>»hS I 1] I I I I 1 , I I I'll I 1 (^: ^ y<^/4^-t/-tAy 'fii/,s . Progressive Business Accounting An Elementary Course in Bookkeeping, Busi- ness Practice, Forms and Usages for Com- mercial Schools and Individual Reference Prepared and Illustrated by LLOYD E. GOODYEAR Author of Goodyear's Baak Accounliog Joint Author of Goodyear's Higher Accountiag THE WATERLOO SYSTEMS CO. Waterloo, Iowa ti • » • fl • • • •-••*•• • •c* • • • ' Ckjpyritrhted Ity LLOYD E. GOODYEAR 1910 eOUCATlON DEPT, PREFACE In our judgment, the call for new work in elementary bookkeeping refers to a course arranged in direct illustrative lines. Bookkeeping is an applijcation of arithmetic. It would be useless to attempt to discover any- thing in the principles of single or double entry bookkeeping that is not well established. It would be equally useless to carry a student through the forms of such discovery. The land-marks of accounting have been definitely placed, the principles have been clearly defined. It is the part of a course of this nature to so arrange the facts that in a progressive order each may follow as a result of that which has preceded. This course consists of twenty-five graded exercises beginning with the ledger form, from that passing to its use, from that to the rules governing its use, and to the other forms contributing to it. The trial balance, state- ment, and ledger closed are the natural and necessary sequt-nces of the line of demonstration commenced. The subject matter of these exercises has always been chosen with reference to the previous experiences of those taking the course. Following exercises ten. fifteen and twenty are business practice sets A, B and C. These subject the knowledge acquired in the exercises to a fair business test. The introduction of transactions and forms, outgoing and incoming, used in A, B and C, gives to the accounting principles and facts learned a business setting. It is claimed for results in the course as here arranged that the student has a more definite knowledge of what to do. and a clearer perception of completion when his task is finished, than in other similar courses now in use. Likewise, the teacher has the maximum control of the students' work with the minimum effort on his part. The slow student cannot seem to be rapid, nor can the progress of the rapid student be covered if the work is taken as outlined, and the accompanying automatic check is used. This is a consideration of importance where one teacher has charge of a large depart- ment. A teacher does not want to do any work that a prepared system can do. He wants to teach, not tinker. The established principles and bookkeeping rules are arranged in num- bered information topics, to which reference is constantly made. The forms are reproductions of the work of a practical writer and accountant who neyer hesitated to allow his work to undergo the test of the first-class busi- ness office in first-class competition. The variety of forms will be found extensive. Exercises I. to X., inclusive, provide a four Aveeks' course for those who do not intend to pursue the subject further. It will take the average commercial worker six months' time to complete the entire course. 5415^49 CONTENTS Exercise I. Ruling the Ledger. II. Debits and Credits. Tlie Cash Account. III. Double Entry. Xicdger of Four Accounts. IV. Account Titles. Nature and Division. V. Ruling the Journal. VI. Journalizing. Posting. Trial Balance. VII. A Journal-Ledger Group. Opened, Continued, Closed. VIII. A Journal-Ledger Group. Opened, Continued, Closed. IX. A Journal-Ledger Group. Opened, Continued, Closed. X. A Journal, Cash, Purchase, Sales, Ledger Group. Opened, Continued, Closed. Set A. Business Practice. Sole Proprietor. 100 Transactions. Exercise XL Statements of Business. XII. Drills in Miscellaneous Journal Entries. XIII. Drills in Miscellaneous Journal Entries. XIV. Drills in Partnership Opening Entries. XV. Journal, Cash, Purchase, Sales, Ledger Group. Pai-tnership. Set B. Business Practice, Partnership. 100 Transactions. Exercise XVI. Partnership Statements. XVII. Drills in Miscellaneous Journal Entries. XVIII. Ruling Special Column Books. XIX. Special Column Group. Opened, Continued, Closed. XX. Corporation and Joint Stock Features. Set C. Business Practice, Corporation. 100 Transactions. Exercise XXI. Single Entry. XXII. Six-Column Journal. XXIII. Departments and Divisions. XXIV. Outlining Books. XXV. The Bookkeeper's Day's Work. Introduction The principles of accountancy should be understood by every person who aspires to economic independence. The art of bookkeeping is one thing; the science of accounts is another. The former is in the nature of a trade which a person may follow profitably and which, from its close relation to business affairs, may lead to commercial opportunities. The latter is the measure by which the business man from time to time examines the progress of the parts of his business and determines its course. By the accounts kept, the business man should know which of his investments of money or effort are profitable and which are unprofitable, what his property consists of and what his debts are. Knowing these facts, he can discontinue those investments showing losses or small gains, and invest more largely in those showing comparatively greater profits. In the earlier history of our country, business was quite simple and the profits of all undertakings were large, so that one could often accumulate much wealth without any regard to bookkeeping. Conditions have since changed. "With the growing density of population, profits in all departments of trade have become smaller and more intelligence in business affairs has become necessary. Now, the successful man can no longer profitably carry his business in his head, but must carry the facts of his business in his books, leaving his mind free to give its entire power to new achievements rather than to have it hampered by an attempt to carry a mass of details already in hand. It is the added power to accomplish results which gives to the person skilled in accounts the great advantage over the person deficient in this branch. Throughout history, the persons who have given their attention to the cost and the returns of given lines of action have been the leaders and commanders of the business world. Those who through lack of knowledge or sluggishness have neglected account-keeping have been the servants, often the poorly paid servants of those better informed. All orderly bookkeeping entries, in whatever books originally made, are entered with a view to their final effect upon ledger accounts. The vital dif- ference between good and bad bookkeeping depends on the clearness or vague- ness of the accounts derived from the first records. Hence, it is essential that a bookkeeping student should, first of all ideas, grasp the idea of an account. Most persons who study beginning bookkeeping need practice in business forms, commercial and legal papers which they will receive and make out for others in business transactions. The papers used, should be associated with the transactions involved and should be practiced in connection with the entries until the one will immediately suggest the other. This consideration calls for much of practice and detailed drill in the earlier part of the work. As the student progresses, all needless writing of forms will be dropped. The student should feel, however, that every detail as presented is to be mastered, for only by a thorough mastery of each part can the whole be accomplished. "With this thought in mind, we may safely say that every young person should apply himself diligently to the study of account-keeping. "We trust that the person who enters upon this work may realize its relation to his future success, and give to it his closest attention. 6 PROGRESSIVE BUSINESS ACCOUNTING TO THE STUDENT You are required to write several exercises before beginning transactions in actual business. These exercises are in the nature of tests by which you will show that paper, blotter, ruler, pens, pencils, etc., are properly used, and, later, that a knowledge of records and accounts is acquired sufficient to enable you to proceed. Comply with the directions exactly as given. Always think before doing. If at any time errors or blots appear, discard the paper used and prepare another paper so that you can submit to your teacher your best work. These first steps must be taken not hurriedly but carefully. EXERCISE I INFORMATION #1. Bookkeeping paper is ruled in two standard ways called ledger and journal. There are many varieties of each, but the two- column ledger paper and the two-column journal paper are the common forms. At the top of all varieties of ruling are placed three lines running from left to right called headlines. These are ruled very closely together, and are placed about one and one-half blue line spaces above the first writing line. The center one of the three headlines should be heavier than the other two. All ruling should be in red ink. From the headlines to the bottom of the sheet are ruled vertical lines, which divide the space into columns suited for journal or ledger entries. EXPLANATION. The purpose of this exercise is to fix in mind the lines and spaces of the ledger ruling and the use of the columns. DIRECTIONS. Rule a sheet of writing paper in ledger form. To rule the headlines, lay the ruler across the paper with the in-slanting or bevel side downward, so that the edge will not touch the paper. Press the ruler firmly with the left hand and draw the pen evenly from left to right so that the right hand draws a light line. Without lifting the ruler, commence with the pen at the left, turning the pen point inward, drawing the second line some- what heavier than the one above. Draw the lines as closely together as pos- sible without touching. Draw the third line below the second, making it no heavier than the first. Next, place the ruler across the top of the paper and make pencil dots exactly in center from left to right, also place dots at bottom of sheet in the same way. Reverse the ruler as before and draw three lines from the head- lines to the bottom of the sheet, using the pencil dots as guide, dividing the page vertically into two equal parts. (The left side is called the debit side; the right, the credit side.) Measure and rule double vertical lines one and three-eighths inches to the left of the right margins of the debit and credit sides and a single line three-eighths inch to the left of each right margin. (These are the debit and credit money columns; the double line preceding dollars and the single line separating dollars from cents, together make one money column.) Rule a vertical line three-eighths inch to left of each money column. (The space thus made is called the folio column.) Rule two vertical lines five-eighths and one inch from the left margin of the debit and credit sides. (The spaces thus made are date columns. The first space for year and month, the second for day of month, are considered one column. The wide space following the day of the month is for explanation. The width of this space depends on the width of the entire sheet.) PROGRESSIVE BUSINESS ACCOUNTING I,. ;\\ J J }'^\}V'i Year &. Mo. lay of No. DEBIT SIDE Explanation Folio 1 Dollars Cts 8 Year & No. day of Mo. CREDIT SIDE Explanation 'olio 1 Dollars Cts On the reverse side of the ruled ledger sheet, write answers to the follow- ing questions, numbering the answers to correspond with the question numbers. All written answers should be in the form of complete sentences, as shown in the model answers given below. The questions should not be copied. QUESTIONS. 1. What two common forms of ruling are used in book- keeping ? Ans. 1. The ledger and journal are the common forms of ruling used in bookkeeping. 2. Describe the headlines. Ans. 2. The headlines are the ruled lines running from left to right at the top of the written portion. 3. The center vertical ruling of the ledger divides the page into what two parts? 4. Name in their order the four columns in each side of the ledger. 5. Why are the date columns divided into two parts? 