,000.00 - Toledo, Ohio. May 1-12, 1941
$2,000.00 - Toledo, Ohio. May 1-12, 1941
$2,000.00 - Toledo, Ohio. May 1-12, 1941
$2,000.00 - Toledo, Ohio. May 1-12, 1941
$2,000.00 - Toledo, Ohio. May 1-12, 1941
$2,000.00 - Toledo, Ohio. May 1-12, 1941
$2, + +136 +JOURNAL ENTRIES, NOTES AND DRAFTS. + +The following is required: + +(1) Draw at sight on the Auto Radiator Repair Co. for the balance due June 1st including interest on all due items, less interest on the payments up to and including the date of the draft. Make the draft payable to one of the banks in the city in which the school is located, it being assumed that this city is the address of the Auto Radiator Repair Co. + +(a) Show in journal form the entry made by the bookkeeper for the Cochran Mfg. Co. to record the draft and interest. + +(2) Prepare a sixty-day interest-bearing note in favor of A. Strange & Co., payable at the Jackson National Bank, for the balance due January 1, including interest on all purchases from the due date up to and including January 1, and allowing interest on each payment from date up to and including January 1. + +(a) Show in journal form the entry made by the bookkeeper for the Cochran Mfg. Co. to record the note and interest. + +(3) July 1, R. H. Donnelley of the R. H. Donnelley Company wishes to transfer $500.00 from his checking account, and give the company's check in settlement for the account. He is to pay interest on each past-due item and to be allowed interest on each payment from date up to and including July 1, also to be allowed credit on his account for interest in the note. + +(a) Write the check for Mr. Donnelley to sign. + +(b) Show the calculations necessary to ascertain the amount of the check. + +(c) Show in journal form the entry necessary to close the account and to record the value of the note and interest. + +Exercise No. 55, Journal Entries, Notes and Drafts. +Journalize the following transactions using the numbers as the days of the current month, and present the work to the teacher for approval. + +1. Gave Simpson Bros. our sixty-day note, dated today, for $250.00, to apply on account. + 2. John Howard gave us his thirty-day note, dated today, for $128.36, in full of account. + 3. Sold James Morgan, on his note for thirty days, 200 bu. oats at 49 cents. + 4. Received $150.00 from A. C. Williams, in payment of his note due today. + 5. Accepted Martin Broa's ten-day draft for $250.86, in part payment of account. + 6. Received $286.48 from M. J. Thompson, on his note, due today. + 7. Bought from the Hall Safe & Lock Co., for $200.00, one fireproof safe, and gave in payment check for $500.00, and our note due in sixty days, for $150.00. + 8. Drew a ten-day draft on A.C. Weaver for $150.00, the balance he owes us, and paid him $150.00 today, to apply on account we owe him; Mr. Weaver has accepted the draft. +Transactions of this nature are not fair to those who draw drafts upon others until they have drawn a draft on their own account (payee), and credits the account with the customer on whom it is drawn (drawer), if the draft is accepted or paid; if it is not accepted or paid, then debits are made against such account (payee). If Mr. Weaver accepts this draft (time) draft or the Cash Account if he pays it (eight) draft, The payee debits the Notes Receivable Account if he does not accept or payed or accepted or Cash Account if he (eight) draft is paid, and credits the account with the drawer. + +9. Bought from Payne & Hart merchandise per invoice of this date, $869.48. +Gave in payment thirty-day note dated today: +10. James Milligan gave us his note for $125.00, due in thirty days from today to apply on account. + +A page from a journal entry book. + +RADIO SET 137 + +11. Received from R. M. Upman, a ten-day draft on Hall Bros., for $150.00, to apply on an account Upman owes us. Hall Bros. have accepted the draft. + +12. Purchased from Remington Typewriter Co., one No. 11 Remington typewriter, for $25.00, and three notes for $25.00, and three notes for $25.00 each, due in thirty, sixty and ninety days. + +This transaction requires an entry with one debit and four credits—one for the cash paid and one for each note. + +13. Drew a ten-day draft on Yeager Bros. for $353.81, the amount they owe us, and sent it to Dawson & Perry to apply on accounts. (See instructions in No. 8.) + +14. J. J. Darling gave us his note for $175.00 due in sixty days from today, and his check for $86.14, in full of account he owes us. + +15. Bought from the Consolidated Milling Company, merchandise per invoice of this date, $689.28. Gave in payment a note which we hold (Notes Receivable) for $127.65, our note due in thirty days for $400.00, and our check for the balance. + +16. Borrowed $400.00 from the bank on our thirty-day interest-bearing note for this amount. + +17. Accepted Marblehead & Co.'s draft at ten days for $681.29, in full of account. + +18. Paid Donaldson Bros. $250.00 in payment of a note which is due today. + +19. Our note for $500.00 is due at the bank today. Gave them a check for $250.00, and a new note with interest for $250.00 in settlement of this. + +20. Accepted Martin Bros.' ten-day draft for $150.00, to apply on account. + +21. Paid our note for $200.00 due today. + +22. Our note for $800.00, in favor of Stillman Bros., is due today. We have settled the same by giving them our check for $300.00, and two interest-bearing notes for $250.00 each, due in thirty and sixty days, respectively. + +23. Robert Davis owes us a note for $627.65, which is due today. He settles the same by giving us his note for $350.00, a note that has been transferred to him for $127.65 each day's interest charge, and a check for $375. + +24. A. L Day owes us $582.65. He settles the account as follows: his thirty-day note for $250.00, our note for $210.00 (Notes Payable) which he holds, and his check for $122.65. + +25. We owe Anderson Bros., $427.55. They accept our check for $127.55, and three notes of equal amount dated today, due in thirty, sixty and ninety days, in full of account. + +RADIO SET + +This is a practice set without vouchers, and consists of the transactions for a period of one month performed by Robert A. McDougal who is engaged in the radio supply business. The transactions are separate from the text and are included with the books of account necessary to record them. The purpose of this set is to provide a review of the principles discussed in the text and in the W.H.Goodwin practice set. The student will follow the teacher's instructions in regard to the completion of this set.. + +138 + +QUESTIONS. + +QUESTIONS + +1. Under what conditions would the cost of a desk be debited to the Purchases account? +2. Under what conditions would the cost of a desk be debited to the Furniture and Fixtures account? +3. W. H. Banks, owner of Banks' Drug Store, rented a typewriter on January 1 for one year at a rental of $3.00 per month. What accounts would his bookkeeper debit and credit when the rent was paid? +4. January 1 of the next year Mr. Banks purchased a new typewriter for $100.00 cash, and on December 31 of the same year he sold it for $75.00 cash. (a) What accounts would his bookkeeper debit and credit when the typewriter was purchased? (b) What accounts would his bookkeeper debit and credit when the typewriter was sold? +5. How much did Mr. Banks save by owning his own typewriter? +6. If he had not sold the typewriter December 31, should he have considered it worth more than $75.00? +7. If he wished to show that it had decreased in value, could you suggest a means of doing this? +8. Why should the credit to the Furniture and Fixtures account show cost and not selling price? +9. If a desk which has been purchased for sale is transferred from stock for use in the office, what accounts will be debited and credited? +10. Would an automobile truck used for delivering merchandise sold be regarded as one of the fixed assets of the business? +11. If a business purchases merchandise costing $500, pays freight $50.00, will the cost of the safe shown in the Furniture and Fixtures account be the cost of the safe at the factory or this cost plus the freight? +12. If fixtures belonging to the business are destroyed by fire, will the insurance have paid all of their cost or only part thereof? +13. What is the legal rate of interest in your home state? +14. Does the law of your state permit the collection of a rate higher than the legal rate? +15. Explain the difference between interest and discount. +16. In what respect does the Interest Cost account resemble the Expense account? Do they both relate to the operations of the business? +17. What is interest a cost to the business? +18. When is interest an income to the business? +19. Why does the law limit the income from interest when it does not limit the income from dividends? +20. If a customer owes the business $500.00 which is due, and gives his note for this amount, due in ninety days, should he be required to pay interest? Why? +21. (a) What is the date of a note dated May 9 and payable ninety days after date? (b) What is the date due of a note dated May 9 and payable three months after date? +22. Why is the interest on a note for $69.27 for sixty days at 6% $1.69? +23. Explain the difference between current assets and fixed assets and the reason for this difference. +24. Explain the difference between the profit on merchandise sold in a mercantile business, and the profit resulting from interest earned. +25. What is the first thought of a bookkeeper when a business form representing a transaction is given to him? The second thought? The third? The fourth? + +Part Two—Partnership + +Chapter XIII + +THE PARTNERSHIP CONTRACT AND ACCOUNTS WITH PARTNERS + +§ 110. Introduction. The purpose of the discussion in this division is to give the student further information in regard to the principles of accounting in connection with the recording of transactions, and practice through the exercises in applying these principles. Two practice sets, separate from the text, accompany this chapter. While the title of each set indicates that the business in each of the practice sets is conducted by partners, yet the principles discussed and illustrated may be applied to a business owned and operated by an individual. This chapter contains a discussion of the partnership and the accounts necessary to record transactions with partners. + +§ 111. Accounting. The science which treats of the proper recording, classification, presentation, and interpretation of the financial facts relating to a business enterprise. Bookkeeping is that part of accounting which relates to the recording of business transactions. It is difficult to determine just where bookkeeping ends and accounting begins because many of the facts are classified as they are recorded if the proper analysis is to be made from the reports prepared at the close of the fiscal period. + +In the preceding chapters no attempt was made to consider the classification of transactions or the analysis of reports. Now that the student understands the method of recording transactions and preparing reports, he can better appreciate the reason for classification and analysis. A course in bookkeeping without a course in accounting would be incomplete. This is so because he would be handicapped in his work as a bookkeeper, and as a manager of his own business he could not interpret the information which would come to him from the accounting department. + +§ 112. A Partnership is the relation existing between two or more persons who have assigned their time, labor, skill and capital in some business enterprise for their joint profit. The partners are the persons who have entered into the agreement to form a partnership. + +§ 113. The Purpose of Forming a Partnership is the mutual benefit of all interested. The qualifications and natural ability of each person differ widely. One may be skilled in business but lack judgment; another may be a good business man; for this reason, the association of two or more partners is often very desirable. A mercantile business owned and operated by a shrewd buyer, a good salesman, and an efficient collector as partners will be sure of success if the three partners are congenial. While the necessary capital for conducting the business is usually the + +139 + +140 +CAPITAL OF A PARTNERSHIP + +chief incentive to the formation of a partnership, yet the natural ability and in- +tegrity of each partner should always be considered, especially if each is to take an active part in the management of the business. + +James Brown opened a hardware store. His partner, David Davis is salarious for a local automobile concern. Frank Jones is an expert auto repair mechanic. These three men form a partnership for the purpose of operating a hardware store. They agree that Frank will manage their shop. If the partners work together and there is no discord, the business should be a success. + +§ 114. The Capital of a Partnership consists of (a) assets invested at the beginning of business, and (b) subsequent investments. The net assets of the partnership are the total assets less the liabilities; these net assets do not belong to any one partner but are held in common by all partners as a whole. This is called Com- +mon. The capital of a partnership is the same as the capital of a business owned by an individual, except that the net capital of the individual business belongs to the owner, while the net capital of a partnership belongs to all partners, but neither partner has any right to withdraw his share or to demand the consent of the others. + +A. L. Day owns and operates a grocery business. He decides to discontinue the business and dispose of the assets at auction. After paying his liabilities, he can use the remainder of his assets in any way he chooses. If Mr. Day wants to open another grocery business, he may do so as partner. Mr. Garber wishes to enter, but Mr. Simpson does not want him to do so. If Mr. Garber makes application for admission, Mr. Simpson must give his consent or else Mr. Garber cannot join. +If two partners cannot agree upon some plan of action, it will be necessary to ask a court of equity to determine what shall be done with the liabilities, and, after the liabilities are paid, divide the remainder of the assets between the partners. + +§ 115. The Articles of Partnership is the contract entered into between the partners at the beginning of the business and must conform to the laws of the state in which the partnership business is located. The agreement between the partners should be in writing and signed by each partner. It should contain the following: + +(1) The date, and time the partnership is to continue. +(2) The name of each partner and the firm name under which the business will be operated. +(3) The assets invested by each partner. +(4) The city and state in which the business is to be located. +(5) The nature of the business. +(6) The duties of each partner. +(7) The amount each partner is to receive for his services. +(8) The division of the profits. +(9) Any special conditions that may be agreed upon by the partners. + +Illustration No. 69 shows the partnership agreement between C. W. Keeland and A.D. Munson, partners in a retail hay, grain, feed and coal business. + +§ 116. The Relation between the Partners is such that neither partner should take action in important cases without consulting the other partners. The individual partner should not have power to make contracts binding on any one as he alone is responsible for its operations, but each partner in a partnership is responsible to the other partners, hence should consult them even though ac- +cordingly they may not approve his action. In this way there is more security for success of a partnership can be assured only with the full cooperation of all the members, and this cooperation can be best effected when the partners are in accord on all business transactions of any importance. + +A successful partnership cannot exist unless their relations are agreeable; otherwise, the business cannot be a success. In the case of Garber and Simpson in the illustration under § 114, +it is possible that each was well qualified to perform the duties under the Articles of Partnership, but the fact that one of them wanted to sell might indicate that their relations were not satisfactory. + +ARTICLES OF COPARTNERSHIP + +ARTICLES OF COPARTNERSHIP + +This Contract, made and entered into on the ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ + +Any of C.W. Keeland of Cincinnati, Ohio, party of the first part, and A.D. Munson of Cincinnati, Ohio, party of the second part. + +WITNESSETH: That the said parties have hereinafter formed a partnership for the purpose of engaging in cut, sawmill, b. retail, hay, grain, feed and coal business under the following stipulations which each made a part of this contract: + +FIRST: The said partnership is to continue for a term of ___ years from date hereof. + +SECOND: The business shall be conducted under the firm name of C.W. Keeland & Co. + +THIRD: The increments are as follows: C.W. Keeland, $500.00; A.D. Munson, $500.00; balance sheet of his business, prepared March 31, the partnership assumes the liabilities shown by this balance sheet. + +A.D. Munson, cash, Five Thousand Dollars ($5,000.00). + +FOURTH: All profits or losses arising from said business are to be shared as follows: + +C.W. Keeland, one-half; A.D. Munson, one-half. + +FIFTH: A periodic record of all transactions is to be kept in a double entry book of accounts which are to be open for inspection of each partner. + +The last six months of each year thereafter statement of the business is to be made, the books closed and each partner credited with the amount of the year. A dividend may be made at such other time as the partners agree upon. + +SIXTH: Each partner is to devote his entire time and energy to the business and is engaged to no other business enterprise without the written consent of the other. + +EIGHTH: Each partner is to have a salary of $200.00 per month; the same is to be withheld at such time as they may require it. Neither partner is to withdraw from the business on account of the loss of his salary without the written consent of the other. + +EIGHTH: The duties of each partner are defined as follows: C.W. Keeland is to have general supervision of the business and act as purchasing agent and credit man; A.D. Munson is to act as sales manager. + +NINTH: Neither partner is to become surety or bondman for anyone without the written consent of the other. + +IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and affixed their seals on this day and year above written. + +Illustration No. 69, Articles of Copartnership. + +EXPLANATION: This contract is the partnership agreement between C.W. Keeland and A.D. Munson. It includes all the conditions mentioned in § 145 and a special condition in which the partners agree not to become surety for another during the term of the contract. + +C.W. Keeland +A.D. Munson + +142 +INCOME TAX FOR A PARTNERSHIP + +§ 117. Method of Forming a Partnership. A partnership is formed by the partners signing the Articles of Copartnership. Each partner is expected to invest, the property of which he shall be entitled to receive upon dissolution, should be kept on file in the office, and if desired, a synopsis of it may be made in the general journal. The business to be operated by the partners may be a continuation of that previously carried on by them, or it may be a new business. The capital of the partnership at the beginning consists of the property invested by the individual partners, less any liabilities that may be assumed. + +§ 118. Admission of a Partner. A partner may be admitted into a going concern at any time, but it must be upon the agreement of all the partners. If the amount of his investment is not dependent on the present worth of the business, it need not be shown on the Balance Sheet and Statement of Profit and Loss, nor need it be closed in the ledger. However, it is better to ascertain the present condition of the business through these reports because the new partner will be better satisfied with his investment if he has full information in regard to the past operations of the business and its probable future prospects. This report also shows that the copartnership agreement of the former partners and requires the preparation of new Articles of Copartnership to be signed by all the members. + +§ 119. Retirement of a Partner. One or more of the members in a partnership may retire without notice, provided they have given all the partners notice. One partner might retire without the consent of all the others, but such action would cause him to be responsible to the other partners for any loss resulting therefrom. When the value of his interest is not dependent on the present worth of the business, it is not necessary to show this on the Balance Sheet and Statement of Profit and Loss, these re- +ports are not necessary. Since the retirement of a partner cancels the Articles of Copartnership, when a new agreement is entered into, it is customary to prepare the Balance Sheet and Statement of Profit and Loss and close out ledger so that the new agree- +ment may begin a fiscal period. + +§ 120. Income Tax for a Partnership. The income of each business operating under a partnership agreement is subject to income tax. The income tax is not paid by the partnership as such, but by the partners individually. Quoting from Section 218 of the Revenue Act of 1921: "Individuals carrying on a business in partnership shall pay income tax on their share of profits." Quoting from Section 224 of the same act: "Every partnership shall make a return for each taxable year, stating specifically the items of its gross income and the deductions allowed by law." This return shall contain the names and addresses of each partner who would be entitled to share in the profits if they are distributed and the amount of the distributive share of each individual. The re- +turn shall be sworn to by any one of the partners. See Appendix C. + +§ 121. Accounting for a Partnership. The accounting required to show the results of the operations of a partnership may be the same as those needed to show the results of the operations of a similar business owned by an individual except that separate Capital account will be required for each partner. The nature of each item that appears on a profit and loss statement for a partnership account for a business owned and operated by a sole proprietor, as explained in § 34. Transactions affecting the compensation of partners as per Articles of Copartnership and their withdrawals from investments are shown separately from those showing income from investments. For this reason it is customary to have two accounts with each partner, a Capital account and a Personal or Drawing account. + +PARTNER'S CAPITAL ACCOUNT + +§ 122. The Purpose of this Account is to show the investments and with- +drawals of the partner, also his share of the net loss or net profit resulting from + +ACCOUNTS WITH PARTNERS 143 + +operations of the business. The nature of the account is the same as that of the Capital account of an individual as explained in § 34. + +Debit the Partner's Capital Account: +\textbf{1} For debts owed by him at the beginning of the period and assumed by the partnership. +\textbf{2} For amounts withdrawn from the partnership during the period. +\textbf{3} For his share of the net loss. + +Credit the Partner's Capital Account: +\textbf{4} For his investment at the beginning of the partnership. +\textbf{5} For all subsequent investments. +\textbf{6} For his share of the net profit earned during the period to remain in the business. + +§ 17. The Balance of the Partner's Capital Account during the fiscal period shows his net investment, and, at the end of the fiscal period after the ledger is closed, his proprietorship in the partnership. The sum of the proprietorship of all the partners at any time is shown on page 108. The balance sheet of each invest- +ment of each partner is shown on the Balance Sheet (Illustration No. 95) in the same manner as the investment of an individual as explained in § 34. + +PARTNER'S PERSONAL ACCOUNT + +§ 121. The purpose of this Account is to show a record of those trans- +actions with the partner which do not affect his Capital account. These include +withdrawals from savings accounts, loans made to himself for withdrawal; also +special transactions, such as temporary loans to the partnership on open account, +cash advanced to the partner for traveling expenses, etc. + +Debit the Partner's Personal Account: +\textbf{1} For cash paid him by the part- +nership on account of (a) salary or +Articles of Copartnership and +(b) profit withdrawn. +\textbf{2} For merchandise which he takes +out on credit and repaid partly on (a) +salary or (b) profit withdrawn. +\textbf{3} For cash paid to him to be used +by him for any other purpose. + +Credit the Partner's Personal Account: +\textbf{4} For his salary as per Articles of +Copartnership. +\textbf{5} For cash paid by him out of +funds advanced to him (§ 3) +or paid out of his private funds in +the course of his business. +\textbf{6} For that part of the profit which +the partners have agreed may be withdrawn. + +§ 17. The Balance of a Partner's Personal Account, a debit, shows the amount he owes the partnership for overdraft on account of salary or profits to be withdrawn; if a credit, the amount due him by the partnership on account of salary or profits to be withdrawn. + +As long as there is a balance between these two accounts each partner will be in balance at the close of the fiscal period. If, for any reason, a Personal account remains open, the balance, if a debit, is shown on this page; if a credit, it is shown on page 108. It is customary for the partnership to assume the liabilities of the business or businesses to be operated by it. This means that the sole proprietor or partners who own the going business will be credited for the value of the assets belonging to the busi- +ness and debited for the liabilities which the partnership assumes. + +§ 124. Opening Entries for a Partnership. When a partnership has been formed by the partners signing the Articles of Copartnership, the cash or other assets invested by each partner become the property of the partnership, and should receive no interest until they are withdrawn. When a partner withdraws money on the debit side of an account and each partner's investment is recorded on the credit side of his Capital account. When the partnership is formed to continue the op- +eration of a business which was formerly owned by one partner, it is cus- +tomary for the partnership to assume the liabilities of the business or busi- +nesses to be operated by it. This means that the sole proprietor or partners who own +the going business will be credited for the value of the assets belonging to the busi- +ness and debited for the liabilities which the partnership assumes. + +October 1, 1908 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +

















































































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+ +October, ____________ + +
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown1908
James Brown
+ +
Notes Receivable - $3,675.35
Grosses Receivable - $3,675.35
Notes Payable - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
+ + + +
Notes Receivable - $3,675.35
Grosses Receivable - $3,675.35
Notes Payable - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
+ + + +
Notes Receivable - $3,675.35
Grosses Receivable - $3,675.35
Notes Payable - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
+ + + +
Notes Receivable - $3,675.35
Grosses Receivable - $3,675.35
Notes Payable - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
+ + + +
Notes Receivable - $3,675.35
Grosses Receivable - $3,675.35
Notes Payable - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
+ + + +
Notes Receivable - $3,675.35
Grosses Receivable - $3,675.35
Notes Payable - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
Accrued Interest Capital - $3,675.35
+ + + +
Notes Receivable - $4,444.44 (due to James Brown) and notes receivable due to James Brown.
+ + + +
Notes Receivable due to James Brown and notes receivable due to James Brown.
+ + + +
Notes Receivable due to James Brown and notes receivable due to James Brown.
+ + + +
Notes Receivable due to James Brown and notes receivable due to James Brown.
+ + + +
Notes Receivable due to James Brown and notes receivable due to James Brown.
+ + + +
Notes Receivable due to James Brown and notes receivable due to James Brown.
+ + + +
Notes Receivable due to James Brown and notes receivable due to James Brown.
+ + + +
Notes Receivable due to James Brown and notes receivable due to James Brown.
+ + + +
Notes Receivable due to James Brown and notes receivable due to James Brown.
+ + + +
Notes Receivable due to James Brown and notes receivable due to James Brown.
+ + + +
Notes Receivable due to James Brown and notes receivable due to James Brown.
+ + + +
Notes Receivable due to James Brown and notes receivable due to James Brown.
+ + + +
Notes Receivable due to James Brown and notes receivable due to James Brown.
+ + + +
Notes Receivable due to James Brown and notes receivable due to James Brown.
+ + + +
Notes Receivable due to James Brown and notes receivable due to James Brown.
+ + + +
Notes Receivable due to James Brown and notes receivable due to James Brown.
+ + + +
Notes Receivable due to James Brown and notes receivable due to James Brown.
+ + + +
Notes Receivable due to James Brown and notes receivable due to James Brown.
+ + +
+ + +
+ + +
+ + +
+ + +
+ + +
+ + +
+ + +
+ + +
+ + +
+ + +
+ + +
+ + +
+ + +
+ + +
+ + +
+ + +
+ + +
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+ +145 + +W. W. Woodward invests a demonstration car which he owns, valued at $1,500.00; two new cars which he has purchased for sale, valued at $1,750.00 each; and cash, $1,000.00. Mr. Armstrong invests machinery and tools, valued at $2,500.00, which he has been using in a shop operated by himself; and cash, $1,000.00. He owes L. M. Hill $3,500.00. + +Mr. Westbrook will have charge of the office and the general operations of the business; Mr. Woodward will devote his time to the sales of automobiles; and Mr. Armstrong will have charge of the repair department. Each partner is to receive one-third of the net profit and one-third of the net loss. The partners agree that no partner shall be called upon to pay more than three times what he has invested in the business. + +No partner is to become surety for any one during the time of the partnership nor shall any partner be called upon to pay more than three times what he has invested in the business. + +Prepare (1) the Articles of Partnership and (2) the opening entries in the journal (including a synopsis of the agreement) and cash book, for the assets and liabilities invested by each partner. The value of the building is to be recorded in a Building account, and half of its cost is to be recorded in each partner's capital account. + +Select titles for the accounts to record the other assets and the liabilities (§ 4). + +Exercise No. 57. Admission of a Partner, and Transfer of Net Profit to Partners' Capital Accounts. + +First Division. July 1 Robert MacFarland, one of the salesman employed by the Central Gas Station (Exercise No. 6), wishes to purchase an interest in the business and the three partners agree that he may do so on condition that he pay for his share payable $1,000.00 cash; one Liberty bond, accepted at par value, $1,000.00; and his note due in six months, for $1,000.00. The assets invested by him become the partnership property and he becomes a partner with equal rights with respect to all matters affecting the partnership from July 1, but that the books will not be closed until the end of the business year. All the partners agree to the other conditions in the original Articles of Partnership. + +Prepare (1) the entry for the assets invested by Robert MacFarland, and (2) show the changes that will be necessary in preparing new Articles of Partnership. + +Second Division. December 31 The Statement of Profit and Loss prepared by the bookkeeper for the Central Garage shows the net profit for the year to be $2,495.75. Make the general journal entry to record this profit and show how it is to be accounted for his share of this profit under consideration the agreement made with Robert MacFarland July 1. The student may assume that this net profit stands as a credit to the Profit and Loss account, and that half of its profit is applicable to the first half of the year and the remainder to the latter half. + +Exercise No. 58. Opening Entry, and Transfer of Net Profit to Partners' Capital and Personal Accounts. + +First Division. H. W. Meyer owns and operates a gasoline station at 3725 Grandview Avenue. James C. Dexter owns and operates a gasoline station at 38 Cooper Street; both sell gasoline under different names: "The Merchants Oil" and Refining Co." These three men agree to form a partnership for the purpose of continuing the operations of these two gasoline stations and establishing a new station at 3888 Grandview Avenue which they will open within two years from October 1. The business is to be conducted under the name of "The Merchants Oil and Gas Co." The investment of each partner is as follows: + +A black-and-white illustration showing three men standing next to a gasoline station. + +146 +**QUESTIONS ON PARTNERSHIP** + +H. W. Meyer invests gasoline in stock, $216.50; oil in stock, $175.95; equipment, $1,600.00; notes receivable, $200.00; accounts receivable, $309.50; cash, $1,000.00; building and equipment; lot, $1,500.00. He owes notes payable, $1,500.00; accounts payable, $375.50. + +James C. Dexter invests gasoline in stock, $1,459.29; oil in stock, $1,298.65; cash, $835.50; rent paid in advance, $500.00; accounts receivable, $1,630.25; and notes receivable, $375.50. + +A. L. Burwell invests gasoline, $415.60; oil, $322.20; and cash $5,000.00. +He owes an account payable, $250.00. + +Mr. Meyer is to have charge of one oil station and supervise the buying; Mr. Dexter is to have charge of the other oil station and keep the books of account; Mr. Burwell is to have charge of the new oil station and supervise the selling. +Each partner is to receive a salary of $250.00 per month; profits are to be divided equally by each partner agrees not to engage in any other line of business. +The student is required to journalize the opening entry in the general journal, showing a synopsis of the Articles of Partnership. + +**Second Division.** September 30 of the following year, the Statement of Profit and Losses shows a profit of $637.68. +It is agreed that each partner's Capital account shall be increased with 5% of this profit and each partner's Personal account credited with the amount of his share of this profit. +The Personal accounts may be withdrawn within ninety days, but not more than one-third is to be withdrawn within any one month. + +The student is required to show in journal entries the entry necessary to transfer the net profit from the Profit and Loss account to the Partners' Capital and Personal accounts; also the entry October 31, when each partner withdraws one-third of the profit credited to his Personal account. + +**QUESTIONS** + +1. Explain the distinction between bookkeeping and accounting. +2. Would you consider it advisable to enter into a partnership agreement with as few partners as possible under an unincorporated form? Why? +3. Name three local business enterprises which are conducted as partnerships. +4. Name the essential elements of the Articles of Partnership and state the reasons why the partnership agreement should be in writing. +5. If one partner should sell the entire stock of goods for cash without the consent of the other partners, and deposit the cash in the bank in the name of the partnership, would this be proper? +6. If a partner whose capital account allows a balance of $9,600.00, sells his interest in the partnership to the other partners for $9,000.00 cash, what entry is required to record the transaction on the books of the partnership? +7. Why does the Federal Government require each partnership and each partner to submit a separate income tax return? +8. (a) Why is an account debited with each asset invested by a partner? (b) Why is the partner's Capital account credited? +9. Why is it advisable to keep two accounts with each partner? +10. If a note invested by one of the partners proves worthless, what account should be debited? If the partner had guaranteed payment, would this change the account debited? + +Chapter XIV +ACCOUNTS WITH FIXED ASSETS + +The Purpose of this Chapter is to explain the accounts necessary to record the value of the various fixed assets usually needed in connection with the operations of a mercantile business, and also to show the method of recording the depreciation of each group. It is necessary to have a separate account with each group of fixed assets because the loss resulting from the use of these assets affects different operating costs. + +§ 126. Fixed Assets consist of property purchased for use in the business which will not be entirely consumed by its use ( § 9 ). This property may be the building and its contents, furniture and fixtures, motor vehicles such as auto- +mobile trucks or horses and wagons for delivering goods, store fixtures, etc. The nature and use of a fixed asset will determine the account in which its value should be recorded. In order to show clearly how to record the fixed assets usually owned by a mercantile business are Office Equipment, Furniture, Fixtures, Delivery Equipment, Buildings, and Land. + +It is necessary to keep separate accounts with each group of fixed assets, one to show the cost of the assets and the other to show the decrease in value on account of use, and lapse of time. The debit side of a fixed asset account should show cost and the credit side cost so that the balance will show cost ( § 9 ). If any other variation occurs in the value of a fixed asset during the year, such as fire losses will mean nothing to the management when adjusting fire losses or determining the amount of decrease in the value of the property. The necessity for keeping two separate accounts is shown by the following illustration: + +§ 127. Depreciation refers to the decrease in the value of fixed assets through their use in connection with the operation of the business and the lapse of time. A typewriter purchased for $100.00 on January 1 and used throughout the year will not be worth $100.00 at the end of the year. An automobile truck purchased for $500.00 on January 1 and used throughout the year will not be worth $2,000.00 at the end of the year. A building purchased for $5,000.00 on January 1 and used as a home for the business throughout the year will still be worth $5,000.00 at December 31. + +The decrease in the value of fixed assets depends largely on the nature of the asset. A safe will not depreciate so rapidly as a typewriter; an automobile truck will depreciate more slowly than furniture; furniture in an old building or a frame building will depreciate more rapidly than brick or concrete buildings. The purpose of the discussion here is not to consider the various methods of arriving at the depreciation of fixed assets but to show the student the reason for deprecia- +tion. The student may see the necessity for taking care of it through a record in the proper accounts. + +The amount of the yearly decrease in the value of fixed assets due to depre- +ciation can be estimated by dividing their cost by their useful life. If it is +estimated that a fixed asset can be used for a period of ten years, the amount of +the depreciation each year would be ten per cent of the cost. If it is estimated that +the fixed asset can be used for twenty years, the depreciation each year would be +half of ten per cent or five per cent. The depreciation is based on cost value and not +on the present value; this is one reason for showing cost value in the account with +each group of fixed assets. + +147 + +148 +ACCOUNTS WITH FIXED ASSETS + +In all cases the amount of depreciation recorded will be based on estimate only. There is no means of knowing the exact amount of the depreciation. How- +ever, the policy should be to depreciate the fixed assets so that the difference be- +tween the cost of the property and its estimated value at the end of the period which +shows the estimated depreciation will show the approximate present value of the +property. If furniture and fixtures which cost $4,000.00 are destroyed by fire, the +adjustment would be made by reducing the account with Furniture and Fixtures to zero, +with Furniture and Fixtures shows the cost value $4,000.00 and the account with +Depreciation shows the estimated decrease $1,000.00, the insurance adjuster will have a basis (perpetual) for deducting $3,000.00 from the adjusted first year's income. + +The reserve for depreciation of a group of fixed assets is usually recorded in an account with the same title as that which shows the cost value of the asset, pre- +ceded by "Reserve for Depreciation of..." e.g., "Reserve for Depreciation of Office Equip- +ment" or "Reserve for Depreciation of Furniture." The indicated account shows the deprecia- +tion on equipment purchased for use in the office. + +Depreciation is an operating cost and the amount is recorded on the date of expense +and charged against income. The nature and use of the fixed asset will determine the expense accounts affected; this is explained further in Chapter XVI. + +**OFFICE EQUIPMENT ACCOUNT** + +§ 128. The Purpose of this Account is to show the cost of the property +purchased for use in the office, which includes desks, chairs, typewriters, safes, +files, bookcases, etc. + +Debit the Office Equipment Account: +\textit{c} 1. For the invested value of office +equipment on hand at the +beginning of the business, and +for the cost of new office +equipment purchased. +\textit{c} 3. The Balance of the Office Equipment Account shows the cost value of +the office equipment owned by the business. It is shown as a fixed asset on +the Balance Sheet (Illustration No. 92). + +**RESERVE FOR DEPRECIATION OF OFFICE EQUIPMENT ACCOUNT** + +§ 129. The Purpose of this Account is to show the estimated amount of +depreciation on office equipment. This depreciation is usually five or ten per cent +of the cost of office equipment, depending on the nature of the equipment; it is +quite common practice to record depreciation monthly or quarterly. + +Debit the Reserve for Depreciation +of Office Equipment Account: +\textit{c} 1. For the cost value of office equip- +ment discarded or destroyed.* +\textit{c} 2. For the cost value of office equipment sold or exchanged. +\textit{c} 3. At the close of each fiscal period, +for the estimated amount of +depreciation on account of the +use of office equipment during +the period. + +Credit the Reserve for Depreciation +of Office Equipment Account: +\textit{c} 1. For depreciation charged to office equipment sold or exchanged. +\textit{c} 3. At the close of each fiscal period, +for the estimated amount of +depreciation on account of the +use of office equipment during +the period. + +The Balance of the Reserve for Depreciation of Office Equipment Account shows +the balance set aside for the depreciation of office equipment, the cost value of +which is debited to the Office Equipment account. The cost value of office +equipment is assumed to be equal to its cost when acquired; in some cases, however, +the debit to the inventory account may be less than for depreciation only, because +for depreciation only, the balance being debited to a non-operating expense account with an appropriate title; + +It is assumed that the reserve for depreciation on the equipment discarded or destroyed ap- +proximately equals its cost value; in some cases, however, this may not be true since it may be more economical to replace such equipment than to discard it. In such case, both a debit to inventory and a credit to depreciation account will be made for depreciation only, but no charge will be made against income until replacement has been made. + +A table showing Debit and Credit entries for Office Equipment Account. + +
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DescriptionDebitCredit
Office Equipment Account:
For invested value of office equipment on hand at beginning of business:
For cost value of new office equipment purchased:
The Balance of Office Equipment Account:
For cost value of office equipment owned by business:
For depreciation charged to office equipment sold or exchanged:
For depreciation charged to office equipment discarded or destroyed:
The Reserve for Depreciation of Office Equipment Account:
For depreciation charged to office equipment sold or exchanged:
For depreciation charged to office equipment discarded or destroyed:
+ +A table showing Debit and Credit entries for Reserve for Depreciation of Office Equipment Account. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
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DescriptionDebitCredit
Office Equipment Account:
For invested value of office equipment on hand at beginning of business:
For cost value of new office equipment purchased:
The Balance of Office Equipment Account:
For cost value of office equipment owned by business:
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+ +ACCOUNTS WITH FIXED ASSETS 149 + +equipment (balance of the Office Equipment account) is shown as a fixed asset on the Balance Sheet and the depreciation (balance of the Reserve for Depreciation of Office Equipment account) is shown as a deduction from this amount (ILL NO. 92). + +The reserve account should always show a credit balance. If at any time the figures are approxi- +mately equal, the office equipment should be revalued by the accountant. The accountant may receive too small or by debiting this account with more than the depreciated value of office equipment due to changes in design, materials, etc., or because of new regulations concerning the use of office equipment. In such cases, the entry to record the additional depreciation or to adjust the amounts debited to the account. The entry to record the additional depreciation affects the same accounts as the entry required when the office equipment is purchased. When the office equipment is sold, the difference between its cost and its sale price is transferred to an expense account or to a special loss account. + + +December 01, 19XX +Administrative Expenses +Red for Office Equipment +$5 +$5 +Store Fixtures and Furniture +$100 +of office equipment. + + +The use of the office equipment will determine the expense account to be debited for the depre- +ciation. Unless there are no number of departments in the office, the depreciation may be regarded as an administrative cost (Chapter XVI). + +STORE FIXTURES ACCOUNT + +§ 130. The Purpose of this Account is to show the cost of property pur- +chased for use in the storeroom, which includes shelving, show cases, scales, trucks, +etc. The nature of this account is the same as that of the Office Equipment account and the various debits and credits are made as desired, the cost of office equip- +ment fixtures may be recorded in one account or in two accounts, depending "Office Furniture and Store Fixtures" or "Furniture and Fixtures" ($ 100). + +Debit the Store Fixtures Account: +\textit{t} For the invested value of store +fixtures on hand at the begin- +ning of business, and for +the cost value of store fixtures +purchased. + +Credit the Store Fixtures Account: +\textit{t} For the cost value of store fix- +tures sold, exchanged, stolen, +destroyed, or discarded. + +§ 131. The Balance of the Store Fixtures Account shows the cost value of the +store fixtures owned by the business. It is shown as a fixed asset on the Balance +Sheet (Illustration No. 92). + +RESERVE FOR DEPRECIATION OF STORE FIXTURES ACCOUNT + +§ 131. The Purpose of this Account is to show the net amount of the +reserve set aside to take care of the estimated depreciation of store fixtures. This +depreciation is usually from three to ten per cent of the cost of the fixtures, depend- + +150 +ACCOUNTS WITH FIXED ASSETS + +oning on the nature of the property. The debits and credits are the same as those given in § 129 except that they apply to store fixtures. The balance of the Reserve for Depreciation of Store Fixtures account is shown as a fixed asset on the Balance Sheet set aside to take care of the depreciation of the store fixtures. The cost value of store fixtures (balance of the Store Fixtures account) is shown as a fixed asset on the Balance Sheet and the depreciation (Illustration No. 92) is recorded as a deduction of Store Fixtures. This is shown as a reduction from this amount (Illustration No. 92). + +1. Entry to Record Depreciation of Store Fixtures. At the close of each fiscal period an entry is made in the general journal to record the estimated depreciation of store fixtures. The Selling Expense account is debited and the Reserve for Depreciation of Store Fixtures account is credited for the cost value of store fixtures owned by the business, as shown by balance of the Store Fixtures account, being $600.00, and the estimated depreciation is four per cent, the entry in journal form will appear as in the illustration below. + +December 31st + + + + + + + + + + + + + + +
Selling Expense$600
Reserve for Depreciation of Store Fixtures- $600
Taxable deductions from income of store fixtures$48
+ +The use of store fixtures will determine the operating account affected by the depreciation. Unless there are a number of departments in which the store fixtures are used, their decrease in value on account of depreciation may be regarded as a selling cost (Chapter XVI). + +DELIVERY EQUIPMENT ACCOUNT + +132. The purpose of this Account is to show the cost of property purchased for use in delivering merchandise, which includes trams, wagons, harness, automobiles, or any other conveyances used by the business in delivering merchandise to customers. The nature of the account is the same as that of the Office Equipment account, and the various debits and credits are similar. + +Debit the Delivery Equipment Account: + +1. For the invested value of delivery equipment at the beginning of the business, and for the cost value of delivery equipment purchased. + +Credit the Delivery Equipment Account: + +2. For the cost value of delivery equipment sold during the year, whether lost, stolen, destroyed, or discarded. + +3. The Balance of the Delivery Equipment Account shows the cost value of the delivery equipment owned by the business. It is shown as a fixed asset on the Balance Sheet (Illustration No. 92). + +RESERVE FOR DEPRECIATION OF DELIVERY EQUIPMENT ACCOUNT + +133. The purpose of this Account is to show the net amounts of the reserve set aside to take care of the depreciation of delivery equipment. This depreciation is usually from ten to twenty per cent of the cost of delivery equipment, depending on the nature of the equipment. The debits and credits are the same as those given in § 129 except that they apply to delivery equipment. The balance of the Reserve for Depreciation of Delivery Equipment account allows the + +ACCOUNTS WITH FIXED ASSETS 151 + +net amount of the reserve set aside for the depreciation of delivery equipment. +The cost value of delivery equipment (balance of the Delivery Equipment account) is shown on the Balance Sheet and the depreciation (balance of the Reserve for Depreciation of Delivery Equipment account) is shown as a deduction from this amount (Illustration No. 92). + +§ 1. Entry to Record Depreciation of Delivery Equipment. At the close of each fiscal year, the business shall record the amount of its estimated depreciation of delivery equipment. The Selling Expense account is debited and the Reserve for Depreciation of Delivery Equipment account credited. If the cost of the delivery equipment owned by the business, as shown by the balance of the Delivery Equipment account, is $3,800.00 and the estimated depreciation is ten per cent, the entry in the journal form will appear as in the illustration below. + +December 31, 19-- + + + + + + + + + + + + + + +
Selling Expense185The total profit of Delivery Equip.185
Ten per cent depreciation on costs of delivery equipment.
+ +If the cost of delivering merchandise sold to customers is recorded in a special account with Delivery Expense (Chapter XVI), this account would be debited for the depreciation. + +LAND ACCOUNT + +§ 134. The Purpose of this Account is to show the cost of land owned by the business, on which is located the buildings in which the business is conducted or on which buildings are to be constructed. When real estate is purchased, a separate value should be placed on the land and the buildings. + +Debit the Land Account: +§ 1. For the invested value of the land at the beginning of the business, +Credit the Land Account: +§ 2. For the cost of any part or all of the land sold. + +The Balance of the Land Account shows the cost value of the land owned by the business, on which the home of the business is located or on which buildings will be constructed for use in connection with the operations of the business. It is shown separately from other fixed assets (Illustration No. 93). + +The cost of land purchased by the business includes the purchase price of the land plus the cost of securing the title. Improvements of a permanent nature, such as sidewalks, grading, streets, etc., are considered improvements and are added to the cost of land purchased. Taxes and expenses in connection with the upkeep of the land are not a part of its cost, and should be recorded in a separate account (Illustration No. 94). In recording these items under Selling Expense, the taxes and cost of upkeep of the land may be debited to this account. No depreciation account is necessary in connection with land because land does not depreciate on account of use. + +BUILDINGS ACCOUNT + +§ 135. The Purpose of this Account is to show the cost of the buildings owned by the business as a home. In the larger cities buildings are sometimes + +152 +ACCOUNTS WITH FIXED ASSETS + +owned as a home for the business without the business holding title to the land, but as rule, the buildings and land are both owned by the business. + +Debit the Buildings Account Credit the Buildings Account: +1. For the cost of buildings owned at the beginning of the business, for the cost of buildings which have been lost, razed, or destroyed. +2. For the cost price of buildings sold, razed, or destroyed. + +3. The Balance of the Buildings Account shows the cost value of the building or buildings used as a home for the business. It is shown on the Balance Sheet as one of the fixed assets (Illustration No. 92). + +The balance of this account includes all costs of the buildings and should be recorded in an account which shows operating cost. The cost of maintaining the buildings includs depreciation, repairs, taxes, insurance, and other expenses necessary to keep them in good repair. A capital outlay for repairs and maintenance is regarded as an expense only when it increases the value of the building. The replacing of a shingle roof with a slate roof would increase the value of the building, hence should be expensed as an increase in the amount of capital invested in the asset. + +RESERVE FOR DEPRECIATION OF BUILDINGS ACCOUNT § 136. The purpose of this Account is to show the net amount of the reserve set aside to take care of the depreciation of buildings. The yearly deprecation is deducted from two to five per cent of the cost of buildings, depending on the nature of the buildings. The debits and credits are the same as those given in § 129, except that they apply to buildings. The balance of the Reserve for Depreciation of Buildings account shows the net amount of the reserve set aside to take care of depreciation. The cost of buildings owned by the business (balance of the Buildings account) is shown as a fixed asset on the Balance Sheet and the depreciation (balance of the Reserve for Depreciation of Buildings account) is shown as an expense in Administrative Expense. + +* Entry to Record Depreciation of Buildings. At the close of each fiscal period an entry is made in the general journal to record the estimated depreciation of buildings. The Administrative Expense account is debited and the Reserve for Depreciation of Buildings account is credited. If no departmental accounts for Administrative Expense (§ 140) is maintained, this account is debited instead of Administrative Expense. If the cost of the buildings owned by the business, as shown by the balance of the Buildings account, is $5,000.00, and the estimated depreciation is one per cent, the entry in journal form will appear as in the illustration below. + +December 31, 19-- + + + + + + + + + + +
Administrative Expense$50
Reserve for Depreciation of Buildings$50
+ +The use of this building will determine the operating expense account affected by the depreciation. Unless a number of departments are maintained, the depreciation may be regarded as a rent cost, hence a debit to Administrative Expense. + +One percent depreciation on cost value +of buildings + +The use of this building will determine the operating expense account affected by the depreciation. Unless a number of departments are maintained, the depreciation may be regarded as a rent cost, hence a debit to Administrative Expense. + +EXERCISES IN FIXED ASSETS 153 + +Exercise No. 59, Recording Transactions with Fixed Assets and Depreciation. + +A track was purchased January 1, 1922, at $10,000.00 cash. At the close of each year, fifteen per cent was allowed for the depreciation during the year. What is the book value of the track December 31, 1927? Show (a) the entry in journal form required to record the purchase of the track, (b) the entry in journal form required to record the estimated depreciation, and (c) the posting of these entries to the proper accounts; also show (d) the entry in journal form required to record the purchase of a new track January 16, 1922, at $3,000.00, cash; $7,000.00 balance of the old track; $1,000.00, and (e) the posting of this entry to the ledger accounts. + +Exercise No. 60, Recording Transactions with Fixed Assets, Depreciation and Fire Loss. + +The following office equipment was purchased January 1, 1917: safe, $300.00; bookkeeper's desk, $75.00; typewriter, $100.00; adding machine, $50.00; chair, $97.50; roller top desk, $95.00; chair, $42.50; filing cabinet, $65.00; adding machine, $35.00. The safe was purchased from the Hall Safe and Lock Company for $35.00 cash and a note for $25.00 due in six months' time. The adding machine was purchased from the Dalton Adding Machine Co. for cash $25.00, and two notes for $5.00 each, due in six and twelve months without interest. Cash was paid for the desks, chairs, typewriter and filing cabinet. + +On December 31, 1922, all of the above equipment was depreciated by five per cent on its cost basis. This equipment was depreciated as follows: desk, 5%; chairs, 16%; typewriter, 12%; adding machine, 18%; files, 5%; safe 4%. All of the above equipment was depreciated by fire January 17, 1923. The insur- ance adjuster settled by paying fifty per cent of the book value Jan. 17, 1923 and allowing the owner to retain the equipment. Jan. 22 the typewriter was exchanged for a new one price $35.00 with an allowance of $15.00 and cash paid for the difference. The adding machine was exchanged for a new one price $35.00 with an allowance of $15.00 and cash paid for the difference. The desks, chairs and files were sold to a junk dealer for cash at their book price as the old equipment. + +The student is required to show (a) the entry in journal form for the furniture when it was purchased, (b) the entry in journal form for the depreciation at the end of each year until January 17, 1923 when it was destroyed by fire; (c) the entry in journal form for the fire adjustment; and (d) the posting of these entries to the proper accounts; (e) the entry in journal form for the purchase of a new typewriter January 22, 1923 at $35.00 cash; (f) the entry in journal form for the purchase of a new adding machine January 22 at $35.00 cash; (g) the entry in journal form for new desks, chairs and files; (h) the entry for the purchase of the new desks, chairs and files; and (i) the posting of these entries to the proper accounts. + +When an item is destroyed by fire only that portion of its value which could only be debited to the Reserve for Depreciation account. The difference between the present book value of the equipment (cost less depreciation) and its exchange or selling price is considered as an increase in value of the equipment owned by this business. + +The amount received from the insurance adjuster reduces this loss, hence it should be credited to the Fire Loss account. When there are losses on fixed assets other than those caused by fire or theft they are recorded as expenses owned by this business, the Reserve for Depreciation account will show the depreciation on the safe, and the Fire Loss account will show net loss on account of fire. + +(See note at bottom of page 14.) + +Exercise No. 61, Recording Transactions with Fixed Assets and Depreciation Adjustment of Fire Loss and Report to the Owner. + +The facts follow: The college has an old desk worth $75. The college bought new Equip- ment and Reserve for Depreciation of Office Equipment accounts on December 10, 1922, at which time it was partially destroyed by fire; books of account were kept up to date but no records were made regarding depreciation on this piece of equipment until December 18 when it was reported to be worth nothing because it had been destroyed by fire. + +The insurance company settled by paying cash for sixty per cent of its book value of this piece of equipment. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
DescriptionCostDepreciationBook ValueFire LossNet Value
Old Desk$75$37.5$37.5$37.5$37.5
New Equipment
Reserve for Depreciation
Total$75$37.5$37.5$37.5$37.5
+ +154 + +QUESTIONS ON FIXED ASSETS + +equipment at the time of the fire and allowing the owner to retain the fixtures. +December 18, the owner sold the equipment to a junk dealer for $20,000. + +The student is required to prepare a journal entry for each item of equipment for the purchase when cash was paid for all equipment, except typewriter No. 2, at the time of purchase; the entry in journal form for the depreciation on office equipment for the first year; the exchange of typewriter No. 1 for typewriter No. 2, assuming that the exchange value of the former was $90.00 and that cash was paid for the difference; (d) the entry in journal form showing that no depreciation is allowed from January 1, 1922, to the date of the fire; (e) the entry in journal form for the sale of the equipment; (f) a statement to the owner showing his loss on office equipment on account of the fire. + +The student is required to show how depreciation is shown in the explanation column of the ledger account. When typewriter No. 1 is exchanged, the new typewriter is shown as No. 2 instead of No. 1. The number of years used by each piece of equipment purchased and the number attached to it by tag or tack; it should be known by this number through the description in the explanation columns of the account or in a special inventory book. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Sam's Shop$300Feb.1922Jan.100
Lack No.1922
Chambers1922
Tyburner1922
Typewriter1922
Park No.1922
Total Office Equipment$300
+ +Reserve for Depreciation of Office Equipment + +A bar graph showing "Total Office Equipment" with values of $300. + +A bar graph showing "Reserve for Depreciation of Office Equipment" with values of $300. + +QUESTIONS + +1. Why is it necessary to have two accounts with each group of fixed assets? + What amount will the insurance adjuster use as a basis for adjusting a fire loss on a truck, cost $4,000.00, reserve for depreciation $1,500.00? +2. Why does the Federal Government limit the amount of depreciation? + Would the percentage of depreciation on a brick building be greater or less than that on an automobile? +3. When is the cost of repairs on a building debited (a) to the Building account? (b) to Administrative Expense? (c) to Building Expense? +4. Under what conditions might a Reserve for Depreciation account show a debit balance? + +Chapter XV + +OPERATING AND NON-OPERATING INCOME + +The Purpose of this Chapter is to explain the accounts needed to record the principal income and the special income of the business during the fiscal period; an income to a business is the profit made through the operations of the business. The owner should know that he may make a profit by operating his business from special income sources but he must also be able to control certain operations of his business. + +§ 137. Every Business is organized for the specific purpose of making a profit. This profit may result (a) from the purchase and sale of merchandise, (b) from the sale of services, and (c) from other sources of income. The profit resulting from the sale of merchandise or services is usually referred to as the operating income of the business. Other profits which result from the operation of the business are considered as non-operating income. Non-operating income includes interest earned, discounts, discounts on purchases, purchases on sales of real estate, and other profits of this nature which may or may not occur during each fiscal period. + +The source of income of a mercantile business is the profit resulting from selling merchandise; a newspaper publishing business, the sale of advertising and subscriptions; a street railway, the sale of tickets; a telephone company, the sale of calls; and so forth. The operating income in all of these businesses may be the same; that is, the merchant, the publisher, the street railway, and the telephone company may each earn interest on notes, make a profit through discounting notes, sell real estate, and so forth. However, none of these businesses will begin their future operations of their business until they have purchased merchandise because this will occur at some time during their fiscal period. + +§ 138. Accounts with Merchandise. The operating income of a mercantile business results from the sale of merchandise which has been purchased for sale. As explained in § 17 and 18, the cost of merchandise purchased may be recorded in two accounts: (a) Purchases Account, and (b) Sales Account. The Purchases account is debited with the invoice cost of merchandise purchased; freight and drayage cost; and credit with returns and allowances; the Sales account is credited with the sales, debited with returns and allowances; and credited with freight cost. The net effect of this entry is that all information obtained from the Purchases and Sales accounts will be all that the owner needs; but where the amounts involved in connection with freight costs, returns, and allowances are large enough to require separate accounts, such accounts will be used to obtain information regarding these items. + +When this information is needed, the invoice cost is recorded in the Purchases account; sales in the Sales account; freight and drayage cost in a separate account; and returns and allowances both in separate accounts and in one account with Purchases. + +The discussion of accounts with Purchases, Freight In., Purchases Returns, Purchases Allowances, Inventory, Sales, Sales Returns, and Sales Allowances, which follows explains how to record these transactions and how to obtain complete detailed information in regard to the cost of the merchandise sold and the returns from sales. + +If desired, this account may be kept with Merchandise which will show all the facts relating to its purchase and sale. However, if this is done, it causes returned sales to be recorded as if they were purchased sales instead of as if they were sales which did not take place. It also requires the price cost to appear on the debit side of the sale on the credit side of the same account, which is contrary to the accounting principle that equal values should appear on each side of the same account, as in Cash and in Accounts Receivable. + +155 + +156 +OPERATING INCOME ACCOUNTS + +PURCHASES ACCOUNT + +§ 139. The Purpose of this Account is to show the net invoice cost of merchandise purchased. When the account is kept for this purpose, returns, allowances, and freight and drayage cost are recorded in separate accounts. The owner of the business needs to know the invoice cost of the merchandise purchased in order to compare the purchases of the current period with those of preceding periods. + +Debit the Purchases Account: Credit the Purchases Account: + +\textit{t} 1. For the invoice cost of merchandise purchased. +\textit{t} 2. For adjustments which reduce the invoice cost of merchandise purchased as shown by the debit side. + +\textit{c} 3. The Balance of the Purchases Account shows the net invoice cost of merchandise purchased during the fiscal period. It is shown on the Statement of Profit and Loss as one of the costs of the merchandise sold (II, No. 93). + +PURCHASES RETURNS ACCOUNT + +§ 140. The Purpose of this Account is to show the net value of merchandise purchased and later returned to the concern from which it was purchased. It is quite evident that merchandise purchased would not be returned unless it was defective or unsatisfactory. If returns are unusually large, the management will know that it is advisable to place orders with other concerns which will deliver the grade and quality of goods desired. + +Debit the Purchases Returns Account: Credit the Purchases Returns Account: + +\textit{t} 1. For any adjustments which reduce the amount of merchandise returned as shown by the credit side. +\textit{t} 2. For the invoice cost of merchandise returned to the seller as shown by the business. + +\textit{c} 3. The Balance of the Purchases Returns Account shows the net amount of purchases returned to the seller. It is shown on the Statement of Profit and Loss as a deduction from the net invoice cost of purchases (balance of the Purchases account) to ascertain the net purchases (Illustration No. 93). + +PURCHASES ALLOWANCES ACCOUNT + +§ 141. The Purpose of this Account is to show the net amount of allowances granted to buyers for damage to merchandise being received in damaged condition or not according to sample. If the amount is unusually large, it is quite evident that it will not be good policy for the business to continue to buy merchandise from those who must be continually making allowances because they do not conform to their specifications or fail to meet their purchase spec- ifications. If desired, purchases allowances may be combined with purchases returns and recorded in an account with Purchases Returns and Allowances because they are both deductions from purchase cost. + +Debit the Purchases Allowances Account: Credit the Purchases Allowances Account: + +\textit{t} 1. For any adjustments which reduce the amount of allowances granted to the business as shown by its credit side. +\textit{t} 2. For the amount of allowances granted to the business by its creditors. + +\textit{c} 3. The Balance of the Purchases Allowances Account shows the net amount of allowances granted to the business by the seller on account of merchandise + +OPERATING INCOME ACCOUNTS 157 + +purchased being unsatisfactory. It is shown on the Statement of Profit and Loss as a deduction from the net invoice cost of purchases (balance of the Purchases account) to ascertain the net purchases (Illustration No. 93). + +**FREIGHT IN ACCOUNT** + +§ 142. The Purpose of this Account is to show the freight, drayage, express, and postage cost of merchandise purchased. The word "in" is used in connection with the title of this account to distinguish the account from that which shows a record of freight and drayage on merchandise sold, usually designated as "Freight Out." Freight and drayage on merchandise purchased is part of the purchase cost of the merchandise, while freight and drayage on merchandise sold are part of the selling cost; hence the necessity for recording the two classes of freight and drayage in separate accounts. + + + + + + + + + + +
Debit the Freight In Account:Credit the Freight In Account:
¶ 1. For transportation (freight, ex- press, and postage) cost and drayage cost on merchandise purchased.¶ 2. For any adjustments which re- duce the transportation and drayage cost as shown by the balance sheet.
+ +§ 13. The Balance of the Freight In Account shows the transportation and drayage cost of merchandise purchased; the drayage cost may be shown in a separate account if desired. The balance of this account is shown on the Statement of Profit and Loss as a part of the cost of the merchandise purchased. (Illustration No. 93.) + +**INVENTORY ACCOUNT** + +§ 143. The Purpose of this Account, as explained in § 55, is to show the value of the merchandise inventory at the close of a fiscal period. Cost value in- cludes the invoice and transportation cost; it is customary to include these two costs as one amount in making the extensions on the inventory sheet. The value of this inventory may be recorded either at its actual cost at the end of the remaining of the next fiscal period, or it may be allowed to remain in the Inventory account throughout the period and closed into Purchases at the close of that period. + + + + + + + + + + +
Debit the Inventory Account:Credit the Inventory Account:
¶ 1. At the close of the fiscal period, with the value of the mer- chandise in stock as shown by the inventory made at that time.¶ 2. At the beginning of the next fiscal period or at its close, for the value of the merchandise in stock as shown by the last entry.
+ +§ 13. The Balance of this Inventory Account. The balance of this account at the beginning of a current fiscal period will be shown recorded either in the Inventory account or in the Purchases account depending on when the entry mentioned in **¶ 2** is made; this value is shown as an addition to the cost of purchases on the Statement of Profit and Loss (Illustration No. 93). The value of merchandise on hand at the close of a current fiscal period will appear on + +158 + +**OPERATING INCOME ACCOUNTS** + +The debit side of the Inventory account; it is shown as a current asset on the Balance Sheet (Illustration No. 62) and as a deduction from the net cost of merchandise purchased on the Statement of Profit and Loss (Illustration No. 93). + +If merchandise is sold to customers, the sales price is recorded in an Inventory account with the year written after the name of the account, in which case the inventory account is called "Inventory" or "Merchandise Inventory." The inventory at the close of the next fiscal period would be recorded in an Inventory account under the same name but with a different year written after the name of the account. For example, if the merchandise inventory was $6,453.75, this was recorded in an account with "Inventory 1920" and was allocated to remain in this inventory throughout the year 1921. December 31, 1921, the inventory was $6,453.75, and was allocated to remain in this inventory throughout the year 1922. After the ledger was closed December 31, 1922, the "Inventory 1920" account was in balance and the value of merchandise in stock December 31, 1922 was shown throughout the year 1922 in the "Inventory 1921" account. + +**SALES ACCOUNT** + +§ 144. The Purpose of this Account is to show the gross returns from the sales of merchandise; when the account is kept for this purpose, the returns and allowances are recorded in separate accounts. As explained in § 18, the account may show both returns from sales, in which case returns and allowances are recorded in the Sales Returns and not in separate accounts. + +Debit the Sales Account: +\textsuperscript{1} For the amount of errors which reduce the returns from merchandise sold as shown by the credit slip. +Credit the Sales Account: +\textsuperscript{2} For selling price of merchandise sold. + +§ 145. The Balance of the Sales Account shows the gross sales during the fiscal period. It is shown on the Statement of Profit and Loss as "Gross Sales" under the caption "Returns from Sales" (Illustration No. 93). + +**SALES RETURNS ACCOUNT** + +§ 146. The Purpose of this Account is to show the net value of merchandise sold and later returned by the one to whom it was sold. If the amount is unusually large, the management will know that the merchandise it offers for sale is not giving satisfaction to customers and can take proper steps to remedy this condition. + +Debit the Sales Returns Account: +\textsuperscript{1} For the selling price of merchandise returned to the business by customers. +Credit the Sales Returns Account: +\textsuperscript{2} For any adjustments which reduce the value of merchandise returned as shown by the debit slip. + +§ 147. The Balance of the Sales Returns Account shows the net amount of sales returned by customers. It is shown on the Statement of Profit and Loss (Illustration No. 93) as a deduction from the gross returns from sales (balance of the Sales Account). + +**SALES ALLOWANCES ACCOUNT** + +§ 148. The Purpose of this Account is to show the net amount of allowances granted by the business to its customers; these allowances are usually granted because the merchandise is not equal to the sample, or was received by the customer in bad condition because of imperfect manufacture or carelessness in packing. Sales allowances should be recorded separately from sales returns because these allowances are a loss, while merchandise returned is placed in stock for resale. + +**NON-OPERATING INCOME ACCOUNTS** 159 + + + + + + + + + + +
Debit the Sales Allowances Account:Credit the Sales Allowances Account:
1. For the amount of allowances granted by the business to its customers.2. For any adjustments which reduce the amount of allowances granted to customers as shown by the debit side.
+ +§ 3. **The Balance of the Sales Allowances Account shows the net amount of allowances granted to customers on account of merchandise sold at a factory. It is shown on the Statement of Profit and Loss (Illustration No. 93) as a deduction from the gross returns from sales (balance of the Sales account).** + +§ 147. **Merchandise Discount** refers to the discount deducted from purchases and sales invoices as per terms. The discount deducted on purchases-invoices is usually referred to as "discount on purchases" or "discount on purchases". The discount deducted from sales invoices is usually referred to as "sales discount" or "discount on sales". The purpose of merchandise discount is to encourage prompt payment of accounts receivable and also to encourage an effort to pay for merchandise within the terms of discount because by doing so he can earn an additional with an asset of less value and thus make a profit. + +**PURCHASES DISCOUNT ACCOUNT** + +§ 148. **The Purpose of this Account** is to show the net amount of discount resulting from the payment of purchase invoices subject to discount within the terms of the discount allowed. This account shows the difference between the amount of the check required to pay the purchases invoice and the net amount of the purchases invoice. + + + + + + + + + + +
Debit the Purchases Discount Account:Credit the Purchases Discount Account:
1. For adjustments made in respect of discounts on purchases when paid within either in full or in part the terms of the invoices credit side of the account.2. For the discount deducted on purchases when paid within either in full or in part the terms of the invoices credit side of the account.
+ +§ 149. **The Balance of the Purchases Discount Account shows** the net amount of the discount deducted from payments of purchases invoices during the time for which the record is kept. If the management regards purchases discount as a non-operating income, it is listed with other income on the Statement of Profit and Loss (Illustration No. 93). If purchases discount is regarded as a deduction from the cost of merchandise purchased, it is shown on the Statement of Profit and Loss as a deduction from the cost of purchases. It is usually deducted from the gross purchases in the preparation of the income tax return (Art. 1553, Taxation). + +NOTE—The purpose of the discussion of purchase discounts as given here is to show the debts and credits applicable to the account; these are the name whether purchases discount is regarded as a non-operating income or as a deduction from purchases cost or as a non-operating income. + +Since the statistical information gained from the facts shown by the Purchases Discount account indicates that this account has been used in many cases, it may be advisable to enter into a discussion as to whether it is better to regard it as a deduction from purchases cost or as a non-operating income. It is regarded as a non-operating income in the exercises in this text and in the practice sets, and as a deduction from gross purchases on the income tax return. + +**INTEREST EARNED ACCOUNT** + +§ 149. **The Purpose of this Account,** as explained in § 107, is to show interest income to the business through use of its money by others. This is regarded as a non-operating income because it is an income that may not occur in every fiscal period. + +160 + +EXERCISES + +Debit the Interest Earned Account: +1. For deductions which reduce the interest from interest as shown by the credit side. +Credit the Interest Earned Account: +2. For interest income from accounts and notes receivable. + +3. The Balance of the Interest Earned Account shows the net returns from interest to the business. It is shown on the Statement of Profit and Loss as one of the non-operating income (Illustration 508-5). + +Exercise No. 62, Purchases and Purchases Discount. + +The student is required to show (a) the entry in journal form when the purchase in the invoice below was made; (b) the entry in journal form when the invoice was paid by the check below; and (c) the posting of these entries to the Purchases and Purchases Discount accounts. + +A building with a sign that reads "The Cincinnati Garage and Paper Co." +**The Cincinnati Garage and Paper Co.** +P.O. Box 723 +CINCINNATI, OHIO +(216) 823-1000 + +Terms +1/30, n/c sold to +south-western publishing co. +309 E. Third St. +CINCINNATI, Ohio +4/18 192 + +Accounts to be settled Monthly + + + + + + + + + + + + + + + + + + + +
DescriptionQuantityUnit PriceTotal Cost
SCOT 9 x 14" String and Button Pattern Envelopes100Per W.19.75191.00
+ +Purchases Invoice Subject to Discount. + +South-Western Publishing Company +381 West Third Street +CINCINNATI, OHIO +July 6 192 + +No. 91202 + +Pay to the order of +The Cincinnati Garage & Paper Co. + +$ 971.76 + +DOLLARS + +To THE FIFTH NATIONAL BANK OF CINCINNATI + +Check in Payment of Purchases Invoice Less Discount. + +EXERCISES +161 + +Exercise No. 63, Recording Transactions with Purchases and Purchases Discount. + +The student is required to show (a) the entries in journal form for the amounts recorded in the above ledger account; (b) the check stub filed out when the check was issued in payment of the invoice on the day it was due; (c) the entry in journal form to record the payment. + +Exercise No. 64, Recording Transactions with Capital, Purchases, Sales, Returns, Allowances, and Purchases Discount. + +Record in journal form the following transactions performed by Lewis & Statler, during the month of August: + +Aug. 1. S. A. Lewis and C. F. Statler formed a partnership, each investing $2,500.00 cash. +Purchased from L. J. Kent Mfg. Co., Pittsfield, merchandise per purchase invoice dated today, terms 2% 10 days, $2,000.00. They prepaid the freight bill $48.50, which was added to the amount of the purchase on the invoice. +3. Cash sales to date per cash register, $343.40. +Sold Holmes & Warder, Richmond, on account, merchandise per sales invoice rendered, $543.50. +6. Received credit from the L. J. Kent Mfg. Co. for $35.00, value of merchandise returned. +10. Paid the L. J. Kent Mfg. Co. $2,140.20 in full for purchases invoice received on the 1st, less discount on the purchase as per terms. +Cash sales for the week per cash register, $475.11. +11. Sold Holmes & Warder, Richmond, on account, merchandise per sales invoice rendered, $290.20. +15. Purchased from the L. J. Kent Mfg. Co., Pittsfield, merchandise per purchases invoice dated August 13, terms 2% 10 days, $853.00. They prepaid freight bill $70.50, which was added to the amount of the purchase on the invoice. +17. Cash sales for the week per cash register, $418.20. +19. Allowed Holmes & Warder credit for $163.00, value of merchandise returned. +20. Purchased merchandise for cash, $2,000.00. +22. Received credit from the L. J. Kent Mfg. Co. for $138.00 because part of the merchandise delivered on the 13th was received in damaged condition. + +(Concluded on page 162.) + + + + + + + + + + + + + + + + + + + + +
Exercise No.63Purchases Discount$25$25$25$25
Exercise No.64Purchases Discount$290$290$290$290
+ +162 + +QUESTIONS + +(Exercise No. 63—Continued from page 161.) + +23. Paid the L. J. Kent Mfg. Co. for purchases invoice received on the 15th, including the freight, less allowance of the 2nd and discount on the purchase as per terms. + +24. Cash sales for the week per cash register, $341.19. + +25. Sold S. T. Hollowell, City, on account, merchandise per sales invoice rendered, $59.80. + +28. Allowed S. T. Hollowell credit for $5.00 because part of the merchandise sold him on the 6th was defective. + +31. Cash sales for the week per cash register, $437.60. + +When the above transactions have been recorded in the journal as instructed, open the necessary accounts on a sheet of ledger paper, allowing five lines for each account except Cash, L. J. Kent Mfg. Co., and Sales, each of which requires ten lines; post, and take a Trial Balance. + +QUESTIONS + +1. Why is it advisable for the bookkeeper to show operating income separate from non-operating income on the Statement of Profit and Loss? +2. Name the operating income and one or more non-operating incomes of a business engaged in the manufacture of ice. +3. Why is it when the balance of the Inventory account closed into the Purchases account? +4. (a) What does the balance of the Sales Allowances account indicate to the management? (b) The balance of the Sales Returns account? +5. (a) What does the balance of the Purchases Allowances account indicate to the management? (b) The balance of the Purchases Returns account? +6. (a) What does the balance of the Freight In Account indicate? (b) What does this mean with respect to freight? (c) What does the balance of the Freight In Account determine with regard to the location of the business? Give an example. +7. What is the purpose of merchandise discount? +8. What does the failure of a customer to pay a sales invoice subject to a three percent discount within the terms of the discount indicate to the owner of the business? +9. Why is the discount deducted from purchases invoices an income to the business? +10. (a) How will the amount of purchases discount be shown on the Statement of Profit and Loss if the management prefers to regard it as a non-operating income? (b) How will it be shown if they prefer to regard it as a deduction from the cost of merchandise purchased? (c) What effect will each of these methods have on the net profit of the business? + +A table showing questions about accounting practices. + +Chapter XVI + +OPERATING AND NON-OPERATING EXPENSE + +The Purpose of this Chapter is to explain the accounts necessary to record the expenses which are anticipated at the time the business is organized and the accounts which are used to show the actual expenses incurred in the operations of the business. The owner of the business should know the cost of operating the business separate from special costs in order to control better the future operation of the business. + +§ 150. Operating Expense. When a business is organized the owner or owners know that certain expenses will be incurred through its operations; these include the cost of rent, salaries, advertising, insurance, and taxes. Expenses of this nature are usually referred to as operating expenses because they are necessary for the conduct of the business. These expenses may be classified into three groups: (a) those applicable to the buying of merchandise or service which the business sells; (b) those which refer to the general administration of the business; and (c) those applicable to the selling of the merchandise or service which the business sells. + +BEYING EXPENSE ACCOUNT + +§ 151. The Purpose of this Account is to show the cost of purchasing merchandise. This includes all expenses paid by the buyer and his assistants, traveling expenses paid by the buyer, and any other expenses applicable to the purchase of merchandise. If an account is not kept with Buying Expense, the cost of buying merchandise is debited to the Administrative Expense account. + + + + + + + + + + + + + + + + + + +
DebitCredit
Buying Expense Account:Buying Expense Account:
1. For all expenses incurred in connection with the purchase of merchandise.For any adjustments which reduce the cost of purchasing merchandise as shown by the debit side.
+ +§ 3. The Balance of the Buying Expense Account shows the net cost of purchasing merchandise; it is shown on the Statement of Profit and Loss as one of the operating costs of the business. + +SELLING EXPENSE ACCOUNT + +§ 152. The Purpose of this Account is to show the cost of selling merchandise. This includes the salaries of the sales manager and his assistants, sales clerks, and traveling salesmen; expenses of the sales manager, his assistants, and traveling salesmen in connection with making sales; advertising cost, insurance on merchandise sold, and commissions paid to salesmen for selling merchandise similar in nature. The cost of delivering merchandise sold is a selling cost and is recorded in the Selling Expense account if an account is not kept with Delivery Expense. The owner needs to know what cost of selling goods because (the cost should be a reasonable percentage of the sales). + +163 + +164 +OPERATING EXPENSE ACCOUNTS + +Debit the Selling Expense Account: Credit the Selling Expense Account: +\textsuperscript{1}. For all expenses directly incurred in connection with the sales of merchandise. +\textsuperscript{2}. For any adjustments which reduce the cost of selling merchandise as shown by the debit side. + +\textsuperscript{3}. The Balance of the Selling Expense Account shows the net cost of selling merchandise; it is shown on the Statement of Profit and Loss as one of the operating costs of the business (Illustration No. 93). + +DELIVERY EXPENSE ACCOUNT + +§ 153. The Purpose of this Account is to show the cost of delivering merchandise sold; that is, the cost of freight, draymen and chauffeurs, repairs on wagons or automobiles used in the delivery of merchandise, insurance and depreciation on delivery equipment, and any other costs applicable to the delivery of merchandise sold. Merchandise shipped by freight must be delivered to the railroad or warehouse at the place where it will be received by the buyer. The delivery expense is the same as the delivery of merchandise direct to the customer. The cost of delivering merchandise sold is a part of the selling expense and may be recorded in the Selling Expense account. The reason for recording this cost of delivering merchandise sold because this should be a reasonable percentage of the sales; another reason is that he may determine the most economical method of making delivery. + +Debit the Delivery Expense Account: Credit the Delivery Expense Account: +\textsuperscript{1}. For all expenses directly incurred in connection with the delivery of merchandise. +\textsuperscript{2}. For any adjustments which reduce the cost of delivering merchandise as shown by the debit side. + +\textsuperscript{3}. The Balance of the Delivery Expense Account shows the net cost of delivering merchandise sold; it is shown on the Statement of Profit and Loss as one of the operating costs of the business (Illustration No. 93). + +LOSS ON DOUBTFUL ACCOUNTS ACCOUNT + +§ 154. The Purpose of this Account is to show the amount which it is estimated will be an amount of uncollectible accounts receivable. This account is opened at the close of the fiscal period when the estimated amount is recorded, and is closed into the Profit and Loss account when the ledger is closed. It remains in balance during the fiscal period. + +Debit the Loss on Doubtful Accounts Account: Credit the Loss on Doubtful Accounts Account: +\textsuperscript{1}. For the amount of estimated loss on accounts receivable. +\textsuperscript{2}. For the amount shown on the debit side at the time the ledger is closed. + +\textsuperscript{3}. The Balance of the Loss on Doubtful Accounts Account shows the loss resulting from the reserve for doubtful accounts (\$ 162, \textsuperscript{4}). It is usually shown on the Statement of Profit and Loss as one of the selling expenses, because credit is extended through the sales department and this loss is the result of the extension of credit (Illustration No. 93). + +OPERATING EXPENSE ACCOUNT 165 + +**ADMINISTRATIVE EXPENSE ACCOUNT** + +§ 155. **The Purpose of this Account** is to show the cost of administration to the business. This includes the salaries of the manager and his assistants, salaries of bookkeepers, salaries of other employees, assistants, rent, heat, light, postage for use in the office, insurance and depreciation on office equipment, taxes, repairs, and other operating expenses which are not applicable to the cost of buying or selling goods. + +The cost of maintenance of buildings, including interest on loans for depreciation, taxes, and repairs on buildings are also shown in this account unless a separate account is kept with Building Expense, in which case these costs are debited to the Building Expense account ( § 160). The manager needs to know the cost of maintaining the affairs of the business because this should be a reasonable percentage of the sales. + +Debit the Administrative Expense Acct.: Credit the Administrative Expense Acct.: + + + + + + + + + + + + + + + + + +
Q 1.For all costs applicable to the administration of the business.Q 2.For any adjustments which reduce the cost of administering the business as shown by the debit side.
Q 3.The Balance of the Administrative Expense Account shows the net cost of administration to the business; it is shown on the Statement of Profit and Loss as one of the operating costs of the business (Illustration No. 93).
+ +**BUILDING EXPENSE ACCOUNT** + +§ 156. **The Purpose of this Account** is to show the cost of maintaining the buildings owned by the business and occupied by it as a home. The cost of maintaining the buildings is one of the operating costs of the business of the same nature as rent. + +Debit the Building Expense Account: Credit the Building Expense Account: + + + + + + + + + + + + + + + + + +
Q 1.For amounts paid for maintaining the buildings, such as painting, papering, re-roofing with the same kind of material, reflooring with the same kind of material, etc.Q 3.For adjustments which reduce by the debit side.
Q 2.For interest on loans and depreciation on the building.
+ +Q 4. The Balance of the Building Expense Account shows the cost to the business of owning its own home; it is shown on the Statement of Profit and Loss as one of the operating costs of the business (Illustration No. 93). + +If an owner receives rent from tenants occupying his buildings, any amount received as rent may be credited to the Building Expense account or to a special account with Building Revenue. The use of this account for all other expense accounts affected by the cost of maintaining it unless a number of departments are maintained, if the cost of owning its own home may be expected by the business as an administrative cost. + +§ 157. **Non-operating Expense.** There are many expenses in connection with the operations of the business which may occur in one fiscal period but not in another. These include commissions paid to salesmen for prompt remittance for sales invoices, attorneys' fees for special purposes, and many other miscellaneous expenses. Interest Cost and Sales Discount are two non-operating expense accounts discussed at this time. + +166 + +**NON-OPERATING EXPENSE ACCOUNTS** + +**INTEREST COST ACCOUNT** +§ 158. The Purpose of this Account is to show the expenses incurred by the business through the premiums paid for the use of money, as explained in § 106. Interest cost is one of the expenses of the business because it represents a service charge (for the use of money) the same as salary and rent. + +*Debit* the **Interest Cost Account** and *Credit* the **Interest Cost Account**: + +† 1. For interest on accounts and † 2. For any adjustments which re- +duce the cost of interest shown by the debit side. + +‡ 3. The Balance of the Interest Cost Account shows the net cost of interest to the business; it is shown on the Statement of Profit and Loss as a non-operating expense (Illustration No. 93). + +**SALES DISCOUNT ACCOUNT** +§ 159. The Purpose of this Account is to show the net amount of dis- +count resulting from customers paying sales invoices within the terms of discount. When remittance is received from a customer within the terms of discount, the account receivable is reduced by the amount of the discount deducted. In some cases, the amount of the discount may be regarded as reducing the cost of merchandise purchases or as a profit resulting from the business paying its bills promptly. + +*Debit* the **Sales Discount Account** and *Credit* the **Sales Discount Account**: + +† 1. For sales discount deducted on sales when paid within the +terms of the sales invoices. + +‡ 2. For any adjustments which re- +duce the amount of discount deducted from customers as +shown by the debit side. + +‡ 3. The Balance of the Sales Discount Account shows the net amount of discount deducted by customers for the prompt payment of sales invoices during the time for which a record is kept by management regarding sales discounts as a non-operating expense; it is shown as such on the Statement of Profit and Loss (Illustration No. 93); if sales discount is regarded as a deduction from the returns from sales, it is deducted from the gross sales on the Statement of Profit and Loss; if it is regarded as a reduction in income tax, it is included in the computation of the income tax return. (Office Decision 140—Sec. 234—Art. 301.) + +*Sales discount is created as a non-operating expense in the exercises in this text and the practice note, and is deducted from gross sales on its return.) + +**Exercise No. 65, Sales and Sales Discount.** + +The Excelsior Mfg. Co., Providence, completed the following transactions with the Boot Shop, a customer in Springfield, during the first six months of 1923: Jan. 10, sale No. 27491, terms $20/10, received check from Boot Shop in full of sale of the 10th; Mar. 6, sale No. 27491, terms $20/10, no discount; Mar. 26, sale No. 27491, terms $20/10, no discount; Apr. 5, re- +ceived check from Boot Shop in full of sale No. 27491; June 2, received check from Boot Shop in full of account. + +It will be observed that these transactions do not fill out all of the entries required to record the transactions on the books of the Excelsior Mfg. Co., allowing discount when check was received within the discount period, (b) post, and (c) take a Trial Balance of balances. + + + + + + + + + + + + + + + + +
+ +EXERCISES 167 + +Exercise No. 66. Recording Transactions with Sales and Sales Discount. + +Show (a) the entry in journal form when the sales invoice shown below was issued; (b) the entry in journal form when the check shown below was received in payment for the invoice, less discount; and (c) the posting of these entries to the proper accounts. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
June 14, 19285120
Mason Book & Stationery Co.,
4179 Union St.
Berwick, Pa.
8/10, n/30TP
10 rms. $8 x 11 Pennslyvania Paper1.8012.00
S- Balance Sheet Paper$0.0026.00
27.00
Postage80
27.80
+ +Carbon Copy of Sales Invoice Subject to Discount. + + + + + + + + + + + + + + + + + + + + + + +
Berwick, Pa.June 2019N.A. 199
60-713 THE BERWICK NATIONAL BANK
60-713
Pay to South-Western Publishing Co. - - - OR ORDER $27.86
Twenty-seven and $8/100 - - - - - - - - - - - DOLLARS
Sales Discount Rates:MASON BOOK AND STATIONERY CO.per Dr. M.M. Masoni
+ +Check in Payment of Sales Invoice Less Discount. + +Exercise No. 67. Recording Transactions with Expense. + +Record direct in the accounts discussed in this chapter, the following transactions, performed by A. R. Pendleton & Co., wholesale merchants: + +July +1. Paid rent, $250.00. ($155.) +2. Gave A. R. Pendleton a check for $48.50, expenses on a buying trip. + +168 + +**QUESTIONS** + +8. Gave Waite & McBride a check in payment for our note No. 11 due today, and $3.25 interest on the same. +9. Paid $2.25 express on shipment to an out-of-town customer, our agreement with the carrier providing for such shipments without extra charge. +10. Paid for the following services: telephone, $12.50; lighting, $18.30; repairs on delivery truck, $12.75. +11. Payroll: office, $290.00; store, $600.00; drivers, $150.00. +12. Paid the City Water Co., $6.00; water cooler. +13. Bought oil for carbon heater and rubber for floor mats in the office, $10.00. +14. Received a cashier's check from the Merchants National Bank in payment for note left for collection, less 50c collection charges. ($ 155.) +15. Paid $3.50 for installing plate glass store window. +16. Returned a part of the office supplies purchased on the 16th and received credit, $3.80. +17. Paid the Times-Star $69.50 for advertising space. +18. Gave A. R. Pendleton a check for $21.75, expenses on a selling trip. +19. Payroll: office, $280.00; store, $600.00; drivers, $150.00. +20. Received a check from B. M. Lardner in full of account, less $6.38 discount. +21. Gave Harris Bros. our note in full of account; the face of this note included $3.15 interest. +22. Monthly payroll: purchasing agent, $750.00; traveling salesman, $750.00; sales manager, $750.00; advertising agent, $750.00. +At the close of the fiscal period, the estimated depreciation is as follows: office equipment, $100.00; store fixtures, $252.50; delivery equipment, $375.00 The estimated loss on uncollectible accounts receivable is $335.66. + +**QUESTIONS** + +1. (a) Why does the business man need to know the cost of buying goods? + (b) Would you consider it advisable to include the cost of buying as a part of the cost of merchandise purchased? (c) Why? +2. Why is it necessary to record the cost of hauling merchandise purchased from one store to another store from the cost of hauling merchandise sold from the store to the customers? +3. If the business owns its own home, will the balance of the Building Expense account be considered as the total cost of rent or will interest on the investment in real estate be recorded separately? +4. Why are expenses classified as "operating" and "non-operating?" +5. Why do merchants deliver to their customers the merchandise sold? +6. Why is the delivery cost a part of the selling cost? +7. Under what conditions would it be advisable to record the cost of advertising separate from the selling cost? +8. Why is interest paid for the use of money an expense to the business? +9. (a) What are the two methods of showing sales discount on the Statement of Profit and Loss? (b) Explain. +10. If a partner devotes his time equally to the buying and selling of merchandise, what accounts are debited for his salary? + +**Chapter XVII** + +CONTROLLING ACCOUNTS + +The Purpose of this Chapter is to explain controlling accounts, one of the most important time-savers applicable to the work of the bookkeeper. The business man is interested in time-saving methods because they reduce the cost of operating his business; the bookkeeper is interested in time-saving methods because they increase his efficiency. + +§ 160. A Controlling Account is one which represents in total the facts shown on the detailed accounts of other accounts. Controlling accounts are used most frequently with accounts receivable and accounts payable because a great number of accounts are required to record the transactions with customers and creditors. In order to avoid the necessity of making a separate entry from the Trial Balance, the work of the bookkeeper in preparing the Trial Balance will be greatly reduced. + +If there are in the ledger one hundred accounts with creditors and two hundred accounts with customers, and twenty-five accounts which relate to the operations of the business, the Trial Balance will contain 325 accounts; if the one hundred accounts with creditors can be represented by one account and the two hundred accounts with customers by another account, then only 125 accounts will be needed; if these two groups of accounts each consist of only twenty-seven accounts, this elimination can be effected by having an account with Accounts Payable which will show in total the transactions recorded in all of the accounts with creditors, and an account with Accounts Receivable which will show in total the transactions recorded in all of the accounts with customers. When this plan is followed, it is customary to open the accounts with creditors and with customers in separate divisions of the main ledger or in separate ledgers. + +The purpose of the controlling account is to save time in taking the Trial Balance and in checking the accuracy of the records. This is made clear by reference to Illustration No. 70 and the explanation in connection therewith. + +**ACCOUNTS RECEIVABLE ACCOUNT** + +§ 161. The Purpose of this Account is to show in total the detailed debits and credits to accounts with customers in another part of the same ledger, or in a separate ledger. If all the transactions with customers are recorded in this account, it will not be necessary to show the various accounts with customers on the face of the ledger. This is done because it is unnecessary to record all the transactions recorded in a group of related accounts. When only one ledger is needed for the accounts with customers, only one controlling account with Accounts Receivable is necessary. When all operations of the business are exten- sive, there may be considerable ledger work involved. In such cases, either the name of the controlling account may be Accounts Receivable, but the territory represented by the accounts in the ledger as "City Ledger," Texas Ledger," etc., must be indicated. It is also necessary to keep a separate controlling account with each ledger, as one controlling account may control several ledgers, but it is better to have a controlling account with each because of the time saved in detecting errors. + +169 + +170 + +CONTROLLING ACCOUNTS + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
ACCOUNTS RECEIVABLE
1056.001056.00
3.50853.10
3.58107.68
14.90747.13
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +














































