T^T" 1 * A jT* 1 I T^ Y"fc f r* U ^ 4 M k TT T & T 
 
 TEACHERS MANUAL 
 
 TO ACCOMPANY 
 
 ACCOUNTING AND BUSINESS 
 PRACTICE 
 
 MOORE AND MINER 
 
 SB SflD bSO 
 
 GINN AND COMPANY 
 
GIFT OF 
 
TEACHER'S MANUAL 
 
 A HANDBOOK FOR TEACHERS 
 PREPARED FOR USE WITH 
 
 ACCOUNTING AND BUSINESS 
 PEACTICE 
 
 BY 
 
 JOHN H. MOOEE 
 
 l\ 
 
 COMMERCIAL DEPARTMENT, BOSTON HIGH SCHOOLS 
 AND 
 
 GEOEGE W. MINER 
 
 4 
 
 COMMERCIAL DEPARTMENT, WESTFIELD (MASS.) HIGH SCHOOL 
 
 BOSTON, U.S.A. 
 
 GINN & COMPANY, PUBLISHERS 
 C&e athenaeum 
 1903 
 
PREFACE 
 
 THIS manual is intended to aid the teacher in deciding upon 
 a plan to be adopted by him in conducting his classes, and to 
 furnish such supplementary exercises as may suggest a series of 
 valuable review topics for special class drills and occasional dis- 
 cussions. All the work given is of a suggestive nature, and is 
 not intended to be in conflict with any particular metHod of any 
 teacher. For convenience, the matter furnished is divided into 
 exercises, but these exercises will be found to be susceptible of 
 such modifications as the teacher may see fit to make. 
 
 COPYRIGHT, 1903 
 BY GINN & COMPANY 
 
 ALL EIGHTS RESERVED 
 
SUGGESTIONS FOE USING "ACCOUNTING AND 
 BUSINESS PRACTICE" 
 
 Familiarity with the Text. It is very desirable that the teacher 
 who uses Accounting and Business Practice should familiarize 
 himself with the plan and scope of the work. As far as possible 
 he should have all the details which he will expect the student to 
 carry out well in mind. If he has the time to write up the work 
 in advance of his pupils, so much the better; but if he has a 
 thorough knowledge of bookkeeping, this will not be absolutely 
 necessary, as the text itself gives clear and definite instructions 
 with regard to the manner of making all records, etc. 
 
 The design of the text is to acquaint the student with modern 
 business forms and documents, and by a variety of transactions 
 to illustrate approved methods of doing business and recording 
 business transactions. The work will be found to be well graded. 
 In the introductory sets the transactions have all been made as 
 simple as is consistent with good business practice. In the inter- 
 mediate portion of the work new and more difficult transactions 
 are introduced. The invoicing, the bank work, and cash-book 
 work are made especially heavy in order that the most approved 
 methods of large business establishments may be illustrated, and 
 that the qualities of accuracy, rapidity, punctuality, and self- 
 reliance may be cultivated. In the advanced portion of the work 
 the single entry method is explained, and accounting as .applied 
 to corporations, manufacturing establishments, banking institu- 
 tions, etc., is illustrated. 
 
 General Methods. In all the duties performed, the teacher 
 should accept nothing but a high grade of work. He should see 
 to it that the students are, first of all, provided with proper 
 materials. A good supply of red and black ink should be 
 
 iii 
 
 285382 
 
iv TEACHER'S MANUAL 
 
 available for every student ; two good penholders should always 
 be in readiness for immediate use, one of which should always 
 be used for black ink, and the other for red ink. Good pens 
 should be liberally supplied, and the student should never be 
 allowed to write with poor ones. Good mechanical work can- 
 not be accomplished without a good ruler. This should be at 
 least fifteen inches long and not less than a quarter of an inch 
 in thickness, with a bevel edge. A good clean blotter should 
 always be at hand to keep the pages of the book from becom- 
 ing soiled. No student should be allowed to do any work upon 
 the blank books until he is able to do the work neatly and 
 accurately. Loose sheets should be used until he has formed 
 some of the essential habits of high-grade accounting. From 
 the outset the teacher should insist upon good, legible figures 
 and some uniformity in the size and proportions of the capitals, 
 small letters, etc. 
 
 Different Adaptations of the Work. Accounting and Business 
 Practice is unique among bookkeeping systems in that it readily 
 adapts itself to the requirements of classes and schools of all 
 kinds. 
 
 First. It may be used for a mere theoretical presentation of 
 the subject of accounting, in which case only the text-book and 
 blank books should be used. 
 
 Second. It may be used in the presentation of the modified 
 system of business practice, in which case the text-book, blank 
 books, and blank business forms should be used. 
 
 Third. It may be used in the presentation of the complete 
 system of business practice, in which case the text-book, blank 
 books, blank business forms, and representative money should be 
 used in connection with well-organized school offices. 
 
 Fourth. The work is so divided that the teacher may use a 
 portion of the text for a theoretical presentation of the subject, 
 a portion for some modified system of business practice, and a 
 portion of the work for some complete system of business prac- 
 tice. Every teacher of originality has ideas of his own, and the 
 text-book is designed to furnish memoranda that may be used by 
 him to accomplish his ends in any particular direction. 
 
SUGGESTIONS V 
 
 Theory. Some teachers may prefer to present only the theo- 
 retical side of accounting in the schoolroom. Accounting and 
 Business Practice is well adapted for such a course of study. It 
 is complete in itself, not being dependent upon outside vouchers, 
 and gives sufficient material for showing the book records of the 
 smallest business houses up to the complex records of wholesale 
 jobbing, manufacturing, and corporation accounting. If the 
 book is used merely for the presentation of the theoretical side 
 of accounting, the business forms outlined for Sets III to VII, 
 inclusive, may be omitted and referred to only as the memoranda 
 requires it in the course of recording the various transactions. 
 The authors do not advise the purely theoretical use of the text- 
 book, but they are mindful of the fact that the conditions govern- 
 ing some schools are such as to make it impractical to try to 
 carry on a satisfactory system of business practice. In this con- 
 nection might be mentioned night schools and other schools with 
 similar equipment and governing conditions. 1 
 
 Modified System of Business Practice. Sets III to VII, inclu- 
 sive, of the text are arranged for a system of business prac- 
 tice. In schools where there is no good office equipment this 
 is the plan of business practice which, in the majority of cases, 
 should be carried out. The text-book is so arranged that the 
 modified system may be conducted with very little effort on the 
 part of the teacher and with the most satisfactory results to 
 the student. 
 
 Any school can make provision for a modified system of business 
 practice. All that is necessary is to arrange a desk or table with 
 convenient drawers or compartments for filing vouchers and other 
 material, for keeping representative money, etc. The students 
 may be required to take turns at serving at this desk. Generally 
 speaking, it would be well to have a student remain in charge of 
 the desk for at least one week at a time. In this way, out of a 
 
 1 In the intermediate portion of the work, where any set is used for 
 theory only, the teacher should get a supply of invoice blanks for use 
 in the invoice book. Sixteen invoices are required per student for each 
 of the three intermediate sets. These invoices may be obtained of the 
 publishers. 
 
vi TEACHER'S MANUAL 
 
 class of twenty-five no one need be called upon to serve oftener 
 than once in every three or four months. At this desk let all 
 the deposits be made, and require the student in charge to enter 
 them in the pass books. Here, also, receipts and payments of 
 money should be made, bills of lading, etc., signed. No books 
 of record need be kept, the students simply going to the desk for 
 the performance of such transactions as require a second party, 
 f If it is found that one student cannot take care of the work of 
 the class, two, or even more, may be selected to have charge of 
 such work. If more than one student is selected the work should 
 be so classified that each has a particular office to perform. For 
 instance, one may be delegated to take care of the bank work, 
 receive deposits, accept notes for discount, make proper entries in 
 the passbooks, balance the pass books, verify bank accounts, etc. 
 Another may be appointed to look after all receipts and pay- 
 ments of cash on account, to keep under proper lock and key the 
 representative money of the school, to sign freight receipts and 
 such other papers as require the signature of a second party, 
 verify amounts on invoices, etc." If the class is small the teacher 
 may find time to look after all this work himself, in which case 
 he should have some definite place for the placing of deposits, 
 checks, and all materials relating to the bank work, so that there 
 will be no delay in transacting such business as may require the 
 services of a second party. 
 
 If students are placed in charge of the desk work all papers, 
 etc., should first be passed upon by the teacher. The student in 
 charge of the desk work should receive no papers that do not 
 bear the O.K. stamp of the teacher. The students, in doing 
 business with the one in charge of the desk, should first present 
 their work to their teacher for approval. He should examine 
 every document as to its accuracy, mechanical arrangement, etc., 
 and by some sort of stamp provided for that purpose mark the 
 work in such a way that the students who are assisting him may 
 readily see that the papers have his approval before they accept 
 them. A system of office practice that is ideal in every particular 
 may be developed along this line by high schools with no office 
 equipment. Of course, where there is office equipment the desk 
 
SUGGESTIONS vii 
 
 plan should be abandoned, and the student or students put in the 
 offices to handle the work just explained. 
 
 The text-book outlines a plan for preparing the incoming 
 vouchers for use in connection with the various transactions. 
 After long experience in the schoolroom, the authors have decided 
 that this is the most satisfactory way of having vouchers reach the 
 student, as they come into his possession for use complete in 
 every detail, place, date, etc. In other words, they are in just 
 the form that he would handle them in actual business. 
 