6. Why are the money columns so divided? DIRECTIONS. When you have completed these requirements, write at the top of the ruled page the exercise number, your name, and date, thus : and pass to your teacher for inspection. If the form and answers are incor- rect, the paper will be returned to you for correction. If it is correct, the paper will be placed in the college file as a specimen of j'our work. ^'l'',' "I le,' '• ■ PROGRESSIVE BUSINESS ACCOUNTING EXERCISE II INFORMATION #2. Business is the process of changing one kind of value into another kind of value. #3. The purpose of the business man is to exchange things of less value for things that he values more highly, thus making a profit. Example: A farmer exchanges with a miller a quantity of wheat for a quantity of flour. The farmer has made a profit because the flour is worth more to him than the wheat. The miller has made a profit because the wheat is worth more to him than the flour. 4^4. The value of anything in business is measured by the amount of money required to buy the thing. #5. The amount of profit is shown by the money cost of the thing exchanged as compared with the money value of the thing received for it. Example: A man buys several automobiles for cash $10,000, or for other property worth $10,000 in cash. He sells them, receiving in exchange cash or property worth $12,000. By exchanging these values in this way his profit is $2,000. #6. Persons conduct business by changing their property of one kind into property of another kind, or by exchanging their property with other persons for cash or other property. Example: A man owns timber land worth $2,000, and cuts from it wood worth $1,000, leaving the land of as great value as it was before. This is a business trans- action in which no dealing is carried on with other persons. The man simply changes one kind of property into another kind. He now sells the wood to another person who pays him cash $1,000 for it. This is also a business transaction. #7. The entire property and indebtedness of any commercial enterprise is referred to as the business. #8. All records of a business are divided for the purpose of inspection and comparison into different parts called accounts, each of which is con- sidered separately from the whole. #9. An account is a complete entry of all transactions as they pertain to a given part in the business. #^0. At the head of each account is the title; below to the left are placed the values which the remainder of the business has contributed to this part (debits) ; to the right are placed the values which this part has conrtib- uted to the remainder of the business (credits). #11. The ledger is the book of accounts. 4itl2. The following general rule governs debit and credit. It should be committed to memory: Debit the receiving account; credit the giving account. EXPLANATION. One account in every buiness is the cash account. This account is important because it shows when and from whence the store of cash at hand receives more cash, or when and for what the store of cash parts with some of the money held. It is necessary to keep this account with great care, because by it one should be able to tell the amount of money available for use. DIRECTIONS. Rule a sheet of ledger paper as directed in Exercise I. and open a cash account by writing the title Cash in the center at the top as shown in the model. The following transactions involve the use of more than one account, but only the one with cash will be considered in this exercise. Write the cash account from the transaction given below, referring to the model as you proceed. PROGRESSIVE BUSINESS ACCOUNTING ~^^^<^^ Q:l^^£^ / ^-:^/i^^t^1^>t.^^Y 'hr^j'^j'^ y f-^Ar.-..^(y ^ .U. ^ l£:. LJl- r-^^^^t^-MAy .:^^^^g<^ /'^^^ ^ i£A ef^' ^a '-f^ ^ jAj2. ///? TRANSACTIONS. Sept. 1, 1909. Henry Miller placed $1,000 into a cash account for use in business. Debit cash, because cash is the receiving account. (See Infor. 12.) Notice the place for the year, which should always be entered at the beginning of an account. Notice that the explanatory space shows from what source the cash was received. The folio column is not used because this entry is not posted from another book, but is entered directly from the transaction in this place. Notice that the amount is placed in the space of the money column provided for dollars. The place for cents is not used. Sept. 2. Paid cash for 100 Sk. Pearl Flour @ $1.65 per sack. As this is the first entry on the credit side, enter the year as shown. The abbre- viation "Sk." stands for sacks or sack. The sign @ means at or each. Enter as shown in the model. Cash is credited because cash is the giving account. Repeat the rule above. (Infor. 12.) Sept. 3. Keceived cash for 10 Sk. Pearl Flour @ $1.75. Notice that the abbreviation Sept. is not repeated. Any entry following is con- sidered September until a change of month is reached. Notice especially that the figures 17.50 are written exactly in column with figures of same order above and below. 3. Received cash for 50 Sk. Pearl Flour @ $1.70. 4. Paid cash for 50 brl. XX Flour @ $5.50. Enter as above. See that the figures are in column. 6. Paid cash for 100 brl. XX Flour @ $5.45. Henry Miller places $500 additional into the cash account. Paid cash for 100 brl. XX Flour @ $5.50. Sold 250 brl. XX Flour @ $6.00 per brl., receiving cash. Henry Miller took back $500 from the cash for use of the business. Sold for cash 40 Sk. of Pearl Flour @ $1.80. Bought for cash 20 T. of Timothy Hay @ $12. Sold for cash 5 T. Timothy Hay @ $15. Bought for cash 10 T. Blue Stem Hay @ $11. Sold for cash 15 T. Timothy Hay @ $16, 10 T. Blue Stem Hay (g 15. 18. 21. 25. 27. Oct. 5. 7. 10. 15. $13.50. DIRECTIONS. At this point the student will subtract the total of cash payments from the total of cash receipts to see the amount of cash that should be on hand. Use a sharp pointed, medium hard pencil with which place the footings of both sides of the account in small, neat figures. (See model.) 10 PROGRESSIVE BUSINESS ACCOUNTING From examination of the form it will be seen that the receiving side of cash shows $3,624.50 taken in at various times. The credit total $2,385 subtracted from the debit total gives the amount, $1,239.50, which should equal the amount on hand, if the cash were counted. On the reverse side of the account sheet, answer in full by sentences the following QUESTIONS. 1. What is meant by the term business? 2. Why do men engage in business? 3. What is the measure of values? 4. How is the amount of profit in any one thing measured? 5. In what two ways are values in a business changed? 6. How is a busines divided for purposes of inspection and comparison? 7. What is an account? 8. What is meant by the title of an account? 9. What is the name of the book in which accounts are kept? 10. Give the general rule for debit and credit. 11. What does the debit side of the cash account show? 12. What does the credit side of the cash account show? 13. What does the credit subtracted from debit total of cash show? Having completed the answers to above questions, at the top of the account side write exercise number, your name, and the date, as directed before, and pass the paper to your teacher for inspection. EXERCISE III INFORMATION # 13. In every transaction, value is changed from one or more parts of the business into one or more other parts of the business, therefore # 14. In every transaction one or more accounts must be debited, and one or more other accounts must be credited, 4^ 15. The debits and credits must be in equal amounts. qijt 16. Double entry bookkeeping is the keeping of books in such a way as to show all debits and corresponding credits in their respective accounts. There must be at least one debit and one credit. :^ 17. The sum of all debit footings will be equal to the sum of all credit footings if the work is correct. EXPLANATION. The same transactions as given in Ex. II. will be given in this exercise. In this exercise it will be necessary to make entries in all of the accounts affected, instead of in the cash account only. Kemember that every transaction involves a debit in one account and a credit in another account. Form the habit of determining which account to debit first, then select the account to credit. /Iways apply the rule given in Infor. #12. DIRECTIONS. Take a sheet of ledger paper from your supplies, and open four accounts (see model) : Henry Miller, Proprietor, at top ; Cash, five lines below; Flour account, twelve lines below, and Hay account, seven lines lower. TRANSACTIONS. Sept. 1, 1909. Henry Miller invests cash in flour and feed business, $1,000. "What account should be debited? CASH, because cash is the receiving account. Make the debit entry as in previous exercises, but be careful to enter on line below PROGRESSIVE BUSINESS ACCOUNTING 11 A'i^y ^ ^^y/ W/^y^^:^.ji^ U.4 'X^^ / (^^^Z^i^^^.^'i-^.^^ -y .r^A i! 't'^ {^^f^.d-^^t^ft^o^^ y^ i ? ^' -T />/ ~ ^ /J J - i i I -f J- o y^.- \=. Si,- ^ -^, /<^<^-,<^ --^^a^t ^/ /4j - 'f/* e^^^ iiy / ff -ii^ Cce^^LA^ i,J /^ r^ M .r^ ^>e. :;>"^ u >-0 ^- / - ^ / ^ ,? /. ^/ /^^ -i^^Jy^:^ /JT //? /7 /r /> xjTJ-^ ^7 ^o .^d.'Ay C^-atA- ^y / r 3 J / /67V* 'A^ ZyZ/. .^ 2 a r^^^^.^^'^rt.-^^ ^ J^^ 'IH} - 7 ^^,.^U'-y.^.<^ /<:: /a ^ (2^^J3t S^ n^ iA '/. /- J'./. 1 i •* o /d '/^ ,. /2A^^ ^/.jT-^iiX'^ l- '-(^^!...a,Ay<£^/£^^^/C>x^^^ ■^_f-7~^ J >^>>^^.^^€.>-v^^ ' / /■y^ (f^tZ,-^-^ /-^ < 7 z/^^- /__^^,^^y_ e/.^-^ Pz>-lA^^^,^^^:t,-i^ V 'j"/-^ > T^..a£-^<;:f^-^t^g-g::^^ -i^a^<,.>6y *•'/! #41-^ /.^ _z. ^ -^ /^uZV -X^ ^.^ -^ :^£Z^ £^r^. / vjT^ i^ /i /J ,^A. >y^4f '^ ^ -r/* -JL±. A J- a . J ^ -#^ S a a i>\ Bought of Grant & Williams a bill of merchandise as per invoice dated today for cash, $2,960.51. Bought of Oscar Nelson three heads of horses for cash, $480. Debit Live Stock account, because the live stock part of the business receives this value. Sold R. W. Emerson for cash 10 brl. salt @ $1.70. Sold Thomas Stone a horse for cash, $175. Sold Samuel Huntington for cash a lot from the real property, as per deed given, for cash, $950. DIRECTIONS. As the above closes the first day's entries, the accounts will be posted. Place the journal to the left and the ledger to the right. With blotter on journal under the left hand, move down the column until you arrive at the first debit title. Cash. Post this debit to the Cash account as shown in model, entering the date as there shown. In the folio column place figure 1, with "J" 'before to indicate that the posting was done from page 1 of the journal. Enter the amount in the money column. Then turn back to the journal and place in the folio column of the journal the ledger page 1 on which the cash account appears. Remember that the post marks must be entered at the time of the posting or they will be of little value, as will be shown later. Next drop your blotter on your journal until you arrive at the following cash debit of $17, which post to the Cash account also. Be sure to enter the page of the journal in the ledger and the page of the ledger in the journal when the posting is done. Pass down to the other Cash debits of $175 and $950, which post as before. (See model.) After cash debits are posted, post the next unposted debit. It is the debit of Real Estate $4,850. This account is on page 2 of the ledger, hence, when you have posted to this account, place 2 before the title in the journal. Post the next debit, Mdse., as before. Post the last unposted debit, Live Stock, to the Live Stock account. Look up the folio column to see if each of the seven debit titles is preceded by a post mark. If so, proceed to post the credits. Begin with Robert Browning credit, which post to that account on page 1 of ledger. Next post all the Cash credits — three in number. After that to Merchandise, Live Stock, and Real Estate. Read Infor. # 27, 28, 29, 30, 31. PROGRESSIVE BUSINESS ACCOUNTING 19 '.