Sales JournalDash Book (Account Head Column)
A - $03.00A - $00.00
B - $05.00B - $00.00
C - $176.00C - $176.00
D - $22.00D - $22.00
E - $22.00E - $22.00
F - $18.00F - $18.00
G - $18.00G - $18.00
H - $18.00H - $18.00
I - $18.00I - $18.00
J - $18.00J - $18.00
K - $18.00K - $18.00
L - $18.00L - $18.00
M - $18.00M - $18.00
N - $18.00N - $18.00
O - $18.00O - $18.00
Cash Book (Account Head Column)General Journal (Account Head Column)
+ + + +
A - Dr.
+ + + +
B - Cr.
+ + + +
C - Dr.
+ + + +
D - Cr.
+ + + +
E - Dr.
+ + + +
F - Cr.
+ + + +
G - Dr.
+ + + +
H - Cr.
+ + + +
I - Dr.
+ + + +
J - Cr.
+ + + +
K - Dr.
+ + + +
L - Cr.
+ + + +
M - Dr.
+ + + +
N - Cr.
+ + + +
O - Dr.
+ + + +
P - Cr.
+ + + +
Q - Dr.
+ + + +
R - Cr.
+ + + +
S - Dr.
+ + + + + +Illustration No. 7o, Chart Showing Operation of a Controlling Account. + + + +

EXPLANATION:

This chart contains a record of ten sales in the sales journal, two cash payments in the cash book, and four receipts in the general journal, together with the right cash receipts from customers in the cash book, and five receipts of assets other than cash from customers in the accounts receivable ledger, and the proof of the subsidiary ledger to the accounts receivable ledger, and the proof of the subsidiary ledger to the general ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts payable ledger to the general ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to the accounts payable ledger, and the proof of the accounts receivable ledger to +```json +[ +{"name": "Illustration No. 7o", +"description": "Illustration No. 7o", +"type": "Illustration No. 7o"}, +{"name": "Chart Showing Operation of a Controlling Account.", +"description": "Chart Showing Operation of a Controlling Account.", +"type": "Chart Showing Operation of a Controlling Account."} +] +``` + +RESERVE FOR DOUBTFUL ACCOUNTS 171 + +
+ + + + + + + + + + + + + + + + + + + + +
Debit the Accounts Receivable Account:Credit the Accounts Receivable Account:
§ 1. For the total of the sales journal at the end of the month.§ 2. For each amount recorded in the general journal or on the receipts book as a credit to an account in the accounts receivable ledger; these amounts should be posted to a special column in each of these books of original entry, in which the date of posting is at the time it is posted to the account in the accounts receivable ledger.)
(If amounts to be debited to accounts in the accounts receivable ledger are recorded in the general journal or on the purchases journal, each amount should be posted to the Accounts Receivable Account at the time it is posted to the account in the accounts receivable ledger.)
§ 3. The Balance of the Accounts Receivable Account shows the total due from all customers and is equal to the same as the total of the various balances shown in the accounts receivable ledger. This balance is shown on the Balance Sheet, being listed after Cash and Notes Receivable (I. I. No. 92).
§ 4. Accounts Receivable Proof. The Trial Balance is made from the accounts in the general ledger, the balance of the Accounts Receivable account being used instead of the various balances shown in the accounts receivable ledger. When this trial balance is found to be correct, it is necessary to prove the correctness of the posting to the accounts in the accounts receivable ledger. The total of all the debit balances in the accounts receivable ledger must be equal to the total of all the credits in that ledger, and also to the balance of the Accounts Receivable account in the general ledger.If a sale to a customer is recorded in the sales journal as $86.00 but is posted to the account in the accounts receivable ledger as $56.00, then there will be a difference between the balance of the Accounts Receivable account in the general ledger and the total of the balances in that account. It is necessary for management to take steps of this nature that a proof be made of the posting to the accounts in the accounts receivable ledger.
+ +**RESERVE FOR DOUBTFUL ACCOUNTS ACCOUNT** + +§ 162. The Purpose of this Account is to show the reserve set up to take care of possible loss resulting from failure to collect from customers. No matter how careful collection methods may be, there will always be some accounts that are almost sure to prove uncollectible. Unless this is taken into consideration at the time the Balance Sheet is prepared, the report to the management will show an inflated value for the asset Accounts Receivable. + +When any loss has been recognized by management, it becomes necessary to take care of this loss due to uncollectible accounts, yet it does indicate to management that this loss has been taken care of. In order that this loss may be reflected on its balance sheet, a deduction from Accounts Receivable is made for this loss. The 1921 Revenue Act provides a deduction for "debts ascertained to be worthless and charged off within five taxable year [or, in other words, within five years] after their date." This deduction is called a Reserve for Doubtful Accounts. + + + + + + + + + + + + + + +
Debit the Reserve for Doubtful Accounts Account:Credit the Reserve for Doubtful Accounts Account:
§ 1. For the amount that cannot be collected from a customer, whether it is a part or all of the balance of his account.§ 2. At the close of each fiscal period, for this amount of reserve designated by the owner or management of the business.
§ 3. The Balance of the Reserve for Doubtful Accounts Account shows that net amount due from customers that has been deducted from Accounts Receivable as shown on the Balance Sheet as a deduction from Accounts Receivable so that the management may know the amount due from customers, estimated loss, and the net amount that it is expected will be collected.
+ +172 + +**ACCOUNTS PAYABLE ACCOUNT** + +* 4. Entry to Set Up Reserve for Doubtful Accounts. At the close of each fiscal period an entry is made in the general journal to record the estimated loss on doubtful accounts. This entry is made by debiting the Loss on Doubtful Accounts account (§ 154) and debiting the Reserve for Doubtful Accounts account credited. If the total amount owed by the business to customers, as shown by the balance of the Accounts Receivable account, is $25,375.00, and it is desired to set up a reserve of $500.00 for doubtful accounts, the journal form will appear as in the illustration below. + + + + + + + + + + + + + + + + + + + + + + + + + +
December 1, 19x
Loss on Doubtful Accounts
$575
Reserve for Doubtful Accounts
$575
One percent of accounts receivable.
will be used as a reserve for doubtful accounts.
+ +The Loss on Doubtful Accounts account is regarded as a selling expense as explained in §154. + +**ACCOUNTS PAYABLE ACCOUNT** + +§ 163. The Purpose of this Account is to show in total the detailed debits and credits to accounts with creditors in another part of the same ledger or in a separate ledger. If all the transactions with creditors are recorded in this account, it shows at a glance the total amount due from them after the Trial Balance. This is a controlling account because it shows in total the transactions recorded in detail in a group of related accounts. + +When a business has more than one office or branch within its territory, the accounts payable, like the accounts receivable, may be kept in separate ledgers, each of which is given a title designating a specific territory. A controlling account may be kept with each ledger or with a group of ledgers. + +Debit the Accounts Payable Account: +* t. For each amount recorded in the general journal or on the payment book as a debit to an account in the accounts payable ledger. +* r. For each amount recorded in the general journal or on the receipts book as a credit to an account in the accounts payable ledger. +Credit the Accounts Payable Account: +* t. For the total of the purchases journal at the end of the month. +* r. For amounts to be credited to accounts in the accounts payable ledger (whether entered in the general journal or on the receipts side of the payment book) that have been posted to the Accounts Payable account (whether they are posted to the account in the accounts payable ledger). + +§ 163. The Balance of the Accounts Payable Account shows the total owed to all creditors and must be the same as the total of the various balances shown in the accounts payable ledger. These balances are shown as such on the Balance Sheet being listed after Notes Payable (Illustration No. 92). + +§ 164. Accounts Payable Proof. The accounts payable are proved in the same manner as accounts receivable. (§ 161, ¶ 4.) + +Ledgers containing accounts with customers and with creditors are referred to as subsidiary ledgers. In this case they are called "Accounts Payable" and "Accounts Receivable." All other accounts opened in the subsidiary ledgers; other personal accounts resulting from sales and purchases of property belonging to the business are opened in the general ledger. + +OUTLINE OF ACCOUNTS 173 + +**OUTLINE OF ACCOUNTS** + +§ 164. The Outline below includes those accounts required in connection with the recording of transactions in the C. W. Keedle & Co. practice set; references are given to discussion of those accounts which have not been developed in this or preceding chapters. The classification is the same as that in the first division of this text. + +**OUTLINE OF ACCOUNTS USED IN THE PARTNERSHIP SET.** + +| Account | Description | +|---|---| +| Cash | Cash. | +| Merchandise Inventory | Merchandise Inventory. | +| Notes Receivable | Accounts Receivable. | +| Accrued Interest Earned (§ 103) | Accrued Interest Earned. | +| Land | Land. | +| Buildings | Buildings. | +| Office Equipment | Store Fixtures. | +| Delivery Equipment | Delivery Equipment. | +| Deferred Charges to Operations | Office Supplies. | +| Insurance | Insurance. | +| Notes Payable | Accounts Payable. | +| Wages (§ 107) | Accrued Interest Cost (§ 201). | +| Reserves for Depreciation of Office Equipment | Reserve for Depreciation of Office Equipment. | +| Reserve for Depreciation of Store Fixtures | Reserve for Depreciation of Store Fixtures. | +| Reserve for Depreciation of Delivery Equipment | Reserve for Depreciation of Delivery Equipment. | +| Reserves on Doubtful Accounts | Reserves on Doubtful Accounts. | +| Capital | Partner, Capital. | +| Partner, Personal | Partner, Personal. | +| Inventory | Purchases. | +| Purchases Returns and Allowances | Purchases Returns and Allowances. | +| Freight In | Freight In. | +| Sales | Sales Returns. | +| Sales Allowances | Sales Allowances. | +| Selling Expense | Travel Expense. | +| Operating Expense | Loss on Doubtful Accounts. | +| Administrative Expense | Building Expense. | +| Non-Operating Income | Interest Earned. | +| Sales Discount | Interest Earned. | +| Non-Operating Expense | Purchases Discount. | +| Loss on Dead Horse (§ 157) | Loss on Dead Horse (§ 157). | + +Operating Income + +Operating Expense + +EXERCISES IN CONTROLLING ACCOUNTS + +Exercise No. 68, Accounts Receivable Proof. +Sales Journal—May + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Account$
2W. D. JayneSpringfield1$ 450.00
3R. W. StarlingSt. Louis2185,50
3C. W. MartinBristol379.30
3R. L. SutherlandRichmond4329.30
4O. R. MartinLincoln5211.15
9R. W. StarlingSt. Louis6137.50
12J. H. JohnsonCanton750.30
15R. L. SutherlandRichmond8293.35
19C. H. WattBristol945.95
26R. W. StarlingSt. Louis10203,50
+ +31 Sales, Cr., Accounts Receivable, Dr., $7,864.95 +The student is required (a) to post the individual sales to the accounts receivable ledger; (b) to post the total to the Accounts Receivable and Sales accounts; (c) to show the proof of the individual accounts with the Accounts Receivable account. + +Exercise No. 69, Accounts Payable Proof. +Purchases Journal—May + + +
3
Jemison & Co.		City
Jewell Tea Co.		St. Albans
Ralph O. Wells
Foster Grocery Co.		2% to 10 days
account
City
3%		$ 895.75
$ 20.00
$ 573.20
$ 178.15
7
Jewell Tea Co.		City
Ralph O. Wells
Foster Grocery Co.		Manchester
Newport
Manchester
Cincinnati
10 to 30 days
4% to 30 days
3% to 10 days
1% to 10 days
627.35
956.31
157.27
359.40
14
Tracy & Tracy
Keaton Grocery Co.
Jewell Tea Co.		Newport
Manchester
Cincinnati
Newport
Newport
Manchester
Cincinnati
Newport
3% to 10 days
3% to 10 days
1% to 10 days
3% to 10 days
8
8
8
1,894.26
23
Tracy & Tracy
Keaton Grocery Co.
Jewell Tea Co.		Newport
Manchester
St. Albans
City
Manchester
St. Albans
account
3% to 10 days