 When the vouchers are being prepared they may be written up 
 as an exercise on business forms. Here is where the teacher 
 should give emphasis to some of the important things relative to 
 checks, notes, drafts, invoices, etc. He should see that every 
 paper is made out correctly in every detail. The accuracy of 
 amounts, etc., may be verified by one of the students in charge 
 of the office work. The teacher, of course, should have an eye on 
 all this checking, and should hold some one responsible for any 
 error which may be overlooked. An examination of business 
 forms with a critical eye will be found of help to the student. 
 Of course, do not keep any one student too long a time at such 
 work. Assign work of this kind to a particular student for a 
 definite time. 
 
 Before the forms are filed away in the envelope for incoming 
 vouchers, they should bear the O.K. stamp of the teacher. The 
 envelope of incoming vouchers may be kept by each student 
 or by those in charge of the desk or office practice. On .the 
 whole, it is considered best to let each student have charge of 
 his envelope of incoming papers after it has been approved by 
 the teacher. The teacher may make such provision for the out- 
 going papers as he sees fit. All outgoing papers should bear his 
 stamp before they are filed away anywhere. In the majority of 
 cases it will be found best to provide each student with an envel- 
 ope of legal size, and instruct him to place in this all outgoing 
 papers after they have been properly O.K.'d. If the teacher 
 thinks best he may require that all outgoing papers in the nature 
 of checks, etc., may be put in a separate envelope for readiness in 
 writing up the pass books at the close of any definite period. 
 
viii TEACHER'S MANUAL 
 
 The pass books should be carefully written up at the points 
 specified in the text-book. In this way an accurate check may 
 be had upon the bank work of each student. 
 
 Some teachers will find it advisable to have all the students, or 
 at least some particular students, first write up the introductory 
 sets of business practice by merely recording the transactions on 
 loose paper in the various books of record ; then collect the loose 
 papers and have them start over again with a different price list, 
 using all the business forms, writing the transactions in the blank 
 books, and carrying on the modified system of business practice. 
 This method will be found helpful in emphasizing some of the 
 fundamental principles of accounting. 
 
 Complete System of Business Practice. If schools have the 
 necessary office equipment they should conduct at least a portion 
 of the work in such a way that the students may have the advan- 
 tages of a complete system of business practice. Such offices may 
 be organized as the teacher deems advisable. In the majority of 
 cases the following offices would be found adequate : (1) School 
 Bank ; (2) School Emporium ; (3) School Exchange. 
 
 School Bank. This is the most important of the three offices 
 required. Some simple system of bank accounting should be 
 provided for this office. The only book which is absolutely 
 necessary for the simplest kind of bank work is the individual 
 ledger. For this work the ordinary form of ledger may be used. 
 If such a ledger is employed, credit each student for his deposits, 
 including the proceeds of notes discounted and the collection of 
 drafts, etc., made in his favor. Debit him with his own checks 
 and with all paper charged to his account at the bank. It will 
 not consume very much time to keep records of this kind, and 
 any student of average ability will be found capable of conducting 
 the work satisfactorily and with benefit to himself. If a com- 
 plete office system can be organized, the regular bank books of 
 record journal, cash book, general ledger, deposit ledger, dis- 
 count register, collection register, discount tickler, draft register, 
 and collection tickler may be used ; and the teacher should 
 select whatever books and form whatever plans his judgment 
 may dictate. 
 
SUGGESTIONS ix 
 
 School Emporium. At this office all merchandise should be 
 bought. Some system of accounting should be adopted that will 
 meet the views and requirements of the teacher. Generally a 
 journal, sales book, bill book, check book, and ledger may be used 
 to advantage. The system adopted should be suited to the 
 convenience of the teacher and school. 
 
 School Exchange. This office is next in importance to the 
 school bank. Here all business which may not properly belong 
 to the school bank or school emporium should be transacted. 
 The sphere of the office should be to act as a sort of middleman 
 between the pupil and all second parties other than the school 
 emporium and school bank. 
 
 At the close of each day's work the school bank and school 
 exchange should exchange statements. A list of all checks and 
 other cash paper which have been received during the day from 
 customers should be made and the proper exchanges effected. 
 This may.be done by a check issued by the office against whom 
 the excess of difference chances to fall. 
 
 The system of accounting to be adopted for the school exchange 
 will depend altogether upon the scope and plan of the office system 
 organized by the teacher. 
 
 In order to sell New York drafts it will be necessary to provide 
 some sort of New York correspondent for the school bank. The 
 school exchange may represent such a correspondent. All drafts 
 issued may be redeemed at the school exchange in practically the 
 same manner as the paper of other fictitious parties. 
 
 Office Assistants. If the complete office system is adopted, 
 there should be in charge of the office at all times competent 
 assistants. This work may be delegated to the members of any 
 of the advanced classes ; make it a part of their regular course 
 and require of them definite results. For the complete office 
 system the students' incoming vouchers should be retained by 
 those in charge of the offices and given out to the individual 
 students as they are required. If the teacher deems it advis- 
 able, these incoming papers may be prepared by those in charge 
 of the offices. With large classes this may not be possible, and 
 it is hardly necessary to the efficiency of the work done. The 
 
X TEACHER'S MANUAL 
 
 individual students may be made to prepare the Hst of incoming 
 vouchers as a drill on business forms. After such forms have 
 been O.K.'d by the teacher and filed in the proper envelope by 
 the student, they may be handed to those in charge of the offices, 
 properly classified by them, and delivered to the students as the 
 transactions progress. Where sufficient time can be devoted to 
 the study of bookkeeping this course of study will be found 
 ideal to both teacher and student. The plans laid down for 
 conducting the work, however, are merely suggestive of what 
 may be undertaken with profit. The teacher should make such 
 adaptations as governing conditions may dictate and suggest. 
 
TEACHER'S MANUAL 
 
 EXERCISE I 
 
 ELEMENTARY JOURNALIZING 
 
 DIRECTIONS. Journalize the following items, using the month of 
 January. Post, make a trial balance and balance sheet, resource and 
 liability statement, loss and gain statement, and close the loss and gain 
 accounts. 
 
 1. Begin business this day investing cash, $2500. 
 
 3. Buy for cash of E. Brown, 100 bbls. flour at $6. 
 
 5. Sell J. Strong on account, one month, 25 bbls. flour at 
 $8.25. 
 
 7. Sell S. Conn for cash, 50 bbls. flour at $8. 
 
 9. Receive cash of J. Strong, to apply on account, $100. 
 
 12. Buy of H. Fenton on account, 200 bbls. flour at $6.20. 
 
 14. Pay one month's rent of store in cash, $25. 
 
 15. Withdraw $1 00 from the business for personal use, by check. 
 17. Sell J. Yernon on account, 50 bbls. flour at $7.80. 
 
 20. Pay H. Fenton, to apply on account, $1000, by check. 
 
 21. Sell H. Jones 40 bbls. flour at $7.50, receiving cash for 
 one-half the amount and the balance on account. 
 
 23. Buy of A. Barnes 20 bbls. flour at $6.25, paying cash for 
 one-half and the balance on account. 
 
 25. Receive J. Vernon's check for $200, to apply on invoice. 
 
 27. H. Jones gives you his note at 10 days, for the balance due 
 on invoice of the 21st. 
 
 29. Give A. Barnes your note at 20 days, for the balance due 
 on invoice of the 23d. 
 
 31. Pay clerk hire in cash, $22.50. 
 
 1 
 
2 TEACHER'S MANUAL 
 
 The teacher will supply the merchandise inventory, giving dif- 
 ferent amounts to different students, so that some results will 
 show a loss and others a gain. 
 
 Have the student act as proprietor. 
 
 The foregoing may be used as a test in elementary work. 
 
 EXERCISE II 
 
 OPENING ENTRIES FOR AN INDIVIDUAL PROPRIETOR 
 
 SUGGESTIONS. A variety of opening entries are given herewith. It 
 is suggested that the student be required first to put all in the form 
 of a journal entry, and then to use the cash book as well as the jour- 
 nal. If it is thought desirable these entries may be posted, and thus 
 complete the opening of a set of books on beginning business. Where 
 both resources and liabilities are given a statement should be made. 
 
 1. You begin business with the following investment : cash, 
 $3265; real estate, store and lot, $4318. 
 
 2. You* begin business with the following resources and lia- 
 bilities : cash on deposit, $3000 ; H. M. Fowler owes you $1600 ; 
 you owe James Todd $450 ; Geo. Farley's note, in your favor 
 for $725; your note, in favor of Jesse Main for $,628 ; interest 
 accrued, $28.45 ; your note, in favor of Willis Hopkins, $200. 
 
 What is your net investment ? 
 
 After a statement has been made analyze each item. 
 
 3. Hiram Follett begins business with the following resources 
 and liabilities : cash, $1500 ; note of E. Judson, in favor of 
 Follett, $350 ; interest accrued on Judsori's note, $3.18 ; J. Lilley 
 owes on account, $325 ; Leslie Potter owes on account, $275 ; his 
 note, in favor of Anson & Peck, $1000 ; interest accrued on the 
 Anson & Peck note, $15.30 ; real estate, $3200. 
 
 What is the net investment ? 
 
 4. Geo. MacDonald begins business under the following condi- 
 tions : having no capital of his own he borrows $5000, giving his 
 note with security. 
 
 What would be his opening entry ? 
 
ELEMENTARY JOURNALIZING 3 
 
 Would there be a proprietor's account? 
 
 How would the gains of the business be disposed of ? 
 
 5. Wesley Harris begins business with the following resources 
 and liabilities : cash on hand, $495.50 ; cash on deposit, $1845.67; 
 his note, in favor of James Oatley, $500 (this note has yet 60 days 
 to run and is without interest, therefore discount is allowed for 
 the 60 days) ; H. Turner's note, in favor of Harris, $675 (69 days' 
 interest has accrued on Turner's note) ; he owes J. Bruner $213 ; 
 merchandise on hand, $2235 ; H. Willis owes Harris $375. 
 