<2/L^d^ /. / fao'. After you have posted the ledger, take a Trial Balance, heading your Trial Balance sheet as shown in the model form. (1) Enter all the ledger titles with their pages on the trial balance sheet. (2) Find the debit or credit balance of each account and place that balance in the debit or credit column of the trial balance sheet. Pencil footing need only be done in the cash account. After the balances are entered, foot and rule a single addition line above the footing and double closing lines below the left side of the page and the footings, as shown. The books being found in balance, the student will proceed to journalize the transactions of Sept. 2. Continue on page 2 of the journal. TRANSACTIONS. Sept. 2. Sold George Taylor, for cash, 2 brl. salt @ $1.70, 20 sk. flour @ $1.45, 5 sk. sugar @ $5.95. Make journal entry. Why is Cash debited? Why is Merchandise credited? Bought of Wm. Floyd, 7 head of horses for cash, $1,150. Sold to John Hart for cash, 8 head of horses for $1,650. Paid Clayton Smith, cash for repairs to building, $42.90. Debit Real Estate. Why? DIRECTIONS. The student will now post the ledger as before, and after posting, pencil foot all the accounts having more than one item and take a trial balance. Rule a heading across the page below that already made. No space should be wasted, as three trial balances are to be taken on this sheet. The student will observe on examining the trial balance that on this date three accounts show that these divisions of the business have received more value than they have given. Which are they? Two accounts show 20 PROGRESSIVE BUSINESS ACCOUNTING two divisions of the business have given more value than they have received. Name them. TRANSACTIONS. Sept. 3. Sold to O'Keen & O'Keen for cash all mer- chandise on hand, per bill, receiving $3,000. Bought of George Taylor, for feed of live stock, 30 bu. corn @ 50c, 2 T. hay @ $12.50, paying cash. Debit Live Stock. Why? Bought of William Floyd, as per deed, adjacent real estate for cash $5,000. DIRECTIONS. Post the entries of the 3d to the ledger accounts, pencil foot, and take a third trial balance, recording it below the trial balances of the first and second. On the reverse side of the trial balance sheet write answers to the fol- lowing QUESTIONS. 1. What is journalizing? 2. What is posting? 3. Explain the use of the folio column. 4. What do you understand by the balance of an account? 5. What are the two kinds of ledger balances? 6. What is the trial balance? Of what value is it? 7. How often are the trial balances most frequently taken? 8. When are post marks to be entered? 9. What does a debit balance show with reference to an account? 10. What does a credit balance show? DIRECTIONS. After answering the above questions, write the transac- tion number, your name, and date at the top of first page of journal, first page of ledger, and trial balance sheet, and pin these three sheets together in the upper left-hand corner, having the pin at the angle shown in the illus- trated journal, and hand all in for inspection. EXERCISE VII INFORMATION #33. The Furniture and Fixtures account is the account with movable property of permanent value purchased for the general use of the business; as, chairs, tables, stoves, shelves, counters, etc. # 34. The Teams account is the account with horses, wagons and the like, used for delivery of goods or other work. # 35. The Expense account is the account of things to be consumed for the general benefit of the business; as, books and stationery, fuel, hired help, rents, etc. # 36. The cash value of an account is the selling worth of the remain- ing property charged to that account. This is found by making a list of the property and its worth, called an inventory. # 37. The gain of an account is the excess of the sum of its total credits and its cash value over its total debits. # 38. The loss of an account is the excess of its total debits over the sum of its total credits and its cash value. # 39. Once each year (or other period) the losses and gains are carried from the commercial accounts to the proprietor's account. This process is called closing the ledger. # 40. The balance of the proprietor's account after the transfer of gains and losses from the other accounts shows the net worth. PROGRESSIVE BUSINESS ACCOUNTING 21 EXPLANATION. In the following, accounts will be opened with Pro- prietor, Cash, Merchandise, Furniture & Fixtures, Teams, and Expense. The student will be required to post certain entries of transactions to these accounts, after which he will take a trial balance to verify his posting. He will then close the ledger, after which he will take a second trial balance after closing. DIRECTIONS. Take a sheet of journal and one of ledger, paging them. Open accounts in the ledger with H. A. Oliver, Proprietor, allowing 10 lines ; Cash, 15 ; Merchandise, 10 ; Furniture & Fixtures, 10 ; Teams, 10 ; Expense, 10. In the purchase or sale of merchandise the student will not be required to write any items or prices, as it is assumed that all items are entered on bills, copies of which are retained for reference. TRANSACTIONS. Dec. 1, 1909. H. A. Oliver begins business with fol- lowing property: Cash, $2,560; Merchandise, cash value, $6,290; Teams, cash value $725. In this transaction, three accounts receive values. These should be journalized as shown in model form on page 69. One account (Proprietor) gives the entire value. This account should be credited with their sum. Paid Edward Reed for rent of store room to January 1, 1910, $30. Debit Expense. Why? Expense is the receiving account. Paid the Eastern Mfg. Co. for furniture and fixtures as listed on their bill, $269.40. 2. Sold O. 0. Wolcott, for cash, merchandise per bill, $69.54. Sold Geo. Gerry, for cash, merchandise per bill, $132.60. Sold James Smith, for cash, merchandise per bill, $16.47. Paid cash for books and stationery for store use, $23.90. Paid cash for feed and care of horses, $10. 4. Bought of Gwinnet, Lyman & Co. merchandise per bill, for cash, $1,231.60. 4. Paid Oscar Anderson, cash for wages to date, $6. (Debit Expense.) 6. Sold Frank Lightfoot, for cash, merchandise per bill, $295.81. 15. Sold to Edward Read the property charged to Teams, receiving in payment a refrigerator and other fixtures per bill valued at $800. 18. Paid Oscar Anderson, wages to date, $24. 20. Sold Samuel Huntington, merchandise per bill rendered, • $650.29, receiving cash in payment. 30. Paid John Sawyer cash for fuel, per bill, for heating purposes, $42.80. DIRECTIONS. After above entries have been journalized correctly, post, pencil foot the ledger, and take a trial balance, dating the trial balance Dec. 31, 1909. Use a separate sheet of paper for the trial balance. Read Infer. # 37, 38, 39, 40 again. INFORMATION # 41. When the ledger is closed, the losses and gains from all accounts are posted to one account called the Loss & Gain account. This account shows all losses on the debit side, and all gains on the credit side. The difference between the total losses and total gains is called the net gain or the net loss. The net gain or loss is posted to the proprietor's account or otherwise disposed of. # 42. When a ledger is closed, and at other times to be mentioned later, entries are made directly in the ledger account; i. e., they are not posted 22 PROGRESSIVE BUSINESS ACCOUNTING J^^2y (^^L£<^^t^^ 'i^i...^^ ^.^:y^,^^ l/ ' ^7,/_:^.^X / ^ ^ ^-T r? / '^"9 ^J^^. ^ / 1 P' y r-7.f yn -^ au.a-^ K _<2,t^.«^^ r^ iJ J' y c> / / <7 i^;-7 a / / a /? y ') / '' / '^^tu^ M-o- gj- // u f/ / yj / ^. vc ^-^ ^J-o y^ V 9-^ / 7 7 > •> // (^y ^-Z J a ?-y Hy /^ // (\fa^^.^,^ ^ y y » ' 7 If ^X ^/ vy 7 > ^ ? ' ^ ?>>• 7/ Qa.^ / -i^a.Zei^*^-^ / -y 9-' ^^ xT^ U- ^/ / 7 ^0 y 9' /^^ io V/ -7Vy,y'v ;^. ^-r^y^^y y> ■^aii / / •y ^/ / ^ V7 (> -f^ ^^ ^v/ // ro ji^y ^y'^ ^/ c^/ tef^>t.-e-'-^/^ '.klA -P C\ // ■^ yj J-H- h JUXjLJu f >A? d- .UuLpJL. Qf^ny' / , .^>z,«-c^^>*^X!»^ >/-/:y rr-j' / , ^/^ // ^'o*^ // 24 PROGRESSIVE BUSINESS ACCOUNTING to the ledger from some other book. Such entries are made in red ink, the red indicating that the entry is to be posted to the opposite side of some other account or to the opposite side of the same account below the ruling. When a red ink entry is posted to the opposite side of some different account, post marks should invariably be placed in the folio columns of both accounts. When the entry is posted below tbe ruling in the same account, the post mark is not needed. Sometimes the posting of a red ink entry in a ledger is called "carrying" the amount. This term is properly used when it refers to posting from one side to the other of the same account. # 43. To close a ledger, six steps are required. First Step. Enter (red ink) the cash values of accounts showing loss or gain, using the explanation "Inventory." Second Step. Enter (red ink) the difference of accounts showing loss or gain in the lesser side, writing In the explanatory space the title "Loss and Gain." Third Step. Rule the loss and gain accounts; carry (black ink) the inventories to the opposite side below the ruling; post (black ink) the Loss and Gain entries to the opposite side of Loss & Gain account, using for explanation the name of the account you are closing. Fourth Step. Enter (red ink) the difference of Loss & Gain account in the lesser side, writing in the explanatory space the title (usually proprietor) of the account to which the net gain or loss is to be posted, and rule the account. Fifth Step. Post (black ink) the entry of Loss & Gain account to the opposite side of proprietor's account. Enter (red ink) the difference of pro- prietor's account in the lesser side, using explanation "Net Worth," rule the account, and carry (black ink) the net worth to opposite side below the ruling. Sixth Step. Enter (red ink) the difference of accounts that do not show loss or gain in the lesser side, using the explanation "Balance," rule the accounts, and carry (black ink) the balance to the opposite side below the ruling. As a proof of work, trial balances should be taken before and after closing. The form and method of taking inventories are explained in A 95. DIRECTIONS. After taking the trial balance, proceed to close the ledger. Find the cash value of each account except the proprietor's. Cash — ^By counting the cash we could find that the amount held is $2,087.01, which is equal to the balance shown by the ledger account. The account, therefore, shows neither loss nor gain. Merchandise — By taking an inventory or list of all merchandise on hand we could find that the cash value of goods not sold is $6,850. Furniture & Fixtures — By taking an inventory of property charged to this account, we could find that it is now worth $1,050. Teams — No property remains in this account. Expense — Of the property charged to this account, we could find that what remains has a cash value of $40. As directed in the first step, the student will now enter the present inven- tories to the credit of Mdse., Furn. & Fixt., and Exp., as shown in the model, using red ink. As directed in the second step, enter the differences of Mdse., Furn. & PROGRESSIVE BUSINESS ACCOUNTING 25 Fixt., Teams, and Expense, using the posting title Loss & Gain. Open an account with Loss & Gain, five lines below the last account. Rule the loss and gain accounts as directed in the third step, observing closely the model. Place footings between the addition lines and the double closing lines showing the accounts in balance. Carry the inventories down in black ink under the date Jan. 1, 1910. Notice there is no inventory to carry down in Teams account. Post the Loss & Gain entries. As directed in step four, enter the difference of Loss & Gain account, placing in explanatory space the title of the proprietor's account; rule and foot the account. As directed in the fifth step, post to proprietor's account and close that account. The sixth step requires accounts not showing loss or gain to be balanced. There is but one such account in this set, Cash. Rule, foot, and carry balance down as in model. Be particular about the dates. Take a second trial balance after closing, under date Jan. 1, 1910. Write on the back of the trial balance paper the answers to the following QUESTIONS. 1. What kind of property is represented by Furniture & Fixtures account? 2. What does Teams account represent? 3. What does the Expense account represent? 4. What is the cash value of an account? 5. How is the gain of an account found? 6. How is the loss of an account found? 7. What is meant by the term Inventory? 8. How is an account showing gain or loss closed? 9. What is the purpose of opening the Loss & Gain account? 10. What does the balance of the proprietor's account show after receiv- ing the net gain or loss? 11. Why are original entries in the ledger made in red ink? 12. How is a ledger account ruled to show that it is closed? 13. What are done with inventories and balances of accounts after the accounts are closed? 14. Under what date is it customary to carry down the proprietor's net worth, the account balances and the inventories. 