75,00

+ +31 Purchases, Dr., Accounts Payable, Cr., $7,167,20 +The student is required (a) to post the individual purchases to the creditors' accounts in the accounts payable ledger; (b) to post the total to the Purchases and Accounts Payable accounts; (c) to show the proof of the individual accounts with the Accounts Payable account. + +Exercise No. 70, Construction of Charts for Controlling Accounts. +Prepare two charts similar to Illustration No. 70, one for accounts receivable and the other for accounts payable, from the following transactions performed during the month of March by Cary & Burke, a partnership engaged in selling woolen goods. +Use a sheet of paper five x ten inches for each chart, allowing two inches for the title at the top, three inches for the left margin in the center, and two inches for the proof at the bottom. +Complete all work with a pen unless permitted to use a pencil. +Mar. 1: Purchase from Holbrook & Thoma, City, on account, merchandise, $1,289.50. +3: Purchased from the Spencer Woolen Mills Co., Taunton, terms, 2% to be collected; cost, $637.00. They prepaid the freight on this shipment; $455 which was added to the amount on the invoice. +(Continued on page 175.) + +EXERCISES IN CONTROLLING ACCOUNTS 175 + +(Exercise No. 70—Continued from page 174.) + +6. Paid Holbrook & Thomas $75.00 to apply on account. +7. Sold P. M. Penrod, 61 Ward Ave., City, on account, merchandise, $356.20. +8. Purchased from Holbrook & Thomas, City, on account, merchandise, $254.50. +9. Sold J. S. Henry, 2311 Park Ave., City, on account, merchandise, $85.00. +10. Received $250.00 from P. M. Penrod to apply on account. +11. Sold merchandise on account as follows: + J. S. Henry, 2311 Park Ave., City, $112.50; + O. J. Merrill, 126 Beatty St., City, $166.00. +Received in part payment of the sale to O. J. Merrill a sixty-day note for $200.00, signed by D. P. Hart, dated January 25, with interest at 6%, which allowed M. Merrill credit for the interest accrued on the note to date. +12. Paid the Spencer Wooden Mills Co. $557.35 in full for purchase of the old account, and freight on the new order of cloth sold. +Sold J. S. Henry, 2311 Park Ave., City, 75c worth of cord which was purchased for use in the store. Charge this to his account. +13. Received $500.00 from J. S. Henry to apply on account. +Sold J. S. Merrill, 126 Beatty St., City, on account, merchandise, $414.95. +Received notice of credit from Holbrook & Thomas for $500.00 value of two lots of cloth purchased on the 8th and returned per agreement. +14. Purchased from Holbrook & Thomas merchandise, $1,809.07. +15. Sold P. M. Penrod, 61 Ward Ave., City, on account, merchandise, $663.96. +Received Bowman Bros., of an error of $2.00 in making the extensions for purchase of the 16th, and received instructions from them to debit their account for this amount. +16. Received $250.00 from M. Merrill in full for sale of the 14th. +Sold merchandise as follows: +O. J. Merrill, 126 Beatty St., City, on account, merchandise, $243.45. +M.W.Miller, 333 Park Ave., City, on account, merchandise, $1,514.80. +Paid Bowman Bros., $750.00 to apply on account. +Received $100.00 from J.S.Henry to apply on sale of the 11th, and $500.00 from P.M.Penrod to apply on account. +Paid Holbrook & Thomas $2,208.97 to apply on account. +17. Sold J.S.Henry, 2311 Park Ave., City; on account; merchandise, $125.60. +Purchased from the Spencer Wooden Mills Co., Taunton; terms, 2%o to day; freight paid by seller; charge this shipment $3-45 which was added to the invoice for this shipment. +O.J.Merrill reported that there was an error of $1.00 in his favor in the extension of the sale of the 8th because he had only the $588. +18. Sold P.M.Penrod, 61 Ward Ave., City; on account; merchandise, $356-2o; Allowed J.S.Henry credit for $335-00; value of one bolt of cloth sold him on account; charge this to his account. +Sold J.S.Henry, 2311 Park Ave., City; on account; merchandise, $284-50. +Received credit from the Spencer Wooden Mills Co. for $150-00 because part of the merchandise purchased from them on the 23rd was 4o per cent extra fine than specified in their invoice. +Allowed P.M.Penrod credit for $5-00 on account of an error in our favor in extensions for sale of the 24th. + +Purchased from Holbrook & Thomas; terms, 2%o to day; mer- +chandise,$7625-85. + +(Concluded on page 176.) + +176 + +QUESTIONS + +(Exercise No. 70—Continued from page 175.) + +27. Sold J. S. Henry, 6 Park Ave., City, $38 worth of stamps which were purchased for use in the store. Charge this to his account. +Received $12.50 from J. S. Henry in full for sale of the 11th, and $200.00 from P. M. Penrod to apply on sale of the 18th. + +28. Received $315.10 from O. M. Merrill in full for sale of the 11th. +Received $315.10 from O. M. Merrill in full for sale of the 11th. +Sold J. S. Henry, 6 Park Ave., City, on account, merchandise $57.40. +Per Mr. Henry's instructions, charge to his account by prepaid express to A. B. Knox, Clinton; debit Mr. Henry's account with $1.40, cash paid for the express charges. +Received $315.10 from O. M. Merrill, W. Grinnell in part payment for sale of the 20th; allowed him discount on this payment per terms of the sale. +Sold P. M. Penrod, 6 Ward Ave., City, on account, merchandise $427.89. +Received $100.00 from J. S. Henry to apply on account. +Received notice of credit from Hollbrook & Thoma for $33.50, value of one barrel of oil sold at 10 cents per gallon. + +31. Sold M. W. Grinnell, Silver Grove, terms 2% to 10 days, merchandise, $165.75. +Received $300.60 from J. S. Henry in full for sale of the 22d, and $300.00 from P. M. Penrod to apply on sale of the 29th. + +QUESTIONS + +I. If there is a difference of 2% between the total of the balances in the accounts receivable ledger and the balance in the Accounts Receivable account in the general ledger, how will the bookkeeper locate the error? +II. If an account in the accounts receivable ledger which shows a balance of $25 is found, then will the bookkeeper discover this error? +III. If all the accounts in the accounts receivable ledger show errors, how will the Accounts Payable account in the general ledger appear? +IV. If a creditor agrees to deliver merchandise purchased and, when this is re- +ceived, pays freight charges by check drawn on a railroad company and gives the railroad company in payment for the freight be recorded and posted if a controlling account is kept with Accounts Payable? +V. If a creditor agrees to deliver merchandise sold to him be prepaid and charged to his account, how will the check given the railroad company in payment for this freight be recorded and posted if a controlling account is kept with Accounts Receivable? +VI. In what does the work of a bookkeeper with Accounts Receivable make the work of the bookkeeper more efficient? +VII. Why are special columns provided in books of original entry for controlling accounts? +VIII. What special columns are required in the cash book and general journal when controlling accounts are kept with Accounts Receivable and Accounts Payable? +IX. If a check is given in payment for freight on merchandise purchased and debited to the Freight In Account, what effect does this have on the con- +trolling accounts? How will this affect the Accounts Payable? +(a) If a creditor by request prepay's the freight on merchandise purchased and includes the amount in the purchases invoice, how will this transaction be recorded and posted if a controlling account is kept with Accounts Payable? (b) How will the entry be made and posted if no controlling account is maintained? + +A black-and-white illustration showing a man sitting at a desk with a stack of papers in front of him. + +Chapter XVIII +BOOKS OF ACCOUNT + +The Purpose of this Chapter is to explain and illustrate the use of special columns in the cash book and general journal. The use of special columns is a great time-saver for the bookkeeper, hence should be understood by the student of bookkeeping. The explanation of special columns will enable the student to appreciate their value. + +§ 165. The Books of Original Entry usually required in connection with the recording of transactions in a mercantile business consist of a purchases journal, sales journal, cash book, and general journal. The purpose of each of these blanks is always the same, namely, to record all transactions in such a manner that the records of the books of account required in connection with the exercise at the conclusion of this chapter and the first practice set (C. W. Keland & Co.) which is separate from this text, are explained and illustrated in the discussion which follows. + +§ 166. The Purchases Journal is a book of original entry in which pur- +chases of merchandise are recorded (§ 3). The ruling in this book should be such that each purchase may be recorded on one horizontal line; this is usually the same as in Illustration No. 17, although it may be necessary to have different classes of purchases entered separately in the purchases journal for different departments. If separate accounts are maintained with Purchases and Freight In., and prepaid freight is charged to customers, then a separate column for Freight Out should be recorded in a special column for "Freight In" or by a separate entry in the general journal. + +§ 167. The Sales Journal is a book of original entry in which sales of mer- +chandise are recorded (§ 40). If desired, the carbon copy of each sales invoice may be filed in a binder as one page in the sales journal; when this plan is fol- +lowed, no ruled sales journal (Illustration No. 20) is necessary. Each customer's account in the accounts receivable ledger is debited with the amount of his pur- +chase order or bill, and credited with the amount received by him. At the end of the month the total of all the sales invoices is posted to the debit of the Accounts Receivable account and to the credit of the Sales account in the general ledger. + +Each sale must be recorded in both the sales journal and on the invoice under which it was made; hence, each invoice must be entered twice, once as a credit to the sales account and once as a debit to the accounts receivable account. When this method is used, errors can easily be detected because regular orders, omissions can be detected easily. + +§ 168. The Cash Book. As explained in § 35, cash receipts may be recorded in a cash book or on pages in the cash payments journal, or cash receipts and payments may be recorded on opposite pages of one cash book, receipts on the left and payments on the right. All amounts received may be entered in one column on the receipts side of the cash book and all amounts paid in one column on the payments side (Illustration No. 21). This classification may also be classified by use of separate columns. This classification is especially desirable when controlling accounts are maintained with accounts receivable and with accounts payable. The reason for this is that the Accounts Receivable account in the general + +177 + +178 +CASH BOOK + +Ledger is credited with the total of the amounts credited to the accounts in the accounts receivable ledger, and the Accounts Payable account in the general ledger is debited with the total of the amounts debited to the accounts in the accounts payable ledger. If all the amounts affecting the controlling accounts are entered at special columns, the total of all the amounts in each special column can be posted at the end of the month. + +Other special columns may be provided for recording transactions affecting cash sales, purchases, administrative expense, selling expense, etc. If the cash sales for each of the twenty-six business days in the month are recorded in one special column, this column will be called "Sales" or "Cash Sales," but if the cash sales for each day are recorded in a special column, the total of this column can be posted in one amount at the end of the month. + +Illustration No. 71, Receipts Side of Cash Book with Special Columns. + +EXPLANATION: The amount of cash received from a customer on account or in full of account is entered in the first column, cash received in payment for cash sales in the second column, and all other amounts of cash received in the third column. Each amount entered in the first column is posted to the credit of the Accounts Receivable account in the general ledger at the end of the month. Each amount entered in the second column is posted to the credit of the Cash account at the end of the month. Each amount entered in the third column is posted to the credit of either the Cash account or to some other account depending upon its nature. For example, if an amount is received from a customer on account or in full of account, it is entered in the first column; if an amount is received from a customer on account or in full of account, it is entered in the second column; if an amount is received from a customer on account or in full of account, it is entered in the third column. The total of all amounts entered in each special column is posted to the credit of either the Cash account or to some other account depending upon its nature. For example, if an amount is received from a customer on account or in full of account, it is entered in the first column; if an amount is received from a customer on account or in full of account, it is entered in the second column; if an amount is received from a customer on account or in full of account, it is entered in the third column. The total of all amounts entered in each special column is posted to the credit of either the Cash account or to some other account depending upon its nature. For example, if an amount is received from a customer on account or in full of account, it is entered in the first column; if an amount is received from a customer on account or in full of account, it is entered in the second column; if an amount is received from a customer on account or in full of account, it is entered in the third column. The total of all amounts entered in each special column is posted to the credit of either the Cash account or to some other account depending upon its nature. For example, if an amount is received from a customer on account or in full of account, it is entered in the first column; if an amount is received from a customer on account or in full of account, it is entered in the second column; if an amount is received from a customer on account or in full of account, it is entered in the third column. The total of all amounts entered in each special column is posted to the credit of either the Cash account or to some other account depending upon its nature. For example, if an amount is received from a customer on account or in full of account, it is entered in the first column; if an amount is received from a customer on account or in full of account, it is entered in the second column; if an amount is received from a customer on account or in full of account, it is entered in the third column. The total of all amounts entered in each special column is posted to the credit of either the Cash account or to some other account depending upon its nature. For example, if an amount is received from a customer on account or in full of account, it is entered in the first column; if an amount is received from a customer on account or in full of account, it is entered in the second column; if an amount is received from a customer on account or in full of account, it is entered in the third column. The total of all amounts entered in each special column is posted to the credit of either the Cash account or to some other account depending upon its nature. For example, if an amount is received from a customer on account or in full of account, it is entered in the first column; if an amount is received from a customer on account or in full of account, it is entered in the second column; if an amount is received from a customer on account or in full of account, it is entered in the third column. The total of all amounts entered in each special column is posted to the credit of either the Cash account or to some other account depending upon its nature. For example, if an amount is received from a customer on account or in full of account, it is entered in the first column; if an amount is received from a customer on account or in full of account, it is entered in the second column; if an amount is received from a customer on account or in full of account, it is entered in the third column. The total of all amounts entered in each special column is posted to the credit of either the Cash account or to some other account depending upon its nature. For example, if an amount is received from a customer on account or in full of account, it is entered in the first column; if an amount is received from a customer on account or in full of account, it is entered in the second column; if an amount is received from a customer on account or in full of account, it is entered in + +CASH BOOK 179 + +Illustration No. 71 shows the receipts side of the cash book with three money columns, and Illustration No. 72 shows the payments side of the cash book with the same number of money columns. The purpose of each column is explained by the printed headings at the top of each page. + +**To Prove Cash.** At the time it is desired to prove cash, each of the three columns on the receipts and payments sides of the cash book is footed in small pencil figures as in Illustrations Nos. 71 and 72. The total of the first and third columns on the payments side deducted from the total of the three columns on the receipts side gives the amount of cash in the bank plus that on hand if it is not all deposited. In practice it is customary to prove cash before depositing the checks and currency in the bank. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
DateName of AccountExplanationAmounts Payable ToNet AmountPay Due Co.General Dr.
Subsidy InsurancePensioners' Div.33.00
Stabling ExpensesCowdiers31.50
Breadbasket Co.Unpaid Dividend3.00
Office EmployeesUnpaid Dividend10.00
R.R.R. Personal ServiceUnpaid Dividend30.00
H.H. Hambrecht Co.
+ + +Total Amounts Payable To: + + + + + +
DescriptionOn Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,Total Cash On Hand,
Cash Book.
+ +Illustration No. 72, Payments Side of Cash Book with Special Columns. + +EXPLANATION. The amount of cash paid a creditor on account or in full of accounts is entered in the first column, and all other amounts of cash paid in full of accounts during the month is entered in the second column, and all other amounts of cash paid in full of accounts during the month is entered in the third column. Each amount entered in these columns is posted to the credit of the account payable ledger written on the same line with it; the total of the first column is posted to the credit of the Accounts Payable account, and the total of the second column is posted to the credit of the Accounts Payable account, and so forth. The total of these two columns is posted to the general ledger at the end of the month. Each amount entered in the third column is posted to the credit of the Accounts Payable account, and so forth. The total of these two columns is posted to the credit of the Accounts Payable account, and so forth. + +The breaks indicate a number of entries omitted. + +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number of entries omitted. +The breaks indicate a number +A table showing cash book transactions with special columns for payments. + +180 + +GENERAL JOURNAL + +§ 169. General Journal. When controlling accounts are maintained with accounts receivable and accounts payable, four columns are usually provided in the general journal as in the illustration below. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Account PayableGeneral LedgerName of Accounts and ExplanationLf.General LedgerAccts. Receivable
1015Notes ReceivableC. H. Thompson Co.1015
Received on full account this day noted.
Receivables not collected from date:
1000Kennecott Copper Co.Our Refund Allowance1
Returned merchandise
1000Notes PayableNoted Payables1000
Demand for cash and merchandise notes in payment of note for taxes due October.
Illustration No. 73. General Journal with Two Special Columns.
EXPLANATION. The two debit columns are ruled at the left and the two credit columns at the right to show the total of the total of the two columns at the left should at all times equal the total of the two columns at the right. At the conclusion of each page these totals should be printed in the margin under "Debit" and "Credit." The totals of the "Accounts Payable," "Cash," "Sales," "Sales Returns," "Sales Discounts," "Cost of Goods Sold," "Purchases," "Purchases Returns," "Purchases Discounts," "Freight In," "Freight Out," "Merchandise Inventory," "Accrued Expenses," "Income Tax Due," and "Accruals" columns at the end of the month.
The blank indicates a number of entries omitted.
December 3, 19--
Account Payable
General Ledger
Name of Accounts and Explanation
Lf.
General Ledger
Accts. Receivable
1015 Notes Receivable C. H. Thompson Co.
Received on full account this day noted.
Receivables not collected from date:
1015 Notes Receivable C. H. Thompson Co.
Returned merchandise
1000 Notes Payable Noted Payables
Demand for cash and merchandise notes in payment of note for taxes due October.
1000 Notes Receivable R.P. Phillips
Personal and professional services of City's best known attorney; also miscellaneous intangibles.
200 Selling the firm's stock.
200 Administrative Expense W. H. Marshall, Inc.
200 Cost of goods sold
12/31 Cash balance for December 31, 19--
12/31 Cash balance for January 31, 19--
12/31 Cash balance for February 28, 19--
12/31 Cash balance for March 31, 19--
12/31 Cash balance for April 30, 19--
12/31 Cash balance for May 31, 19--
12/31 Cash balance for June 30, 19--
12/31 Cash balance for July 31, 19--
12/31 Cash balance for August 31, 19--
12/31 Cash balance for September 30, 19--
12/31 Cash balance for October 31, 19--
12/31 Cash balance for November 30, 19--
Cash balance for December 31, 19--
Cash balance for January 3, 20--
+ +LEDGER +181 + +The amount in each transaction which affects the debit side of an account in the accounts payable ledger is entered in the "Accounts Payable, De." column; the amount in each transaction which affects the credit side of an account in the accounts receivable ledger is entered in the "Accounts Receivable, Cr." column. This permits the posting of each amount to the proper account in the accounts payable and accounts receivable ledgers. The total of all the special debit columns is equal to the total of the total of the special debit column to the Accounts Payable account and the total of the special credit column to the Accounts Receivable account at the end of the month. Illustration No. 73 shows one form of a special column journal. + +§ 170. The Ledger. As explained in § 169, the ledger contains all of the accounts necessary for recording transactions. The accounts in the ledger should be arranged in the same order as they will appear on the Balance Sheet and Statement of Profit and Loss. The reason for this is that these reports are prepared from the Trial Balance, and the Trial Balance is made from the ledger. Illustration No. 88 shows a Trial Balance with the correct arrangement of the accounts. + +When controlling accounts are maintained with accounts receivable and accounts payable, the information regarding these accounts may be kept in separate books or in separate columns of the ledger or in separate ledgers; this will depend on the number of creditors from whom the business buys on account and the number of customers to whom the business sells on account. + +§ 171. An Auxiliary Book is one which provides detailed information in regard to transactions recorded in another book. Its purpose is to simplify the explanation in the books of original entry and to provide information which would not be available even though the explanation might be given in detail. The notes receivable book, notes payable book, bank check book, and insurance policy book are auxiliary books used by this business. In this chapter, additional auxiliary books will be explained in subsequent chapters. + +§ 172. The Notes Receivable Book is an auxiliary book which contains detailed information in regard to notes and acceptances receivable. The ruling should provide columns for (a) the date, (b) the number, (c) the drawer or endorser, (d) the payee, (e) interest rate, (f) maturity date, (g) date of issue, (h) date of time, paper, and due date, (i) the amount, (j) rate of interest, (k) when paid, and (l) remarks. This arrangement permits full information in regard to a note or draft to be written down quickly. Illustration No. 74 shows a popular form of ruling for the notes receivable book. + +§ 173. The Notes Payable Book is an auxiliary book which contains detailed information relative to notes signed and drafts accepted by the business. The ruling should provide columns for (a) the date, (b) the number, (c) the drawer or endorser, (d) the payee, (e) interest rate, (f) maturity date, (g) date of issue, (h) date of time, paper, and due date, (i) the amount, (j) rate of interest, (k) when paid, and (l) remarks. This arrangement permits full information in regard to a note or draft to be written down quickly. Illustration No. 75 shows a popular form of ruling for the notes payable book. + +If desired, the notes receivable and payable books may be used as posting mediums, in which case one is referred to as notes receivable journal and the other as notes payable journal; these forms are shown in Illustrations No. 76 and 77. + +§ 174. Insurance Policy Record. The purpose of this book is to provide a record of each insurance policy. The information it should show (a) the date of the policy, (b) number, (c) name of the insurance company, (d) kind of property insured, (e) amount insured per unit or units of expiration, and (f) premium paid for the policy. Additional columns should be provided for + +(Continued on page 182) + +A table showing a sample form of a special column journal. +A table showing a sample form of a notes receivable book. +A table showing a sample form of a notes payable book. +A table showing a sample form of an insurance policy record. + +182 +AUXILIARY BOOKS + +NOTES RECEIVABLE + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
DESCRIPTIONAMOUNTAMOUNTAMOUNT
Notes Receivable
Notes Receivable - C. W. Johnson & Co.$500.00C. W. Johnson & Co.$500.00
Notes Receivable - C. W. Johnson & Co.$300.00C. W. Johnson & Co.$300.00
Notes Receivable - C. W. Johnson & Co.$250.00C. W. Johnson & Co.$250.00
Notes Receivable - C. W. Johnson & Co.$200.00C. W. Johnson & Co.$200.00
Notes Receivable - C. W. Johnson & Co.$150.00C. W. Johnson & Co.$150.00
Notes Receivable - C. W. Johnson & Co.$125.00C. W. Johnson & Co.$125.00
Notes Receivable - C. W. Johnson & Co.$115.00C. W. Johnson & Co.$115.00
Notes Receivable - C. W. Johnson & Co.$115.00C. W. Johnson & Co.$115.00
Notes Receivable - C. W. Johnson & Co.$115.00C. W. Johnson & Co.$115.00
Notes Receivable - C. W. Johnson & Co.$115.00C. W. Johnson & Co.$115.00
Notes Receivable - C. W. Johnson & Co.$115.00C. W. Johnson & Co.$115.00
Notes Receivable - C. W. Johnson & Co.$115.00C. W. Johnson & Co.$115.00
Notes Receivable - C. W. Johnson & Co.$115.00C. W. Johnson & Co.$7,675,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,875,$999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999,$3333333333333333333333333333333333333333333333333333333333333,$66666666666666666666666666666666666666666666666666666,$222222222222222222222222222222222222222,$44444444444444444444444444444444444444,$1111111111111111111111111111111,$444444444444444444444,$2222222,$66,$2,$,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
+ +Illustration No. 74 Left Page of Notes Receivable Book. +EXPLANATION: Each note receivable or acceptance receivable is recorded on one line at the time it is received; the number given this may be used as the explanation of the entries in the general journal and cash book. + +Illustration No. 75 Left Page of Notes Payable Book. +EXPLANATION: Each note signed by the business and each draft accepted by it is recorded in this book at the time of issue or acceptance; the number given each may be used as the explanation of the entries in the general journal and cash book. + +Illustration No. 76 Left Page of Insurance Policy Record. +EXPLANATION: The book is ruled so that all the information desired in connection with each policy may be recorded on one horizontal line; A description of the policy is written on the left-hand page; the premium is entered on the right-hand page; the amount which has expired during the year is shown on the right-hand page; Premiums on policies which do not expire during the year are distributed in the next year. + +amount which expires during each month; with this information the bookkeeper can easily determine the value of the covered and unexpired insurance at the close of the fiscal period. +The insurance which has expired during the year is debited to + +AUXILIARY BOOKS 183 + +NOTES RECEIVABLE + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Time of PaymentAmountInterest RateInterest PaidTotal Due
Due in 30 days$500$500
Due in 60 days$750$750
Due in 90 days$1,250$1,250
Due in 120 days$1,500$1,500
Due in 180 days$2,000$2,000
Due in 240 days$2,500$2,500
Due in 360 days$3,500$3,500
+ +Illustration No. 74, Right Page of Notes Receivable Book. + +EXPLANATION. The total of the unpaid notes and acceptances should always equal the balance of the Notes Receivable account in the general ledger, also the total of the notes and acceptances in the safe and in the hands of agents for collection. + + + + + + + + + + + + +
Time of PaymentAmountInterest RateInterest PaidTotal Due
Due in 30 days$500$500
Due in 60 days$750$750
Due in 90 days$1,250$1,250
Due in 120 days$1,500$1,500
Due in 180 days$2,000$2,000
Due in 240 days$2,500$2,500
Due in 360 days$3,500$3,500
+ +Illustration No. 75, Right Page of Notes Payable Book. + +EXPLANATION. When notes are made payable the date should be entered in the "When Paid" column. The total of the unpaid notes and drafts should at all times equal the balance of the Notes Payable account in the general ledger. A proof of this should be prepared monthly. + + + +
INURANCE POLICY RECORD.
+ + + +
Jan
Feb
March
April
May
June
July
Aug
Sep
Oct
Nov
Dec
Total Amounts:
+ + + + + + + + + + + + +
$488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $488 $48 +
$167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 +
$393.333.333.333.333.333.333.333.333.333.333.333.333.333.33 +
$999.999.999.999.999.999.999.999.999.999.999.999.99 +
$555.555.555.555.555.555.55 +
$222.222.222.222.22 +
$111 +
$66 +
$3 +
$P.O.A. + +Illustration No. 76, Right Page of Insurance Policy Record. + +The distribution by months is shown only for the current year, the amount of unexpired premium on insurance endowment policies is shown for the previous year and for next year; this unexpired premium will be distributed in the columns representing the months to which it is applicable. It is necessary to show the nature of the property insured and its value; also the operating expenses such as salaries and wages for delivery equipment and merchandise is debited to Selling Expense, expired insurance on office equipment to Administrative Expense, etc. +the proper operating accounts at the close of the year, at which time the book-keeper should transfer the unexpired insurance to a new page in the insurance policy record. +Illustration No. 76 shows a popular form of the insurance policy record + +184 +EXERCISE + +§ 3.75. The Bank Check Book contains blank checks to be used by the depositors for withdrawing funds deposited in the bank. The check book provided by the bank may contain two copies of these blank checks on the page. Illustration No. 58 shows a check book with two checks to the page and with the bank account kept on the front of the check stub. The record on the front of the check stub is reconciled with the monthly bank statement as explained in § 80. + +Exercise No. 71, Retail Furniture Business + +The Trial Balance given below was taken from the books of Gobel & Mitchell, partners engaged in a retail furniture business. It shows the results of the operations of the business from January 1 to November 30. + +Gobel & Mitchell, Trial Balance, November 30, 1922. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Cash (1)$4,696.91
Notes Receivable (7)801.50
Accounts Receivable (4)4,118.76
Reserve for Bad Accounts (4)79.33
Office Equipment (5)160.00
Reserve for Depreciation of Office Equip. (4)30.00
Delivery Equipment (4)4,000.06
Reserve for Depreciation of Del. Equip. (4)350.00
Building (4)3,500.00
Land (4)2,500.06
Office Supplies (5)329.12
Insurance (4)401.66
Pnotes Payable (6)2,000.00
Accounts Payable (10)3,921.51
J. R. Gobel, Capital (6)15,376.50
J. R. Gobel, Personal (7)20.00
W. H. Mitchell, Capital (6)15,376.50
W. H. Mitchell, Personal (7)30.00
Sales (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,431.44
Sales Returns (5)107.00
Sales Discounts (5)51.86
1921 Inventory (4)18,522.45
Purchases (7)28,187.65
T freight (4) ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... 2,107.56
Purchases Returns and Allowances (6)
Selling Expense (15)2,680.49
Administrative Expense (12)1,819.78
Interest Earned (6)42.19
Purchases Discount (5)576.50
Commission (5)118.50
Interest Cost (5)51.20
Sales Discount (6) .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 40.85
Total:$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.98$74,665.
+ +Notes Receivable +Note signed by M.B Wallace dated July 12 due in six months with interest at 3% from date. +Signed by J.H Weber dated October 15 due in sixty days with interest at 3% from date. +\textit{Note Receivable} $= $ \textit{Note Signed} + \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $ \textit{Note Signed} = $ 2 \times $. + +EXERCISE +185 + +**Accounts Receivable:** + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
H. O. Rau (4)400 Lincoln Ave., CityOct. 15, to days$ 311.50
L. J. Walker (6)330 Craig St., CityNov. 5, 30 days101.75
West Side Furn. Exch. (4)CityNov. 1, account412.41
Schott Decorating Co. (4)CliftonNov. 15, account60.05
C. A. Hahn Co. (4)220 Pike St., CityNov. 15, 30 days610.15
S. A. Burkhardt (4)609 Market St., CityNov. 10, 30 days619.00
Just Rite Furn. Co. (4)427 Elm St., CityNov. 15, account441.60
J. N. Hook & Co. (4)13 Wth St., CityNov. 20, account118.70
M. L. Schmitt (4)222 Fifth Ave., CityNov. 20, account217.60
R. R. Phillips (4)ElmwoodOct. 16, 60 days300.00
E. E. Frank (4)ReadingOct. 2, 60 days260.00
W. H. Miller (4)2527 Erie Ave., CityNov. 20, 30 days1,160.00
F. X. Vance (4)318 Burnet Ave., CityJan. 3, 30 days159.00
+ +**Insurance Premiums Paid:** +On merchandise, $205.15; on delivery equipment, $106.16; on building, $90.29; total, $401.60. + +**Notes Payable:** +Note in favor of Merchants National Bank, dated October 10, due in sixty days with interest at % from date. +$2,000.00 + +**Accounts Payable:** + +
C. H. Campbell Furn. Co. (6)ShelbyvilleNov. 15, 2/30, n/o$ 601.95
Hasselblad-Whetton Co. (4)UticaNov. 2, 3/20, n/o$201.70
The Robt. Mitchell Furn. Co. (4)Cincinnati-BellvueOct. 25, 60 days475.00
A.J.Campbell Furn.(4)BostonNov. 3, n/o$389.89
De Luxe Upholstery Co.(4)Grand Rapids High PointOct. 12, 6/6 days$800.00
Kearns Furniture Co.(4)Nov. 30, 2/5/3, n/o$593.76
+ +On ledger paper open an account with each account shown on the Trial Balance, allowing for the amount indicated by the mark in parenthesis after the name of the account and the amount of the note payable. +Notes Payable, and Insurance accounts write the special information in regard to the notes and insurance; the two notes due the business should be entered as separate accounts in the general ledger under the heading "Accounts Payable," one for selling account in the general ledger for accounts receivable and another for accounts payable, the individual accounts with customers and creditors will be opened on ledger paper. +The transactions for December are to be recorded in the purchases journal, sales journal, cash book, and general journal. +Loose sheets of paper will be used, rule No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'s No.'. The cash balance shown on the Trial Balance should be entered in the "General" column on the receipts side of the cash book before any transactions are recorded. + +December + +
Gave the Werk Realty Co., a check for $100.00 in payment of rent of warehouse for December,$385.
N.R.Hayes Garage a check for $385 in payment of rent of warehouse and repairs on delivery truck.$385.
Debt Selling Expense for both payments.$385.
Bought from the C.H.Campbell Furniture Co., Shelbyville terms $2/20,$385.
No.f.o.f terms $2/2/3.$385.
Received a check from the Schott Decorating Co., in full of account.$385.
Sold J.H.Weller,
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186 +EXERCISE + +3. Received $35.25 for cash sales. +Received from C. E. Perry & Co., their note dated December 1, due in thirty days, with interest at 6% from date, in full of account. +Sold C. A. Anderson, Linwood, terms 60 days, 1 dining room suite per sales invoice No. 823, $25.00. +Received $25.00 for cash sales. + +4. Gave the Brookville Furniture Co. a check in full of account, less discount. +Sold J. N. Hook & Co., 13 W. 17th St., City, terms account, 1 library table per sale invoice No. 824, $45.00. + +5. Withdraw $200.00 from the bank and paid the following: stamps, for letters, $10.00; J. R. Gobel and W. H. Mitchell, each $3.00 for personal use. +Paid $25.00 to the Kearsley Hardware Co., terms 1/10, n/f/o. +Returned to the Kearns Furniture Co., 1 chair, cost price, $8.00. +Received a check from J. H. Weber in payment for invoice dated Nov. 5. +Sold R. O. Burns, Richmond, terms 30 days, 1 kitchen cabinet per sales invoice No. 825, $25.00. +Withdraw $200.00 from the bank to pay the weekly pay roll as follows: +office employees, $50.00; employees in selling department, $15.00. +Bought from the West Side Furniture Exchange a sofa set, terms 2/15, n/f/o; furniture per purchases invoice No. 157, $275.00. +Received $975.00 for cash sales. + +9. The old account balance on hand and interest on the same was paid as follows: +note for $1,000.00 dated today, due in sixty days, and check for $1,930.00, +balance due on the old note and interest on the new note at 6%. +Received $106.66 from West Side Furniture Exchange to apply on account. +Transferred from stock to the office, 1 table (cost, $28.66) and 2 chairs (cost, $4.00 each). +Sold C. E. Herzog, 243 Eastover Ave., City terms account, 1 dining room chair per sale invoice No. 826, $45.00; Jans Rite Furniture Co., City, terms account, 3 wardrobes per sales invoice No. 856, $180.00. +Bought from the Imperial Furniture Co., Grand Rapids, terms 2/15, n/30, +furniture per purchases invoice No. 158, $250.00. + +11. Received a check from O.H. Miller in payment of account less % discount per special agreement. + +Make the following sales discount in the general journal: +Gave the Hasselbarth-Wleton Co., a check in full of account, less discount. + +12. Sold S.A Burkhart, 696 Market St., City, terms 30 days, 1 tea wagon per sales invoice No. 857, $189.99; C.U Newton, 142 Front St., City, terms account up to $35 plus % discount. +Received $86.98 for cash sales. + +13. Purchased an Underwood typewriter for $169.99; gave in payment the old typewriter (cost value $666) and our check for $89.99. + +Sold R.R Phillips; Elmwood; terms 60 days; 1 oak buffet per sales invoice No. 829; S.D.; H.C.; Kern; 233 Earnshaw Ave., City; terms account, +$75 plus % discount; received a check for $745. +Withdraw $200.00 from the bank to pay the weekly pay roll. +Gave the Kearns Furniture Co., a check in full of account, less credit for chair and other discounts. + +15. Bought from the Connellville Furniture Co., Connersville, terms 1/15, +n/30; furniture per purchases invoice No. 159, $395.99. +Paid freight on furniture purchased, $218.76. +Bought from the American Stationery Co., City; terms account, +miscellaneous office supplies, $287.58. + +Enter in the general journal as this is not a purchase of merchandise. +Received a check from J.H Weber in payment for note and interest, due on the 14th. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
DescriptionAmount
Received $35.25 for cash sales.$35.25
Received from C.E Perry & Co., their note dated December 1,due in thirty days,
with interest at 6% from date,in full of account.
Sold C.A Anderson Linwood,terms 60 days,1 dining room suite per sales invoice No.823,$25.
per sale invoice No.824,$45.
per sale invoice No.824,$45.
Gave the Brookville Furniture Co.a check in full of account,less discount.
Sold J.N Hook & Co.,City,terms account,1 library table per sale invoice No.824,$45.
per sale invoice No.824,$45.
Withdraw $200.
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Bought from Hasselbarth-Whetton Co., Utica, terms 2/30, n/60, furniture per purchases invoice No. 161, $341.75. +Gave this note to pay the full check in full of account, less discount. +Received a check from the Just Rite Furniture Co. in full of account. + +31. Received from R. R. Phillips his 30-day note dated December 14, with interest at 6% from date, in full of invoice dated October 16. +Paid from the bank $250 for cash sales. +Credit each partner's personal account with $200.00, salary for the month. +Debit § 255 for J. R. Gobel's salary and § 152 for W. H. Mitchell's salary. +When the foregoing transactions have been recorded, proceed as follows: +1. Prove cash (balance, $3,600.77). +2. Post from the journal all entries, including the totals of the special columns, and take a Trial Balance. Allow four lines for each new account opened. +Retain the Trial Balance and all books of account for use in Exercise No. 80. + +**QUESTIONS** + +1. (a) What accounts are debited and credited with the total of the purchases journal at the end of the month when a controlling account is kept with Accounts Payable? +(b) What accounts are debited and credited with the total of a sales journal at the end of the month if a controlling account is kept with Accounts Receivable? +(c) Why is the balance of cash on hand at the beginning of the month deducted from the total of all the columns on the receipts side of the cash book before posting the cash receipts for the month? +(d) If there are 312 business days during the year and cash sales are recorded on the receipts side of the cash book each day, how many entries will be required in the special column? How many entries would be required if sales were made monthly and a special column is provided for cash sales on the receipts side of the cash book? +(e) How many entries would have been required, including those that would have been omitted had a special column been used? +(f) The term "cash book" refers to the writing up of each cash sale and each total, both in the cash book and ledger. + +2. What entry will be required in the general journal for a $500.00 note received from a customer on account on January 9 if this note is described as No. 50 in the notes receivable book? + +3. How does the bookkeeper prove that the notes payable record is correct as compared with the Notes Payable accounts? +4. If all records are complete and correct, what relation does the pass book have to the entries on the receipts side of the cash book? +5. How does the bookkeeper reconcile the bank statement with his bank account on the check stubs? +6. What is paid into your insurance policy record? +7. Describe in detail the method of proving cash with a cash book ruled similar to Illustrations Nos. 74 and 75. + +A page from an accounting textbook or journal. + +Chapter XIX +BUSINESS FORMS AND VOUCHERS + +The Purpose of this Chapter is to explain and illustrate business forms and vouchers which have been discussed in previous chapters. The student needs to understand the various business forms which represent transactions in business if he is to record the transactions correctly. + +§ 176. Each Transaction is represented by a bookkeeping by a business form or voucher, or both. When the bookkeeper recorded the transaction from the facts given in the business form, it is filed for future reference. The purchases order, invoice, receipt, deposit ticket, check, bank draft, cashier's check, money order, draft, and note were discussed and illustrated in previous chapters. + +§ 177. A Business Letter is a written communication relative to a transaction to be completed or confirming the completion of a transaction. The subject + +C.W. Keeland & Co. DEALERS IN Hay, Grain, Feed and Coal +C.W. KEELAND & CO. +DEALERS IN +Hay, Grain, Feed and Coal + +CINCINNATI, Ohio., April 7, 192 + +Young & Doyle, +1000 Broad St., +Cincinnati, Ohio. + +Gentlemen: + +Replying to your letter of this date asking for price on your purchase lots will quote per lb. 300 per ton, delivered at your place of business. We have a car in the yard and can have it placed on your siding to-morrow. + +Please advise us at once, as we could not make this price unless we were permitted to unload the car at your warehouse. + +Sincerely, + +Y. W. KEELAND & CO. +P.O. C.W. Keeland + +Illustration No. 77, Business Letter. + +EXPLANATION. This letter is written on the letterhead of the firm and is a reply to an inquiry for price on hay in cartload lots. The letter has been reduced about one-third in size. + +189 + +199 BUSINESS FORMS AND VOUCHERS + +matter in the business letter should be explicit and so arranged that the reader may easily interpret its meaning. If the nature of the letter is such that the intercepts given therein will not be necessary, a copy of the letter or of the intercepts of the transaction completed, a copy of the reply should be attached to the letter and filed for convenient reference. The answer to the business letter should not be returned unless it is necessary that it be returned, hence the writer would not have a copy of the letter or the answer in his file. No special form of business letter is necessary, but the arrangement should be such that the facts stated in the letter may be clearly set forth, as in Illustration No. 77. + +§ 176. A Certified Check. A certified check is one which has been guarantied by the bank authorized to pay it; this guarantee is effected by the cashier or other official of the bank writing across the face "Certified" together with the name of the person who certifies it. In many cases, however, when presentation, the holder of a check does not know that it will be paid upon presentation; with certification the holder knows that it will be paid upon presentation. The form of certification is shown in Illustration No. 78. The drawer or the holder of a check must obtain a certificate from a bank authorized to pay it to guarantee fulfillment of a contract, in settlement of taxes payable at a bank other than the one on which the check is drawn, in payment of real estate when purchased, payment of judgments in courts, and in other cases where it is necessary for the holder to know that the check will be paid upon presentation. + + +The 397 +The Merchant National Bank +Junctions, 191 +The Merchant National Bank +Pay to the order of The Merchant National Bank $250 +$250 +CERTIFIED BY +W.B. Bowman. +Illustration No. 78, Certified Check. + + +§ 179. A Bill of Lading is the receipt issued by a transportation company for merchandise or other property received by it for shipment. The Interstate Commerce Commission, which has supervision of all railroads in the United States during their operation, requires each railroad to issue three copies of each bill of lading for each shipment, each copy to conform to the requirements imposed by the Commission. These three copies are described as "original," "shipping order," and "memorandum." size is 8½ x 7 or 8½ x 11. See Illustration No. 79 on pages 191, 192, 193 and 195. + +When a shipment is to be made by freight, the shipper prepares the three bills of lading; by the use of carbon paper the three copies may be prepared at the same time. Each bill of lading consists of three parts as follows: (1) original, (2) shipping order, and (3) memorandum. The original and shipping order are presented to the agent of the transportation company with the merchandise to be shipped; he retains them until delivery is made and then returns them to him. The agent retains the shipping order and the shipper retains the original. The original should be mailed to the consignee—that is, the one to whom the merchandise was shipped—because the merchandise in transit belongs to him and he holds the transportation company responsible for its delivery. If the merchandise is delivered + +BUSINESS FORMS AND VOUCHERS +191 + +Uniform Straight Bill of Lading +Original---Not Negotiable + +A blank bill of lading form. +**UNIFORM STRAIGHT BILL OF LADING** +**ORIGINAL---NOT NEGOTIABLE** + +Shipper's No. ____________ Arof's No. ____________ + +B. S. C. S. W. Baird + +Company + +Received, subject to the classification and mark in effect at the time of the issue of this Bill of Lading. + +At: ____________ From: ____________ +To: ____________ For: ____________ + +The undersigned consignor hereby certifies that the articles herein described have been properly packed and securely fastened in accordance with the instructions of consignee, warehouseman, or other person having charge of the consignment. + +This bill of lading is issued under the authority of the Uniform Commercial Code of the State of Ohio. + +The consignor warrants that he has delivered to the carrier all goods covered by this bill of lading in good condition and that they are free from any defect which would prevent their safe delivery. + +The consignor agrees to pay all reasonable expenses incurred by the carrier in connection with this shipment. + +The consignee agrees to deliver to the carrier all goods covered by this bill of lading in good condition and that they are free from any defect which would prevent their safe delivery. + +The consignee agrees to pay all reasonable expenses incurred by the carrier in connection with this shipment. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consignor and consignee agree that the carrier shall be liable only for damages resulting from its own negligence or willful misconduct. + +The consig... +[Cut off] + +
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No.Description of Article(s) Special InstructionsWeightFreight RateChargesDateCar No.
1200 lbs. #1 Corn600 lbs.$3.50$7501/2/23873
2200 lbs. #2 Corn511 lbs.$3.50$7501/2/23873
3200 lbs. #3 Corn274 lbs.$3.50$7501/2/23873
+ +At my request, I am sending you a copy of this bill of lading. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill of lading within five days after receipt of your order, please notify me immediately. +If you do not receive this bill... +[Cut off] + +C. W. Keeland & Co. Cincinnati + +For C. W. Keeland + +Performer's signature (shipper's signature) ____________ 806 Commerce St., Cincinnati, Ohio + +Illustration No. 79, Original Straight Bill Of Lading: + +(For back, shipping order and memorandum see pages 192, 193 and 195.) + +promptly and in good condition, the conscience may not be required to present +the bill of lading but, if it is received in "bad order" or is lost in transit, the con- +signees have to submit the original bill of lading as evidence if his ownership +of merchandise is disputed by them. The conscience may demand payment on account +any claims for damages or loss to merchandise while in transit. + +The memorandum is retained by the shipper as evidence of shipment. In case merchandise shipped is not delivered promptly, the conscience may request the shipper to ask for a "tracer." This tracer is a written communication + +192 +BUSINESS FORMS AND VOUCHERS + +CONTRACT TERMS AND CONDITIONS + +The terms of this bill of lading are subject to the terms of the contract between the shipper and the carrier. + +The carrier agrees to deliver the goods at the port, station, or place specified in this bill of lading, and to deliver them in good order and condition, excepting only such damages as may be caused by the ordinary wear and tear of the goods themselves, or by the inherent nature of the goods, or by any fault of the carrier. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in loading and unloading the goods. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from the port, station, or place specified in this bill of lading to the port, station, or place specified in this bill of lading. + +The carrier agrees to pay all reasonable expenses incurred by the shipper in transporting the goods from + +# BUSINESS FORMS AND VOUCHERS + +193 + +**Customs Revenue Property Bill of Lading issued by Customs, March 20, 1911** + +**THIS SHIPPING ORDER** +which has been filed with us on a first-class form, is +subject to the terms and conditions set forth below. + +**Shipper's Bill** + + + + + + + + + + +
B. S. G. E. B. Railroad Company
Company
+ +**RECEIVED**, subject to the instructions and terms in effect on the date of this bill of lading, the following consignment: + + + + + + + + + + + + + + +
atCincinnati, OhioDay 6.10.
FromC. W. Leonard & Co.
+ +The property described herein, as received good order, except as noted corrected and verified at the hands of persons duly authorized, is hereby accepted by the undersigned, and will be delivered to the party named in this bill of lading upon receipt of notice that it is ready for shipment. + +**EXPLANATION.** The shipping order is the same size as the original bill of lading illustrated on page 191; it is not all reported here because that part not shown is the same as on page 191. + +§ **180. A Credit Bill** is a receipt in invoice form, setting forth in detail the nature of the credit for which it is issued. A credit bill may be rendered for cash, merchandise returned, an allowance, service, or anything of value with which the account of the buyer or seller may be settled. The term "credit bill" is used for bills rendered for credits but they are usually printed with a different colored ink from the sales invoice forms. Illustration No. 80 shows one form of credit bill. + +Illustration No. 80, Credit Bill. + +§ **181. A Telegram** is a communication or message sent by means of a telegraph company. The rate for transmitting a message is based on a minimum number of words and the time of sending. There are four classes of telegrams: fast day messages, ordinary day messages, ordinary night messages, and fast night messages. + +* * * + +May 7, 19 + +A telegram form with handwritten notes and a stamp indicating "Credit Bill changed on May 5th." + +§ **182. A Day Letter** is accepted by the telegraph company to be sent some time during the day and delivered when received at its destination. Fast day messages take precedence over day letters both in the sending and the delivering. The rate is based on fifty words with a fixed charge for each word in excess of ten. See Illustration No. 81. + +* * * + +2500 feet from (forbid) of + +A telegram form with handwritten notes and a stamp indicating "Credit Bill changed on May 5th." + +§ **183. A Day Letter** is accepted by the telegraph company to be sent some time during the day and delivered when received at its destination. Fast day messages take precedence over day letters both in the sending and the delivering. The rate is based on fifty words with a fixed charge for each word in excess of fifty + +* * * + +194 +BUSINESS FORMS AND VOUCHERS + +**POSTAL TELEGRAPH - COMMERCIAL CABLES** + +CLASS OF SERVICE DESIGNED +FART DAY TELEGRAPH +NIGHT TELEGRAPH + +TELEGRAM + +RECEIVER'S NUMBER +CHARGE + +THE POSTAL TELEGRAPH CABLE COMPANY (INCORPORATED) +TRANSMITS AND DELIVERS THIS MESSAGE SUBJECT TO THE TERMS AND CONDITIONS PERTAINING ON THE BACK OF THIS SCENE. + +SEND the following Telegram, subject to the terms on back hereof, which are hereby agreed to + +Cincinnati, Ohio, May 15, 192 + +Short Bros., +Cleveland. +Number one corn sixty seven cents buchel f. o. b. care here. + +HORLAID +C. W. EEELAND & CO. + +Illustration No. 81, Fast Day Message, 4 t. + +* 3. A Night Message is accepted by the telegraph company to be sent during the night and delivered the next morning. The rate, which is based on ten words with a fixed charge for each word in excess of ten, is less than that for the fast day message. + +* 4. A Night Letter is accepted by the telegraph company to be sent during the night and delivered the next morning. The rate, which is based on fifty words with a fixed charge for each word in excess of fifty, is the same as that for the fast day message. + +Form Used + + + + + + + + + + + + + + + + + + + + + + + + +
Class of Service DesiredTelegramChargeTime Filled
Fart Day Telegraph
Night Telegraph
+ +WESTERN UNION TELEGRAPH CO. +TELEGRAM + +SEND the following message, subject to the terms on back hereof, which are hereby agreed to + +Cincinnati, Ohio, May 14, 192 + +Anderson, Peck & Fowler, +Clinton, N. Y. + +Fast freight Short Bros., Cleveland, one corn number one corn, and F. L. H., one corn number two corns per day. +freight rate on bill of lading sent each consignee. Send invoice to us and change to our account. Advise us freight rate on each shipment. + +HORLAID +C. W. EEELAND & CO. + +Illustration No. 82, Night Letter, 4 t. + +EXERCISES +105 + + + + + + + + + + + +
Exhibit Number: 827
Lot of Land: 1914
Columbus, March 15, 1914
+ +THIS MEMORANDUM is an acknowledgment that a Lot of Land has been leased and is subject to the terms and conditions set forth in this Memorandum. The property named herein, and is enclosed with this letter for your record. + +Shipper's No. ____________ Agent's No. ____________ + +B. & C. S. T. Realtors + +RECEIVED, subject to the classifications and tariffs in effect on the date of the receipt by the carrier of the property described in the Original Bill of Lading, the following: + +Description of Property: +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W. C. Keelands & Co. +- W.C.Keeleand&Co +EXPLANATION: The position of the three forms of the bill of lading is illustrated by pages 191, 193 and 194; these pages contain all the information for the three forms, that part omitted on pages two and three being shown on pages 191 and 192. + +§ 182 Statement of Account It is customary for business concerns to send customers a statement of their account on the first of the month The purpose of this statement is to permit the customer to audit his account and report any discrepancies The information given on the statement is obtained from the ledger account showing the transactions completed during the month This form shows (a) the balance due from the customer at the beginning of the month, (b) the date and amount of each debit entry, (c) the date, nature, and amount of each credit entry, and (d) the balance due from the customer at the end of the month On page one is printed a summary of all transactions showing a credit or debit from each of the creditors showing the transactions completed during the month The statement should be compared with the account with the creditor and errors reported promptly. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
A.M.SUMMARY STATEMENT OF ACCOUNTSUMMARY STATEMENT OF ACCOUNT
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
M.W.C.Keeleand&Co.W.C.Keeleand&Co.
HAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, FEED AND COALHAY, GRAIN, +Description: A handwritten note indicating "HAY GRAN FEE D COL" and "HAY GRAN FEE D COL" repeated multiple times on a sheet of paper." +>
+ +Illustration No., 83 Statements of Account. + +EXPLANATION: The statement at left was prepared from a ledger account showing two debits and no credits and the one at right from a ledger account showing a balance from a preceding account. + +Exercise No., 72 Business Letters and Credit Bill + +March 17 Rice Bros., Clinton returned to the Julian Shoe Company Ncw York six pairs shoes which were billed at $620 per pair in invoice of March 1 The shoes were returned because the sizes were not according to specifications in the order Credit is asked for the value of the shoes + +1 Prepare a letter to Rice Bros., Clinton by April 11 inches; the letter which Rice Bros would write signed "Rice Bros." By your name + +2 Prepare on a sheet of paper 8% inches by 11 inches an answer to this letter under date of March 25 acknowledging receipt of the shoes and enclosing credit bill + +196 +EXERCISES + +Exercise No. 73, Straight Bill of Lading. +July 7, the Evans Bros. Hardware Company, 530 Broadway, Cincinnati, shipped via B. & W. freight to the City National Bank, Main St., Marysville, Union County, Ohio, to keep nails, 100 lbs.; each; 1 case, 12 gal. paint, 125 lbs.; 1 case, 2 doz. picks, 75 lbs.; 1 bundle containing 2 doz. handles, 25 lbs.; 1 case containing 1 doz. shovels, 30 lbs. + +Rule out the use of paper similar to the illustration on page 194, and write on this in the proper position the information required to prepare the bill of lading for this shipment. It will not be necessary to make the two extra copies nor to copy the printing in the illustration. + +Exercise No. 74, Statements of Account. +Render a monthly statement for each of the following accounts under date of November 1: + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +Use blank statements of account which may be purchased from a stationery store, or blank forms used by a local merchant; if neither of these is available, rule paper similar to one of the statements in Illustration No. 83. Use your name as the name of the merchant who is to receive the statements. + +QUESTIONS: +1. (a) Why should a copy of each letter written be retained? (b) Why should this copy be filed? (c) Why should the letter which it answers be filed with it? +2. (a) How does a merchant send each of his customers a statement on the first of the month? (b) What facts are shown on each statement? +3. Why are statements of account usually rendered on the first of the month? +4. When is a bill of lading issued by a transportation company for merchandise accepted by it for shipment? +5. Why are the railroad companies required to use a uniform size blank for their receipts and bills of lading? +6. What information should be given in the receipt issued by a transportation company for merchandise accepted for shipment? +7. Why would the City National Bank require certification of a check drawn on its own National Bank and presented to it in payment for a note which it holds? +8. Why would it be advisable for an individual who wished to open an account with a bank to have his check first deposited, to have the check certified before presenting it for deposit? +9. Is there any distinction between the terms "business form" and "voucher?" +10. Why should the bookkeeper file each business form or voucher which serves as a basis for the bookkeeping record? + +Chapter XX + +GENERAL INFORMATION + +§ 183. Terms on invoices. When merchandise is sold on account, a definite date for payment is expressed or implied. If the date of settlement is not expressed, it is usually implied that the amount is due on the first of the following month. When a specific date of settlement is agreed upon, or when discount is allowed for prompt payment, this date is stated on the invoice. + +Space is usually provided on the invoice after the word "Terms" for all information in regard to the terms of sale. Thus, "30 days" indicates that the amount of the invoice is due thirty days from its date, but if the purchaser pays it within ten days from the date, a discount of 5% may be deducted from the amount of the invoice; an invoice rendered September 1 with a "90 days" term means that the buyer has sixty days from September 1 for full settlement of the invoice, or will allow a discount of 5% if paid within ten days or a discount of 3% if paid within thirty days. + +§ 184. Payment of Invoice Subject to Discount. When the purchaser pays an invoice subject to discount within the terms of the purchase invoice, he ascertains the amount of the check by deducting from the amount of the invoice the discount mentioned in the terms. Thus, if the terms are 5% to 30 days, and he pays his bill within ten days, he will pay $100.00 less a discount of $5.00. The one issuing the check debits the firm to whom it is issued for the full amount of the invoice ($100.00), and credits Cash for amount of the check ($147.00) and Purchases Discount ($5.00). The seller then credits Cash for $142.00, who receives this check debits Cash for the amount of the check ($142.00) and Sales Discount for the amount of the discount ($5.00), and credits the account with the discount to his credit. + +If only a part of an invoice subject to discount is paid within the terms of the bill, the same accounts are affected, but it is necessary to divide in order to ascertain the amount with which the creditor's account is debited. Thus, if the amount of the bill is $100.00 and he pays $65.00, he will pay $35.00 less a discount of $1.75 (one-fifth of $35.00). He will receive a check for $63.25 and will debit Cash for $63.25 and Credit Purchases Discount for $1.75. + +When partial payments are made on an invoice subject to discount, multiply the amount of the invoice by the discount mentioned in the terms to ascertain the amount of the discount. When a partial payment is made on an invoice subject to discount, divide this amount into one-fifth of it to find out how much will be debited to your account; then subtract this amount from your account balance before you make any payment. + +The discount is ascertained by subtracting the payment from the amount debited to your creditor's account. + +197 + +198 + +# GENERAL INFORMATION + +## § 185. Collecting Notes and Drafts. + +The holder of a note or an accepted draft may require the maker or drawer to pay the note or acceptance at his office or at a bank where he has an account. Where the maker or drawer resides in the same city, it is customary for the holder to leave the note for collection with the bank at which he does business. Where the holder resides in a different city from that of the maker or drawer, the collector must send the note to the maker's or drawer's place of business or a bank in the same city in which the maker or drawer resides. As a rule the maker of a note will give the name of the bank at which he does business as the place of payment, and the drawer of a draft will accept it as payable at the bank which he does business with. When a note is sent by mail to a person residing in the note, the holder should leave the note or draft at this particular bank before the due date. The endorsement of a note or time draft left for collection should be qualified by "paid" or "paid and collected." + +A sight draft is usually made payable to the bank which is to collect it— that is, the bank at which the customer does business or one in the same city. If the collecting bank collects the sight draft, the drawer retains the received draft until it is paid by its own bank. If it is refused payment, it is returned to its own cashier's check ($§ 81 and 82). If the drawer refuses to pay the sight draft, the bank returns it to the drawer. + +It is customary for banks to charge a small fee for collecting notes, time drafts, and sight drafts. This fee is charged because it is an expense to him; the amount may be debited to Administrative Expense or to an account with Collection and Exchange. + +## § 186. Exchange + +Exchange is a term applicable to a sight draft drawn by one bank on funds deposited with another bank; it is sometimes referred to as a bank draft. Exchange takes its name from the fact that when the bank on which it is drawn is located in New York City, it is called "New York exchange." A bank draft drawn on a bank in Chicago, as "Chicago exchange," etc. When the bank on which the draft is drawn is located in the same country, it does not matter whether it be drawn on a foreign country, as "foreign exchange." Domestic exchange is represented by one draft; foreign exchange may be represented by one draft or three; if three drafts are drawn they are known as "trades." Both drafts and trades instructs to effect that when one is paid the other two are not to be paid. + +Exchange is due to the volume of business in the large cities. New York City sells far more merchandise to merchants throughout the world than the merchants through out all other cities combined. In New York City there are many merchants who buys merchandise from New York to pay for the same with a check on a bank in New York, much time can be saved in the collection of these checks. Since busi- ness concerns do not have their headquarters in New York City, they often transact with banks on banks in New York, practically every bank in the United States has funds on deposit with a New York bank so that the customers of the bank may be provided with New York exchange when they wish to purchase it for re- mittence. + +A small fee is usually charged by the bank issuing the exchange to cover the interest and expense in connection with issuing the exchange. This charge is an expense to the purchaser of the exchange; it is debited to Administrative Expense or to an account with Collection and Exchange. + +## § 187. C. O. D. Shipments. + +When the purchaser agrees to pay for the merchandise on delivery, the terms are designated as "C. O. D., " an abbreviation of "cash on delivery." When merchandise is shipped under such terms, either on C. O. D. terms resides in the same city, collection can be made by letter from whom delivers merchandise; if at customer resides in another city, it is necessary to have transportation company collect for merchandise before making delivery. The postmaster collects for C. O. D. parcel post shipments, the agent of + +# GENERAL INFORMATION + +199 + +**FEDERAL REGULATIONS ORDER No. 5000 dated October 3, 1922** + +## UNIFORM ORDER BILL OF LADING + +**ORIGINAL** + +**Shippers' No.** ____________ **Agents' No.** ____________ + +**New York, New Haven & Hartford Railroad Company** + +Reprint, subject to the endorsement and use of all terms of the order bill of lading. + +**Order Bill of Lading** + +The undersigned acknowledges receipt of the goods herein described, except as noted below, and agrees to pay the face amount thereof, together with all charges and expenses incurred in connection with the delivery of such goods, including all taxes and duties which may be due on the same, and agrees that the carrier shall have the right to collect any such taxes and duties from the consignee or consignor at any time after delivery of the goods. + +The carrier will deliver the goods to the person or persons named in this bill of lading, or to his agent designated by him, at the place and on the date specified in this bill of lading. The carrier will also deliver them to any other person or persons who may be authorized by the consignee or consignor to receive them. + +If any part of this bill of lading is lost or destroyed, or if any part thereof is altered or defaced, or if any part thereof is not delivered, the carrier will not be responsible for any loss or damage occasioned thereby. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act or omission of any person other than himself or his agents acting under his authority. + +The carrier will not be liable for any loss or damage caused by any act或 + +200 +GENERAL INFORMATION + +CONTRACT TERMS AND CONDITIONS + +Illustration No. 85, Reverse Side of Order Bill of Lading. + +EXPLANATION. This shows the back of the order bill of lading with the endorsement necessary. The shipping order and memoranda are the same as those illustrated at the top of pages 103 and 104, here are not repeated. All of the conditions not shown in this illustration are on the face of the original bill of lading. + +of the receiving railroad and the merchandise forwarded to its destination, where it will be held by the agent of the railroad until the consignee presents the original bill of lading. The shipper must get this original bill of lading into the possession of the consignee, but at the same time he must secure payment for the merchandise before it is delivered. If payment is effected through a bank, the bank draws a sight draft for the amount of the sale, together with the original bill of lading, and sends these for collection to a bank in the city where the purchaser resides. When the bank receives this draft and bill of lading, it notifies the drawer, who secures the bill of lading and delivers it to the consignee. The consignee then signs his bill of lading to the agent of the railroad and receives the merchandise. The bank remits the amount of the draft to the seller. If the purchaser does not pay the draft, it will be returned to him by his bank. The seller then takes possession of the merchandise in the possession of the agent until he receives instructions from the seller as to its disposition; this accounts for the suggestion that the seller collect a part of the value of the merchandise before making shipment. + +The terms governing bills of lading are discussed in §79. The form is practically the same except that the order bill of lading contains space on the back for the endorsement, as it is necessary for the shipper to endorse it in order to transfer title to the consignee. + +§ 2. Express Shipments. When a C. O. D. shipment is made by express, the express company charges a fee for forwarding it. The express company pays the charges and value of the shipment. The sales invoice is not sent to the customer but is enclosed in an envelope (Illustration No. 86), which is attached to the package. + +When a C. O. D. shipment is made by parcel post, a special ticket provided by the Post Office Department is attached to the express company agent will hold it until the consignee pays the amount of the invoice in his envelope. After the consignee has paid the amount of the invoice, he secures possession of the merchandise; the express company agent places in the envelope an express money order for payment of all charges and value due on account; this returns to him an envelope to be forwarded to the shipper. The shipper should specify that the consignee is to pay all charges for issuing this money order sent in payment for a C. O. D. shipment; otherwise, if express agent issuing this money will deduct from his account. + +§ 3. Parcel Post Shipments. When a C. O. D. shipment is made by parcel post, a special ticket provided by the Post Office Department is attached to + +GENERAL INFORMATION +201 + +A circular stamp with "C. W. England & Co." written around the edge. +**C. W. England & Co.** +**208 Commerce St.** +**Cincinnati** +**Ohio** + +A rectangular envelope with a circular stamp in the center. The stamp has "C. B. Jackson" written around the edge. Below the stamp, "188 Wayne Blvd." is written, followed by "Sunter, S. C." and "Cincinnati, O. June 6". On the right side of the envelope, "21-09 and ----" is written. + +Illustration No. 86, Both Sides of C. O. D. Express Envelope. + +A rectangular envelope with a circular stamp in the center. The stamp has "C. B. Jackson" written around the edge. Below the stamp, "188 Wayne Blvd." is written, followed by "Sunter, S. C." and "Cincinnati, O. June 6". On the left side of the envelope, "CHARGES $27.00" is written, followed by "FREIGHT $3.50" and "Total $30.50". On the right side of the envelope, "State of Delivery" is written, followed by "Directed this parcel to be delivered at the Postal Delivery post office". Below that, "No." is written, followed by "12345". Below that, "Date" is written, followed by "1970". Below that, "Time" is written, followed by "1:30 PM". Below that, "Postage" is written, followed by "$1.75". Below that, "Total" is written, followed by "$30.50". Below that, "For Delivery" is written, followed by "To Delivery Post Office". Below that, "For Delivery Post Office" is written twice. + +Illustration No. 87, Both Sides of Tag for C. O. D. Parcel Post Shipment. + +
Account NameAmountAmount
Oct. 10100100
Sep. 10100100
Oct. 8250250
Sep. 8250250
Sep. 8250250
Sep. 8250250
Sep. 8250250
Sep. 8250250
Sep. 8250250
Sep. 8250250
Sep. 8250250
Sep. 8250250
Sep. 8250250
Sep. 8250250
Sep. 8250250
Sep. 8250250
Sep. 8250250
Sep. 8250250
Sep. 8250250
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
C.O.D.PARCEL NUMBERNo.2345
STATE OF DELIVERY
Directed this parcel to be delivered at the Postal Delivery post office
No.12345
Date1970
Time1:30 PM
Postage$1.75
Total$30.50
For Delivery Post Office
For Delivery Post Office
+ +202 +GENERAL INFORMATION + +package. This ticket shows the amount to be collected before delivery is made. +When the merchandise arrives at its destination, the postmaster at that point will not deliver it until the consignee pays the amount mentioned on the ticket. When the consignee pays the money, the postmaster will send the shipper a post-office money order for the amount of the sale. + +§ 18. Method of Recording C. O. D. Shipments. When the terms are C. O. D., the sale is recorded in the sales journal in the same manner as a sale on account, except that "C. O. D." is entered in the "other" column under the customer's account or to his "C. O. D. Shipments" account. Since "C. O. D." applies to the terms of payment in the same manner as "3/10, n/30" applies to the terms of payment, it is the better practice, especially where the sales are made to regular customers, to record all such sales in one place, and to keep a supplementary record of them in another place so that the bookkeeper may know at all times that the proper attention has been given to each shipment. In recording sales on C. O. D., it is necessary to enter them on an account with "C. O. D. Shipments," the name of the customer is written in the explanation column on the debit side of the account; when remittance is received for the shipment, it is entered on the same line as the credit side of this account; when no remittance is received, it is entered on an account with "C. O. D. Express Shipments," it is necessary to have separate accounts with those made by freight, express, and parcel post, in which case the captions of the accounts may be "C. O. D. Freight Shipments," "C. O. D. Express Shipments," and "C. O. D. Parcel Post Shipments;" the caption may be the name of the railroad company, the local express company, or the post office. + +§ 19. How to Correct Errors. Errors in recording transactions in a book of original entry or in posting should not be made, but when they occur, must be corrected immediately; otherwise they will accumulate and become more difficult to correct by an entry in the general journal; errors in posting may be corrected by drawing a red line through figures only and writing the correct amount above. Do not erase in a book of original entry. + +§ 190. Arrangement of Accounts in the Ledger. The accounts in the ledger are arranged in order as they appear on the Balance Sheet and Statement of Profit and Loss to facilitate the preparation of these reports. This arrangement is shown in the illustrations of the ledger in this text and in the outline of accounts needed to record the transactions in the practice sets. Accounts with customers' names are kept together; accounts with creditors' names are kept together; accounts with receipts are kept together; accounts with payments are kept together; accounts with cash receipts are kept together; accounts with cash payments are kept together; accounts with Accounts Receivable account in the general ledger; Accounts with creditors should be kept in the accounts payable ledger and controlled by the Accounts Payable account in the general ledger. + +§ 191. Index to the Ledger. The position of each account in a ledger should be indicated in the index so that the bookkeeper may readily locate it. +The method of indexing will depend entirely upon whether a loose-leaf or bound ledger is used. No matter which form of ledger is used, the bookkeeper should indicate clearly what information he desires to have available when he opens it; otherwise, he will be sure to have trouble locating it when the information recorded in the account is needed. +The purpose of this discussion at this time is to impress the student with the importance of indexing at the time accounts are opened and not to describe the various forms of ledgers in use. + + + + + + + + + + + + + + +
Package.This ticket shows amount to be collected before delivery is made.
When merchandise arrives at its destination,The postmaster at that point will not deliver it until consignee pays amount mentioned on ticket.
When consignee pays money,The postmaster will send shipper a post-office money order for amount of sale.
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Method of Recording C.O.D.When terms are C.O.D., sale recorded in sales journal same manner as sale on account.
Except that "C.O.D."applies to terms of payment.
Since "C.O.D."applies to terms of payment.
It is better practice,especially where sales made to regular customers.
To record all such salesIn one place and keep supplementary record in another place.
So that bookkeeper knowsat all times proper attention has been given.
To each shipment.
When remittance receivedFor shipment entered on same line as credit side of this account.
No remittance receivedEnter on account with "C.O.D.Express Shipments."
+ + + + +
How to Correct ErrorsError recording transactions in book original entry or posting should not be made but when they occur must be corrected immediately otherwise they will accumulate and become more difficult to correct by entry general journal errors posting may be corrected by drawing red line through figures only and writing correct amount above do not erase book original entry
Arrangement Accounts LedgerAccounts ledger arranged order appears Balance Sheet Statement Profit Loss facilitate preparation reports this arrangement shown illustrations ledger text outline accounts needed record transactions practice sets accounts customers names kept together accounts creditors names kept together accounts receipts kept together accounts payments kept together accounts cash receipts kept together accounts cash payments kept together accounts Accounts Receivable account general ledger accounts creditors should be kept Accounts Payable account general ledger
Index LedgerPosition each account index so that bookkeeper may readily locate it method indexing will depend entirely upon whether loose leaf or bound ledger used no matter which form ledger used bookkeeper should indicate clearly information desire have available when open otherwise he will sure have trouble locating it when information recorded account needed purpose discussion time impress student importance indexing at time accounts opened not describe various forms ledgers use
+ +EXERCISES 203 + +§ 192. Detecting Errors in a Trial Balance. If the Trial Balance does not balance it indicates an error in (1) posting, (2) additions or forwarding in the books of original entry, and (3) checking. The error may be detected by (4) transferring the amounts from the ledger to the Trial Balance, or (5) addition of the Trial Balance. The error can be detected only by checking the work; the process of checking should be the reverse of its completion—that is, (1) addition of the Trial Balance, (2) checking of postings, (3) additions and subtractions in the ledger, (4) additions and forwarding in the books of original entry, and (5) posting. The checking should be indicated by clock marks on the face of the model or original entry and ledger for the first month in the Model Set, Chapter VI. + +The careful bookkeeper, before checking, will look for an amount equal to the error or to one-half of the error. If he finds such an amount, he will know that this amount is equal to the error would result in the amount of the error. Posting an amount equal to one-half of the error would result in no change in the trial balance. If the amount of the error is multiple of nine (divisible by nine without a remainder), it may indicate transposed figures. Any number composed of two figures, the difference between which is the same as the result of dividing nine into that number, will indicate an error of nine. Thus, if the Trial Balance is out of balance $45, it may indicate that an amount of $6 has been posted as $56 instead of $6. If this is so, then $45 + $6 = $51, and $51 – $45 = $6. Forty-five divided by nine equals five; the difference between the first and second figures in each amount in the preceding sentence is five. + +Exercise No. 75, Recording Transactions Involving Merchandise Discount. + +The following transactions relative to purchases and sales of merchandise and payments and receipts thereon were completed during the months of April and May. Record these transactions in journal form (on a sheet of journal paper), post to the ledger and take a Trial Balance. + +April 1. Bought merchandise from Union Mfg. Co., Chicago, merchandise per purchases invoice dated March 25, $402.95; terms, 3/10, n/30. + +May 4. Sold Charles Crawford Co., Chicago, merchandise per sales invoice of this date. + +May 5. Sent the L. H. Mabley Mfg. Co., check for purchases invoice of March 25, less discount. + +May 8. Bought merchandise from Union Mfg. Co., Chicago, merchandise per purchases invoice dated April 7, $293.48; terms, 3/10, n/60. + +May 13. Received a check from M. D. Putterbaugh for $200.00 to apply on sales invoice of April 3. + +May 18. Bought merchandise from Anderson & Mumford, Crawfordsville Co., merchandise per purchases invoice dated April 28, $4142.87; terms, 3/10, n/60. + +May 20. Sold Charles Crawford Co., Chicago, merchandise per sales invoice of this date, + +May 21. Sent the Union Mfg. Co., check for full invoice of April 7. + +May 24. Sent Anderson & Mumford check for $800.00 to apply on purchases invoice dated April 8. + +May 26. Sold Waltham City Co., merchandise per sales invoice of this date, $162348; terms, May 20–21, 3/10, n/30. + +May 28. Received a check from Charles Crawford for $200.00 to apply on sales invoice dated May 26. + +May 30. Bought from Davis Bros., Akron, merchandise per purchases invoice dated May 20, $2992.90; terms, 4/10, 2/30, n/60. + +June 1. Sent Davis Bros., a check for $4000 to apply on purchases invoice dated May 30. + +31. Received check for $150.00 from Charles Crawford to apply on sales invoice of May 4. + +A page from a bookkeeping exercise involving recording transactions involving merchandise discounts. + +204 + +**QUESTIONS** + +**Exercise No. 76, C. O. D. Freight Shipment.** + +December 10 the Whittaker Paper Company received an order from Marsh Bros., of Atlanta for five dozen boxes of Christmas stationery to be shipped by freight, with instructions to rush the shipment and send C. O. D., unless it was desired that it be sent by air. The Whittaker Paper Company had no previous dealings with Marsh Bros., and as it was a rush order, they sent it C. O. D. The sale was entered on December 11 as sales invoice No. 30475, total $82.50, the balance due being collected from the National Bank. + +The draft and bill of lading were sent to the Atlanta National Bank for collection. + +Prepare (a) the sales invoice; (b) the original bill of lading; (c) the draft payable at sight; (d) the bill of lading; (e) the receipt for goods on the case. +Use blank paper similar to Illustrations Nos. 50, 68, and 84 unless blank forms are available; the original only of the bill of lading need be prepared. + +**Exercise No. 77, Arrangement of Accounts.** + +Arrange the following accounts in the order in which they should appear in the ledger as explained in Nos. 104 and 150. + + + + + + + + + + + + + + + + + + + + + + +
J. W. Macon, Capital Office Expense Interest Income Reserve for Depreciation of Delivery Equipment AccountNon-Sales Purchases Discount Cash Inventory Sales Returns Fines & Penalties J. H. Bill, Capital Administrative Expense Sales Reserve for Doubtful AccountsSelling Expense Interest Earned Inventory Receivable L. H. Hill, Capital Purchases Returns and Allowances Reserve for Depreciation Office Equipment
+ +**QUESTIONS** + +1. What is the least amount that will be required to pay an invoice of $1,651.75, terms 3/10, 2/30, n/60? +2. What is the amount of the debit for a payment of $362.50 on an invoice, terms 3/10, n/50, the payment being made within ten days from the date of the invoice? +3. (a) When is the due date of an invoice with the terms Feb. 1, 1923, 3/10, n/60? (b) When should check be sent in payment of this invoice in order to secure the discount? +4. Why is it advisable for the drawer of a draft to make it payable at the bank where his account does business and send it to this bank for collection? +5. What procedure should John Smith of Chicago follow if he wishes to collect a note signed by Henry Jones of Atlanta, Georgia, made payable at the Atlanta National Bank? +6. Why do some large department manufacturers in New York City require their customers to send checks payable on New York banks in payment for merchandise sold them? +7. Why will a bank in Dallas, Texas, accept a check payable on a bank in New York City? +8. What will be the marking on a case of merchandise shipped by freight C. O. D. to A. R. Dodd, Hope, Ark., by Roberts Bros., Decatur, Ill? +9. How does the seller collect for a C. O. D. freight shipment? +10. Why is it advisable to arrange the accounts in the ledger in the same order as they appear on the Balance Sheet and Statement of Profit and Loss? + +Chapter XXI + +ACCRUALS AND DEFERRED ITEMS + +The Purpose of this Chapter is to explain the method of recording those assets and liabilities which are not shown by accounts at the close of the fiscal period. These are usually referred to as accrued assets, accrued liabilities, deferred expenses, deferred revenues, etc., and include items which result from obligations owed to the business on account of income earned during the current fiscal period but not due and payable until a succeeding fiscal period. Accrued liabilities result from services rendered to the business during the current fiscal period but not yet paid for, and deferred revenues refer to receipts received prior to operation refer to property or services purchased by the business during the current fiscal period which will not be consumed until a succeeding fiscal period. Deferred expenses refer to costs incurred by the business during the current fiscal period but which will not be carried until a succeeding fiscal period. + +§ 193. Accrued Interest Earned is an accrued asset resulting from accrued interest on interest-bearing notes which are not due and payable until a succeeding fiscal period, and on past-due notes and accounts receivable. This may be illustrated as follows: a note for $500.00, dated October 2, due in four months, with interest at 6% per annum, was recorded as a liability on October 2, 19X7, in the Accrued Interest Earned Account. +At the close of the fiscal period, December 31, this note is worth $913.50 (face of note $500.00, interest $13.50). When the Balance Sheet is prepared on December 31, the book value of the note, as recorded in the Notes Receivable account, is $913.50. Since this amount has been recorded as a liability, it must be necessary to record interest until collected. If the Balance Sheet is to show the true value of the assets belonging to the business and the true proprietorship of the business, all that is necessary is to record the $913.50 as an asset in the Accrued Interest Earned Account as a part of the total accrued interest on notes receivable and accounts receivable is recorded at the close of the period in an account with Accrued Interest Earned. + +THE ACCRUED INTEREST EARNED ACCOUNT + +§ 194. The Purpose of this Account is to show the asset resulting from accrued interest on notes receivable and accounts receivable. This account is opened only at the close of the fiscal period. + + + + + + + + + + + + + + + + + + + + + + +
DebitCredit
Accrued Interest Earned Account:Accrued Interest Earned Account:
§ 1. At the close of each fiscal period, for amounts of accrued interest on notes receivable and accounts receivable.§ 2. After the ledger is closed, for the amount credited to notes on the debit side; or for the amount of accrued interest when collected in the next fiscal period.
§ 3. The Balance of the Accrued Interest Earned Account shows the amount due for interest which has not been collected up to date at the close of the current assets of the business and is shown as such on the Balance Sheet (III. No. 92).
+ +205 + +206 +ACCRUALS AND DEFERRED ITEMS + +§ 195. Entry to Record Accrued Interest Earned. As explained in the preceding discussion, the amount of the accrued interest earned should be shown on the Balance Sheet only after the business has acquired true proprietorship of the business. Since the facts shown on the Balance Sheet should also be recorded in accounts on the ledger, it is necessary to record the amount of the accrued interest earned in the general journal. In this entry, the account "Accrued Interest Earned" is usually referred to as one of the adjusting entries (§ 46, 4) because its purpose is to record in an account the value of an asset which does not appear on the ledger. Applying this to the accrued interest in § 195, the record in the general journal will be as in the illustration below. + +December 3, 19-- + + + + + + + + + + +
Accrued Interest Earned1350
Interest Earned1350
+ +Recording the asset Accrued Interest Earned increases the income from interest the same as if cash had been received for the interest. When this entry is posted, the $13,50 will appear as an asset on the debit side of the Accrued Interest Earned account, and as an income on the credit side of the Interest Earned account. + +§ 196. Entry to Close the Accrued Interest Earned Account. The accrued interest earned may be allowed to remain in the Accrued Interest Earned account until the interest is collected, or the balance of this account may be transferred to the Interest Earned account by an entry in the general journal after the interest is collected. This method of accounting eliminates all that concerns the necessity of separating accrued interest earned from interest earned when notes or accounts affected by the accrued interest are collected in a subsequent period. + +Referring to the illustration in § 195, if the accrued interest is allowed to remain in the Accrued Interest Earned account until the note is collected on February 2, the entry in journal form will be as in the illustration below. + +February 2, 19-- + + + + + + + + + + + + + + + + + + + + + + +
Cash718
Notes Receivable700
Interest Earned1350
Accrued Interest Earned1350
Paid-in Cash payment for note and interest due today.
+ +**ACCRUALS AND DEFERRED ITEMS** +207 + +If the balance of the Accrued Interest Earned account is transferred to the Interest Earned account after the ledger is closed, the entry will be as in the illustration below. + +December 3, 19-- + +Interest Earned +Accrued Interest Earned +To bring up the balance of the +Accrued Interest Earned account +to the Interest Earned account + +When the note is collected on February 2, the entry, in journal form, will be as in the illustration below. + +February 2, 19-- + + + + + + + + + + + + + + +
Cash918
Interest Earned900
Accrued interest earned for notes and interest due today.10
+ +A comparison of the Interest Earned account after each entry is posted, shows that the balances are as follows: In the first case, the Accrued Interest Earned account is credited with $4,500, in the second case, the Interest Earned account is credited with $13,500 and credited with $18,000, showing a net credit balance of $4,30. + +§ 197. **Accrued Wages** is an accrued liability which results when the close of the fiscal period occurs on a date different from the usual time of paying employees. This may be illustrated as follows: the weekly pay roll for Jenkins Bros., retail merchants, is $600.00 payable at the close of business on Saturday of each week. The books are closed on Friday evening. As shown by line (a) of the Balance Sheet and Statement of Profit and Loss are to show true results, the bookkeeper will have to pay the employees on Wednesday evening, or $300.00 due them. The liability for this amount must be charged to the operating cost on the Statement of Profit and Loss. Since the employees are not concerned with the closing of the books and will not expect their wages before the usual time, it is customary to show the amount due the employees at the close of the fiscal period in an account with Accrued Wages. + +**ACCRUED WAGES ACCOUNT** + +§ 198. **The Purpose of this Account** is to show the amount due employees at the close of the fiscal period because the end of the fiscal period falls on a date different from that on which the pay roll is paid. This account is opened only at the close of the fiscal period. + +208 +**ACCRUALS AND DEFERRED ITEMS** + +Debit the Accrued Wages Account: +† 1. After the ledger is closed for the amount shown on the credit side; or for the accrued wages when paid. + +Credit the Accrued Wages Account: +† 2. For the amount due employees at the close of the fiscal period. + +† 3. The Balance of the Accrued Wages Account shows the amount due employees at the close of the fiscal period; it is a current liability and is shown as such on the Balance Sheet (Illustration No. 92). + +§ 199. **The Entry to Record Accrued Wages** is made in the general journal at the close of the fiscal period; it is regarded as one of the adjusting entries (§ 46). +† 4. because it places in the ledger a liability which has not been recorded. Re- +ferring to Illustration No. 92, suppose that $500.00 is due to office employees (this +is for office employees, $50.00 for the buying department, and $150.00 for the selling department), the entry in the general journal necessary to record this liability will be as in the illustration below. + +December 31, 19-- + + + + + + + + + + + + + + + + + + + + + + + + + + +
Buying Expense50
Selling Expense150
Administrative Expense100
Accrued Wages300
These three accounts due employees
+ +When this entry is posted, the $300.00 will appear on the credit side of the Accrued Wages account and the amounts applicable to the Buying Expense, Selling Expense, and Administrative Expense accounts will appear on the debit side of these accounts; consequently the ledger will show a liability and an operating cost at December 31. + +§ 200. **Entry to Close the Accrued Wages Account.** The Accrued Wages account may be allowed to remain open until the wages have been paid and then debited with the amount for which it is credited, or the balance may be transferred to the operating expense accounts. In either case, after all wages have been paid, the pay roll will be paid in a few days after the books are closed, the amount is usually allowed to remain in the Accrued Wages account and this account closed when the pay roll is paid. Referring to the pay roll in § 197 and the entry in § 199, the required entry to close January 3, when the pay roll is paid, will be as in the illustra- +tion below. + +January 3, 19-- + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Accrued Wages300
Buying Expense50
Selling Expense150
Administrative Expense100
Cash300
This bill for week ending January 3.
+ +**ACCRUALS AND DEFERRED ITEMS** +209 + +When this entry is posted, the Accrued Wages account will be in balance and only one-half of the pay roll for the week will be debited to the expense accounts, this being that part of the pay roll for the week which is applicable to the next fiscal period. + +If the Accrued Wages account is closed after the ledger is closed, the post-closing entry necessary to transfer the balance of the Accrued Wages account to the proper operating accounts will be as set in the illustration below: + +December 31, 1975 + + + + + + + + + + + + + + + + + + + + + + +
Accrued Wages300
Payroll Expense300
Welfare Expense100
Administrative Expense100
To close the Accrued Wages account.
+ +When this entry is posted, the Accrued Wages account will be in balance and the amount of the accrued wages applicable to each of the expense accounts will appear on the credit side of that account. When the pay roll is paid on January 3, the entry, in journal form, will be as in the illustration below: + +January 3, 1976 + + + + + + + + + + + + + + + + + + + + + + +
Payroll Expense100
Welfare Expense100
Administrative Expense100
Cash100
Payroll for Week Ending January 3.
+ +When this entry is posted, the full pay roll for the week will appear on the debit side of the expense accounts to which it is applicable, but there will be a credit to each of these accounts when made up in the same way as when the Accrued Wages account is closed at the time the pay roll is paid. The student should post these entries and compare the results. + +§ 201. **Accrued Interest Cost** is an accrued liability resulting from the accrued interest on interest-bearing notes issued by the business prior to the close of the fiscal period but not due and payable until a succeeding fiscal period, and on which interest has been computed at a rate of six per cent per annum. On December 1, the business borrows $5,000.00 from the bank on its note, due in ninety days, with interest at 6% from date. December 31, at the close of the fiscal period, the amount of this indebtedness will have increased to $5,025.00 because of the accrued interest cost. In order to record this additional indebtedness as a liability owed by the business and the true proprietorship, it will be necessary to record the additional indebtedness of $25.00 and to show it on the Balance Sheet as a part of the liabilities. Interest accrued on notes payable and accounts payable is recorded at the close of the period in an account with Accrued Interest Cost. + +A table showing Accrued Wages and Payroll Expense for December 31, 1975. + +A table showing Payroll Expense and Cash for January 3, 1976. + +210 +ACCRUALS AND DEFERRED ITEMS + +§ 202. The Purpose of this Account is to show the amount of accrued interest owed by the business at the close of the fiscal period because the notes to which it is applicable are not due or the accounts to which it is applicable are past due and unpaid. This account is opened only at the close of the fiscal period. + +Debit the Accrued Interest Cost A/cct.: Credit the Accrued Interest Cost A/cct.: + +§ 1. Interest on notes payable is shown on the credit side; or for the amount of accrued interest when paid in the next fiscal period. + +§ 2. The Balance of the Accrued Interest Cost Account shows the amount owed by the business for interest which has not been paid; it is a current liability and is shown as such on the Balance Sheet (Illustration No. 92). + +§ 203. Entry to Record Accrued Interest Cost. At the close of the fiscal period, an entry is made in the general journal showing the amount of accrued interest cost. This entry is usually referred to as one of the adjusting entries (§ 46, § 4) because its purpose is to record in an account in the ledger the amount of a liability which does not appear there. The entry in the general journal for the accrued interest mentioned in § 201 will be as in the illustration below. + +December 31, 19-- + +Interest Cash +Accrued Interest Cost +Accrued interest on notes payable + +Recording the liability Accrued Interest Cost increases the cost of interest the same as if cash had been paid for the interest. When this entry is posted, the $2,500 appears as a debit in the ledger account on the debit side of the Accrued Interest Cost account, and as an expense on the debit side of the Interest Cost account. + +§ 204. Entry to Close the Accrued Interest Cost Account. The accrued interest cost may be allowed to remain in the Accrued Interest Cost account until it is paid, or it may be recorded as an expense in closing entries. The Accrued Interest Cost account by an entry in the general journal after the ledger is closed. The latter practice is possibly better because it avoids the necessity of separating accrued interest cost from other expenses or accounts affected by the accrued interest cost are paid in a subsequent period. + +Referring to the illustration in § 203, if the accrued interest is allowed to remain in the Accrued Interest Cost account until the note is paid on March 1, then the entry required at that time, in journal form, will be as in the illustration below. + +March 1, 19-- + +Interest Payable +Interest Cash +Accrued Interest Cash +Funds note and interest due to bank. + +$250 +$50 +$80 +$075 + +**ACCRUALS AND DEFERRED ITEMS** + +If the balance of the Accrued Interest Cost account is transferred to the Interest Cost account after the ledger is closed, the entry will be as in the illustration below. + +December 31, 19-- + +Accrued Interest Cost +Interest Cost + +To transfer the balance of the +Accrued Interest Cost account +to the Interest Cost account. + +When the note is paid on March 1, the entry, in journal form, will be as in the illustration below. + +March 1, 19-- + +Notes Receivable +Interest Cost +Cash + +Paid note and interest due today + +A comparison of the Interest Cost account after each entry is posted will show that the final results are the same. In the first case, the Interest Cost account is debited with $50.00; in the second case, it is credited with $50.00. The net effect is a net debit balance of $50.00. + +**2. Deferred Charges to Operations** refer to (a) the value of property on hand at the close of the period which was purchased for use in the business and which will be consumed by its use, and (b) operating cost paid in advance. + +Deferred charges applicable to material may be illustrated as follows: during the business year, materials worth $500 were purchased and used up; they have been purchased as needed, and their value debited to the Office Supplies account. +At the close of the year, the balance of the Office Supplies account will show the net value of supplies on hand but not yet used up. This is called a "perpetual" account. +The value of supplies on hand is determined by taking a physical count of all items on hand. This is called a "physical" inventory. +Consequently, it is necessary to ascertain the value by an inventory in the same manner as the value of merchandise in stock is ascertained. +The value of office supplies is shown on the Balance Sheet as an asset because it represents a future liability of value which will be used in the operations of the business during the next period. + +Deferred charges applicable to operating costs paid in advance may be illustrated as follows: A $500 charge was made under a five-year insurance policy issued for one year. At the close of the fiscal period, December 31, one-half the value of this premium, or $250, remains as an asset to the business because the policy does not expire until June 30. The other half has expired and must be shown on the Balance Sheet. Otherwise, the total assets and proprietorship will not show true facts. + +The asset referred to as a deferred charge is recorded in an account; but the amount recorded in the account shows the total cost and not the value of the + + + + + + + + + + + + + + +
Notes Receivable500
Interest Cost75
Cash375
+ +211 + +212 +ACCRUALS AND DEFERRED ITEMS + +asset at the close of the fiscal period. In the case of insurance, the cost of the premium is debited to the Insurance account at the time it is paid, hence, the balance of this account represents the cost of insurance which has expired and the cost of the insurance which is yet to expire. For this reason the adjusting entry required to show the value of a deferred charge is made by debiting the Insurance account and crediting the Office Supplies account which has been used, thus leaving in the account the value of the property or service yet to be consumed. Insurance and Office Supplies are two accounts that require adjusting on account of deferred charges. + +**OFFICE SUPPLIES ACCOUNT** + +§ 206. The Purpose of this Account is to show the cost of material purchased for use in the office which will be consumed by its use; this material includes office stationery, pens, ink, wastebaskets, etc. The value of this material on hand at the close of a fiscal period is ascertained by a physical inventory at cost, the same as the value of merchandise. + +Debit the Office Supplies Account: +* 1. For amounts paid for supplies, to be used in the office. +Credit the Office Supplies Account: +* 2. (a) For any adjustment which increases the value of office supplies as shown by the debit side; (b) for the value of office supplies used during the difference between the balance of this account and the inventory of office supplies. + +* 3. The Balance of the Office Supplies Account, before the value of the supplies used has been entered on the credit side, shows the total amount of supplies purchased; the balance of this account after the value of the material used has been entered, shows the value of office supplies on hand at the close of the fiscal period. This balance is part of the cost of business and is shown as such on the Balance Sheet (Illustration No. 92). + +Advertising Material and Shipping Room Material are two other accounts of the same nature as Office Supplies, but they represent materials beneficially purchased for advertising purposes, and latter, material for use in packing the merchandise. + +§ 207. Entry to Adjust the Office Supplies Account. After the value of the office supplies on hand at the close of the fiscal period has been ascertained through an inventory, it is necessary to transfer to an operating account the cost of the material used, which is the difference between the inventory and the balance on this account. If the balance of this Office Supplies account is $1,200.00 and the inventory shows $500.00, then cost of office supplies used is $912.50; the entry required to transfer this to the Administrative Expense account will be as in the illustration below. + +December 3, 19-- + +Office Supplies Account +Office Supplies Used +Balance of Office Supplies Used +$912.50 + +ACCRUALS AND DEFERRED ITEMS 213 + +**INSURANCE ACCOUNT** + +§ 208. The Purpose of this Account is to show a record of the amount paid for insurance. Insurance is a protection afforded by insurance companies against loss due to fire, theft, or other perils. This protection is secured by the payment of a small fee to a company organized for the purpose of issuing insurance, the fee paid for the protection is usually referred to as the premium, and the receipt of this premium is recorded in the Insurance Account. Each policy has a premium which is paid in advance, usually for one year. The insured has the privilege of canceling the policy at any time, in which case he will receive a refund of a part of the premium paid. Each insurance policy should be recorded in the Insurance Account. + + + + + + + + + + +
Debit the Insurance Account:Credit the Insurance Account:
1. For all insurance cost, which is premium paid for insur- ance.2. (a) For any adjustments which reduce the cost of insurance as shown on the Insurance Account; (b) at the close of each fiscal peri- od, for the insurance cost for the period as shown by the policy record.
+ +§ 209. The Balance of the Insurance Account, before the entry for expired insurance has been made, shows the net cost of insurance, and, after the expired insurance has been credited to the account, the value of the premiums on unexpired insurance. This balance is called the Insurance Account and is shown as such on the Balance Sheet (Illustration No. 5). + +§ 209. Entry to Adjust the Insurance Account. At the close of the fiscal period, it is necessary to take out of the Insurance account the value of the insurance expired as shown by the insurance policy record. The Insurance account will be adjusted by debiting it with an amount equal to that portion of its balance which will depend upon the nature of the property protected by the insurance. Insurance cost on office equipment is usually regarded as an administrative expense; insur- ance cost on buildings is regarded as a selling expense; and insurance cost on landings, as a building expense. For this reason it is necessary to determine the value of the expired insurance applicable to each kind of expense involved in order that an accurate adjustment may be made. Assuming that the total cost of insurance is $450.00 and the value of the unexpired in- surance is $150.00, the entry would require a credit of $300.00 to the Insurance account and a debit of $300.00 to operating accounts affected. If the expired insurance cost on office equipment was $200.00, on buildings $450.00, and on landings $450.00, the entry would be as in the illus- tration below. + +December 31, 19-- + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Insurance Expense150
Administrative Expense150
Building Expense450
Insurance Expense300
Capital improvements and maintenance;
Store fixtures; delivery equipment;
Office equipment and materials;
+ +214 +**ACCRUALS AND DEFERRED ITEMS** + +When this entry is posted, the balance of the Insurance account will show the value of the unexpired insurance as recorded in the insurance policy record, and the amount of cost of insurance on hand at the close of the fiscal period, recorded in the proper expense accounts. The balance of the Insurance account will be shown on the Balance Sheet as one of the deferred charges to operations (Illustration No. 92). + +**Deferred Credit to Income refer to income collected in advance, all of which has not been earned at the close of the fiscal period. This may be illustrated as follows: Martin Bros. own a building at 220 Main Street in which their business is operated. They rent one floor to A. B. Smith for $100.00 per month. At the end of each month, the rent collected is credited to a Building Revenue account. At the close of the fiscal period, December 31, the Building Revenue account shows a credit of $100.00, rent for one month, but no rent has been earned by Martin Bros., since they have not yet received any rent. If during the next month, $50.00 has been earned, the other $50.00 being applicable to the next period. Unless the unearned rent is taken out of the Building Revenue account, this account will show a profit of $100.00 at the close of the fiscal period. It is customary to record an item of this nature as a deferred credit to the income account which has been credited with the income. The caption of the account required to record the value of the unearned income from the rent collected in advance would be "Deferred Credit to Building Revenue." + +**DEFERRED CREDIT TO BUILDING REVENUE ACCOUNT** + +§ 211. **The Purpose of this Account** is to show at the close of the fiscal period the rent collected in advance. It is opened only at the close of the fiscal period. + +Debit **Deferred Credit to Building Revenue Account** Credit **Deferred Credit to Building Revenue Account**: + +* t. After the ledger is closed, for the amount shown on the credit side. +* 2. At the close of the fiscal period, for that part of the rent collected in advance which is applicable to that fiscal period. +* 3. The Balance of the Deferred Credit to Building Revenue Account shows the amount of rent that is yet to be earned. It is regarded as a liability and is shown as such on the Balance Sheet, being listed after the current and fixed liabilities. + +§ 212. **Entry to Open the Deferred Credit to Building Revenue Account:** At the close of the fiscal period, it is necessary to record the amount of rent collected but not yet earned by the business. This entry is referred to as one of the adjusting entries ($ 46, *t*) because its purpose is to record in an account in the ledger the value of a liability which does not appear there. The general journal entry for the rent collected in advance mentioned in § 210, will be as in illustration below. + +December 31, 19-- + +| Debit | Credit | +|---|---| +| Rent Collected in Advance | $4 | +| Deferred Credit to Building Revenue | $4 | + +Rent Collected in Advance + +A scanned document showing an entry for "Deferred Credit to Building Revenue" debited $4 and credited $4. + +EXERCISES 215 + +When this entry is posted, the $50.00 will appear on the credit side of the Deferred Credit to Building Revenue account and on the debit side of the Building Revenue account; consequently, the ledger will show a liability of $50.00 and a debit income of $50.00. + +§ 213. Entry to Close the Deferred Credit to Building Revenue Account. After the ledger is closed, it is necessary to transfer the balance of the Deferred Credit to Building Revenue account to the Building Revenue account in order that the latter account may show in the next period only the income from rent applicable to that period. Applying this entry to the transaction in § 212, the record in the general journal will be as in the illustration below: + +December 31, 19XX + + + + + + + + + + + + + + +
Deferred Credit to Building Revenue$50
Building Revenue$50
Transfer the balance of the Deferred Credit to Building Revenue account to the Building Revenue account.
+ +When this entry is posted, the Deferred Credit to Building Revenue account will be in balance, and the amount of rent collected in advance, applicable to the next period, will appear on the credit side of the Building Revenue account. + +Exercise No. 78, Accruals and Deferred Items. +At the close of the fiscal period June 30, the accruals and deferred items to be recorded on the books of J. H. Kilgour & Co. are as follows: + +Interest accrued on notes receivable..............$ 68.95 +Insurance: +Payments, per Insurance account: +On merchandise, store fixtures and delivery equipment........482.65 +On office equipment..................................43.75 +On building............................................92.50 +Unexpired, per insurance policy records: +On merchandise, store fixtures and delivery equipment........96.60 +On office equipment..................................11.50 +On building.............................................24.00 +Office supplies: +Total purchased per Office Supplies account...........$37.40 +On hand per inventory.................................192.95 +Interest accrued on notes payable.......................25.60 + +1. Make the adjusting entries (a) to record the accrued assets and liabilities, + (b) to transfer the expired insurance to the proper operating accounts, and (c) to + transfer the value of the office supplies used to the proper operating account. +2. Make the post-closing entries to transfer the accrued assets and liabilities + to the proper operating accounts after the ledger is closed, under date of July 1. + +A table showing accruals and deferred items for J. H. Kilgour & Co., including interest accrued on notes receivable ($68.95), payments per Insurance account (including On merchandise, store fixtures and delivery equipment $482.65; On office equipment $43.75; On building $92.50), unexpired per insurance policy records (including On merchandise, store fixtures and delivery equipment $96.60; On office equipment $11.50; On building $24.00), Office supplies (Total purchased per Office Supplies account $37.40; On hand per inventory $192.95), and Interest accrued on notes payable $25.60). + +216 + +**QUESTIONS** + +**Exercise No. 79. Accruals and Deferred Items.** + +At the close of the fiscal period, December 31, the accruals and deferred items to be recorded on the books of Wenger & Hoag are as follows: + +| | | +| :--------------------------------------------------------------- | :------ | +| Commission due from others for services rendered | $265.50 | +| Insurance: | | +| Payments, per Insurance account: | | +| On merchandise, store fixtures, and delivery equipment: | 500.00 | +| On office equipment | 27.65 | +| Unexpired insurance policy record: | | +| On merchandise, store fixtures, and delivery equipment: | 235.55 | +| On office equipment | 9.45 | +| Rent for month due but not paid | 150.00 | +| Wages unpaid: | | +| Office employees | 33.75 | +| Employees on strike | 42.80 | + +1. Make the adjusting entries (a) to record the accrued assets and liabilities, and (b) to transfer the expired insurance to the proper operating accounts. +2. Make the post-closing entries to transfer the accrued assets and liabilities to the proper operating accounts after the ledger is closed, under date of January 1. + +**QUESTIONS** + +1. Why is it necessary to record accrued interest earned and accrued interest cost at the close of the fiscal period? +2. How would magazine subscribers collected in advance be recorded at the close of the fiscal period by the bookkeeper for the company publishing the magazine? +3. (a) If an account is kept with Advertising Material, what will the balance of this account show when all the advertising material in stock has been made at the close of the fiscal period? (b) How will the advertising material used be shown on the Statement of Profit and Loss? (c) How will the advertising material on hand be shown on the Balance Sheet? +4. Why is it necessary to describe the nature of the property insured when recording a policy in the insurance policy record? +5. If the value of property in stock, $240,000, is not taken into consideration in preparing the Balance Sheet and Statement of Profit and Loss how will this affect the net income? +6. If $800.00 is paid for three months' rent in advance on December 1, how will this amount monthly prepaid rent be recorded at the close of the fiscal period December 31? +7. What entry may be made for accrued interest earned after the ledger is closed? +8. (a) What is the purpose of the Accrued Interest Cost account? (b) What is the difference between this account and the Accrued Interest Earned account? +9. Is there any difference between the merchandise in stock at the close of the fiscal period and the office supplies and advertising material in stock, from the viewpoint of one who is using this information as a basis for making a loan to the business owning the property? +10. What does the balance of the Office Supplies account show (a) before the inventory is recorded and (b) after the inventory is recorded? + +Chapter XXII +ADJUSTING ENTRIES AND REPORTS + +The Purpose of this Chapter is to present in pictorial form the work re- +quired of the bookkeeper at the close of the fiscal period. It is a Model Set with +the books of original entry and accounts omitted. The principles involved have +been discussed and illustrated in the preceding chapters. + +§ 214. The Work Required at the close of the fiscal period is usually +completed in the following manner: + +1. Trial Balance at the end of the month which closes the fiscal period. +2. Preparation of the list of inventories, accruals and reserves. +3. Adjusting entries in the journal for the inventories, accruals and +reserves, and the posting of these entries. +4. Trial Balance after the adjusting entries have been posted. +5. Preparation of the Balance Sheet. +6. Preparation of the Income and Profit and Loss. +7. Recording and posting the closing entries. +8. Recording and posting the post-closing entries. +9. Post-closing Trial Balance. + +If desired, the Trial Balance mentioned in paragraph 1 may be prepared on paper ruled with +eight money columns—one for the debits and credits in the Trial Balance; two for the debit and +credit balances of each account; one for the balance of each account after adjustment; and one for +this balance, provided that journal entries (paragraph 3) can be posted to the Adjustment columns and +the assets, liabilities, costs and income entered into the other columns. When this plan is followed, the +Trial Balance will be found to be identical with that shown in Illustration No. 88. This method of procedure is discussed under the title "Working Sheet" in a subsequent chapter. + +EXPLANATION OF ILLUSTRATIONS + +§ 215. The Trial balance at the close of the fiscal period in Illustration +No. 88 shows all accounts in the ledger as they stood at Keeland & Co, on December 31, +1928. It is the same as that shown in Trial Balance illustrated in paragraph 1 of this chapter for +the preceding months. This Trial Balance shows the same facts as the Trial +Balance in Illustration No. 5 and the other Trial Balances illustrated in previous +chapters. The difference between this Trial Balance and those illustrated in previous chapters is that the ledger +from which this Trial Balance was taken contains a greater number of accounts. + +§ 216. The List of Inventories, Accruals and Reserves in Illustration +No. 86 shows all inventories, accruals and reserves as they stood at trial balance +Illustration No. 88. The value of the merchandise in stock and the rent supplied on hand was ascertain by a physical inventory. The amount of the accrued interest on notes received during the month was obtained from the interest- +bearing note receivable until the next fiscal period began, which was verified by reference to the notes receivable book, Illustration No. 74, and the notes payable book, Illustration No. 75. The amount of the expired and unexpired insurance was ascertained by inspection of all policies issued since January 1, 1928, as referred to in Illustration to No. 76. The amount of accrued wages represents the wages due employees in the selling department for three days, the fiscal period ending on Wednesday, December 31, 1928, being considered as a day's pay; also rental rent refers to the rent of the office which is due only until the first of February, 1929. +The percentages for reserves sec up on account of depreciation and loss on doubtful +accounts were supplied by the unification; these conform to the percentages permitted by the Collector of Internal Revenue in the preparation of the income + +217 + +ADJUSTING ENTRIES AND REPORTS + +218 + +C.H. Keiland's Co. +Trial Balance December 31, 19XX + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
+ + + + + + +
Cash15076
Notes Receivable17003
Accounts Receivable33320
Taxation for Qualified Allowances1001
Taxation for Qualified Allowances670
Taxation for Sale of Office Equip.24
Sales Tax200
Other one for Sale of Home Features1030
Delivery Equipment3000
Taxation for Sale of Delivery Equip.300
Buildings3000
Taxation for Depletion of Buildings45
Land4005
Office Supplies10055
Purchase Invoices19996
Potable Supplies300139
Potable Supplies199959
C.O.M. Keiland Capital5000
C.O.M. Keiland Capital5000
Sales Returns267827-7
Sales Allowances4191
In Stock Inventory219951
In Purchases1846484
Sale Price for Sales Returns and Allowances717897
Selling Expenses136465
Administrative Expenses
+
DescriptionTotal +
Sales Returns4191 +
Sales Allowances219951 +
In Stock Inventory1846484 +
In Purchases717897 +
Sale Price for Sales Returns and Allowances136465 +
Selling Expenses267827-7 +
Sales Returns267827-7 +
Sales Allowances4191 +
In Stock Inventory219951 +
In Purchases1846484 +
Sale Price for Sales Returns and Allowances717897 +
Selling Expenses136465 +
Sales Returns267827-7 +
Sales Allowances4191 +
In Stock Inventory219951 +
In Purchases1846484 +
Sale Price for Sales Returns and Allowances717897 +
Selling Expenses136465 +
Sales Returns267827-7 +
Sales Allowances4191 +
In Stock Inventory219951 +
In Purchases1846484 +
Sale Price for Sales Returns and Allowances717897 +
Selling Expenses136465 +
Sales Returns267827-7 +
Sales Allowances4191 +
In Stock Inventory219951 +
In Purchases1846484 +
Sale Price for Sales Returns and Allowances717897 +
Selling Expenses136465 +
Sales Returns267827-7 +
Sales Allowances4191 +
In Stock Inventory219951 +
In Purchases1846484 +
Sale Price for Sales Returns and Allowances717897 +
Selling Expenses136465 +
Sales Returns267827-7 +
Sales Allowances4191 +
In Stock Inventory219951 +
In Purchases1846484 +
Sale Price for Sales Returns and Allowances717897 +
Selling Expenses136465 +
Sales Returns267827-7 +
Sales Allowances4191 +
In Stock Inventory219951 +
In Purchases1846484 +
Sale Price for Sales Returns and Allowances717897 +
Selling ExpensesIllustration No. 88, Trial Balance at the Close of the Fiscal Period tax return. All the information given in this list is necessary in order that a Balance Sheet and Statement of Profit and Loss may be prepared which will show the management the true value of the assets, liabilities, and proprietorship. + +A table showing various financial items with their totals. + +Illustration No. 88, Trial Balance at the Close of the Fiscal Period + + + + + + + + + + + + + + + + + + + + + + + + +
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Description
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Description
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Description
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Description
...219 + +C. W. Kieland & Co. +Inventories, Accruals and Reserves, December 31, 1922 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Inventory of Merchandise Dec. 31, 192212/31/22
Accrued:
Interest accrued on motor vehicles1079
Unpaid wages on selling dept.6187
Total unpaid amt. of office100
Interest accrued on motor payable1193
Deferred Charges:
Coffee and coffee on hand4008
Unpaid endowments
Cir.Miller Store-Buildings and Office Equip.
Expired, inventory record10953
Cir. Office Equipment1048
Total premiums paid576
Taxed for policy record576
Cir. Buildings:
Total premiums paid36
Expired for policy record18
Reserves:
Cir. Office Equipment: $75
Instore fixtures: $75
Liability equipment: $75
Cir. Buildings: $75
Taxable endowments: $75 of Accruals Receivable
+ +Illustration No. 89, List of Inventories, Accruals and Reserves of the business, and the net profit resulting from operating the business during the fiscal period. + +§ 217. The Adjusting Entries required at the close of the fiscal period in Illustration No. 90 were prepared from the list of inventories, accruals and reserves (Illustration No. 89) near the end of this chapter as explained and illustrated in preceding paragraphs. The entry to record the value of the motor vehicles in stock at the close of the fiscal period—in this case, the 1922 Inventory—may be made in connection with closing the ledger or as an adjusting entry; the final results are then shown on the Balance Sheet and Statement of Profit and Loss. Therefore, before the Balance Sheet and Statement of Profit and Loss are prepared, these reports can be made from the Trial Balance taken after the adjusting entries are posted. The entries to record the value of the office supplies in stock (Insurance and Insurance) do not record the value of the office supplies in stock and the unexpired insurance, but transfer from the Office Supplies account and the Insurance account the value of the office supplies which have been used and the amount of the expired insurance. When preparing the list of inventories, accruals and re- + +ADJUSTING ENTRIES AND REPORTS + +December 31, 1925 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
10,193Inventory3518.19
15Purchases3518.19
Merchandise on hand December 31, 1925
1Accrued Interest Earned1337
12Interest Earned1337
Accrued rent for schedule
14Selling Expense6001
17Administrative Expense100
19Potential Cash1337
20Accrued Wages6001
22Accrued Rent100
Accrued interest for schedule
27Administrative Expense70705
Office supplies used during the year
28Selling Expense14275
29Administrative Expense576
30Building Expense18
Fire Insurance Coverage Insurance
Fire Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insurance Coverage Insuranc +Illustration No. 90, Adjusting Entries for Inventories, Accruals and Reserves in Illustration No. 89.
+ +
Description of AccountCumulative Balance at Beginning of Year (or Ending of Previous Year)Cumulative Balance at End of Year (or Beginning of Next Year)
Accrued Interest Earned (Schedule)
Potential Cash (Schedule)
Selling Expense (Schedule)
Administrative Expense (Schedule)
Potential Cash (Schedule)
Selling Expense (Schedule)
Potential Cash (Schedule)
Selling Expense (Schedule)
Potential Cash (Schedule)
Selling Expense (Schedule)
Potential Cash (Schedule)
Selling Expense (Schedule)
Potential Cash (Schedule)
Selling Expense (Schedule)
Potential Cash (Schedule)
Selling Expense (Schedule)
+ + + +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
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+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ + +
Illustration No. 90, Adjusting Entries for Inventories, Accruals and Reserves in Illustration No. 89.
+ +ADJUSTING ENTRIES AND REPORTS +221 + +serves, it is necessary to show the kind of property to which the expired insurance premiums are applicable, in order that the adjusting entry for insurance can be made without further reference to the insurance policy. The combined entries for store fixtures, delivery equipment and depreciation on store fixtures and delivery equipment increases the selling expense. Hence the debit to this account includes both reserves. + +C.W. Keelander Co. +Trial Balance December 31, 19-- + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +






























































































<
Cash1830.7
Potential Receivables1860.5
Accounts Receivable3330.0
Reserve for Depreciation of Store Fixtures1171
Store Fixtures Reserve200
Coffee Equipment200
Reserve for Dep. of Office Equip.-10
Office Fixtures500
Reserve for Dep. of Office Fixtures500
Delivery Equipment3000
Reserve for Dep. of Delivery Equip.600
Buildings3000
Reserve for Depreciation of Buildings90
Sand4000
Office Supplies4000
Insurance4647
Potential Payable-4647
Potential Payable-4647
Paid Wages6151
Owned Rent100
Owned Interest Cost1133
C.O.D. Receipts Capitalized-8500
C.O.D. Receipts Capitalized
+ +Illustration No. 91, Trial Balance after the Adjusting Entries in Illustration No. 90 have been Posted +(Concluded on page 222) + +ADJUSTING ENTRIES AND REPORTS + +222 + +Illustration No. 91, Trial Balance after the Adjusting Entries in Illustration No. 90, and Trial Balance after the Perpetual Inventory. + +NOTE. When the Working Sheet is used (p. 214), this Trial Balance is omitted, as the same facts are shown by the assets, liabilities, costs and income columns. + +§ 218 The Final Trial Balance (Illustration No. 91) was made after the adjusting entries had been posted to the ledger from which the Trial Balance (Illustration No. 88) was made. A comparison of the final Trial Balance (Illustration No. 91) with the Trial Balance taken before the adjusting entries were made (Illustration No. 88) shows that: + +The accounts receivable accounts each show an increased credit balance due to the additional reserve set up because of the operations of the business during the past year; the balance of the Office Supplies account has changed because the value of the supplies purchased has decreased; the balance of the Insurance account shows that the balance of the Insurance account has changed because of the expired insurance has been transferred to the proper expense accounts; the final Trial Balance shows an increase in the amount of Sales and a decrease in Cost of Goods Sold and Accrued Interest Cost; the 1922 Inventory appears on the final Trial Balance, and there is a credit to Purchases for the same amount as the 1922 inventory (both sides of the equation being equal); there is a debit to Selling Expenses for the amount needed in connection with the preparation of the Statement of Profit and Loss); Selling Expenses shows an increased debit balance because of the unpaid wages, expired insurance, depreciation, and loss on doubtful accounts; Loss on Doubtful Accounts is now shown as a debit balance because of its increased liability to doubtful accounts; Administrative Expense and Building Expense each show an increased debit balance because of the depreciation, expired insurance, office supplies used, and interest on notes receivable; Interest Cost shows an increased debit balance because of the accrued interest on notes receivable; Interest Cost shows an increased debit balance because of the accrued interest on notes payable. + +The following table shows how much of each item in the Trial Balance, Illustration No. 91, is used in the preparation of the Balance Sheet or Statement of Profit and Loss, except Purchases, both sides of which are needed in arriving at the net cost of merchandise sold; the balances of the proprietors' Capital accounts are not used either as a basis for determining their withdrawals or for computing their loss but are needed in connection with the proof of these in Illustration No. 94. + +§ 219 The Balance Sheet in Illustration No. 92 was prepared from the asset, liability, and reserve accounts on the Trial Balance, Illustration No. 91. The information in this report is arranged in the following order: (1) current assets, with the proper deduction for the anticipated loss on doubtful accounts as + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Trial Balance Dec. 31, 1922 (Concluded)
Traight through account653434Conduir
Adjusting Expense70338
Bad and Doubtful Accounts7350
Other Incomeable Expense16005
Building Expense17019
Grosses Earned16347
Doubtful Discount52363
Interest Cost10305
Purchase Discount675755550000
Total Assets653434653434
Total Liabilities and Reserves653434653434
Total Equity (or Net Worth)




























