 What is the opening entry when Harris begins business ? 
 Analyze each item in your statement. 
 
 6. Harold Leslie is to open a dry goods business in your city 
 on Oct. 1 ; he engages you as bookkeeper Sept. 1, and you begin 
 your duties at once. 
 
 How would you proceed to open the books ? 
 What work would you have on the books during the month of 
 September ? 
 
 7. Thomas Anderson has been bookkeeper for Judd & Co. He 
 has resigned on account of impaired health, and Judd & Co. have 
 employed you as his successor. You are to begin your duties in 
 four weeks. 
 
 What would you do on assuming the duties of your position? 
 Would it be well for you to spend a few days with Mr. Anderson 
 before he left ? 
 
 EXERCISE III 
 ELEMENTARY JOURNALIZING 
 
 DIRECTIONS. In the following transactions both the journal entry 
 and the explanation should be stated; also the rule for each journal 
 entry. Have student act as proprietor. Use the month of February. 
 
 1. Begin business and invest cash, $2345. 
 
 3. Buy for cash of E. C. Weldon, 80 bbls. flour at $6. 
 
 5. Sell Morris New for cash, 30 bbls. flour at $7. 
 
 7. Sell Geo. Nash on account, 20 bbls. flour at $6.50. 
 
 8. Buy of R. H. Collins on account, 70 bbls. beef at $16. 
 10. Sell J. H. Jacobs on account, 20 bbls. beef at $17.50. 
 
4 TEACHER'S MANUAL 
 
 11. Sell John Allen for cash, 10 bbls. beef at $17.25. 
 14. Sell Amos Noble 10 'bbls. beef at $18, receiving cash $100 
 and the balance on account. 
 
 17. Receive cash of Geo. Nash, to apply on account, $100. 
 19. Pay R. H. Collins cash, to apply on account, $100. 
 
 23. Withdraw $60 for personal use. 
 
 24. Pay one month's rent in cash, $38. 
 
 25. Give R. H. Collins your note at 3 days for balance on 
 account, $1020. 
 
 26. Amos Noble pays you $80, in full of account. 
 
 27. J. H. Jacobs gives you his note at 10 days, with interest, 
 in full of account, $350. 
 
 27. Buy of Asa Kelly 60 bbls. pork at $12, paying one-half 
 cash ; balance on account. 
 
 28. Pay in cash your note, in favor of R. H. Collins, for $1020. 
 28. Pay bill for office stationery in cash, $17.20. 
 
 28. Give Asa Kelly your note at 30 days, with interest, for $360. 
 28. The proprietor increases his investment $1000 in cash. 
 
 NOTE. If the teacher so desires, the above may be posted, state- 
 ments made, and the books closed. Varying amounts may be used 
 for inventories. 
 
 EXERCISE IV 
 CASH-BOOK ENTRIES 
 
 DIRECTIONS. Use a sheet of ordinary journal paper and record 
 the following transactions in cash-book form, using the month of 
 November for dates. 
 
 1. Begin business this day and invest cash, 
 
 2. Pay cash for a set of office books, $9.75. 
 
 3. Buy merchandise of C. H. Haswell for cash, $368.40. 
 
 4. Pay one month's rent of the store in cash, $26.50. 
 
 5. Sell Frank Arnold merchandise for cash, $236.25. 
 
 6. Pay John Newton $67.45, to apply on account. 
 
 NOTE. The credit of John Newton's account and all similar 
 accounts is recorded in books outside of the cash book. Only the 
 cash transactions of the business are given in this set. 
 
STATEMENTS 5 
 
 8. John Allen pays $126.75, in full of account. 
 
 9. Sell E. ]ST. Carr merchandise for cash, $108.75. 
 
 10. Buy merchandise of Henry Willis for cash, $627.30. 
 
 11. A note which you gave Herman Biggs Oct. 11 falls due 
 to-day. The note is for $275, and you pay it in cash. 
 
 12. S. N. Parsons gave you his note on Sept. 13 for $300. 
 The note falls due to-day, and he pays it in cash. 
 
 13. Sell Samuel Langdon merchandise for cash, $175.95. 
 
 14. You pay a bill of sundry items for office use, in cash, $8. 
 16. A note which you gave W. B. Williams on Sept. 16 falls 
 
 due to-day. You pay the note and interest in cash. Face of the 
 note, $200 ; interest, $2. 
 
 18. Amos Osborn gave you his note on Oct. 18 for $300. He 
 pays the note and interest to-day in cash. The interest amounts 
 to $1.50. 
 
 20. Pay William Larkin $22.50, to apply on his monthly 
 salary. 
 
 After recording the above transactions, enter the balance of 
 cash, and close the cash book. 
 
 EXERCISE V 
 STATEMENTS 
 
 From the data given below, make a statement of (a) resources 
 and liabilities, and (6) losses and gains. 
 
 Debit footings : 
 
 James Corbin, member of firm $260. 
 
 Cash 2875.25 
 
 Hartford Bank 2989. 
 
 Real Estate 7500. 
 
 Merchandise 6650.89 
 
 Bills Receivable 2689. 
 
 Bills Payable 975.80 
 
 Expense 167.50 
 
 Interest and Discount 40.78 
 
 Levi Williams 900. 
 
6 TEACHER'S MANUAL 
 
 Credit footings : 
 
 James Corbin, member of firm $6567.44 
 
 John Smith, member of firm 7897.50 
 
 Cash 1297.28 
 
 Hartford Bank 897.75 
 
 Merchandise 5489.80 
 Bills Receivable . 1600. 
 
 . Bills Payable 1275.80 
 
 Interest and Discount 22.65 
 
 Inventories : 
 
 Merchandise 2405. 
 
 Real Estate 7800. 
 
 Stationery 12.50 
 
 From the data given below, make a statement of (a) resources 
 and liabilities, and (b) losses and gains. 
 
 Debit footings : 
 
 James Ward, Proprietor $314.01 
 
 Cash 3450.30 
 
 Union Bank 3586.80 
 
 Real Estate 9000. 
 
 Merchandise 7981.07 
 
 Bills Receivable 3226.80 
 
 Bills Payable 1170.96 
 
 Expense 201. 
 
 Interest and Discount 48.93 
 
 H. B. Howard 1080. 
 
 Credit footings : 
 
 James Ward, Proprietor 7882.93 
 
 J. C. Rowe 9477. 
 
 Cash 1556.74 
 
 Union Bank 1077.30 
 
 Merchandise 6587.76 
 
 Bills Receivable 1920. 
 
 Bills Payable 1530.96 
 
 Interest and Discount 27.18 
 
ELEMENTARY JOURNALIZING 7 
 
 Inventories 
 
 Merchandise $2886. 
 
 Real Estate 9360. 
 
 Expense 15. 
 
 NOTE. If the teacher so desires, the above items may be used in 
 making a balance sheet ; also accounts may be opened in the ledger 
 and the above items entered, thus completing the opening of a set of 
 books. 
 
 By using different amounts for inventories the results may be varied. 
 
 EXERCISE VI 
 
 ELEMENTARY JOURNALIZING GIVING AND 
 RECEIVING NOTES 
 
 SUGGESTIONS. After journalizing the following, the cash items may 
 be placed in the cash book. Use the month of March. 
 
 1. Give H. E. Benton your note at 10 days, in full of account, 
 $432. 
 
 4. Geo. Munson gives you his note at 15 days, with interest, 
 in full of account, $345. 
 
 5. Pay rent of the store by giving the owner, James Nellis, 
 your note at 10 days, $42. 
 
 6. H. M. Zaner pays you the interest accrued on his note in 
 cash, $16.45. 
 
 9. You pay the interest on your note, in favor of Frank 
 Storm, in cash, $23.06. 
 
 11. You owe Jesse Warner $512 ; give him cash for one-half 
 the amount, and your note at 10 days for the balance. 
 
 13. C. D. White owes you $268 ; he gives you cash for 
 one-half the amount and his note at 15 days, with interest, for 
 the balance. 
 
 15. The note you gave James Nellis for rent of store is now 
 due ; pay the same in cash. Amount of the note, $42. 
 
 18. Receive cash of Geo. Burns for his note and interest due 
 to-day. Face of note, $425 ; interest accrued, $10.65. 
 
8 TEACHER'S MANUAL 
 
 21. You owe Peter Culver on account, $145 ; interest accrued 
 on overdue items amounts to $3.45. Give him your interest- 
 bearing note for $148.45. 
 
 24. Your note in favor of Henry Seton is due to-day, and you 
 redeem it by issuing a new note for the same amount, $236.10. 
 
 26. Your note, in favor of Samuel Barnum for $200, and interest 
 on the same, $6.50, is due to-day. You redeem the note and inter- 
 est on same by issuing a new interest-bearing note for $206.50. 
 
 28. The note of Joseph Harris, in your favor for $300, due 
 to-day, is settled by his giving you a new note, bearing interest, 
 for the amount of the old note. 
 
 30. The note of Willis Gordon and interest on the same are 
 due to-day. Face of note, $420; interest, $7.80. He settles by 
 giving you a new note for $427.80, bearing interest. 
 
 EXERCISE VII 
 ELEMENTARY JOURNALIZING ALLOWANCES 
 
 SUGGESTIONS. After journalizing the following, the cash items may 
 be entered in the cash book. Use the month of April. 
 