15. Give the six steps of closing a ledger. DIRECTION. Submit your work for inspection as instructed in pre- vious exercises. EXERCISE VIII INFORMATION # 44. Purchase or sale of property refers to one person exchanging value with another person. # 45. Property is purchased or sold in exchange for cash, or for other property, or for claims against others. i^ 46. The usual business claims against others are notes or accounts. # 47. Our ledger title for claims held against others in form of notes is Notes Receivable. # 48. Our ledger title for claims not in writing against others is the name of the person against whom the claim is held. 26 PROGRESSIVE BUSINESS ACCOUNTING # 49. Our ledger title for claims in the form of notes held by others against us is Notes Payable. # 50. Our ledger title for the claims not in writing in favor of others is the name of the person who has the claim against us. # 51. Accounts with notes and with persons, like the cash account, are assumed to have a fixed cash value, as they represent an actual amount in money neither more nor less to be paid or received, hence they are not expected to show losses nor gains. For this reason they are called financial accounts, as opposed to the accounts representing things for which money is given or received called commercial accounts. # 52. For convenience in handling accounts, place the commercial account first in a ledger, and the financial account in a second division. The cash account is a financial account, but as it represents actual value in hand, it is placed among the commercial accounts. In a business requiring comparatively many cash entries, the cash account is placed in a separate cover from the rest of the ledger accounts. # 53. When closing a ledger, the financial accounts are left standing without any change other than to balance them, unless their values have been impaired. EXPLANATION. The following exercise will as briefly as possible give the opening, journalizing, posting, and closing of business transactions involv- ing both commercial and financial accounts. DIRECTIONS. Open a ledger of two pages, placing on the first page the titles, J. B. Emery, Proprietor, 6 lines. Cash 8 lines. Merchandise 8 lines, Furniture & Fixtures 5 lines. Expense 5 lines. On page 2, Notes Receivable 5 lines, Notes Payable 5 lines. Below the Notes Payable account enter the personal accounts as they are opened, allowing 5 lines to each. Use a sheet of journal paper, first page for journal entries and reverse page for trial balance and answers. TRANSACTIONS. June 1, 1909. J. B. Emery began business, investing cash $3,000 and one note against D. Minkler for $1,000. Debit Cash, and Notes Receivable. Be sure to give the name of the payer of the note, as this name is to be carried to the explanatory space in the ledger when the posting is done. Paid to Geo. Coleman, store rent to July 1, $40. 2. Bought of Grant & Williams, on account, Mdse. per their invoice dated June 1, $1,850.12. Credit Grant & Williams' account, because that title represents a claim against us given to others in exchange for the Mdse. received. 3. Bought of P. Keenan & Co., furniture and fixtures for store use, per their bill of June 2, amounting to $360.49, giving our 30-day note in payment. Credit Notes Payable, because that account represents a written claim given in exchange for the property. 4. Sold 0. 0. Wolcott, on account, a bill of goods amounting to $69.42. Debit O. O. Wolcott, because that title represents a claim received in exchange for the property. 6. Sold Thomas Stone for his 10-day note, bill of goods amounting to .$211.64. Debit Notes Receivable, because that title represents written claims received. 7. Paid Grant & Williams on account, $500 cash. Debit G. & W., because this is the title of the claim receiving the cash. 8. Received cash of D. Minkler, $1,000, in payment of his note. Credit Notes Receivable, the giving account. PROGRESSIVE BUSINESS ACCOUNTING 27 10. Sold Geo. Taylor, on account, Mdse. per bill, $650.91. 10. Bought of Grant & AVilliams, Mdse. per invoice, on account, $729.40. 30. Bought of Gwinnett, Lyman & Co., for our 60-day note, Mdse. per bill, $2,640.30. DIRECTIONS. After the journal is correctly completed, post all ac- counts, remembering to open accounts with Grant & Williams, 0. 0. Wolcott, and Geo. Taylor. After posting, take a trial balance on reverse side of journal paper, dating the trial balance June 30, 1909 ; then close the ledger. Enter inventories as follows: Merchandise, $4,325; Furniture & Fix- tures, $360.49. The financial accounts are considered worth face. Merchandise and Expense are the only accounts showing losses or gains. Close them into Loss & Gain account, and balance Cash, Notes Receivable, and Notes Payable. Rule only double closing lines when the columns do not require totals to show equality in closing. Post the inventories to the debit of the accounts, under date July 1. Take a trial balance, July 1, using the same balances in the financial accounts on page 2 as in previous trial balance. QUESTIONS. 1. In what three ways is property sold? 2. In what forms are the two usual business claims against others? 3. What is our ledger title for notes in our favor? For notes against us? 4. What is the ledger title for claims against persons on open account? 5. What are financial accounts? 6. What are commercial accounts? 7. How are financial accounts treated when closing the ledger? 8. Why do we debit the name of the person who buys of us on account ? 9. Why do we debit Notes Receivable when a person buys of us for a note? 10. What are included under the title of Notes Payable ? ^ DIRECTIONS. Having completed the work, write the heading at top of the two papers, placing journal above, ledger below; pin carefully as before and pass in for inspection. EXERCISE IX INFORMATION # 54. Labor is a valuable thing which may be ex- changed for cash. A person's labor value is measured commercially by the amount of money he can earn in one year. # 55. Interest or the use of money is a valuable thing measured by the amount of money that one dollar will earn in one year. # 56. Labor account and Interest account enter largely into many kinds of business. 4^ 57. Persons who keep books to show the general results of their labor or business should make a monthly journal entry which shows the result of a month's transactions in labor, cash, etc., and should close the books once each year. :^ 58. The lousiness year does not necessarily begin on January 1. It may begin on the month which makes the starting date most convenient for the work in hand. # 59. A person's small daily receipts and disbursements of cash should be kept in a meorandum book from which the items are to be totalled and charged to the appropriate accounts at the end of the month. 28 PROGRESSIVE BUSINESS ACCOUNTING EXPLANATION. In the following exercise the student will keep the books of a capable young person, showing his accounts with labor and his receipts and disbursements of cash during the year in which he takes the course in a commercial college. Accounts are to be kept with Proprietor, Cash, School Expense, Living Expense, Labor, Interest and Notes Payable. The accounts here kept in a small way are like in nature to accounts of similar titles if kept in a large business. DIRECTIONS. Use a folded sheet of journal paper ; page it 1, 2, 3, and 4. And a folded sheet of ledger paper, paging it 1, 2, 3, and 4. Open accounts in the ledger, allowing John Manning, Proprietor, 10 lines, Cash the remainder of page 1 ; School Expense 15 lines from top of page 2, and Living Expense the remainder of page 2. Labor 15 lines from top of page 3 ; give Interest and Notes Payable equally the remaining space on page 3. Post the entries monthly. TRANSACTIONS. On Sept. 1, 1909, John Manning begins a year's business, the purpose of which is to devote his time in such a way as to make the most use of it. He is a young man who is able to earn $6 per week or $312 per year. "We will consider his coming year's work worth $300. He has on hand cash, $100. He invests the cash and the year's work. Make an opening journal entry, debiting cash $100, Labor $300, and crediting John Manning, Proprietor, $400. Remark: It will be noticed that the proprietor gives to the coming year's work a cash value based on what he could earn as shown by the previous year. If he is able to get more than that amount from his labor, the Labor account at the close of the year will show a gain over expectation. If he gets less than that amount, the result will show a loss. He should so direct his labor as to make it more valuable than it was the year before. ^t^^^^J^ 't^^-f-a^'ytyt^'yt^-'X^iC^^^t^C^ /(PC - ?^^^2-<^<>-^^ >/^ ^ Q-^-^Cytyy^'^-^fM-ft-f^ -<^^'-yCz,d^-«e-^-,<^/'-^i-<>..i^^/4^;»4/< t£jL^. ^Jao- tZ-ii-^^^^ a-^ty!-£tt.,^ , /^^- ^£?C He buys a nine months' scholarship in a business college for $90, and text books and stationery for $10, paying cash. (Debit School Expense, because that part of the business receives value.) Borrowed of his father, Ezra Manning, $150, on a note payable two years from date with interest at 6 per cent, payable semi-annually. Paid Mrs. Close, cash for board and room one month, $13. (Debit Living Expense.) Sept. 30. The Cash memorandum book shows that during the month cash was paid for clothing, for room and board to Jan. 1, 1910; this does not include the first month's board; for entertainments, for society, dues, etc., $55,45, to be charged to Living Expense. There was paid for a diction- ary and a penman's paper, $1.50. Charge to School Expense. During tht» month no time was lost. One month's labor, valued at $25, was therefore given to School Expense. The month's entries of debits and credits are to be grouped in one entry, thus : PROGRESSIVE BUSINESS ACCOUNTING 29 Note that the total debits equal the total credits. As this completes the entries of the month, post to the ledger accounts. Oct. 31. The memo, book shows paid during the month of October for Living $5.30, for School Expense $2. One week's work in school was lost, so that $20 will be considered the amount to pass from Labor account to the School Expense account. (Make a journal entry as in September. Post as before.) Nov. 30. The memo, of cash payments this month shows Living Expense to be $4.20, and School Expense $.30. A full month's labor was passed to School Expense at $25. Dec. 31. Cash payments for month per memo, are : Living Expense $33.90, School Expense $27.80, which includes $22.50 passed from Labor account as two days' school work was lost on account of sickness. (Journalize and post.) Pencil foot the cash account to show amount now remaining. Is the amount there shown $29.05 ? If so, the account is correct. As your business year closes Aug. 31, 1910, instead of Dec. 31, 1909, place the year date 1910 in the date column of all accounts under the last date. Place year under the blue line in about the same way a pencil footing is placed, so as not to interfere with the entry on the next line. Jan. 31, 1910. The cash payments for the month, including three months' board, as per memo, book, are: Living Expense $40.16, School Expense $3.80. One full month's labor is given to School Expense $25. On Jan. 3, borrowed cash $40 of father, Ezra Manning, giving a demand note for the amount.- During the month there was received cash, per memo., for work done on Saturdays, $5.50. The correct entry is as shown below. r^^-^ (^-^i^.^:^ -^-^^^^-.c^^ -^^^^^^t-f-^^y^^iW/ j^^'^a .jL-t-t^-t-'M-^ C-jC^t^-^'Tt'd^ _^=&£:^: _-^_/ .(:>/^t/Cf~i'-^ (i'^ii--^^'£-f^-'^--^'~^fy'--t'^^ i / / o £.,,L..Uy -J-z^-t^ J£J.S- :fa,.^^-!'-iy i£^ iZIk- /1-1,-^^Z^ -^.^a^C^e^ Feb. 28. Cash payments for February, per memo, book, are Living Expense $8.50, School Expense $.80, one-half year's interest on father's note $4.50. Labor passed to School Expense $25. Cash was earned by extra labor during the month $8. (Journalize as in model.) j^^ ML (f.<^^.^Zy ..Ju^^^^^e,■iZ-^.^:^^^^■^:a^^y'^e£^J,. r j ¥ J ^^ '}fc 30 PROGRESSIVE BUSINESS ACCOUNTING Pencil foot the cash account to see the amount of cash on hand. If $24.79 is shown, the amount is correct. March 31. The cash memo, shows paid for Living Expense $3.13, School Expense $.80, Labor passed to School Expense $25. Cash was earned during the month by extra labor, $7.50. April 30. The cash memo, shows paid for Living Expense $15.20, School $.20. Passed to School Expense from Labor account, $25. Earned during the month by extra labor $8. Is the cash on hand shown to be $20.96? May 31. Living Expenses in cash for month $15.50, School Expenses $30.50, of which $5.50 is credited to Cash and $25 to Labor.