+ +ADJUSTING ENTRIES AND REPORTS +223 + +C.W. Keeland Co. +Balance Sheet, December 31, 1975 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Current Assets:
Cash$307
Notes Receivable18465
Accounts Receivable2282
Late Pay for Late Cash337
Inventory, Dec. 31, 1975331019
Accrued Interest Earned1537
Total Current Assets24568
Tied Up to:
Office Equipment4000
Land and Building Appreciation Less-257
Reserve for Depreciation Less3000
Last Reserve for Depreciation Less17860
Deficiency Equipment3000
Last Reserve for Depreciation Less3400
Buildings80000
Last Reserve for Depreciation Less9916
Land4000
Total Fixed Assets.97560
Deferred Charges to Operations:
Office Supplies4453
Vaue Insurance4648
Total Deferred Charges.9171
Total Assets and Deferred Charges.
106699
Current Liabilities:
No Tax Payable200139
Accounts Payable179579
Accrued Wages6571
Accrued Rent.180
Accrued Interest Cash.1138
Total Current Liabilities.245685
Proportionship:
Cash and Equipment.719735
A. Earnings.719735
Total Proportionship.1439460
Total Liabilities and Proportionship.
1523499
+ +Illustration No. 92, Balance Sheet, "Report" Form + +224 +ADJUSTING ENTRIES AND REPORTS + +represented by the Reserve for Doubtful Accounts account: (2) fixed assets, with the proper reserves for depreciation; (3) deferred charges; (4) current liabilities; +(5) proprietorship, including the proprietary interest in the business. The form is the same as the Balance Sheet for the model set described and illustrated in Chapter VI, with the exception of additional accounts which have been explained in sub- +sequent chapters. The proprietorship is shown on the Balance Sheet as that part of its value is applicable to the business only as a going concern, hence are the least available of all the assets from the standpoint of those who might wish to extend credit to the business. The proprietorship is shown in one of two forms, similar to that shown by his capital account on the Trial Balance because his interest has been increased through the operations of the business; a proof of the correctness of the amount of this increase is shown in Illustration No. 94. As previously explained, the profit and loss account shows the net income and loss from sales less operating +liabilities, and his proprietorship in the business; it is a reported matter and is shown in one of two forms, as explained in Chapter VII. + +§ 220 The Statement of Profit and Loss in Illustration No. 93 was prepared from the data given in Illustration No. 91, showing income and the operating and non-operating expense accounts in the Trial Balance, Illustration No. 91. The information in this report is arranged in the following order: (1) gross sales (bal- +ance of Sales Account); (2) net sales from sales (returns and allowances deducted from the total sales); (3) net cost of purchases (less freight); (4) inventory plus debt side of the Purchases account plus balance of the Freight +in account, less the amount of the purchases returns and allowances); (4) net cost of goods sold (less freight); (5) gross profit on sales (which is equal to Gross +inventory, which is the same as the credit side of the Purchases account); (5) gross profit on sales (net returns from sales less net cost of merchandise sold); (6) operating cost +(total operating expenses less operating income); (7) net profit from operations (gross profit on sales less total operating cost); (8) other income (Interest Earned and Purchases Discount); (9) gross income (net +profit from operations less other income); (10) balance sheet items (Sales Less +Cost and Sales Discount). (11) net income (gross income less deductions from income); (12) distribution of the net income (that part of the profit which is to be credited to each partner's Capital account and to his Personal account for with- +drawals), and to show how much each partner received as a dividend. The ownership +of the business the net profit resulting from the operations of the business during +the fiscal period and the various facts in connection with this net profit which will be of importance to each partner are shown in Illustration No. 94. As a report +and may be prepared in one of two forms, as explained in Chapter VII. + +§ 221 The Proof in Illustration No. 94 shows that the proprietorship on +the Balance Sheet (Illustration No. 92) and the net profit on the Statement of Pro- +fit and Loss (Illustration No. 93) are correct. This proof is made possible by the con- +sistence of the bookkeeper before he submits his report to management, but need not be submitted as a part of the reports. The net profit on the Statement of +Profit and Loss, Illustration No. 93, is $34,364. The proprietary interest of each partner at any time during a fiscal period is shown by his Capital Account balance at +the end of that period. In Illustration No. 94, we see that at December 31st, +the proprietorship at that date was $52,197.32, which represents an increase from +the proprietorship at the end of the period shows an increase in proprietorship; in +the illustration it is $52,197.32 each, or $34,364 total. No facts set forth by +the Balance Sheet or Statement of Profit and Loss can be accepted as correct until +this proof has been made. +This proof is not necessary when the Working Sheet [§ 224] is prepared because the results are proved when the difference between the assets and liabilities columns is the same as the difference between the income and costs columns. + +ADJUSTING ENTRIES AND REPORTS 225 + +C.W. Keelands Co. +Statement of Profits and Losses for Year Ending December 31 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Revenues from sales:RevenuesNet Revenues
Less ReturnsLess ReturnsLess Returns
Allowances0.010.01
Net Revenues from sales0.010.01
Cost of Sales sold:Inventory Dec. 31, 1976Inventory Dec. 31, 1977
Purchased116.84116.84
Bought from117.09Supplies
Debtors, Liabilities and Differences0.050.05
Total Cost of Sales Turned In.223.97223.97
Inventory Dec. 31, 1977223.97223.97
Net Cost of Sales Sold.
Operating Expenses:
Dollars Expended:24,128
Dues and Beneficial Accounts5,835
Administrative Expenses:1,666
Building Expenses:17,679
Total Operating Expenses:20,174
Net Profit from Operations.
Other Income:
Interest Earned.
Interest Earned.
Total Other Income.
Total Other Income.
Deductions from Income:
Fines and Costs.
Sales Discount.
Total Deductions from Income.
Net Income.
Distribution:
C.W. Keelands, Capital.
C.W. Keelands, Personal.
G.O. Morrison, Capital.
G.O. Morrison, Personal.
Net Income Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.
Available for Distribution.C.W. Keelands Co. +Statement of Profits and Losses for Year Ending December 31 +Revenues from sales: +Revenues +Less Returns +Allowances +Net Revenues from sales +Cost of Sales sold: +Inventory Dec. 31, 1976 +Purchased +Bought from +Debtors, Liabilities and Differences +Total Cost of Sales Turned In. +Inventory Dec. 31, 1977 +Net Cost of Sales Sold +Operating Expenses: +Dollars Expended +Dues and Beneficial Accounts +Administrative Expenses +Building Expenses +Total Operating Expenses +Net Profit from Operations. +Other Income: +Interest Earned +Interest Earned +Total Other Income. +Total Other Income. +Deductions from Income: +Fines and Costs +Sales Discount +Total Deductions from Income. +Net Income. +Distribution: +C.W. Keelands, Capital +C.W. Keelands, Personal +G.O. Morrison, Capital +G.O. Morrison, Personal +Net Income Available for Distribution. +Illustration No. 93, Statement of Profit and Loss, "Report" Form + +226 + +ADJUSTING ENTRIES AND REPORTS + +Proof + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Net Profit (Statement of Profit and Loss)u39404
C.E. Recland
Shareholders' Capital (Balance Sheet) $750,000
Shareholders' Capital (Profit/Loss) $100,000
Decrease in Shareholders' Capital5197.83
W.D. Morrison
Shareholders' Capital (Balance Sheet) $1,000,000
Shareholders' Capital (Profit/Loss) $1,000,000
Increase in Shareholders' Capital1177.83
Total Increase in Shareholders' Capital1199.64
+ +Illustration No. 94, Proof of Net Profit + +§ 222. The Closing Entries in Illustration No. 95 were prepared from the Statement of Profit and Loss, Illustration No. 93. The purpose of these entries is to close all operating and non-operating income and expense accounts and to give each shareholder his share of the net profit for the period. The process of closing is the same as that explained in Chapter VIII with the exception of additional entries necessary because of additional accounts. The first entry closes the Sales Returns and Sales Allowances account into the Purchases account; the second entry closes the Cost of Goods Sold account into the Purchases account; the third entry, the Purchases Returns and Allowances account into the Purchases account; these three entries are identical with the second, third and fourth entries discussed in Chapter VIII. The seventh entry closes the non-operating income accounts into the Profit and Loss account and the non-operating expenses into this account; these two entries were not shown in the illustration in Chapter VIII because there were no non-operating incomes and no non-operating expenses. The ninth entry closes the Profit and Loss account into the appropriate capital accounts; this is equivalent to the fifth entry in Chapter VIII, the only difference being in the distribution of the net profit. The entry to place the value of the closing inventory—in this case, the 1922 Inventory—on the books is made by placing a debit to Cost of Goods Sold (Illustration No. 93) as a closing entry as in Chapter VIII (see note at § 57). A comparison of the discussion at this time with that given in Chapter VIII is made that the student may see that the method of closing is the same, the changes being due to the additional accounts and not to a change in the order of entries after the closing journal entries. + +(Concluded on page 228.) + +The journal entry method of closing the ledger, as shown in Illustration No. 95, is preferable because it provides in a book of original entry a record of each entry in the ledger and thus facilitates auditing. However, if desired, the closing entries may be made direct in the ledger; this plan is explained in Appendix B. + +ADJUSTING ENTRIES AND REPORTS 227 + +December 31, 19xx + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
13 Sales Returns10563019
14 Sales Allowances4191
Taxable thresholds: Returns and allowances accounts
15 Purchases73176871971
in Inventory711577
16 Freight In
To close the inventory and freight for accounts
17 Taxable thresholds: Returns and Allowances4118541185
or Sales Allowances
To close the taxable returns and allowances account
18 Sales18709181870918
or Purchases
To close the purchases account
19 Sales769327769327
or Profit and Loss
To close the sales account
20 Profit and Loss30174
or Selling Expenses
To close the selling expenses accounts
Account Code:Description:Amount:
2000:Profit and Loss:30174.00
2001:Selling Expenses:30235.00
2002:Administrative Expenses:3255.00
2003:Building Expands:3409.00
2004:To close the operating expenses accounts:
2005:Interest Earned:
2006:Earned Income:
2007:Profit and Loss:
2008:To close the operating expenses accounts:
+ +Illustration No. 95, Journal Entries to Close the Ledger—Continued + +228 +ADJUSTING ENTRIES AND REPORTS + +December 31, 1972 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
m Dorfich and Lied1675010405
H. F. Dorfich Cash6475
1972 Cash Disbursement
To close the non-operating reference accounts
31
m Dorfich and Lied089464
" C. H. Ireland, Capital"169335
" C. H. Ireland, Personal"500
" C. H. Ireland, Capital"169335
" C. H. Ireland, Personal"500
To close the Dorfich and Lied account.
+ +Illustration No. 95, Journal Entries to Close the Ledger—Concluded. + +(Continued from page 226.) + +have been posted to the accounts in the ledger and those accounts which are in balance ruled, the operating and non-operating income and expense accounts will be in balance and the Capital and Personal accounts of each partner will show his proprietary interest in the business. The Capital accounts of the partner should be balanced and ruled in the same manner as explained in Chapter VII-§ 223. + +§ 223. The Post-Closing Entries in Illustration No. 95 are required to close the Accrued Rent and Interest Earned and Interest Paid Accounts, as well as the Interest Earned and Interest Cost accounts, as explained in §§ 196 and 204. The Accrued Rent and Accrued Wages accounts are not closed because these obligations will be paid early in the next fiscal year (§ 200) and in one amount at that time. The above entries will result in the Interest Earned and Interest Cost accounts being in balance and the interest resulting from these accruals will be properly recorded in the two accounts with interest. + +December 31, 1972 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + " Interest Cost" + " To close the Accrued Interest Cost account." + " To close the Accrued Interest Cost account." + + +Illustration No. 96, Post-Closing Entries + +ADJUSTING ENTRIES AND REPORTS 259 + +§ 224. The Post-Closing Trial Balance in Illustration No. 97 was prepared from the ledger accounts after the entries in Illustrations Nos. 95 and 96 were posted. The purpose of this Trial Balance is to show that the ledger is in balance at the end of the fiscal period, thus enabling the bookkeeper to prepare a Trial Balance at the end of the first month in the next fiscal period. If the ledger is out of balance at the beginning of the fiscal period because of errors in closing or posting of entries, it will remain out of balance until the error is discovered and corrected. + +C.H. Keeland & Co. +Post-Closing Trial Balance December 31, 19XX + +
m Interest Earned17071707
Accrued Interest Earned
To close the Accrued Interest Earned account.
31
m Accrued Interest Cost11331133
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Cash1530.79
Notes Receivable1540.65
Accounts Receivable2338.01
Reserve for Doubtful Accounts317
Office Equipment480
Reserve for Depreciation of Office Equipment48
Saleable Features304
Reserve for Depreciation of Saleable Features2020
Delivery Equipment500
Reserve for Depreciation of Delivery Equipment600
Buildings3000
Reserve for Depreciation of Buildings90
Land4000
Office Supplies4043.3
Taxes Receivable4648
Pensions Payable2001.19
Pensions Payable - Non-Current Liabilities1757.97
Pensions Payable - Current Liabilities1681
Pensions Payable - Other Liabilities108
Pensions Payable - Other Liabilities - Capitalized Pensions - Personal Pensions - Capitalized Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal Pensions - Personal + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +Illustration No. 97, Post-Closing Trial Balance + +230 + +EXERCISE AND QUESTIONS + +**Exercise No. 80.** + +The following list of accruals, deferred items, reserves, and merchandise inventory, December 31, 1923, is applicable to the retail furniture business, Exercise No. 71, pages 184-77. + +(a) Merchandise in stock, $21,265.97. +(b) Interest accrued on notes receivable, $18.05. +(c) Interest accrued on notes payable, $1.85. Unpaid pay roll for one-half week; office employees, $25.00; selling department, $75.00. December garage rent unpaid, $25.00. +(d) Office supplies on hand, $125.07. Unexpired insurance: on merchandise, $41.42; on buildings, $42.10; on building, $33.42. +(e) Reserves for Depreciation: Office Equipment, 5%'; Delivery Equipment, 10%; Building, 25%'. +(f) Receivables Doubtful Accounts: 1/4% of sales (credit balance of Sales account). + +Follow instructions given below: + +1. Make the adjusting journal entries. +2. Post the ledger accounts in Exercise No. 71 and take a Trial Balance. +3. Prepare a Balance Sheet and a Statement of Profit and Loss, both in "report" form. (The profit is shared equally by the partners). +4. Record in the general journal the entries necessary to close the ledger. +5. Make the post-closing entries, post them, and take a post-closing Trial Balance. + +**QUESTIONS** + +1. Is it necessary for the bookkeeper or accountant to prepare the Balance Sheet first? + Why is the Balance Sheet usually prepared first and the Statement of Profit and Loss second? +2. What information does the management of the business obtain from (a) the Balance Sheet and (b) the Statement of Profit and Loss? +3. What is the distinction between (a) the adjusting entries and closing entries and (b) between the closing entries and post-closing entries? + Is it necessary to close the ledger at the end of the fiscal period? Give reason for answer. +4. If merchandise which cost $2,000.00 is inventoried at $1,500.00, what effect will this have on the net profit? + Why is it customary when taking stock to use the cost price of merchandise instead of the market price when the latter is greater than the former? +5. What effect would an error in closing the ledger have on the Trial Balances in subsequent periods? +6. How is the amount of accrued interest earned and accrued interest cost obtained? + +Chapter XXIII +PARTNERSHIP PROBLEMS + +The Purpose of this Chapter is to develop the principles discussed in the preceding chapters by means of problems requiring their application, and to illustrate the use of these principles in the preparation of financial statements for business conducted by partners; also to give additional practice in the preparation of the Balance Sheet and Statement of Profit and Loss for a partnership business. Each problem is treated as an exercise and numbered consecutively, following the preceding chapter. + +Exercise No. 81, Opening Entries. + +F. L. Burke, R. S. Cooke, and C. B. Summers form a partnership for the purpose of transporting freight between cities. F. L. Burke and R. S. Cooke have been operating independent lines but wish to consolidate; C. B. Summers is admitted as a partner because of the additional cash capital needed for the operation of the consolidated business. + +Mr. Burke invests the present assets of his business, consisting of the following: three trucks, cost price $2,500.00 each; depreciation on trucks, $750.00; accounts receivable, $1,251.50; reserve for doubtful accounts, $161.30; notes receivable, $500.00; cash in bank, $1,500.00; notes payable, $1,500.00; and stock issued at the following liabilities: accounts payable, $327.60; a note for $1,000.00 payable at the First National Bank; accrued interest on the note, $8.50. + +Mr. Cooke invests the present assets of his business, consisting of the following: three trucks, cost price $1,650.00 each; depreciation on trucks, $1,320.00; office equipment, $350.00; depreciation on office equipment, $35.00; accounts receivable, $762.50; reserve for doubtful accounts, $84.70; check on the City National Bank, $4,323.15. + +Mr. Summers invests cash in the partnership amounting to $75,500.00. + +Prepare in journal form, under date of July 1, the entries necessary to open the books of the new partnership. Debit an account with Trucks with the present value of the trucks invested. + +Exercise No. 82, Opening Entries. + +W. H. Rankin and Chas. O. Watkins form a partnership for the purpose of engaging in the mail shoe business. Mr. Rankin invests his present stock of goods amounting to $876.75; he has a note due him from customers for $276 for bad debts; a note he owes for $375.60; accrued interest on this, $376; office equipment, cost value, $417.65; depreciation on the same, $4477.; store fixtures $656.00; depreciation on the same, $656.00; cash in bank to his credit, $4,128.65; he has a note due him from customers for $176.75. + +Mr. Watkins invests cash, $2,000.00; a note in his favor, $1,500.00; and accrued interest on this note, $27.65. + +In preparing these entries on date of February 1, the entries required to record the investment of the partners. + +231 + +232 +PARTNERSHIP PROBLEMS + +Exercise No. 83, Opening Entries. + +W. H. Armstrong and C. L. Whittle form a partnership for the purpose of engaging in the retail hardware business. Mr. Armstrong invests cash in the bank, $387.62; merchandise in stock, $2,438.20; personal accounts due him, $972.40; reserve for bad debts, 2%; office equipment, cost value, $500.00; depreciable property, cost value, $150.00; accrued interest on the same, $47.50; notes receivable, $975.27; accrued interest on the same, $56.20. +The partnership assumes personal accounts which he owes, $942.76; a note due the First National Bank of Chicago, $1,427.86; merchandise in stock, $1,350.48; personal accounts due him, $843.65; less 2% for bad debts; delivery equipment, cost value, $850.00; depreciation on the same, $85.00; notes receivable due him, $1,265.74; accrued interest on the same, $852.37. +The partnership assumes personal accounts which he owes, $953.40; a note due the City National Bank, $500.00. + +Prepare in journal form, under date of October 1, the entries required to record the investment of the partners. + +Exercise No. 84, Transactions Affecting Partners' Capital Accounts. + +1. Record direct in the capital accounts the following transactions relating to the investments and withdrawals of L. B. Audigier, M. B. Griffin and C. B. Carter, in the real estate business: + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
+
+
+
+
+
+ + +2. December 31, the net profit, as shown by the Statement of Profit and Loss was $4,369. The make the entry to transfer this to their capital accounts assuming that profits are to be shared equally. + +3. January 1 of the following year, the business was sold for $24,169. +Show the division of this cash between the partners according to each partner's net investment. + +Exercise No. 85, Consolidation of Two Partnerships. + +E.F.Penn and G.W.Penn are partners operating a retail grocery business in one locality and F.V.Knight and H.O.Penn are partners operating the same line of business in another locality. +It is agreed to form a partnership, consolidating + +PARTNERSHIP PROBLEMS +233 + +the two businesses. Each partner is to invest $5,000.00 and share equally in the profits of the new business. The Trial Balance taken from the ledgers of the two concerns after the books were closed April 30, 192... are as follows: + +**PENN BROS. Post-Closing Trial Balance, April 30, 192...** + +
Jan.1.Each partner invested $3,000.00; 28.L. B. Audigier withdrew
Feb.1.M. B. Griffin invested $1,200.00; 24.C.B.Carter invested $1,500.00;
Mar.1.L.B.Audigier invested $2,500.00;8.M.B.Griffin invested $1,500.00;
12.C.B.Carter withdrew $1,265.25;16.M.B.Griffin invested $1,500.00;
17.L.B.Audigier withdrew $1,342.86;19.M.B.Griffin withdrew $1,500.00;
Apr.15.The firm accepted real estate belonging to L.B.Audigier valued at$1,812.63;
$1,812.63;22.M.B.Griffin withdrew $1,265.91;
July.1.L.B.Audigier withdrew $500.00.
Aug.1.M.B.Griffin withdrew $1,342.86;36.L.B.Audigier invested
19.M.B.Griffin invested $1,500.00;$375.79;
Sept.1.C.B.Carter invested $852.37;39.C.B.Carter withdrew $1,500.00;
Oct.5.M.B.Griffin withdrew $1,500.00;41.L.B.Audigier withdrew
$1,500.00;$1,500.00;
Nov.
M.B.Griffin invested $1,265.91;
C.B.Carter invested $1,500.00;
L.B.Audigier invested $1,500.00;
Dec.
C.B.Carter withdrew $250.00;
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
+
Cash:308.47
Notes Receivable:364.30
Accounts Receivable:1,094.30
Reserve for Bad Debts:34.20
Merchandise Inventory:1,275.45
Accrued Interest Earned:611
Furniture and Fixtures:209.00
Reserve for Depreciation of Furniture and Fixtures:-29.50
Buildings:4,000.00
Reserve for Depreciation of Buildings:200.00
Land:2,869.85
Inventories:1,967.85
Notes Payable:-331.10
Accounts Payable:-101.27
Accrued Interest Cost:-35.65
Accrued Rent:-74.69
E. F. Penn, Capital:5,635.99
E. F. Powell, Capital:-1,041.35
G. W. Penn, Capital:5,427.43
G. W. Penn, Personal:852.26
12,966.7712,966.77
+ +**KNIGHT & POWELL Post-Closing Trial Balance, April 30, 192...** + + + + + + + + + + + + + + + + + + + +
+
Cash:-2,869.85
Accounts Receivable:-3,748.16
Inventories:4,800.00
Furniture and Fixtures:375.00
Reserve for Depreciation of Furniture and Fixtures:487.5
Delivery Equipment:1,850.00
Reserve for Depreciation of Delivery Equipment:375.00
Inventories:366.84
Office Supplies:414.17
Notes Payable:1,091.65
Accounts Payable:-14,347.0
Accrued Interest Cost:-16.17
Accrued Rent:-175.00
E. F. Knight, Capital:-4,396.56
E. F. Knight, Personal:-375.
O. Powell, Capital:-3,846.56
O. Powell, Personal:-3953.
13,958.1213,958.12
+ +(1) Prepare the journal entries to open the books of the new partnership. +Debit the fixed asset accounts for their net invested value. + +(2) Prepare the journal entries to close the partners' personal accounts into their capital accounts. + +(3) Show in journal form the entries necessary to record the additional cash investment of three of the partners and the withdrawal of cash from investment by one partner, in order to make the net investment of each equal to $5,000.00, +the amount agreed upon. + +A table showing the post-closing trial balance for Penn Bros., including cash, notes receivable, accounts receivable, reserve for bad debts, merchandise inventory, accrued interest earned, furniture and fixtures, reserve for depreciation of furniture and fixtures, buildings, reserve for depreciation of buildings, land, inventories, notes payable, accounts payable, accrued interest cost, accrued rent, E.F.Penn's capital and personal accounts; G.W.Penn's capital and personal accounts; O.Powell's capital and personal accounts. + +A table showing the post-closing trial balance for Knight & Powell including cash, notes receivable, accounts receivable, inventories; furniture and fixtures; delivery equipment; inventories; office supplies; notes payable; accounts payable; accrued interest cost; accrued rent; E.F.Knight's capital and personal accounts; O.Powell's capital and personal accounts. + +A table showing the post-closing trial balance for Knight & Powell including cash; notes receivable; accounts receivable; inventories; furniture and fixtures; delivery equipment; inventories; office supplies; notes payable; accounts payable; accrued interest cost; accrued rent; E.F.Knight's capital and personal accounts; O.Powell's capital and personal accounts. + +A table showing the post-closing trial balance for Knight & Powell including cash; notes receivable; accounts receivable; inventories; furniture and fixtures; delivery equipment; inventories; office supplies; notes payable; accounts payable; accrued interest cost; accrued rent; E.F.Knight's capital and personal accounts; O.Powell's capital and personal accounts. + +A table showing the post-closing trial balance for Knight & Powell including cash; notes receivable; accounts receivable; inventories; furniture and fixtures; delivery equipment; inventories; office supplies; notes payable; accounts payable; accrued interest cost; accrued rent; E.F.Knight's capital and personal accounts; O.Powell's capital and personal accounts. + +A table showing the post-closing trial balance for Knight & Powell including cash; notes receivable; accounts receivable; inventories; furniture and fixtures; delivery equipment; inventories; office supplies; notes payable; accounts payable; accrued interest cost; accrued rent; E.F.Knight's capital and personal accounts; O.Powell's capital and personal accounts. + +A table showing the post-closing trial balance for Knight & Powell including cash; notes receivable; accounts receivable; inventories; furniture and fixtures; delivery equipment; inventories; office supplies; notes payable; accounts payable; accrued interest cost; accrued rent; E.F.Knight's capital and personal accounts; O.Powell's capital and personal accounts. + +A table showing the post-closing trial balance for Knight & Powell including cash; notes receivable; accounts receivable; inventories; furniture and fixtures; delivery equipment; inventories; office supplies; notes payable; accounts payable; accrued interest cost; accrued rent; E.F.Knight's capital and personal accounts; O.Powell's capital and personal accounts. + +A table showing the post-closing trial balance for Knight & Powell including cash; notes receivable; accounts receivable; inventories; furniture and fixtures; delivery equipment; inventories; office supplies; notes payable; accounts payable; accrued interest cost; accrued rent; E.F.Knight's capital and personal accounts; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trial balance for Knight & Powell including cash; + +A table showing the post-closing trail + +234 +PARTNERSHIP PROBLEMS + +Exercise No. 86, Admission of a Partner. + +D. P. Winters and L. S. French are partners operating a drug business under the firm name of Winters & French. They are admitted to the partnership with S. M. Smiley who is operating a drug store as an individual. The assets, liabilities and pro- prietorship of the partnership and of the individual are shown below: + +**WINTERS & FRENCH Post-Closing Trial Balance, June 30, 192** + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Cash...5,979.76
Inventory—Drugs...4,458.10
Inventory—Merchandise1,000.00
Office Equipment...300.00
Reserve for Depreciation of Office Equipment27.50
Store Fixtures...850.00
Reserve for Depreciation of Store Fixtures85.00
Soda Fountain Equipment...500.00
Reserve for Depreciation of Soda Fountain Equipment25.00
Office Supplies...66.40
Soda Fountain Supplies137.85
Income Tax Payable...23.65
Notes Payable...6,330.00
Accounts Payable...234.62
Accrued Interest Cost...300.00
Acquired Assets...1,500.00
D. P. Winters, Capital...2,349.52
L. S. French, Capital...2,349.52
+ +12,052.96 +12,052.96 + +**SMILEY'S PHARMACY Post-Closing Trial Balance, June 30, 192** + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
+ Reserves for Depreciation of Soda Fountain Equipment
+ Soda Fountain Supplies
+ Reserve for Depreciation of Soda Fountain Equipment
+ Income Tax Payable.
Cash...7,444.65
Notes Receivable...236.27
Accounts Payable.-194.35
Reserve for Bad Debts.-15.15
Inventories—Merchandise.-15.15
Inventories—Merchandise.-434.71
Accrued Interest Earned.-241.85
Accrued Interest Cost.

+
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PARTNERSHIP PROBLEMS
Exercise No. 86, Admission of a Partner..                                                D.P.Winters and L.S.French are partners operating a drug business under the firm name of Winters & French.  They are admitted to the partnership with S.M.Smiley who is operating a drug store as an individual.  The assets, liabilities and proprietorship of the partnership and of the individual are shown below:                                         &nbsp;&nbsp;
+		WINTERS & FRENCH Post-Closing Trial Balance, June 30, 192
+
+
+
+
+
+
+
+
+
+
+
+
+
+ + + + + + + Sale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale AmountSale DescriptionSale Amount + +
Merchandise Inventory, March 15, 19--$12,894.35.
Accrued interest on notes receivable, $872.62.
Accrued interest on notes payable, $3626.2.
Unpaid Wages: setting department, $460.00; office, $360.00.
Unpaid Wages: insurance expense, $673.84.
One-half of expired insurance is on merchandise and one-half on furniture and fixtures; one-fourth is applicable to administrative expense and three-fourths to selling expense.
Office supplies: inventory and allowance for obsolescence and deterioration of furniture and fixtures; one-fourth is applicable to administrative expense and three-fourths to selling expense.
Advertising material on hand per inventory, $2657.27.
Depreciation of furniture and fixtures is $75 per month; this is applicable to administrative expense and three-fourths to selling expense.
Reserve for Doubtful Accounts, one-twelfth of 1% of net sales.
$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,668.39$6,6 +
+ +Prepare (1) the adjusted entries required by the Trial Balance from the ledger after these entries are posted; (2) the Balance Sheet; (3) The Statement of Profit and Loss; (4) the closing entries; (a) the post-closing entries; and (b) the post-closing Trial Balance after all these entries are posted. +April 1 the administrator accepted $5000 cash in full settlement for Mr. Abbott's interest in the business. +Record this transaction in journal form. + + +
+ + + <% + var table = document.getElementsByTagName("table")[0]; + var rows = table.rows; + var cols = table.columns; + var totalRows = rows.length; + var totalCols = cols.length; + + // Loop through each row + for (var i = 1; i < totalRows; i++) { + // Loop through each column + for (var j = 1; j < totalCols; j++) { + // Get the cell value + var cellValue = rows[i].cells[j].textContent.trim(); + + // Check if the cell value is empty + if (cellValue === "") { + // Remove the empty cell + rows[i].removeChild(rows[i].cells[j]); + } + } + } + %> + + + + <% + var table = document.getElementsByTagName("table")[0]; + var rows = table.rows; + var cols = table.columns; + var totalRows = rows.length; + var totalCols = cols.length; + + // Loop through each row + for (var i = 1; i < totalRows; i++) { + // Loop through each column + for (var j = 1; j < totalCols; j++) { + // Get the cell value + var cellValue = rows[i].cells[j].textContent.trim(); + + // Check if the cell value is empty + if (cellValue === "") { + // Remove the empty cell + rows[i].removeChild(rows[i].cells[j]); + } + } + } + %> + + <% + var table = document.getElementsByTagName("table")[0]; + var rows = table.rows; + var cols = table.columns; + var totalRows = rows.length; + var totalCols = cols.length; + + // Loop through each row + for (var i = 1; i < totalRows; i++) { + // Loop through each column + for (var j = 1; j < totalCols; j++) { + // Get the cell value + var cellValue = rows[i].cells[j].textContent.trim(); + + // Check if the cell value is empty + if (cellValue === "") { + // Remove the empty cell + rows[i].removeChild(rows[i].cells[j]); + } + } + } + %> + + <% + var table = document.getElementsByTagName("table")[0]; + var rows = table.rows; + var cols = table.columns; + var totalRows = rows.length; + var totalCols = cols.length; + + // Loop through each row + for (var i = 1; i < totalRows; i++) { + // Loop through each column + for (var j = 1; j < totalCols; j++) { + // Get the cell value + var cellValue = rows[i].cells[j].textContent.trim(); + + // Check if the cell value is empty + if (cellValue === "") { + // Remove the empty cell + rows[i].removeChild(rows[i].cells[j]); + } + } + } + %> + + <% + var table = document.getElementsByTagName("table")[0]; + var rows = table.rows; + var cols = table.columns; + var totalRows = rows.length; + var totalCols = cols.length; + + // Loop through each row + for (var i = 1; i < totalRows; i++) { + // Loop through each column + for (var j = 1; j < totalCols; j++) { + // Get the cell value + var cellValue = rows[i].cells[j].textContent.trim(); + + // Check if the cell value is empty + if (cellValue === "") { + // Remove the empty cell + rows[i].removeChild(rows[i].cells[j]); + } + } + } + %> + + <% + var table = document.getElementsByTagName("table")[0]; + var rows = table.rows; + var cols = table.columns; + var totalRows = rows.length; + var totalCols = cols.length; + + // Loop through each row + for (var i = 1; i < totalRows; i++) { + // Loop through each column + for (var j = 1; j < totalCols; j++) { + // Get the cell value + var cellValue = rows[i].cells[j].textContent.trim(); + + // Check if the cell value is empty + if (cellValue === "") { + // Remove the empty cell + rows[i].removeChild(rows[i].cells[j]); + } + } + } + %> + + <% + var table = document.getElementsByTagName("table")[0]; + var rows = table.rows; + var cols = table.columns; + var totalRows = rows.length; + var totalCols = cols.length; + + // Loop through each row + for (var i = 1; i < totalRows; i++) { + // Loop through each column + for (var j = 1; j < totalCols; j++) { + // Get the cell value + var cellValue = rows[i].cells[j].textContent.trim(); + + // Check if the cell value is empty + if (cellValue === "") { + // Remove the empty cell + rows[i].removeChild(rows[i].cells[j]); + } + } + } + %> + + <% + var table = document.getElementsByTagName("table")[0]; + var rows = table.rows; + var cols = table.columns; + var totalRows = rows.length; + var totalCols = cols.length; + + // Loop through each row + for (var i = 1; i < totalRows; i++) { + // Loop through each column + for (var j = 1; j < totalCols; j++) { + // Get the cell value + var cellValue = rows[i].cells[j].textContent.trim(); + + // Check if the cell value is empty + if (cellValue === "") { + // Remove the empty cell + rows[i].removeChild(rows[i].cells[j]); + } + } + } + %> + + <% + var table = document.getElementsByTagName("table")[0]; + var rows = table.rows; + var cols = table.columns; + var totalRows = rows.length; + var totalCols = cols.length; + + // Loop through each row + for (var i = 1; i < totalRows; i++) { + // Loop through each column + for (var j = 1; j < totalCols; j++) { + // Get the cell value + var cellValue = rows[i].cells[j].textContent.trim(); + + // Check if the cell value is empty + if (cellValue === "") { + // Remove the empty cell + rows[i].removeChild(rows[i].cells[j]); + } + } + } + %> + + <% + var table = document.getElementsByTagName("table")[0]; + var rows = table.rows; + var cols = + +236 +PARTNERSHIP PROBLEMS + +Exercise No. 89, Trial Balance, Statements and Ledger Closing. +On December 31, 1922, the accounts in the ledger of T. B. Austin & Co. show the following balances: + +
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +














































Cash$8,200.00
Notes Receivable.1,480.00
Accounts Receivable.10,800.00
Reserve for Accounts Receivable.500.00
Furniture and Fixtures.800.00
Res. for Dep. of Furn. and Fix.200.00
Delivery Equipment.2,200.00
Res. for Dep. of Deli. Equipment.1,500.00
Buildings.3,000.00
Res. for Dep. of Buildings.300.00
Land.35,750.00
Insurance.290.00
Office Supplies.474.49
Advertising Material.197.95
Xeres Payable.5,000.00
Accounts Payable.11,000.00
T. B. Austin, Capital.16,800.00
A: Bldg., Capital.1,555.00
Sales.48,000.00
1921 Inventory3,300.00
Purchases.3,355.00
Freight and Drayage In.-3,450.00
Buying Expense.-96.00
Selling Expense.-765.85
Delivery Expense.-1,245.85
Administrative Expense.-2,275.85
Income Taxes Receivable.-378.75
+ + + + + +
(a) (1922 inventory, $28,769.25)
+ + + +(b) Accrued interest on notes receivable, $25.6o. + + + +(c) Accounts Receivable: Notes Payable, $31.8o. + + + +(d) Unpaid pay roll: office, $126.oo; selling department, $1675; delivery equipment, $65.95; advertising material, $65.95; + + + +(e) Expired insurance: furniture and fixtures, $1675; delivery equipment, $65.95; advertising material, $65.95; + + + +(f) Supplies used: office supplies, $39345; advertising material, $716.o; + + + +(g) Reserve for depreciation: furniture and fixtures, $5%; delivery equipment, $6%; buildings, $2%; + + + +(h) Reserve for Doubtful Accounts: $1% of accounts receivable, + + + +(i) Make the entries to close the ledger. + + + +(j) Make the necessary post-closing entries. + + + +(k) Prepare a Balance Sheet and Statement of Profit and Loss assuming that the business is operated by two partners. + + + +(l) Prepare a profit-sharing Trial Balance. + +Exercise No. 96, Changing from a Partnership to a Sole Proprietorship. +Ammon and Banbury are partners operating a motion picture theater. +Neither receives a salary; the profit being shared equally at the end of the year. + + + + + +
Cash
+ + + +Notes Receivable. + + + +Accounts Receivable. + + + +Reserve for Accounts Receivable. + + + +Furniture and Fixtures. + + + +Reserve for Dep of Furn and Fix. + + + +Delivery Equipment. + + + +Reserve for Dep of Deli Equipment. + + + +Buildings. + + + +Reserve for Dep of Buildings. + + + +Land. + + + +Insurance. + + + +Office Supplies. + + + +Income Taxes Receivable. + + + +Purchases. + + + +Freight and Drayage In. + + + +Buying Expense. + + + +Selling Expense. + + + +Delivery Expense. + + + +Administrative Expense. + + + +Income Taxes Payable (Note). + + + +Purchase Discount (Note). + + + +Purchase Interest on Notes Payable (Note). + + + +Purchase Discount on Sales (Note).> + + + + +  Amounts ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($)  Balance ($) &lt;br/> + + +
DescriptionDescriptionDescription +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description +Description + +PARTNERSHIP PROBLEMS 237 + +Ammon receives injuries in an automobile accident which necessitate his retir- +ing from active management. Banbury wishes to continue his connection with +the business but does not wish to assume any responsibility on his own respon- +sibility. It is agreed that Ammon shall buy Banbury's interest as shown in the +ledger, payable one-half cash and one-half note, and that he shall retain Banbury +as manager until the end of the year. The partners' accounts appear in the ledger as follows: +Ammon, Capital, Cr., $15,000.00; Ammon, Personal, Dr., $550.00; Banbury, Capital, Cr., $1,500.00; +Banbury, Personal, Dr., $1,500.00; Ammon's share of net profits for the year is $6,000. +Statements prepared December 31 show that the net profit for the year is $6,000. + +1. Make the entries in journal form (a) to transfer the net profit to the partner's capital accounts; (b) to close Banbury's personal account into his capital account; (c) record the note and interest given by Ammon in payment for Ban- +bury's interest. + +2. Assuming that the net profit for the first year after the agreement was +effective is $6,000, (a) record in journal form the distribution of this net profit; +(b) compare the compensation received by each under the partnership agreement +and under the new agreement, stating whether it was more or less under the latter than under the former. + +**Example No. 91. Accruals and Deferred Items.** + +At the close of the fiscal period April 10, the accruals and deferred items to be recorded on the books of Binner & Johnson are as follows: + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Interest accrued on notes receivable$275.60
Interest accrued on notes payable218.65
Taxes assessed (Administrative Expense)214.40
Wages unpaid
Administrative division of the office116.50
Purchasing division of the office35.99
Selling division of the office231.95
Clerks clerks in store310.00
Divers of delivery trucks125.60
Rent for month's pay in advance April130.00
Insurance:
865.40
332.59
230.00
207.90
75.75
107.59
Material:
721.65
119.60
853.89
144.99
Total stamps purchased per Stamps account801.59
Total stamps used in advertising department-38.98
-261.08
+ +1. Make the adjusting entries (a) to record the accrued assets and liabilities. + (b) to record prepaid rent in the proper account; (c) to transfer the expired + insurance to the proper operating account; (d) to transfer all other accrued material + used to the proper operating accounts. + +2. Make the post-closing entries to transfer the accrued assets and liabilities + and the prepaid expense in (a) and (b) above, to the proper operating accounts, + under date of April 11. + +A table showing accruals and deferred items. + +235 + +QUESTIONS + +QUESTIONS + +1. (a) What account is credited for that part of the profit which is to be with- +drawn by a partner? (b) What account is credited for that part which is to be left with the business? +2. Robert Johnson invests $5,000.00 and withdraws $1,200.00; James Carrel invests $4,000.00 and withdraws $800.00. The business is sold for $10,500.00 cash. How much of this cash will each partner receive, the profit and cash to be divided in the same proportion as the net investment. +3. If an individual earns by a partnership his commission on his services are debited direct to his capital account, what effect will this have on (a) the operating cost of the business and (b) on the net profit of the business? +4. If there are three partners in the business and one of them sells his interest in the business for one of the other partners' share, what entry will be required to record this sale? (b) If he sells to the other two partners, rent and payment is made from the assets of the partnership, what entry will be made? +5. If there are three partners in a business and one of them (with the consent of the others) sells his interest for part cash and part note to a person who is not connected with the firm, what entry will be required to record this transaction? +6. If a partnership business composed of two partners has been operated at a loss of $4,000.00 during the fiscal period, and the two partners, who share this loss equally, each invests $1,500.00 cash and has $500.00 debited to his personal account to cover this loss, what entry will be made to record the transaction? +7. If the profit resulting from the operations of a partnership business during a fiscal period is $6,000.00 and the two partners agree to withdraw all of this one-half share of their profits, what entries will be necessary to record the partnership as "Real Estate, $2,750.00" as his share of the profit and the other accepting $3,000.00 cash as his share, how will the transaction be recorded? +8. One of the partners is to receive five per cent of the total sales as his com- +pensation for services rendered the partnership, maintaining his own auto- +mobile for use in calling on customers. At the close of the business year +the total sales amounting to $14,500.00 are debited to Sales Account and shows a debit balance of $4,999.99 for amounts withdrawn on account of commission. +What entries will be required to record the commission and the check paid him for the balance of his commission? +9. J. C. Bridges and L. W. Peart are partners in a mercantile business. At the close of the business year, his personal account shows a credit balance of $1,400.00 for amounts advanced to the partnership and for salary during the year. +He agrees to receive a commission in advance equal to 15 per cent of profits by the partnership at the beginning of the previous fiscal period for $185.00 as recorded in the Delivery Equipment account, and depreciated at the rate of ten per cent for each fiscal period. What entries are necessary to record this transaction? +10. T. B. Bridges and L. W. Peart are partners in a mercantile business. At +the close of the fiscal period Mr. Bridges' capital account shows a credit balance of $1,452.56; Mr. Peart's capital account shows a credit balance of $5,322.56; Mr. Peart pays Mr. Bridges $3,500.00 cash for one-half of his interest in the business, thus giving Mr. Peart a three-fourths interest and Mr. Bridges a one-fourth interest. +What entry is necessary to record this transaction? + +Chapter XXIV + +CONSIGNMENTS + +The Purpose of this Chapter is to explain the method of recording transactions affecting merchandise sold by one party to another. It is intended to illustrate, through the practice set, some of the transactions performed by a commission business. While the tendency in modern business is to buy and sell, yet there are many cases in which it is to the advantage of all parties that the transaction shall be made by consignment. + +§ 225. A Consignment is merchandise sent by the owner to another to be sold for the owner. The owner of the merchandise sent as a consignment is known as the consignor and the one to whom the merchandise is sent as the consignee. The consignment is at the risk of the consignor and belongs to him until it is sold by the consignee. + +The consignee consigns the merchandise to the consignee; the consignee sells the merchandise and pays for it; he then sends back to the consignor all of his goods after all merchandise in the consignment has been sold. The consignee may have in his possession more than one consignment at any time, but a separate record is kept of the sales of the merchandise in each consignment. + +§ 226. The Relation of the Consignor and Consignee is that of principal and agent. The agent must follow the instructions of the principal in regard to the sale of his merchandise. In order that he may do so, regardless of any specific agreement in regard to the method of sale, the agent is supposed to follow the trade custom of the business in which he is engaged. The agent should exercise due care in handling and selling his principal's merchandise and must take the same care of it; otherwise, he will be responsible for any damage that may occur through his negligence. + +§ 227. Compensation of Consignee. The consignee receives a fee for the sale of merchandise on consignment; this fee is referred to as commission and is based on a agreed percentage of such sales. The commission is the consignee's profit, that is, his income from the services rendered in connection with selling consigned goods. A profit will accrue to the consignor if he receives from the consignee a reasonable compensation for his services in connection with sales. + +§ 228. Purpose of Consignments. Merchandise is consigned because its nature is such that the consignor does not wish to purchase it or because the consignor believes that it will be to his advantage to offer it for sale on consignment. + +It is important that a merchant should know what class of merchandise may be offered for sale on consignment, and are not given to convey the idea that such merchandise is always sold in this manner. Trade customs and normal conditions govern, to a large extent, the marketing of all classes of merchandise. + +§ 229. Business Forms and Accounts. The business forms required in connection with a consignment consist of those of shipment, receipt, bill of lading, invoice, bill of lading, bill of exchange, bill of lading, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill of exchange, bill + +240 +CONSIGNMENTS + +that the title to the merchandise shipped on consignment remains in the shipper while the title to merchandise sold passes to the purchaser. Illustration No. 98 shows one form of invoice of shipment. + +**Invoice of Shipment.** + + + + + + + + + + + + + + + + + + +
Invoice of ShipmentJun 18, 19
Shipped via:Consigned to:
216 Main St., Birminghamto be sold for account and risk of
C. W. KEELAND & CO., Consignor.
+ +Illustration No. 98, Invoice of Shipment. + +§ 231. The Account Sales is the business form used by the consignee for reporting to the consignor the sales and expenses in connection with the consignment. The information shown in it consists of the date, name and address of the + + + + + + + + + + + + + + + + + + + + + + + + + + +
Account Sales
M. Southern Transportation Co.
Address: Atlanta
Below please find account sales of
200,000 cases Birmingham
Sold to: Thompson-Wilson Commission Merchant
Received July 19 and sold for account of
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
DATESCUMULATIVETOTAL AMOUNTDATESSOLDER'S NAMETOTAL AMOUNT
July 19Freight$30.00July 19W. Thompson-Wilson$30.00
July 19Freight$30.00July 19W. Thompson-Wilson$30.00
July 19Purchase Returns$300.00July 19W. Thompson-Wilson$300.00
Advertising
Freight$2.18
Purchase Returns$300.00
Commissioner's Commission
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +                                                               + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + +   + + &nbsp;... + +
+ +
+ + 18 **Materials Receivable Discounted at 8%** + + 19 **Invoices Turned In: Merchandise** + + 20 **Cumulative Allowance for full refund:** + + 21 **Materials Receivable Discounted at 8%** + + 22 **Invoices Turned In: Merchandise** + + 23 **Cumulative Allowance for full refund:** + + 24 **Materials Receivable Discounted at 8%** + + 25 **Invoices Turned In: Merchandise** + + 26 **Cumulative Allowance for full refund:** + + 27 **Materials Receivable Discounted at 8%** + + 28 **Invoices Turned In: Merchandise** + + 29 **Cumulative Allowance for full refund:** + + 30 **Materials Receivable Discounted at 8%** + + 31 **Invoices Turned In: Merchandise** + + 32 **Cumulative Allowance for full refund:** + + 33 **Materials Receivable Discounted at 8%** + + 34 **Invoices Turned In: Merchandise** + + 35 **Cumulative Allowance for full refund:** + + 36 **Materials Receivable Discounted at 8%** + + 37 **Invoices Turned In: Merchandise** + + 38 **Cumulative Allowance for full refund:** + + 39 **Materials Receivable Discounted at 8%** + + 40 **Invoices Turned In: Merchandise** + + 41 **Cumulative Allowance for full refund:** + + 42 **Materials Receivable Discounted at 8%** + + 43 **Invoices Turned In: Merchandise** + + 44 **Cumulative Allowance for full refund:** + + Central Hotel + + +Illustration No. 101, Receipts Side of Cash Book. + +EXPLANATION. The ruling is similar to that in Illustration No. 29, except that two special columns are used, one for cash sales of merchandise and the other for cash sales of merchandise from stock. Each amount entered in the "Consignment Ledger, Cr." column is posted to the credit of an account in the consignment ledger. The balance of this column is passed to the credit of the Consignment Ledger account in the general ledger at the end of the month. + +STORAGE ACCOUNT + +§ *23.* The Purpose of this Account is to record the storage charges on consigned merchandise. These charges are made by the consignor for the space occupied by the merchandise belonging to the consignee. This storage charge is based on the rent cost to the consignee. + +Debit the Storage Account: + +* For allowances which reduce the income from storage as shown by the credit to this account. +* For the amount deducted as storage from the sales of each consignment until the account sales is rendered. + +Credit the Storage Account: + +* For the amount deducted as storage from the sales of each consignment until the account sales is rendered. + +§ *24.* The Balance of the Storage Account shows the income from storage. It is shown as one of the non-operating incomes on the Statement of Profit and Loss. If desired, the credit to the Storage Account may be shown on the Statement of Profit and Loss as a deduction from the cost of rent. + +The break indicates a number of entries omitted. + +CONSIGNMENTS 243 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
DateAccount Debited.ExplanationGeneral LedgerCash LedgerPurchases Dr.
1Consignment No. 102.Illustration No. 102, Payments Side of Cash Book.
2Consignment No. 103.EXPLANATION: The ruling is similar to that in Illustration No. 30, except that two special columns are provided, one for accounts in the consignment ledger and the other for cash purchases of merchandise. Each amount entered in the "Consignment" column is posted to the debit of the Consignment account in the general ledger at the end of the month. The ruling, which will be a credit, may be shown on the Statement of Profit and Loss as a non-operating income or as a deduction from the total cost of drayage.
3Consignment No. 104.Illustration No. 104, Payments Side of Cash Book.
4Consignment No. 105.DRAYAGE ACCOUNT
5Consignment No. 106.This is a practice set without vouchers consisting of the transactions for two months, performed by Thompson & Streem partners engaged in the commission business. The transactions are separate from the text and are included with the books of account necessary to record them. The purpose of this set is to provide practice in recording transactions peculiar to a commission business.
COMMISSION SET
DescriptionDateAccount Debited.ExplanationGeneral LedgerCash LedgerPurchases Dr.
Illustration No. 102, Payments Side of Cash Book.
EXPLANATION: The ruling is similar to that in Illustration No. 30, except that two special columns are provided, one for accounts in the consignment ledger and the other for cash purchases of merchandise. Each amount entered in the "Consignment" column is posted to the debit of the Consignment account in the general ledger at the end of the month. The ruling, which will be a credit, may be shown on the Statement of Profit and Loss as a non-operating income or as a deduction from the total cost of drayage.
DRAYAGE ACCOUNT
This is a practice set without vouchers consisting of the transactions for two months, performed by Thompson & Streem partners engaged in the commission business. The transactions are separate from the text and are included with the books of account necessary to record them. The purpose of this set is to provide practice in recording transactions peculiar to a commission business.
COMMISSION SET
DescriptionDateAccount Debited.ExplanationGeneral LedgerCash LedgerPurchases Dr.
Illustration No. 102, Payments Side of Cash Book.
EXPLANATION: The ruling is similar to that in Illustration No. 30, except that two special columns are provided, one for accounts in the consignment ledger and the other for cash purchases of merchandise. Each amount entered in the "Consignment" column is posted to the debit of the Consignment account in the general ledger at the end of the month. The ruling, which will be a credit, may be shown on the Statement of Profit and Loss as a non-operating income or as a deduction from the total cost of drayage.
DRAYAGE ACCOUNT
This is a practice set without vouchers consisting of the transactions for two months, performed by Thompson & Streem partners engaged in the commission business. The transactions are separate from the text and are included with the books of account necessary to record them. The purpose of this set is to provide practice in recording transactions peculiar to a commission business.
COMMISSION SET
DescriptionDateAccount Debited.ExplanationGeneral LedgerCash LedgerPurchases Dr.
Illustration No. 102, Payments Side of Cash Book.
EXPLANATION: The ruling is similar to that in Illustration No. 30, except that two special columns are provided, one for accounts in the consignment ledger and the other for cash purchases of merchandise. Each amount entered in the "Consignment" column is posted to the debit of the Consignment account in the general ledger at the end of the month. The ruling, which will be a credit, may be shown on the Statement of Profit and Loss as a non-operating income or as a deduction from the total cost of drayage.
DRAYAGE ACCOUNT
This is a practice set without vouchers consisting of the transactions for two months, performed by Thompson & Streem partners engaged in the commission business. The transactions are separate from the text and are included with the books of account necessary to record them. The purpose of this set is to provide practice in recording transactions peculiar to a commission business.
+ +
Description                                  Date Account Debited. Explanation General Ledger Cash Ledger Purchases Dr.  +
+ + + +
DescriptionDescription Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description Description DescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptionDescriptio
 Date Account Debited. Explanation General Ledger Cash Ledger Purchases Dr.  +
+ + + +
DescriptionDescriptio
 Date Account Debited. Explanation General Ledger Cash Ledger Purchases Dr.  +
+ + + +
DescriptionDescriptio
 Date Account Debited. Explanation General Ledger Cash Ledger Purchases Dr.  +
+ + + +
DescriptionDescriptio
 Date Account Debited. Explanation General Ledger Cash Ledger Purchases Dr.  +
+ + + +
DescriptionDescriptio
 Date Account Debited. Explanation General Ledger Cash Ledger Purchases Dr.  +
+ + + +
DescriptionDescriptio
 Date Account Debited. Explanation General Ledger Cash Ledger Purchases Dr.  +
+ + + +
DescriptionDescriptio
 Date Account Debited. Explanation General Ledger Cash Ledger Purchases Dr.  +
+ + + +
DescriptionDescriptio
























































+ +240 + +**QUESTIONS ON CONSIGNMENTS** + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Inv L.F.Name of Account and ExplanationCauseConsignorSalesAcctg Rec.
18. Anderson: Clinton