 1. John King prepays an invoice amounting to $186. You 
 allow him a discount of 2%, and receive the balance in cash. 
 
 5. You owe Joel Starr $206 on account, and pay the same in 
 cash, less 3%. 
 
 7. Your note for $450, in favor of Ira Johnson, is paid to-day, 
 less 90 days' discount. 
 
 9. Ernest Garrett pays his note in your favor, less 60 days' 
 discount ; face of the note, $654. 
 
 13. There is a mortgage on your house and lot amounting to 
 $2200; to-day one year's interest is due, $110. Settle for the 
 interest, by giving your note at 10 days. The mortgage is held 
 by Chas. Bennett. 
 
 16. Your note for $678, in favor of Elmer Stevens, and interest 
 amounting to $12, are due to-day. Give him your check for one- 
 half the amount, and your 10-day note, with interest, at 10 days, 
 for the other half. 
 
CLOSING ENTRIES FOR INDIVIDUAL PROPRIETOR 9 
 
 20. You sell James Munhall 100 bbls. flour at $6.25 per bbl., 
 and receive in payment his check for $325, and your note which 
 he held for the balance, $300. 
 
 21. Buy of Howard Cleary 60 bbls. beef at $16.50 per bbl., 
 and give him in payment your check for $600, and his note which 
 you hold for $390. 
 
 23. Your office safe is too small, and you sell it to Edgar Field 
 for $65, and receive his note, at 10 days, with interest, for that 
 amount. 
 
 How would the entry be changed in the above if you had sold 
 the safe and received cash? 
 
 26. You have Isaac Shaw's note for $600, with interest, at 90 
 days. The note has run for 30 days, and you discount it at the 
 bank and receive cash for the proceeds. 
 
 28. You have John Davis' note for $400, with interest, at 60 
 days. The note has run for 30 days, and you discount it at the 
 bank and receive cash for the proceeds. 
 
 30. You receive to-day William Weaver's 30-day note for $300, 
 without interest. You discount it at once and receive cash for 
 the proceeds. 
 
 EXERCISE VIII 
 CLOSING ENTRIES FOR AN INDIVIDUAL PROPRIETOR 
 
 1. H. B. English invested $3000 in business, and at the close 
 of one year the losses and gains of the business were as follows : 
 gain on merchandise, $266.55 ; loss on expense, $106.20; gain on 
 discount, $46.75. 
 
 His withdrawals during the year amounted to $400. 
 
 Open an account with the proprietor, and with Loss and Gain ; 
 close the Loss and Gain account, and show the proprietor's present 
 worth. 
 
 Is he worth more or less than at the beginning of the 
 year? 
 
 What effect did the withdrawals have upon the net results of 
 the year's business ? 
 
10 TEACHER'S MANUAL 
 
 2. Donald B. Caffrey invested $2600 in business, and at the 
 close of one year the losses and gains of the business were as 
 follows : gain on merchandise, $753.20 ; loss on expense, $156.42 ; 
 gain on interest, $12.35 ; loss on discount, $19.48. 
 
 Open an account with the proprietor, and with Loss and Gain ; 
 , close the Loss and Gain account, and show the proprietor's present 
 worth. 
 
 Analyze the proprietor's account and the Loss and Gain account. 
 
 3. Henry Barber invested $2000 in business, and at the close 
 of the year the losses and gains of the business were as follows : 
 gain on merchandise, $127.40 ; loss on expense, $210.65; gain on 
 discount, $13.25. 
 
 His withdrawals during the year were $300. 
 
 Open an account with proprietor and with Loss and Gain ; close 
 the Loss and Gain account, and show the proprietor's present worth. 
 
 What is the net result shown by the business ? 
 
 How much less is the proprietor worth than at the beginning 
 of business ? Why? 
 
 Why is the difference between his investment and his present 
 worth at the closing considerably more than the loss shown by 
 the Loss and Gain account ? 
 
 4. John Benton invested $1800 in business, and at the close 
 of the year the losses and gains of the business were as follows : 
 gain on discount, $45.60 ; loss on merchandise, $1250 ; gain on 
 interest, $22.46 ; loss on expense, $136.54. 
 
 During the year he withdrew $750. 
 
 Open an account with the proprietor; and with Loss and Gain ; 
 close the Loss and Gain account, and show the proprietor's net 
 insolvency. 
 
 What conditions operated to cause insolvency, aside from the 
 losses sustained? 
 
 Could the proprietor continue in business after such a showing ? 
 
 5 . Willis Avery wished to engage in business, but had no capital 
 of his own. He borrowed $2000 to begin business. At the close 
 of the year the losses and gains were as follows : gain on merchan- 
 dise, $620 ; loss on expense, $175; gain on discount, $56.24; loss 
 on interest, $125. 
 
ELEMENTARY TEST 11 
 
 During the year he withdrew $150 for personal use. 
 Open the necessary accounts and the Loss and Gain account. 
 Has the proprietor an investment account? 
 Into what account is the Loss and Gain closed? 
 
 EXERCISE IX 
 ELEMENTARY TEST 
 
 1. What is a journal ? 
 
 2. What are the distinct uses of the journal? 
 
 3. What are unit rulings ? 
 
 4. What is an explanation, and what is its value ? 
 
 5. What is the form for a simple entry ? Illustrate. 
 
 6. What is the form for a compound entry ? Illustrate. 
 
 . 7. Why must the debits and credits be equal in each journal 
 entry ? 
 
 8. What is the importance of paging in the journal ? 
 
 9. As evidence in a court of law, which part of the journal 
 entry is the more valuable, the journal entry proper or the 
 explanatory part ? Why ? 
 
 10. What is bookkeeping? What is the object of keeping 
 accounts ? 
 
 11. Give the general rule for journalizing. 
 
 12. Give rules for journalizing the following : 
 
 a. Proprietor's account. b. Merchandise account. 
 
 c. Personal accounts. 
 
 13. Name two classes of accounts. 
 
 14. Name three kinds of accounts. 
 
 15. To which class does each of the following belong? 
 
 a. Merchandise. b. Cash. 
 
 c. A personal account. 
 
 16. Which side of the following accounts should be the larger 
 if there is any difference between the sides ? 
 
 a. Cash, b. Bills Payable. 
 
 c. Bills Receivable. 
 
12 TEACHER'S MANUAL 
 
 17. Define each of the following terms : 
 
 a. Merchandise. d. Discount. 
 
 b. Expense. e. Cash. 
 
 c. Interest. f. Bills Payable. 
 
 g. Bills Receivable. 
 
 18. Name three accounts that may show a loss or a gain. 
 
 19. How do you close an account having a resource inven- 
 tory ? 
 
 20. How do you close a merchandise account when there is 
 no inventory? 
 
 EXERCISE X 
 ELEMENTARY TEST 
 
 1. What is a ledger? 
 
 2. Why is the proprietor's account usually placed first in the 
 ledger ? 
 
 3. Why is the journal page transferred to the ledger in posting ? 
 
 4. What is the value of paging when an account is closed by 
 balance and the balance carried to another page ? 
 
 5. What do we mean by closing an account ? (Apply this to 
 the different kinds of accounts.) 
 
 6. What is the value of pencil footings in the ledger ? 
 
 7. Name some accounts in the ledger that are termed real 
 accounts. 
 
 8. Name some accounts in the ledger that are termed repre- 
 sentative accounts. 
 
 9. Under what conditions should a real account be closed? 
 
 10. Under what conditions should a representative account be 
 closed ? 
 
 11. When is the Loss and Gain account opened in the ledger ? 
 Why? 
 
 12. What does the difference between the sides of the Cash 
 account show? Is such difference a resource or a liability? 
 Why? 
 
ELEMENTARY TEST 13 
 
 13. To which class of accounts do the following belong? 
 
 a. Interest. c. Discount. 
 
 b. Bills Payable. d. Bills Receivable. 
 
 14. How is the gain on merchandise found? How do you 
 find the present worth ? 
 
 15. What does the business statement show ? 
 
 16. How frequently is it necessary to show the proprietor's 
 present worth? 
 
 17. Just what accounts must be closed to find the present 
 worth? 
 
 18. Why is it necessary to have all inventories before closing 
 the books ? How are the different inventories found ? 
 
 19. Tell definitely how you would close the following : 
 
 a. Merchandise. d. Discount. 
 
 b. Expense. e. Loss and Gain account. 
 
 c. Interest. /. Proprietor's account. 
 
 20. How are the following accounts closed ? 
 
 a. Cash. . b. Bills Receivable. 
 
 c. Personal accounts. 
 
 21. Write the following, supplying all necessary data : 
 
 a. A promissory note. c. A receipt. 
 
 b. A check. d. A blank indorsement. 
 
 e. A full indorsement. 
 
 EXERCISE XI 
 
 ELEMENTARY TEST 
 
 1. Why is a cash book used in business ? 
 
 2. What does the balance of the cash book show? 
 
 3. How is such balance proved to be correct ? 
 
 4. Why is it not necessary to keep a cash account in the 
 ledger when a cash book is used ? 
 
14 TEACHER'S MANUAL 
 
 5. What is the difference between bills receivable and bills 
 payable ? 
 
 * 6. What is the difference between a bill and bills receivable or 
 bills payable ? 
 
 7. Of what value is numbering (a) on checks? (b) on check 
 stubs ? 
 
 8. What is the necessity for taking a trial balance ? 
 
 9. Just what does the trial balance prove ? 
 
 10. What is the value of a trial balance to (a) the bookkeeper ? 
 (&) the proprietor ? 
 
 11. Do errors in journalizing affect the equality of the ledger ? 
 Why? 
 
 12. What advantage is there in using the following books ? 
 
 a. Cash book. b. Sales book. 
 
 c. Invoice book. 
 