- Earned during the month, $7.25 in cash. The nine months' course in college is now completed. Compare cash receipts with cash payments to see amount on hand. If correct, the books should show a balance of $7.21. June 6. Began work for the Drew Manufacturing Co., as assistant book- keeper, receiving a temporary salary of $9 per week. (Copy this memo, in the explanatory space of the journal, entering the date but no titles or amounts.) June 30. From the memo, book appears the following cash and labor items for the month : Paid for sundry items to be charged to Living Expense, $21. Received month's salary in cash, $27. (Debit Living Expense and Cash; credit Labor and Cash.) July 31. Received July salary in casli, $38. Paid during the month, cash for Living Expense, $19.50. Aug. 31. Received August salary in cash, $40. Paid for living expenses during the month, $20.25, and for the demand note to Ezra Manning, $40; also interest on the demand note, $1.59, and six months' interest on the $150 note, $4.50, making the interest in all, $6.09. After all entries are posted, take a trial balance on an extra half sheet of the journal paper. The Drew Mfg. Co. have offered John Manning a salary of $60 per month for the ensuing year, which he has accepted. (Make memo, in journal.) Preparatory to closing ledger, account of cash on hand is made showing $5.37. The salary earning capacity for the ensuing year is $720, to which an inventory value of $700 is given. Enter this inventory to the credit of Labor account, and carry the gains or losses of School Expense, Living Expense, Labor, and Interest through Loss and Gain account to the pro- prietor's account and close that account. Close the proprietor's account, carrying down the net worth. Take a trial balance. On the reverse side of the trial balance, write answers to QUESTIONS. 1. Has labor a cash value in business? 2. How is the value of labor measured? 3. How is the use of money valued? 4. How often should the earnings of labor and the personal expenses be entered in the journal? 5. Does a business year always begin on January 1? 6. How often should the ledger of one's personal business be closed? DIRECTION. Submit your work for examination. PROGRESSIVE BUSINESS ACCOUNTING 31 EXERCISE X INFORMATION # 60. The common transactions in a mercantile busi- ness are of three kinds: (1) the purchase of merchandise, (2) the sale of merchandise, (3) the handling of cash. #G1. In addition to the above kinds of transactions, there are a number of unclassified transactions. #62. A standard system of bookkeeping divides the original entries among four books, viz. : the Purchase Book, the Sales Book, the Cash Book and the Journal. #63. The Purchase Book contains the entries for the purchases of mer- chandise. #64:. The Sales Book contains the entries for all sales of merchandise. #65. The Cash Book contaihs the entries for all receipts or payments of cash. #66. The Journal contains all entries not provided for in the other three books. #61. By dividing the original entries among four books, the amount of posting can be reduced, the entries can be more conveniently made, and the records of past transactions can be found more readily. #68. In a mercantile or buying and selling business, the accounts with persons require the most careful use of explanatory columns in the ledger, because the facts of an account are repeatedly referred to when paying or collecting bills. #69. The ledger should be divided into three parts: (1) general ac- counts, (2) purchase accounts, (3) sales accounts. When a business becomes large enough, these three parts are placed in three separate ledgers. #10. All purchases of merchandise are footed in the purchase book and the total is posted to the debit of the Merchandise account on the last day of the month. #11. The cash book is so arranged that the debit and credit footings are the same as they would be if posted to the ledger, hence no cash account is required in the ledger. EXPLANATION. In this exercise the student will make illustrative entries in the four books of original entry above outlined, will post same and will take a trial balance. Keep clearly in mind that every transaction involves a debit and a credit.. Also keep inniind that where there are many debits to Merchandise in the purchase book, or many credits to Merchandise in the sales book, much time and labor can be saved by posting all of the entries in one total rather than by posting one at a time. DIRECTIONS. Take one folded sheet and one half sheet of journal paper. Page the folded sheet 1, 2, 3, and 4, and the half sheet page 1. Use page 1 of the folded sheet for the purchase book, pages 2 and 3 for a cash book, and page 4 for a sales book. Use page 1 of the half sheet for the journal and head them as shown in model. Take a folded sheet of ledger paper and page it 1, 2, 3, and 4. Use pagt-s 1 and 2 for general accounts, 3 for purchase accounts, and 4 for sales accounts. "Write these headings on the ledger as on the other books. Divide the ledger space equally among the six accounts on pages 1 and 2. Clayton Smith, Propr., Merchandise, Furniture & Fixtures, Expense, Notes Payable, Notes 32 PROGRESSIVE BUSINESS ACCOUNTING Keceivable. Space the personal accounts one-third page each as required. It is important that the student follow all instructions as outlined in the notes following the transactions. ^ -|^.^g8.W^^>?^^<^^^>z^.^::gv€y -ta-^-^^g-V - ^.:t.<^ ^^^^■' TRANSACTIONS. July 1, 1909. Clayton Smith began business as a dealer in galvanized grain bins used by farmers for storing wheat, oats, barley, etc. He invested cash $500. A memo, of the opening should be made in the journal. (See model.) The cash invested should be entered in the debit side of the cash book. This entry has the effect of debiting Cash because the cash book is the cash account. The account of Clayton Smith, the proprietor, is credited from the cash book. Notice that there is space in the cash book for title to be posted, and for explanation. After making the entry debiting Cash, post from debit side of cash book to credit side of proprietor's account. In the ledger folio space write "C2" to show that the posting was taken from the cash book page 2. After posting, place the ledger page in the folio column of the cash book. Paid cash for rent of ware house one month $15. This should be entered in the credit side of the cash book, thus crediting the Cash account. The debit title, Expense, is written in the title column and the explanation follows. (See model.) After entry, post at once to the debit of Expense. Post mark in cash book. What account is debited? What account is credited? Bought an office desk and chairs for cash $12. (Enter in cash book an^ post to Furniture & Fixtures.) Purchase of property other than merchandise cannot be entered in the purchase book as the total purchases charge to Mdse. Paid for a desk room in an office one month $6. -%4- ^> l&^tXg»^'»^t-.^-e:<€-<-l^U>^ >/'Z..i^'^i^y^^<.'ay'-T^ (Se-'.^i^ ijf / a f- y/ -/^>A> i> >/-f '-A/c / - /^a. /^ JZ. 2 ^ /6 •y^«g>->-^-->-^-OT^-tf'. c>^J-t^i-'C.^^ ^^1? "Y.y :i - / j'a a .^^.^^<^ ;^' /-^^^^rx^ (S^^/ /x " J- f"' -££- l^ x^Lg.g,g^g^<;:::^t:-^^^itv<-^^ f /> aL-^>t^zi. ' ^y kjT'-- /i^-.>-^^^C^'^^pz^'4-r--tx.<:<,,^~^^ a^ /o. w / — 7^' / a o — // / yJ^-tzL..^^ oA^ J^ ^^^ @ $108 @ $120 @ $132 to pay balance due on bill July 12. Received invoice from Waterloo Metal Culvert Co., on 30 days account consisting of 6 metal grain bins 1000 bu. 4 '' " '' 1250 bu. 1 '' '' " 1500 bu. July 14. Sent cash to Waterloo M. C. Co. of July 5, $54. Enter in cash book as before and post to debit of Waterloo Metal Culvert Co. Observe that the two debits of $54 each equal the one credit of $108. This shows that the bill is paid. When a bill is paid make X mark opposite the credit and the balancing debit amounts to show that settlement of that part has been made. (See model.) July 15. Sold AVilliam Floyd 1 grain bin, 1000 bu., on account, $135. Enter in sales book as shown in model. Open account with William Floyd at top of page 4 of ledger. Enter ledger page in sales book after posting. Sold Frank Lightfoot, on account, 3 grain bins, 1250 bu., @ $150, 1 grain bin, 1,500 bu., @ $165. (Open account page 4, one-third down the page.) Received of Frank Lightfoot, cash to apply on above purchase, $350. Enter in the debit side of cash book as in model and post to the credit of Frank Lightfoot's account. July 16. Bought of Manning, Dale & Co., 2 metal grain bins, 1,200 '.u., @ $112.50; 2 metal grain bins, 800 bu., @ $90.00, on account. Enter in purchase book and open account as before. Remember that purchase accounts are on page 3 of ledger. Paid Waterloo Metal Culvert Co., on account, $500. Enter in cash book; post to ledger. Paid xVTanning, Dale & Co., cash on account, $50. July 17. Sold George Taylor, on his 30-day note, 2 M. D. & Co. 800 Ini. bins @ $112.50. Enter in sales book as in model. Post to Notes Receivable account in ledger. Sold George Gerry on account 1 M. D. & Co. 1200 bu. bin @ $140. Open account on page 4. PROGRESSIVE BUSINESS ACCOUNTING 35 -L-L'^rff ■ . . j^ /a ' ¥■ M:Z.^Z^-r>^^^<^^.,'^t^^ VJ " /- /a-t>-iiM^ M^. d^a. /It^vJ /^ J - ^S^c-.,.'rt^^i,^:/^.^-.U^a*-^-^^ 5^ ^—/j^^.U*<^ -^^^ dy. d^ -1^,^^ ,Jl,. i^^y<:^^/f^^jLJ::^-^A-i^^. --iZc^,^^ z^^- fA". / /-/J^s . " ., /VV- ^< ^^^u^^....^^^.^.^-.^^,.^ y^ 2^-/^>^f.*jL<^ ^i'n^a^ &^ -lO.^,^^ /^^r-- / /J^^-Z-tJ „ '■ /kT^- J/ P^^-^^L.^ (f.^ ^ J' 6 Sold Edward Read for his 6 months' note, 3 AV. M. C. & Co. 1000 bu. bins @ $135, 1 M. D. & Co. 1200 bu. bin @ $140. Enter and post to Notes Receivable. July 22. Sent AVaterloo M. C. Co. a 60-day note for $760 to balance their account. A journal entry is required. Debit W. M. C. Co.; credit Notes Payable. See model entry. When posting, use X marks. Received cash of William Floyd in full of account, $135, Place X marks before the amounts to show payment. July 24. Sold William Floyd on account 2 AV. M. C. Co. 1000 bu. bins @ $135, 1 W. M. C. Co. 1250 bu. bin @ $150. Bought of Waterloo Metal Culvert Co., giving in payment a 90-day note, 5 W. M. C. Co. 1000 bu. bins @ $108, 1 W. M. C. Co. 750 bu. bin @ $100. Post to credit of Notes Payable. July 31. Paid for livery hire $18, cash. (Charge Expense.) DIRECTIONS. As this is the close of the month, totals are to be posted and a trial balance taken. Rule an addition line at the foot of the amounts in the purchase book, foot and double rule as shown in model. All of the items in this book have been posted to the credit of the firms from whom the purchases were made. The total is to be posted to the debit of the merchandise account. Indicate this posting and post mark as there shown. Foot, rule, and post total of sales book to the credit of the Merchandise account. Pencil foot the debit and credit columns of the cash book, and carry the pencil footings to the second line. The total receipts less the footings to the second line as shown in model. The total receipts less the 36 PROGRESSIVE BUSINESS ACCOUNTING total payments, shows a cash balance of $245.50 remaining. Enter this bal- ance in the credit side in red ink and rule addition lines on the final debit and credit column. Be sure to rule the addition lines at equal distances from the top,, not one above the other. After ruling, carry the balance below the ruled space as in model. Take a trial balance, entering the cash balance first, and the ledger accounts after. This is to be placed below the entries on page 1 of the journal. Close the ledger; the financial accounts following expense need not be balanced. The inventories are: Mdse. 6—1000 bu. W. M. C. Co. bins @ $108, 1—750 bu. W. M. C. Co. bin @ $100. Furniture & Fixtures, valued at $20. Place the Loss & Gain account at foot of page 2. Take a trial balance after closing and copy it below the trial balance already taken. On the back of the journal sheet write answers to the following QUESTIONS. 1. What are the three common kinds of transactions in a mercantile business? 2. Are there occasionally other kinds of transactions? 