1. Commodity Balance: 162 50

2. Commodity Balance: 277 30

3. Commodity Balance: 1750

4. Commodity Balance: 100
5. Commodity Balance: 162 50

6. Commodity Balance: 1750

7. Commodity Balance: 162 50

8. Commodity Balance: 100
9. Commodity Balance: 162 50

10. Commodity Balance: 1750

11. Commodity Balance: 162 50

12. Commodity Balance: 100
13. Commodity Balance: 162 50

14. Commodity Balance: 1750

15. Commodity Balance: 162 50

16. Commodity Balance: 100
17. Commodity Balance: 162 50

18. Commodity Balance: 1750

19. Commodity Balance: 162 50

20. Commodity Balance: 100
No.
Illustration No. 103, Sales Journal.
EXPLANATION: This sales journal is similar to Illustration No. 19, except that a special column is provided for the "Consignment Ledger," in which the amount entered in the "Consignment Ledger," Cr., column is posted to an account in the consignment ledger; the total of this column is posted to the credit of the Consignment Ledger account in the general ledger at the end of the month.
QUESTIONS
What entry is made for the value of merchandise received from the owner to be sold for him?
What is the difference between merchandise purchased by the business and merchandise received by it on consignment, in so far as title is concerned?
Why is it necessary for the consignee to keep consigned goods separate from goods owned by him?
What is the difference between a consignment inward and a consignment outward?
How does the consignor secure a profit on the merchandise on consignment?
How is a Trial Balance made from the consignment ledger when there is an account in the general ledger with Consignment Ledger?
How is the value of merchandise belonging to a consignment shown on the Balance Sheet?
How is the value of merchandise belonging to a consignment out shown on the Balance Sheet?
What is the purpose of (a) the Storage account, and (b) the Drayage account?
How are the balances of the Storage and Drayage accounts shown on the Statement of Profit and Loss?
+ +A page from a book or journal, showing questions about consignments and their accounting treatment. + +**Illustration No. 103, Sales Journal** + +**EXPLANATION:** This sales journal is similar to Illustration No. 19, except that a special column is provided for the "Consignment Ledger," in which the amount entered in the "Consignment Ledger," Cr., column is posted to an account in the consignment ledger; the total of this column is posted to the credit of the Consignment Ledger account in the general ledger at the end of the month. + +**QUESTIONS** + +1. What entry is made for the value of merchandise received from the owner to be sold for him? +2. What is the difference between merchandise purchased by the business and merchandise received by it on consignment, in so far as title is concerned? +3. Why is it necessary for the consignee to keep consigned goods separate from goods owned by him? +4. What is the difference between a consignment inward and a consignment outward? +5. How does the consignor secure a profit on the merchandise on consignment? +6. How is a Trial Balance made from the consignment ledger when there is an account in the general ledger with Consignment Ledger? +7. How is the value of merchandise belonging to a consignment shown on the Balance Sheet? +8. How is the value of merchandise belonging to a consignment out shown on the Balance Sheet? +9. What is the purpose of (a) the Storage account, and (b) the Drayage account? +10. How are the balances of the Storage and Drayage accounts shown on the Statement of Profit and Loss? + +Part Three—Corporation + +Chapter XXV + +§ 239. Introduction. The purpose of the discussion in this and succeeding chapters is to familiarize the student with the application of the principles of accounting to a business operated as a corporation; also to give additional practice in applying these principles to problems which may arise in connection with practice sets applicable to a corporation business, separate from the text, accompanying this division. The accounting principles involved in connection with recording these transactions are applicable to a business owned and operated by a sole proprietor or partnership, but not to a corporation, with the exception of those which affect accounts peculiar to a corporation. + +§ 240. A Corporation is defined by the Supreme Court of the United States as “an association of individuals united for some common purpose and permitted by the law to use a common name, and to change its members without dissolution of the association.” This means that the corporation is an artificial person created by the law. Since corporations are created by the law, they have all the rights and liabilities existing by the same law and engaged in a business of like nature. The contracts executed by the corporation are under the corporate name, and in its legal relation it is known only by this name. For example, John Smith, a citizen of Ohio, owns and operates an automobile business in Cleveland, Ohio, under the name of the Central Garage. The Citizens Motor Car Company, a corporation under the laws of Ohio, has been organized for the purpose of operating the Central Garage. It is called “The Citizens Motor Car Company.” If John Smith fails to pay a debt incurred by him, and the one to whom it is due seeks settlement through the courts, the summons to appear in court will be addressed to John Smith, not to The Citizens Motor Car Company. If The Citizens Motor Car Company fails to pay an account, and the one to whom the debt is due seeks settlement through the courts, he will be addressed to John Smith, not to The Citizens Motor Car Company because this is the legal title of the corporation. John Smith and The Citizens Motor Car Company are two different persons who own and operate a business relating to automobiles. However, John Smith could, if he desired, add to his automobile business an automobile repair shop under another name such as “The Central Auto Co.” He could not do this unless the right granted by the State included other lines of merchandise than automobiles for any specific purpose and cannot engage in any other line other than that authorized by the law which created it. + +§ 241. The Purpose of a Corporation is (a) to provide capital for the operation of a business enterprise, (b) to distribute the risk of investors, and (c) to centralize control. The corporate form of proprietorship permits the investor with little capital to invest large sums in enterprises which require large amounts of money to pay him a profit on his investment, but which may not require any part of his time in connection with its operation. Whereon one has money to invest, it is preferable to invest small amounts in different enterprises rather than the entire amount in one enterprise; this is especially true where the investor does not expect to take an + +747 + +248 + +active interest in the operations of the businesses in which he invests. Distribution of the investment may result in a profit on a part or all of them; investment in one enterprise will result in loss. + +Arthur Mays has invested a device for automatically removing water from the windshield of an automobile while it is raining. He is advised by those experienced in the automobile business that this share of the investment would be better than investing in a new automobile plant for its manufacture. By combining his capital and that of a number of others who realize the merits of the invention, he can obtain a greater return. It would be preferable, because it is possible that those who wish to invest small amounts in this enterprise would not care to participate in the management of the business. + +§ 212. Comparison of the Corporation and the Partnership. A corporation differs from a partnership in the manner of organization, method of conducting the business, responsibility of the investors, and the manner of dissolution. Both are formed for a definite purpose—the conduct of a business enterprise. The partnership is formed by contract; the corporation is created by the authority of the law of the state in which it is organized. The affairs of both corporations are conducted by officers elected by shareholders. In a partnership, only those who have invested capital in the corporation are in charge of officers who are elected by those who have invested capital in the corporation. Each partner in a partnership is individually responsible for all of the obligations of the partnership. A partner in a partnership is not responsible for all of the obligations of the corporation, because these debts are contracted in the name of the corporation and must be collected out of its assets. (The liability of partners is limited by law; but the liability of a corporation is limited by the law which authorized the corporation.) A partnership continues during the time specified in the contract, unless dissolved by a decree of court; by agreement, by the death of a partner, the withdrawal of a partner or the disability or death of any partner whose disability or death does not affect other partners and is not affected by the death, legal disability, or withdrawal of any one of those who have invested capital in it. Since the right to continue as a corporation may be revoked by its stockholders, it may cease to exist at any time—“it never dies.” A partner in a partnership may sell his interest in the partnership only with the consent of the other partners; each investor in a corporation may sell his interest at will, without consulting any other member. + +Arthur Mays has invested $500,000 in his automobile manufacturing capital to promote the manufacture and sale of his invention so that each investor was responsible for all of the debts which might be contracted in connection with the operation of this business. However, if each investor knew that no one could make money from this invention, he would not invest $500,000 and prove to be profitable, he might be willing to take a chance and invest a small amount. Arthur Mays made this investment because he believed that he had discovered something which required pay obligations which the business could not pay, but if he knew that his friend took no chance other than the loss of the amount invested, he would not hesitate to seek an investment from him. + +§ 243. Proprietorship in a Corporation. When one individual owns and operates a business, he has full control of the same, and the proprietorship is vested in him. In order to protect himself against loss resulting from his own mistakes, his proprietorship is vested in the partnership, each partner possessing the right to act for the other partner or partners; as the proprietorship is vested in the partnership, neither partner can bind another partner without obtaining permission from all or some part of the others. When a business is operated as a corporation, the proprietorship is vested in the corporation because it is an artificial person created by law for law purposes. The owner cannot transfer his ownership except through sale or gift without consulting any other investor. The value of the proprietary interest of a partner in the business is fixed by Articles of Copartnership; the value of such unit of proprietorship in a corporation is fixed by the state law granting corporate authority to the corporation. + +A diagram showing two types of business entities: Partnership and Corporation. + +**CAPITAL AND CAPITAL STOCK** + +249 + +The proprietorship in a corporation is usually divided into units of equal value; the value of each unit is usually $100.00, but may be $1.00, $50.00, $25.00, or any other amount which the corporation may choose to refer to as "a share" or "a share of stock" in the corporation. Each investor may own one or more of these shares; thus, if the value of each unit is $100.00, and a stockholder purchases three units, then his proprietary interest or investment is $300.00. + +Another method of organizing a corporation is by selling its capital stock to its manufacturer and sale of his patent. He decides to make the value of each unit or share $100.00, so it will be not necessary for those who are interested to invest a large amount unless they prefer to do so. This means that the proprietorship in the corporation will be divided into many shares, and that these shares may be owned by five hundred different persons, each holding one share, or by a lesser number of individuals, provided more than one share is owned by one or more investors. + +§ 244. Capital and Capital Stock. The capital (proprietorship) of a corporation is the assets minus the liabilities—that is, the net amount remaining after all the debts have been paid. Capital stock represents the total amount with which the investors in the corporation are authorized to invest. If at the beginning of the corporation the full amount of capital stock is subscribed and paid for at its par value, then this amount will remain constant throughout the life of the corporation at that time; however, it will not remain the same because the net assets of the corporation will either increase or decrease through the operations of the business. Each investor owns one share of capital stock; therefore, he has one vote on every outstanding capital stock; one who owns one-thousandth of the capital stock of the corporation also owns the right to one-thousandth of the capital of the corporation. + +If Arthur Mays receives $25,000.00 cash from the investors in the corporation which is to promote the business described in § 243, then his proprietary interest in the corporation at the beginning is $25,000.00. If at the end of the first year, the assets of the corporation are $85,000.00 and the liabilities are $16,000.00, the capital or proprietary interest at that time is $79,000.00. + +§ 245. The Method of Organizing a Corporation is prescribed by the law of the state in which it is organized. On page 250 is given the procedure for organizing a corporation in New York (at left), and Illinois (at right); the method for organizing a corporation in California (at top); minimum par value of stock, the minimum number of stockholders at the beginning, and the amount of investment required before the certificate of incorporation is granted. + +§ 246. The Charter of a corporation is a certificate signed by the incorporators and approved by the proper state officials; it is the written authority under which the corporation does business. Illustration No. 149 shows the form of a charter issued by New York State; it remains in existence until it expires or is dissolved and remains in existence until the expiration of time for which it was granted or until dissolved by legal procedure. + +§ 247. When the Charter has been Granted, the corporation is ready to begin business. The first business to be performed is to sell the stock that is, secure cash or other property from those who are to invest in the corporation. The purpose of this operation is to raise enough money so that when invested in this capital is secured through the sale of its stock to those who wish to invest. Some states require that a part of the capital stock be subscribed for before the charter can be issued; in others it is customary to have those who wish to invest in the corporation subscribe in writing before their names can be purchased. Where a part of the capital is not to be paid in until after the corporation is formed, these written promises for payment must be secured after this charter is granted. When the necessary capital has been provided through this sale of stock, the corporation is ready to begin its business activities. + +A diagram showing two charts: one for New York State and one for Illinois. + +250 +**ORGANIZING A CORPORATION** + +New York + +"Except as provided in section 2a of this chapter, choice of more persons may become a stock corporation for any lawful business pur- +pose, including but not limited to the trans- +ferring, trading, and filing a certificate which will contain the following: +1. The name of the proposed corporation. +2. The purpose or purposes for which it is to be formed. +3. The amount of capital stock, and if any part thereof is to be issued to investors thereof. +4. The number of shares of which the capi- +tal stock shall consist, the value of which shall not exceed $100 per share, the par value in dollars and the amount of capital not less than four times such par value. Such corpora- +tion will begin business. By amendment of the original law, stock may now be issued without limitation on the number of shares. +5. The city, village, or town in which its +principal office is located, or if none is to be located in the city of New York, the +town or village in which it is organized. +6. Its contemplated duration. This may +be made perpetual or for a term not less +than three years. +7. The number of its directors, not less +than three. +8. Its names and post office addresses of +the directors for the first year. +9. The names and post office addresses of +the subscribers to the certificate of incorpora- +tion and the number of shares in the corpora- +tion subscribed by each thereof. +10. The certificate must be signed by all +three or more persons who have applied for +the charter and their signatures acknowled- +ged by a Notary Public or other designated official. + +Illinois + +"A corporation may be formed for any lawful purpose (except banking, insurance, +real estate brokerage, operation of railroads, +and certain other specified purposes). No more +persons, citizens of the United States, at least one of whom shall be a citizen of this State, shall sign, seal, and acknowledge a statement of +the following: +1. Names and post office addresses of the +corporation. +2. Name of the proposed incorporation. +3. A clear and definite statement of the pur- +pose or purposes for which it is to be formed. +4. The period of duration. +5. The name and address of principal office in this State, giving city or town, street and number, +if any. +6. Number of shares into which the capital stock is divided, whether whole parts or +shares shall have full value and if so, the par +value thereof, which shall not be less than one dollar per share; a description of classes +of stock created, a description of different classes, +the rights attaching thereto, including voting rights, +interests and preferences each class shall rep- +resent. +7. Names and addresses (give street and number) of the original subscribers to the capi- +tal stock created by this certificate, if any. +8. Total amount of authorized capital stock. +9. Amount of stock each is proposed to +pay in cash, which shall not be less than +$1,000.00. +10. The payment of at least one-half of the +capital stock in cash within six months after its issue at a price not less than $5.00 per share for each share of capi- +tal stock created by this certificate. If it is pro- +posed to issue at once, with a description of +the property being paid for by this property, if any, +paid for each such capital stock. +11. Number, names and post office ad- +dresses of directors chosen, at least one of whom shall be a resident of this State, and the term for which elected." + +Procedure for the Organization of a Corporation in New York and Illinois + +§ 218. A Stockholder in a corporation is a person who owns one or more shares of stock in the corporation. He may have come into possession of this stock through purchase from another shareholder or through inheritance from another shareholder; in either case his ownership is evidenced by a written state- +ment known as a certificate of stock. Illustration No. 107, and by the proper record of this certificate on the books of the corporation. + +Robert C. Brown subscribes and pays for four shares of stock in the corporation organized by Arthur W. Brown under Section 218 hereof. I am aware that Mr. Brown will receive, as evidence of the cash paid, a written statement in the form of a certificate of stock showing the name of the corporation, the number of shares he has purchased, and the par value of each share; also my name and address as subscriber; also my signature; also my seal if I have one; also my date when I signed this certificate. + +1 + +**CHARTER OF INCORPORATION** + +251 + +**Charter of Incorporation** + +Be it known that J. C. Wilson, J. W. Jones, R. L. Wood, E. F. Miller, and W. S. Shields, all more than twenty-one years old, are hereby constituted a body politic, and corporate by the name and style of the Union Printing and Publishing Company, with a capital stock of Fifty ($50,000.00) Thousand Dollars. + +The general powers of said corporation are: + +1. To carry on any business or trade. +2. To have and use a common seal, which may differ at pleasure; if no common seal, then the signatory to this charter shall be authorized to sign all instruments under the seal of the corporation. +3. To purchase and hold, or receive by gift, any addition to the personal property of said corporation, any real estate necessary for the transactions of the corporate business, and also to purchase and accept bonds, notes, debentures, or other securities of any person or persons, and sell and convey for corporation purposes. +4. To adopt by-laws and make all rules and regulations, not inconsistent with the terms and constitutions, deemed expedient for the management of corporate affairs. +5. To appoint a Board of Directors consisting of five (5) persons, in addition to the President, Secretary, and Treasurer, as the business of the corporation may require. +6. To designate the name of the officer, and fix the compensation of the officers. +7. To pay out of its funds such dividends as it may deem advisable upon its profits, and also to execute a mortgage or mortgages for further security for the repayment of money thus borrowed. +8. The Board of Directors shall have power to issue stock certificates. +9. A failure to elect directors at the proper time does not dissolve the corporation, but those in office continue until elected again. +10. The term of all offices may be fixed by the by-laws of the corporation; the same however, not to exceed twelve (12) months. +11. The corporation may, by by-law, make regulations concerning the subscription for or transfer of stock; for upon the amount of capital to be invested in the enterprise; the division of the same into shares; the manner in which subscriptions may be made; and the payment thereof; and also at one time only. +12. The right of action shall exist in a corporation to sue a defective stockholder for the failure to pay his dividend. +13. The corporation shall have power to purchase type, presses, paper, etc., for the purpose of printing newspapers or other publications; provided that such purchases shall be made only from such shops and the execution of all orders for job work usually undertaken and performed in first-class printing and publishing establishments. +14. The Board of Directors shall consist of five or more members at the option of the corporation; to be elected during its own year or by proxy by the majority of the votes cast, each share representing one vote. +15. A minority of the Board of Directors shall constitute a quorum, and shall fill all vacancies which may occur during their absence; provided that no less than three-fifths (3/5) of such members shall apply for, and obtain the charter. +16. The Board of Directors shall show the original and subsequent stockholders; their respective interests; the amount which has been paid on the shares subscribed; the transfer of stock; and other transactions in which it is presumed the stockholders or creditors may have an interest. +17. It is agreed that no stockholder shall sell any part or portion of his stock without first obtaining permission from these boarders expressly given or otherwise implied from the nature of the business for which this charter is applicable. + +We, the undersigned, apply to the State of Tennessee, by virtue of the law of this land, for a charter of incorporation under this instrument. + +Witness our hand, August 16, 1923. + +Illustration No. 104 Charter of Incorporation (Tennessee). + +EXPLANATION - It will be observed that the par value of each share is to be fixed by the Board of Directors when they determine that there is need for more members in case there be three or more than three as required in New York and Illinois. + +§ 249. Classification of Stock. Those who make application for the charter designating rights to certain classes of stockholders in the corporation. If some of the stockholders wish with rights and privileges different from others it will be necessary to indicate this in the certificate of stock issued to each stockholder. There are usually two kinds of stock issued, common and preferred. + +The board is authorized to issue certificates showing what class each share belongs to in connection with its classification in accordance with this section. + +The bookkeeper is required to record all transactions connected with transfers between classes. + +A study of corporation law and laws of various states authorizing organization of corporations. + +§ 250. Common Stock. Common stock is that issued to stockholders who are to participate in the management of the business, and to share in + +253 + +CLASSIFICATION OF STOCK + +profits which may result from its operations without financial preference. The term "common" as used in connection with the stock in a corporation is not to be interpreted as meaning that this stock has less value than other stock issued by the corporation. It is used only to distinguish between the stock which has no financial preference and that which has financial preference. + +**24. Preferred Stock** refers to stock issued by the corporation to stockholders who wish to have the amount of the income from their investment in the corporation stated, and who do not care to take an active part in the management of the business. In order to secure this right, the corporation provides that the preferred stockholders do not have the privilege of taking an active part in the management of the business, as this is often permitted through the authority given to directors under common law corporations. This privilege is known as "cumulative," because any dividend paid out of profits during any year is payable before dividends are paid on any other class of stock. If this dividend is payable out of the profits of each year, the preferred stock is "non-cumulative;" if the dividend is to be paid out of future profits, when the profits of each year are available, then it is "cumulative." + +**25. Par Value Stock** refers to stock issued without value in those states which authorize corporations to issue no par value stock. The laws in these states set a minimum (nominal) value at which no par value stock may be issued; therefore, such stock is issued without value. The nominal value of par value stock before the corporation is authorized to issue the stock. The market value of each share of no par value stock is determined by dividing the proprietorship (net worth) of the corporation by the number of shares outstanding. + +The purpose of issuing stock with no par value is to encourage those who wish to invest in corporation stock to ascertain the real value of the stock before purchasing it, rather than to base their purchase upon a guess as to what they might find it worth after they own it. The law states that the holder is entitled to ten shares of stock in the corporation, per dollar value $100 par value stock. This means that if a person purchases one share of $100 par value stock for $100, he will be entitled to ten shares of $100 par value stock. He can sell his shares for $100 each, or for more or less than $100, depending upon how much he wishes to sell them for. If he sells his shares for more than $100 each, he will receive more money than he paid for his shares. If he sells his shares for less than $100 each, he will receive less money than he paid for his shares. + +The purpose of issuing stock with no par value is to encourage those who wish to invest in corporation stock to ascertain the real value of the stock before purchasing it, rather than to base their purchase upon a guess as to what they might find it worth after they own it. The law states that the holder is entitled to ten shares of stock in the corporation, per dollar value $100 par value stock. This means that if a person purchases one share of $100 par value stock for $100, he will be entitled to ten shares of $100 par value stock. He can sell his shares for $100 each, or for more or less than $100, depending upon how much he wishes to sell them for. If he sells his shares for more than $100 each, he will receive more money than he paid for his shares. If he sells his shares for less than $100 each, he will receive less money than he paid for his shares. + +The purpose of issuing stock with no par value is to encourage those who wish to invest in corporation stock to ascertain the real value of the stock before purchasing it, rather than to base their purchase upon a guess as to what they might find it worth after they own it. The law states that the holder is entitled to ten shares of stock in the corporation, per dollar value $100 par value stock. This means that if a person purchases one share of $100 par value stock for $100, he will be entitled to ten shares of $100 par value stock. He can sell his shares for $100 each, or for more or less than $100, depending upon how much he wishes to sell them for. If he sells his shares for more than $100 each, he will receive more money than he paid for his shares. If he sells his shares for less than $100 each, he will receive less money than he paid for his shares. + +The purpose of issuing stock with no par value is to encourage those who wish to invest in corporation stock to ascertain the real value of the stock before purchasing it, rather than to base their purchase upon a guess as to what they might find it worth after they own it. The law states that the holder is entitled to ten shares of stock in the corporation, per dollar value $100 par value stock. This means that if a person purchases one share of $100 par value stock for $100, he will be entitled to ten shares of $100 par value stock. He can sell his shares for $100 each, or for more or less than $100, depending upon how much he wishes to sell them for. If he sells his shares for more than $100 each, he will receive more money than he paid for his shares. If he sells his shares for less than $100 each, he will receive less money than he paid for his shares. + +The purpose of issuing stock with no par value is to encourage those who wish to invest in corporation stock to ascertain the real value of the stock before purchasing it, rather than to base their purchase upon a guess as to what they might find it worth after they own it. The law states that the holder is entitled to ten shares of stock in the corporation, per dollar value $100 par value stock. This means that if a person purchases one share of $100 par value stock for $100, he will be entitled to ten shares of $100 par value stock. He can sell his shares for $100 each, or for more or less than $100, depending upon how much he wishes to sell them for. If he sells his shares for more than $100 each, he will receive more money than he paid for his shares. If he sells his shares for less than $100 each, he will receive less money than he paid for his shares. + +The purpose of issuing stock with no par value is to encourage those who wish to invest in corporation stock to ascertain the real value of the stock before purchasing it, rather than to base their purchase upon a guess as to what they might find it worth after they own it. The law states that the holder is entitled to ten shares of stock in the corporation, per dollar value $100 par value stock. This means that if a person purchases one share of $100 par value stock for $100, he will be entitled to ten shares of $100 par value stock. He can sell his shares for $100 each, or for more or less than $100, depending upon how much he wishes to sell them for. If he sells his shares for more than $100 each, he will receive more money than he paid for his shares. If he sells his shares for less than $100 each, he will receive less money than he paid for his shares. + +The purpose of issuing stock with no par value is to encourage those who wish to invest in corporation stock to ascertain the real value of the stock before purchasing it, rather than to base their purchase upon a guess as to what they might find it worth after they own it. The law states that the holder is entitled to ten shares of stock in the corporation, per dollar value $100 par value stock. This means that if a person purchases one share of $100 par value stock for $100, he will be entitled to ten shares of $100 par value stock. He can sell his shares for $100 each, or for more or less than $100, depending upon how much he wishes to sell them for. If he sells his shares for more than $10 + +SURPLUS +253 + +§ 255. Value of Stock. Stock in a corporation may have four different values, as follows: + +(1) The par value is the amount stated in the certificate; no par value stock does not have a par value. + +(2) The market value is the price at which the stock is quoted on a Stock Exchange, or at which it can be sold; stock quoted at "79" is worth $79.00 for each share. + +(3) The book value of stock is the par value plus the surplus or the par value minus the deficit. If the capital stock is one hundred thousand dollars and the surplus is twenty thousand dollars, the book value of stock has a par value of one hundred and ten dollars; if there is no surplus, but a deficit of ten thousand dollars, the book value is ninety dollars per share. + +(4) The real value is the amount that would be received for the stock if the assets of the corporation were liquidated; the real value and the book value would be the same if the assets were sold for the value recorded on the books of the corporation. + +§ 256. A Dividend is that part of the profit of the corporation distributed to the stockholders. The Board of Directors determines the amount of profit to be distributed as dividend, and the amount to be retained as surplus. The divi- +dend is usually a certain per cent of the par value of the stock; a dividend of 6% means that each share owns $0.06 per share of stock in the corpo- +ration will receive $6.00 dividend. + +§ 257. An Assessment is the reverse of a dividend; that is, the stockholder is required to pay to the corporation a certain per cent of the par value of the stock he holds instead of receiving from the corporation a certain per cent of the par +value of his stock. This assessment occurs when there is a lack of capital in +the corporation, or inquired through the failure of business, and it is necessary to procure additional working capital in order to continue the operation of +the business. Each stockholder must pay the assessment levied by the Board of Directors, and if he fails to do so, he becomes liable to any other who holds +stock subject to assessment and refuses to pay, becomes a debtor to the corporation, +and the amount can be collected in the same manner as any other debt. + +§ 258. The Surplus of a corporation is that part of the profit which has +not been distributed to stockholders in dividends. This surplus is one of the lia- +bilities of the corporation to the stockholders. The proprietorship of the corpora- +tion is the outstanding capital stock plus the surplus. + +§ 259. Bonds. A bond is a long-time note arranged in a special form. Bonds are usually issued in denominations of $1000.00, $5000.00, and $10000.00, and usually secured by a mortgage on real estate or personal property owned by the corpora- +tion. Each bond contains two parts: one part, called a promissory note, is a written promise of the corporation to pay the amount mentioned; and the other, the interest coupons, that is, the written promises of the corporation to pay annually during its term an interest equal to so much per centum as it may be payable in twenty years, with interest payable semi-annually at 6%, would have forty coupons, each coupon being a written promise or obligation of +the corporation executing the bond to pay $3000. On the due date of each coupon, +the holder of the bond detaches it from the bond, and presents it to the trustee + +254 +SINKING FUND + +(usually a bank or trust company) for collection. When the bond referred to is due, at the end of several years, all of the coupons will have been removed. Bonds issued by both public and private corporations; that is, a city, a county or a state may borrow money by issuing bonds in the same way as an incorporated railroad or other business enterprise. + +§ 260. Sinking Fund refers to assets owned by the corporation, but usually in the hands of a trustee who represents the bondholders. When a mortgage is given to secure the bondholders, this usually specifies the amount of cash or other assets to be held by the trustee until the bonds mature. If these funds have available, at the maturity of the mortgage, funds with which to pay the bonds it secures. The mortgage usually specifies the nature of the securities to be purchased by the trustee with the cash received from the corporation. + +§ 261. Sinking Fund Reserve refers to a yearly reserve set up against current profits in anticipation of the payment of bonds at maturity; the amount of this reserve being equal to one-tenth of the amount of bonds that have to run—one-tenth of the amount if they mature in ten years, one twentieth if they mature in twenty years, one fifteenth if they mature in fifty years. After the net profit for each year has been deducted from the account, that part of the profit to be set aside for sinking fund is taken out of the surplus and added to the Sinking Fund Reserve account. At the maturity of the bonds, the Sinking Fund Reserve Fund account will have a credit equal to the par value of the bonds and is transferred to the sinking fund. + +A sinking fund differs from a sinking fund reserve in that, in the former, the cash is given to the trustee and invested by him in securities according to the terms of his contract. In the latter, no investment is made until after the reserve account and the cash remains as working capital for the corporation. The investor in a bond should be assured that his investment is well secured and that his interest is safeguarded throughout the life of the bonds. + +§ 262. Method of Conducting the Business of a Corporation. The affairs of a partnership are conducted by the partners or managers selected by them, under their own management and subject only to orders issued by the Board of Directors. The members of the Board of Directors are elected by the stock-holders, each stockholder, whose stock permits him to vote, being entitled to one vote for every share he holds. When all stock-holders have voted on how to conduct the corporation is completed, the stockholders meet and elect a Board of Directors who are responsible to them for the management of the affairs of the corporation. The Board of Directors elect from their number officers who are responsible to them for conducting certain departments of business such as secretary and treasurer, whose duties are fixed by the Board of Directors. Stockholders meet annually to elect a Board of Directors; this Board usually elects the officers at its annual meeting. A corporation may issue stock which cannot be bought by any person unless he owns more than fifty per cent of the stock, because he could elect the Board of Directors, and through his control of the majority of the stock, elect those officers who would favor his election. This institution is formed usually prohibits one stockholder from owning all the stock, but there is no law which prohibits a stockholder from purchasing the majority of the stock. + +§ 263. Income Tax for a Corporation. Each corporation is required to pay a Federal Income Tax on its net income the same as an individual. The amount of tax is specified in the law which requires its payment. This tax is levied on the net income, which is defined as "gross income less deductions allowed." For the purpose of applying the federal income tax, corporations are divided into + +INCOME TAX FOR A CORPORATION 255 + +two classes, corporations and personal service corporations. The latter title is used to distinguish between the smaller corporations in which each stockholder takes an active interest in the business and the larger corporations where the stockholder purchases stock as an investment and takes no active interest in the business. + +Questioning from the Revenue Act of 1921: +"The term 'personal service corporation' means a corporation whose income is to be ascribed primarily to the activities of the principal owners or stockholders who are themselves regularly engaged in the active conduct of the affairs of the corporation, but does not include any foreign corporation, nor any corporation $0 per centum or more of whose gross income consists (1) of gains, profits, or other income derived from the sale of securities, or (2) of profits, commissions, or other income, derived from a government contract or contracts made between April 6, 1917, and November 11, 1918, both dates inclusive." + +The tax of a personal service corporation is more of the nature of the tax imposed on individuals as the taxes are paid by the individual stockholders and not by the corporation. + +§ 264. Bookkeeping for a Corporation. The nature of the work required to record the transactions performed by a corporation does not differ from that required to record the same transactions performed by a partnership. The only difference between keeping books for a corporation and for a partnership, is the addition of accounts required to record the capital invested in the corporation and addition of accounts required to record the earnings of the corporation and the profits resulting from its operations. These accounts are discussed in Chapter XXVI. + +QUESTIONS + +1. Give three reasons why you would prefer having money invested in a corporation instead of in a partnership. +2. In what respect does a corporation differ from an individual? +3. What are the requirements for forming a corporation in your home state? When was this law last amended? Have you ever purchased stock? +4. What are the four values that may be attached to stocks? Explain each. +5. What is the difference between par value and no par value stock? Explain such terms for each. +6. Why does stock sell (a) for more than its par value; (b) for less than its par value? +7. Why would an acquisition be willing to pay more than the book value for the assets of a going business which it purchases? +8. Would the sales on account in a retail business operated by a corporation be recorded in a different manner than they would in a business of the same nature owned by an individual? +9. What authority does a stockholder in a corporation have in connection with the operations of the business of the corporation? + +A page from a book discussing corporate taxation. + +Chapter XXVI + +ACCOUNTS PECULIAR TO A CORPORATION + +The Purpose of this Chapter is to explain the accounts which are peculiar to a corporation; these include the accounts necessary to record the proprietorship of the corporation and other transactions which occur only in the operations of a business conducted by a corporation. For example, Capital Stock, Unissued Capital Stock, Subscribers to Capital Stock, Subscriptions to Capital Stock, Treasury Stock, Donated Treasury Stock, Surpluses, Dividend, Organization Expense, Bonds Payable. + +**CAPITAL STOCK ACCOUNT** + +§ 265. The Purpose of this Account is to show the par value of the capital stock authorized by the charter, or the par value of the capital stock issued and not canceled. There are two methods of keeping the Capital Stock account: with either method, the balance at the time of organization shows the par value of capital stock authorized by the charter at the time it is granted; with the other method, the Capital Stock account is credited only with that part of the capital stock issued. + +Debit the Capital Stock Account: + + + + + + + +
1.For the par value of stock withdrawn by amendment to the charter when such authori- zation is dissolved, for the par value of capital stock as shown on the Balance Sheet.
+ +Credit the Capital Stock Account: + + + + + + + +
2.For (a) the par value of capital stock authorized by the char- ter when this amount is credited to the Capital Stock account at organi- zation; (b) the par value of capital stock at the time the stock is sold.
+ +§ 3. The Balance of the Capital Stock account will show (a) the par value of the authorized capital stock of the corporation when credited with the full authorized capital stock at the time of organization; or (b) the par value of the capital stock issued and outstanding when credited with the stock as issued. The par value of the authorized capital stock and the par values of the capital stock issued are shown on the Balance Sheet. + +**UNISSUED CAPITAL STOCK ACCOUNT** + +§ 266. The Purpose of this Account is to show the par value of the un- issued capital stock; that is, the stock authorized by the charter but not sold and issued. This account is used to show (a) that part of capital stock issued at the time of organization, nor when the Capital Stock account is used to show the par value of stock issued. + +Debit this Account: + + + + + + + +
1.For (a) for par value of cap- ital stock authorized by the charter when this amount is credited to the Capital Stock account at organi- zation; (b) for par value of capital stock at time of orga- nization.
+ +Credit this Account: + + + + + + + +
2.For (a) for par value of cap- ital stock issued when the amount of authorized cap- ital stock is recorded on the debit side of this ac- count; (b) for par value of capital stock at time of orga- nization.
+ +§ 3. The Balance of the Unissued Capital Stock Account shows the par value of unissued capital stock. It has no value until sold, hence is shown on the Balance Sheet as a deduction from the authorized capital stock. + +256 + +ACCOUNTS PECULIAR TO A CORPORATION 257 + +SUBSCRIBERS TO CAPITAL STOCK ACCOUNT + +§ 267. The Purpose of this Account is to show the amount due from those to whom the capital stock has been sold on the deferred payment plan. This account is not included when the subscribers pay for their stock at the time it is purchased. + +Debit the Subscribers to Capital Stock Account Credit the Subscribers to Capital Stock Account + + + + + + + + + + + + + + + + + + +
§ 1.For the par value of capital stock subscribed but not paid for.§ 2.For cash or other assets received from subscribers to apply on stock subscribed.
§ 3.The Balance of the Subscribers to Capital Stock Account shows the amount owed by subscribers for capital stock purchased but not paid for, as shown on the Balance Sheet as a current asset unless the payments are extended over a long period, in which case it is shown as a separate item below the current assets and above the fixed assets.
+ +SUBSCRIPTIONS TO CAPITAL STOCK ACCOUNT + +§ 268. The Purpose of this Account is to show the par value of stock subscribed but not issued because it has not been paid for. This account is not needed when subscribers pay for their stock at the time it is purchased. + +Debit the Subscriptions to Capital Stock Account Credit the Subscriptions to Capital Stock Account + + + + + + + + + + + + + + + + + + +
§ 1.For the par value of stock issued to subscribers.§ 2.For the par value of capital issued to subscribers.
§ 3.The Balance of the Subscriptions to Capital Stock Account shows the par value of stock issued but not issued because subscribers have not paid their subscriptions. It is shown on the Balance Sheet as an addition to the capital stock outstanding, or, if no stock has been issued, as the only item of proprietorship.
+ +TREASURY STOCK ACCOUNT + +§ 269. The Purpose of this Account is to show the par value of treasury stock owned by the corporation. This stock has no connection with unissued capital stock, and the facts recorded in this account apply only to the stock of the corporation which has been fully paid up and issued but has come back into the possession of the corporation through purchase or donation (§ 254). + +Debit Treasury Stock Account Credit Treasury Stock Account: + + + + + + + + + + + + + + + + + + +
§ 1.For the par value of the capital stock of the corporation pur- chased by or donated to it.§ 2.For the par value of treasury stock sold.
§ 3.The Balance of the Treasury Stock Account shows the par value of the treasury stock owned by the corporation. It is shown on the Balance Sheet as a deduction from the balance of the Capital Stock account:
+ +TREASURY STOCK DONATED ACCOUNT + +§ 270. The Purpose of this Account is to show the par value of stock donat- ed to the corporation by its shareholders, after deducting any benefitting from its sale. When the donation is made, the Treasury Stock account is debited, and the Treas-ury Stock Donated account is credited with the par value. When the stock is sold, + +A page from a financial accounting book showing accounts related to capital stock and treasury stock. + +258 + +ACCOUNTS PECULIAR TO A CORPORATION + +Cash or the account which shows the value of the asset received for it, is debited, and the Treasury Stock account is credited; if paid at a discount or premium, the difference between the par value of the stock and the amount received is debited or credited to the Treasury Stock Donated account. Cash or other assets which come into the possession of the corporation through donation increase the capital of the corporation and it is necessary to record this increase. + +Debit the Treasury Stock Donated Account Credit the Treasury Stock Donated Account. +\textsuperscript{1} For the discount on donated stock. +\textsuperscript{2} For the par value of stock donated to the corporation by the stockholders. +\textsuperscript{3} For the premium on donated stock. +\textsuperscript{4} The Balance of the Treasury Stock Donated Account, before the donated stock is sold, shows the par value of donated stock; and after it is sold, shows the capital resulting from the donation. It may be used for dividends, or be transferred to an account with Capital Surplus. The balance of the Treasury Stock Donated account should not be closed into the Surplus account because it is not profitably withdrawn, but should be kept for a definite purpose. It is shown on the Balance Sheet as part of the capital of the corporation in connection with the Capital Stock and Surplus accounts. + +SURPLUS ACCOUNT + +§ 271. The Purpose of this Account is to show the undivided profits; that is, that part of the profit which has not been distributed to stockholders. The par value of the capital stock issued and outstanding, plus the balance of the Surplus account is the proprietorship of the corporation and should be the same as the difference between its assets and liabilities. + +Debit the Surplus Account Credit the Surplus Account. +\textsuperscript{1} At the close of each fiscal period, for the net loss if the operations of the business have resulted in a loss. +\textsuperscript{2} For any portion of profit which is to be paid as a dividend to the stockholders or set aside for a specific purpose. +\textsuperscript{3} For any adjustments during the period which diminish the profits for a preceding period. +\textsuperscript{4} At the close of each fiscal period, for the net profit if the operations of the business have resulted in a profit. +\textsuperscript{5} For any additions during the period which increase the profits for a preceding period. +\textsuperscript{6} The Balance of the Surplus Account shows the undivided profits resulting from the operations of the business. It is shown on the Balance Sheet as a part of the capital of the corporation, being listed in connection with the capital stock, but as a separate item from it. If there is a surplus greater than the balance of the Surplus account, this excess is recorded in a Deficit account. +*The amounts involved in this debit and credit are usually small and result from errors which reduce or increase profits. When such errors occur they are entered in this account under each item in an account with "Adjustment of Errors in Previous Periods," and at the close of each fiscal period, transfer from this Surplus account an amount sufficient to cover the adjustment account. This plan avoids recording small amounts in this Surplus account and simplifies auditing." + +ACCOUNTS PECULIAR TO A CORPORATION 259 + +**DIVIDEND PAYABLE ACCOUNT** + +§ 273. The Purpose of this Account is to show the amount set aside by the board of directors for distribution as a dividend among the stockholders. Dividends are not considered as income until they are actually paid. A separate account may be opened with each dividend, if desired, in which case the first one is designated as "Dividend No. 1," the second as "Dividend No. 2," etc. + +Debit the Dividend Payable Account: Credit the Dividend Payable Account: + + + + + + + + + + + + + +
t.For part or all of the dividend paid.t.For that part of the profit which has been made by the board of directors in distribu- tend to the stockholders.
c.The Balance of the Dividend Payable Account shows the amount of the dividend declared, but not yet received by stockholders. As a rule, the account will be in balance because dividend checks will be issued only after the dividend has been declared and authorized. However, in case the address of a stockholder is not known, or if for some reason the check has not been issued, the account will not be in balance and its amount will be shown on the Balance Sheet as a liability owing at the close of such a fiscal period, it is shown on the Balance Sheet as a current liability. + +**ORGANIZATION EXPENSE ACCOUNT** + +§ 273. The Purpose of this Account is to show the cost of organizing the corporation, which includes legal fees, commission on the sale of stock, salaries of stock salesman, office rent, and other expenses incurred before the corporation is ready to begin the operations for which it is organized. At the time the corporation is organized, these expenses are debited to this account and are regarded as a permanent asset or as a charge against Surplus to be distributed over a number of consecutive fiscal periods. + +Debit the Organization Expense Account: Credit the Organization Expense Account: + + + + + + + + + + + + + +
t.For all expenses incurred in the organization of the cor- poration.t.For that part of the organiza- tion expense written off at the close of each fiscal period. (See Note 10.)
c.The Balance of the Organization Expense Account, if no part of the organization expense is written off at the close of each fiscal period, shows the assets resulting from the expenditures in connection with the organization of the corporation. This account is debited when any portion of this expense is written off over a number of fiscal periods, and credited with that part remaining as an asset. Organization expense is shown as a separate item on the asset side of the Balance Sheet. + +Note 10. It should be noted that organization expense is not an operating cost deductible from the income of the corporation; hence, if any part is written off at the close of each fiscal period, it does not affect net income or surplus. When any portion of this expense is written off over a number of fiscal periods, the amount to be written off each year and the number of fiscal periods covered by the process are determined by the Board of Directors or management of the corporation. + +**BONDS PAYABLE ACCOUNT** + +§ 274. The Purpose of this Account is to show the amount of the indebted- ness resulting from bonds issued by the corporation. These bonds arc usually secured by a mortgage on real estate or personal property ( § 259). + +Debit the Bonds Payable Account: Credit the Bonds Payable Account: + + + + + + + + + + + + + + + + + + +
t.For the face value of bonds paid by the corporation.t.For the face value of bonds issued by the corporation.
c.c.
+ +260 + +ACCOUNTS PECULIAR TO A CORPORATION + +§ 3. The Balance of the Bonds Payable Account shows the face value of the bonds owed by the corporation. It is shown on the Balance Sheet as a fixed liability. +When bonds are sold at less than par, the discount is debited to a Discount on Bonds account; when they are sold at more than par, the premium is credited to a Premium on Bonds account. In either case, the account which shows the difference between the par value and the selling price will appear on the Statement of Profit and Loss as an non-operating income or loss. + +GODWILL ACCOUNTS + +§ 275. The Purpose of this Account is to show the value of goodwill purchased by the corporation. Goodwill refers to the difference between the purchase price and the book value of the net assets of a going concern; it is recorded as goodwill only on the books of the buyer. Goodwill is of the same nature as organizational capital and may be regarded as permanent asset or may be written off over a number of consecutive fiscal periods. + +Debit the Goodwill Account: +For that part of the goodwill written off at the close of each fiscal period (the remainder is credited.) + +Credit the Goodwill Account: +written off at the close of each fiscal period (the remainder is debited.) + +§ 3. The Balance of the Goodwill Account, if no part of the goodwill is written off at the close of each fiscal period, shows the cost value of the goodwill purchased by the corporation. When goodwill is written off during a fiscal period, the balance will show the value of the goodwill at the conclusion of the business year. This amount will be shown as a separate item on the asset side of the Balance Sheet. + +Goodwill is an intangible asset which cannot be measured in dollars. It represents a resale still accruing. He wishes to retire from active management, and A.J. Downey, D.T. Ford, Robert McDowell, and C. H. McMillan agree to give him $100,000 cash and $100,000 worth of stock having a par value of $100,000 each. They also agree to invest $100,000 in their own names in any one or more corporations which they may acquire with their own money. The Stockholders' Equity account shows $100,000 invested in shares of stock issued by these corporations. + +The Stockholders' Equity account shows $100,000 invested in shares of stock issued by these corporations. + +QUESTIONS + +1. What accounts are needed in connection with the investment in a corporation? +2. What accounts will be debited and credited in the opening entries of a corporation in which the capital stock is $60,000.00 (a) all stock is subscribed and paid for in cash, and (b) if only $50,000.00 is subscribed and paid for? +3. What are two methods of recording capital stock? Explain each. +4. If you were asked to record a transaction in which you received $15,000 cash and donated common stock having a par value of $15,000.00, what accounts would you debit and credit? +5. If you were asked to record a transaction in question No. 4 were sold for $8,500.00 cash, what accounts would you debit and credit? +6. What accounts would be debited and credited if a corporation with a capital stock of $75,000 sold on the installment plan only $75,000.00 of the stock at the beginning? +7. Why does the law usually forbid a corporation from purchasing its own stock and retaining ownership of it for an indefinite period? +8. What is the difference between the capital and capital stock of a corporation? +9. Why do net profit or loss resulting from the operations of a corporation during a fiscal period transferred to Surplus account and not to the Capital Stock account? +10. If the amount shown by the Goodwill account is $16,000.00 and it is desired to close this out over a period of five years, what entry will be required at the close of each year? + +Chapter XXVII + +BOOKS OF ACCOUNT PECULIAR TO A CORPORATION + +The Purpose of this Chapter is to explain and illustrate the books of account required to record the transactions completed during the organization of a corporation and those performed by the officers in connection with the corporate affairs. The books needed to record the transactions completed in the regular course of business are similar to those used by corporations, except that some of those needed to record such transactions for a like business owned and operated by an individual or by partners. The books of account required to record transactions completed in the regular course of business include: cash book, bank book, subscribers' journal, subscribers' ledger, stock certificate book, stockholders' journal, stock transfer book, and minute book. + +§ 276. Subscription Book. The law governing the organization of corporations usually requires that a certain per cent of the capital be paid in when the corporation is organized for the charter. It is necessary therefore, for the organizers to secure subscriptions to the capital stock at a price equal to all or part of the stock subscribed. These subscriptions are usually obtained by having proposed stockholders sign a subscription list, ruled similar to Illustration No. 105. This subscription book is made up by binding together subscrip-tion lists; these lists are usually punched to fit a binder. The signature column on the subscription book provides a basis for recording the transactions between the subscribers. The signature of a proposed stockholder to the subscription list indicates his agreement to pay for the number of shares mentioned in connection with his subscription; hence, the subscription list is the contract between the corporation and the subscriber. For this reason, the subscription list should be kept in a safe place until the subscriptions have been paid in full and the stock issued as per contract. + + + + + + + + + + + + + + + + + + + + + + + + +
SUBSCRIPTION LIST
We,the undersigned,hereby subscribe for the number of shares of stock in the corporation known as:
1.A. Whitney & Co.,at opposite our names upon terms:
and agree to pay for said upon terms:
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +262 +SUBSCRIBERS' JOURNAL + +§ 277. The Subscribers' Journal contains a record of the subscriptions for stock; the information for each entry is obtained from the subscription as shown on the subscription form attached to each subscriber's book. The ruling should be arranged that the subscription of a subscriber may be recorded on one horizontal line. Space should be provided for the date, name of the subscriber, his address, and the number of shares subscribed, whether common or preferred stock. Each subscriber is debited in the subscribers' journal with the par value of the stock he has purchased; at the end of the month, the Subscribers to Capital Stock account credited for the total subscriptions recorded in each entry. + +Illustration No. 106 shows the ruling for a subscribers' journal. +If transactions of this nature are not numerous, the entries may be made in the general ledger by debiting Subscribers to Capital Stock account, crediting Subscriptions to Capital Stock account credited for the par value of the subscrip- +tions recorded in each entry. + +
DateNo. of SharesPaid ValueSignatures
July 2100$15,000J.A. Whitney
10015,000J.A. Whitney
202,000F.O. Knauss
171,700C.V. Bowers
5500H. Hayes
5500B.T. Monahan
101,000L.E. Bowman
101,000Ollie Barnes
7700Louise Rimmer
2200C.O. Melton
1414,000Susanna Blacke
151,500
+ + + + + + + + + + + + + + + + + + + + + + + + +
DateNameAddressNo.SharesPar ValueCommonPreferred
+ +§ 278. The Subscribers' Ledger contains accounts with those subscribers who purchase stock on the deferred payment or installment plan; when a sub- +scriber pays cash for his stock at the time he subscribes for it, no account is needed because his interest is immediately recorded in the general ledger. When he does not pay cash for his stock until after it is recorded, the facts as all the information needed is the debit to a subscriber's account for stock subscribed by him, and the credit to his account for cash received as part payment of his stock. When he does not pay cash for his stock until after it is recorded, the facts as all the information needed is the debit to a subscriber's account in the general ledger, and the credit to Cash in Bank. The accounts in the subscribers' ledger are controlled by this account. + +§ 279. The Stock Certificate Book is a loose-leaf book containing stock certificates. Each certificate contains space for recording the information written in the certificate. When a subscriber pays his stock, he is entitled to a certificate showing his interest in the corporation; this interest is indicated by the number of shares and the par value of each. Illustration No. 107 shows how a certificate is attached to a stub. When a certificate is issued, it is placed on top of its stub and the attached stub with the necessary information in regard to the certificate. When this certificate is removed from the stub and given to the purchaser, he will retain it as evidence of his interest in the corporation. The information on this stub should be entered on page No. ____________ of this book. + +Certificate No. ____________ + +Issued to: +Name: ____________ +Address: ____________ +Date: ____________ +Number of Shares: ____________ +Price per Share: ____________ +Total Price: ____________ + +This Certificate is issued to: +Name: ____________ +Shares of Capital Stock of: +J. A. Whitney & Co. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. + +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. + +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. + +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. + +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. + +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. + +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. + +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. + +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. + +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. + +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. + +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. + +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. + +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. + +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. +Issued under Section 351 of +the Internal Revenue Code. + +Illustration No. 107, Stock Certificate Attached to Stub + +STOCKHOLDERS' JOURNAL. +263 + +will be transferred, either direct or through the stockholders' journal, to an account with him in the stockholders' ledger. The stockholder who pays for his subscription on the deferred payment or installment plan receives a receipt for each payment; these receipts are surrendered when the subscrip- +tion is paid in full and the certificate of stock issued. + +EXPLANATION. The illustration at the left shows the manner in which certificates may be used by the owner for instructions in regard to transfer of shares. On October 25, 19XX, James Whitman sold five shares to Ernest L. Massemore. On October 25, the space would be filled as follows: 1st, "James L. Whitman"; 2nd, "Ernest L. Massemore"; 3rd, "James Whitman", or some other officer of the corporation authorized to make transfer; 4th, "Ernest L. Massemore"; 5th, "James Whitman"; 6th, "James O. Whitman"; 7th, "James Whitman"; 8th, "James Whitman"; 9th, the signature of a disinterested person who witnessed the transfer. + +Illustration No. 108, Form on Back of Stock Certificate. + +§ 280. The Stockholders' Journal contains a record of the stock certificates issued; it is sometimes referred to as a corporation journal. The information for the accounts recorded in this journal is obtained directly from the stock certificate stubs. The information regarding to each certificate may be recorded on one horizontal line. The purpose of this journal is to provide a posting medium for the accounts in the stockholders' ledger. + +If the corporation owns less than one thousand shares of stock, or if no transfer is made directly from the stock certificate stub, the stockholders' journal is not needed. + +§ 281. The Stockholders' Ledger contains an account with each stock- +holder. The information recorded in each account shows the number of shares owned by the stockholder, the par value of the stock, and the class of stock, that is whether it is common or preferred. The Cash account in the general ledger is a controlling account for the accounts in the stockholders' ledger. The information recorded in the account with a stockholder is posted direct from the stock certificate stub, or from the stockholders' journal. Illustration No. 109 shows an account with a stockholder in the stockholders' ledger. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +', +
DateWt.Stock HeldTo whom Transferred and other ExplanationsDebitCredit
July 3, 19XX1400
Aug. 8, 19XXErnest L. Massemore1000
Aug. 8, 19XXErnest L. Massemore1000
Aug. 8, 19XXErnest L. Massemore1000
Aug. 8, 19XXErnest L. Massemore1000
Aug. 8, 19XXErnest L. Massemore1000
Aug. 8, 19XXErnest L. Massemore1000
Aug. 8, 19XXErnest L. Massemore1000
Aug. 8, 19XXErnest L. Massemore1000
Aug. 8, 19XXErnest L. Massemore1000
Aug. 8, 19XXErnest L. Massemore1000
Aug. 8, 19XXErnest L. Massemore1000
Illustration No. 109, Stockholders' Ledger.
Date +Wt. +Stock Held +To whom Transferred and other Explanations +Debit +Credit +July 3, 19XX +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• +• + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, 19XX + +August 8, + +264 +MINUTE BOOK + +necessary. In several states the law requires that the corporation maintain a stock transfer book; Illustration No. 110 shows the form usually used. + +When a stockholder wishes to withdraw his investment in a corporation, he seeks a buyer for his stock and sells his stock to him. The corporation has nothing to do with this transaction except to receive the money from the seller and deliver the certificate of stock to the buyer. The buyer then becomes a stockholder and receives a new certificate of stock from the corporation. The information in regard to the transaction is given the corporation by the transfer of the certificate; space is provided on the face of the certificate for recording the date of transfer, the name of the buyer, and other data. When a new stockholder, the former certificate will be surrendered to the corporation, and attached to the old certificate, which will then show two transfers. When a stockholder desires to sell all or part of his stock, the old certificate is surrendered, and two new certificates issued, one to each stockholder for the number of shares he owns. + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
DatesNo. of SharesBy Wism.SurrenderedNo. of New CertificatesNo. of SharesInc.Exc.Total Value
+ +Illustration No. 110, One Form of Ruling for a Stock Transfer Book. + +§ 283. Minute Book. The affairs of a corporation are controlled by the stockholders because they are the owners of the business. The stockholders elect from their number officers who are elected to take charge of and care for the details of the operations of the business. All business transacted by the stockholders and by the board of directors is recorded in the minute book by the secretary or corporate agent; no special ruling is required for the information recorded in the minute book but the minutes of each meeting should be in consecutive order for ready reference. + +QUESTIONS + +1. What is the difference between a subscriber and a stockholder? + (a) What evidence does a stockholder have that he has an interest in the capital of the corporation? (b) What evidence does a partner have that he has an interest in the capital of a partnership? +2. (a) How will a stockholder determine the value of his investment in a corporation, as evidenced by the certificate of stock which he holds? (b) How will a partner determine the value of his interest in a partnership? +3. (a) What is the purpose of the subscription list? (b) In what way is the subscription list connected with the subscription book? +4. What is the connection between the subscribers' journal and the subscribers' ledger? +5. What account in the general ledger controls the accounts in the subscribers' ledger? + (a) What is the connection between the stock certificate and the stub? (b) How may canceled certificates be filed? (c) Why would a stockholder wish to have his certificate canceled? +6. (a) What is shown on page one of each stockholders' journal and the stockholders' ledger? (b) What account in the general ledger controls the accounts in the stockholders' ledger? +7. If at any time during its existence a corporation sells five shares to one who is not a stockholder in the corporation, what is the method of procedure to show the transaction properly recorded on books of record? +8. Who shall be president, or presiding officer, and secretary both sign the minutes of each meeting of the board of directors as recorded in the minute book? + +Chapter XXVIII +OPENING ENTRIES FOR A CORPORATION + +The Purpose of this Chapter is to explain the opening entries for a corporation. The method of selling the capital stock of the corporation determines the journal entries necessary to record the investment; these entries are discussed in this chapter. There are four methods of selling capital stock: (1) part or all of cash or cash and other assets; (2) part or authorized capital stock sold for cash or cash and other assets; (3) part or all of the authorized capital stock sold for the purpose of continuing the operations of a going business; and (4) stock sold on installment payments. + +§ 284. Authorized Capital Stock Sold at Time of Organization. +When all stock is sold at the time the corporation is organized, Cash or Cash and some other asset is received in payment for the entire amount of the capital stock which the corporation is authorized to issue; if the value of the assets received is not equivalent to the par value of the stock issued, the difference is debited to an account with Discount on Capital Stock or credited to a Profit and Loss Account. + +If the charter granted the Central Plumbing Company authorizes the issuing of $50,000.00 common stock and all of this is sold for cash, the entry in journal form will be as follows: + + + + + + + + + + + + + + +
Cash$0,000.00
Capital Stock$0,000.00
Cash received for authorized capital stock issued.
+ +When this entry is posted, the ledger will show that Cash has been received on the credit side of the Capital Stock account. The fact that no authorized capital stock is recorded in the ledger indicates to each shareholder that the $50,000.00 is the full amount of stock which the corporation is authorized to issue. + +If the charter of the Central Plumbing Company authorizes the incorporators to issue $25,000.00 common stock and $25,000.00 preferred stock and cash has been received in payment for all the stock, the entry in journal form will be as follows: + + + + + + + + + + + + + + + + + + +
Cash$0,000.00
Capital Stock, Common25,000.00
Capital Stock, Preferred25,000.00
Cash received for authorized capital stock issued.
+ +When this entry is posted, the ledger will show the same facts as when the entry first illustrated was posted except that Cash has been received on both sides of the Capital Stock account. + +If, at the time the Central Plumbing Company was organized, it was agreed to issue $5,000.00 of stock to a subscriber in exchange for land which he owns and cash was received for the remainder of the capital stock, the entry in journal form will be as follows: + + + + + + + + + + + + + + + + + + +
Cash4,500.00
Land5,500.00
Capital Stock5,000.00
Cash and land received for authorized capital stock issued.$9,500.00
+ +When this entry is posted, the ledger will show the same facts as when the first entry was posted, except the assets received will be shown in two accounts, one with Cash and the other with Land. + +265 + +266 + +**OPENING ENTRIES FOR A CORPORATION** + +Land. If the same conditions existed and the stock were equally divided between the common and preferred as in the second entry, the entry would be the same as the above, except that there would be two credits to show the two classes of stock. + +§ 285. Part of Authorized Capital Stock Sold at Time of Organization. +When only a part of the authorized capital stock is sold at the time the corporation is organized, the authorized capital stock should be recorded; otherwise its value will not be shown in the ledger and the stockholders will have no means of knowing the total amount of capital stock authorized by the charter, which is referred to in the charter. This is usually recorded by an entry in which the Unissued Capital Stock account is debited and the Capital Stock account credited for the par value of the stock sold. If this entry is made, it will appear on the face of some balance sheet. If the charter authorizes the issuing of both common and preferred stock, the par value of each will be shown in a separate Capital Stock account and the par value of the authorized capital stock will also be debited to separate Unissued Capital Stock accounts. In this case, when these entries are posted, all stockholders will know the authorized capital stock and the par value of that which is not issued, without referring to the charter. + +If the incorporators of the Citizens' Motor Car Company are authorized with the authority to issue $100,000.00 common stock and only $75,000.00 is sold for cash at the time of organization, the entries to record the authorized capital stock and the stock sold will appear in journal form as follows: + + + + + + + + + + + + + + + + + + + + +
Unissued Capital Stock$100,000.00Unissued Capital Stock$100,000.00
Authorized capital stock of Citizens' Motor Car Co.
Cash75,000.00Cash received for 750 shares of stock issued.75,000.00
+ +When these entries are posted, the par value of the authorized capital stock and of the stock issued will be shown on the face of each balance sheet. The balance sheet will show that $35,000.00 less than $75,000.00 has been received for cash at the time of organization. + +If the incorporators of the Citizens' Motor Car Company are authorized to issue both common and preferred stock in equal amounts and $75,000.00 cash is received for $25,000.00 preferred and $25,000.00 common stock at the time of organization, the entries in journal form will appear as follows: + + + + + + + + + + + + + + + + + + + + +
Unissued Capital Stock, Common$35,000.00Unissued Capital Stock, Preferred$35,000.00
Authorized capital stock of Citizens' Motor Car Co.
Cash75,000.00Cash received for 75 shares of common and 45 shares of preferred stock issued.75,000.00
+ +When these entries are posted, the balance sheet will show $35,000.00 common stock authorized and $35,000.00 issued, and $85,000.00 preferred stock authorized and $85,000.00 issued. + +If, at the time of organization of the Citizens' Motor Car Company, it is agreed to issue $25,000.00 of common stock and $25,000.00 of preferred stock + +OPENING ENTRIES FOR A CORPORATION 267 + +to one of the subscribers for land which he owns and cash is received for $30,000.00 common stock and $35,000.00 preferred stock, the entries in journal form will appear as follows: + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Unissued Capital Stock, Common$0,000.00
Unissued Capital Stock, Preferred$0,000.00
Capital Stock, Common35,000.00
Capital Stock, Preferred35,000.00
Authorized capital stock of Citizens' Motor Car Co.
Cash64,000.00
Land16,000.00
Unissued Capital Stock, Common
Unissued Capital Stock, Preferred
Cash and other assets amounting to $35,000 of common and 40 shares of preferred stock issued.
+ +When these entries are posted, the ledger will show the same facts as in the two preceding entries, except that $85,000.00 of the assets received will be recorded in the Land account and $85,000.00 in the Cash account. + +§ 286. Corporation Organized to Continue a Going Business. A going business is one which is in operation. A corporation organized to continue such a business will purchase the assets and assume the liabilities of the business. It is customary to record this transaction by making two entries in the ledger: (1) recording the opening entries for the corporation. The entries required are usually made in the following order: (1) to close the accounts in the ledger of the concern which is being taken over by the corporation; (2) to record the authorized capital stock of the corporation; (3) to record the cash and other assets received by the corporation; and (4) to record the liabilities assumed by the corporation. + +The entries required in connection with the purchase of a going business by a corporation are illustrated by the following case: J. A. Smith owns and operates a retail shoe business, but wishes to retire from active management. R. W. Wiley, C. U. Moon, J. H. Patterson, and P. A. Carlson, four of his employees, decide to buy out his interest in his business and incorporate it under his name as a corporation; Mr. Smith agrees to accept stock in the corporation for his interest in the business. Each of the other four incorporators agrees to purchase one hundred shares at par. The necessary capital is subscribed approximately equally among them, and all the enterprising members agree to pay their share immediately on receipt of stock in payment to, or the other four incorporators. The capital stock of the corporation is $55,000 consisting of one thousand shares of $5 each; Mr. Smith's interest in the business is represented by one thousand shares of $5 each; and one thousand shares representing his interest in the corporation is the People's Shoe Company. The post-closing Trial Balance of the business owned and operated by J. A. Smith, on December 31 is as follows: + +J. A. SMITH + +post-closing Trial Balance, December 31, 192 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Cash13,500.00
Accounts Receivable17,500.00
Reserve for Doubtful Accounts.
Office Equipment25,500.00
Furniture and Fixtures of Office Equipment.
Store Fixtures.1,350.00
Reserve for Dep't of Store Fixtures.
Notes Payable.
Accounts Payable.
J.A.Smith Capital.
Mdse Inventory, December 31, 192.7,662.50
Total Assets:24,662.50
Total Liabilities & Capital:24,662.50
+ +J.A.Smith +December 31, 192 + +268 + +**OPENING ENTRIES FOR A CORPORATION** + +The entries in journal form to close the accounts on the ledger of J. A. Smith will appear as follows: + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
People's Shoe Company2,662.00
Cash11,500.00
Accounts Receivable1,730.00
Office Equipment230.00
Store Fixtures1,500.00
Natural Gas, Dec. 317,662.00
To record the sale of the assets of the business to the People's Shoe Company.
Reserve for Unpaid Accounts275.00
Rss. for Dep. of Office Equipment,230.00
Rss. for Dep. of Store Fixtures300.00
Natural Gas, Jan. 13,300.00
Accounts Payable12,459.00
To record the purchase of the reserves and liabilities of the business to the People's Shoe Company.16,162.00
Stock, People's Shoe Company8,500.00
Taxable Income Tax Expense8,500.00
To record the receipt of capital stock from the People's Shoe Company in payment of amount due from them.
J. A. Smith, Capital8,500.00
Natural Gas, People's Shoe Company
To record the acceptance by J. A. Smith of 170 shares of his stock in payment of his interest in the business.
+ +When these entries are made, each of the asset accounts will be closed by an entry on the credit side, and each of the liability and reserve accounts and the proprietorship account, by an entry on the debit side. The books of J. A. Smith are thus completely closed. + +The entries in journal form to open the books will appear as follows: + + +
Unissued Capital Stock$6,000.00
$9,000.00
To record the authorized capital stock of the People's Shoe Company.
Cash13,598.00
Accounts Receivable1,735.00
Office Equipment255.00
Suez Fixed Assets1,695.00
Mileage Inventory, Jan. 1
A.A.S., Jan. 1, Vendor		7,662.99
24,662.99
To record the purchase of the assets of J. A. Smith.16,162.99
J. A. Smith, Vendor
Award for Unpaid Accounts275.00
Rss. for Dep. of Office Equipment,235.00
Rss. for Dep. of Store Fixtures555.00
Natural Gas, Jan. 1
A.A.S., Jan. 1, Vendor		3,399.99
To record the issue taken over and the liabilities assumed from J. A. Smith.
J. A. Smith, Vendor$8,500.99
$8,500.99
$8,500
$8,500
$8,500
$8,500
$8,500
$8,500
$8,500
$8,500
$8,500
$8,500
$8,500
$8,500
$8,500
$8,500
$8,500
$8,500
$8,500
$8,5...
+ +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W. Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of four shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; J.H. +Patterson; and P.A Carbon; one to shares. + +Cash + +Unissued Capital Stock + +To record the issue of two shares of stock upon receipt of cash in payment to R.W Wiley; C.U Moon; +J.H Patterson; +and P.A +Carbon; +one +to +shares. + +Cash + +OPENING ENTRIES FOR A CORPORATION 269 + +When these entries are posted, the authorized capital stock will be recorded on the books of the corporation as a credit to the Capital Stock account; the unused capital stock will be shown by the balance of the Capital Stock account. The amount of the stock subscribed by each subscriber will be recorded in the accounts of the subscribers. All of the reserves taken over from J. A. Smith will be recorded in the proper accounts; and the account with J. A. Smith will show a credit balance equal to the amount of his stock that has been issued. When all of the reserves taken over, and the stock issued in payment for the net assets, will be in balance. The books of the corporation are now ready for the recording of current transactions. + +§ 287. Capital Stock Sold on the Installment Plan. When all the capital is not needed at the time the corporation is formed, it is customary to allow subscribers to pay for their shares in installments. This plan is especially applicable to corporations organized for the purpose of manufacturing a product which will require the construction of a new factory. Much time will elapse between the organization of the corporation and the completion of the factory, during which time the installment payments may be necessary. The deferred payment plan will permit many to subscribe for the stock who other-wise would be prohibited from doing so because they might not have sufficient cash to pay for their money. + +If, for example, Central Tire Company, a corporation organized for the purpose of manufacturing automobile tires, with a capital stock of $250,000.00, par value $100.00 per share, sells $200,000.00 of its stock for cash and $200,000.00 to subscribers who agree to pay one fourth of the subscription in cash and the balance in three equal installments, the opening entries in journal form would be as follows: + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Issued Capital Stock250,000/00
To record the authorized capital stock.250,000/00
Cash250,000/00
Issued Capital Stock250,000/00
To record the sale and issue of stock for cash.250,000/00
Subscribers to Capital Stock25,000/00
Subscriptions to Capital Stock25,000/00
To record subscriptions to capital stock.25,000/00
Cash25,000/00
Subscribers to Capital Stock25,000/00
To record subscriptions by subscribers in payment for the first installment of 25 per cent.25,000/00
+ +When these entries are posted, the authorized capital stock will be shown in the Capital Stock account; the unused stock in the Issued Capital Stock account; the balance due from subscribers in payment for their shares; and any difference between what was received from subscribers in exchange for their promise to pay for their stock will be shown by the Subscriptions to Capital Stock account. The balance due from subscribers in payment for their first installment on stock subscribed will be recorded. + +When cash is received from a subscriber for all of his subscription, he is entitled to a certificate of stock; when cash has been received from all of the subscribers in payment for their shares, and no further payments have been received for all of the capital stock sold. Since each subscriber will want a certificate at the time he pays his subscription in full; and it is hardly possible that all will pay at the same time, it is advisable to make a transfer from this account to another account after one or more subscribers have paid their subscriptions; then enter out of this account and transfer it to another account when certificates are issued. + +If John Smith, who has subscribed for ten shares of the Central Tire Company's stock, has paid the last installment on his subscription and a certificate of stock has been issued, the entries in journal form will be as shown at the top of page 279. + +If John Smith, who has subscribed for ten shares of the Central Tire Company's stock, has paid the last installment on his subscription and a certificate of stock has been issued, the entries in journal form will be as shown at the top of page 279. + +270 + +EXERCISES IN OPENING ENTRIES + + + + + + + + + + + + + + + + + + +
Cash250,000250,000
Subscribers to Capital StockTo record cash received from John Smith in payment for the last installment for stock subscribed.
Subscriptions to Capital StockIssued a certificate for ten shares of stock to John Smith.1,000,0001,000,000
+ +When these entries are posted, the Subscribers to Capital Stock account will show a debit balance of $3,000,000, the Unissued Capital Stock account, a debit balance of $1,000,000, and the Subscribers to Capital Stock account, a credit balance of $250,000. When all the subscriptions have been paid in full and the stock issued, the entries are made in the same form as the entries above; when all the subscriptions have been paid in full and the stock issued, the entries are made in the same form as the entries above; when all the subscriptions have been paid in full and the stock issued, the entries are made in the same form as the entries above. + +If a Balance Sheet is prepared before all the subscribers have paid their subscriptions in full, the capital accounts will be shown therein as in the illustration below, assuming that the surplus is $3,500,000: + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
PROPRIETORSHIP:
Authorized Capital Stock250,000. 66
Less Issued Capital Stock47,500. 66
Capital Stock Issued and Outstanding
Subscriptions to Capital Stock...25,000. 66
17,500. 66
Total Proprietorship.
233,500.99
+ +In the above illustration, $250,000.66 of the authorized capital stock of $250,000.66 has been sold for cash and issued. Of the remaining $250,000.66 of stock, $25,000.66 has been subscribed by subscribers who have paid in full and received certificates for their shares; $17,500.66 has been issued but not yet paid for; and $17,500.66 has been issued but not yet paid for; and $17,500.66 has been issued but not yet paid for; and $17,500.66 has been issued but not yet paid for; and $17,500.66 has been issued but not yet paid for; and $17,500.66 has been issued but not yet paid for; and $17,500.66 has been issued but not yet paid for; and $17,500.66 has been issued but not yet paid for; and $17,500.66 has been issued but not yet paid for; and $17,500.66 has been issued but not yet paid for; and $17,500.66 has been issued but not yet paid for; and $17,500.66 has been issued but not yet paid for; and $17,500.66 has been issued but not yet paid for; and $17,500.66 has been issued but not yet paid for; and $17,500.66 has been issued but not yet paid for; and $17,500.66 has been issued but not yet paid for; and $17,500.66 has been issued but not yet paid for; and $17,500.66 has been issued but not yet paid for; and $17,5 + +EXERCISES IN OPENING ENTRIES 271 + +stock (par value, $100.00 per share). The corporation is to take over the assets and assume the liabilities of Warren Bros. at book value, and to issue to H. O. Warren and C. W. Warren 50 shares of preferred stock in payment for their business. Bowser contributes manufacturing supplies valued at $75,000.00, and receives payment in common stock at par. M. A. Miller subscribes for $50,000.00 of preferred stock, for which he pays cash at par. + +The Balance Sheet of Warren Bros. on December 5, 192-, the date on which the charter is granted, is as follows: + +**WARREN BROS.** +Balance Sheet, December 5, 192 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
CashAssetsLiquidity
$3,500.00Accounts ReceivableAccounts Payable$3,500.00
$41,500.00InventoryNotes Payable$3,500.00
66,850.00Office EquipmentMortgages Payable$3,500.00
14,000.00Delivery EquipmentTotal Liabilities$42,850.00
18,569.00Machines
162,569.00Buildings
45,569.00Land
39,569.00H. O. Warren Proprietorship$198,859.00
C. W. Warren Proprietorship$198,859.00
Total AssetsTotal Liabilities and Prop.$262,659.00
Total Assets$327,569.00Total Liabilities and Prop.$262,659.00
+ +(1) Make the entries in journal form to close the books of Warren Bros. +(2) Make the entries in journal form to open the books of the corporation. + +Exercise No. 94, Opening Entry. + +Albert C. Bacon, who has been conducting a retail grocery store, decides to incorporate under the name of A. C. Bacon Grocery Company, Inc., and Company. +H. M. Barnes, E. M. Ward, C. A. Peters, A. S. Weller, and A. E. Harmon join with him in the application for the charter. The corporation is to have an authorized capital stock of $10,000.00 consisting of 1,000 shares, par value $1.00 each. +Bacon is to receive $75,000 for his interest in the business; $25,000 for Weller for 5% shares and Harmon for 1% shares; payment to be made when the charter has been granted. +Bacon is to receive $6,875 for his interest in the business; payment to be made when the balance in stock at par. + +On January 1, 192-, when the charter is granted, the Balance Sheet made from Bacon's ledger appears as follows: + +**A. C. BACON** +Balance Sheet, January 1, 192 + + + +
CashAssetsLiquidity
+ + + + + + + + +Total Assets $17373.89 Total Liabilities and Prop.$237749 + +272 + +QUESTIONS + +1. Why should the authorized capital stock be shown on the Balance Sheet? +2. How should this be recorded when only a part of the authorized capital has been sold and issued? +3. What is the difference between investment in a corporation before the subscriptions by subscribers have been paid in full, and the stock issued to them? +4. If the authorized capital stock is $100,000.00, and $90,000.00 has been sub- scribed, of which $54,000.00 has been paid and stock issued, and $45,000.00 only has been paid for what accounts in the balance sheet? +5. If the stockholders vote to reduce the capital stock of the corporation, how will this reduction be effected? +6. When cash is paid for assets purchased by a corporation at the beginning, what account shows the difference between the purchase price and the book value of these assets? +7. If preferred stock is issued at par value $100.00, with each share of preferred stock, par value $100.00, purchased and paid for in cash, how will the sale of 100 shares of preferred stock be recorded, assuming that cash is received for the stocks at the time it was purchased? +8. Why would a corporation issue its own stock for cash with preferred stock purchased? +9. If a corporation (authorized capital stock issued, $200,000.00) secures an amendment to its charter permitting it to double the capital stock, and it is decided to sell three-fourths of this new issue, what entry will be required to record this stock provided it is sold one-half cash, balance payable within six months? If all of this new issue is sold between preferred and common stock, what effect would this have on the entries? +10. In what respect does the opening entry for a corporation resemble the opening entry for a business operated by an individual or by partners? + +A table with questions about accounting. + +Chapter XXIX + +CONSTRUCTION AND INTERPRETATION OF SPECIFIC ACCOUNTS + +The Purpose of this Chapter is to explain accounts with selling cost, branch store agents, controlling accounts, and notes receivable discounted. Some of these accounts have been explained in previous chapters, but the information is repeated briefly in this chapter for the benefit of the student who is working this division independently of those which precede it. + +§ 288. Selling Expense refers to the cost of selling the merchandise or service in which the business deals. As explained in Chapter XVI, all the cost of selling may be classified into three classes: (a) selling expenses, (b) selling cost may be analyzed at the time they occur and recorded in separate accounts. Selling cost may be divided into (a) advertising, (b) salaries in the selling department, (c) travel expenses, (d) warehouse expense, and (e) delivery expense. + +If desired, selling expenses may be classified so as to apply to departments, each of which is charged with its share of such expenses. In some cases, however, it is desirable that this plan be desirable when the operations of the business are extensive and the management must depend on regular reports for control. + +The classification of the accounts discussed in this chapter applies more to the nature of the expenses than to the departments, the purpose being to show the student that selling expenses are of two kinds: (a) those incurred by the selling department and (b) those incurred by other parts of the total cost of each. The management of a business should know the selling cost applicable to advertising material, salesmen's salaries, traveling expenses, storage costs, shipping room or warehouse, cost of delivering goods sold, etc. + +§ 289. Advertising Cost refers to the expense incurred in connection with advertising in newspapers and magazines, circulars, catalogs, novelties, etc. Two accounts should be kept to show these expenses: one with Advertising Expense and the other with Advertising Material. + +ADVERTISING EXPENSE ACCOUNT + +§ 290. The Purpose of this Account is to show the cost of advertising. This includes (a) salaries, (b) newspaper and magazine space, and (c) catalogs, circulars, etc., which are distributed; the entry for the cost of each is made at the close of the fiscal period after the value of the material on hand has been ascertained by an inventory. + +
Cash$1733.89Notes Payable$3233.89
Notes Receivable2334.46Accounts Payable$237749.
Accounts Receivable1946.38Accounts Payable$237749.
Merchandise Inventory6335.88Total Liabilities and Prop.$237749.
Furniture and Fixtures696.99A.C.Bacon Proprietorship$3369.
+ + + + + + + + + + + + + + + + + + + + + + + + +
DebitCredit
The Advertising Expense Account:The Advertising Expense Account:
1. For the cost of advertising material used during the period.3. For any adjustment which re- quires an increase in advertising cost as shown by a debit side of this account.
2. At the close of the fiscal period,4. For any adjustment which re- quires a decrease in advertising cost as shown by a credit side of this account.
for the cost of advertising ma- terial used during the period.
+ +* * * + +§ 291. The balance of the Advertising Expense Account shows the net cost of advertising. It is shown on the statement of Profit and Loss as one of the selling expenses. + +273 + +274 + +SELLING EXPENSE ACCOUNTS + +ADVERTISING MATERIAL ACCOUNT + +§ 291. The Purpose of this Account is to show the cost of material purchased for use in advertising; this includes catalogs, circulars, stationery for the advertising department, advertising novelties, etc. The nature of the account is the same as that of Office Supplies. + +Debit the Advertising Material Account: Credit the Advertising Material Account: + + + + + + +
¶ 1. For the cost of advertising material purchased.¶ 2. At the close of the fiscal period, for the cost of advertising material used.
+ +§ 3. The Balance of the Advertising Material Account during the fiscal period shows the cost of advertising material purchased; the balance of this account after the value of such material has been used during the closing month of the fiscal period, shows the value of advertising material on hand. This latter balance is shown on the Balance Sheet (Illustration No. 130) as a deferred charge. + +SALARIES IN SELLING DEPARTMENT ACCOUNT + +§ 292. The Purpose of this Account is to show the amount paid to employees (except those engaged in selling merchandise). In a mercantile business this includes the salaries of clerks who are engaged in selling merchandise and of those who supervise the work of these clerks. + +Debit the Salaries in Selling Department Account: Credit the Salaries in Selling Department Account: + + + + + + +
¶ 1. For the salaries of all sales clerks except those on the road.¶ 2. For any adjustments which reduce the cost shown by the debit side.
+ +§ 3. The Balance of the Salaries in Selling Department Account shows the amount paid clerks and salesman; it is shown on the Statement of Profit and Loss (Illustration No. 131) as one of the selling costs. + +TRAVELING EXPENSE ACCOUNT + +§ 293. The Purpose of this Account is to show the cost of selling merchandise through traveling salesmen; this includes salaries, transportation, hotel accommodation, and other authorized expenditures. Salaries include only the amount paid to each salesman's drawing account, but also commission paid to him in excess of his drawing account. + +Debit the Traveling Expense Account: Credit the Traveling Expense Account: + + + + + + +
¶ 1. For the salaries of traveling salesmen.¶ 3. For any adjustments which reduce the cost shown by the debit side.
+ +§ 2. For all amounts paid as expenses for salesmen on the road, as reported by each salesman. + +§ 3. The Balance of the Traveling Expense Account shows the cost of selling merchandise through traveling salesmen; it is shown as one of the selling costs on the Statement of Profit and Loss (Illustration No. 131). + +NOTE: An account is kept with each traveling salesman; this is debited with the cash advanced to him and credited with his expenses as reported weekly or monthly. + +**SELLING EXPENSE ACCOUNTS** + +275 + +§ 294. **Warehouse Expense** refers to the cost of preparing merchandise for delivery after it is sold, and includes wages of employees in the warehouse or shipping room and material used in packing the merchandise. Warehouse expense is one of the operating costs resulting from the sale of merchandise and is shown on the income statement as part of the cost of sales. It is a variable or fluctuating expense item. When a record of the sales by departments is maintained, the total warehouse expense is distributed to the departments in the same proportion as the sales for each department. + +Since material is needed in connection with the shipment of merchandise sold, two accounts are necessary to show the cost of maintaining the warehouse, one with warehouse material and the other with warehouse labor. The account "Warehouse Material" is used for recording receiving and shipping, the title "Shipping Room" may be substituted for "Warehouse". + +If a record of sales by departments is maintained, the cost of maintaining the warehouse separate from the cost of selling or costs which result from selling, and the warehouse is used for receiving goods, then two accounts are necessary to show the cost of maintaining the warehouse. Warehouse expense is the proper account at the cost of each month or fiscal period. The amount transferred will depend on the volume of purchases and sales or the average cost included in inventories, freight charges on shipments and shipping goods. + +**WAREHOUSE MATERIAL ACCOUNT** + +§ 295. The Purpose of this Account is to show the cost of cases, wrapping paper, twine, nails, and other supplies purchased for use in packing merchandise after it has been sold. The nature of this account is the same as that of Adver- +tising Expense (Illustration No. 130). This account shows only those items which are ap- +plicable to material purchased for use in the warehouse. The balance, after the adjusting entry for the value of the material used during the period has been made at the close of the fiscal period, shows its value when the material on hand; this is shown as a deferred charge on the Balance Sheet (Illustration No. 130). + +**WAREHOUSE EXPENSE ACCOUNT** + +§ 296. The Purpose of this Account is to show the cost of maintaining +the warehouse or shipping room; this includes rent, wages of employees and cost +of material used during the period; the entry for the latter cost is made at the close +of each fiscal period after the value of the material has been ascertained through +an inventory. + + + + + + + + + + + + + + + + + + + + + + +
DebitCredit
Warehouse Expense Account:Warehouse Expense Account:
1. For wages of employees and other expenses in connection with moving or storing ware- +house at the time the expense is incurred.3. For any adjustments which reduce the cost shown by the debit sale.
2. For all other types of warehouse ma- +terial consumed during the period, at the close of the fis- +cal period.
+ +§ 297. Delivery Expense is the cost of delivering merchandise after it has been sold, to both local and out-of-town customers. Delivery cost includes all +wages earned by employees engaged in delivering merchandise, including pay for horses, +the cost of maintaining the delivery equipment (such as taxes, license, repairs, +depreciation, and insurance), prepaid freight, express, or parcel post where the consignee pays for such service, and all other expenses incurred in making delivery after sale. The cost of delivery is usually recorded in two accounts: one with Delivery Expense and the other with Freight Out. + +§ 298. The Balance of the Warehouse Expense Account shows the cost of main- +taining the warehouse; it is shown on the Statement of Profit and Loss either +in the selling group (Illustration No. 131) or as a separate item. + +§ 299. Delivery Expense is also shown on page 130 under "Costs". + +276 + +DELIVERY EXPENSE ACCOUNT + +§ 298. The Purpose of this Account is to show the cost of delivering merchandise to local customers and to the freight depot for out-of-town customers, whether the business owns its own delivery equipment or has its merchandise delivered by contract. + +Debit the Delivery Expense Account: +1. For the cost paid for delivery of merchandise sold. +2. For the cost of maintaining a delivery department, which includes (a) salaries, wages, and feed, (b) repairs, insurance, taxes, and depreciation on delivery equipment. +3. For adjustments which decrease the delivery cost as shown by the debit side of this account. + +The Balance of the Delivery Expense Account shows the cost of delivering merchandise; it is shown as one of the selling expenses on the Statement of Profit and Loss (Illustration No. 131). + +"Freight Out" means "f.o.b." is a term frequently used in connection with the sale and shipment of merchandise. If the seller is to deliver the merchandise to the buyer, he de- +cides (this by stating in his quotation price of "F. o. b., your freight station," if the seller is not to deliver it to him at his place of business), or "F. o. b., your freight station," or "F. o. b., your freight station." The meaning of the first expression is that the seller pays the freight to the freight station, and then delivers the merchandise to the buyer at his place of business. The second expression means that the seller agrees to pay the freight to the freight station, but does not agree to deliver it to his place of business. The third expression means that when the transportation company delivers it, the buyer will pay the freight when the transportation company delivers it, or that he (the seller) will pay the freight and add the amount to the invoice rendered by the buyer. + +FREIGHT OUT ACCOUNT + +§ 299. The Purpose of this Account is to show the delivery cost of mer- +chandise sold f. o. b., the freight station of a customer; this includes the freight paid by the seller for freight paid by him from one place to another, deducted by him from the amount of the sales made f. o. b. The term "freight" includes transportation cost whether the merchandise is shipped by railroad, steamship, express, or parcel post. The term "out" is written after "freight" to indicate whether the charge is for delivery or return delivery. When it is applicable to merchandise bought (Freight In), the balance of the account is a purchase cost; if it is applicable to merchandise sold (Freight Out), it is a selling cost. + +Debit Freight Out Account: +1. For all transportation costs incurred in delivering merchandise sold f. o. b., the customer's freight station, and transportation cost of merchandise returned by a cus- +tomer. +2. For any adjustment which re- +duces the delivery cost result- +ing from paying freight on mer- +chandise sold as shown by the +debit side. + +The Balance of the Freight Out Account shows the transportation cost of merchandise sold f. o. b., a customer's freight station. It is shown as one of +the selling expenses on the Statement of Profit and Loss (Illustration No. 131). + +NOTE: If desired, the Freight Out Account may be credited with the transportation cost on merchandise sold f. o. b., a customer's freight station, and debited with the transportation cost when it is paid. This plan is desirable when a delivered price is made on all or the greater part of the merchandise sold, because the selling price includes trans- +portation costs; but if only a portion of each bill is delivered at a delivered price, it will not show the true sales. When this plan is followed, the Freight Out account will be in balance after all bills have been paid; if not in balance, it will show the amount of transportation which is unpaid. + +ACCOUNTING FOR AGENCIES 277 + +§ 300. Agencies. An agent is one who acts in a legal capacity for another, either in the performance of a contract or the sale of merchandise, with reference to the use of merchandise belonging to a principal, and the other, who carries at all times merchandise belonging to various principals; the latter class includes the consignee in a commission business where he receives merchandise from various persons and sells it to others. When the agent represents a principal from year to year and carries his goods in stock for sale at a price fixed by the principal and on a commission basis, it is necessary for the agent to keep an account with the principal showing the value of his stock at any time, the terms of the agreement and remit for the merchandise sold. The commission merchant usually sells all the goods before sending an account sales; the agent makes periodic reports of merchandise sold without waiting for an account sales. + +The agent's account with a principal shows the value of merchandise of a certain variety but pays for it. Thus, if a drugstore has the exclusive sale of a certain kind of medicine, but buys and pays for this medicine the same as other merchants, he is not an agent but has an exclusive license with the manufacturer of the medicine will be the same as that with any other trade creditor. + +AGENT'S ACCOUNT WITH PRINCIPAL + +§ 301. The Purpose of this Account is to show a record of all the transactions which the agent has in connection with merchandise belonging to the principal. The account is of the same nature as the Consignment In account except that the agent makes reports periodically according to agreement and continues to sell the same merchandise for the same principal from year to year. + + + + + + + + + + + + + + + + + + + + + + +
The Agent Debits the Principal:The Agent Credits the Principal:
¶ 1. For the transportation cost paid by the agent.¶ 4. For the value of merchandise received by the principal as per invoice rendered; the Purchases account is debited.
¶ 2. For cash (or other assets) given in payment for the amount due him for his merchandise.¶ 5. The Balance of this Agent's Account with the Principal shows the amount due to him from his agency; it is not all a liability of the agent because he is required to pay only for the merchandise sold. At the close of a fiscal period, the value of the merchandise in stock belonging to the principal should be removed from the ledger by an entry in which this account is debited and Purchases credited; after this entry, there should be no balance in this ledger again by an entry in which Purchases is debited and this account credited.
¶ 3. For the agent's commission on sales of merchandise belonging to the principal.
+ +NOTE. It will be advisable for the agent to maintain a going inventory of the merchandise which he has in stock belonging to the principal. A card ruled for purchases and sales should be provided for each principal, and each month when invoices are received from suppliers, these invoices should be entered in such cards; also, when invoices are sent out to customers, these invoices should be entered in such cards; after this entry, there should be no balance in this ledger again by an entry in which Purchases is debited and this account credited. + +PRINCIPAL'S ACCOUNT WITH AGENT + +§ 302. The Purpose of this Account is to show the transactions which the principal has with his agent, in order that he may verify the reports of the + +278 + +BRANCH STORE ACCOUNTING + +agent. The debits and credits below are applicable when the agent carries in trade merchandise of the principal and reports the sales of this merchandise at specified times as per agreement. + +The Principal Debits the Agent: + + + + + + + + + + + + + + +
t. For the value of merchandise shipped to the agent as per sales invoices rendered, the Sales account is credited.The Principal Credits the Agent:
2. For cash (or other assets) received by the agent on account of sales, for transportation and other costs paid by him, and for his commission on sales.
3. The Balance of the Principal's Account with the Agent shows the amount due from the agent for merchandise in his possession; it is not all an asset because the agent is required to pay only for the merchandise he has sold.
+ +It is necessary for the principal to adjust the account with the agent at the close of the fiscal period because the merchandise in the hands of the agent has not been sold to the agent. The method used to make these adjustments is called "adjusting entries." This takes out of the Sales account the value of the merchandise credited to it, which has not been sold, and records in that account the cost of such merchandise in the hands of the agent. The cost of such merchandise is shown at cost on the Balance Sheet of the principal; the value of this merchandise is not shown on the Balance Sheet of the agent because he has not purchased it. + +§ 303. The Account which the agent keeps with the principal and the account which the principal keeps with the agent should agree at the time the periodic report is submitted by the agent. The adjustments necessary for the principal's account are made after they are filed with him before any changes are made in his account, hence either can make these adjustments without notifying the other. + +§ 304. Branch Store Accounting. A branch store, as the name indicates, is a store operated at a place different from that where its parent store is located in one city, or in another city. Branches are maintained by wholesale establishments for the retail distribution of certain classes of merchandise and to enable the main store to keep its stock up-to-date in various parts of the community which it serves. There are many other reasons for the establishment of branch stores, but these two will serve the purpose in this present discussion. + +When a branch store is established, it is necessary for the general office (usually located at the main store) to know about all activities of the branch through its records. There are two methods in general use: + +1. No accounting records are kept by the branch store except memoranda of transactions completed by it. These memoranda are kept in books of original entry in which each ledger for recording branch store transactions is maintained at the general office. When this plan is followed, all business forms and vouchers which represent transactions completed by the branch store are forwarded to the main store for recording purposes. In this case, however, no record of transactions remains in the records of the branch store for auditing purposes. + +2. The branch store maintains a complete accounting system, including books of original entry similar to those used by a main store. Although each branch store records all transactions which it completes and maintains in the general ledger an account with the general office or main store, which takes place at the close of each month or quarter, depending upon how long branches are maintained by a general office, there will be a similar controlling account for each branch. Monthly reports are submitted by each branch so that the controlling account on the main store ledger may be audited. The title of the controlling account for each branch store in the general ledger of the main store may be "Branch Store," or any name applied + +BRANCH STORE ACCOUNTS 279 + +to the branch store, such as "Store No. 10," "Southside Branch," "Milwaukee Branch," "Springfield Branch," or the name under which the branch store is operated if such name is different from that of the main store. + +The purpose of this discussion is not to give a detailed explanation of branch store accounting, but to show the student some of the methods used. The subject of accounting in its various forms is so extensive that it would require many pages to explain all the details. It is realized that there is much more to learn about the subject than is given in an elementary accounting text. + +**BRANCH STORE ACCOUNT** + +§ 305. **The Purpose of this Account** is to show a record of all transactions with the branch store which it controls. This account is kept under the second plan discussed in § 301. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Debit the Branch Store Account:Credit the Branch Store Account:
† t. For the net assets on hand at the branch store at the beginning of the fiscal period.† 6. For cash received from the branch store for the sales made by it.
† 2. For merchandise sold to the branch by the main store.† 7. For net assets on hand at the branch store at the close of the fiscal period.
† 3. For merchandise returned to the branch by the main store.
† 4. For salaries and wages paid to employees of the branch store by the main store.
† 5. For other expenses paid for the branch by the main store.
† 8. The Balance of the Branch Store Account, after the adjustments have been made, will show either a debit or a credit to the fiscal period, will show the profit or loss resulting from the operations of the branch store during that period, whether it is a larger, a loss, or if the credit side is larger, a profit. The balance will be shown in the trading section on the Statement of Profit and Loss (Illustration No. 131) of this book. The Statement of Profit and Loss submitted by the management of the branch store will support the entry on the Statement of Profit and Loss of the main store. +
+ +§ 306. **The Purpose of this Account** is to show the value of the assets on hand at the branch store at the close of the fiscal period; these assets include all property, plant and equipment owned by it. If desired, the current assets, fixed assets, and deferred charges may be recorded on separate sheets. The manager of the branch store will prepare a Balance Sheet from his books and this will be used as a schedule to support the item "Branch Store Inventory" on the Balance Sheet (Illustration No. 132). If desired, any portion of these assets, or all of them, or inventory or inventories of the branch store assets may be transferred to the Branch Store account (Illustration No. 134), or this transfer may be made at the close of the fiscal period. + +† Debits † 5 may be omitted and † 6 changed to read "For all sales made by the branch store." If these changes are made and the Branch Store account is debited with the net profit or cost resulting from operations during that period, whether it is a profit or a loss, or if this debit side is larger than a credit side, then this debit will be shown in trading section on Statement of Profit and Loss (Illustration No. 131) prepared by manager of branch store, and this statement will show net value of assets belonging to branch store at close of fiscal period and will be shown as a current asset on Balance Sheet of main store prepared at that time. + +280 + +**CONTROLLING ACCOUNTS** + +§ 307. A **Controlling Account** is one which represents in total the facts shown in detail in a number of other accounts (§ 160). Controlling accounts are used more frequently with accounts receivable and accounts payable because usually a great number of accounts are required to record the transactions with customers and creditors. The controlling account is kept in the general ledger and the accounts receivable and accounts payable are kept in a subsidiary ledger. The controlling account in the general ledger for accounts with customers is Accounts Receivable, and for accounts with creditors, Accounts Payable. + +§ 308. The **Accounts Receivable Account** in the general ledger contains in total the same debits and credits which appear in detail in the various accounts with customers. The amount of each debit is entered in detail in the subsidiary ledger with the amount of his purchase as recorded in the sales journal, and the Accounts Receivable account is debited at the end of the month with the total of this journal. Each customer is credited in the subsidiary ledger with cash received from him during the month, and the balance of such cash is posted to the credit of the Accounts Receivable account in the general ledger; credits to customers which include discounts are posted to the credit of Discounts on Sales. In a special column of the cash book Each customer is credited, in a special column in the general journal, with notes, drafts, and assets other than cash accepted to apply on account, and the total of such credits is posted to the credit of Accounts Receivable account in the general ledger. Each customer is credited in his account in a subsidiary ledger with the amount of each allowance for damaged goods or goods returned as recorded in the sales returns journal, and the total of this journal is debited to his account in the general ledger. Accounts Receivable account in the general ledger. + +The balance of the controlling account with Accounts Receivable in the general ledger should be listed and the total proved with the balance of the Accounts Receivable account. + +§ 309. The **Accounts Payable Account** in the general ledger contains in total the same debits and credits which appear in detail in the various accounts with creditors in a subsidiary ledger. Each creditor is credited in the subsidiary ledger with the amount of his purchase from him as recorded in the purchases journal, and each creditor's account is credited at the end of month with the total of this journal. Each creditor is debited in the subsidiary ledger with cash paid to him as recorded on the payments side of the cash book, and the total of such cash paid creditors is posted at the end of month to the debit of the Accounts Payable account in the general ledger. Credits to creditors which include discounts are posted to their account in a special column of a special cash book. Each creditor is debited, in a special column in the general journal, with notes, drafts, and assets other than cash paid by him to apply on account, and each creditor's account is debited at end of month with such credits as are posted to its account in a special column of a special cash book. The balance of the controlling account with Accounts Payable in the general ledger should be listed and proved with the balance of Accounts Payable. + +The balances in all sub-accounts should be listed and proved before listing and proving any balance due creditors or debtors. After Trial Balance from general ledger has been proved, balances in subsidiary ledger should be listed and proved with balance of Accounts Receivable account. + +The balances in all sub-accounts should be listed and proved before listing and proving any balance due creditors or debtors. After Trial Balance from general ledger has been proved, balances in subsidiary ledger should be listed and proved with balance of Accounts Payable account. + +EXERCISES +281 + +**NOTES RECEIVABLE DISCOUNTED ACCOUNT** + +**§ 310. The Purpose of this Account** is to allow the balance of unpaid notes receivable which have been discounted. When a note receivable is discounted, the holder guarantees payment at maturity by his endorsement; this creates a "contingent" liability. Contingent liabilities should be recorded in the ledger and shown on the Balance Sheet. + +Debit this Account: + + + + + + + + + +
1.For the face of each discounted note receivable when it has been paid by the maker; no notice of protest at maturity indicated;
2.For the face of each note receivable discounted; this entry is made at the time the note is discounted.
+ +Credit this Account: + + + + + + + + + +
1.For the face of each note receivable discounted; this entry is made at the time the note is discounted.
2.For the face of each note receivable discounted; this entry is made at the time the note is discounted.
+ +**§ 315. The Balance of the Notes Receivable Discounted Account shows the amount of unpaid notes which have been discounted; it is shown as a contingent liability on the Balance Sheet or as a deduction from the Notes Receivable account (Illustration). + +When a note or accepted draft is received, its value is recorded in the Notes Receivable account and should remain there until collected or protested. When a note receivable is discounted, Cash includes the amount due from the maker, less any discount allowed. This indicates collection; hence the amount of the note receivable should be taken out of the Notes Receivable account and credited to Discounted Notes Receivable. The difference between what was discounted and Notes Receivable credited, if any, should be entered in a special journal called Discounted Notes Receivable. + +Since all discounts are recorded at one time, when a note is discounted it will be required to issue his check to the holder for the face of the note, interest if any, and any discount allowed. This check will be recorded as a debit to Discounted Notes Receivable and as a credit to Notes Receivable. All discounts are entered in a general journal. + +Exercise No. 95, Sale of Branch Store + +The Allyn Trading Company, a corporation, is operating a branch store in another city. Robert Montgomery, the manager of the branch store, wishes to purchase $2,000 worth of stock in order to expand his business. As part of his purchase of stock in the Allyn Trading Company he will accept stock in the new corporation as part payment. The inventory of the branch store shows the net assets to be $6,000. + +Mr. Montgomery applies for and secures a charter for the Montgomery Mer-cantile Company with a capital stock of $25,000.00. The Allyn Trading Company agrees to accept this amount for the branch store, to be paid as follows: cash, $5,000; notes payable to Montgomery Mercantile Company for $15,000; and notes payable to Montgomery Mercantile Company for $5,000.00 each, with interest at six per cent from date, due in six, twelve, and eighteen months respectively. + +Make up all necessary entries necessary to record this transaction on the books of the Allyn Trading Company under date of December 1, 1927, assuming that the branch store accounts appear on the books of the Allyn Trading Company as Branch Store Inventory, Dr., $13,631.75; Branch Store Purchases, Dr., $14,649.11; and Branch Store Sales, Cr., $19,573.96. + +Exercise No. 96, Constructing Selling Expense Accounts + +Open accounts on a sheet of Ledger paper with Advertising Expense, Ad-vertising Material, Salaries in the Selling Department, Traveling Expense, Ware-house Material, Warehouse Expense, Delivery Expense, and Freight Out; and record at least three transactions in each account; indicate the nature of each item in the explanation column of the account in which it is recorded. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
AccountDescriptionAmount
Advertising ExpenseAdvertising Material$250
Selling DepartmentSalaries$350
Traveling ExpenseWarehouse Material$150
Traveling ExpenseWarehouse Expense$250
Traveling ExpenseDelivery Expense$150
Traveling ExpenseFreight Out$250
+ +282 +EXERCISES + +**Exercise No. 97. Note Receivable Discounted.** + +Show, in journal form, the entries necessary to record a note receivable (a) when received from a customer to apply to account; (b) when discounted at the bank; (c) when the discounted note is paid by the maker; (d) when the discounted note is not renewed; (e) when the discounted note is protested. + +**Exercise No. 98. Agent and Principal.** + +The following transactions were completed by the Southern School Book Depository, agent for the Davis Publishing Company: + +Jan. 1. Received from the Davis Publishing Company 500 Davis law texts at $4.00. +10. Sold the College Book Store City, 100 law texts at $1.00. +13. Paid freight on law texts received March 10, $12.60. +23. Received from the Davis Publishing Company 500 law texts at $1.00. +26. Sold the Central High School, City, 200 law texts at $1.00. +27. Paid $25.50 freight and dragging on law texts received March 25. +Feb. 16. Received from the Kentucky Book Store Law texts at $4.00. Paid express, $1.00. +25. Sold the Lincoln High School, Lincoln, 100 law texts at $1.00. +Mar. 3. Sold the Central Business College, City, 200 law texts at $1.00. +10. Paid freight and dragging on law texts received March 15, $1.00. +11. Paid freight and dragging on law texts received March 10, $27.65. +Received from the Lincoln High School five law texts which were delivered to the Davis Publishing Company and returned them to the Davis Publishing Company, paying express $5. +31. Rendered Davis Publishing Company a report, and sent check for the balance due, commission, 12½ % of net sales. + +1. Record in journal form the above transactions, post and make the report of the bookkeeper to the Southern School Book Depository. +2. Record the same transactions as they would be recorded by the book-keeper of the Davis Publishing Company. + +**QUESTIONS** + +1. Why is it advisable for a merchant who does a considerable volume of business to classify discounting of notes receivable accounts? + - (a) What is the difference between Freight In and Freight Out? (b) How is each shown on the Statement of Profit and Loss? + - Explain why it is advisable for a manufacturer who makes a delivered sale price his customers that he will pay for all of the freight at the time the sale is made, and debit the Freight Out account when the freight is paid. + - Explain the two methods for recording transactions with a branch store. + - Who is a principal? + - Who is a principal? + - What is the purpose of the agent's account with the principal? The principal's account with the agent? + - Will all the debits on the agent's account with the principal appear as credits on the principal's account with the agent? + - Why is a liability incurred when a note receivable is discounted? + - How is the liability incurred in question 9 shown on the Balance Sheet? + +A page from an exercise book showing questions about accounting. + +**Chapter XXX** + +## SPECIAL RULING IN BOOKS OF ACCOUNT + +The Purpose of this Chapter is to explain the use and advantage of special columns in books of original entry through illustrations showing transactions recorded in them. A printed statement of the transactions recorded in the illustrations is that shown on page 283. The method of posting from the special columns in each book of original entry is explained by requiring the student to post from the illustrations. + +### § 311. Business Transactions are recorded in books of original entry and posted as they occur and in the order of their occurrences. When a number of transactions affecting the same account are recorded, one or more special columns in each book of original entry which contains a record of transactions affecting the account. In a mercantile business, the usual books of original entry are sales journal, (a) cash receipts journal, (b) cash payments journal, (c) returned sales journal, (e) cash book, or separate cash receipts and cash payments journals, (f) notes receivable journal, (g) notes payable journal, and (h) general journal. In addition to the books of original entry a symbol of auxiliary books may be needed, such as include a petty cash book, a bank book, a payroll book. + +### § 312. Petty Cash Fund refers to the fund provided for payment of small amounts when all cash received is deposited in the bank, and all payments are made by check. The cash needed for this fund is secured by check; the money received by the check is kept in the safe and used for paying obligations where the amount is less than $500 for paying obligations where the amount is $500 or more. The bank receives a receipt for each payment from the petty cash fund. The Petty Cash Fund account is debited for the amount of the check at the time it is issued. Expenditures from this fund are charged to accounts affected by expenditures. When the fund is exhausted, a check is issued to renew it. This check is debited to the accounts affected by the expenditures as shown by the petty cash book. The Petty Cash Fund account is credited for the amount paid out from this fund. This may be $20.00, $50.00 or $100.00, depending on the desires of the management. + +### § 313. The Petty Cash Book is an auxiliary book which records expenditure from the petty cash fund. When these expenditures affect a number of expense accounts, special columns should be provided for each account in which expenditure affects it. The amount paid out from the petty cash book. The petty cash book should be ruled when the petty cash fund is exhausted. The amount of the check to renew the fund should be sufficient to bring it up to the balance of the Petty Cash Fund account in the general ledger, with any necessary adjustment for interest on outstanding checks at the end of the period, the petty cash book should be balanced; the amount of the fund on hand carried down below the ruling, and the expenditures debited to the proper expense accounts. Illustration No. 110 shows a petty cash book with seven amount columns; the use of these columns is explained by the headings. + +283 + +284 +SPECIAL-COLUMN PURCHASES JOURNAL + +TRANSACTIONS RECORDED IN THE ILLUSTRATIONS + +§ 314. The Books of Account shown in Illustrations Nos. 111-120, con- +tain a record of the transactions performed by the Arnold Drug Store during the month of December. The use of the special columns in each illustration can be better understood by comparing each entry with the transaction. + +December 2 + +Paid rent for the month, $75.00, by our check No. 63. +Sold Miller & Barr, Canton, per sales invoice No. 77, drugs, $102.74, sundries, +$534.16; terms, 2% trade acceptance, 30 days. Received in payment of this in- +voice, less 2% discount, their 30-day trade acceptance payable at the Citizens' +Bank, Canton. + +Received from Williams Pharmacy in payment for sales invoice No. 60, a +60-day note, $287.14, dated November 15, signed by J. B. Macklin, payable at +the City National Bank, with interest at 6% from date; allowed them credit for +the accrued interest on the note. + +Gardner & Co.'s 15-day note for $217.25, payable at the City National +Bank, dated November 30, with interest at 6% from date, in payment for pur- +chases invoice No. 15. + +Paid $4.00 from the petty cash fund for stamps to be used in the office. +Accepted John D. Park & Son's 60-day trade acceptance for $537.75, payable +at the City National Bank, in payment for purchases invoice No. 20 less 3% dis- +count as per terms. + +Illustration No. 111, Purchases Journal. + +EXPLANATION. The method of recording is the same as in other purchases journals illustrated in preceding chapters, except that a record is kept of the merchandise purchased for two separate periods of time (first and second columns), and a record is kept of the sundries purchased (third column). At the end of the month, the Accounts Payable account is credited for the total of the first column, the Drugs Purchases account debited for the total of the second column, and the Sundries Pur- +chases account debited for the total of the third column. + +December 4 + +Bought from Park, Davidson & Co., Chicago, per purchases invoice No. 23, +dated December 2, drugs, $250.00; sundries, $200.00; terms 2/10 n/30. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
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ItemDescriptionAmountDateTermsPaid
1Drugs - Cephalosporin Vite$250.00Dec. 22/10 n/30$250.00
2Sundries - Tetracycline Tablets$250.00Dec. 22/10 n/30$250.00
3Sundries - Tetracycline Tablets$250.00Dec. 22/10 n/30$250.00
4Sundries - Tetracycline Tablets$250.00Dec. 22/10 n/30$250.00
5Sundries - Tetracycline Tablets$250.00Dec. 22/10 n/30$250.00
6Sundries - Tetracycline Tablets$250.00Dec. 22/10 n/30$250.00
7Sundries - Tetracycline Tablets$250.00Dec. 22/10 n/30$250.00
8Sundries - Tetracycline Tablets$250.00Dec. 22/10 n/30$250.00
9Sundries - Tetracycline Tablets$250.00Dec. 22/10 n/30$250.00
10Sundries - Tetracycline Tablets (Continued)$250.00 (Continued)Dec. 2 (Continued)2/10 n/30 (Continued)$250. (Continued)(Continued)(Continued)(Continued)(Continued)(Continued)(Continued)(Continued)(Continued)(Continued)(Continued)(Continued)(Continued)
+ +Illustration No. 111, Purchases Journal. + + + +
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PostingsDescriptionAmount
City National Bank Dr.$3,643.69
Petty Cash Fund Dr.$217.62
Notes Receivable Dr.$1,217.62
Accounts Receivable Dr.$3,134.87
Accounts Payable Cr.$849.91
Store Fixtures Cr.$849.91
Office Fixtures Cr.$849.91
Equipment for Office Use Cr.$849.91
Store Fixtures Cr.$849.91
Reserve for Depreciation of Store Fixtures Cr.$849.91
Delivery Equipment Cr.$849.91
Accounts Payable Cr.$217.62
Accrued Warehouse Rent Cr.$572.66
Advertising Expense Cr.$572.66
+ + +
DescriptionAmount
City National Bank Dr.$3,643.69
Petty Cash Fund Dr.$217.62
Notes Receivable Dr.$1,217.62
Accounts Receivable Dr.$3,134.87
Accounts Payable Cr.$849.91
Store Fixtures Cr.$849.91
Office Fixtures Cr.$849.91
Equipment for Office Use Cr.$849.91
Store Fixtures Cr.$849.91
Reserve for Depreciation of Store Fixtures Cr.$849.91
Delivery Equipment Cr.$849.91
Accounts Payable Cr.$217.62
Accrued Warehouse Rent Cr.$572.66
Advertising Expense Cr.$572.66
+ + +
DescriptionAmount
Petty Cash Fund Dr.$217.62
Notes Receivable Dr.$1,217.62
Accounts Receivable Dr.$3,134.87
Accounts Payable Cr.$849.91
Store Fixtures Cr.$849.91
Office Fixtures Cr.$849.91
Equipment for Office Use Cr.$849.91
Store Fixtures Cr.$849.91
Reserve for Depreciation of Store Fixtures Cr.$849.91205 + +January 3 + +Pai I M. F. Duff, attorney, $250.00 for legal service in connection with organizing the corporation and securing the charter. +Debit Organization Expense +Credit Cash $250.00 (T-12-91) +Prove the entries in the cash book and general journal to the same ledger used in December. + +QUESTIONS + +1. What is the difference between a book of original entry and an auxiliary book? +2. What is the purpose of special columns in books of original entry? +3. What is the purpose of separate sales accounts? +4. Why is it necessary to provide special columns in the purchases journal and sales journal when separate sales and purchases accounts are maintained? +5. Why is the total of the Sales Discount column on the receipts side of the cash book equal to the total of the Purchases Discount column on the payments side of the cash book, not used in proving cash? +6. To what accounts in the general ledger is the total of the Sales Discount column on the receipts side of the cash book posted? Why? +7. What effect will it have on the Trial Balance if the bookkeeper makes an error of $1.00 in adding the Purchases Discount column on the payments side of the cash book? Give reason for your answer. +8. What is the advantage of the notes receivable and notes payable journals? +9. If interest is charged on notes receivable, what entry will be required if a customer does not receive credit for the full amount of the note because of the interest involved? +10. (a) Why does the bookkeeper reconcile his bank account with the statement rendered by the bank? (b) Describe, in detail, the method of making this reconciliation. + +Chapter XXXI +GENERAL INFORMATION + +The Purpose of this Chapter is to explain trade acceptances and the accounting procedure in connection therewith, collateral security, power of attorney, journal voucher, exhibits, schedules, analytical statements and methods of numbering accounts. The buyer or seller may wish to consult his bookkeeper about this information if he is to complete successfully the work required of him as a book-keeper. As a business man, he will need this information so that he may interpret the reports submitted by his purchasing department. + +§ 316. A Trade Acceptance as defined by the Federal Reserve Board is "a bill of exchange (time draft) drawn by the seller on the purchaser of goods sold, and accepted by such purchaser." As explained in §94, it is assumed that this acceptance is made on the date of purchase, or within a few days thereafter. The principle involved is that at one time the seller has no money available until the former is drawn and accepted at the expiration of the time of credit, with the purpose of giving additional time, while the latter is drawn and accepted at the time of sale, with the purpose of giving immediate payment. This practice is followed in Great Britain and the countries of Continental Europe where practically every commercial transaction is financed by means of a time draft. Its successful application in these countries has brought about a demand for its use in the United States, and this is being advocated by many leading business organizations. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
TRADE ACCEPTANCEAMERICAN TRADE ACCEPTANCE CORPORATION
TRADE ACCEPTANCE CORPORATION OF THE UNITED STATESCORPORATION OF THE UNITED STATES
No. 455Chattanooga, Tenn., July 19, 19--
B. B. Lambertson's Station Lexington, Ohio
August 23
One Hundred Sixty-five Dollars, $165.
Pay to the order of Ourselves
Dated, Aug. 23, 19--
This bill payable to any bank, banker or trust company in the United States which we may designate.
Accepted at Lexington O. J. Whitney
Possible at Lexington National Bank
By J. A. Whitney & Co.
+ +Illustration No. 121. Trade Acceptance. + +§ 316. The Purpose of a Trade Acceptance is (a) to provide a better evidence of the debt resulting from the sale of merchandise on account than the open book account; (b) to provide commercial paper that may be discounted by the seller without encumbering his own capital; and (c) to facilitate collection. + +1. Open Book Account. The open book account is the seller's record of his transactions with the buyer. It is the result of a business habit which has many disadvantages. It forces the seller to carry the financial burden of the buyer, and ties up the seller's invested or borrowed capital for an indefinite period. As + +276 + +GENERAL INFORMATION 207 + +an asset, the open book account is neither quick nor sure. At best, book accounts are seldom available for a loan of more than 5% of their value. The book account balance is usually the only evidence of the amount of the debt. In cases of dispute the burden of evidence is on the seller. As sales are often completed over the telephone or counter telephone, it is sometimes difficult to prove the amount of the account. If each sale on account is closed by a trade acceptance, all of these disadvantages, and many others, are avoided. The buyer has no interest in the transaction between the seller and the buyer as to the amount of the indebtedness, and the date of maturity. + +1 A.2. A Class of Collectible Securities. Borrowed capital is usually obtained by selling notes properly executed by the business, or by discounting notes received from customers. The National Banking law very wisely limits the amount of the loans to be made to any one business by national banks, and practically all of the state banking laws now conform to the national law. This means that a business cannot borrow money from a bank without borrowing its own paper. Notes given by the business to customers are usually for an extension of time, hence are not the best class of commercial paper, as a business with a high credit rating can obtain funds at a low rate of interest by borrowing from customers. It is necessary for the business to become surety on notes discounted by it, or the borrowing limit regulated by the banking laws affects the discounting of notes. The Federal Reserve System requires that all banks keep a reserve fund sufficient to finance a preferred class of commercial paper which may be discounted to an unlimited extent by the business, and in no way affect the borrowing capacity in regard to its own or others' notes discounted. Reserve banks are permitted to go into the market and buy such preferred class of commercial paper when they wish and rediscount them. Being a preferred class of security, the trade acceptance gives the business a greater borrowing capacity and a smaller discount rate because the better its security, the less its interest cost. + +6 Purpose of Open Account. One of the principal objections to the open book account is the ease with which the buyer can secure an extension of time. The seller is under obligation to the buyer as a customer and may be forced to extend terms beyond those agreed upon unless he has some other source of income otherwise. The same also applies to the discount period where sales are made subject to a special discount for prompt payment. Many buyers will take advantage of the seller by allowing extra time to expire before making remittance with the hope that they will not have to pay for what they receive until after they have paid for what they ordered. This will cause him to allow the discount even though the time has expired. If each sale on account is closed by a trade acceptance, these and many other annoying features are avoided. The buyer does not know how much he owes until he pays it; thus he cannot use his credit rating against himself until he has paid it; and if he does not pay promptly, he will find that his bank should they not be discounted. The average individual has a high regard for his credit rating with the bank and, as a rule, will pay an obligation maturing at the bank quicker than he will an open account. + +§ 317. Accounting Procedure. When a sale is made, terms "trade acceptance," the seller records it in the sales journal in the same manner as a sale on account except that it is recorded as a purchase in the purchases journal and a sales invoice with a request for its acceptance on delivery. The buyer records the purchase in the purchases journal and the accepted trade acceptance in the same manner as an accepted draft or a note receivable. When the seller receives the trade acceptance accepted by the buyer, it is recorded in the same manner as an accepted draft or a note receivable. + +An accepted trade acceptance is the name as an accepted draft or a note. Trade acceptances may be either accepted drafts or notes payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within 30 days or more than 30 days but not more than 90 days. Note that trade acceptances are payable within + +293 +# GENERAL INFORMATION + +§ 318. A Power of Attorney is written evidence of authority granted an individual to act as agent for another. One who acts as agent without a power of attorney may be held personally responsible for the contracts which he makes for his principal. Illustration No. 122 shows one form of power of attorney. + +KNOW ALL MEN BY THESE PRESENTS, That JAMES C. WILSON, of the city of Boston, Massachusetts, does hereby appoint and authorize Miss Margaret A. Davidson, of the office of said city, county, and state, my true and lawful attorney, to act for me and in my name in all matters whatsoever, including but not limited to any business as retail clothing merchant. + +1. To deposit and withdraw my account in the Merchants National Bank. +2. To sign checks, drafts, notes or bills of exchange which may require my endorsement for payment or cash or for collection in the said bank. +3. To make一切 bills of exchange which may be drawn on me by those from whom I have purchased merchandise. +I hereby certify and confirm all that the said attorney may lawfully do or cause to be done by virtue of this power of attorney. + +In Witness Whereof, I have hereunto set my hand and sealed this twenty-fifth day of May, in the year of our Lord one thousand nine hundred and twenty-five. + +Signed, sealed and delivered +in the presence of +PAUL WHITELAW. [Seal] + +Illustration No. 122, Power of Attorney. + +EXPLANATION This contract authorizes Miss Margaret A. Davidson to sign certain contracts on behalf of Mr. Wilson. The signature on this note is a facsimile of that which Miss Davidson is authorized to sign checks, and to use it with the form of signature to be used by her. + +§ 319. Collateral Security. When money is loaned, the lender usually requires the borrower to give some evidence aside from the promise that he will pay the money. Such specific collateral evidence is usually given in the form of security which may be personal or collateral. Personal security is secured by the signature of the one who wishes to guarantee the obligation. Collateral security + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
$650.00DATESEPTEMBER 17
RECEIVED FROMWALTER H. WILSON
FOR THE FIFTH THOUSAND NATIONAL BANK OF BOSTON,DATESEPTEMBER 17
IN THE NAME OF THE FIFTH THOUSAND NATIONAL BANK OF BOSTON,PAYABLE TOCITY NATIONAL BANK OF BOSTON
AT THE FIFTH THOUSAND National Bank of Boston, in entire faith with which you agree to pay on demand at your place of business, having borrowed from us sufficient money for the purpose for which you borrow.
For City National Bank Note No.
Issued September 17th.
At your request we will issue a certificate showing the amount due you on this note.
The undersigned certifies that this note has been properly endorsed and delivered to us.
We have received this note in good condition.
This note is payable only in City National Bank Notes.
+
F.D. Address:650 MURRAY AVE.BOSTON, MASS.
+ +Illustration No. 123, Collateral Note. + +EXPLANATION This note is the same form as the usual promissory note except that space is provided for a description of the collateral security attached to this note in five shares of City National Bank stock. This stock is not shown in the illustration, since the student is familiar with the form of a certificate of stock, through the preceding discussion. + +GENERAL INFORMATION +299 + +is effected by placing the title to personal or real property, as guaranty for the payment of the obligation. The title to chattels and real estate is placed as collateral security by the use of a written document referred to as a "mortgage." This is a legal instrument which transfers title to the mortgagor's property to the mortgagee. A second form of collateral security is by the use of a collateral note; this class of personal property usually consists of written contracts such as stocks and bonds. Illustration No. 123 shows one form of collateral note. + +The J. A. Whitney Company, Inc. +JOURNAL VOUCHER No. 15 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
JOURNAL PAGEDATEJuly 26, 192
DEBIT:Delivery Equipment300.00
CREDIT:Unissued Capital Stock300.00
REMARKS: Five shares of stock (par value $100.00) issued in payment for a used Reo truck for use in the delivery department.
APPROVAL:
J. S. Martin
SECRETARY
J. A. Whitney
PRESIDENT
+ +Illustration No. 124, Journal Voucher. + +EXPLANATION: This journal voucher was issued by the president of the corporation, and authorizes the issue of five shares of capital stock in exchange for a delivery truck. Without this journal voucher, the shareholders of the corporation might question the correctness of the entry. + +§ 321. An Exhibit, as applied to accounting, is a statement of material facts with reference to the financial condition of the business, presented in summarized form. The exhibits submitted to the board of directors usually consist of the balance sheet, Statement of Profit and Loss, and Analysis of the Surplus account. Exhibits are usually denoted by letter(s), the balance sheet being Exhibit A, Statement of Profit and Loss, Exhibit B, and Analysis of the Surplus account, Exhibit C. + +Exhibits should be brief and condensed so as to provide a comprehensive view of the financial condition of the business. Details in regard to the facts set forth in each exhibit are given in schedules or analytical statements which accom- pany it. + +A page from a journal voucher showing details about delivery equipment and unissued capital stock. + +300 +GENERAL INFORMATION + +§ 322. A Schedule is a detailed list showing the items which compose a total on the Balance Sheet or Statement of Profit and Loss, as a list of notes receivable, accounts receivable, merchandise in stock, etc. Schedules are usually numbered and appear at the end of the Balance Sheet and Statement of Profit and Loss, as illustrated in Chapter XXXII. + +§ 323. An Analytical Statement is a detailed analysis of the balance of an account on the Statement of Profit and Loss, as a list of the various expenditures which relate to the selling expenses, buying expenses, administrative expenses, etc. Each analytical statement is usually numbered, and the number indicated on the Statement of Profit and Loss. + +§ 324. Numbering Accounts. In a business of material size, many accounts will be required to show the results of the transactions performed in the operations of the business. Reference to these accounts may be facilitated by giving each account a number according to its classification. The use of number to describe the nature of an account is called its classification. See illustration No. 125, in which the arrangement is based on the division of the accounts into three groups: (1) property accounts, (2) proprietorship accounts, and (3) revenue accounts. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
1. PROPERTY ACCOUNTS
11. Accounts Receivable2. PROPRIETORSHIP ACCOUNTS
111. Cash Receipts201. Unissued Capital Stock
112. Cash202. Treasury Stock
113. Notes Receivable203. Reserve for sinking fund
114. Notes Receivable Discounted*204. Reserve for sinking fund
115. Accounts Receivable3. REVENUE ACCOUNTS
116. Merchandise Inventory31. Income Accounts
117. Merchandise Inventory Discounted*32. Expense Accounts
118. Fixed Assets33. Operating Expense Account.
120. Reserve for Dep., of Office Equipment34. Purchases Returns and Allowances.
121. Store Fixtures35. Sales Returns and Allowances.
122. Merchandise Wp., of Store Fixtures36. Merchandise Income Account.
123. Delivery Equipment37. Interest Earned.
124. Building38. Interest Earned.
125. Land39. Sales Discounts.
126. Merchandise Inventory Discounted*40. Advertising Expense Account.
127. Goodwill41. Warehouse Expense Account.
128. Fruits & Vegetables Inventory Discounted*42. Freight Out.
129. Fruits & Vegetables Inventory Discounted*43. Merchandise Income Account.*Zero preceding last digit indicates its opposite tendency.























