 13. How do you post from the following books ? 
 
 a. Journal. c. Sales book. 
 
 b. Cash book. d. Invoice book. 
 
 14. What do each of the following terms mean ? 
 
 a. On account. b. 1/10, 30 days net. 
 
 c. Note, 15 days. 
 
 15. If goods are sold on account when is the bill for the same due ? 
 
 16. Why do we close accounts showing losses and gains ? 
 
 17. How do we close personal accounts, and when is such 
 closing necessary? 
 
 18. Why is a red-ink entry always transferred to the opposite 
 side of an account ? 
 
 19. How are errors in a trial balance to be found? 
 
 20. What additions must be gone over if there is an error in a 
 trial balance? 
 
 21. If the error in the trial balance is 1, 10, 100, or 1000, what 
 mistake, ordinarily, has been made ? 
 
ELEMENTAEY TEST 15 
 
 EXERCISE XII 
 ELEMENTAEY TEST 
 
 1. What is a business statement ? 
 
 2. If the resources are larger than the liabilities, what is the 
 condition of the business ? 
 
 3. If the liabilities are larger than the resources, what is the 
 condition of business ? 
 
 4. Define check. From memory write an ordinary check. 
 
 5. Why do erasures affect the validity of a check or note ? 
 
 6. How is an invoice receipted ? Illustrate. 
 
 7. How is a bill receipted if paid by note ? Illustrate. 
 
 8. Why is it important to number notes and checks ? 
 
 9. What ought you to know of a party before selling to him 
 on account? 
 
 10. How can exact and reliable information regarding a busi- 
 ness man be obtained ? 
 
 11. If the debit side of a personal account is the larger, what 
 does the account show ? 
 
 12. To which class of accounts do personal accounts ordinarily 
 belong ? 
 
 13. What does the Merchandise account show after it has 
 been closed and the inventory has been brought below the ruling ? 
 
 14. There are six necessary steps in closing the Merchandise 
 account ; name them. 
 
 15. If the amount of an error in the trial balance is 9 or some 
 multiple of 9, what is the probable error ? 
 
 16. If it is necessary to check over the posting how should such 
 checking be done ; that is, in what order ? 
 
 17. Where are the check marks to be placed in the different 
 books ? 
 
 18. What error in the journal would not affect the equality of 
 the ledger after posting ? 
 
 19. What error in the journal would affect the equality of the 
 ledger after posting ? 
 
16 TEACHER'S MANUAL 
 
 20. How are errors in the journal to be discovered before we 
 proceed to post ? 
 
 '21. What error in posting would not affect the equality of the 
 ledger ? 
 
 22. What error in posting would affect the equality of the 
 ledger ? 
 
 23. What errors are likely to be made in the sales book? 
 
 24. How may errors in a sales book be discovered? 
 
 EXERCISE XIII 
 ELEMENTARY TEST CLOSING THE LEDGER 
 
 Open an account with the student as proprietor, using the 
 following items : 
 
 Dr. Cr. 
 
 $85. $2200. 
 
 Open an account with Merchandise, using the following items : 
 
 Dr. Cr. 
 
 $500.50 $458. 
 308.75 246.77 
 
 567.20 396.85 
 
 476.35 557.23 
 
 Merchandise inventory, $627. 
 
 Open an account with Expense, using the following items : 
 
 Dr. 
 
 $35. 
 22. 
 12.50 
 
 Expense inventory, $24. 
 
 The above may be used as a test, the student opening a loss 
 and gain account, and then closing the accounts given. Dates 
 and paging for the ledger accounts should be supplied by the 
 teacher. 
 
ELEMENTARY TEST CLOSING THE LEDGER 17 
 
 As a class exercise the above may be used as follows : 
 
 Analyze the debits and credits of each account. 
 
 Omit the inventory and close the Merchandise account. 
 
 Note the difference in the net result when an inventory is used 
 and when it is not used. 
 
 Under what conditions would there be no inventory in a 
 business ? 
 
 Omit the inventory and close the Expense account. What is 
 the effect on the net result shown by the account ? Why ? 
 
 Under what conditions would there be no inventory in an 
 expense account? 
 
 What effect does a withdrawal have upon the proprietor's 
 account? Why? 
 
 When the business shows a net loss how is the proprietor's 
 account closed? 
 
 NOTE. The teacher may do a great deal of work like the above, 
 and thus add to the knowledge and efficiency of the class. Different 
 amounts, inventories, paging, etc., may be given to different students, 
 and the net results compared. 
 
 EXERCISE XIV 
 
 ELEMENTARY TEST CLOSING THE LEDGER 
 
 Open an account with the student as proprietor, using the fol- 
 lowing items : 
 
 Dr. Cr. 
 
 $150. $2850. 
 
 Open an account with Expense, using the following items : 
 
 Dr. Cr. 
 
 $45. . $20. 
 
 37.50 
 15.25 
 33.40 
 Expense inventory, $65. 
 
18 TEACHER'S MANUAL 
 
 Open an account with Merchandise, using the following items : 
 
 Dr. Cr. 
 
 $856.20 $562.65 
 
 733.85 328.54 
 
 432.50 217.64 
 
 912.67 674.32 
 
 433.89 512.04 
 
 298.46 482.56 
 
 119.78 
 Merchandise inventory, $1256.80. 
 
 Open an account with Interest, using the following items : 
 
 Dr. Cr. 
 
 $5.65 $4.35 
 
 3.10 3.25 
 
 2.45 
 1.67 
 
 Open an account with Discount, using the following items : 
 
 Dr. Cr. 
 
 $3.40 $5.75 
 
 2.75 3.46 
 
 1.10 6.52 
 
 3.45 
 1.75 
 
 The above may be used as a test, the student opening a loss 
 and gain account, and then closing the accounts given. Dates 
 and paging should be supplied by the teacher. 
 
 As a class exercise the above may be used as follows : 
 
 Analyze each ledger account. 
 
 For additional work follow the suggestions given under 
 Exercise XIII. 
 
ERASURES 19 
 
 EXERCISE XV 
 ERASURES 
 
 SUGGESTIONS. Dictate a short journal exercise and then show how 
 to make the following corrections : (a) a change in an amount ; (b) a 
 change in an entry. 
 
 Dictate a short ledger exercise and then show how to make the 
 following corrections : (a) an amount written on the wrong side ; (6) a 
 transposition of figures. 
 
 When errors have been discovered on books of account, they 
 should be promptly and carefully corrected. The use of the 
 eraser for making corrections should not be permitted. Where 
 it is found necessary to change any item written in ink in the 
 ledger, cash book, journal, etc., the particulars of the change 
 should be indicated in some manner; that is, the correction 
 should be made in such a way as to make the reason for the 
 change readily apparent. 
 
 An erasure in books of record is always regarded with more or 
 less suspicion by auditors or any person who may find it desirable 
 to look over the books. The accountant also usually finds it 
 embarrassing, if not exceedingly difficult, to satisfactorily explain 
 why a particular erasure has been made. 
 
 In bank, corporation, and all high-grade accounting few, if any, 
 erasures are found in the books of record. To a certain extent 
 erasures foster carelessness and dishonesty, and have a tendency 
 to weaken the strength of any entry as a permanent and valuable 
 record. Some accountants make all corrections of errors in post- 
 ing by a contra entry; i.e., an entry on the opposite side of the 
 ledger account designated by the words " By error " or " To error," 
 to cancel the record erroneously made. After the contra entry 
 has been made, the item may be correctly entered. Auditors, etc., 
 prefer to have all errors of this kind corrected by ruling carefully 
 and neatly in red ink through the amount that is wrong, and then 
 writing the amount correctly in black ink just above the figures 
 which have been canceled. This gives a brief history of the 
 
20 TEACHER'S MANUAL 
 
 error, makes proper corrections, and, if done neatly, does not 
 detract in any appreciable way from the general appearance of 
 the work done. Where a wrong entry has been made in the 
 journal, cash book, etc., corrections, in most cases, should be 
 made by ruling a red line through what is wrong and writing the 
 entry correctly just above the items canceled. 
 
 EXERCISE XVI 
 INDEXING 
 
 A good accountant not only keeps accurate records, but the 
 information contained in those records is instantly available for 
 reference. One of the chief aids to ready reference is a system 
 of indexing. Various records are indexed, but the information 
 given below applies chiefly to ledger indexing. 
 
 In a small business a few pages of the ledger are arranged for 
 indexing ; in a large business a separate book is used. 
 
 A page or a part of a page is set apart for the use of each letter. 
 All names beginning with A are placed under that letter. We 
 will illustrate by using several names : John Adams, page 23 ; 
 Peter Anson, page 145 ; Win. Appleton & Son, page 67. 
 
 Under A these would be arranged as follows : 
 
 A 
 
 Adams, John, 23 
 Anson, Peter, 145 
 Appleton, Wm., & Son, 67 
 
 In indexing names the surname is always written first, and the 
 Christian name follows. The number after each name indicates 
 the page of the ledger on which the person's account may be 
 found. Before opening an account in a ledger the name should 
 be indexed. 
 
 An interesting class exercise is to make an alphabetical index 
 of the names of all in the class. 
 
INDEXING 
 
 21 
 
 The Vowel System of Indexing. In a very large index the 
 alphabetical system would not be satisfactory. If there were 
 several pages of names beginning with S, for instance, it would 
 take too much time to find a name. 
 
 In the vowel system there is a space allotted for each letter, as 
 in the alphabetical arrangement, and this space is then divided 
 into six divisions, one for each vowel, A,E,I, 0, U, Y. Suppose 
 we take the letter S and arrange a series of names according to 
 the vowels. 
 