3. What four books of original entry may be used? 4. What entries does the purchase book contain? 5. What entries does the sales book contain? G. What entries does the cash book contain? 7. What entries does the journal contain? 8. By dividing the original entries among four books, what three advantages are secured? 9. What can you say of the use of the explanatory column of the ledger in personal accounts. 10. The ledger is divided into what three parts? 11. When a purchase book is used, how is Mdse. debit posted? 12. When a sales book is used, how is the Mdse. credit posted? 13. Why are the cash book totals not posted to the cash account in the ledger ? 14. How is the cash book balanced? 15. What two books must be referred to in taking a trial balance? DIRECTIONS. After answering the above questions, pin your work as before directed, purchase book at top, then ledger, then journal, with ques- tions at back, and submit for inspection. " "^vjvi^i PROGRESSIVE BUSINESS ACCOUNTING 37 Set A BUSINESS PRACTICE TO THE STUDENT : If you have mastered the principles presented in the preceding ten exer- cises, you will find the following work not only comparg-tively easy, but very profitable as well. At this point, you are to begin business transactions in your own name. You will make business papers, handle cash, buy and sell, collect accounts and in other ways conduct your business as a business man. If you are independent in action, if you use your own mind to think out your problems, if you are industrious, patient and thoughtful, you will develop into one of the most valued members of society — a well-poised business man. Kindly remember that however important a person's work, he cannot afford to slight the details, for the little things like small coins will eventually amount to important values. Never avoid any sensible problem, however hard. Grind the rough kernels of the business world into the finest flour. Remember that of the thousands that have a smattering of bookkeeping knowledge, very few are masters of accounting. The few that are masters can command business success at almost any time, almost any- where. EXPLANATION. You are to begin a jobbing business which you will own as sole proprietor. You will be instructed, as each transaction arises, how to conduct it in the proper way, how to prepare the proper papers, etc. You will begin business with a capital in cash. This you will take care of exactly as a good business man should. The work is divided into periods for the purpose of measuring your progress, but these periods need not inter- fere with your always using the current date for your transactions. Keep your desk, books, papers, etc., in such a condition that any matter of past business can be referred to promptly when desired. DIRECTIONS. Have journal, cash book, purchase book, sales book, and ledger ready for use. The Journal, Cash, and Trial Balance will be a book of twelve pages. Use pages 1, 2, and 3 for Journal; 4, 5, 6, and 7 for Cash Book, and pages 8, 9, 10 and 11 for Trial Balances and Statements. The Purchase Book, Sales Book and Inventory Book will be in one cover. Use twelve pages, 1 and 2 for the Purchase Book, 3 to 10 for the Sales Book, and 11 and 12 for Inventories. The Ledger will require four folded sheets with the index at the front. Page it 1 to 14, beginning with the sheet following the index. Allow pages 1 to 6 for general accounts, 7 to 9 for purchase accounts, and 10 to 14 for sales accounts. INFORMATION # 80. In a ledger of any size it is necessary to transfer all of the titles to an alphabetical list called an index. (See model.) The titles are entered as written in the ledger with the page on which the account may be found following, so that the page on which any desired account is kept may be promptly found. In the case of the names of persons or firms, the surname is placed first, followed by the initials or given name. A book- keeper should form the habit of indexing accounts as soon as entered. 38 PROGRESSIVE BUSINESS ACCOUNTING INDEX. 1 & J R (^^^^^a^^- (^^^V-^-^->^if..^£^-.^^^:t^-/^ T^e^^'>-^^t.-?^-fs£w<^ 1>?r^ (^ L2. .^:C/^^^::2^rf^<^--<-g^'^-^i^ - 7 Q^U■■7^^■^ . J^-i^-i^'ny 'yh'Z^e^^l.-V^ ^^^.^^ y-^-. IjZ ^^^g<^C-.^U^ ..g^»^ M^r^. .e^^:n^c^ / <~-pC-^£-'?1.-»,^^ ^ ^%,it-?£v -f^g;^-.^^:^..^^^,.^^ /^ o w CZ'C^^^^-.-'yz-^^iti^cA^^ I, X & Y PROGRESSIVE BUSINESS ACCOUNTING 39 DIRECTIONS. Place the following general accounts in your ledger and index them when placed: Student's name, Proprietor 1, Merchandise and Furniture & Fixtures 2 (each one-half page), Expense 3, Interest & Dis- count and Merchandise Discount 4 (each one-half page), Notes Payable and Notes Receivable 6 (each one-half page). When purchase or sales accounts are opened, allow each one-third page, beginning with the first page of the purchase or sales divisions. EXPLANATION. Your business in the following transactions is that of Jobber, a person who buys from manufacturers or importers and sells to dealers certain commodities in quantities. Your location is that of an im- portant trade center and your dealings will be with city customers. A 1. Begin business with a cash capital of $5,000. DIRECTIONS. The currency for opening is at the desk of the teacher, who has it in charge for you. Count the money carefully and if correct, make the opening entry. Use the local address and the current date. Make memo, of the opening in the journal (see form in Ex. X). Make entry for posting in cash book as in Ex. X, and post to the credit of the proprietor's ledger account. Do not forget to post mark. Place the currency in your cash drawer. Do not proceed until you are sure that you actually have the right amount of cash, and that the journal, cash book, and ledger records are correct. INFORMATION # 81. It is the principal business of a bank to keep on deposit the cash of business men and to lend them money when they require it. Business men usually deposit the greater part of their cash on hand, so as to avoid the risk of carrying any large amount of money in the cash drawer. The money deposited remains in the bank subject to the order of the depositor. The banks require that when cash is deposited, the depos- itor make a deposit ticket on which is given the date, name of depositor, OSITIiO BY DEPOSITED IN THE Citizens Savings Banii WATERLOO, lOfVA :Z 190-^ FIRST NATIONAL BANK OF WATERLOO, IOWA By Specify the banks on which check* are drawn Dollars Cents Banlc Kotf \^iP ^ Gold Silver Check$ PLEASE LIST EACH CHECK SEPARATELY DOLLARS CENTS f /^ ^o :? / / ^2. f "^ J^ t^<3 ' V ^ y^C 7^' 40 PROGRESSIVE BUSINESS ACCOUNTING and the amount and kind of money deposited. The bank provides a pass book, to be held by the depositor. In this book the bank teller places the date and amount of each deposit. These entries in the pass book are in the nature of a receipt for all moneys left. The pass book is carried by the depositor and should always be taken to the bank when a deposit is to be made. A 2. Deposit in the bank all cash on hand, $5,000. Place the bills neatly, right side up, with deposit ticket at top, and all in the pass book. Secure a package of deposit tickets and pass book of your banker. In passing any papers out, write the transaction number in the upper left corner. The teller of the bank will require you to leave your signature in a book or on cards kept for that purpose, to compare with other signatures of yours on other papers. Having made the deposit, examine the pass book to see that the teller has entered the amount correctly. INFORMATION # 82. A check is an order drawn on a bank, directing the bank to pay a certain sum of money to the proper person presenting it. The bank, after paying the check, charges the amount against the amount to the credit of the depositor. The check should be filled in writing with great care, to guard against its being altered by any persons who handle it. A check is usually made payable to the order of some person, which signifies that the person to whom it is written (called the payee) can either present it to the bank, or he can pass it as cash to some other person by indorsement ; i. e., writing name across the back, and the latter person can present it for payment. The person , drawing or signing the check is called the drawer. The bank on whom the check is drawn is called the drawee. Checks are most conveniently kept in books, from which they may be removed as issued. The part remaining in the book is called the stub, and on it is the full record of the check. The stub should also show the balance in the bank, each check amount being deducted from the previous balance and the remainder carried forward to the next stub. The check stub should be filled before filling the check. See model stub and check. Ko.-ZL- FOR Bro't (or'd Deposited Total This Check C«r'd for'd <^^/l? Walerloo, Iowa, J^"4v^^ / , 19^2^ No.^ Pay tn <^^-^g'<^-^>'3^t-^g^o-t-^:^^-.g-^^ (£U^z:Lr!L:zl^ (^ nr Order, $!^^!£J3i: y^ j^ "^.^ — ■ — — Dollars i^r4g*^€<>^^x^>^-gZ Ot-t^^'-i^ / f^ / f d? f. ^ /. 7 ^=.^-Ei:«e.>^ A 11. Buy of Kuhn, Aldrich & Co. the following goods : 20 bx. #1 Chocolate. 20 cs. Condor Coffee. 10 cs. Gem Glucose Syrup. 10 cs. Good Quality Ground Pepper. 25 pi. Town Talk Mixed Candy. Milwaukee, Wis. Q^^^n^ /^r'/^/?a. Please deliver ^ k/^—^J^. ^^z^*t22iL ./^TZ-C^-^f-^-^ C-^t!g-<;>-Z.--g:tS^ Terms ^^''^^^z^ PROGRESSIVE BUSINESS ACCOUNTING 43 DIRECTIONS. The order for the goods should be written on an order sheet, of which a carbon copj^ is to be retained in the office. Insert the carbon carefully between the sheets and write the order with pencil as shown in the form. Kemove the upper sheet and take it to the office of Kuhn, Aldrich & Co., who will bill the goods to you at ten days. On receipt of the bill, compare it with the order, and if the goods delivered are as ordered, compute the extensions and addition. If found correct, write O. K. and your initials at the bottom of the bill. Fold the bill so that it will easily slip into your voucher file, stamp it with a voucher stamp on the back, and show that the debit title is Mdse. and the credit title is K. A. & Co. Enter the bill in your purchase book, as in model, and place the bill (V. #6) in the file for vouchers payable. ■%>^^ • Cht-t=^.^.^.e^ yi.^^ 'Z/'^ X 'J_J_J- ro Open an account with the firm of whom purchased at the top of page 7 of your ledger, index the account, and post the credit, writing in the explanatory space of ledger "V. :^6 a/c 10 da.," folio mark in ledger and in purchase book. A 12. Buy of Esmond Canning Co. on account: 15 cs. Ideal Tomatoes. 15 cs. Red Raspberries. 50 cs. Royal Sweet Corn. 50 cs. Lima Beans. 10 cs. Holt Co. Gooseberries. DIRECTIONS. Fill the order sheet, present it, and receive bill, which you will audit, and enter as before. Be careful that no mistakes in billing are made. Note carefully the terms. Stamp "V. #7" and show debit and credit titles as instructed in A3. Enter in the purchase book and file the vouchers with vouchers payable. Open an account with Esmond Canning Co. on page 7, one-third from top. Index, post, and post mark. Notice that the terms of this bill differ from the terms of the previous bill. A 13. Buy of the Ajax Biscuit Co. on account: 10 doz. 1:;^ Box Oatmeal Crackers. 20 doz. 1# Box Graham Crackers. 20 cs. Big White Elephant Biscuit. 50 doz. 3# Soda Crackers. 10 doz. 1# Delicoes. 5 can 12# Emperor Bars. 5 can 10:#: Mapline Wafers. Proceed as before. The character # after a number moans pounds. A 14. Sell to W. A. Damon, 129 Sixth St., on account 10 days: 1 bx. #1 Chocolate 2 pi. T. T. Mixed Candy 1 cs. 10# G. G. Syrup 5 cs. Royal Sweet Corn 2 cs. B. AV. Elephant Biscuit @ @ @ (5) $4.20 $2.40 $2.50 $2.05 $2.35 44 PROGRESSIVE BUSINESS ACCOUNTING DIRECTION. Make a full entry of this sale in Sales Book as shown in the model form below: £_/_£. ^^r>^^:l^^->-^-.^^^^^y ^a^/ ,1 ^i^y / ^ ^ ■Qg^l^^-g^^.^^ ^ i Ji ^-^iii^ -^^ ^fe.