Illustration No. 125, Numbering Accounts.
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
13. Liability Accounts44. Administrative Expenses Account.45. Non-Operating Expense Account.46. Interest Expense Account.47. Other Income Account.48. Other Expense Account.49. Other Revenue Account.50. Other Expenditure Account.51. Other Revenue Account.52. Other Expenditure Account.53. Other Revenue Account.54. Other Expenditure Account.55. Other Revenue Account.56. Other Expenditure Account.57. Other Revenue Account.58. Other Expenditure Account.59. Other Revenue Account.60. Other Expenditure Account.61. Other Revenue Account.62. Other Expenditure Account.63. Other Revenue Account.64. Other Expenditure Account.65. Other Revenue Account.66. Other Expenditure Account.67. Other Revenue Account.68. Other Expenditure Account.69. Other Revenue Account.70. Other Expenditure Account.71. Other Revenue Account.72. Other Expenditure Account.73. Other Revenue Account.74. Other Expenditure Account.75. Other Revenue Account.76. Other Expenditure Account.77. Other Revenue Account.78. Other Expenditure Account.79. Other Revenue Account.80. Other Expenditure Account.81. Other Revenue Account.82. Other Expenditure Account.83. Other Revenue Account.84. Other Expenditure Account.Other Revenue Account:Other Expenditure Account:Other Revenue Account:Other Expenditure Account:Other Revenue Account:Other Expenditure Account:Other Revenue Account:Other Expenditure Account:Other Revenue Account:Other Expenditure Account:Other Revenue Account:Other Expenditure Account:Other Revenue Account:Other Expenditure Account:Other Revenue Account:Other Expenditure Account:Other Revenue Account:Other Expenditure Account:Other Revenue Account:Other Expenditure Account:Other Revenue Account:Other Expenditure Account:Other Revenue Account:Other Expenditure Account:Other Revenue Account:Other Expenditure Account:Other Revenue Account:Other Expenditure Account:Other Revenue Account:Other Expenditure Account:Other Revenue Account:Other Expenditure Account:Other Revenue Account:Other Expenditure Account:Other Revenue Account:Other Expenditure Account:Other Revenue Account:Other Expenditure Account:Other RevenueAccount:
+ +GENERAL INFORMATION 301 + +§ 325. Depreciation. Depreciation refers to the decrease in the value of fixed assets due to their use in the operations of the business and to the lapse of time. The depreciation of fixed assets is usually calculated by means of a formula in a short time, such as office supplies, advertising material, shipping room material, etc.; it is applicable only to fixed assets purchased for use in the business, which will decrease in value because of their use but which usually have some value no matter how long they remain unused. Fixed assets that are used up and become worthless because it is one of the operating costs of the business. If not recorded from year to year, the Balance Sheet and Statement of Profit and Loss prepared at the end of each year will show a higher value than the actual value. + +There are several methods for calculating depreciation, but the two most generally used are the "straight line" method and the "declining balance" method. With the straight line method, the cost of the asset is divided into equal parts over a period of a designated number of years, and it is depreciated in equal amounts for each of these years between the time of purchase and the time it is to be scrapped. Thus if it is assumed that a typewriter which costs $100 is expected to last five years (assuming) value of $20 per year for five years, depreciation for each year would be $100.00 cost minus $20.00 exchange value, equals $75.00 depreciation; $75.00 divided by 5, the number of years, equals $15.00 depreciation each year; $15.00 depreciation times 5 years equals $75.00 total depreciation; thus the typewriter has been depreciated 75% ($75.00/$100). + +With the declining balance method, the depreciation is calculated on the value of the fixed asset at the end of each year. If it is assumed that the typewriter with a cost of $100 is expected to last five years (assuming), then for the first year would be 1/5 of $100.00, or $20.00; the depreciation for the second year would be 2/5 of $80.00, or $16.00; the depreciation for the third year would be 3/5 of $64.00, or $32.00; and so forth until the end of five years being $32.77. + +Depreciation should be shown on the Balance Sheet as a deduction from the cost value of the assets; it is shown on the Statement of Profit and Loss through the increase in the operating expense accounts affected by the use of the fixed assets. + +The amount shown on the Balance Sheet and on the Statement of Profit and Loss is the result of its being entered in both journal and posted to the accounts in the ledger. + +It is practical to show the exact amount of the depreciation on each fixed asset no matter which method may be used. The reason for this is that it is not within the human mind to fix an exact future value on property which is to be used in the business, and to determine in advance the amount of the depreciation that will occur during any given period. The purpose of recording depreciation is to take out of the profit each year the estimated decrease in value of the fixed assets through their use in the operations of the business, and to show them at their true worth on hand at any particular valuation only. While they may not be exact, yet they will enable the management to know approximately what value of fixed assets, in case this information is needed in the adjustment of fire loss. It also makes possible the distribution of losses which are common in fire loss but which amount which will not be known until it is necessary to replace the fixed assets. + +§ 326. Turnover refers to the number of times the capital invested in a given class of merchandise will be reinvested in the same class of goods because of sales made during a given period. For example, if a merchant buys fresh meat which he buys and sells more rapidly than the piano merchant will turn over his planes which he buys and sells. A turnover of ten times applicable to a certain class of merchandise, means that the merchant buys and sells this class of merchandise ten times each year. + +302 +EXERCISES + +The method of determining turnover is explained and illustrated in Commercial Arithmetic, hence it is not necessary to discuss it in detail here. The method most popular with merchants is to determine the cost of the goods sold during the year by the average inventory (at cost) for the year. Applying this rule to the Statement of Profit and Loss in Illustration No. 131, the turnover would be $3.25; this is calculated as follows: Cost of goods sold, $74,626.50; Average inventory at cost for year, $45,867.83; cost of goods sold, $74,626.50; $41,606.50+$31,261.75=$45,867.83; $45,867.83+2=$22,933.915; average inventory at cost for year, $74,626.50+$22,933.915=3.25 turnover. + +Exercise No. 100, Trade Acceptance + +May 19 the Fillmore Music Company of Denver, Colorado, placed an order with the John Church Company of Cincinnati, Ohio, for five hundred songbooks No. 387. May 25 these books were shipped to Denver at a freight charge of 6% per copy; terms were accepted at sixty days. May 28 the Fillmore Music Company received the invoice and entered it in its purchases journal, holding the trade acceptance until the merchandise was delivered. May 31 the music books were received and inspected by the John Church Company. June 3 the John Church Company received the trade acceptance and instructed the bookkeeper to record it. + +Record in journal form the entries made by the John Church Company when the order was placed by the Fillmore Music Company when the invoice was received, the entry made by the Fillmore Music Company when the trade acceptance was accepted, and the entry made by the John Church Company when the trade acceptance was received, assuming that each concern keeps accounts with Trade Acceptances Receivable and Trade Acceptances Payable. + +Exercise No. 101, Journal Vouchers + +The following transactions were recorded by the bookkeeper for the R. H. Donnelly Corporation and supported by journal vouchers. + +Oct. 27. Mays Bros. & Minot, a customer, report merchandise received in bad condition, and the salesman in their territory requests that they be allowed credit for $62.50. + +30. At the close of the fiscal period, the sales manager requests that $216.50 debited to the Delivery Expense account, which shows a sales cost, be deducted from his account because he has incurred expenses equal to the cost of hauling merchandise purchased from the station to the warehouse by the delivery equipment. + +Nov. 9. The attorney for the corporation reports that the account with Jeffries is uncollectible and that it is advisable to write off this account as uncollectible; and the credit manager instructs that its balance, $61.50, be closed into the Reserve for Uncollectible Accounts account. + +18. The president authorizes the sale of ten shares of common stock (par value $10) authorized at $96 per share and accepts payment in full of this his sixty-day note for this amount dated today, with interest at 6% from date. + +Make each of the above entries in journal form and prepare the journal voucher (Illustration No. 124) which would support it: select your own names for the officers authorizing the issue of the journal vouchers and indicate the title of each. + +**QUESTIONS** + +Exercise No. 102, Depreciation + +Make, in journal form, the entries for the following transactions relating to a Packard truck purchased by the Haggard Drug Company; post the entries affecting the Delivery Equipment and Reserve accounts. + +Jan. 2, 1919. Purchased for $1,500.00 cash a Packard truck to be used in delivering merchandise. + +Dec. 31, 1919. Recorded an estimated depreciation on the truck of 12½% of cost. + +Nov. 6, 1920. Paid $66.00 for a new tire to replace a worn tire on the truck. + +Dec. 31, 1920. Recorded an estimated depreciation on the truck of 12½% of cost. + +April 13, 1921. Paid $107.60 for storage and repairs on truck. + +Dec. 31, 1921. Recorded an estimated depreciation on the truck of 12½% of cost. + +Mar. 17, 1922. The truck was badly damaged in a collision with a street car. Brought suit against the street car company for $1,500.00 damages. + +May 8, 1922. Paid $1,054.65 for repairs on the damaged truck. + +Dec. 31, 1922 on Damaged Truck. + +July 7, 1922. Collected $4,000.00 damages from the street car company; the street car company paid the costs of the suit. + +Dec. 31, 1922. Recorded an estimated depreciation on the truck of 12½% of cost. + +Feb. 1, 1923. Gave the old truck and our check for $2,750.00 in full payment for a new truck, cost price $3,750.00. + +Debt Adjustment of Errors in Previous Periods account for the difference between the reserve for depreciation at December 31, 1923 and the reserve for depreciation at December 31, 1922 because if the reserve for depreciation set up during the four previous years had been sufficient, the profit for each of these years would have been correspondingly less; hence, the Surplus account (§ 271, § 3), which shows the accumulated profits, would have been less. + +**QUESTIONS** + +1. (a) What are the advantages of a trade acceptance? (b) The disadvantages? +2. Can you explain by example the three classes of security usually given as guarantee for the payment of obligations? +3. When merchandise is sold on account, what guarantee does the merchant have that he will receive payment before the sale when it is due? +4. (a) When should a bookkeeper require a power of attorney? (b) When is a power of attorney not essential to the work of a bookkeeper? +5. (a) What is the purpose of a journal voucher? (b) Why should a journal voucher be signed? +6. (a) What is the connection between an exhibit, a schedule, and an analytical statement? (b) How is each used in connection with the preparation of reports? +7. What is the advantage of numbering accounts, and using numbers in addition to the titles of the accounts? +8. What is depreciation? +9. What is the difference between the straight line and the declining balance method of determining the amount of the depreciation? +10. What is turnover? + +**Chapter XXXII** + +**WORKING SHEET, ADJUSTING ENTRIES AND REPORTS** + +The Purpose of this Chapter is to explain by means of illustrations the work required of the bookkeeper or accountant at the close of a fiscal period. The illustrations provide a model set with the books of original entry and accounts omitted. The illustrations are prepared from the general ledger of a business owned and operated by an individual or by partners, the only exception being the method of showing the proprietorship. + +§ 327. **The Working Sheet** is a ruled form used by the bookkeeper or accountant in the preparation of the Balance Sheet and Statement of Profit and Loss. It consists of two parts, one for the Trial Balance and eight or more amount columns for the Trial Balance, adjustments, Balance Sheet, and Statement of Profit and Loss. The purpose of the Working Sheet is to ascertain the net effect on the accounts of all transactions during a fiscal period and to show the results thereof in a statement of Profit and Loss. The Working Sheet is prepared from the Trial Balance taken at the end of the fiscal period and the entries for the inventories, accruals, and reserves. + +To illustrate clearly what is meant by "adjusting entries" at the close of a fiscal period are best explained by illustrations. The illustrations which follow consist of (a) the Trial Balance taken at the close of the fiscal period, (b) a list of inventories, accruals, and reserves, (c) the adjusting entries for these in journal form, (d) the entries in the Balance Sheet, (e) the Statement of Profit and Loss, (f) the closing entries in two forms, (g) the post-closing entries, and (h) the post-closing Trial Balance. + +§ 328. **Preparation of the Working Sheet.** The Working Sheet is completed by (a) copying the Trial Balance in the first two columns, (b) posting the adjusting entries to each account affected by them, (c) posting to each account affected by them, (d) posting to each account affected by them, (e) posting to each account affected by them, (f) posting to each account affected by them, (g) posting to each account affected by them, (h) posting to each account affected by them, (i) posting to each account affected by them, (j) posting to each account affected by them, (k) posting to each account affected by them, (l) posting to each account affected by them, (m) posting to each account affected by them, (n) posting to each account affected by them, (o) posting to each account affected by them, (p) posting to each account affected by them, (q) posting to each account affected by them, (r) posting to each account affected by them, (s) posting to each account affected by them, (t) posting to each account affected by them, (u) posting to each account affected by them, (v) posting to each account affected by them, (w) posting to each account affected by them, (x) posting to each account affected by them, (y) posting to each account affected by them, (z) posting to each account affected by them. + +§ 329. **Copying the Trial Balance.** The Working Sheet should be provided with a sufficient number of horizontal lines for all the accounts in the general ledger and additional lines for new accounts made necessary through posting the adjusting entries. After the Trial Balance has been copied in the first two columns at the left, it should stand as written and both columns should be erased after copying. + +304 + +TRIAL BALANCE AT CLOSE OF PERIOD 305 + +J. A. WHITNEY & CO. +TOTAL BALANCE, DECEMBER 31, 192 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
1Merchants National Bank1049070
2Petty Cash17680
3Estate Receivable335090
4Due from Discounted Accounts Receivable1099799
5Accounts Receivable - Subscribers to Capital Stock700CC
6Cherry Hill Property Office Equipment8750CC
7Estate Receivable - Accumulation of Office Equip.310CC
8Store Fixtures - Accumulation of Store Fixtures2106CC
9Delivery Equipment - Accumulation of Delivery Equip.2106CC
10Taxation for Depreciation of Building Building Depreciation for Depreciation of Building2100CC
11Land1690CC
12Cash - Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplies Office Supplies - Accumulated Depreciation of Office Supplie +A table showing Trial Balance at Close of Period for J. A. Whitney & Co., with various accounts and their balances.
+ + + + +
Description (No.)
Illustration No. 126, Trial Balance at Close of Fiscal Period.		Total Balance (No.)
$19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $19814.49 $198 +A table showing Trial Balance at Close of Period for J. A. Whitney & Co., with various accounts and their balances.
+ +EXPLANATION: This Trial Balance was prepared from the ledger of J. A. Whitney & Co., an incorporated corporation, having its principal office at New York City, N.Y., under the laws thereof, and is presented in accordance with the rules and regulations adopted by the American Institute of Accountants, which require that the balance sheet be drawn up in such a manner as to show the value real estate purchased from a customer to effect the settlement of his account without legal proceedings; it is carried on the ledger of the corporation as an asset to be sold, and not as one to be used in the business. + + + + + +
Description (No.)
Illustration No. 25, Trial Balance at Close of Fiscal Period.		Total Balance (No.)
$250000000000000000000000000000000000000000000000000000000000000000000000000 +A table showing Trial Balance at Close of Period for J. A. Whitney & Co., with various accounts and their balances.
+ + + + + +
Description (No.)
Illustration No. 25, Trial Balance at Close of Fiscal Period.		Total Balance (No.)
$25 +A table showing Trial Balance at Close of Period for J. A. Whitney & Co., with various accounts and their balances.
+ + + + + +
Description (No.)
Illustration No. 25, Trial Balance at Close of Fiscal Period.		Total Balance (No.)
$25 +A table showing Trial Balance at Close of Period for J. A. Whitney & Co., with various accounts and their balances.
+ + + + + +
Description (No.)
Illustration No. 25, Trial Balance at Close of Fiscal Period.		Total Balance (No.)
$25 +A table showing Trial Balance at Close of Period for J. A. Whitney & Co., with various accounts and their balances.
+ + + + + +
Description (No.)
Illustration No. 25, Trial Balance at Close of Fiscal Period.		Total Balance (No.)
$25 +A table showing Trial Balance at Close of Period for J. A. Whitney & Co., with various accounts and their balances.
+ + + + + +
Description (No.)
Illustration No. 25, Trial Balance at Close of Fiscal Period.		Total Balance (No.)
$25 +A table showing Trial Balance at Close of Period for J. A. Whitney & Co., with various accounts and their balances.
+ + + + + +
Description (No.)
Illustration No. 25, Trial Balance at Close of Fiscal Period.		Total Balance (No.)
$25 +A table showing Trial Balance at Close of Period for J. A. Whitney & Co., with various accounts and their balances.
+ + + + + +
Description (No.)
Illustration No. 25, Trial Balance at Close of Fiscal Period.		Total Balance (No.)
$25 +A table showing Trial Balance at Close of Period for J. A. Whitney & Co., with various accounts and their balances.
+ + + + + +
Description (No.)
Illustration No. 25, Trial Balance at Close of Fiscal Period.		Total Balance (No.)
$25 +A table showing Trial Balance at Close of Period for J. A. Whitney & Co., with various accounts and their balances.
+ + + + + +
Description (No.)
Illustration No. 25, Trial Balance at Close of Fiscal Period.		Total Balance (No.)
$25 +A table showing Trial Balance at Close of Period for J. A. Whitney & Co., with various accounts and their balances.
+ + + + + +
Description (No.)
Illustration No. 25, Trial Balance at Close of Fiscal Period.		Total Balance (No.)
$25 +A table showing Trial Balance at Close of Period for J. A. +```json +[ + {"name": "TrialBalanceAtCloseOfPeriod", "value": "335"}, + {"name": "J.A.WHITNEY&CO.", "value": "335"}, + {"name": "TOTALBALANCEDECEMBER3", "value": "335"}, + {"name": "ILLUSTRATIONNO.TRIALBALANCEATCLOSEOFPERIOD", "value": "335"} +] +``` + +306 +LIST OF ADJUSTMENTS + +§ 330. Entries in the Adjustment Columns. The adjustment columns are provided because each inventory, accrual or reserve affects two accounts, one or both of which may be in the ledger. The journal entries for these inventories, accruals, and reserves are posted to the adjustment columns on the Working Sheet in the manner indicated below. The net profit for the period has been ascertained through the Working Sheet. + +The posting of the entries in Illustration No. 128 to the adjustment columns of the Working Sheet can be accomplished by tracing the two illustrations and tracing the posting. The first journal entry is to record the merchandise inventory at the close of the period. This is posted to the credit adjustment column on a line with Purchases, and to the debit adjustment column on a line with Cost of Goods Sold. (Illustration No. 127.) The second entry is to record the store inventory, and is posted in the same manner except that it is entered on a line with Store Inventory. The third entry is to record the accounts receivable, and is posted on a line with Accounts Receivable. The fourth entry is to record the accounts payable, and is posted on a line with Accounts Payable. + +It will be observed that in both cases new accounts are necessary for the debit entries because the purpose of each entry is recorded in the account which does not appear in the ledger. In all cases, credits are posted in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debits, but they are entered in the same manner as debITS + +ADJUSTING ENTRIES 307* + +December 31, 19-- + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +




























































































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531923 Inventory3126/78
34Purchase3126/78
Medic inventory at the close of the fiscal period
541923 Branch Store Inventory9127/65
37Branch Store9127/65
Stock on hand at the branch store at the close of the fiscal period
55Accrued Interest Earned1495
56Record Rent on Library & Property2750
47Interest Earned1093
40Library & Property Revenue2750
Accrued interest per schedule
51Interest Earned6945
42Warehouse Expense150
37Branch Store13042
41Traveling Expense7405
43Delivery Expense12450
8Cashier's Salary Expense6500
57Taxable Interest Earned
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+ + + + +308 +EXTENSIONS ON WORKING SHEET + +December 31, 192 + +
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40Administrative Expense465
38Selling Expense1301
43Delivery Expense1753
10Building Expense2338
10Cherry St. Property Revenue1753
22Insurance(12780)
Captive insurance per schedule
40Administrative Expense15
38Selling Expense1050
13Delivery Expense1072
10Building Expense150
63Loss on Breakdown Center Receivables for Office Equipment10556
10Rent for Shop of Office Equipment15
Rent for Shop of Store Fixtures1050
13Rent for Shop of Deli Equipment8672
Rent for Shop of Building150
Rent for Deli Food Center Receivables for Office Equipment10556
Reserves per schedule:
+ +Illustration No. 128, Adjusting Entries (Concluded). + +EXPLANATION: These entries were prepared from the list of inventories, accounts and reserves in Illustration No. 127. The date is given in connection with the two inventories to distinguish between the two dates when the inventory was taken. + +Revenue account is credited for the rent which has not yet been collected, because this account shows the income from the property; this account is deducted with the accrued taxes because the cost of the property is reduced by the amount of taxes paid during the year. When these include materials in stock and unexpired insurance, transfer the cost of materials used and insurance expired to the expense account, and deduct from the balance of each account which is to show a deferred charge will be the value of the asset. + +§ 331. Extensions on the Working Sheet. Each account on the Trial Balance shows an asset, a liability, a cost or an income, hence the balance will be extended into one of the four columns at the right, all the columns on the Working Sheet indicating that they are credit adjustment columns being equal to debit figures as in Illustration No. 129. The totals of the debit and credit columns on the Trial Balance will be equal because equal debits and credits have been recorded in the ledger, and a zero balance will appear in accordance with the ledger. The totals of the debit and credit adjustment columns will be equal because these two (Concluded on page 310) + +A table showing extensions on working sheet. + +WORKING SHEET +309 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Working Sheet December 18, 1926
Item DescriptionAmountAdjustmentsBalance afterPage and line
Balance, Bank Account1,000.001,000.00
Interest on Bank Loan50.0050.00
Interest on Notes Receivable333.33333.33
Purchase Tax Receivable1,000.001,000.00
Profit on Sale of Stock1,250.001,250.002,250.00
Admissions to Cash Book25.0025.00
Renters de Property250.00250.00
Taxable Income25.0025.00
The proceeds of Offaly Insurance Fund25.0025.00
The Journal of Store Cost

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Description of Building:Total Amount:Total Adjustments:Total Balance After Adjustments:Total Page and Line:
New Purchase of Building:1,775.00-1,775.00-1,775.00-1,775.00
New Purchase of Building:1,775.00-1,775.00-1,775.00-1,775.00
New Purchase of Building:1,775.00-1,775.00-1,775.00-1,775.00
New Purchase of Building:1,775.00-1,775.00-1,775.00-1,775.00
New Purchase of Building:1,775.00-1,775.00-1,775.00-1,775.00
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+ + +Description +of +Building: +New +Purchase +of +Building: +New +Purchase +of +Building: +New +Purchase +of +Building: +New +Purchase +of +Building: +New +Purchase +of +Building: +New +Purchase +of +Building: +New +Purchase +of +Building: +New +Purchase +of +Building: +New +Purchase +of +Building: +New +Purchase +of +Building: +New +Purchase +of +Building: +New +Purchase +of +Building: +New +Purchase +of +Building: +New +Purchase +of +Building: +New +Purchase +of +Building: +New +Purchase +of +Building: +New +Purchase +of +Building: +New + +Illustration No. 429, Working Sheet (Continued). + +310 + +PURPOSE OF WORKING SHEET + +Working Sheet Decs. 1, 195 (Concluded) + +
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Period BalanceAdjustmentsPeriodic LossesProfit and Losses
1. Brightest Forward10/17/20 - 1/18/2010/17/20 - 1/18/2010/17/20 - 1/18/20
2. 1973's inventory.
3. Additional Inventory.
4. Increased Inventory.
5. Decreased Inventory.
6. Other Inventory.
7. Other Inventory.
8. Other Inventory.
9. Other Inventory.
10. Other Inventory.
Net income
+ +Illustration No. 129, Working Sheet (Concluded). + +EXPLANATION: This Working Sheet was prepared from the Total Balance, Illustration No. 126, and the adjusting entries, Illustration No. 128. The student should check each amount in the Adjustments column with the journal entries in the Illustration in the same manner as checking the totals of the Income and Loss columns in the Balance Sheet. In making this check, the student should check the extensions in the Balance Sheet and Profit and Loss columns. Where two or more items are combined into one item on the Balance Sheet, the student should make a similar extension for each item in the illustration. + +Pencil check marks should be placed at the right of each amount on the Working Sheet to indicate that it has been checked by the student. The student should complete all the work required in connection with the preparation of the Working Sheet. + +The years "1922" and "1923" are used to distinguish between the "old" and "new" inventories ($30). + +(Continued from page 305) + +columns are the result of posting journal entries in which debits and credits are equal. The total of the asset and liability columns will not be equal unless the business has been operated without a profit or loss. The difference between the total of the asset column and the total of the liability column (with the capital account included) is called net worth or equity. If the assets are greater than the liabilities, the business has been operated at a profit, and if the liabilities are greater than the assets, the business has been operated at a loss. The totals of these two income statements will show whether or not the business has been operated without a profit or a loss. If the total of the cost column is greater, the business has been operated at a loss, and if the total of the income column is greater, it has been operated at a profit. The difference between these two totals of these two income statements will be shown as either an income or a cost extended as an asset, or as a cost extended as an income, or as a cost extended as an asset will not be detected through a comparison of the net profit shown by the difference between the assets and liabilities, and the difference between the cost and income. + +The purpose of the Working Sheet is to ascertain the net profit or net loss resulting from operating the business during a fiscal period; this purpose is accomplished by comparing two income statements, one showing how much is due to differences between cost and income. When the results do not prove, it is necessary to audit the work to ascertain the error or errors. It is necessary for one making the extensions to distinguish between an asset and a cost or liability, because an increase in an asset extended as an income, or a cost extended as an asset will not be detected through a comparison of the net profit shown by the difference between the assets and liabilities, and + +J.A. MURRAY & CO. +BALANCE SHEET +314 + +Illustration No. 40, Balance Sheet, in "Account Form" for Corporation. + +**Explanation:** The Balance Sheet was prepared from the asset and liability columns of the Working Short Illustration No. 42a and liability column on the Working Short. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Current Assets:
Cash in Bank$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned
Cash in Treasury

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Cash in Treasury$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned
+ +
Cash in Treasury$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned$1,866.50Interest Earned
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Current Liabilities:
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+Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities: +Current Liabilities:"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" cellspacing=3>"style="" +```json +[ +{"name":"Cash in Bank","value":$1,866.5}, +{"name":"Cash in Treasury","value":$1,866.5} +] +```json +[ +{"name":"Cash in Bank","value":$1,866.5}, +{"name":"Cash in Treasury","value":$1,866.5} +] +```json +[ +{"name":"Cash in Bank","value":$1,866.5}, +{"name":"Cash in Treasury","value":$1,866.5} +] +```json +[ +{"name":"Cash in Bank","value":$1,866.5}, +{"name":"Cash in Treasury","value":$1,866.5} +] +```json +[ +{"name":"Cash in Bank","value":$1,866.5}, +{"name":"Cash in Treasury","value":$1,866.5} +] +```json +[ +{"name":"Cash in Bank","value":$1,866.5}, +{"name":"Cash in Treasury","value":$1,866.5} +] +```json +[ +{"name":"Cash in Bank","value":$1,866.5}, +{"name":"Cash in Treasury","value":$1,866.5} +] +```json +[ +{"name":"Cash in Bank","value":$1,866.5}, +{"name":"Cash in Treasury","value":$1,866.5} +] +```json +[ +{"name":"Cash in Bank","value":$1,866.5}, +{"name":"Cash in Treasury","value":$1,866.5} +] +```json +[ +{"name":"Cash in Bank","value":$1,866.5}, +{"name":"Cash in Treasury","value":$1,866.5} +] +```json +[ +{"name":"Cash in Bank","value":$1,866.5}, +{"name":"Cash in Treasury","value":$1,866.5} +] +```json +[ +{"name":"Cash in Bank","value":$1,866.5}, +{"name":"Cash in Treasury","value":$1,866.5} +] +```json +[ +{"name":"Cash in Bank","value":$1,867}, +{"name":"Cash in Treasury","value":$1,877} +] +```json +[ +{"name":"Cash in Bank","value":$1,977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$977}, +{"name":"Cash in Treasury","value":$977} +] +```json +[ +{"name":"Cash in Bank","value":$97}, + +312 + +**STATEMENT OF PROFIT AND LOSS** + +**Exhibit B** + +J. A. WHITNEY & CO. + +**STATEMENT OF PROFIT AND LOSS FOR PERIOD ENDING DECEMBER 31, 1922** + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +





































































