 We will take the following list of names : Jas. Sand, John Sell, 
 Wm. Silent, A. B. Soule, E. M. Sulzer, T. B. Syren. These names 
 all begin with S, and each name is placed under the vowel that 
 immediately follows the initial letter. By this arrangement one 
 need consult only a portion of the index under any given letter 
 to find the required name. 
 
 S 
 
 A 
 
 
 
 
 Sand, Jas., 32 
 
 Soule, A. 
 
 B., 70 
 
 E 
 
 U 
 
 
 SeU, John, 46 
 
 Sulzer, E. 
 
 M., 78 
 
 / 
 
 F 
 
 
 Silent, Wm., 67 
 
 Syren, T. 
 
 B., 109 
 
 The teacher may have his class arrange their names under a 
 vowel index. 
 
 In a large set of books paging is done before posting. The 
 page of each account, as found in the index, is placed opposite 
 the item to be posted ; then as each item is posted a check mark 
 (>/) is placed next to the folio figures. If the paging is in red 
 ink and the check mark in black ink, it makes both paging and 
 checking more conspicuous. 
 
22 TEACHER'S MANUAL 
 
 EXERCISE XVII 
 TERMS OF PURCHASE AND SALE 
 
 The following apply to terms on invoices : 
 
 1. Terms : on account. 
 
 When is the above due ? 
 
 Does the purchaser pay the face of the bill, or does he 
 
 get it for less ? 
 Does the seller realize the face of the bill or invoice ? 
 
 2. Terms : cash. 
 
 Are these terms always the best for the buyer ? 
 Are cash terms always the best for the seller ? 
 
 3. Terms : cash, l%. 
 
 How does No. 3 differ from No. 2 ? 
 
 4. Terms: 10 days. 
 
 When is a bill, under such terms, due ? 
 
 Which terms are the better for the seller, No. 1 or No. 2 ? 
 
 5. Terms : 3/5, net 30 days. 
 
 Just what do the above terms mean ? 
 
 Why are different terms quoted on the same bill ? 
 
 Explain "net 30 days." 
 
 6. Terms : 5/10, net 30 days. 
 
 Explain the above terms. 
 
 If the seller receives payment within 10 days will he real- 
 ize the face of the bill? 
 
 If the buyer pays within 10 days what effect will it have 
 upon the selling price of his goods ? 
 
 Why would a seller offer such a large discount for early 
 payment ? 
 
 7. Terms : 2/5, net 60 days. 
 
 Explain the above terms. 
 
 How does No. 7 differ from No. 6 ? 
 
 How does No. 7 differ from No. 5? 
 
 8. Terms : on account, 10 days. 
 
 How does No. 8 differ from No. 1 ? 
 
TERMS OF PURCHASE AND SALE 23 
 
 9. Terms : 30 -day note, from date of bill. 
 
 What advantage is it for the seller to receive such a note ? 
 Can he realize the money on it before it is due ? 
 How does this differ from " on account, 30 days " ? 
 
 10. Terms : 30 -day note, from date of bill, with interest at 6%. 
 
 How does No. 10 differ from No. 9 ? 
 
 Is No. 10 better for the seller than No. 9 ? 
 
 If the seller discounts the note, is No. 10 better than 
 
 No. 9 ? Give reasons for your answer. 
 Apply the terms of No. 9 and No. 10 to a bill of $684.50, 
 
 the notes being discounted, and compare the results. 
 
 11. Terms: 30-day note in 10 days, with interest at 6%, 
 
 less 1%. 
 
 How do the terms of No. 11 differ from Nos. 9 and 10? 
 Does the face of the note in No. 11 differ from either 
 
 No. 9 or No. 10 ? 
 Apply the above terms to the same amount given in 
 
 No. 10, discounting the note, and compare results. 
 
 (Discount each note for the full time it has to run.) 
 
 12. Terms : New York draft, less 2%. 
 
 Explain the above fully and note the relative advantage 
 to both buyer and seller. 
 
 13. Terms : sight draft in 10 days for the amount of the bill, 
 
 less 1%. 
 
 Fully explain the meaning of the above terms. 
 When should the sight draft be drawn ? 
 How would the sight draft be drawn ? 
 How does No. 13 differ from No. 12 ? 
 
 14. Terms : 10-day draft, less 2%. 
 
 Is the draft in No. 14 the same kind as in No. 13 ? 
 Make a clear distinction between No. 14 and No. 13 ? 
 On a bill of $438.25 apply the terms of both No. 13 and 
 No. 14, and note the difference in the net result. 
 
 15. Terms : 3/10, 1/30, net 60 days. 
 
 Fully explain the above. 
 
 Apply the terms to an invoice of $974.20, and note the 
 net results to the seller. 
 
24 TEACHER'S MANUAL 
 
 16. Terms : New York draft for one-half the bill ; balance in 
 
 30 days, less 1%. 
 Would the discount be taken off the entire bill or only 
 
 one-half of it ? 
 Apply the terms to a bill of $1000, and note the net 
 
 results to the seller. 
 
 17. Terms: net 10 days, F.O.B., Boston. 
 
 When do the seller's expenses regarding shipment cease ? 
 When do the buyer's expenses regarding shipment begin? 
 Just what do the above terms mean ? 
 
 18. Terms : C.O.D., less 2%, by American Express. 
 
 Under the above terms to whom does the seller deliver 
 the goods ? From whom does he receive the returns of 
 the shipment? 
 
 From whom does the buyer receive them ? 
 
 Under what conditions are such terms desirable ? 
 
 What is the particular service rendered by the express 
 company? 
 
 Who pays the charges on C.O.D. shipments? 
 
 19. Terms : C.O.D., less 3%, to the order of Merchants Bank. 
 
 Under the above terms to whom does the seller deliver 
 the goods ? 
 
 From whom does the buyer receive them ? 
 
 What part does a bill of lading have in the above ? 
 
 What action must the buyer take before he can get the 
 goods ? 
 
 Under what conditions will a railroad company deliver 
 goods ? 
 
 From whom will the seller receive returns from the ship- 
 ment? 
 
 What charges are there for collections like the above, and 
 who bears them ? 
 
 NOTE. This exercise.on terms is sufficiently suggestive for a teacher 
 to conduct an interesting and profitable lesson. By consulting a num- 
 ber of business houses other terms may be secured, if the teacher so 
 desires. 
 
BUSINESS FORMS 25 
 
 EXERCISE XVIII 
 BUSINESS FORMS 
 
 SUGGESTIONS. Write the following forms and then make the 
 entries for all the parties. 
 
 1. James Wilson owes you $168, and pays you $85.50. Write 
 the receipt. 
 
 2. John Smith owes you $400, and you draw a sight draft on 
 him, in favor of yourself, for that amount. Write the draft. 
 
 3. Draw a time draft payable after sight, observing the 
 following conditions : 
 
 Place, Pittsfield, Mass. 
 Date, January 1, 1903. 
 Time, 30 days. 
 Amount, $165.86. 
 Drawer, yourself. 
 
 Drawee, D. M. Cole, Boston, Mass. 
 Payee, John Rich, Boston, Mass. 
 Write the acceptance. 
 
 4. Draw a time draft, observing the following conditions : 
 
 Place, Albany, New York. 
 Date, March 1, 1903. 
 Time, 60 days. 
 Amount, $250. 
 Drawer, Henry Brown. 
 Drawee, yourself, Springfield, Mass. 
 Payee, William Jones, Springfield, Mass. 
 Write the acceptance. 
 
 5. Write a check, observing the following conditions : 
 
 Place, Hartford, Conn. 
 
 Date, April 1, 1903. 
 
 Bank, First National, Hartford, Conn. 
 
 Maker, yourself. 
 
 Payee, John Mark. 
 
 6. George Wells owes you $100 and pays the entire amount. 
 Write the receipt. 
 
26 TEACHER'S MANUAL 
 
 7. Write a promissory note, observing the following condi- 
 tions : 
 
 Place, Portland, Me. 
 
 Date, February 1, 1903. 
 Time, 100 days. 
 Maker, yourself. 
 Payee, James Tree. 
 Payable at Union Bank. 
 Interest, 6%. 
 
 This note is transferred to Henry Wilde by full indorsement. 
 
 EXERCISE XIX 
 JOURNALIZING BANK AND PERSONAL DRAFTS 
 
 May 1. Sold O. M. Pratt merchandise amounting to $6218. 
 Received in payment the following: cash, $1800 ; his check, $1218 ; 
 a New York draft, $1000 ; his note at 30 days with interest, $800; 
 his sight draft on A. C. Carter, $750 ; balance on account. 
 
 NOTE. For the purpose of illustrating the principles of debit and 
 credit, transactions like the above may be journalized as a compound 
 entry. In business, however, the items would be entered in different 
 books of record, cash book, journal, etc. The teacher should explain. 
 
 2. Bought of 0. M. Butler merchandise amounting to $5420. 
 Gave in payment the following : my check for $920 ; a sight draft 
 on Chas. Heald for $1500 ; my note with interest, at 60 days, 
 $1200 ; cash, $800 ; balance on account. 
 
 3. Gave L. D. Parker a sight draft on Geo. Miller for $346.95, 
 to apply on account. 
 
 4. Received of Thomas Gorham a sight draft on Wm. Downes 
 for $267.25, to apply on account. 
 
 5. Gave David Wells the sight draft I received of Thomas Gor- 
 ham, to apply on account. 
 
 6. Bought merchandise of Y. M. Grady amounting to $896.40. 
 Gave in payment my note at 90 days, with interest, for $496.40, 
 and Isaac Potter's note, which I held for $400. 
 