<,^J^y~ , J. / ^AJ- Copy this sale on a bill head, using one of your bills received as a model. When the bill is correct deliver it to W. A. Damon. Open an account with W. A. Damon at the top of page 10 and index it. Do not forget to place the street number after the name of the account. The street number may not be mentioned again in future transactions, but should be found by referring to the ledger. Post the sale to the debit of this account, naming the terms as in purchase entries. A 15. Sell Cole & Camp, 38 Market St., at 10 days net: 10 cs. Lima Beans @ $1.90 2 cs. Condor Coffee @ $8.20 5 doz. !:#: Graham Crackers @ $1.30 8 doz. 3# Sodas @ $3.00 1 can 12# Emperor Bars @ $1.68 1 can 10# Mapline Wafers @ $1.80 Enter and bill as before. Open the account on page 10, one-third from top. Hereafter bill sales at 10 days net until otherwise directed. A 16. Sell DeLong & Co., 1248 Ebersole Ave., 2 cs. Holt Co. Gooseberries @ $2.60 1 cs. Red Raspberries @ $2.90 1 cs. 1/4 # Extra Pepper @ $3.00 10 cs. Ideal Tomatoes @ $2.60 2 doz. 1# Oatmeal Crackers @ $1.30 Enter and bill as before. J^^fi'71.^^ :2.\^ (S'e >-<^^yt^>t^i^ y^.s^^>L-^ . Vry f^ yJ l 4^JL^ -JS;t£^:^^c^i::J'^ /iPU(^y ^ kJ~ c-^ ^-^^ ■^ y.J. JAu. -L^ -^^-^ y^t^ y^?2^t--»L^>e/ i^-t^-fi^t^Y :^v ^ _2_i£ *'~^J<^ ■-c:><^^,.i-t-<<-^ ^-^-.t^ clt<-a^ a.-i&^^lii-^Lt,^ j^LAj. / J' i/- -;2^ LJi- ^^^^^--Ztjz.^ ^^ a ^ ^KJ PROGRESSIVE BUSINESS ACCOUNTING 45 ^ ^ — t^-;^;^ yp^-^^fi-^ T^^^^^-^^ot-^.-,^.-^^^ ^-^-t^o-^-^^ ^y <^Ag^ -i^S-.^ -TgP.g-<£^^^-^:Cg^t^ ^ >;-.^ 2 4/: (t^ -t^. ^ ^^ '^^^ -^ / ^^^^-^^^^-y^ty i:t-i-.^,:f^^ /j££ J/ lau- atory part of the receipt write "To apply on account.") A 34. Sell Courtney & Son, usual terms: 4 bx. D. Peaches (g $5.40 1 can 10# Mapline Wafers @ $1.80 2 cs. Big W. Elephant @ $2.40 6 cs. Red Raspberries (5) $2.90 2 bx. 12# Chocolate @ $4.20 INFORMATION # 84. The Merchandise Discount account is kept to show the amounts allowed for the payment of bills before they are due. Wholesale houses bill their sales on 30 days, 60 days, 4 months, 6 months or other period of time, the period usually being governed by the kind of goods sold. Quick payment is desirable. To encourage the customer to pay promptly, an allowance of 1%, 2%, 6%, or other rate according to contract, may be deducted from the bill. The amount paid in settlement is called the net amount, and the amount deducted is called the Merchandise Dis- count. If you owe Esmond Canning Co. $259.00 for goods billed 2/10 n/60 (2% discount if paid in 10 days or full amount if paid in 60 days), the dis- count if paid within the 10 days period would be $5.18 and the cash payment would be $253.82. The journal entry for the payment would be as shown in model. The debit would be posted to the Esmond Canning Co. 's account in the ledger. The cash credit would be posted to the cash book without using the title column as in model, and the Mdse. Disc't would be posted to the ledger. 48 PROGRESSIVE BUSINESS ACCOUNTING /ffif Jh*^-'^7 C'^^ft-r f t^ dtt-tn^n^^n^di, \ i^^^ jj-^f. ■ U:^. a^ (i^-tg^ i ^ IN ACCOUNT WITH ^ '.^t yj^t^^w y/c,^g^^V / ^ i^/ Z ^. ^. ^ 'J^ i-^ i2 -.^^ ' ^^^ y^^ ^ z^ ^L Y^p V /^ i;_ ^w/ v£^- A 91. Receive statements from Kuhn, Aldrich & Co., Esmond Canning Co., and Ajax Biscuit Co. Compare these statements with the accounts in your ledger and if they agree, place them in j^our file of miscellaneous papers. A 92. Make out statements for all of your customers showing unsettled accounts, eight in number, and present the statements. A 93. Receive cash of W. A. Damon in full of his account. Receipt the statement which you handed him. A 94. Balance your cash book and take a trial balance of your accounts. Record the trial balance on page 9 of the trial balance book. Remember that totals of purchase and sales books must be posted before taking trial balance. Review in Ex. VII. Infor. #36, 37, 38, 39, and 40. INFORMATION # 94. An inventory is a list of property or value at hand pertaining to any given account. Merchandise or other chattels are 56 PROGRESSIVE BUSINESS ACCOUNTING j7^L^.^t.^£.4...*:i..ri.-C^^^^.^^^^ / ^^^. inventoried from an actual count of the items on hand listed on journal ruling. After the list is taken, a price is placed on each kind. This price is the present market value, or what it would take to replace the goods — not the selling price. The extensions are then made, and the total is called the inventory value or cash value of the account. (For liability inventory, see Infor. #140.) PROGRESSIVE BUSINESS ACCOUNTING 57 '^j2-t:^^.^^4^Z^ <£■uct>L^€.^..^y (2^ Ihi^^ c^^^-^f^Z^^^ I^,^;^^ 1k..„L.?l^.,^^^^.a,t.^-^'lt.^Z.^ .(// i/-a yc^Zi-^^'-f^ i:Z'^--g^,.-L'C,,ei^^L^ y-(^ ^^ -UZ ^<>^^/i:^c^ ^t/"<7 /c^ A 95. Find the cash value of the Merchandise, Furniture & Fixtures, and Expense accounts. The items of the inventories and the prices are shown in the model form. Copy these inventories on page 11 of the purchase and sales book, extend the prices where needed and find the totals. Caution: It is advisable to make these difficult lists on loose paper until they are found to be absolutely correct. They can then be copied in the permanent books. INFORMATION # 95. When the books are to be closed, in addition to the inventories of property, there should be taken lists of the notes receiv- able, accounts receivable, notes payable and accounts payable. These, to- gether with the cash balance, should be placed in the inventor}^ book, so that complete detailed lists of all resources and liabilities may bo found, if looked for, in one place under one date. 58 PROGRESSIVE BUSINESS ACCOUNTING A 96. Place the cash balance in page 12 of inventories as in model. Make a list of the notes which you received and now have on hand on the same page, total the list and compare the total with the Notes Receivable balance in the trial balance. Make a list of the Accounts Receivable balances from the ledger. Total the list and compare the total with the total of accounts due you in the trial balance. Make a list of the notes payable from the stubs of the notes payable book. Omit the one that is paid. Compare this list with the balance of Notes Payable in the trial balance. Make a list of the Accounts Payable, taking the amounts from the vouchers payable tile. Compare this list with the total of balances due others found in the trial balance. INFORMATION # 96. A Statement of the Business is a formal list of all resources and their total, of all liabilities and their total, and the differ- ence between totals of resources and liabilities showing the net worth. Statements aie made periodically to show the progress or condition of the business to those who are financially interested. A complete statement requires also a detailed exhibit of the gains and losses. The model form is a correct statement of the present business. A 97. Make a statement of your business : On journal paper, after writing the heading, copy the resources and liabilities from your inventory book and find the difference, which is your net worth. You will observe that five of the commercial accounts show a balance on the ledger either greater or less than the cash value of the inventory. These are Merchandise, ledger Dr. balance $2,320.68 Inventory $2,812.45 Furniture & Fixtures, ledger Dr. balance 452.00 '' 295.00 Expense '' " " 162.32 " .... 25.50 Interest & Discount " " " .43 " none Mdse. Disci " Cr. " 20.14 " .... none Remember that a resource inventory is properly an additional credit to an account; therefore, those accounts having resource inventories plus credit total greater than the debit totals show gains. Those accounts having a debit total greater than the resource inventories plus the credit totals (if any) show losses. Thus, the following accounts show gains : Merchandise and Merchan- dise Discount. The following show loss: Furniture & Fixtures, Expense, and Interest & Discount. Place the gains first on the statement, as follows: Mdse. sales from ledger $4,230.67, plus Inventory $2,812.45, less Mdse. purchases $6551.35. Mdse. Disct. received $34.45, less allowed $14.31. Afterward place the losses as follows : Furn. & Fixt. purchases $452, less inventory $295. Expense, purchases $162.32, less inventory $25.50. Int. & Disct. allowed 70 cts., less received 27 cts. From the total gains subtract the total lo.sses. The result is the net gain. To the net gain add the proprietor's worth at starting. The result is the present net worth, equal to the net worth shown by the difference between resources and liabilities given above. Rule and finish the statement as in model. PROGRESSIVE BUSINESS ACCOUNTING 59 Cly .^^^..^^^^£^t..£^7.^A^. /^^^. /'Z'tf-i.£-^^^i.Z-u--ti.-^i^^ ^.Af-'f-^'n^C^-t-Y £Z. Uc; >tSt..-^-^ / i J }J a. /^ d Z^ ^•^^^--e.-e-e.^-v-e-^ A^-J- " ^^'^^t-«^-.^.^-^ tjj£ 2ayee. 5. Define indorser. 68 PROGRESSIVE BUSINESS ACCOUiNTING 6. What is meant by the term negotiable paper? 7. Define sight draft ; time draft. 8. Define indorsement in blank ; indorsement in full. 9. How is a draft accepted? 10. How are drafts collected? 11. What is a cash item as applied to drafts? 12. When is a draft a collection item? 13. What is the usual method of sending cash by mail? 14. What ledger title is used to indicate accepted drafts by the acceptor? 15. How does a bank check differ in use from a draft? EXERCISE XIV INFORMATION # 115. Persons invest in business not only cash, but any other kinds of value they may possess. Frequently several kinds of property are invested. When such is the case, an account is opened with each part invested, and the proprietor is credited with their sum. # 116. Frequently the proprietor has debts to pay which are included as liabilities of the business. When such is the case, the liabilities are cred- ited to the appropriate accounts and the proprietor is debited with their sum. :^117. The difference between the resources and the liabilities included in the proprietor's investment is his net worth and should be placed to his credit. 4^ 118. Frequently a large number of accounts or notes receivable, or accounts or notes payable are entered in the investment. When such is the case, the titles of the accounts are not entered in the journal, but are grouped and the accounts are opened in the ledger from a list which should accom- pany the inventories of other property. EXPLANATION. This exercise presents to the student a number of opening entries to be journalized but not posted. The first one will be dated Feb. 22, and those following may be numbered consecutively from 22 upward. DIRECTIONS. Page a half sheet j-ournal, and enter each investment as given. Remember that each is assumed to belong to a separate business; i. e., that no entry has any connection with the other entries. TRANSACTIONS. Feb. 22. Henry Patterson opens a grain and feed business at 158 Quincy St., investing the following: Cash, $820.60; Mdse. per inventory, $1,398.20; Furniture & Fixtures per inventory, $129.50. Enter the full memoranda, then debit the three accounts mentioned and credit the proprietor with their sum. 23. W. B. Jones begins business as dealer in coal and wood, investing stock on hand per inventory, $4,291.80; coal yard and buildings, $3,000; forty-eight accounts receivable in ledger as per list, $1,429.80. Skip two lines between opening entries. 24. Thomas Hunter opens a hotel business, investing cash $2,500; build- ing and ground, $7,500; Furniture & Fixtures per inventory, $3,490; fifteen notes due from others as per list, $2,140.60. 25. John Erickson begins a farming business, investing cash $42.90; 160 acres of land and buildings, $12,800; live stock, per inventory, $2,140; machinery and tools, $742.60. PROGRESSIVE BUSINESS ACCOUNTING 69 26. Conrad Oliver opens a grocery store, investing as follows: Cash, $300; building and grounds, $2,750. He owes the following to be paid out of the business: Note due the bank, $600. 27. Henry Ahlman begins the hardware business, investing cash, $492.81 ; stock of goods per inventory, $6,291.83; Furniture & Fixtures per inventory, $320.80; sundry notes receivable per list, $2,942.80. He owes sundry notes per list $1,291.80, and sundry accounts per list $1,692.41. 28. H. A. Smith begins a dry goods business, investing cash $1,205; stock of goods, $7,390.40; sundry accounts receivable, $500.59. He owes sundry notes payable $3,491.60, and sundry accounts payable $2,691.49. U^ ^^^^z '^.^^^ -/^;:zi?>^ .^..m ■:i f ^ •^-^y L^ ^-^-^^ ^^^^g^z-^^ ^y^^^^ ZZ-^LiL^ g^<5g-^^<»^^>^^^J^^>^ V^ U^- yk^^rL.i.^/^tZ:t^^^^- vi.^ / ^y ^.U-,^^^^^ ■_ <^:?ez,^/^^ yf^,}/. Jil^l/iJ P^LtC^^- /^ f rji cB^^^-^-^fiyk '^- <^__{_:^^ "^ J(^ A/Al/t. tf t^^^it^y ^^.:^-^/^>..Je;Z^ Ll^jl i^^^u^^ ^::^U^ ^ L^ i£^ -^^^^Ij^-^j:! ^:t-f-tf-ry^^ ^~a , ^ c?g>ja/T^ f^ J Wj2 ¥- -^a^G4,^.^u^ ^P^-^!^^-^t-^:y! 7 l^ f ^. ^^ J a^^jziL^^^ ^^^.^^ f^fU7^4^ /go-ZZ^ -<^Suy: Kfx/(P/. 