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Return from Sales:30690165
Dress Sales81
Debtors' Returns301
Sales Allowances1001148135
Net Returns from Merchandise Sold.10646020
Cost of Merchandise Sold:
1922 Cost1646.03
Add Purchases Freight6507.15
Prior Years Cost2014.031006760
Debtors' Purchase Returns and Allowances169
Total Net Cost of Merchandise Purchased.17486828
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
``` + +CLOSING ENTRIES +313 + +**CLOSING ENTRIES** + +The closing entries are prepared from the Statement of Profit and Loss. The purpose is to close all cost and income accounts and to transfer the net profit or loss to the Surplus account. These entries may be made in one of two forms. +With one form, the profit on sales is closed into the Profit and Loss account through the Sales account and with the other, the costs affecting the sales and the returns from sales are closed into one division of the Profit and Loss account. + +December 31, 19X2 + +
Cost of Merchandise Sold: + +$74565 + +DC + +$59237 + +TC + +$1444 + +DC + +$32378 + +DC + +$65 + +DC + +$29994 + +DC + +$47 + +DC + +$2904 + +DC + +$2904 + +DC + +$2904 + +DC + +$2904 + +DC + +$2904 + +DC + +$2904 + +DC + +$2904 + +DC + +$2904 + +DC + +$2904 + +DC + +$2904 + +DC + +$2904 + +DC + +$2904 + +DC + +$2904 + +DC + +$2904 + +DC + +$2904 + +DC + +$2904 + +DC + +$2904 + +DC)Illustration No. 134, Statement of Profit and Loss for a Corporation. + +EXPLANATION: This Statement of Profit and Loss was prepared from the cost and income columns on the Working Sheet, Illustration No. 130.
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Sales42132
Sales Returns
Allowance3021
For Allowance on Sales Returns and Allowances12001
Purchases2025001
192 Inventory106005
Bought In56140
To Allowance on Purchases Returns and Allowances
Purchases Returns and Allowances18732
Purchases18732
To Allowance on Purchases Returns and Allowances
Sales741250
Purchases7-1250
To Allowance on Purchases Account
Sales339370
To Allowance on Sales Account339370
Branch Store14006
To Allowance on Branch Store Account14006
+ +Illustration No. 132, Closing Entries with Profit on Sales Closed Through the Sales Account (Continued). + +These entries were prepared from the Statement of Profit and Loss in Illustration No. 131. The method of preparing these entries is shown by the fact that the profit on sales is closed into the Profit and Loss account through the Sales account. When these entries are posted, the accounts which appear on the Statement of Profit and Loss will be in balance. + +CLOSING ENTRIES + +December 31, 19-- + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Refers and Losses2974.09
Selling Expenses396.01
Salaries and Wages Expense586.29
Advertising Expense374.04
Traveling Expense764.30
Merchandise Expense300.76
Delivery Expense237.05
Break Out455.5
Loss on Defective Units Receivables10.04
Administrative Expense234.03
Purchasing Expense-124.98
To close the operating expenses account.
Interest Income117.8
Purchase Discount518.89
Cash at Property Revenue130.00
Purchase of Stock13
Budget and Losses789.74
Total Operating Income Account.31
Budget and Losses374.04
Vintages Cost
Sales Discount
To close the non-operating expense accounts.
Total Non-Operating Income Account.
+ +Illustration No. 132, Closing Entries with Profit on Sales Closed Through the Sales Account (Concluded). + +and the operating and non-operating costs and non-operating income are closed into another division of this account. Illustration No. 132, on pages **313** and **314** shows the entries necessary to close all cost and income accounts through one division of this account, and illustrates the method by which these entries are discussed in preceding chapters. Illustration No. **133** shows the Profit and Loss account resulting from posting these entries. Illustration No. **134** shows the necessary entries when two divisions of this account are used, and Illustration No. **135** shows the Profit and Loss account with the two divisions resulting from posting these entries. A comparison of the two methods will show that the final results are the same. However, the Profit and Loss account + +POST-CLOSING ENTRIES 315 + +with the two divisions shows information which cannot be obtained readily from the account when only one division is used. Thus if a comparison between sales and returned sales, sales allowances, purchases, or freight cost is desired, the information can be obtained from the Profit and Loss account with the two divisions without referring to the various ledger accounts. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
+ + +
Profit and Loss
Div.Selling Expenses396115389730
Salaries & Wages506239500494
Advert. Expenses33519410723
Raw Materials76618055099
Hazardous Cargo30004213706
Lod Capital237745Sale of Stock (1)
Freight Out4425
Lessons Debited10456
Adverts. Expenses222370
Petty Expenses124937
Loducts Sold27993
Lodal Dividend14447
Burdenshed555825
+ +Illustration No. 133, Profit and Loss Account. +EXPLANATION: This account shows the Profit and Loss account after the entries in Illustration No. 132 have been posted. + +December 31, 1923 + +Branch Store +1923 Branch Store Inventory +To show the 1923 Branch Store In- +ventory account. +Interest Earned +Accured Interest Earned +To show the Accured Interest Earned account. +Accured Interest Cost +Interest Cost +To show the Accured Interest Cost account. + +Illustration No. 134, Post-closing Entries. +EXPLANATION: The purpose of these entries is to close the 1923 Branch Store Inventory account and those accounts with accruals which will not be canceled by payment at an early date. + +316 +CLOSING ENTRIES + +December 31, 19-- + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Sales10,971.52
Cumulative Returns and Allowances10,932
Profit and Loss10,932.00
Profit and Loss7,521.74
Store Returns3021
Valued Allowances12401
1923 Inventory1484.65
Unbilled Sales5057.60
Regulated Surplus8614.03
In-Process Trading Accounts
Branch Store1,000.00
Profit and Loss1000.00
Unrecorded Branch Store Account
Profit and Loss2991.84
Delivering Expenses191.91
Interoffice Shipping Expense655.79
Grossing Up Expenses375.65
Grossing Up Expenses758.70
Miscellaneous Expenses300.28
Liquor Expense237.885
Bargain Cut48.55
Paid on Balance Credit Line10.66
Administrative Expenses224.83
Building Expenses120.98
To settle the Advertising account.
+ +Interest Earned +Business Discount +Discount on Property, Equipment +Profit and Loss +Profit and Loss +To close the non-operating income accounts. + +Illustration No. 135, Closing Entries Through Division of the Profit and Loss Account (Continued). + +PROFIT AND LOSS ACCOUNT +317 + +December 31, 19-- + + + + + + + + + + + + + + + + + + + + + + +
Profit and Loss621121
-Interest, Cost,20793
-Sales Revenue15847
-Expenses59183
To close the non-operating expense accounts and the Profit and Loss account.
+ +Illustration No. 135. Closing Entries Through Division of the Profit and Loss Account (Concluded). + +EXPLANATION. These entries were prepared from the Statement of Profit and Loss, Illustration No. 131, compare with Illustrations Nos. 135, 133 and 136. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
+
+ + +
Dec.Sales Returns & RefundsSales AllowancesSales DiscountsSales Returns & RefundsSales AllowancesSales DiscountsTotal SalesCost of Goods SoldGross ProfitLess: Selling ExpensesLess: Administrative ExpensesLess: Interest ExpenseLess: Taxes DueNet SalesGross Profit on SalesLess: Operating ExpensesLess: Other ExpensesNet Income (Loss)
Dec. 31
+ +Illustration No. 136. Profit and Loss Account. + +EXPLANATION. This illustration shows the Profit and Loss account after the entries affecting it in Illustration No. 135 have been posted. Compare with Illustration No. 135 which shows the same facts with the profit on sales closed through the Sales account. + + +
Illustration No. 136, Profit and Loss Account.
Illustration No. 136, Profit and Loss Account.
Illustration No. 136, Profit and Loss Account.
Illustration No. 136, Profit and Loss Account.
Illustration No. 136, Profit and Loss Account.
Illustration No. 136, Profit and Loss Account.
Illustration No. 136, Profit and Loss Account.
Illustration No. 136, Profit and Loss Account.
Illustration No. 136, Profit and Loss Account.
Illustration No. 136, Profit and Loss Account.
Illustration No. 136, Profit and Loss Account.
Illustration No. 136, Profit and Loss Account.
Illustration No. 136, Profit and Loss Account.
Illustration No. 136, Profit and Loss Account.
Illustration No. 136, Profit and Loss Account.
+ +318 + +POST-CLOSING TRIAL BALANCE +J. A. WHITNEY & CO. + +POST-CLOSING TRIAL BALANCE, DECEMBER 31, 1925 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
1Merchants National Bank7445BO
2Duty Cash100CO
3Interest Receivable-325099
4Eotes Receivable Discounted1000CO
5Lien Accounts Receivable99CO
6Accounts Receivable Discountable-82142
7Lien Accounts Receivable Discountable-82142
8Lien Accounts Receivable Discountable - Lien on Cherry Street Property-700CO
9Lien Accounts Receivable Discountable - Cherry Street Property-1000CO
10Eotes Reserve for Depreciation of Office Equip.-482EE
11Eotes Reserve for Depreciation of Store Fixtures-2000COO
12Eotes Reserve for Depreciation of Delivery Equip.-2818COO
+ + + + + + + + + + + +
13
Lien
Eotes Reserve for Depreciation of Building
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
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Lien on Cherry Street Property
Lien on Cherry Street Property
Lien on Cherry Street Property
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+ + + +
Illustration No. 137, Post-closing Trial Balance.
+ +EXPLANATION: This Trial Balance is taken from the ledger after all closing and post- +closing adjustments have been posted, to prove that the ledger is in balance. The amounts +will be the same as the entries in the asset and liability columns of the Working Sheet, used also the accounts upon the Balance Sheet. + +QUESTIONS ON THE WORKING SHEET + +1. When and why is the Working Sheet prepared? +2. From what source is the information in the preparation of the Working Sheet obtained? +3. How is the information in connection with the inventories, accruals, and reserves? +4. Why is the amount of each inventory, accrual and reserve entered in both the debit and credit adjustment columns of the Working Sheet? +5. Why are the amounts in the credit adjustment column added to credit balances. +6. Why are entries in the debit adjustment column added to debit balances of the Trial Balance? + +QUESTIONS 319 + +7. Why is it necessary for the one making the extensions on the Working Sheet to know whether an account on the Trial Balance shows an asset or a cost, a liability or an income? +8. Why is the difference between the asset and liability columns the net profit or loss resulting from the operations of the business? +9. Why is the difference between the cost and income columns the net profit or loss resulting from the operations during the year? +10. Why is the difference between the asset and liability columns the same as the difference between the income and cost columns? + +QUESTIONS ON THE FINANCIAL REPORTS + +1. What is the purpose of the adjusting entries? +2. Why are the adjusting entries made and posted before the Balance Sheet and Statement of Profit and Loss are prepared? +3. Why does the difference between assets and liabilities on the Balance Sheet show the proprietorship of the business? +4. Can the Balance Sheet be prepared from the Balance Sheet columns on the Working Sheet without reference to the accounts in the ledger? +5. What is meant by "closing" when referring to the net cost shown on the Statement of Profit and Loss the net profit for the year? +6. Can the Statement of Profit and Loss be prepared from the income and cost columns on the Working Sheet? +7. What is the source of the information needed in making the journal entries to close the ledger accounts? +8. What is the result of posting the closing entries? +9. What is the purpose of the post-closing entries? +10. What is the purpose of the post-closing Trial Balance? + +Chapter XXXIII +MANUFACTURING ACCOUNTS + +The Purpose of this Chapter is to explain the accounts needed to record transactions which occur in connection with the manufacturing of merchandise. The determination of the particular method of cost accounting fair to the fundamental accounts required when we purchase and sell a part or all of the merchandise which it sells. + +§ 333. Manufacturing. The merchant buys the merchandise which he sells, he actually acquires the ownership of the same through the invoice and freight bills. The manufacturer does not sell the merchandise which he buys in the same form in which he buys it, but in a changed form. Because of these changes, it is necessary for him to record facts in addition to those needed by the merchant, who purchases his goods. In order that he may ascertain the cost of each unit or each article manufactured, a special accounting system is necessary in order to ascertain the cost of each unit or each article manufactured. Where the operations are limited to a small factory or department, such a system can be accurately determined through three accounts: Materials, Labor, and Manufacturing Expenses. + +Fixed assets other than those used in a mercantile business may be needed in connection with the manufacture of goods. These fixed assets are treated on the books in the same way as that with office equipment. It is quite evident that the insurance and depreciation on fixed assets purchased for use in manufacturing will increase the cost of manufacture and that this increase will be shown through the Manufacturing Expense account ( § 336); hence, no special discussion is necessary for the fixed asset accounts. + +MATERIALS ACCOUNT + +§ 334. The Purpose of this Account is to show the cost of the materials purchased or used in the manufacture of the goods that are to be produced by the factory. The nature of these materials and their cost will determine what kind of material therefrom, will determine the nature of the raw material purchased. A manufacturer of safes might purchase the necessary castings from a foundry or he might purchase them from a foundryman who would make them himself. He might buy the cases for the books which he manufactures or he might manufacture them on his own case-making machines. The Materials account shows a record of all costs incurred for materials for use in the factory which will eventually become a part of the manufactured product. + + + + + + + + + + + + + + +
DebitCredit
For the cost of material pur- chased, which includes the invoice and transportation cost.For any adjustments which re- duce the cost of material purchased as shown by the de- ducted.
3. The Balance of the Materials Account at the close of the fiscal period shows the cost of material purchased during the period. It is shown on the State- ment of Profit and Loss ($ 340) as one of the costs of goods manufactured.
+ +If a separate record is kept of the material in the storeroom and the material in process of manufacture, then two accounts called Storeroom Materials and Process Materials are used. The Storeroom Materials account is debited with the cost of material taken out of the storeroom and transferred to the factory, while at the same time it is credited with its balance at hand. When this balance is transferred to the Manufacturing account ( § 347), it becomes part of the cost of goods manufactured. + +A separate account is also kept for materials which have been received into stock but not yet processed into finished goods. This account is called Finished Goods Inventory. When finished goods are sold, this account is debited with their cost and credited with their sale price. + +The following table shows how these accounts are related: + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + 320 + +MANUFACTURING ACCOUNTS 324 + +**LABOR ACCOUNT** + +§ 335. The purpose of this Account is to show the cost of direct labor in the manufacturing department. Labor is divided into two classes: (a) that performed by employees who are engaged in the manufacture of the product sold, usually referred to as "direct" labor; (b) that performed by employees whose work is not applied directly to the product manufactured, usually referred to as "indirect" labor. + +Debit the Labor Account: +\textit{t.} For the direct labor cost as \textit{t.} 2. For any adjustments which reduce the direct labor cost. + +\textit{t.} 3. The Balance of the Labor Account at the close of the fiscal period shows the direct labor cost for the period. It is one of the costs of the goods manufactured and is shown as such on the Statement of Profit and Loss (\$ 340). + +**MANUFACTURING EXPENSE ACCOUNT** + +§ 336. The purpose of this Account is to show the cost of the various expenses incurred in connection with the manufacture of goods, including the Materials or Labor accounts. These costs include factory expenses (rent, heat, light, etc.), indirect labor (supervisors' and foremen's salaries, wages of elevator operators, janitors, etc.), and all other costs which are not included in the Manufacturing department, etc. The manufacturing expenses are so varied that it is sometimes advisable to group them in several classes and record transactions affecting each class in a separate account. + +Debit this Account: +\textit{t.} 1. For all expenses incurred in the factory which are not applicable to materials or direct labor cost. +\textit{t.} 2. For any adjustments which reduce the deficit to this account. + +\textit{t.} 3. The Balance of the Manufacturing Expense Account at the close of the fiscal period shows the manufacturing expenses for the period. This is one of the costs of the goods manufactured and is shown as such on the Statement of Profit and Loss (\$ 340). + +§ 337. Method of Ascertaining Cost of Goods Manufactured and Sold + +At the beginning of the first fiscal period, the cost of material purchased during the period is shown by the Materials account, labor cost by the Labor account, and manufacturing expense by the Manufacturing Expense account. The total cost of materials, labor, and manufacturing expense during the year, except the goods which are in process of manufacture at the close of the fiscal period; it is not practical to finish all jobs which are in process of manufacture during that period. + +To ascertain the cost of the goods manufactured, it is necessary to take an inventory of the goods which are in process of manufacture because this value must be deducted from the total cost of manufacturing for the period. The inventory taken at the end of each month shows only part of what will be included in manufacturing expense applicable to these goods. The difference between the total cost of materials, labor, and manufacturing expense during the period, less the cost of goods which are still in process, is the cost of goods manufactured during the period (finished goods). + +The value of goods manufactured but not sold is ascertained by an inventory, and the amount deducted from the cost of all the goods manufactured to ascertain the cost of those sold during that period. The cost of sales for a trading business at the close of the period is deducted from the total purchases cost to ascertain the cost of goods sold in a trading business. + +* + +322 MANUFACTURING ACCOUNTS + +**MANUFACTURING ACCOUNT** + +§ 338. The Purpose of this Account is to show the combined materials, labor, and manufacturing expense applicable to the cost of merchandise manufactured in the factory during the fiscal period. It is a summary account used in closing the ledger and is not debited or credited with any transactions that occur during the period. + +Debit the Manufacturing Account Credit the Manufacturing Account: + +
Storeroom MaterialsProcess MaterialsFinished Goods InventoryManufacturing Account
+ + + + + + + + + + + + +
1.For the inventory of goods in process at the beginning of the fiscal period.5.For the inventory of goods in process at the close of the fiscal period.
2.For the balances of the Materials, Labor, and Manufacturing Expense accounts.
4.The Balance of the Manufacturing Account shows the cost of goods manufactured during the fiscal period. It is a summary account used in closing the ledger and does not appear on the Statement of Profit and Loss.
+ +The unit cost of each item of merchandise may be ascertained by dividing the number of units manufactured into the total cost of manufacture. It is customary to make monthly tests of the unit cost of merchandise manufactured. This test will show whether or not prices have been affected, unless the sale price is based on the changed cost price. The best method of ascertaining the unit cost of merchandise manufactured is to determine what part of its cost was incurred during the month. In other words, to ascertain what part of its cost was incurred during the month, it is necessary to ascertain the unit cost through such a system is thoroughly explained in the chapters relating to cost accounting. The purpose of the discussion of the accounts in connection with manufacturing at this time is to show how they differ from those which are used when the volume of good manufactured does not justify the expense of an elaborate cost system. + +**TRADING ACCOUNT** + +§ 339. The Purpose of this Account is to show the gross profit on sales of merchandise. In a business which manufactures a part or all of the goods sold, this account will show the facts set forth in the Statement of Profit and Loss beginning with the balance of the Manufacturing account (costs of good manufactured) and ending with the balance of Sales Returns and Purchases Allowances which it sells. It will show the facts beginning with the purchase of merchandise. The Manufacturing account and the Trading account are usually opened in the ledger as sections of the Profit and Loss account. When a business has only one account for both Profit and Loss, it may be shown in one account. The Trading account is a summary account used in closing the ledger and does not appear on the Statement of Profit and Loss. + +Debit the Trading Account Credit the Trading Account: + + + + + + + + + + + + + + +
1.For the balance of the Purchases or Manufacturing account.4.For the balance of the Sales account.
2.For balances of Sales Returns and Sales Allowances accounts.5.For balances of Purchases Returns and Purchases Allowances accounts.
3.For merchandise inventory or finished goods at the beginning of the fiscal period.6.For merchandise inventory or finished goods at close of fiscal period.
+ +7. The Balance of the Trading Account shows gross profit or loss on sales, and transferred to the Profit and Loss account in the same manner as the Sales account is closed into the Profit and Loss account. If the Trading account is a section of the Profit and Loss account, the Profit and Loss account is ruled and the balance carried down, as in Illustration No. 136. + +**MANUFACTURING PROCESS** + +§ 340. The Manufacturing Process, as explained in connection with the Materials, Labor, and Manufacturing Expense accounts, is illustrated by the transactions and entries which follow. + +December 31, 1922. CANDY Kitchen had in stock manufactured candy, $1,645.87; sugar in process of manufacture, $1,637.52; and materials in stock, $3,560.42. During the year, purchases of sugar, flavoring, and other material used in manufacturing candy amounted to $1,347.18. The cost of materials consumed in the manufacture of candy was $4,137.18. The sales of candy during the year amounted to $21,000.00. At the close of the year, December 31, 1923, the inventory of manu- +factured candy was $5,000.90, the inventory of candy in process, $1,542.91, and the inventory of materials in stock, $10,836.71. + +One entry in journal form to record the materials cost, one to record the labor cost, and one to record the manufacturing cost, assuming that cash was paid, +would appear as follows: + +| | | | +|---|---|---| +| Materials | 11,642.87 | | +| Cash | 11,642.87 | | +| Labor | 5,261.49 | | +| Cash | 5,261.49 | | +| Manufacturing Expense | 4,137.18 | 4,137.18 | + +The manufacturing section of the Statement of Profit and Loss prepared from the three accounts and the inventories at the beginning and close of the period. +would appear as follows: + +CANDY KITCHEN + +Statement of Profit and Loss, December 31, 1923. + +| | | +|---|---| +| **Manufacturing Section** | | +| Inventory of Materials, Dec. 31, 1922... | 3,860.47 | +| Add: Materials Placed in Process during period... | 11,642.87 | +| Total Materials Cost... | 15,503.34 | +| Deduct: Inventory of Materials, Dec. 31, 1923... | 4,889.27 | +| Materials Placed in Process during period... | 10,343.35 | +| Labor Placed in Process during period... | 5,261.49 | +| Mfg. Expense Placed in Process during period... | 4,137.18 | +| Total Materials, Labor, and Mfg. Expense Placed in Process... | 19,742.09 | +| Add: Inventory of Goods in Process, December 31, 1922... | 1,542.91 | +| Deduct: Inventory of Goods in Process, December 31, 1923... | - | +| Cost of Goods Manufactured... | 21,379.62 | +| Cost of Goods Sold... | - | +| Gross Profit on Sales... | - | + +The trading section of the same Statement of Profit and Loss would appear as follows: + +Trading Section + +Sales... | 21,000.00 +Cost of Goods Sold... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... +Inventory of Finished Goods... | 1645.87 +Cost of Goods Manufactured (per Mfg. Section)... | 19836.71 +Less: Inventory of Finished Goods... | - | +Net Cost of Goods Sold... | - | +Gross Profit on Sales... | - | + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Sales...21,000.00
Cost of Goods Sold......
Inventory of Finished Goods...1645.87
Cost of Goods Manufactured (per Mfg. Section)19836.71
Less: Inventory of Finished Goods...-
Net Cost of Goods Sold...-
Gross Profit on Sales...-
+ +Candy Kitchen Inventory and Manufacturing Costs Diagram + +324 + +**MANUFACTURING PROCESS** + +The entry to close the 1922 inventory accounts with materials and materials in process and the balances of the Materials, Labor and Manufacturing Expense accounts into the Manufacturing account will appear in journal form as follows: + + + + + + + + + + + + + + + + + + + + + + + + + + +
Manufacturing26,239.39
1922 Inventory of Materials3,560.42
Materials11,642.97
Labor8,460.41
Manufacturing Expense4,137.18
1922 Inventory of Materials in Process1,037.37
+ +The entry to place the 1923 inventories of materials and materials in process of manufacture in the ledger would appear in journal form as follows: + + + + + + + + + + + + + + +
1923 Inventory of Materials4,890.77
1923 Inventory of Materials in Process1,517.91
Manufacturing6,402.68
+ +The balance of the Manufacturing account, which shows the cost of the goods manufactured during the year, may be closed directly into the Profit and Loss account or closed through the Trading account. The following entry applies to the latter method: + +Trading +Manufacturing + + + + + + + + + + +
19,836.71
19,836.71
+ +The entry to close the 1922 Inventory of Finished Goods account into the Trading account will be as follows: + + + + + + + + + + + + + + +
Trading
1922 Inventory of Finished Goods1,645.87
1,645.87
+ +The entries to close the Sales account into the Trading account and to place the 1923 Inventory of Finished Goods in the ledger may be combined as follows: + + + + + + + + + + + + + + + + + + +
Sales
21,000.00
1923 Inventory of Finished Goods3,009.50
24,009.50
+ +The balance of the Trading account, which shows the gross profit on sales, is closed into the Profit and Loss account by the following entry: + + + + + + + + + + + + + + +
Trading
2,556.92
Profit and Loss2,556.92
+ +The operating and non-operating incomes and expenses would be closed into Profit and Loss as explained and illustrated in previous chapters. The balance of the Profit and Loss account, which shows the net income, is then closed into the Surplus account, and any appropriation for dividends or for any other special purpose is taken out of Surplus by an entry debiting Surplus and crediting the account which is to show the amount of the appropriation. + +EXERCISES 375 + +Exercise No. 104, Purchase of the Stock of One Corporation by Another. + +The Johnson Candy Co. is incorporated with a capital stock of $25,000,000 (2,500 shares), all common, $200,000.00 of which is subscribed and paid for, October 5 the stockholders of the Day Candy Company issue a certificate of stock to each shareholder of the Day Candy Company for the number of shares of the Day Candy Company stock which he holds; cash is received from each for the difference between the value of his shares and the face value of the stock certificates issued to him. The stockholders of the Day Candy Company receive certificates of stock representing their holdings in the Johnson Candy Company. The balance sheet prepared from the books of the Day Candy Company is as follows: + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
DAY CANDY COMPANY
Balance Sheet, October 10, 192.
CURRENT ASSETS:
Cash.600.00
Notes Receivable.2416.00
Accounts Receivable.1337.00
Less Value of Bad Debts.18.10
Inventory, October 10, 192.1326.80
Beach candy in Stock.47.85
Bulk Candy in Stock.391.25
Raw Material in Stock.109.34
Board in Stock.33.75
Barrels in Stock.237.65
FIXED ASSETS:
Land.159.00
Plant and Equipment.2,656.00
Less Reserve for Depreciation.613.00
Delivery Vans.269.85
Less Reserve for Depreciation.33.85
Office Equipment.579.85
Less Reserve for Depreciation.5.00
Total Fixed Assets.3,424.85
DEFERRED CHARGES TO OPERATION:
Factory Supplies on Hand...$14.95
Office Supplies on Hand...19.96
Prepaid Insurance...396.40
TOTAL ASSETS AND DEFERRED CHARGES79837.21
LIABILITIES AND PROPRIETORSHIP
CURRENT LIABILITIES:
Notes Payable...1266.90
Accounts Payable...6412.89
FIXED LIABILITIES:
Mortgage payable, <>1000.00
PROPRIETORSHIP:
Capital Stock Issued and Outstanding$999.99
Surplus...1662.62
TOTAL LIABILITIES AND PROPRIETORSHIP79837.21
+ +The stockholders of the Day Candy Company and the number of shares held by each are as follows: +Kenton Grocery Co., $25 shares; Benjamin A. Darrow, $25 shares; M. F. Curtin, $25 shares; S. G. Beers, $25 shares; Johnson Galleries, $25 shares; D.X. Bloom, $1 share; E.H. Buhrlidge, $5 shares; H.A. Adair, $5 shares; Robert Janson, $5 shares; H.A.DeCamp, $5 shares. +October 10, the Johnson Candy Company issues a certificate of stock to each shareholder of the Day Candy Company for the number of shares of the Day Candy Company stock which he holds; cash is received from each for the difference between the value of his shares and the face value of the stock certificates issued to him. +A table showing current assets, fixed assets, deferred charges to operation, total assets and liabilities, and proprietorship for the Johnson Candy Company as of October 10, 192. + + + +
CURRENT ASSETS:
Cash
Notes Receivable
Accounts Receivable
Less Value of Bad Debts
Inventory, October 10, 192.
Beach candy in Stock
Bulk Candy in Stock
Raw Material in Stock
Board in Stock
Barrels in Stock

FIXED ASSETS:
Land
Plant and Equipment
Less Reserve for Depreciation
Delivery Vans
Less Reserve for Depreciation
Office Equipment
Less Reserve for Depreciation

DEFERRED CHARGES TO OPERATION:
Factory Supplies on Hand...
Office Supplies on Hand...
Prepaid Insurance...

TOTAL ASSETS AND DEFERRED CHARGES:

LIABILITIES AND PROPRIETORSHIP:
Current Liabilities:
Notes Payable...
Accounts Payable...

Fixed Liabilities:
Mortgage payable, <>

Proprietorship:
Capital Stock Issued and Outstanding
Surplus...

TOTAL LIABILITIES AND PROPRIETORSHIP:

+ + + +
CURRENT ASSETS:
Cash
Notes Receivable
Accounts Receivable
Less Value of Bad Debts
Inventory, October 10, 192.
Beach candy in Stock
Bulk Candy in Stock
Raw Material in Stock
Board in Stock
Barrels in Stock

FIXED ASSETS:
Land
Plant and Equipment
Less Reserve for Depreciation
Delivery Vans
Less Reserve for Depreciation
Office Equipment
Less Reserve for Depreciation

DEFERRED CHARGES TO OPERATION:
Factory Supplies on Hand...
Office Supplies on Hand...
Prepaid Insurance...

TOTAL ASSETS AND DEFERRED CHARGES:

LIABILITIES AND PROPRIETORSHIP:
Current Liabilities:
Notes Payable...
Accounts Payable...

Fixed Liabilities:
Mortgage payable, <>

Proprietorship:
Capital Stock Issued and Outstanding
Surplus...

TOTAL LIABILITIES AND PROPRIETORSHIP:

+ + + +
CURRENT ASSETS:
Cash
Notes Receivable
Accounts Receivable
Less Value of Bad Debts
Inventory, October 10, 192.
Beach candy in Stock
Bulk Candy in Stock
Raw Material in Stock
Board in Stock
Barrels in Stock

FIXED ASSETS:
Land
Plant and Equipment
Less Reserve for Depreciation
Delivery Vans
Less Reserve for Depreciation
Office Equipment
Less Reserve for Depreciation

DEFERRED CHARGES TO OPERATION:
Factory Supplies on Hand...
Office Supplies on Hand...
Prepaid Insurance...

TOTAL ASSETS AND DEFERRED CHARGES:

LIABILITIES AND PROPRIETORSHIP:
Current Liabilities:
Notes Payable...
Accounts Payable...

Fixed Liabilities:
Mortgage payable, <>

Proprietorship:
Capital Stock Issued and Outstanding
Surplus...

TOTAL LIABILITIES AND PROPRIETORSHIP:

+ + + +
CURRENT ASSETS:
Cash
Notes Receivable
Accounts Receivable
Less Value of Bad Debts
Inventory, October 10, 192.
Beach candy in Stock
Bulk Candy in Stock
Raw Material in Stock
Board in Stock
+Description: A table showing current assets, fixed assets, deferred charges to operation, total assets and liabilities, and proprietorship for the Johnson Candy Company as of October 10, 192. + + + +
CURRENT ASSETS:326 +EXERCISES + +between $0.00 per share and $100.00 per share. Judson Gilbert, who holds twenty shares of the Day Candy Company stock, was not present at the meeting when the consolidation was effected and refused to exchange his stock. A compromise was effected by the Johnson Candy Company paying him $8,500.00 on his sur- +render of the stock of the Day Candy Company and assuming all liabilities of the Day Candy Company stock. +1. Make the entries to close the books of the Day Candy Company. +2. Make the entries on the books of the Johnson Candy Company to record (a) the purchase of the stock of the Day Candy Company, and (b) the assets received from the Day Candy Company and the liabilities assumed. + +**Exercise No. 101, Manufacturing.** + +The following transactions were completed by the Roberts Clothing Company, manufacturer of men's clothing, during the month of July, 192-: +1. Purchased from the Globe Clothing Co., Chicago, cloth per invoice of May 28, +$1,642.75. +2. Paid for required machinery, $18.75. +3. Payroll for the week: $1,627.75, $500.00 for superintendent and foreman, and +the balance for employees. +4. Purchased from the Maryland Manufacturing Company, City, cloth buttons and +shirts per invoice of June 24, $142.30. +5. Payroll for the week, $1,765.30, $500.00 for superintendent and foreman, and +the balance for employees. +6. Paid freight charges on purchases from the Globe Clothing Co., $96.30. +7. Paid laborers on machinery, $36.75. +8. Payroll for the week: $1,639.27, $500.00 for superintendent and foreman, and +the balance for employees. +9. Purchased from the Maryland Manufacturing Company, City, cloth and buttons per invoice of this date, $144.57. +10. Payroll for the week, $1,661.07, $500.00 for superintendent and foreman, and +the balance for employees. +11. Sales to customers on account during the month, $8,562.50. Prepare a manu- +facturing statement showing the cost of merchandise manufactured and sold. +All goods manufactured have been sold to customers. The value of goods in process at the beginning of the month was $2742.65, and at the close of the month, $3,147.65. +Record these transactions in journal form, post to the accounts, make the adjusting entries for the goods in process, cost, and prepare a manufacturing statement. + +**QUESTIONS** +1. Distinguish between a merchant and a manufacturer. +2. What information in connection with purchases does a manufacturer need +to know? +3. Name some of the materials which a manufacturer of automobiles would need to buy? +4. Name some of the finished products in connection with the manufacturing +of automobiles which the manufacturer might buy. +5. What is manufacturing expense? +6. How does manufacturing expense differ from selling expense? +7. What are three principal costs which enter into the manufacture of merchandise? +8. Would the manufacturer have a Sales account in his ledger? a Purchases account? +9. What facts does the Manufacturing account show? The Trading account? +10. When are the Manufacturing and Trading accounts opened? closed? How? + +Chapter XXXIV +COMPARATIVE REPORTS + +The Purpose of this Chapter is to explain and illustrate the Comparative Balance Sheet and the Comparative Statement of Profit and Loss. When properly analyzed, much valuable information can be gained from these reports which will show the condition of the business at the conclusion of two or more consecutive fiscal periods. These reports will be of assistance to the management in planning future operations of the business. + +§ 341. A Comparative Balance Sheet shows the assets, liabilities, and proprietorship for two or more consecutive fiscal periods. The information on the report is arranged in the same manner as the Balance Sheet prepared at the conclusion of each fiscal period except that only one year's figures are shown and the amounts involved. Illustration No. 138 shows a Comparative Balance Sheet prepared from the asset, liability, and proprietorship accounts of the American Mercantile Co. for the fiscal periods ending December 31, 1921, and December 31, 1922. + +§ 342. Analysis of a Comparative Balance Sheet. An analysis of Illustration No. 138 shows the following facts: The cash balance has decreased, and the notes receivable and accounts receivable have increased. While the total current assets have increased due to the increase in notes receivable and accounts receivable indicate that collections for 1922 have not been so good as for 1921. The fixed assets show an increase because of the additional investment in land. The total current liabilities have increased $5,000.00 due to an increase in the accounts payable and notes payable. The proprietorship has increased $5,000.00 which is shown by the increase in the Surplus account. Much valuable information can be gained from a Comparative Balance Sheet both by the owner of the business and those outside of the business who are interested in it. + +§ 343. A Comparative Statement of Profit and Loss shows the income and expenses during two or more consecutive fiscal periods for two or more consecutive periods. The information is arranged in the same manner as the Statement of Profit and Loss at the conclusion of a fiscal period except that two or more columns are provided for the amounts involved. Illustration No. 139 shows a Comparative Statement of Profit and Loss prepared from the cost and income accounts on the ledger of the American Mercantile Co. for the fiscal periods ending December 31, 1921, and December 31, 1922. + +§ 344. Analysis of a Comparative Statement of Profit and Loss. +An analysis of Illustration No. 139 shows the following: The sales in 1922 show an increase over those in 1921 by $5,000.00, merchandise an increase of more than $20,000.00, and the cost of operating the business an increase of more than $10,000.00. This indicates that a greater profit has been made on the volume of (Concluded on page 320) + +327 + +328 +COMPARATIVE REPORTS + +THE AMERICAN MERCANTILE COMPANY + +Comparative Balance Sheet for Two Years Ending December 31, 1922 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
AssetsDec. 31, 1921Dec. 31, 1922Increase or Decrease
Current Assets:
Cash4457.203876.10$587.10
Note Receivable1050.00439.00616.00
Accounts Receivable4000.007000.003000.00
Less Reserve for D'Brail Accts40.00350.00316.00
Merchandise Inventory1479.701899.40419.70
Accrued Interest Earned-94.95-94.95-94.95
Total Current Assets64282.2568671.56$4389.31
Fixed Assets:
Office Equipment1250.001250.00
Less Reserve for Depreciation62.501187.50125.00
Store Fixtures2000.001886.80113.20
Less Reserve for Depreciation-39.25-1766.85-1737.65
Delivery Equipment-450.00-450.00
Description of Line Item Value (in $)Description of Line Item Value (in $)
Less Reserve for Depreciation
-450.00 -450.00 -450.00 -450.00 -450.00 -450.00 -450.00 -450.00 -450.00 -450.00 -450.00 -450.00 -450.00 -450.00 -450.00 -450.00 -450.00 -45.
Building
11,688.76 -1,688.76 -1,688.76 -1,688.76 -1,688.76 -1,688.76 -1,688.76 -1,688.76 -1,688.76 -1,688.
Total Fixed Assets
Land
9393.33 -9393.33 -9393.
Description of Line Item Value (in $)Description of Line Item Value (in $)
-9393.
Goodwill
Description of Line Item Value (in $)Description of Line Item Value (in $)
-21837.56 -21837.
Total Assets
Description of Line Item Value (in $)Description of Line Item Value (in $)
-1,999,737 -1,999,737 -1,999,737 -1,999,737 -1,999,737 -1,999,737 -1,999,737 -1,999,737 -1,999,737 -1,99.
Deferred Charges per Schedule
Description of Line Item Value (in $)Description of Line Item Value (in $)
-1,146,36.
Total Assets and Deferred Charges per Schedule No.
Description of Line Item Value (in $)Description of Line Item Value (in $)
-1,622,116 -1,622,116 -1,622,116 -1,622,116 -1,622,
+ + + +
Liabilities and Proprietorship Current Liabilities:
+ + + +
Note Receivable Bank Notes Payable-Creditors Accounts Receivable Accrued Wages Accrued Interest Cash Proprietorship Capital Stock Surplus Total Proprietorship Total Liabilities and Proprietorship Illustration No. + + +
Note Receivable Bank Notes Payable-Creditors Accounts Receivable Accrued Wages Accrued Interest Cash Proprietorship Capital Stock Surplus Total Proprietorship Total Liabilities and Proprietorship Illustration No. + + +
Note Receivable Bank Notes Payable-Creditors Accounts Receivable Accrued Wages Accrued Interest Cash Proprietorship Capital Stock Surplus Total Proprietorship Total Liabilities and Proprietorship Illustration No. + + +
Note Receivable Bank Notes Payable-Creditors Accounts Receivable Accrued Wages Accrued Interest Cash Proprietorship Capital Stock Surplus Total Proprietorship Total Liabilities and Proprietorship Illustration No. + + +
Note Receivable Bank Notes Payable-Creditors Accounts Receivable Accrued Wages Accrued Interest Cash Proprietorship Capital Stock Surplus Total Proprietorship Total Liabilities and Proprietorship Illustration No. + + +
Note Receivable Bank Notes Payable-Creditors Accounts Receivable Accrued Wages Accrued Interest Cash Proprietorship Capital Stock Surplus Total Proprietorship Total Liabilities and Proprietorship Illustration No. + + +
Note Receivable Bank Notes Payable-Creditors Accounts Receivable Accrued Wages Accrued Interest Cash Proprietorship Capital Stock Surplus Total Proprietorship Total Liabilities and Proprietorship Illustration No. + + +
Note Receivable Bank Notes Payable-Creditors Accounts Receivable Accrued Wages Accrued Interest Cash Proprietorship Capital Stock Surplus Total Proprietorship Total Liabilities and Proprietorship Illustration No. + + +
Note Receivable Bank Notes Payable-Creditors Accounts Receivable Accrued Wages Accrued Interest Cash Proprietorship Capital Stock Surplus Total Proprietorship Total Liabilities and Proprietorship Illustration No. + + +
Note Receivable Bank Notes Payable-Creditors Accounts Receivable Accrued Wages Accrued Interest Cash Proprietorship Capital Stock Surplus Total Proprietorship Total Liabilities and Proprietorship Illustration No. + + +
Note Receivable Bank Notes Payable-Creditors Accounts Receivable Accrued Wages Accrued Interest Cash Proprietorship Capital Stock Surplus Total Proprietorship Total Liabilities and Proprietorship Illustration No. + + +
Note Receivable Bank Notes Payable-Creditors Accounts Receivable Accrued Wages Accrued Interest Cash Proprietorship Capital Stock Surplus Total Proprietorship Total Liabilities and Proprietorship Illustration No. + + +
Note Receivable Bank Notes Payable-Creditors Accounts Receivable Accrued Wages Accrued Interest Cash Proprietorship Capital Stock Surplus Total Proprietorship Total Liabilities and Proprietorship Illustration No. + + +
Note Receivable Bank Notes Payable-Creditors Accounts Receivable Accrued Wages Accrued Interest Cash Proprietorship Capital Stock Surplus Total Proprietorship Total Liabilities and Proprietorship Illustration No. + + +
Note Receivable Bank Notes Payable-Creditors Accounts Receivable Accrued Wages Accrued Interest Cash Proprietorship Capital Stock Surplus Total Proprietorship Total Liabilities and Proprietorship Illustration No. + + +
Note Receivable Bank Notes Payable-Creditors Accounts Receivable Accrued Wages Accrued Interest Cash Proprietorship Capital Stock Surplus Total Proprietorship Total Liabilities and Proprietorship Illustration No. + + +
Note Receivable Bank Notes Payable-Creditors Accounts Receivable Accrued Wages Accrued Interest Cash Proprietorship Capital Stock Surplus Total Proprietorship Total Liabilities and Proprietorship Illustration No. + + + + +
Note Receivable Bank Notes Payable-Creditors Accounts Receivable Accrued Wages Accrued Interest Cash Propri +EXPLANATION: The names of the accounts and the figures in the first two account columns are applicable to the Balance Sheet for 1921 and the names of the accounts and the figures in the last column are applicable to the Balance Sheet for 1922; increases being printed in bold type in the first column at the right; decreases being printed in italic type in the second column at the right; increases being printed in bold type in the third column at the right; decreases being printed in italic type in the fourth column at the right; increases being printed in bold type in the fifth column at the right; decreases being printed in italic type in the sixth column at the right; increases being printed in bold type in the seventh column at the right; decreases being printed in italic type in the eighth column at the right; increases being printed in bold type in the ninth column at the right; decreases being printed in italic type in the tenth column at the right; increases being printed in bold type in the eleventh column at the right; decreases being printed in italic type in the twelfth column at the right; increases being printed in bold type in the thirteenth column at the right; decreases being printed in italic type in the fourteenth column at the right; increases being printed in bold type in the fifteenth column at the right; decreases being printed in italic type in the sixteenth column at the right; increases being printed in bold type in the seventeenth column at the right; decreases being printed in italic type in the eighteenth column at the right; increases being printed in bold type in the nineteenth column at the right; decreases being printed in italic type in the twentieth column at the right; increases being printed in bold type in the twenty-first column at the right; decreases being printed in italic type in the twenty-second column at the right; increases being printed in bold type in the twenty-third column at the right; decreases being printed in italic type in the twenty-fourth column at the right; increases being printed in bold type in the twenty-fifth column at the right; decreases being printed in italic type in the twenty-sixt +Description of Line Item Value (in $)Description of Line Item Value (in $)
+ +		Description of Line Item Value (in $)
+ +		Description of Line Item Value (in $)
+ +		Description of Line Item Value (in $)
+ +		Description of Line Item Value (in $)
+ +		Description of Line Item Value (in $)
+ +		Description of Line Item Value (in $)
+ +		Description of Line Item Value (in $)
+ +		Description of Line Item Value (in $)
+ +		Description of Line Item Value (in $)
+ +		Description of Line Item Value (in $)
+ +		Description of Line Item Value (in $)
+ +		Description of Line Item Value (in $)
+ +		Description of Line Item Value (in $)
+ +		Description of Line Item Value (in $)
+ +		Description of Line Item Value (in $)
+ +		Description of Line Item Value (in $)
+ +		Description of Line Item Value (in $)
+ +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +Description of Line Item Value (in $) + +COMPARATIVE REPORTS 329 + +THE AMERICAN MERCANTILE COMPANY +Comparative Statement of Profit and Loss for Two Years Ending December 31, 1922 + +| | Dec. 31, 1921 | Dec. 31, 1922 | Increase or Decrease | +|---|---|---|---| +| **RETURN FROM SALES:** | | | | +| Gross Sales | $10,000.00 | $14,000.00 | $3,000.00 | +| Less Sales Returns and Allowances | 3500.00 | 4000.00 | 500.00 | +| Net Returns from Sales | 6500.00 | $14,000.00 | $7,500.00 | +| Cost of Goods Sold | 16619.86 | 19779.66 | 3169.80 | +| Inventory at beginning of year | 5598.13 | 8442.46 | 2844.33 | +| Purchases | 16653.56 | 14747.46 | -1906.10 | +| Freight and Drayage In | | | -210.90 | +| Total Purchases Cost | $19,553.66 | $18,200.46 | $1,353.20 | +| Less Inventory at end of year | 14079.46 | 18999.46 | -4920.86 | +| Net Cost of Goods Sold | $5,474.20 | $2,727.88 | -2746.32 | +| Gross Profit on Sales | $27,282.14 | $27,282.14 | $- | +| Operating Expenses: | | | | +| Buying Expense | 3835.06 | 6833.05 | -2998.99 | +| Selling Expense | 7785.66 | 8785.66 | -999.99 | +| Delivery Expense | 4446.06 | 8785.66 | -4339.60 | +| Administrative Expense | 6666.66 | 4355.86 | -2210.80 | +| Total Operating Expenses | $23,255.78 | $32,355.78 | -9,100.00 | +| Net Profit from Operation (Net Income) | $4,026.36 | $4,926.36 | -8999.99 | +| Other Income: | | | | +| Interest Earned from Purchases Discount (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (Interest Earned) (InterestEarns) +| Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchases Discount ($ Interest earned from Purchises Discount ($ Interest earned from Purchises Discount ($ Interest earned from Purchises Discount ($ Interest earned from Purchises Discount ($ Interest earned from Purchises Discount ($ Interest earned from Purchises Discount ($ 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Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts: Purchase Discounts +| Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income Gross Income +| Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total Other income Total other income +| Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses Net Operating Expenses +| **Total Deductions From** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** **Income** +| Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales Discount Sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount sales discount +| **Net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses net operating expenses** +Illustration No. 139, Comparative Statement of Profit and Loss + +EXPLANATION. +The names of the accounts and the figures in the first two columns of the table are applicable to the Statement of Profit and Loss for 1921, and the names of the accounts and the figures in the third column are applicable to the Statement of Profit and Loss for 1922. +The increase or decrease is shown in the last column at the right, decreases being printed in italic. +If desired, an additional column may be inserted between the second and third columns which will record the percentage of increase or decrease as explained in line 14 of Illustration No. + +(Continued on page 327) +sales because the increase in the costs is not so great as the increase in the income. +The purchases during 1922 show an increase of more than $25,000, but this is to be expected because of the increase in prices. +The cost of goods sold at the close of December 31, 1922 shows an increase over that at the close of December 31, 1921, but this is to be expected because of the increase in purchases. +The gross profit on sales shows an increase of more than $12,500. +The total deductions show an increase of almost $3,500 and the non-operating income shows an increase of $750. +The total deductions show an increase of almost $3,500 and the non-operating income shows an increase of $750. +The total deductions show an increase of almost $3,500 and the non-operating income shows an increase of $750. +The total deductions show an increase of almost $3,500 and the non-operating income shows an increase of $750. +The total deductions show an increase of almost $3,500 and the non-operating income shows an increase of $750. +The total deductions show an increase of almost $3,500 and the non-operating income shows an increase of $750. +The total deductions show an increase of almost $3,500 and the non-operating income shows an increase of $750. +The total deductions show an increase of almost $3,500 and the non-operating income shows an increase of $750. +The total deductions show an increase of almost $3,500 and the non-operating income shows an increase of $750. +The total deductions show an increase of almost $3,500 and the non-operating income shows an increase of $750. +The total deductions show an increase of almost $3,500 and the non-operating income shows an increase of $750. +The total deductions show an increase of almost $3,500 and the non-operating income shows an increase of $750. +The total deductions show an increase of almost $3,500 and the non-operating income shows an increase of $750. +The total deductions show an increase of almost $3,500 and the non-operating income shows an increase of $750. +The total deductions show an increase of almost $3,500 and the non-operating income shows an increase of $750. +The total deductions show an increase of almost $3,5 + +330 +GRAPHHS + +operating expense for 1922 shows an increase of more than $10,000.00, but the non-operating expense shows a decrease of $100.00. The net profit for 1922 shows an increase of more than $5,500.00, but this is not in proportion to the increase in sales, hence indicates that the operating cost has increased out of proportion to the increase in sales. + +§ 345. A Graph or graphical chart is a pictorial presentation of comparative facts. There are three forms of graphs in general use, (a) the bar graph, (b) the curved graph, and (c) the circular graph. Each of these forms may be used in presenting facts shown on the reports prepared from bookkeeping records. The facts usually set forth in graphs are: (a) comparison of sales for two or more periods, (b) comparison of selling expense for two or more periods, (c) comparison + +(Continued on page 331) + +Illustration No. 140, Horizontal Bar Graph. +EXPLANATION: This shows a comparison of the sales for the two years in Illustration No. 139. The unit in each bar is based on $10,000.00. + +Illustration No. 141, Vertical Bar Graph. +EXPLANATION: The figures used in this graph are given in the second paragraph of § 346. The unit in each bar is based on $10,000.00. + + +A bar graph showing operating expenses for two years. The x-axis represents years from 1922 to 1924, with intervals of 2 years. The y-axis represents amounts from $80,000 to $120,000 in increments of $20,000. + + + +A bar graph showing operating expenses for two years. The x-axis represents years from 1922 to 1924, with intervals of 2 years. The y-axis represents amounts from $80,000 to $120,000 in increments of $20,000. + + + +A bar graph showing operating expenses for two years. The x-axis represents years from 1922 to 1924, with intervals of 2 years. The y-axis represents amounts from $80,000 to $120,000 in increments of $20,000. + + +BAR GRAPH + +of sales and selling expense for one or more periods, (d) comparison of purchases with purchases expense for one or more periods, (e) comparison of purchases with sales for one or more periods, (f) comparison of current assets for two or more periods, (g) comparison of fixed assets for two or more periods, and (h) comparison of net income for two or more periods; any other facts shown on the reports submitted by the bookkeeper to the manager of a business can be presented in pictorial form. + +§ 346. A Bar Graph is used to compare totals for two or more periods. Thus, if it is desired to show in pictorial form by a bar graph the sales for the two years, in Illustration No. 138, the Sales and Loss in Illustration No. 139, the bars would be arranged as in Illustration No. 140. + +If the comparison of sales is for six periods, the sales for the first year being $50,000.00, for the second, $60,000.00, for the third, $80,000.00, for the fourth, $65,000.00, for the fifth, $75,000.00, and for the sixth, $55,000.00, the facts presented in bar graph would appear as in Illustration No. 141. + +If desired, the bars in the bar graph may be made to show a comparison of more than one group of figures. Thus, if it is desired to show net sales, cost of sales, selling expense and administrative expense on the same bar graph for the two periods in Illustration No. 139, the graph would appear as in Illustration No. 142. + +EXPLANATION. The first four bars show the sales, cost of sales, selling expense (including delivery expense), and administrative expense for 1921, and the second four bars the same facts for 1922 (Illustration No. 139). Each bar is divided into ten units of $10,000.00 each, and each unit represents a difference of $1,000. For convenience, it is customary to base the comparison on even hundreds or thousands of dollars. + +Illustration No. 142: Vertical Bar Graph + +334 + +332 + +CURVED GRAPH + +§ 347. A Curved Graph is used to present a comparison of figures over a number of periods. Assuming that the monthly sales and selling expense for the years 1921 and 1922 are as shown at the top of page 333, a curved graph setting forth the facts would appear as in Illustration No. 143. + + +A curved graph showing monthly sales and selling expense for the years 1921 and 1922. +The x-axis (horizontal) represents months from January to December. +The y-axis (vertical) represents values from 0 to 14,000. +The top curve represents "Net Sales" and the bottom curve represents "Selling Expense". +Values for each year are marked on the graph: +- For 1921: Net Sales = 10,000, Selling Expense = 3,000 +- For 1922: Net Sales = 12,000, Selling Expense = 3,500 + + +Illustration No. 143, Curved Graph. + +EXPLANATION. The curves at the top show a comparison of sales for the two years, and the curves at the bottom show a comparison of the selling expense for the two years. The figures used are given at the top of page 333. The graph is divided into fifteen units, of $1,000.00 each, each unit being subdivided into five units of $200.00 each. + +CIRCULAR GRAPH 333 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
SalesSelling Expense
19211922
January$ 9,000.00$ 21,000.00$ 1,000.00$ 5,000.00
February7,500.006,000.002,500.003,500.00
March...11,000.0013,000.002,000.002,200.00
April...4,500.0012,500.001,500.002,550.00
May16,500.0018,555.881,698.882,698.88
June8,655.8812,555.882,555.883,255.88
July...8,698.8814,698.883,469.884,698.88
August16,555.8812,555.882,555.883,255.88
Sepember...14,698.8813,698.883,698.884,698.88
October...9,698.8814,698.884,698.886,698.88
November...
+
Cost of Mdo Sold































































                                                              73 £ + + + December... 
Cost of Mdo Sold
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+ +
+Description: A circular graph showing sales and selling expenses for the years 1921 and 1922. + +**Description:** This image is a circular graph illustrating the sales and selling expenses for the years 1921 and 1922. + +**Legend:** +- **Sales (in dollars):** + - January: $9,000 + - February: $21,000 + - March: $11,000 + - April: $4,500 + - May: $16,555 + - June: $8,698 + - July: $14,699 + - August: $16,555 + - September: $14,699 + - October: $9,699 + - November: $14,699 + - December: $14,699 + +- **Selling Expenses (in dollars):** + - January: $21,000 + - February: $6,555 + - March: $14,699 + - April: $12,555 + - May: $21,469 + - June: $2,556 + - July: $4,699 + - August: $21,469 + - September: $4,699 + - October: $2,556 + - November: $4,699 + - December: $4,699 + +**Analysis:** +The graph shows that the total sales for both years are approximately equal ($21,469). The selling expenses for each month are also relatively consistent across the two years. + +**Conclusion:** +The graph indicates that the company's sales and selling expenses were relatively stable over the two-year period. + +**Question:** What was the total cost of merchandise sold in each year? + +**Answer:** The total cost of merchandise sold in each year can be determined by summing up the "Cost of Mdo Sold" values for each month. + +For **Year 1 (1921)**: +\[ \text{Total Cost of Mdo Sold} = \$21 + \$6 + \$14 + \$12 + \$21 + \$2 + \$4 + \$21 + \$4 + \$2 + \$4 + \$4 \] +\[ \text{Total Cost of Mdo Sold} = \$ \boxed{ \text{Sum of all values} } \] + +For **Year 2 (1922)**: +\[ \text{Total Cost of Mdo Sold} = \$ \boxed{ \text{Sum of all values} } \] + +**Note:** The exact numerical values for the total cost of merchandise sold in each year cannot be calculated without additional data on individual months' costs. + +### § 418. +A Circular Graph is used to present figures where a comparison is based on one dollar's worth of goods. Thus when the merchant receives $1.00 for merchandise sold he knows that this amount must cover the cost of the merchandise the selling cost the administrative cost and his profit and that each cost and return is a certain per cent of the total sales. The facts relative to sales cost of sales cost of buying cost selling cost of renting cost of administration and profit for the two fiscal periods illustrated in Illustration No. 19 when presented in circular graph form will appear as in the illustration below. + +Description: A circular graph showing costs and profits for two fiscal periods (years). + +**Description:** This image is a circular graph illustrating costs and profits for two fiscal periods (years). + +**Legend:** +- **Costs (in dollars):** + - Advertising Expense + - Delivery Expense + - Selling Expense + - Buying Expense + +- **Profits (in dollars):** + - Profit + +**Analysis:** +The graph shows that the total costs and profits for both fiscal periods are approximately equal. + +**Conclusion:** +The graph indicates that the company's costs and profits were relatively stable over the two fiscal periods. + +**Question:** What was the total cost of advertising expense in each fiscal period? + +**Answer:** The total cost of advertising expense in each fiscal period can be determined by summing up the "Advertising Expense" values for each month. + +For **Fiscal Period A (Year X)**: +\[ \text{Total Advertising Expense} = \$ \boxed{ \text{Sum of all values} } \] + +For **Fiscal Period B (Year Y)**: +\[ \text{Total Advertising Expense} = \$ \boxed{ \text{Sum of all values} } \] + +**Note:** The exact numerical values for the total advertising expense in each fiscal period cannot be calculated without additional data on individual months' expenses. + +### Costs and Profit in Each One Dollar Sale + +Illustration No. 144. Circular Graph. + +**EXPLANATION:** Each of the above circles represents a sale of $1. So That part of the dollar which was spent to purchase merchandise is included as a deduction from the gross sales figure and the operating expenses paid to effect this sale and the profit remaining after all costs applicable to this sale have been paid are indicated by the unshaded portion. This information will be valuable to the merchandiser in determining whether or not he has made a satisfactory sale. + +**Comparison with Comparative Statement of Profit and Loss** + +Illustration No. 145 shows a comparative statement of profit and loss for two fiscal periods (years) similar to those illustrated in Illustration No. 19 except that instead of expressing percentages as shown in Illustration No. 144 they are expressed as percentages in terms of dollars. + +This statement shows that the company's costs and profits were relatively stable over the two fiscal periods. + +**Question:** What was the total cost of advertising expense in each fiscal period? + +**Answer:** The total cost of advertising expense in each fiscal period can be determined by summing up the "Advertising Expense" values for each month. + +For **Fiscal Period A (Year X)**: +\[ \text{Total Advertising Expense} = \$ \boxed{ \text{Sum of all values} } \] + +For **Fiscal Period B (Year Y)**: +\[ \text{Total Advertising Expense} = \$ \boxed{ \text{Sum of all values} } \] + +**Note:** The exact numerical values for the total advertising expense in each fiscal period cannot be calculated without additional data on individual months' expenses. + +### Costs and Profit in Each One Dollar Sale + +Illustration No. 144. Circular Graph. + +**EXPLANATION:** Each of the above circles represents a sale of $1. So That part of the dollar which was spent to purchase merchandise is included as a deduction from the gross sales figure and the operating expenses paid to effect this sale and the profit remaining after all costs applicable to this sale have been paid are indicated by the unshaded portion. This information will be valuable to the merchandiser in determining whether or not he has made a satisfactory sale. + +**Comparison with Comparative Statement of Profit and Loss** + +Illustration No. 145 shows a comparative statement of profit and loss for two fiscal periods (years) similar to those illustrated in Illustration No. 144 except that instead of expressing percentages as shown in Illustration No. 144 they are expressed as percentages in terms of dollars. + +This statement shows that the company's costs and profits were relatively stable over the two fiscal periods. + +**Question:** What was the total cost of advertising expense in each fiscal period? + +**Answer:** The total cost of advertising expense in each fiscal period can be determined by summing up the "Advertising Expense" values for each month. + +For **Fiscal Period A (Year X)**: +\[ \text{Total Advertising Expense} = \$ \boxed{ \text{Sum of all values} } \] + +For **Fiscal Period B (Year Y)**: +\[ \text{Total Advertising Expense} = \$ \boxed{ \text{Sum of all values} } \] + +**Note:** The exact numerical values for the total advertising expense in each fiscal period cannot be calculated without additional data on individual months' expenses. + +### Costs and Profit in Each One Dollar Sale + +Illustration No. 144. Circular Graph. + +**EXPLANATION:** Each of the above circles represents a sale of $1. So That part of the dollar which was spent to purchase merchandise is included as a deduction from the gross sales figure and the operating expenses paid to effect this sale and the profit remaining after all costs applicable to this sale have been paid are indicated by the unshaded portion. This information will be valuable to the merchandiser in determining whether or not he has made a satisfactory sale. + +### Comparison with Comparative Statement of Profit and Loss + +Illustration No. 145 shows a comparative statement of profit and loss for two fiscal periods (years) similar to those illustrated in Illustration No. 144 except that instead of expressing percentages as shown in Illustration No. 144 they are expressed as percentages in terms of dollars. + +This statement shows that the company's costs and profits were relatively stable over the two fiscal periods. + +### Question: + +What was the total cost of advertising expense in each fiscal period? + +334 +PERCENTAGES + +§ 349. Percentages are used to present a comparison of figures and are sometimes even more comprehensive than the graphs or the figures themselves. +All bookkeeping facts presented in percentage form should be based on net sales. +Net income is calculated by subtracting all expenses from gross sales and profit, hence the same base should be used for calculating the percentage of each. +There are many other reasons, but since these are given in connection with the study of percentages they will not be discussed here. + +When percentages are used to emphasize facts on a Balance Sheet or Statement of Profit and Loss, they are usually shown in a separate column on the reports. Illustration No. 145 shows the 1922 Statement of Profit and Loss in the Comparative Nature of Illustration No. 144 with the percentages based on net sales entered in the column provided for them. + +THE AMERICAN MERCANTILE COMPANY + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + %
% of Net Sales
RETURNS FROM SALES:
Gross Sales14,000.00103
Less Sales Returns and Allowances4000.003
Net Returns from Sales14,000.00100
Cost of Goods Sold14276.5010
Inventories, January 1, 19229824.4063
Freight and Drayage In.14874.4010
Total Purchases Cost18780.4083
Less Inventory, December 31, 192218990.4013
Total Cost of Goods Sold
99210.0070
Gross Profit on Sales
41790.0030
Operating Expenses:
Gross Profit on Sales%
Gross Profit on Sales5323.005
Operating Expenses:18580.009
Advertising Expense:8700.006
Delivery Expense:4350.00*
Administrative Expense:
Total Operating Expenses:32625.0023
Net Profit from Operations:9165.007
Other Income:
Interest Earned:650.000.4
Purchases Discount:850.006.6
Total Other Income:
1500.001
Gross Income:
Deductible Income:16663.008
Interest Cost:100.00-0.1
Sales Discount:1000.006.7
Total Deductions from Income:
+ + + +
Illustration No. 145, Statement of Profit and Loss with Percentages.
+ +EXPLANATION: Net sales are taken as a base and $1,666 units are used in the calculations. +A comparison of Illustrations No. 144 and No. 145 shows that the percentages are better when the student can understand the percentages better. It will be observed that each $1,666 sale consists of $666 units, a certain number of these units being applicable to the various costs and the profit. + +Illustration No. 145, Statement of Profit and Loss with Percentages. + + + +
Illustration No. 145, Statement of Profit and Loss with Percentages.
+ +EXPLANATION: Net sales are taken as a base and $1,666 units are used in the calculations. +A comparison of Illustrations No. 144 and No. 145 shows that the percentages are better when the student can understand the percentages better. It will be observed that each $1,666 sale consists of $666 units, a certain number of these units being applicable to the various costs and the profit. + +Illustration No. 145, Statement of Profit and Loss with Percentages. + + + +
Illustration No. 145, Statement of Profit and Loss with Percentages.
+ +EXPLANATION: Net sales are taken as a base and $1,666 units are used in the calculations. +A comparison of Illustrations No. 144 and No. 145 shows that the percentages are better when the student can understand the percentages better. It will be observed that each $1,666 sale consists of $666 units, a certain number of these units being applicable to the various costs and the profit. + +Illustration No. 145, Statement of Profit and Loss with Percentages. + + + +
Illustration No. 145, Statement of Profit and Loss with Percentages.
+ +EXPLANATION: Net sales are taken as a base and $1,666 units are used in the calculations. +A comparison of Illustrations No. 144 and No. 145 shows that the percentages are better when the student can understand the percentages better. It will be observed that each $1,666 sale consists of $666 units, a certain number of these units being applicable to the various costs and the profit. + +Illustration No. 145, Statement of Profit and Loss with Percentages. + + + +
Illustration No. 145, Statement of Profit and Loss with Percentages.
+ +EXPLANATION: Net sales are taken as a base and $1,666 units are used in the calculations. +A comparison of Illustrations No. 144 and No. 145 shows that the percentages are better when the student can understand the percentages better. It will be observed that each $1,666 sale consists of $666 units, a certain number of these units being applicable to the various costs and the profit. + +Illustration No. 145, Statement of Profit and Loss with Percentages. + + + +
Illustration No. 145, Statement of Profit and Loss with Percentages.
+ +EXPLANATION: Net sales are taken as a base and $1,666 units are used in the calculations. +A comparison of Illustrations No. 144 and No. 145 shows that the percentages are better when the student can understand the percentages better. It will be observed that each $1,666 sale consists of $666 units, a certain number of these units being applicable to the various costs and the profit. + +Illustration No. 145, Statement of Profit and Loss with Percentages. + + + +
Illustration No. 145, Statement of Profit and Loss with Percentages.
+ +EXPLANATION: Net sales are taken as a base and $1,666 units are used in the calculations. +A comparison of Illustrations No. 144 and No. 145 shows that the percentages are better when the student can understand the percentages better. It will be observed that each $1,666 sale consists of $666 units, a certain number of these units being applicable to the various costs and the profit. + +Illustration No. 145, Statement of Profit and Loss with Percentages. + + + +
Illustration No. 145, Statement of Profit and Loss with Percentages.
+ +EXPLANATION: Net sales are taken as a base and $1,666 units are used in the calculations. +A comparison of Illustrations No. 144 and No. 145 shows that the percentages are better when the student can understand the percentages better. It will be observed that each $1,666 sale consists of $666 units, a certain number of these units being applicable to the various costs and the profit. + +Illustration No. 145, Statement of Profit and Loss with Percentages. + + + +
Illustration No. 145, Statement of Profit and Loss with Percentages.
+ +EXPLANATION: Net sales are taken as a base and $1,666 units are used in the calculations. +A comparison of Illustrations No. 144 and No. 145 shows that the percentages are better when the student can understand the percentages better. It will be observed that each $1,666 sale consists of $666 units, a certain number of these units being applicable to the various costs and the profit. + +Illustration No. 145, Statement of Profit and Loss with Percentages. + + + +
Illustration No. 145, Statement of Profit and Loss with Percentages.
+ +EXPLANATION: Net sales are taken as a base and $ + +EXERCISE 335 + +Exercise No. 105. Comparative Reports, Graphs and Percentages. + +The Trial Balance of the American Mercantile Company, taken at the close of the fiscal year ended December 31, 1923, shows the following account balances: +Cash, Dr., $20,810.10; Notes Receivable, Dr., $3,800.00; Accounts Receivable, Dr., $36,800.00; Reserve for Doubtful Accounts Receivable, Cr., $110.00; Office Equipment, Dr., $175.00; Store Fixtures, Dr., $4,000.00; Store Fixtures, Cr., $300.00; Delivery Equipment, Dr., $4,500.00; Reserve for Depreciation of Delivery Equipment, Cr., $900.00; Buildings, Dr., $25,000.00; Reserve for Depreciation of Buildings, Cr., $15,000.00; Notes Payable—Bank, Cr., $5,000.00; Notes Payable—Creditors, Cr., $1,500.00; Accounts Payable, Cr., $436.50; Mortgage Payable, Cr., $142.50; Sales Returns and Allowances, Dr., $36.87; Interest Earned, Dr., $27.69; Purchases, Dr., $214.99; Purchase Discounts, Dr., $189.49; Sales Returns and Allowances, Dr., $36.87; Inventory Cost, Dr., $159.64; Selling Expense, Dr., $159.64; Administrative Expense, Dr., $27.69; Advertising Expenses on hand, $15.26; Advertising charges to Operation, $15.26; Interest Earned, Cr., $75.00; Purchases Discount, Cr., $1,697.59; Interest Cost, Dr., $666.75; Sales Discount, Dr., $175.09; Donations, Dr., $175.09. +(a) Merchandise Inventory, December 31, 1923: $157,549.4 +(b) Interest accrued on notes receivable: $76.8 +(c) Interest earned on notes payable: $27.69 +(d) Unpaid wages: Buying Expense: $125.0 +(e) Selling Expense: $75.0 +(f) Administrative Expense: $27.69 +(g) Office supplies on hand: $15.26 +(h) Advertising expenses on hand: $15.26 +(i) Advertising charges to operation: $15.26 +(j) Interest earned: Cr.: $75.0 +(k) Purchases discount: Cr.: $175.1 +(l) Sales discount: Cr.: $175.1 +(m) Donations: Cr.: $175.1 +(n) Merchandise inventory: Dec 31 1923: 7% of Accounts Receivable. +(o) The student is required to prepare the following: + 1. A Working Sheet under date of December 31, 1923. + 2. A comparative Balance Sheet and a comparative Statement of Profit and Loss for 1922 and 1923 showing necessary data are shown on the Working Sheet and the illustrations Illustration Nos. 138 and 139. + 3. Journal entries to close the ledger: December 31, 1923. + 4. Post-closing entries under date of January 1, 1924. + 5. A circular graph similar in form to Illustration No. 144 showing a comparison of net sales and selling expense for the years 1922 and 1923. + A Statement of Profit and Loss showing the percentages based on net sales as well as additional parts of $368.88 using even hundreds of dollars. + In calculating the percentages. + A circular graph similar in form to Illustration No. 144 showing the proportionate part of a dollar applicable to the cost of merchandise sold and the variation in selling expense and administrative expense and Loss required in No. 7 may be used as a basis in preparing this graph. + +QUESTIONS ON ILLUSTRATIONS NOS. 138 AND 139. + +What is the increase in sales for 1922? +What is the increase in the selling expense for 1922? +Is the increase in sales in proportion to the increase in the selling expense? +What is the increase in cost of sales for 1922? + +336 + +**QUESTIONS** + +5. (a) Can you assign a reason for the decrease in administrative expense? (b) For the increase in delivery expense? +6. Is the increase in current assets in proportion to the increase in sales? +7. Is the increase in current liabilities in proportion to the increase in purchases? +8. Is the increase in proprietorship the same as the increase in net income? +9. If a business has a large amount of cash on hand, what effect would this have on the current liabilities and proprietorship? +10. If you owned ten shares of stock in the American Mercantile Co., for which you had paid par, would you regard this as a good investment based on the facts shown by the two reports? + +**QUESTIONS ON GRAPHS** + +1. Which form of graph would be more satisfactory for setting forth in pictorial form a comparison of sales for three consecutive years? +2. Explain the connection between the circular graph and the percentages. +3. Why are sales used as a base for ascertaining the percentage of the costs to the sales? +4. Would the percentage of buying expense be based on total purchases or the net cost of purchases? Give a reason for answer. +5. Why is buying expense not included with the purchase cost of merchandise? +6. What effect would it have on the percentage if the cost of merchandise sold is increased? +7. Could a comparison of sales, cost of sales, cost of selling, and administrative cost be shown on one bar graph? Explain. +8. When comparing percentages for two or more periods, would all the percentages be based on the same dollar total, or the sales for each period? Explain. +9. Of what advantage to the owner of the business is a circular graph showing the total costs which enter into each dollar of sales he receives? +10. Of what advantage to the owner of a business is a curved graph setting forth a comparison of the sales by months during two or more years? + +Chapter XXXV + +CORPORATION PROBLEMS + +The Purpose of this Chapter is to give the student an opportunity to apply the principles discussed in this book to problems involving the recording of transactions affecting the organization, operations, and dissolution of corporations. If the student understands the principles governing corporation accounting, he will have no trouble in making the required entries to open the corporation books, to close a set of corporate accounts, or to record those transactions affecting the proprietorship of the corporation. + +Exercise No. 106. Opening Entries. + +May 1, 1923, a charter was granted to C. W. Addison, J. B. Chaney, E. O. Dana, L. B. Simrall, and D. V. Beatty for the purpose of operating gaming factories. C. W. Addison and J. B. Chaney own buildings, and machinery which have been used for this purpose in the past, but the operations have been discontinued. The charter granted provides for a capital stock of $100,000.00, half of which is to be paid in cash and the other half in machinery. + +C. W. Addison and J. B. Chaney each subscribe for one hundred shares of common and one hundred shares of preferred stock with the understanding that one share of each class shall be worth $500 each. They also agree to pay for the land, buildings, and machinery owned by them: each is to pay cash for the other half of his subscription. E. O. Dana, L. B. Simrall, and E. D. Townsend each subscribe for ten shares of preferred stock and one hundred shares of common stock to be paid for in cash; they are to pay one-half of their subscriptions in cash and one-half in equal installments payable in 90 days. + +J. W. Wolfe subscribes for one hundred shares of preferred stock with the privilege of deducting a discount of three per cent for cash. D. V. Beatty subscribes for one hundred shares of preferred stock with the privilege of deducting cash from his payment on account of his subscription; he is to pay cash for the common and the corporation is to accept machinery valued at $3,500.00 and his note for $8,000.00 in payment for the preferred. + +Machinery valued at $7,500 is to be paid for by cash; it is agreed that preferred stock to be paid for in cash shall be issued when preferred stock to be paid for in cash is issued; H. Pearson, W. L. Garber, and K. Feger each subscribe for ten shares of preferred and fifteen shares of common stock, agreeing to pay cash for the preferred and one-third of the common; balance of the common stock to be paid in two equal installments payable in 90 days. + +Prepare in journal form the entries required to record the authorized capital stock and the subscriptions. + +Make in journal form the entries necessary to record the cash and other property received by the corporation as per agreement at the time corporation was organized, assuming that stock was issued when fully paid. + +Prepare in journal form the entries when the deferred payments are made, it being assumed that Mr. Darling has paid half of his note and interest at maximum rate and receives the other half with an interest charge due in sixty days. + +Exercise No. 107. Entry for Stock Sold. + +W. G. Darling subscribed for ten shares of the capital stock of the Boyd Manufacturing Co., at $1000 per share. He paid cash $250.00 and gave his sixty-day note for the balance, attaching the certificate of stock as collateral security. He died before payment was made on his note; therefore, it was collected by Mr. Darling with the administrator by refunding one-half the amount Mr. Darling had paid. + +Prepare in journal form (a) the entry when the stock was sold to Mr. Darling, and (b) the entry when settlement was made with the administrators. + +337 + +338 + +EXERCISES + +Exercise No. 108, Opening Entries. + +F. L. Burke, R. S. Cooke, and C. B. Summers, partners in a mercantile business, wish to incorporate at the close of business June 30, 192... The Balance Sheet prepared from their books at that time shows the following facts: + +BURKE, COOKE & SUMMERS +Balance Sheet, June 30, 192... + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Assets
CURRENT ASSETS:
Cash6,011.70
Notes Receivable1,000.00
Accounts Receivable12,014.00
Less Reserve for Bad Debts245.66
Accrued Interest Earned11,758.34
Merchandise Inventory, June 302,560.0021,284.60
FIXED ASSETS:
Office Equipment350.00
Less Reserve for Depreciation57.50
Store Fixtures499.00
Less Reserve for Depreciation17.80
Delivery Equipment-4,100.00
Less Reserve for Depreciation-3,620.004,381.50
DETERIORATED CHARGES TO OPERATION:
TOTAL ASSETS AND DETERIORATED CHARGES TO OPERATION:
+ + + +
Total Assets and Deteriorated Charges to Operation:
+ + + +
Current Liabilities:
+ + + +
Current Liabilities:
+ + + +
Liabilities and Proprietorship:
+ + + +
Proprietorship:
+ + + +
Proprietorship:
+ + + +
Total Liabilities and Proprietorship:
+ + + +
The three partners sign application for a charter of incorporation with a capital stock of $25,000.00, consisting of one thousand shares of $25.00 a share. +F. L. Burke subscribed for one thousand shares; R. H. Porter subscribed for two hundred shares; R. H. Porter, ten shares; J. G. Winkler, five shares; W. G. Brownfield, six shares; J. C. Walters, five shares; the remaining one hundred shares will be sold later. +Each partner is to receive one hundred shares for his interest in the business and pays cash for the balance of his subscription. +F. L. Burke has been using a similar business operated by himself, valued at $4,000.00; he pays cash for the balance of his subscription. +All other subscribers have paid cash for all their subscriptions. +The difference between the par value of the stock accepted by the partners in payment for their interest in the business and the proprietorship of the three partners is to be regarded as goodwill. + +Prepare in journal form the entries (a) to close the partnership books, and (b) to open the corporation books. + +The difference between the par value of the stock accepted by the partners in payment for their interest in the business and the proprietorship of the three partners is to be regarded as goodwill. + +Prepare in journal form the entries (a) to close the partnership books, and (b) to open the corporation books. + +The difference between the par value of the stock accepted by the partners in payment for their interest in the business and the proprietorship of the three partners is to be regarded as goodwill. + +Prepare in journal form the entries (a) to close the partnership books, and (b) to open the corporation books. + +The difference between the par value of the stock accepted by the partners in payment for their interest in the business and the proprietorship of the three partners is to be regarded as goodwill. + +Prepare in journal form the entries (a) to close the partnership books, and (b) to open the corporation books. + +The difference between the par value of the stock accepted by the partners in payment for their interest in the business and the proprietorship of the three partners is to be regarded as goodwill. + +Prepare in journal form the entries (a) to close the partnership books, and (b) to open the corporation books. + +The difference between the par value of the stock accepted by the partners in payment for their interest in the business and the proprietorship of the three partners is to be regarded as goodwill. + +Prepare in journal form the entries (a) to close the partnership books, and (b) to open the corporation books. + +The difference between the par value of the stock accepted by the partners in payment for their interest in the business and the proprietorship of the three partners is to be regarded as goodwill. + +Prepare in journal form the entries (a) to close the partnership books, and (b) to open the corporation books. + +The difference between the par value of the stock accepted by the partners in payment for their interest in the business and the proprietorship of the three partners is to be regarded as goodwill. + +Prepare in journal form the entries (a) to close the partnership books, and (b) to open the corporation books. + +The difference between the par value of the stock accepted by the partners in payment for their interest in the business and the proprietorship of the three partners is to be regarded as goodwill. + +Prepare in journal form the entries (a) to close the partnership books, and (b) to open the corporation books. + +The difference between the par value of the stock accepted by the partners in payment for their interest in the business and the proprietorship of the three partners is to be regarded as goodwill. + +Prepare in journal form the entries (a) to close the partnership books, and (b) to open the corporation books. + +The difference between the par value of the stock accepted by + +CORPORATION PROBLEMS +339 + +**Exercise No. 109, Transactions with a Delinquent Subscriber.** + +Record the following transactions in journal form: +May 5. C. W. Green subscribed for fifteen shares of Peoples Telephone Co., stock at $67.66 per share, due within thirty days. +9. Received from C. W. Green $100.00 on account of stock subscription. +25. Brought suit against C. W. Green for $50.00, balance due on stock subscriptions. + +June 5. Court rendered a judgment against C. W. Green for $67.66, covering the amount of his indebtedness, $60.00, court costs, $26.40, and interest on his account, $11.96. Gave the court a check for $26.40 in payment thereof. +20. Received from the court a check for $68.96, amount of the judgment rendered against C. W. Green. + +Issued to C. W. Green a check for $53.08, A. J. Green, attorney. +21. Gave A. Y. Burris, attorney, a check for $53.08, five per cent collection fee for collecting the account against C. W. Green. + +**Exercise No. 110, Donated Stock.** + +January 1, 1923, the Mercantile Trading Company, a corporation with a capital stock of $500,000.00, of which $250,000.00 is common and $250,000.00 preferred, finds that it can pay maturing obligations and that it will be necessary to increase its capital stock by selling some of its stock held in trust for the benefit of the corporation's creditors when such stock has been sold, hence additional capital can not be secured through the sale of stock without the legal formalities of having the capital stock increased, which would require a special meeting of the shareholders and an election of directors called to decide the future policy of the corporation At this meeting it is agreed that each stockholder will donate to the corporation approximately one fifth of the common stock held by him and that he will receive in return one fifth of the stock that it will be better for the stockholders to sacrifice a part of their holdings in order to tide the business over its present financial embarrassment than to take the chance of losing more heavily through the creditors asking for a receiver to take charge of the business. + +Jan. 5. $50,000.00 of the common stock was received from the stockholders as per agreement of the 1st; this stock was donated to the corporation. +6. Transfered from First National Bank donation stock to the First National Bank to apply as part payment on a note for $50,000 due today; the bank accepts the stock at 99. +7. Received from A.J.Roberts a donation for 30 shares (par value, $100.00) of the donated common stock. +8. Paid Anderson Bros., $4,239.75 balance due them, with 30 shares of donated common stock at 99 and check for the balance. +1 Record in journal form all incoming transactions and post to ledger accounts allowing five lines for each account. +2 Assuming that the net proprietorship of the corporation at the close of the next fiscal year is $65,587.75 indicate the form in which this would be shown on the Balance Sheet. + +**Exercise No. 111, Organization and of Opening Entries for a Corporation.** + +The Roberts Printing Co., is incorporated in the state New York The incorporators are Robert H., A.J., V.W., Boyles, T.E., Robbins, and A.J. Smith The corporation has an authorized capital stock of $250,000.00, par value $100.00 per share Subscriptions for this stock are as follows: A.L Roberts,$75,587; H.B Boyles,$35,587; V.W Boyles,$35,587; T.E Robbins,$19,587; A.J Smith,$12,587; S.P Benham,$5,587; L.M + + + + + + + + + + + + + + + + + +