CASH-BOOK ENTRIES 27 
 
 7. Gave David Cress my sight draft on R. H. Hilpot to apply 
 on account, $23-5. 
 
 8. Insured my store and contents, valued at $15,000, in the 
 Niagara Insurance Company for full value ; premium, l%, paid 
 by check. 
 
 9. Gave David Beeson my check to apply on account, $640. 
 
 10. Remitted to David Olney a New York draft for $76.50, to 
 apply on account. 
 
 11. Received of Amos D wight, to apply on account, his check 
 for $1225. 
 
 12. Received of Albert Melrose a New York draft, to apply on 
 account, $1625. 
 
 13. Bought of William Grayson real estate for $16,800, and 
 paid for the same as follows : the check received from Amos 
 Dwight ; the New York draft received of Albert Melrose ; my 
 check for $5150; a sight draft on Wilson & Co. for $2,000; a 
 mortgage on the property for the balance. 
 
 14. I am informed by the Union Bank that my account is 
 overdrawn $121.45, and at once deposit $254. 
 
 NOTE. After journalizing the above enter all cash items in the 
 cash book. 
 
 EXERCISE XX 
 CASH-BOOK ENTRIES 
 
 SUGGESTIONS. Use a sheet of ordinary journal paper and record the 
 following transactions in cash-book form, using the month of January 
 for the dates. These items do not afford a connected series of trans- 
 actions, but outline a useful cash-book exercise. After recording the 
 transactions close the cash book. 
 
 1. You make a cash investment in business of $2800. 
 
 2. For subrental of a part of your store, John Harris pays you 
 in cash, $165. 
 
 3. For an office outfit, books, stationery, furnishings, etc., you 
 pay William Norton $142.70. 
 
28 TEACHER'S MANUAL 
 
 4. You pay Ernest Hamill cash, to apply on account, $875.40. 
 
 5. A. P. Jensen pays you cash, to apply on account, $356.70. 
 ' 6. You hold David Ware's note for $1250, and it has yet 60 
 
 days to run. Discount the note at the First National Bank and 
 receive credit for the proceeds. The note is without interest. 
 
 7. Andrew Ellis holds your note for $850. It has yet 86 days 
 to run, but he offers to discount it at 6% for the unexpired time 
 if you pay it now. Make the payment, less discount. 
 
 8. You buy by check on Hampden National Bank a New York 
 draft for $609.75. Remit it to Asa Munson, to apply on account. 
 The bank charges $1 exchange on the draft. 
 
 9. J. D. Burrill sends you a sight draft on C. E. Dennison, to 
 apply on account, $235. 
 
 10. You hold D. Hanna's note for $650, and the note is due 
 to-day, with interest for 93 days. He pays both the note and 
 interest in cash. 
 
 11. Daniel W. Campton holds your note for $975.60. The note, 
 with 77 days' interest, is due to-day. Pay the same in cash. 
 
 12. You hold David Creig's interest-bearing note for $560. 
 The note has run for 48 days ; you discount it at the bank and 
 receive credit for the proceeds. The note has yet 45 days to run. 
 
 20. In this morning's mail you receive a sight draft drawn on 
 you by J. W. Mason, in his own favor for $210. Pay the draft 
 by check. 
 
 24. You have been absent from the city and on your return 
 find that your note for $500, held by James Larkin, due on the 
 22d, has been protested for non-payment. The note was payable 
 at the City National Bank. Pay the note, with interest added 
 for 92 days, and protest fees amounting to $1.25. 
 
 30. Pay the City Carting Company $106.24 for freight and 
 drayage. 
 
 31. Pay monthly salaries amounting to $235. 
 
JOURNALIZING BANK AND PERSONAL DRAFTS 29 
 
 EXERCISE XXI 
 JOURNALIZING BANK AND PERSONAL DRAFTS 
 
 June 1. Sell Daniel Ames merchandise amounting to $1876.50. 
 Receive in payment the following : cash, $650 ; his 10-day note, in 
 your favor, $450 ; R. M. Kurd's note, in favor of Ames, for 
 indorsed to you ; his check for the balance. 
 
 2. Sell George Cannon merchandise amounting to 
 Receive in payment the following : his note at 3 months, on 
 interest, $375; his check for $200; his sight draft on Albert 
 Hatch for the balance. 
 
 3. Buy of Samuel Eaton merchandise amounting to $578.90. 
 Give in payment the following : the check and sight draft received 
 of George Cannon (see transaction above), and your check for the 
 balance. 
 
 4. W. M. Briton presents a draft drawn by A. L. Hunter on 
 you, at sight, for $238.17. Pay the draft by check. 
 
 5. Pay your note due to-day, in favor of A. S. Murphy, for 
 $985.50, as follows : check for $385.50 ; X. H. Woodford's accept- 
 ance, less 60 days' discount, $300; balance in cash. 
 
 6. Sell F. H. Starrett merchandise amounting to $2165. 
 Receive payment as follows : note of NT. E. Huntress, in favor of 
 Starrett, for $1000; interest accrued on the note, $16.75; his 
 check for $600 ; balance on account. 
 
 7. Discount R. B. Young's acceptance at First NTational Bank ; 
 face of acceptance, $326.90; discount allowed for 72 days; pro- 
 ceeds left on deposit in the bank. 
 
 8. Buy of J. K. Gray merchandise amounting to $432, and 
 accept his 30-day draft in payment of same. 
 
 9. Sell Alfred Stowe merchandise amounting to $83.45, and 
 receive a New York draft in payment of same. 
 
 10. Buy merchandise of Frederick Seton amounting to $567.54, 
 and pay for same by a sight draft on Gray & Son for $200, and 
 your check for the balance. 
 
 11. Receive from C. E. Rowe a bank draft for $90, on account. 
 
30 TEACHER'S MANUAL 
 
 12. David Bennett owes you on account, $140.60. He has 
 failed in business and is able to pay but 40^ on the dollar. 
 Receive cash for settlement on the above basis. (Make a ledger 
 account with Bennett and close the same.) 
 
 NOTE. After journalizing the above, enter all cash items in the 
 cash book. 
 
 EXERCISE XXII 
 JOURNALIZING MISCELLANEOUS 
 
 July 1. Receive cash of James Brown for his note, due to-day, 
 and interest on same for 93 days. Face of note, $1500. 
 
 2. Prepay my note, in favor of Johnson & Co.,, less 26 days' 
 discount. Face of note, $150. 
 
 3. Pay my note, in favor of E. Felton, due to-day, in cash. 
 Face of note, $600 ; interest accrued for 37 days. 
 
 4. Buy of James Powers 1000 bu. wheat at 66f^, paying cash 
 for one-half the amount and the balance on account. 
 
 5. Give James Snell your note at 60 days, with interest, for 
 rent of store for one month, $60. 
 
 6. Thomas Fleming gives you his note at 60 days, with 
 interest, in full of account, $750. 
 
 7. Horace Mann draws a sight draft on you, in favor of 
 Charles Anson, for $345. You pay the same by check. 
 
 8. Buy of A. W. Haley, 1200 bu. corn at 42^, and accept his 
 draft at 30 days in payment of same. 
 
 9. Sell S. B. Clark 2000 bu. wheat at 72^, and receive payment 
 as follows : his check for $725 ; cash, $275 ; balance on account. 
 
 10. Pay Austin & Brown for invoice of $346, less 2%, by check. 
 
 11. Give C. T. Coleman your note at 90 days, with interest, in 
 full of account, $452. 
 
 12. You discount S. Daniels' note at the bank; face of note, 
 $350; discount is allowed for 66 days; proceeds are paid to you 
 in cash. 
 
 13. S. B. Clark gives you his note at 60 days, with interest, 
 for the balance due on invoice, $440. 
 
COMPOUND ENTRIES 31 
 
 14. Give James Powers your note at 30 days, with interest, 
 for the balance due on invoice, $333.33. 
 
 NOTE. In the use of the above exercise all cash items may be 
 placed in the cash book, and all others journalized. After placing 
 the cash items in the cash book, journalize them as an additional exer- 
 cise. All the items may then be placed in the cash book, the cash 
 book closed, and the balance compared with the results, when only 
 the cash items were entered. The two balances should be the same, 
 but the total footings should be different. 
 
 EXERCISE XXIII 
 
 COMPOUND ENTRIES, AND QUESTIONS ON 
 BANK DRAFTS 
 
 August 1. W. R. Sell settles his account with you in full, as 
 follows : balance of account, $180, and interest on the same for 
 36 days. He gives you his note at 30 days, with interest, for $100, 
 and the balance in cash. 
 
 2. Pay your note, in favor of Waverly & Co., as follows : face 
 of note, $900 ; interest accrued for 63 days. Give your check for 
 $350 ; H. Taylor's acceptance for $400, less 30 days' discount ; 
 balance in cash. 
 
 3. Sell Henry David your warehouse for $6000. Receive in 
 payment his 10-day draft on Clay & Co., for $4000, Clay & Co. 
 accepting the draft; his personal note for $1000; balance in 
 cash. 
 
 4. Sell Buell & Co. merchandise amounting to $2000. Pay- 
 ment is made as follows : Gove & Co.'s note, in favor of Buell & 
 Co., for $1000, Buell & Co. indorsing the note; interest accrued 
 on Gove & Co.'s note, $16.50; their check for $500; balance on 
 account. 
 
 5. Sell Jones & Co. 1000 bu. corn at 45^, and receive in pay- 
 ment your note which they held. 
 
 6. Sell French & Co. 2000 bu. oats at 37 p. In payment they 
 give you their check for $400, and their order on Curr & Co., 
 payable in money, in 10 days, for the balance. 
 