1^^ ^^^.^ ^^.^/:« y .^^ DIRECTIONS. QUESTIONS. Head the exercise and pass it in for inspection. 1. May a person invest more than one kind of property in business? 2. When different resources are invested, what account is credited? 3. "When both resources and liabilities are invested, how is proprietor's credit found? 4. How are open accounts entered in an investment? 5. How are notes receivable and notes payable entered? EXERCISE XV INFORMATION # 119. A partnership is an association of two or more persons in one business. Each contributes some value to the business and each shares in the gain or loss. 70 PROGRESSIVE BUSINESS ACCOUNTING :#: 120. The relations of each partner to the firm should be clearly stated in a written contract between the partners called agreement of co-partnership. This contract should specify the amounts contributed by each, the amount of time to be given by each to the business, the manner of the division of profits, and the other matters which concern their legal relations. # 121. Ordinarily, each partner has power to bind the other in firm contracts, each is liable personally for the debts of the entire firm, a relation of trust exists between the partners, so that it may be said that it is unwise for any person to join business interests with persons in whom there is any lack of confidence, or with whom there is no positive agreement. # 122. Beginning a partnership, the property invested by each should be charged to the account to which it belongs as in any other opening entry, and the partners contributing should be credited with the total value of their investment. If liabilities of any partner are assumed by the firm, the partner bringing the liability should be debited and the accounts representing the liability should be credited. # 123. After investments are entered, the books are conducted as in any business until they are to be closed. # 124. At closing, the losses and gains of the business are carried to the Loss & Gain account and the net gain is there divided among the partners in the proportion agreed upon. An entry is made for each partner in the Loss & Gain account. The sum of these entries equals the net gain or loss. The account is then balanced, and the net gain or loss entries are posted to the opposite side of the partners' accounts. EXPLANATION. This exercise is to give the form for opening and closing partnership books. The commercial transactions are simple and few, so that the journal and ledger are the only books required. DIRECTIONS. Prepare a half sheet of journal paper, which may be paged 1 and 2. A half sheet of journal, headed trial balances on one side and statement on the other, and a half sheet of ledger, paged 1 and 2. Divide page 1 of the ledger equally among four accounts: H. C. Collins, Partner; George Dunn, Partner; Samuel Coe, Partner; and Loss & Gain. Divide page 2 equally among seven accounts: Cash, Merchandise, Real Estate, Furni- ture & Fixtures, Expense, Notes Receivable, and Notes Payable. TRANSACTIONS. Nov. 1. H. C. Collins, George Dunn, and Samuel Coe have this day formed a partnership under the firm name of Collins, Dunn & Coe, for the purpose of engaging in the furniture and decorating business. H, C. Collins invests Cash, $529.40; Merchandise per inventory, $6,521.80; Furniture & Fixtures per inventory, $725. George Dunn invests a store building and lot valued at $8,800. The firm assumes payment of his note favor W. H. Dorr for $1,000. Samuel Coe invests cash, $4,000, and a note against C. B. True for $1,500. The firm assumes a note given by him to Allison & Co. for $800. The conditions of the partnership are given in detail in articles of co- partnership, a copy of which is in the hands of each partner. Enter above in the journal, referring to the model form. Post entries to the ledger. Nov. 5. Paid cash for sundry expenses per bill, $87.50. 17. Bought of Grand Rapids Furniture Co., Mdse. for cash, $2,951.80. 19. Paid freight bill of invoice above, $32.59. (Charge Mdse. for pay- ments of freight on merchandise received.) PROGRESSIVE BUSINESS ACCOUNTING 71 Jl^y^^^yy^ (^ZVA^^J..A^^c^^Jt^ ^t^.^-^^^^^J^j'y ^^r-^.^L^.^^l^ ^Z.^.^y ■><&.<^V-<><^'t-^^ ~( ^,..,^^(£d;:tit^t2^ - i.L.^..<^J.,A^.^..>J^^^^.^ fe"^ 'Pf^rf-T^^'/Pa^ ^ j/j^i^^^^y 'A. C i? £> 7 /^^ y^Z^i^' ^^ rr^a. . AfWr^^rT /^ ^/^t' :fz..^i^^y/J^//y^ a. Tn ':h^^-Jr..^'^:U,^^^^f ff £>. ^^-<^^ ^Ci6i-,.y,^^eZ^(3t^.^i^M>u.tti.^ jtA/y/?/7 'Pt'^.t^^^^ ';^^^i^>-<^^^t-^<-^^- / >^^ •^^^^^^VT^ ^^ ^-^^i^y ^ .£^^ -'a^^»t«^^<^<^^^gv>y 1h*.ii>d^.2t^f^j^ / J~tP £> ^7-£JL -^.it^i-C^tMAy' C/"v/^ ^, y^^y.j-.. ^ 25. Paid W. H. Dorr cash in full of his note, $1,000. 30. Sold J. B. Elliott, for cash, merchandise per bill rendered, $1,329.68. Dec. 2. Paid cash for insurance of building and merchandise, $118. 19. Keceived cash for merchandise sold to the Palace Hotel Co., $7,462.40. 20. Sold the building and lot owned by the firm to M. C. Remington, receiving in payment cash $2,000 and notes for $8,000. DIRECTIONS. Dec. 31. Take a trial balance before closing. Make a statement of the business. The statement will not differ in arrangement from the form given at close of set A, except that the final division of the net gain among the partners should be in the form given here- with. According to the contract, the gains and losses of the business are to be divided among partners as follows: H. C. Collins, 2/5, George Dunn, 2/5, Samuel Coe, 1/5. Inventories are as follows: Merchandise $2,850, Real Estate none. Furniture & Fixtures $700, Expense none, other accounts at face. 72 PROGRESSIVE BUSINESS ACCOUNTING Closing of a Partnership Statement V-9 / {P,J '(^c ^ ^ (^^-.^-Z^.^^-^ '^^.^^^^v^;. nn /, 2 ^ // J /^ J'<} ^ i '^a^n^T-ci^^-^ (^ZtT^-e^ ^ 7 ^ ^ /-^■— -g^^g.-z..-^-^?-?,.,< ^. ... ■ ' . . contribntes .-r.^?rr*?:ri^ri?C l^^:^^>fi^r^h??r^. ' -^^-:^/ r :^^''f^o-yTy ^^. Vr^ The profits or losses of said partnership business'^are to be shared in the following proportions: I win With respect to the time and services given, and the compensation to Se received it is agreed thatr It is ako agreed that aside from the profits and compensations heretofore mentioned, neither partner is to withdraw from the business any money or other property, except with the written consent of the partners. It is especially agreed that neither of the parties to this contract shall sign or endorse any bank note, draft or com- mercial paper, oor stgn any official or other bond, nor do any other act to create a financial liability or obligation, without the written conSENT 6f his co-partner. At the expiration or sooner determination of said co-partnership, the business and property of said firm may be closed out by sale ; and after all debts and liabilities are paid and discharged, the amount remaining shall be divided between the partners in the ratio of their respeetive interests; or, if the parties so agree, the co-partnership may be continued for such further time, and upon such .terms as the members thereof may be able to agree upon. Witness our hands thi*=r^^2^::^;^r-?day of; ^<^ir??rfr^^^^!^rr^!^ -rTTr l »/:^fi>rtr^<^^ State oirrr^^^^^:^:^^^^^ t){ the first part, and of the second part witnesseth : That the said party of the first part has this day leased unto the party of the second part the following„d^cribed premises, to-wit: And it is further agreed that if any rent shall be due and unpaid, demand therefor being waived, or if default be made in any of the covenants herein contained, it shall then be lawful for said party of the first part to re-enter the said premises and remove all persons and property therefrom, or hi may recover possession thereof by action for the forcible detention of said property. And the said party of the second part agrees to hire said premises, and^o pay the party of^he first part there- for the?r ^r!<-rr?r?rr?'rTrrfr^7-r?yrc< v ' . f. rent of to be paid as follows, to-wit: except when said premises are untenable b» reason of fire from any other cause than the carelessness of the party of the second part, or of persons of . . . ; . ^^?7-r<<<^ .\. family or in ^^?^<<-r^<^ / . employ or by superior force or inevitable necessity. And the said party of the second part covenants that.j< enants tha .will use said premises as a: and for no other purpose whatever; and that. 2j(^V^<_... especially will -not use said premises nor permit the same to be used for any unlawful business or purpose whatever; thatrrr r??^-?^. will not assign this lease nor let or underlet - said premises without the written consent of the^ lessor, under the penalty of the forfeiture of alt • . '/^^ri.oj the first part, in considerallon of the sum of D OLLARS. in hand paid by..— - '^^^^-^^■-C<.^^^ •County and Slate of-T^ ^^::^--£-€^'-t<-^ :U^ J^^^ of the second part, the receipt ivhereof is hereby achiowlcdged, have bargained and sold, and by these jucsenls do grant and convey unto the said party of the second part, ~::- :/i<rt,^:(^ - '(i^*^;^4--^'r^<''^-:<^^^ ..■r:pi^^^4X;;^;i;^;t^^ l,frS^::e:Z-:^!^^::::^r5fC:!?^^ --^<^'-^t^. hand.Trr..ihis /.^^■^Zr^^^^H^. INDEX Page Acceptance f^6 Accounts 8 54 Account sales ^'-i Acknowledgement 149 Articles of incorporation 114 Balances of account 15 Bank account 60 Bank bookkeeping 137 to 144 Bankruptcy 92 Bill of lading 83-120 Bill of sale 154 Capital stock 106 Cash account 8 Cash books 31-32-33-41-102-103 Cash books (single entry) 134 Cash check 41 Cash items 66 Cash sales and purchases 49-50 Cash value of account 20 Certificates of deposit 126 Checks 40-41 Closing the ledger 20-24-57 C. O. D.'s ■ 98 Collection items 66 Columns of journal and ledger . . 7-15 Commercial accounts 26 Commission 85 Compound entries 28-29 Consignments 73-84-85 Contra columns 121 Controlling account 98 Co-partnership agreement 152 Corporations *106 Day book (Single entrj') 133 Debit and credit rule 8 Deed 149 Departments 137 Deposit tickets 39 Discount 66 Dividends 107 Double entry 10 Draft register 139 Drafts 65 Errors — how located 88-89 Exchange ^^ Expense account 20 Expense bills 80 Financial accounts ^6 Folio columns 15 Forwarding 45 Furniture and Fixtures 20 Page Gains 20 General balances — bank 141 General journal — bank 140 Group titles 97 Headlines 6 Index 37-38 Individual depositors' ledger .... 138 Indorsements 60-65-66 Insolvency 92 Installment certificate 117 Installment ledger 107 Interest 27 Inventory 20-55-56 Journals 14-15-27-48-63-100 Labor 27 Lease 153 Ledger 8-14-31-85 Ledger closed 22-23 Ledger divisions 31 Ledger index 37-38 Liability inventory 92 Lists 57 Live stock 16 Loan and discount register .... 139 Loans 86 Loss and Gain 21 Mercantile transactions 31 Merchandise account 13 Merchandise discount 47 Minute book 114 Money columns 6 Mortgage — chattel 151 Mortgage — real estate 150 Negotiable paper 66 Net gain or loss 21 Net proceeds 83 Net worth 20 Note, promissory 52-54 Note sales and purchases 51 Notes receivable and payable . . . .25-26-76 Notice of incorporation 116 Opening entries 32-68-69 Orders '. 65 Order sheet 42-43 Outlining books 144 Parties to commercial paper .... 40 Partnership 69-70-71-72 Partnership agreement 153 Part payments 82 Pencil footings 18 Posting 10-15 Profit, how shown 8 Page Property, purchase or sale 25 Proprietor's net worth 68 Purchase book 31-34-43 Real estate account 13 Receipt 47 Red ink entries 24 Remittance register 139 Rule for debit and credit 8 Ruling directions 6 Sales book 31-35-64-104 Sales for notes 51 Shipments 73-83 Shipping address 121 Short extensions 107 Sight drafts 66-87 Single entry 132 Six-column journal 135-136 Special column books 96-136 Page Statement to customer 54 Statement of the business 58-59 Stock certificate 119 Stock ledger 106-107 Subscription 106 Surplus 107 Teams account 20 Telegrams 125 Time drafts 66 Titles 8 Transfer of real property 79 Transfer of stock 110 Treasury stock 106 Trial balance 19 Undivided profits 107 Unsubscribed stock 106 Vouchers 41 Warranty deeds 149 RETURN CIRCULATION DEPARTMENT T0«— #* 202 Main Library LOAN PERIOD 1 HOME USE 2 3 4 5 6 ALL BOOKS MAY BE RECALLED AFTER 7 DAYS Renewals and Recharges may be made 4 days prior to the due date. Books may be Renewed by calling 642-3405. DUE AS STAMPED BELOW MAR - ]993 M.'mDl^rClRC tt 3 02'93 ivui^ *^ )RAA NO. DD6 UNIVbKbllYUI-LA BERKELEY LII-ORNIA, BbKKbLtY CA 94720 >D i 1429 U.C.BERKELEY LIBRARIES coHEsaaast 54 1 349 UNIVERSITY OF CAUFORNIA LIBRARY