Exercise No.DescriptionAmount
1Record in journal form all incoming transactions and post to ledger accounts allowing five lines for each account.
2Assuming that the net proprietorship of the corporation at the close of the next fiscal year is $65,587.75 indicate the form in which this would be shown on the Balance Sheet.
+ +340 +CORPORATION PROBLEMS + +Wiley, $2,500.00; and M. J. Coleman, $25,000.00. It is decided to hold $50,000.00 of the capital stock for future use. All subscriptions are paid in cash. + +A. A copy of the articles of incorporation was sent to all subscribers and attached to the details of the incorporation. The corporation is to engage in the printing and publishing business in the city of Albany, New York. + +2. A form in outline form each step involved, from the time Roberts conceived the idea until the incorporation was completed, is ready to begin business operations. + +3. Prepare the charter, taking into consideration the conditions required in the New York law and the form of charter in Chapter XXV. + +4. Show in journal form the opening entries. + +Exercise No. 112, Changing a Partnership to a Corporation. +Smiley, Winters & French, partners, agree to incorporate at the close of the business year, June 30, 1922. A Balance Sheet prepared at this time is as follows: + +SMILEY, WINTERS & FRENCH +Baldwin Street, Rome 81, 1922 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
CURRENT ASSETS:
Cash:1241778
Accounts Receivable:336.52
Less Reserve for Bad Debts:80.85185.67
Inventory-Drugs:255.08
Inventory-Supplies:100.64
Inventory-Soda Fountain Supplies:182.61634.24
+ + + + + + + + +
Assets + +
Cash:
+ + + +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ +
+ + + + + + + + + + + + + + + + + + + + + + + +CORPORATION PROBLEMS 341 + +The capital stock of the corporation is to be $25,000.00, consisting of five hundred shares at $5.00 per share. The subscriptions at the time the charter is granted, and are now outstanding, are as follows: C. H. Love, 100 shares; S. M. Smiley, 100 shares; A. L. Frost, 50 shares; E. D. Carpenter, 50 shares; and C. C. Lowrey, 50 shares. The corporation agrees to pay the partners $15,000.00 for its interest in the corporation, which is to be paid by cash to the partners in full satisfaction of the liabilities. Each partner is to pay cash for the stock subscribed for by him and to receive cash for 95 per cent of his proprietary interest in the business as shown by the Balance Sheet; the remaining five per cent is to constitute a surplus to take care of any unforeseen contingencies affecting the assets of the partnership. The other subscribers pay cash for their subscriptions. + +1. Prepare in journal form the entries necessary to close the books of the partnership. +2. Make in journal form the entries necessary to open the books of the corporation taking into consideration the conditions mentioned. + +If desired, the student may show the cash paid to the partners for their interest in the business and the cash received from them by the corporation for the stock subscribed, though in practice only the difference would be paid to or received by the corporation, as it does not lay the cash belonging to the partnership. + +Exercise No. 113. Distribution of Profit. + +The Union Grocery Company is incorporated with a capital stock of $200,000.00—$100,000.00 preferred stock at $100.00 each common; $90,000.00 of the preferred and $85,000.00 of the common has been issued. The preferred stock pays a dividend of eight per cent. The Surplus account at the close of the fiscal period, December 31, 1922, shows a balance of $22,500.00; this amount is due to deduct a dividend of eight per cent on all preferred stock and ten per cent on all outstanding common stock, and to transfer a Sink Fund Reserve account $5,000.00 to provide for bonds which will mature in the future. + +Make in journal form the entries necessary to record the dividends and the sinking fund reserve. + +Exercise No. 114. Stock Dividend. + +At the close of business December 31, 1922, The Capital Stock account of the Consolidated Manufacturing Co. shows a debit balance of $26,000.00, and the Unissued Capital Stock account, a credit balance of $167,500.00; The Surplus account shows a credit balance of $162,500.00. The board of directors decides to declare a stock dividend of ten per cent and a stock dividend of fifty per cent of the outstanding stock. + +Make in journal form the entries necessary to record these dividends. + +Stock dividend refers to capital stock issued to the stockholders for a part of their interest in the surplus. The value of this stock is debited to the Surplus account. + +Exercise No. 115. Changing from a Corporation to a Sole Proprietorship. + +The Peoples Trading Co. is incorporated with a capital stock of $25,366.67 consisting of one thousand shares at $25.3667 each share; one thousand shares owned by C. H. Love, the other one thousand being owned by various stockholders. + +Mr. Love decides to change the business from a corporation to a sole proprietorship; he proposes that he shall own more than ninety-five per cent of all shares than fifty per cent of the stock; he votes a majority for cancellation of the charter and his attorney complies with the necessary legal requirements. + +December 16th when notice is received that the charter has been canceled, The Balance Sheet of the corporation is as shown at top page 342: + +
+ + + + + + + + +
Capital Stock$25,366.67
Surplus Account$25,366.67
+ +CORPORATION PROBLEMS + +THE PEOPLES TRADING COMPANY +Balance Sheet, December 10, 192. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Assets
CURRENT ASSETS:
Cash in Bank19430.15
Credit Card Fund760.00
Notes Receivable1110.00
Less Notes Receivable Discount105.00
Accounts Receivable983.20
Less Allowance for Doubtful Accounts104.16
Misc. Inventory, December 10, 192.974.03
Accrued Interest on Notes Receivable96.96
3357.15
FIXED ASSETS:
Office Equipment430.00
Less Reserve for Depreciation45.00
State Taxable455.00
Less Reserve for Depreciation372.68
Delivery Equipment249.00
Less Reserve for Depreciation720.00
Buildings and Fixtures8600.00
Less Reserve for Depreciation646.00
Land4500.00
15176.68
GOODWILL:6649.18
+ + + +
Deferred Charges to Operation:
+ + + +
Office Supplies:
+ + + +
Advertising Material:
+ + + +
Warehouse Supplies:
+ + + +
Freight In:
+ + + +
Total Assets and Deferred Charges:
+ + + +
Current Liabilities:
+ + + +
Notes Payable - Bank:
+ + + +
Notes Payable - Creditors:
+ + + +
Accounts Payable:
+ + + +
Accrued Interest on Notes Payable:
+ + + +
Accrued Wages:
+ + + +
Preference:
+ + + +
Capital Stock Issued and Outstanding:
+ + + +
Total Liabilities and Preference:
+ + + +
Liabilities and Preference:
+ + + +
Notes Payable - Bank:
+ + + +
Notes Payable - Creditors:
+ + + +
Accounts Payable:
+ + + +
Accrued Interest on Notes Payable:
+ + + +
Accrued Wages:
+ + + +
Preference:
+ + + + + +
CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES: +
$5601.57$12811.09$4279.48$5601.57343 + +Exercise No. 116, Reduction of Capital Stock. +The Davis Printing Co. is incorporated with a capital stock of $50,000.00, consisting of five hundred shares of $100.00 par value stock. At the close of the fiscal period December 31, 192... C. U. Davis, who holds $10,000.00 worth of stock, wishes to retire from the business and agrees to accept $5,000.00 for his stock. The remaining $5,000.00 is paid by the corporation and the corporation's check was issued for $8,000.00 in payment for this stock at its annual meeting of the stockholders held January 2, to reduce the capital stock from $50,000.00 to $40,000.00 and the corporation's attorney is instructed to prepare the necessary articles of amendment to the charter so that the amended charter has been granted, reducing the capital from $50,000.00 to $40,000.00. +Record in journal form the purchase of stock from C. U. Davis, and the reduction of capital stock on January 1st. + +Exercise No. 117, Change from Corporation to a Partnership. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
THE R. J. JOHNSON CORPORATION
Balance Sheet, October 31, 192...
CURRENT ASSETS:Assets
Cash1989: 73
Notes Receivable2725: 43
Accounts Receivable2979: 43
Less Reserve for Doubtful Accounts291: 16
Mdse., Inventory, October 31, 1922941: 12
Branch Store Inventory, October 31, 1925573: 36
Accrued Interest Earned462: 36
Total Current Assets24: 65
FIXED ASSETS:
Office Equipment666: 69
Less Reserve for Depreciation556: 69
Store Fixtures1456: 69
Less Reserve for Depreciation1265: 69
Total Fixed Assets
DETERRED CHARGES TO OPERATION:
Office Rent Due...233: 66
Unexpired Insurance...85: 66
Total Deferred Charges to Operation.













































TOTAL ASSETS AND DEFERRED CHARGES:Liabilities and Prepropriorship.73862: 49
CURRENT LIABILITIES:
Note Payable...7888: 69
Accounts Payable...388: 42
Acreal Wages...388: 42
Total Current Liabilities.17436: 02
PREPROPRIORSHIP:Liability and Prepropriorship.3888: 42
Capital Stock Issued and Outstanding Surplus...5888: 42
Total Propriorship.Liability and Prepropriorship.3888: 42
TOTAL LIABILITIES AND PROPRIORSHIP.Liability and Prepropriorship.73862: 49
+ +A table showing financial data for The R.J. Johnson Corporation as of October 31, 192X. + + + + + + + + + + +
Description/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account TypeDescription/Account Type +
Current Assets:
+ + + + +
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Description:
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+ +
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + 344 +CORPORATION PROBLEMS + +The capital stock of the H. R. Judson Corporation consists of 500 shares of stock, par value $100.00, owned by the following: F. A. McArthur, 100 shares; D. W. Stokes, 50 shares; J. K. Kincaid, 75 shares; E. P. Ramsey, 25 shares; C. M. Derrick, 50 shares; C. Vance, 40 shares; J. T. Nolan, 50 shares; H. S. Gordon, 35 shares; and J. B. Johnson, 25 shares. + +On October 31, the corporation will hold a meeting to vote on the proposal of the stockholders that the charter be amended so as to provide that upon dissolution of the corporation, the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that the retiring stockholders shall receive all of the assets of the corporation except for their share of the corporation's liabilities and debts, and that + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +Exercise No. 119 +Treasury Stock. + +January 1 H. Arnold Shouse Company sold for cash H. F. Ritter one of its traveling salesman commission (grant) bonds at face value capital stock at $113.00 with understanding that company would buy back at any time he wished to discontinue his connection with company He paid $500 cash balance to be deducted from his commission at end year. + +October 5 H. F. Ritter surrendered half his stock at $111.00 received credit on his account this amount less six per cent interest on amount his indebtedness was reduced to zero. + +December 31 H. F. Ritter was credited with $216.50 commission on sales January 5 company paid H. F. Ritter $200 cash on account commissions. + +March 1 company gave H.F.Ritter check balance due him on account for five shares cost $146.00 Record these transactions in journal form An account with Premium on Capital Stock will show record amounts received paid in excess par value. + +
Exercise No. 118Entries for Donated Stock.
May 1 tothe stockholdersof Adams Manufacturing Co., donated $50,000.00 (200 shares) common stock at $25 each to acquire preferred stock to be sold by it to meet outstanding obligations.
May 15GaveA. L. Crim Company a check for $25,000.00, 25 shares of donated common stock at $100 each plus $25 cash in settlement for a past-due account amounting to $875.00.
June 1Received cash$625.00 cash in payment for a sale
June 25Received cash$40 shares donated common stock at $104.00.
Record these transactions in journal form.
1.Post to ledger accounts.
2.Illustrate how proper method showing ownership on Balance Sheet prepared under date December 31 assuming authorized common stock is $250,000.00 authorized preferred stock is $250,000.00 with $50,000 cash received paid for balance due a credit balance.
+ + + + + + + + + + + + + + + + + + + +
Exercise No.DescriptionTotal Amounts
No. 118Entries for Donated Stock.$50,000.00 (200 shares)
No. 119Treasury Stock.$255,688.58
+ +Chapter XXXVI + +VOUCHER ACCOUNTING AND CASH JOURNAL + +The Purpose of this Chapter is to explain (a) the voucher system of accounting and (b) the cash journal. Many business concerns require a voucher for each purchase of merchandise or material, and a check for each payment made by check. The vouchers are usually prepared with the method of issuing the vouchers and the checks given in payment of them. The cash journal is very popular with practicing bookkeepers, because of the time saved in proving cash and posting. + +§ 356. The Voucher is a written statement, usually prepared on a printed form, containing detailed information regarding a purchase of merchandise, material or service; receipts and canceled checks are sometimes referred to as vouchers. A voucher is prepared for each purchase of merchandise or material at the time the purchase is made, and for each payment made by check at the time the payment is made. The blank forms prepared for vouchers are usually printed on both sides; full information in regard to the obligation is given on one side, and the accounts affected are listed on the other side. The voucher may be sent with the check for receipt or it may be folded and the carbon filed separately. In practice it is not always possible to secure return of the voucher sent with the check, even when it is accompanied by a stamped return envelope, it is customary to retain the voucher in the office and file the canceled check with it; this form of voucher + +**VOUCHER JACKET** + +**COWDEN BUICK COMPANY** + +No. ____________ Date of Issue May 12, 19 ____________ Date Due June 1, 19 ____________ + +In Account with Pink Tire Company, + +Address 816 Main Street, City ____________, for the following: + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Invoice DateDescriptionAmount
May 1831 x 4 Cord Tires - Type C-B.10.6773.80
31 x 4 Fabric - ".18.0062.00
33 x 4 Cord - ".21.25
1831 x 4 Cord Tires - ".2.1264.00
31 x 4 Fabric - ".1.9560.40
33 x 4 Cord - ".2.6174.00
8 x 8 x 4 ".8.0018.00
2 x 4 x 4 ".8.0016.00
Total Amount:$310.67
+ +M.D. Cowden + +V.B.Schmitt + +D.T.Cowden + +Illustration No. 146, Inside of Voucher or Voucher Jacket. + +EXPLANATION: This voucher jacket is prepared for an invoice of tires and tubes for which payment is to be made according to the terms of the invoice as shown on the voucher. + +345 + +346 +VOUCHER SYSTEM + +is sometimes referred to as a "voucher jacket" because the voucher is folded and the check placed inside. The number of the voucher is indicated on the check so that the auditor may know the voucher to which it is applicable. Illustrations Nos. 146 and 147 show one of the vouchers required in the garage business illus- +trated in the practice set separate from the tenant's bill. + +For convenience, it is customary to place each voucher on the same form so that the one who received it would be sure to return the voucher with his receipt. This practice is not followed when the vouchers are issued by a central office, but it has been maintained in the voucher and the inconvenience to the bank clerks in handling large voucher checks. + +§ 351. The Voucher System of Recording Purchases. It is necessary for every business to make purchases of merchandise, material and service. Where the operations are simple and limited in amount, this work can be done personally; but, where the trans- +actions are numerous and performed by subordinates, it is necessary to provide a convenient method of recordation. One of the best methods devised is to require a voucher for each purchase. + +The voucher prepared for each purchase is usually signed by at least two individuals, (a) the one authorized to make the purchase and (b) the one who verifies that the purchase was made according to order. Each voucher is numbered consecutively and, after it has been paid, is filed in the order of the number; vouchers issued for future payments should be filed under their respective numbers. Each voucher is recorded in the voucher payable register at the time it is issued. + +There is no reality no voucher method of keeping books, but the use of vouchers in connection with purchases is a good system of recordation. In this connection, it will be seen that the so-called "voucher system" is used, all purchases, either for cash or on account, are recorded in the voucher register; all receipts are entered in another register; and all other dis- +tribution in one book of original entry and then avoids duplication of special columns where pur- +chases on account are recorded in one book and cash purchases in another. + +Illustration No. 147, Outside of Voucher or Voucher Jacket. +EXPLANATION. The accounts affected by the purchase described on the inside of the +voucher are indicated by entering the amounts on the line with the name of the account. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
DISTRIBUTIONRECEIPT/ELATION
Line No.Item DescriptionAmountLine No.Item DescriptionAmount
1Merchandise A for Purchase200.002Merchandise B for Purchase810.00
3Merchandise C for Purchase500.004Merchandise D for Purchase200.00
5Merchandise E for Purchase150.006Merchandise F for Purchase150.00
7Merchandise G for Purchase250.008Merchandise H for Purchase150.00
9Merchandise I for Purchase150.0010Merchandise J for Purchase150.00
11Cash Received from Tenant A for Purchase-250.0012Cash Received from Tenant B for Purchase-250.00
SOMA'S ACCOUNT:
+ +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +SOMA'S ACCOUNT: + +Tom p 7-11 + +VOUCHER PAYABLE REGISTER 347 + +§ 352. The Voucher Payable Register is a book of original entry ruled to contain a record of each voucher issued. The ruling provides columns for all the information which may be recorded on one line, that is, the voucher may be made on one horizontal line. When the voucher method of keeping is used, it is not customary to open accounts with those from whom merchandise, material, or service is purchased, but to record all obligations for purchases in the Voucher Payable Register. This method of keeping the books is further explained in connection with Illustration No. 148. + +§ 353. The Cash Journal is a combination of the cash book and the general journal; if desired, the purchases journal, sales journal, notes journal, and miscellaneous journals may be included. The purpose of the cash journal is to save time in proving cash and posting, and to avoid a repetition of special columns in the books of original entry. When transactions of similar nature occur frequently, it is advisable to enter them in a special journal and transfer the totals only to the cash journal daily, weekly, or monthly. In Illustration No. 149 shows a cash journal with fifteen amount columns, containing a record of part of the transactions in the practice set (garage business) which is separate from the Merchants National Bank. + +1. Merchants National Bank. The title of these two columns indicates that all cash received is deposited in the bank and all cash payments made by check. If a person wishes to keep his own records of receipts and payments he must use columns for "Cash, Dr." and "Cash, Cr." would be necessary. The balance at the beginning of the month is entered in the "Name of Account" column because the total of the Bank Dr. and Bank Cr. account with the bank in the general ledger after this account already shows the balance. + +The cash received in each transaction is entered in the Bank Dr. column and the credit indicated by the entry in the column or columns at the right. The amount shown in this column is added up at the end of each day's work to show the balance indicated by the entry in the Vouchers Payable column at the right. The difference between the total of the Bank Dr. column plus the balance on hand at the beginning of the month and the total of the Bank Cr. column equals either the balance of cash in the bank as shown by the check stub, or in the bank and on hand. To prove cash it is not necessary to add all the columns of the cash journal together, but it is advisable to add all entries for credits and debits for the cash received and paid are entered in these columns so that any error can be discovered its correctness. The method of proving is illustrated by the small figures in Illustration No. 149. + +2. Accounts Payable. Two columns are provided, one for debits and the other for credits. Only those amounts affecting accounts for which special columns are not provided are entered in these columns; where transactions affecting one account do not affect another account they are entered separately. + +3. Accounts Receivable Ledger. Two columns are provided for the Accounts Receivable account in the general ledger because the transactions with customers are often made on separate lines. When a customer pays his bill or when some action affects the debit of an account with a customer, the amount is recorded in the "Accounts Receivable, Dr." column, and when a transaction affects the credit of an account with a customer, the amount is recorded in the "Accounts Receiv- able, Cr." column. When transactions affecting both accounts with customers are frequent occurrence, it is advisable to record both debits and credits each in a special journal and then transfer them to this ledger. + +The cash journal is popular with bookkeepers because of the time saved in recording transactions, but it is not so popular with auditors because of difficulty auditing the transactions recorded on one horizontal line. If a bookkeeper will record each transaction on a separate line and explain it, the difficulty of auditing the cash journal will be eliminated. + +348 +CASH JOURNAL + +Voucher-Payable Register + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
DateWh No.NameAddressPortRim of New LoadWashers Payable
May 21Bank Reserve Due ToPenn. BankOut of stock100000
1-25 Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires, Tires,Bank Reserve Due ToBank Reserve Due ToBank Reserve Due ToBank Reserve Due To
1-25 Bank Reserve Due ToTire - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - City - CityBank Reserve Due ToBank Reserve Due ToBank Reserve Due To
1-25 Bank Reserve Due ToTireTireTireTire
1-25 Bank Reserve Due ToTireTireTireTire
1-25 Bank Reserve Due ToTireTireTireTire
Illustration No. 148 Left Page of Voucher Payable Register.
EXPLANATION. The ruling provides columns for all the information written on each voucher; thus the amount of each voucher is entered in the "Vouchers Payable," C. column and in the column or columns which show the total of the vouchers paid during the month. The account for Vouchers Payable account in the general ledger is credited with the total vouchers issued during the month.
4. Vouchers Payable. A debit column only is provided for Vouchers Payable because the credits to this account in the general ledger are posted from the voucher payable register. In order to keep a record of the cash journal transferring the totals from the voucher payable register either daily or monthly it will be necessary to provide a credit column for Vouchers Payable and debit columns for the expenses as in the voucher payable register. The better practice is to post all debits and credits to one account.
5. Used Cars. This column is applicable to the use of a garage which acts as sales agent for automobiles and accepts used cars as part payment for new cars. The exchange value of each used car is entered in the debit column, the credit for this transaction is entered in the "Tire and Tube Sales" C. column. The debits for purchases are recorded in the entries in the voucher payable register but since it is not customary to pay cash for used cars the debit to this account will not be made until such time as it becomes advisable to do so by the management and this is not entered in the voucher payable register.
6. Sales Columns. Seven columns are provided for sales; the use of each is indicated by the name of the account written at the top. The cost of the material sold is entered in the "Sales" C. column and the amount received is recorded in one of the columns at the left. Thus, if cash is received for a tire, the amount is entered in the "Bank Dr." column and in the "Tires and Tubes Sales," Cr., column. If a bill is received from a vendor for labor performed enter it in the "Accounts Receivable," Cr. column and in the "Tires and Tubes Sales," Cr., column.
7. Repair Order Number. Each repair order is given a number and when completed the Repairs account is credited for the amount of the labor. The number of repairs made during any month may be found by adding together all outstanding orders.
8. Remarks. This is for any special explanation of the transactions which will be of assistance in interpreting the record either by the management or by
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +CASH JOURNAL. 349 + +
DescriptionCost (Dollars)Cash Received (Dollars)Cash Paid (Dollars)Cash Balance (Dollars)
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + +
PayeeCash PayeePayee's AccountInvoice DateInvoice No.Invoice AmountInvoice DateInvoice No.Invoice AmountSundry Accounts Dr.Sundry Accounts Cr.LF
Purchase Dr.
+ +Illustration No. 148, Right Page of Voucher Payable Register. + +EXPLANATION: Each account affected by the vouchers issued is debited with the total of the amounts entered in the column provided for the account. No accounts are opened with the individuals or business concerns to whom vouchers are issued. When a check is issued in payment of a voucher, the amount of the check is debited with the amount in the column provided for "Vouchers Payable, Dr." in the cash book or cash journal. + +The auditor. Care should be used by the bookkeeper in explaining the transactions so as to avoid confusion. Where the entry is supported by a journal voucher, the number of this voucher should be indicated in the journal voucher column and the journal voucher filed for reference. Accountants sometimes refer to the cash journal as the "hash" journal because of confusion in recording the transactions; such confusion could be avoided by a careful explanation in the "Remarks" column. + +9. Method of Recording Transactions. The equality of debits and credits is maintained in the recording of transactions in the cash journal the same as in the ledger. In order that this equality may be maintained, where more than two accounts are involved in a transaction, all entries should be made on one line, and where more than two accounts are involved in a transaction, all entries should be recorded in journal form on scratch paper before the entry is made in the cash journal. + +When cash is received through the performance of a transaction, the Cash account is debited by entering the amount in the "Bank, Dr." column, and the proper account credited by entering the amount in either the "Sales Returns, Cr." column or columns at the right. When cash is paid through the completion of a transaction, the Cash account is credited by entering the amount in the "Bank, Cr." column, and the Vouchers Payable account is debited by entering the amount in the "Vouchers Payable, Dr." column. When merchandise is sold to a customer, his account is debited by entering the amount in the "Accounts Receivable, Dr." column, and the Sales account or accounts credited by entering the amount in either of these columns. When merchandise is returned to a customer, he returns a part or all of the merchandise purchased and receives credit for its value, the Sales Returns account is debited by entering the amount in the "General Ledger, Dr." column, and the customer's account is credited by entering the amount (Concluded on page 352) + +Family law office - Attorney for your family law issues + +350 +CASH JOURNAL + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
MonthPeriodNo.Name of AccountChq.General LedgerAmt. Rec Ledger
Dr.Cr.Dr.Cr.Dr.Cr.
Balance 1/31/7
Mr. Brown's Clothing Co.28
Mr. Brown's Hardware Co.365
Mr. Hoffman
DescriptionAmount Dr.Amount Cr.
Notes Receivable570570
Notes Payable310310
Stocks & Supplies38403840
Accounts Receivable197197
Purchase Orders340340
Purchase Invoices197197
Purchase Returns & Allowances197197
Purchase Invoices - Other Accounts Receivable197197
Purchase Returns & Allowances - Other Accounts Receivable197197
Purchase Invoices - Other Purchase Orders197197
Purchase Returns & Allowances - Other Purchase Orders
DescriptionAmount Dr.Amount Cr.
Purchase Invoices - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances - Other Accounts Receivable - Other Purchase Orders - Other Purchase Returns & Allowances -Other Accounts Receivable-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-OtherAccountsReceivables-OtherPurchaseOrders-OtherPurchaseReturns&Allowances-
+ +Illustration No. 149, Cash Journal, Left Page. + +EXPLANATION: The cash balance at the beginning of the month is entered in the "Name of Account" column because this already appears in the ledger on the debit side of the Merchants National Bank Cash account. The amount of cash received during the month is entered in the "Bank Dr." column. When proving cash, the total receipts (Bank Dr. column) is written on scratch paper and the balance on hand is subtracted from it to obtain the cash balance. This balance is added to the amount before deducting the payments (Bank Cr. column). The credit for each amount entered in the Bank Dr. column and the debit for each + +CASH JOURNAL. +351 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
With PayNew CarCashed CashPayInvoice Cr.AmountLess a PreTaxableLess a PreTaxableLess a PreTaxableRemarks
10060
174700
10060
10060
Illustration No. 149, Cash Journal, Right Page.
amount entered in the Bank Cr. column are recorded in one or more of the columns at the right of the name of the account. Transactions which do not involve the receipt or payment of cash are indicated by a zero in the Bank Cr. column. The total of the Bank Cr. column shows the number of entries omitted. The small figures above the totals show the page of ledger on which the account to which the amount is posted appears. This amount is posted to the debit or credit side of the account as indicated by "De-" or "Cr-" at the top of the column.
Cash journal
With PayNew CarCashed CashPayInvoice Cr.AmountLess a PreTaxableLess a PreTaxableLess a PreTaxableRemarks
1006012805500580058005800580058005800580058005800Liquidated Mortgages for this date.
174700243333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333444444444444444444444444444444444444444444444444444444444444444444444444444444466666666666666666666666666666666666666666666666666666666666666666666667777777777777777777777777777777777777777777777777777777777777888888888888888888888888888888889999999999999999999999999999999999999999999999999999999999999911111111111111111111111111111111222222222222222222222222222222222222222222222222222222222222222222222255555555555555555555555555555555555555555555555555555555555555555555555555555555555555555555Page 1 of 1> + +352 +CASH JOURNAL + +in the "Accounts Receivable Cr." column; it will be necessary to write "Sales Returns" in the explanation column on a line with the amount entered in the "General Ledger Dr." column, and then the name of the customer on a line with the amount entered in the "Accounts Receivable, Cr." column. Each transaction should be recorded on one or more lines; two transactions should never be recorded on one line. + +The date of each transaction should be entered in the "Remarks" column at the right; this is provided for the explanation of the transaction in the same manner as space is provided for an explanation of each transaction in a book of original entry. + +§ 354. Sales Journal. When the individual sales are recorded in a special sales journal, the total only of this journal is transferred to the cash journal, either weekly or monthly, according to the desires of the management. Illustration No. 150 shows the form of sales journal that would be required to record the transactions in the practice set, provided these occur with sufficient frequency to require the use of this special journal. + +Illustration No. 150, Form of Sales Journal. + +§ 355. Cash Receipts Journal. When transactions in which cash is received from customers on account or in full of account occur with sufficient frequency to justify the use of a cash receipts journal in which to record them, the transactions should be recorded in such a way that they may be readily available, or at such other time as the management may direct. Illustration No. 151 shows the form of cash receipts journal which would be required to record the cash received from customers in the practice set when these are not entered direct in the cash journal. + +Illustration No. 151, Form of Cash Receipts Journal. + +GARAGE SET + +This is a practice set without vouchers consisting of the transactions for two months, performed by the Corden Buick Company, a corporation engaged in operating a garage. The transactions are separate from the text and are included with the books of account necessary to record them. The purpose of this set is to provide practice in the voucher method of bookkeeping and in recording transactions in the cash journal. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
DateL.F.Account DebitedAddressTermsA/crs.4 Pts.Tev & T.D.G., A., D.StoragBreakinTotal
+ + + + + + + + + + + + + + + + + + + + + + +
DateL.F.Amount CreditdExplanationA/crds.Bank Drs.
+ +Appendix A + +SINGLE ENTRY BOOKKEEPING + +The Purpose of this Appendix is to explain and illustrate Single Entry bookkeeping sometimes referred to as a "method" of keeping books. The information given will be of assistance to the student who may be required to keep books for one who thinks there is a Single Entry method; it will also be useful if the student can learn how to keep his books in the Double Entry System. + +§ 356. Single Entry Bookkeeping. Bookkeeping is the systematic recording of business transactions as explained in § 8. When the values received and the values parted with in each transaction are recorded, the method is usually referred to as Double Entry. Single Entry bookkeeping is best defined as any method that is not Double Entry. In other words, when a value is received, the values received and the values parted with are always recorded, but in Single Entry the values received and the values parted with may be recorded in some transactions, in others not, or they may be recorded either before or after the values parted with are recorded. + +§ 357. Comparison. In Single Entry bookkeeping, all transactions according to the wishes of those interested, and any desired accounts kept; in Double Entry the record and accounts kept must conform to certain principles, which cannot be changed; the name of an account might be changed, but its real meaning must remain unchanged; it is impossible to make a mistake in posting, footing accounts in the ledger, and making the Statement of the Business; in Double Entry he proves the postings and footings by the Trial Balance and the Statement of Profit and Loss. The advantages of Double Entry are so apparent that this method is used by every up-to-date business man who employs a bookkeeper, and by many who keep their own books. The reason Single Entry is not generally used is that one who keeps the books knows nothing of the many advantages of Double Entry. + +§ 358. Books of Account. Any book used with the Double Entry method may be used with Single Entry, but the day book, cash book, and ledger are the most popular. In order to use these books properly, however, they do not know any method, but only know what they want their books to do so that they can get the desired results by using these three books. + +§ 359. Day Book. This is a book of original entry. All transactions except those which require more than one entry are entered in this book in the order in which they occur. The two money columns do not indicate debits and credits, hence it is necessary to write Dr. and Cr. (abbreviation of debit and credit) after the name of the account. This shows to which side of the account in the ledger amends should be made. Illustration No. 140 shows how this book is ruled on the same line as the name of the account. Illustration No. 152 shows the form of day book to be used. + +§ 360. Single Entry Cash Book. Any desired form of ruling may be used. The following illustration Illustration No. 153 shows one very popular way in which to keep a cash book in connection with a Single Entry set of books. The ruling is similar to the ordinary journal: receipts are entered in the first column, and payments in the second column. When the cash book is ruled at the end of the month, both balances are brought down together on one line under each column on the left, the two columns ruled, and the balance brought down, as in Illustration No. 153. + +§ 361. Ledger. This book may be similar to any ledger used with a Double Entry set of books; that is, it may have the regular ledger ruling or any special ruling adapted to the needs of the business. In every case it must be ruled with + +353 + +354 +APPENDIX A + +two money columns, one for the debit amounts, and one for the credit amounts. +Some blank book manufacturers make a book which is labeled "Single Entry Ledger." This is ruled like the day book and provided with an index. This form is used when the day book and cash book are omitted, and the transactions are entered direct in the ledger. + +December 2, 19-- + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
H. H. La PenaCir.1250
Note-liable (100 days)Cir.500
Note-liable (100 days)Cir.500
Brought stationary stock for $22.00
Third, cash ($100) payment notes $80.00
and due in 60 and 90 days balance to be paid before January 1st
+ + + + + + + + + + + +
Bellamy-Halliday Co., Louisville, Ky.100
Brough merchandise in account for invoice of this date
+ + + + + + + + + + + + + + + + + + + + + + +
C. B. McElroy Co.Liv.4250
(Declarative) and Top of p. S. Sales
Invoice Note Books25
Illustration No. 153, Single Entry Day Book,1750
+ + + + + + + + + + On account:
Employer's wages
Salesman's wages
Lending cash sales
Helds
University School In full of account
Suspense
Brough Transfers In full of account
Breathalyzer In full of account
Breathalyzer Canada
DateDescriptionReceipts Payments
1C. W. Ogden Corp Investments1500
2H. H. La PenaPaid payment stock1000
3Brough Transfers Brough and charges1487
4V. H. La Pena
+ + +
DateDescriptionReceipts Payments
Illustration No. 153, Single Entry Cash Book.
"The break indicates a number of entries omitted."
+ + +
DateDescriptionReceipts Payments
Illustration No. 153, Single Entry Cash Book.
"The break indicates a number of entries omitted."
+ + +
DateDescriptionReceipts Payments
Illustration No. 153, Single Entry Cash Book.
"The break indicates a number of entries omitted."
+ + +
DateDescriptionReceipts Payments
Illustration No. 153, Single Entry Cash Book.
"The break indicates a number of entries omitted."
+ + +
DateDescriptionReceipts Payments
Illustration No. 153, Single Entry Cash Book.
"The break indicates a number of entries omitted."
+ + +
DateDescriptionReceipts Payments
Illustration No. 153, Single Entry Cash Book.
"The break indicates a number of entries omitted."
+ + +
DateDescriptionReceipts Payments
Illustration No. 153, Single Entry Cash Book.
"The break indicates a number of entries omitted."
+ + +
DateDescriptionReceipts Payments
Illustration No. 153, Single Entry Cash Book.
"The break indicates a number of entries omitted."
+ + + <
DateDescriptionReceipts Payments
Illustration No. 153, Single Entry Cash Book."The break indicates a number of entries omitted."
+ + + +
+ + +
Purchases Account Balance (October)Sales Account Balance (October)Purchases Account Balance (November)Sales Account Balance (November)
$2,587$
(October)		$2,587$
(October)		$2,587$
(November)		$2,587$
(November)
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
Illustration of a Supplies Account.
+ + + +
Purchases Balance (October)
+ + + +
Sales Balance (October)
+ + + +
Purchases Balance (November)
+ + + +
Sales Balance (November)
+ + + +
Purchases Balance (December)
+ + + +
Sales Balance (December)
+ + + +
Purchases Balance (January)
+ + + +
Sales Balance (January)
+ + + +
Purchases Balance (February)
+ + + +
Sales Balance (February)
+ + + +
Purchases Balance (March)
+ + + +
Sales Balance (March)
+ + + +
Purchases Balance (April)
+ + + +
Sales Balance (April)
+ + + +
Purchases Balance (May)
+ + + +
P O U N D S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E R S & Q U A R T E + + + +
P O U N D S & Q U A + + + +
P O + + + +
P O + + + +
P O + + + +
P O + + + +
P O + + + +
P O + + + +
P O + + + +
P O + + + +
P O + +361 + +The Fourth Entry is that required to transfer the balance of the Expense account to the Profit and Loss account. This entry is necessary because the net amount of the expense account is shown on the Statement of Profit and Loss by subtracting the expenses from the sales. The Profit and Loss account shows the net income or loss after this entry has been made. + +The illustration at the right shows the Balance Sheet before and after this entry has been made. The Balance Sheet shows the balance of the Profit and Loss account after this entry has been made. + +The Fifth Entry is that required to transfer the balance of the Profit and Loss account to the proprietor's Capital account. This entry is necessary because one of its objects in making the ledger is to transfer the net profit or loss to the proprietor's Capital account. The Profit and Loss account is debited because it shows a net loss or gain, but it does not profit; the proprietor's Capital account is credited because this profit is equivalent to an increase in his capital. When this entry is made, the Profit and Loss account will balance at zero, and the balance of the proprietor's Capital account will show his capital after his proprietorship as shown by the Balance Sheet. + +The illustration at the right shows the Balance Sheet before and after this entry has been made, and the Profit and Loss and Proprietor's Capital accounts after this entry has been made. + +Closing the Inventory Account + +The inventory of merchandise at the close of the fiscal period may remain in the Purchases account throughout the next fiscal period, or it may be closed into the Purchases account at the beginning of the next period; the transfer of the inventory from the Inventory account to the Purchases account, whether made at the beginning or close of the fiscal period, should be through a general journal entry as illustrated on page 40. + +362 +APPENDIX B + +
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Sales
Oct 6Oct 7Oct 8Oct 9Oct 10
Oct 6Oct 7Oct 8Oct 9Oct 10
Oct 6Oct 7Oct 8Oct 9Oct 10
Oct 6Oct 7Oct 8Oct 9Oct 10
Oct 6Oct 7Oct 8Oct 9Oct 10
Oct 6Oct 7Oct 8Oct 9Oct 10
Oct 6Oct 7Oct 8Oct 9Oct 10
Oct 6Oct 7Oct 8Oct 9
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + "; + foreach ($row as $cell) { + echo ""; + echo ""; + echo ""; + } + echo ""; + } + + // Calculate total tax liability + $total_tax_liability = 18 + 17; + echo ""; + + // Calculate total tax due + $total_tax_due = 18 + 17; + echo ""; + + // Calculate net taxable income + $net_taxable_income = 3554.10 - 68.50; + echo ""; + + // Calculate tax rate + $tax_rate = $total_tax_due / $net_taxable_income; + echo ""; + + // Calculate tax liability + $tax_liability = $net_taxable_income * $tax_rate; + echo ""; + + // Calculate refund + $refund = $net_taxable_income - $tax_liability; + echo ""; + + // Calculate tax paid + $tax_paid = $tax_liability; + echo ""; + + // Calculate tax withheld + $tax_withheld = $tax_liability; + echo ""; + + // Calculate net income after taxes + $net_income_after_taxes = $net_taxable_income - $tax_liability; + echo ""; + + // Calculate net income before taxes + $net_income_before_taxes = $net_taxable_income; + echo ""; + + // Calculate gross income + $gross_income = $net_taxable_income; + echo ""; + + // Calculate adjusted gross income + $adjusted_gross_income = $net_taxable_income; + echo ""; + + // Calculate taxable income + $taxable_income = $net_taxable_income; + echo ""; + + // Calculate taxable income after deductions + $taxable_income_after_deductions = $net_taxable_income; + echo ""; + + // Calculate taxable income after deductions and credits + $taxable_income_after_deductions_and_credits = $net_taxable_income; + echo ""; + + // Calculate taxable income after deductions and credits and exemptions + $taxable_income_after_deductions_and_credits_and_exemptions = $net_taxable_income; + echo ""; + + // Calculate taxable income after deductions and credits and exemptions and adjustments + $taxable_income_after_deductions_and_credits_and_exemptions_and_adjustments = $net_taxable_income; + echo "
" . htmlspecialchars($cell[0]) . "" . htmlspecialchars($cell[1]) . "" . htmlspecialchars($cell[2]) . "
TOTAL TAX LIABILITY:" . number_format($total_tax_liability) . "
TOTAL TAX DUE:" . number_format($total_tax_due) . "
NET TAXABLE INCOME:" . number_format($net_taxable_income) . "
TAX RATE:" . number_format($tax_rate * 100, 2) . "%
TAX LIABILITY:" . number_format($tax_liability) . "
REFUND:" . number_format($refund) . "
TAX PAID:" . number_format($tax_paid) . "
TAX WITHHELD:" . number_format($tax_withheld) . "
NET INCOME AFTER TAXES:" . number_format($net_income_after_taxes) . "
NET INCOME BEFORE TAXES:" . number_format($net_income_before_taxes) . "
GROSS INCOME:" . number_format($gross_income) . "
ADJUSTED GROSS INCOME:" . number_format($adjusted_gross_income) . "
TAXABLE INCOME:" . number_format($taxable_income) . "
TAXABLE INCOME AFTER DEDUCTIONS:" . number_format($taxable_income_after_deductions) . "
TAXABLE INCOME AFTER DEDUCTIONS AND CREDITS:" . number_format($taxable_income_after_deductions_and_credits) . "
TAXABLE INCOME AFTER DEDUCTIONS AND CREDITS AND EXEMPTIONS:" . number_format($taxable_income_after_deductions_and_credits_and_exemptions) . "
TAXABLE INCOME AFTER DEDUCTIONS AND CREDITS AND EXEMPTIONS AND ADJUSTMENTS:"; + +APPENDIX C + +368 + +SCHEDULE A - EXPLANATION OF ITEM 4. (Rates and Bonuses) + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
1. Kind of property:2. Number of units:3. Square feet:4. Square feet per unit:5. Net profit:6. Net profit per unit:
1,000,000 square feet$1,000,000$1,000,000
+ +*Note: adjusted line items may differ from your actual income.* + +SCHEDULE B - EXPLANATION OF ITEM 5. (Business and Professional) + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
1. Kind of property:2. Number of units:3. Square feet:4. Square feet per unit:5. Net profit:6. Net profit per unit:
1,000,000 square feet$1,000,000$1,000,000
+ +Total interest from Business or Profession: Gross Sales $16,784.90 - Netturns $101.92 = $16784.98 +Total Business Expenses (including interest): Gross Sales $495.20 - Insurance $2,539.90 = $3169.65 +Net Profit (net loss) from business (profit from rent, royalties): +Expenses of Business expenses: Net purchases $11,441.43 - Inventory 6/31/22 $1,477.36 +Rent $760.00, taxes $76.00, insurance $60.00, salaries $990.00, delivery cost $100.00 advertising $295.00 miscellaneous $84.45 + +SCHEDULE C - EXPLANATION OF ITEM 6. (Miscellaneous Income) + + + + + + + + + + Total Miscellaneous Income:Miscellaneous Income Total:$2,539.90 + +SCHEDULE D - EXPLANATION OF ITEM 7. (Business and Professional) + +
Kind of propertyNumber of unitsSquare feetSquare feet per unitNet profit
Miscellaneous Income
Item 7.Item 8.Item 9.Item 10.Item 11.Item 12.
Kinds of propertyNo.Sq.Ft.Sq.Ft./UnitNet ProfitTotalTotal
Tax refund received from state or local governmentYesNoNoNoNoNo
Tax refund received from federal governmentYesNoNoNoNoNo
Tax refund received from foreign governmentYesNoNoNoNoNo
+ + + + Kind of property                                                               +  No. Sq.Ft. Sq.Ft./Unit Net Profit Total Net Profit Total Net Profit per Unit Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any) Total Net Profit per Unit (if any)  + + +
Total Miscellaneous Income:
Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +

Total Miscellaneous Income Total:
$2,539.90 +
Total Miscellaneous Income Total: +A table showing miscellaneous income details with a total of $2,539.88. + +SCHEDULE E - EXPLANATION OF ITEM 8A & B & C & D & E & F & G & H & I & J & K & L & M & N & O & P & Q & R & S & T & U & V & W & X & Y & Z + + + +
Item 8A - Traveling expenses incidental to attending Board meetings.
+ + + +
Item 8B - contributions to Community Chest.
+ + + +
Item 8C - contributions to Community Chest.
+ + + +
Item 8D - contributions to Community Chest.
+ + + +
Item 8E - contributions to Community Chest.
+ + + +
Item 8F - contributions to Community Chest.
+ + + +
Item 8G - contributions to Community Chest.
+ + + +
Item 8H - contributions to Community Chest.
+ + + +
Item 8I - contributions to Community Chest.
+ + + +
Item 8J - contributions to Community Chest.
+ + + +
Item 8K - contributions to Community Chest.
+ + + +
Item 8L - contributions to Community Chest.
+ + + +
Item 8M - contributions to Community Chest.
+ + + +
Item 8N - contributions to Community Chest.
+ + + +
Item 8O - contributions to Community Chest.
+ + + +
Item 8P - contributions to Community Chest.
+ + + +
Item 8Q - contributions to Community Chest.
+ + + +
Item 8R - contributions to Community Chest.
+ + + +
Item 8S - contributions to Community Chest.
+ + + +
Item 8T - contributions to Community Chest.
+ + + +
Item 8U - contributions to Community Chest.
+ + + +
Item 8V - contributions to Community Chest.
+ + + +
Item 8W - contributions to Community Chest.
+ + + +
Item 8X - contributions to Community Chest.
+ + + +
Item 8Y - contributions to Community Chest.
+ + + +
Item 8Z - contributions to Community Chest.
+ +SCHEDULE F - EXPLANATION OF ITEM 6A + + + + +
Kind of property
No.< /thead > +Sq.Ft.< /thead > +Sq.Ft./Unit< /thead > +Net Profit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profit Per Unit< /thead > +Net Profits... +A table showing miscellaneous income details with a total of $4444444444444444444444444444444444444444444444444444444...$. +A table showing miscellaneous income details with a total of $6666666666666666666666666666666666666666666666...$. +A table showing miscellaneous income details with a total of $77777777777777777777777777777777...$. +A table showing miscellaneous income details with a total of $8888888888888...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous income details with a total of $...$. +A table showing miscellaneous收入详情，总计为：￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥￥... +370 +APPENDIX C +370 +APPENDIX C +370 +APPENDIX C +370 +APPENDIX C +370 +APPENDIX C +370 +APPENDIX C +370 +APPENDIX C +370 +APPENDIX C +370 +APPENDIX C +370 +APPENDIX C +370 +APPENDIX C +370 +APPENDIX C +370 +APPENDIX C +370 +APPENDIX C +370 +APPENDIX C +370 +APPENDIX C +370 +APPENDIX C +370 +APPENDIX C +370 +APPENDIX C +370 + + +**INCOME FROM SALARIES, WAGES, COMMISSIONS, ETC.** + +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 1040A Instructions** +* **Form 104 + +APPENDIX C + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Filing Date:
5/1/2005
PARTNERSHIP AND PERSONAL SERVICE CORPORATION RETURN OF INCOME
For calendar year 2022
For calendar year 2022
This return must be filed by the last day of the period beginning on April 15, 2023.
No tax was due in this quarter.
The filing deadline is June 15, 2023.
The filing deadline is June 15, 2023.
The filing deadline is June 15, 2023.
The filing deadline is June 15, 2023.
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Filing Deadline:
May 15, 2023
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Filing Deadline:
June 15, 2023
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Filing Deadline:
July 15, 2023
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Filing Deadline:
August 15, 2023
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Filing Deadline:
September 15, 2023
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Filing Deadline:
October 15, 2023
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Filing Deadline:
November 15, 2023
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Filing Deadline:
December 15, 2023
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Form (continued)Page No. (continued)Total Amount Due (continued)Due Date (continued)Tax Refund (continued)Interest (continued)State Tax (continued)Other Tax (continued)Total Other Tax (continued)Total Other Tax Due (continued)Total Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)Date Due (continued)
1. Net income (loss) for the year ended December 31, 20XX$ 625.00Net income (loss) for the year ended December 31, 20XX$ 625.00
2. Net income (loss) for the year ended December 31, 20XX, adjusted to reflect the effect of changes in accounting principles and other items that do not affect net income (loss)Net income (loss) for the year ended December 31, 20XX, adjusted to reflect the effect of changes in accounting principles and other items that do not affect net income (loss)
3. Net income (loss) for the year ended December 31, 20XX, adjusted to reflect the effect of changes in accounting principles and other items that do not affect net income (loss), less:** +
  • Deferred tax assets and liabilities
  • Other adjustments
Net income (loss) for the year ended December 31, 20XX, adjusted to reflect the effect of changes in accounting principles and other items that do not affect net income (loss), less:** +
  • Deferred tax assets and liabilities
  • Other adjustments
4. Net income (loss) for the year ended December 31, 20XX, adjusted to reflect the effect of changes in accounting principles and other items that do not affect net income (loss), less:** +
  • Deferred tax assets and liabilities
  • Other adjustments
  • Less:** +
    • Deferred tax assets and liabilities
    • Other adjustments
Net income (loss) for the year ended December 31, 20XX, adjusted to reflect the effect of changes in accounting principles and other items that do not affect net income (loss), less:** +
  • Deferred tax assets and liabilities
  • Other adjustments
  • Less:** +
    • Deferred tax assets and liabilities
    • Other adjustments
+ +**Note:** The amounts shown above have been rounded to the nearest dollar. + +SCHEDULE D - BALANCES + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +**Note:** The amounts shown above have been rounded to the nearest dollar. + +QUESTIONS: + +The following questions relate to the information provided by the Partnership in this Schedule D. + +**Question:** What is your total amount of Purchased Property & Equipment? + +**Answer:** $750.00 + +**Question:** What is your total amount of Lien on Purchased Property & Equipment? + +**Answer:** $(15).00 + +**Question:** What is your total amount of Purchased Property & Equipment after adjusting for Lien on Purchased Property & Equipment? + +**Answer:** $735.00 + +**Question:** What is your total amount of Purchased Property & Equipment after adjusting for Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment? + +**Answer:** $729.99 + +**Question:** What is your total amount of Purchased Property & Equipment after adjusting for Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment? + +**Answer:** $728.99 + +**Question:** What is your total amount of Purchased Property & Equipment after adjusting for Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment? + +**Answer:** $728.99 + +**Question:** What is your total amount of Purchased Property & Equipment after adjusting for Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment? + +**Answer:** $728.99 + +**Question:** What is your total amount of Purchased Property & Equipment after adjusting for Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment? + +**Answer:** $728.99 + +**Question:** What is your total amount of Purchased Property & Equipment after adjusting for Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment? + +**Answer:** $728.99 + +**Question:** What is your total amount of Purchased Property & Equipment after adjusting for Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment? + +**Answer:** $728.99 + +**Question:** What is your total amount of Purchased Property & Equipment after adjusting for Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchased Property & Equipment, less any Lien on Purchsed + +APPENDIX C + +373 + +GENERAL INSTRUCTIONS. + +PARTNERSHIP AND PERSONAL SERVICE CORPORATION RETURNS OF INCOME. + +1. Partnership Returns. - Except as provided below, all partnerships, limited partnerships, limited liability companies, limited liability partnerships, limited partnerships, limited partnership corporations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associations, limited partnership associates (LLC), and other similar entities that do not have separate legal existence from their members or partners shall file a single return for all income and expenses of the entity and its members or partners. This includes any entity that has been formed to engage in the conduct of a trade or business through the use of a single member or partner. The following rules apply: + +a. If a partner or member of a single-member LLC does not have a separate legal existence from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners and does not have a separate tax identification number from the entity and its members or partners + +b. If an individual who is an employee of an employer that is subject to FICA taxes files an individual return for FICA taxes on his own behalf under this section (other than as described in paragraph (c) of this section), he must also file an individual return for FICA taxes on behalf of his employer. + +c. If an individual who is an employee of an employer that is subject to FICA taxes files an individual return for FICA taxes on his own behalf under this section (other than as described in paragraph (c) of this section), he must also file an individual return for FICA taxes on behalf of his employer. + +d. If an individual who is an employee of an employer that is subject to FICA taxes files an individual return for FICA taxes on his own behalf under this section (other than as described in paragraph (c) of this section), he must also file an individual return for FICA taxes on behalf of his employer. + +e. If an individual who is an employee of an employer that is subject to FICA taxes files an individual return for FICA taxes on his own behalf under this section (other than as described in paragraph (c) of this section), he must also file an individual return for FICA taxes on behalf of his employer. + +f. If an individual who is an employee of an employer that is subject to FICA taxes files an individual return for FICA taxes on his own behalf under this section (other than as described in paragraph (c) of this section), he must also file an individual return for FICA taxes on behalf of his employer. + +g. If an individual who is an employee of an employer that is subject to FICA taxes files an individual return for FICA taxes on his own behalf under this section (other than as described in paragraph (c) of this section), he must also file an individual return for FICA taxes on behalf of his employer. + +h. If an individual who is an employee of an employer that is subject to FICA taxes files an individual return for FICA taxes on his own behalf under this section (other than as described in paragraph (c) of this section), he must also file an individual return for FICA taxes on behalf of his employer. + +i. If an individual who is an employee of an employer that is subject to FICA taxes files an individual return for FICA taxes on his own behalf under this section (other than as described in paragraph (c) of this section), he must also file an individual return for FICA taxes on behalf of his employer. + +j. If an individual who is an employee of an employer that is subject to FICA taxes files an individual return for FICA taxes on his own behalf under this section (other than as described in paragraph (c) of this section), he must also file an individual return for FICA taxes on behalf of his employer. + +k. If an individual who is an employee of an employer that is subject to FICA taxes files an individual return for FICA taxes on his own behalf under this section (other than as described in paragraph (c) of this section), he must also file an individual return for FICA taxes on behalf of his employer. + +l. If an individual who is an employee of an employer that is subject to FICA taxes files an individual return for FICA taxes on his own behalf under this section (other than as described in paragraph (c) of this section), he must also file an individual return for FICA taxes on behalf of his employer. + +m. If an individual who is an employee of an employer that is subject to FICA taxes files an individual return for FICA taxes on his own behalf under this section (other than as described in paragraph (c) of this section), he must also file an individual return for FICA taxes on behalf of his employer. + +n. If an individual who is an employee of an employer that is subject to FICA taxes files an individual return for FICA taxes on his own behalf under this section (other than as described in paragraph (c) of this section), he must also file an individual return for FICA taxes on behalf of his employer. + +o. If an individual who is an employee of an employer that is subject to FICA taxes files an individual return for FICA taxes on his own behalf under this section (other than as described in paragraph (c) of this section), he must also file an individual return for FICA taxes on behalf of his employer. + +p. If an individual who is an employee of an employer that is subject to FICA taxes files an individual return for FICA taxes on his own behalf under this section (other than as described in paragraph (c) of this section), he must also file an individual return for FICA taxes on behalf of his employer. + +q. If an individual who is an employee of an employer that is subject to FICA taxes files an individual return for FICA taxes on his own behalf under this section (other than as described in paragraph (c) of this section), he must also file + +1 +Illustration No. 166 Page 1 Instructions for Partnership Return. +1 + +374 +APPENDIX C + +Page 1 of Instructions. +SCHEDULES TO BE SUBMITTED IN SUPPORT OF ITEMS IN SCHEDULE A. + +The schedules called for below should be prepared and filed with the return. Description(s) to be included with the number of the item in Schedule A which is/are subject. Make a heading on page of such items as may be necessary, and enter the items and address on each sheet. Attach a separate sheet for each item. + +
ASSETS - BALANCES
Purchased property and equipment:$ 750.00Purchased property and equipment:$ 750.00
Purchased property and equipment:$ 750.00Purchased property and equipment:$ 750.00
Purchased property and equipment:$ 750.00Purchased property and equipment:$ 750.00
Purchased property and equipment:$ 750.00Purchased property and equipment:$ 750.00
Purchased property and equipment:$ 750.00Purchased property and equipment:$ 750.00
Purchased property and equipment:$ 750.00Purchased property and equipment:$ 750.00
LIABILITIES - BALANCES
Lien on purchased property and equipment:$ (15).00Lien on purchased property and equipment:$ (15).00
Lien on purchased property and equipment:$ (15).00Lien on purchased property and equipment:$ (15).00
Lien on purchased property and equipment:$ (15).00Lien on purchased property and equipment:$ (15).00
Lien on purchased property and equipment:$ (15).00Lien on purchased property and equipment:$ (15).00
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
SCHEDULE A - CODE OF GOOD SALES PRACTICES OF EXPENSES RELATED TO THE BUSINESS
1. Amounts paid by the partnership to employees (including amounts paid to employees of affiliated partnerships)
2. Amounts paid by the partnership to independent contractors (including amounts paid to independent contractors of affiliated partnerships)
3. Amounts paid by the partnership to agents, brokers, or other persons engaged in selling its securities (including amounts paid to agents, brokers, or other persons engaged in selling securities of affiliated partnerships)
4. Amounts paid by the partnership to attorneys, accountants, or other persons engaged in preparing or filing tax returns (including amounts paid to attorneys, accountants, or other persons engaged in preparing or filing tax returns of affiliated partnerships)
5. Amounts paid by the partnership to any person who is not an employee, agent, broker, or independent contractor (including amounts paid to any person who is not an employee, agent, broker, or independent contractor of an affiliated partnership)
6. Amounts paid by the partnership to any person who is not an employee, agent, broker, or independent contractor (including amounts paid to any person who is not an employee, agent, broker, or independent contractor of an affiliated partnership)
7. Amounts paid by the partnership to any person who is not an employee, agent, broker, or independent contractor (including amounts paid to any person who is not an employee, agent, broker, or independent contractor of an affiliated partnership)
8. Amounts paid by the partnership to any person who is not an employee, agent, broker, or independent contractor (including amounts paid to any person who is not an employee, agent, broker, or independent contractor of an affiliated partnership)
9. Amounts paid by the partnership to any person who is not an employee, agent, broker, or independent contractor (including amounts paid to any person who is not an employee, agent, broker, or independent contractor of an affiliated partnership)
10. Amounts paid by the partnership to any person who is not an employee, agent, broker, or independent contractor (including amounts paid to any person who is not an employee, agent, broker, or independent contractor of an affiliated partnership)
11. Amounts paid by the partnership to any person who is not an employee, agent, broker, or independent contractor (including amounts paid to any person who is not an employee, agent, broker, or independent contractor of an affiliated partnership)
12. Amounts paid by the partnership to any person who is not an employee, agent, broker, or independent contractor (including amounts paid to any person who is not an employee, agent, broker, or independent contractor of an affiliated partnership)
13. Amounts paid by the partnership to any person who is not an employee, agent, broker, or independent contractor (including amounts paid to any person who is not an employee, agent, broker, or independent contractor of an affiliated partnership)
14. Amounts paid by the partnership to any person who is not an employee, agent, broker, or independent contractor (including amounts paid to any person who is not an employee, agent, broker, or independent contractor of an affiliated partnership)
15. Amounts paid by the partnership to any person who is not an employee, agent, broker, or independent contractor (including amounts paid to any person who is not an employee, agent, broker, or independent contractor of an affiliated partnership)
16. Amounts paid by the partnership to any person who is not an employee, agent, broker, or independent contractor (including amounts paid to any person who is not an employee, agent, broker, or independent contractor of an affiliated partnership)
17. Amounts paid by the partnership to any person who is not an employee, agent, broker, or independent contractor (including amounts paid to any person who is not an employee, agent, broker, or independent contractor of an affiliated partnership)
18. Amounts paid by the partnership to any person who is not an employee, agent, broker, or independent contractor (including amounts paid to any person who is not an employee, agent, broker, or independent contractor of an affiliated partnership)
19. Amounts paid by the partnership to any person who is not an employee, agent, broker, or independent contractor (including amounts paid to any person who is not an employee, agent, broker, or independent contractor of an affiliated partnership)
20. Amounts paid by the partnership to any person who is not an employee, agent, broker, or independent contractor (including amounts paid to any person who is not an employee, agent, broker,
or other persons engaged in selling securities of affiliated partnerships)
21. Amounts paid by the partnership to any person who is not an employee,
agent,
broker,
or other persons engaged in selling securities of affiliated partnerships)
22. Amounts paid by the partnership to any person who is not an employe,
agent,
broker,
or other persons engaged in selling securities of affiliated partnerships)
23. Amounts paid by the partnership to any person who is not an employe,
agent,
broker,
or other persons engaged in selling securities of affiliated partnerships)
24. Amounts paid by the partnership to any person who is not an employe,
agent,
broker,
or other persons engaged in selling securities of affiliated partnerships)
25. Amounts paid by the partnership to any person who is not an employe,
agent,
broker,
or other persons engaged in selling securities of affiliated partnerships)
26. Amounts paid by the partnership to any person who is not an employe,
agent,
broker,
or other persons engaged in selling securities of affiliated partnerships)
27. Amounts paid by the partnership to any person who is not an employe,
agent,
broker,
or other persons engaged in selling securities of affiliated partnerships)
28. Amounts paid by the partnership to any person who is not an employe,
agent,
broker,
or other persons engaged in selling securities of affiliated partnerships)
29. Amounts paid by the partnership to any person who is not an employe,
agent,
broker,
or other persons engaged in selling securities of affiliated partnerships)
SCHEDULE A - BAD DEBTS
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
SCHEDULE A - BAD DEBTS
SCHEDULE A - BAD DEBTS
SCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTSSCHEDULE A - BAD DEBTS
+ +Illustration No. 167 Page 2 of Instructions for Partnership Return. + +APPENDIX C + +375 + +
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Form 1060CORPORATION INCOME AND PROFITS TAX RETURNPage 1 of 2 Return
For Calendar Year 192
This return should be filed by the last day of the month following the close of the period covered by this return.
On for period began ____________ and ended ____________, 192
If your corporation is commencing business during this period, file a continuation statement with this return.
Under penalties of perjury, I (we) affirm that the information contained in this return is true and correct.
Lester L. Herring
Address of Corporation
J. A. Whitman & Co.,
Ald. Shute Street,
Fresno, Calif.
Post Office Box No. ____________
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
+ +
REVENUE OF BUSINESSEntirety RecoverySee Form W-9 for instructions.
SCHEDULE A: TAXABLE NET INCOME
CASH INCOME:1,700.00 $
Less: Sales taxes and other taxes collected on behalf of others, less allowance made for such taxes, if any.-18.75 $
Less: Income taxes due and payable to State and Federal Government, less any refund allowed.-15.00 $
Less: Income taxes due and payable to State and Federal Government, less any refund allowed.-15.00 $
Less: Income taxes due and payable to State and Federal Government, less any refund allowed.-15.00 $
Less: Income taxes due and payable to State and Federal Government, less any refund allowed.-15.00 $
Less: Income taxes due and payable to State and Federal Government, less any refund allowed.-15.00 $
Total Cash Income:1,426.25 $
+ +
+
Description$ Amount DueLess Allowances for Taxes Collected on Behalf of Others (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Less Allowances for Taxes Due to State and Federal Government (if any)
+		Lessor Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items Not Otherwise Included in Cash Income or Less Amounts of Other Items NotOtherwiseIncludedinCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeorCashIncomeo + +376 +APPENDIX C + +**Page 2 of Form 10-K** + +**Section A - CAPITAL STRUCTURE AND INCOME TAXES** + +**A. INFORMATION ABOUT THE COMPANY** + +The Company was incorporated under the laws of Delaware on June 15, 2008, with its principal place of business located at 1000 North Glebe Road, Suite 400, McLean, VA 22101. The Company's telephone number is (703) 799-1000. + +**B. INFORMATION ABOUT THE OWNERSHIP OF THE COMPANY** + +As of December 31, 2022, the Company had one class of stock authorized by the Company's Certificate of Incorporation. As of such date, the Company had no outstanding shares of any class of stock. The following table sets forth information regarding the beneficial ownership of the Company's common stock as of December 31, 2022: + + + + + + + + + + + + + + + + +
StockholdersNumber of SharesPercentage of Total Shares
Class A Common Stock1,000,000100%
+ +**C. INFORMATION ABOUT THE COMPANY'S BUSINESS** + +The Company is engaged in the design, development and sale of software products and services that enable businesses to manage their supply chain operations more efficiently and effectively. The Company's products and services are designed to help businesses improve their supply chain performance through greater visibility into their supply chains, improved inventory management, better forecasting and demand planning capabilities, and enhanced collaboration among business partners. + +**D. INFORMATION ABOUT THE COMPANY'S FINANCIAL STATEMENTS** + +The financial statements included in this report have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. + +**E. INFORMATION ABOUT THE COMPANY'S EMPLOYEES** + +As of December 31, 2022, the Company employed approximately 15 full-time employees. + +**F. INFORMATION ABOUT THE COMPANY'S EMPLOYMENT AGREEMENTS** + +The Company does not have any employment agreements with any of its officers or directors. + +**G. INFORMATION ABOUT THE COMPANY'S EMPLOYMENT POLICIES AND PRACTICES** + +The Company does not have any policies or practices that are intended to discourage employees from reporting violations of law, including securities laws and regulations. + +**H. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CURRENCY** + +The Company does not use foreign currency in its operations. + +**I. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN TAXES** + +The Company does not pay taxes in any foreign country. + +**J. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**K. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**L. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**M. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**N. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**O. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**P. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**Q. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**R. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**S. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**T. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**U. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**V. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**W. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**X. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**Y. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**Z. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**AA. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**BB. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**CC. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**DD. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**EE. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**FF. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**GG. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**HH. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**II. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**JJ. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**KK. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**LL. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**MM. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**NN. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**OO. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**PP. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**QQ. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**RR. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**SS. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**TT. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**UU. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**VV. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**WW. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**XX. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**YY. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +**ZZ. INFORMATION ABOUT THE COMPANY'S USE OF FOREIGN CAPITAL** + +The Company does not use foreign capital in its operations. + +\* Indicates a change from prior year. +\*\* Indicates a change from prior year. +\*\*\* Indicates a change from prior year. +\*\*\*\* Indicates a change from prior year. +\*\*\*\*\* Indicates a change from prior year. +\*\*\*\*\*\* Indicates a change from prior year. +\*\*\*\*\*\*\* Indicates a change from prior year. +\*\*\*\*\*\*\*\* Indicates a change from prior year. +\*\*\*\*\*\*\*\*\* Indicates a change from prior year. +\*\*\*\*\*\*\*\*\*\* Indicates a change from prior year. +\*\*\*\*\*\*\*\*\*\*\* Indicates a change from prior year. +\*\*\*\*\*\*\*\*\*\*\*\* Indicates a change from prior year. +\*\*\*\*\*\*\*\*\*\*\*\* Indicates a change from prior year. +\*\*\*\*\*\*\ *\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from prior year. +\* Indicates a change from previous years + +APPENDIX C +377 + +Page 3 of Section. + +**QUESTIONS.** + +The answers to the questions on pages 25, 26 and 27 of this form, if any, must be: + +A. The name of the corporation (as shown on the certificate of incorporation or similar corporate document filed with the Secretary of State of the state in which the corporation is organized). + +B. The address of the principal executive office of the corporation. + +C. The address of the principal place of business of the corporation. + +D. The name and address of each person who has been designated by the corporation as a "signatory" under section 10(b) of the Act, and who is required to sign all documents filed with the Commission under section 18(a) of the Act. + +E. The name and address of each person who has been designated by the corporation as a "signatory" under section 18(c) of the Act, and who is required to sign all documents filed with the Commission under section 18(d) of the Act. + +F. The name and address of each person who has been designated by the corporation as a "signatory" under section 18(e) of the Act, and who is required to sign all documents filed with the Commission under section 18(f) of the Act. + +G. The name and address of each person who has been designated by the corporation as a "signatory" under section 18(g) of the Act, and who is required to sign all documents filed with the Commission under section 18(h) of the Act. + +H. The name and address of each person who has been designated by the corporation as a "signatory" under section 18(i) of the Act, and who is required to sign all documents filed with the Commission under section 18(j) of the Act. + +I. The name and address of each person who has been designated by the corporation as a "signatory" under section 18(k) of the Act, and who is required to sign all documents filed with the Commission under section 18(l) of the Act. + +J. The name and address of each person who has been designated by the corporation as a "signatory" under section 18(m) of the Act, and who is required to sign all documents filed with the Commission under section 18(n) of the Act. + +K. The name and address of each person who has been designated by the corporation as a "signatory" under section 18(o) of the Act, and who is required to sign all documents filed with the Commission under section 18(p) of the Act. + +L. The name and address of each person who has been designated by the corporation as a "signatory" under section 18(q) of the Act, and who is required to sign all documents filed with the Commission under section 18(r) of the Act. + +M. The name and address of each person who has been designated by the corporation as a "signatory" under section 18(s) of the Act, and who is required to sign all documents filed with the Commission under section 18(t) of the Act. + +N. The name and address of each person who has been designated by the corporation as a "signatory" under section 18(u) of the Act, and who is required to sign all documents filed with the Commission under section 18(v) of the Act. + +O. The name and address of each person who has been designated by the corporation as a "signatory" under section 18(w) of the Act, and who is required to sign all documents filed with the Commission under section 18(x) of the Act. + +P. The name and address of each person who has been designated by the corporation as a "signatory" under section 18(y) of the Act, and who is required to sign all documents filed with the Commission under section 18(z) of the Act. + +Q. The name and address of each person who has been designated by the corporation as a "signatory" under section 18(aa) of the Act, and who is required to sign all documents filed with the Commission under section 18(bb) of the Act. + +R. The name and address of each person who has been designated by the corporation as a "signatory" under section 18(cc) of the Act, and who is required to sign all documents filed with the Commission under section 18(cd) of the Act. + +S. The name and address of each person who has been designated by the corporation as a "signatory" under section 18(dd) of the Act, and who is required to sign all documents filed with + +**REPRESENTATION OF CAPITAL STOCK** + +D. What is your role in this transaction? ☐ Individual ☐ Partner ☐ Other ____________ + +E. Are you filing this form solely on behalf of this transaction? ☐ Yes ☐ No + +F. Is this transaction being effected through an intermediary? ☐ Yes ☐ No + +G. Have you received compensation for filing this form? ☐ Yes ☐ No + +H. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +I. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +J. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +K. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +L. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +M. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +N. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +O. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +P. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +Q. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +R. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +S. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +T. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +U. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +V. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +W. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +X. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +Y. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +Z. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AA. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AB. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AC. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AD. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AE. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AF. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AG. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AH. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AI. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AJ. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AK. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AL. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AM. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AN. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AO. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AP. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AQ. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AR. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AS. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AT. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? ☐ Yes ☐ No + +AU. Have you received compensation for filing this form other than compensation described in paragraphs D through G above? □Yes □No + +APPENDIX C + +378 + +Page 4 of Return. + +SUBJECAL A - RESTITUTION OF NET INCOME AND ANALYSIS OF CHANGES IN SURPLUS. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
1. The corporation (hereinafter referred to as "the corporation") was organized under the laws of the State of California on _____________. It has been in existence since that date.
2. The corporation is engaged in the business of _____________.
3. The corporation is a member of a consolidated group of corporations, the parent of which is _____________.
4. The corporation is a member of a consolidated group of corporations, the parent of which is _____________.
5. The corporation is a member of a consolidated group of corporations, the parent of which is _____________.
6. The corporation is a member of a consolidated group of corporations, the parent of which is _____________.
7. The corporation is a member of a consolidated group of corporations, the parent of which is _____________.
8. The corporation is a member of a consolidated group of corporations, the parent of which is _____________.
9. The corporation is a member of a consolidated group of corporations, the parent of which is _____________.
10. The corporation is a member of a consolidated group of corporations, the parent of which is _____________.
11. The corporation's net income for each year during the period beginning with the calendar year ended ____________ and ending with the calendar year ended ____________ was:
Year EndedNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet IncomeNet Income
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +ALPHABETICAL INDEX + +
Item DescriptionAmount ($)
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ + ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ + ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ + _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ + ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ + ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ + ______________________________________________________ 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------------------------------------------------------------------------------------------------------------------------------------------------------------------- + ------------------------------------------------------------------------------------------------------------------------------------------------------------------- + ------------------------------------------------------------------------------------------------------------------------------------------------------------------- + ------------------------------------------------------------------------------------------------------------------------------------------------------------------- + ------------------------------------------------------------------------------------------------------------------------------------------------------------------- + +``` + +380 +ALPHABETICAL INDEX + +| | | | | +|---|---|---|---| +| **Corporation**, Defined, § 210 | | | Page | +| **Accounts Feculari**, to § 265-275, 250-260 | | | | +| **Books of Accounts**, to § 276, 261-264 | | | | +| **Income Tax for**, to § 247, 262-264 | | | | +| **Method of Organization**, to § 245, 249 | | | | +| **Joint Stock Companies**, to § 249, 249 | | | | +| **Proprietorship**, to § 243, 247 | | | Page | +| **Purpose of**, to § 241, 247 | | | | +| **Corporations Organized to Continue a Com-** | | | Page | +| ing Business, § 280 | | | | +| **Correcting Entries**, § 43, p. 357-358 | | | Page | +| **Cost**, § 81, p. 36-37, p. 109, p. 109-110, p. 110-111, p. 111-112, p. 112-113, p. 113-114, p. 114-115, p. 115-116, p. 116-117, p. 117-118, p. 118-119, p. 119-120, p. 120-121, p. 121-122, p. 122-123, p. 123-124, p. 124-125, p. 125-126, p. 126-127, p. 127-128, p. 128-129, p. 129-130, p. 130-131, p. 131-132, p. 132-133, p. 133-134, p. 134-135, p. 135-136, p. 136-137, p. 137-138, p. 138-139, p. 139-140, p. 140-141, p. 141-4, p. 4-5, p. 5-6, p. 6-7, p. 7-8, p. 8-9, p. 9-0, p. 0-0, p. 0-0, p. 0-0, p. 0-0, p. 0-0, p. 0-0, p. 0-0, p. 0-0, p. 0-0, p. 0-0, p. 0-0, p. 0-0, p. 0-0|Page| +| **Credit Bill**, § I80 | Income ..., § I89 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90 ... I90...I9...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I...I..|Page| +| **Debit Credit**, § II85 ..., II86 ..., II87 ..., II88 ..., II89 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9 ..., II9...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II...,II,...|Page| +| **Current Entries**, § III., pp. III., IV., V., VI., VII., VIII., IX., X., XI., XII., XIII., XIV., XV., XVI., XVIII., XIX., XX., XXIII., XXIV., XXV., XXVI., XXVIII., XXIX., XXX., XXXIII., XXXIV., XXXV., XXXVI., XXXVIII., XXXIX., XL., XLI., XLIII., XLIV., XLV., XLVI., XLVIII., XLIX., L., LI., LIII., LIV., LVIII., LXVIII., LXIX., LXXVIII., LXXIX., LXXXVIII., LXXXIX., XCXVIII., XCXIX., XCXXVIII., XCXXIX., XCXXXVIII., XCXXXIX., XCXLVIII., XCXLIX., XCCLXVIII., XCCLIX., XCCLXXXVIII., XCCLXXXIX..|Page| +| **Curved Graphs**, § III77, pp.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IV.IVI.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V.V..|Page| +| **Day Letter**, § III5, pp.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL.LL..|Page| +| **Deficit**, Defined, § III5 | Income ..., § III5 - III6 - III7 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - III8 - IV.|Page| +| **Deferred Credits to Income**, § IV55 | Interest ..., § IV55 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56 .. IV56..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV..IV.|Page| +| **Deferred Credits to Building Revenue Ac-** | Interest ..., § V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 . V47 , etc.|Page| +| **Delivery Equipment Account**, § VI33 | Inventory ..., § VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI33 , VI3 + + +Data Table with Alternating Background Colors and Text Alignment Centered on Rows and Columns. +
A, B, C Check, § 31PagePage
Accountancy, § 62113275
Account, Defined, § 139105
Accounts Payable, § 138240157
Accounts Payable, § 231240157
Accounts Payable, § 232240157
Accounts Payable, § 233240157
Accounts Receivable, § 234240157
Accounts Receivable, § 235240157
Accounts Receivable, § 236240157
Accounts Receivable, § 237240157
Accounts Receivable, § 238240157
Accounts Receivable, § 239240157
Accounts Receivable, § 240240157
Accounts Receivable, § 241240157
Accounts Receivable, § 242240157
Accounts Receivable, § 243