32 TEACHER'S MANUAL 
 
 7. Sell a team of horses to Carlson & Co. for $325, and receive 
 in payment their sight draft on Hudson & Co. for that amount. 
 
 NOTE. Journalize each of the above items. 
 
 QUESTIONS 
 
 You buy a New York draft at First National Bank, New 
 Haven, Conn., drawn on Chemical Bank of New York, and send 
 the draft to Hall & Son, Alton, 111. How will the draft reach the 
 Chemical Bank in New York? 
 
 Why is it that the First National Bank of New Haven, Conn., 
 can draw drafts on the Chemical Bank in New York? 
 
 Give a clear distinction between a bank draft and a personal 
 draft. 
 
 If you were a stranger in New York and wished to open an 
 account with the Second National Bank in that city, how would 
 you proceed ? 
 
 EXERCISE XXIV 
 JOURNALIZING MISCELLANEOUS 
 
 September 1. R. L. Weston owes you $286.40, and interest 
 accrued oil same amounts to $12.60. He has failed in business and 
 is able to pay creditors only 50^ on the dollar. You settle with him 
 on the basis named. He gives you a note at 90 days, with interest, 
 for $100, and cash for the balance. The note is indorsed by 
 Thomas Fulton. (Open and close his ledger account.) 
 
 2. Sell Abram Carson merchandise amounting to $986.50. 
 Receive payment as follows : your acceptance, which he held for 
 $644, less 69 days* discount ; his check for the balance. 
 
 3. You exchange a farm valued at $4000 for three city lots 
 valued at $10,000. The difference is paid as follows : your check 
 for $2000 ; your 60-day draft on Frank McCall for $1500, less 60 
 days' discount ; a first mortgage on the city lots for the balance. 
 
 5. Your note, in favor of E. A. Heald for $900, and interest 
 thereon amounting to $20, is due to-day and payable at the Union 
 
INVENTORIES 33 
 
 Bank. In order to meet the note and interest you discount at 
 Union Bank Isaac Shaw's note for $1200, which you hold; you 
 allow discount on Shaw's note for 100 days. After paying the 
 note the Union Bank places the balance to your credit. Jour- 
 nalize and show how much is on deposit to your credit at the 
 Union Bank. 
 
 7. James Suydam informs you that he will be unable to meet 
 his note of $640, in your favor, which matures to-morrow. You 
 accept the following offer : he gives you a new note for $640, with 
 interest, as a renewal of the old note ; and the interest on the old 
 note, $10.20, he pays in cash. 
 
 8. Buy of William Rose merchandise amounting to $1640. 
 Pay for same as follows : your 30-day draft for $600, less 30 days' 
 discount ; Harry Rad way's note for $500, upon which interest has 
 accrued amounting to $9.50 ; your check for $400 ; balance on 
 account. The 30-day draft is drawn on Hiram B. Murray. 
 
 9. John Brown has drawn a 60-day draft on you for $840, in 
 favor of William Gordon. Instead of accepting the same you 
 prepay the draft less the 60 days' discount, as follows: your check 
 for $425 ; a sight draft on Ezra Walsh for the balance. 
 
 EXERCISE XXV 
 
 INVENTORIES 
 
 The subject of inventories is an extensive one, and the fol- 
 lowing suggestions will indicate to the teacher just how to pro- 
 ceed to both interest and instruct his class in this important 
 subject. 
 
 MERCHANDISE INVENTORIES RESOURCE 
 
 Merchandise on hand is the most common form of inventory 
 in a business where merchandise is handled. 
 
 1. How does a merchant ascertain just what quantity of goods 
 he has on hand ? 
 
 2. At what price is this quantity valued? 
 
34 TEACHEE'S MANUAL 
 
 3. If holiday goods were inventoried early in December, at what 
 price would they be valued ? Would the price or estimate change 
 if -these same goods were inventoried late in January ? 
 
 4. Under what conditions would merchandise be estimated at 
 more than cost value ? 
 
 5. Under what conditions would it be estimated at less than 
 cost? 
 
 6* If an inventory is too high, what effect does it have upon 
 the business statement? Why? 
 
 7. If an inventory is too low, what effect does it have upon the 
 business statement ? Why ? 
 
 LIABILITY INVENTORIES AND MISCELLANEOUS DRILLS 
 
 A very common form of liability inventory for merchandise is 
 an unpaid freight bill. 
 
 1. Why is such an unpaid freight bill a liability inventory? 
 
 2. How would such an inventory be entered in the Merchandise 
 account when the books were closed ? 
 
 3. How does a liability inventory affect the Merchandise 
 account ? Why ? 
 
 The writer has known of several business houses where all 
 invoices of merchandise bought were simply placed on file and 
 not entered in the regular books until they were paid. Under 
 such conditions all unpaid invoices at the time of closing the 
 books would be a liability inventory. Why ? 
 
 The teacher will find it an interesting exercise to have the class 
 make up a short merchandise account, enter both resource and 
 liability inventories, and then close the account. Analyze the 
 account both before and after closing. 
 
 The teacher may give notes of introduction to several members 
 of his class, to leading merchants or manufacturers of the 
 community, and ask them to call and get specific information 
 regarding the taking of inventories, the information thus obtained 
 to be reported to the class. This is far more helpful to the class 
 than for the teacher to do all the work of collecting information 
 himself. 
 
INVENTORIES 35 
 
 In all the above work the use of the Merchandise account is 
 invaluable as an aid to both the interest and instruction of the 
 class. 
 
 The teacher should prepare a classified merchandise account 
 and have the class enter the inventories in the various classified 
 accounts, each classified account to be closed into the general 
 Merchandise account. 
 
 4. Close the Merchandise account, as given in Exercise 37, 
 using both inventories. 
 
 5. Close the account, using only the resource inventory. 
 
 6. Close the account, using only the liability inventory. 
 
 7. Close the account, using only the debit and credit items, 
 both inventories being omitted. 
 
 8. Compare the net result of each closing with the net results 
 of each of the other closings. 
 
 9. These comparisons bring out striking differences ; the class 
 should make a written outline of the differences noted. 
 
 10. Discover the reason for each difference outlined ; discuss 
 freely. Be sure that all points are clearly understood. 
 
 11. What effect does each result of the different closings have 
 upon the proprietor's account ? Why ? 
 
 12. Close the Expense account, as given in Exercise 36, using 
 both inventories. 
 
 13. Close the account, using only the resource inventory. 
 
 14. Close the account, using only the liability inventory. 
 
 15. Close the account, using neither inventory. 
 
 16. Note the difference in the net results obtained, and discuss 
 the reasons for all differences noted, following the plan suggested 
 for the Merchandise account. 
 
 17. Close the account of James H. Harlan, as suggested in 
 Exercise 37. 
 
 18. Why does this account show a loss ? 
 
 19. Personal accounts usually belong to the resource and 
 liability class of accounts. To which class does this account 
 belong? Why? 
 
 20. What effect does the closing of an ordinary personal account 
 have upon the proprietor's account ? 
 
36 TEACHER'S MANUAL 
 
 21. What effect does the closing of the account of James H. 
 Harlan have upon the proprietor's account ? Why ? 
 * 22. Open an account with interest and discount, as follows : 
 
 Dr. Cr. 
 
 $23.45 $18.50 
 
 7.85 11.05 
 
 12.65 2.03 
 
 23. Interest and discount inventory, resource, $13.52. 
 
 24. Interest and discount inventory, liability, $18.35. 
 
 (For explanation of interest and discount inventories, see the 
 latter part of this exercise.) 
 
 25. Close the above account, using both inventories. 
 
 26. Close the account, using only the resource inventory. 
 
 27. Close the account, using only the liability inventory. 
 
 28. Close the account, omitting both inventories. 
 
 29. Note carefully the differences obtained in the net results. 
 
 30. Discuss the reasons for all differences noted. 
 
 31. Note the effect of each different closing upon the pro- 
 prietor's account, and the reason therefor. 
 
 NOTE. A great variety of work may be obtained by the teacher 
 for his class in the use of Exercise 37. For instance, close the Mer- 
 chandise account in each of the ways suggested, and also one of the 
 other accounts, transferring the results to the Loss and Gain account, 
 and then to the proprietor's account. 
 
 Before concluding the exercise, the student should open an account 
 on a ledger page with each account given in the exercise, and close 
 them as directed. If he is able to do this he has a good understand- 
 ing of some of the technical features involved in the closing of a ledger. 
 
 EXPENSE INVENTORIES 
 
 1. The student should decide whether the following are resource 
 or liability inventories : 
 
 a. An office safe on hand valued at $67.50. 
 
 b. An unpaid stationery bill amounting to $18.65. 
 
 c. Unpaid rent amounting to $45, due from the business. 
 
 d. Office books and office stationery on hand valued at $32. 
 
INVENTOKIES 37 
 
 e. Unpaid salaries amounting to $72.50. 
 
 f. A quantity of coal valued at $28.45. 
 
 g. An unpaid gas bill amounting to $6.80. 
 
 h. An unpaid telephone bill amounting to $7.45. 
 
 1. An insurance policy, the unearned premium of which is 
 worth $37.60. 
 
 The above inventories may be used as follows for a class 
 exercise : 
 
 2. Create an expense account and enter one of the above 
 resource inventories, closing the account. 
 
 3. What effect does a resource inventory have on the Expense 
 account ? Why ? 
 
 4. Create an expense account and enter one of the liability 
 inventories, closing the account. 
 
 5. What effect does a liability inventory have on the Expense 
 account? Why? 
 
 6. Create an expense account, and enter both a resource and 
 a liability inventory, closing the account. 
 
 INTEREST INVENTORIES 
 
 All interest-bearing notes on hand or outstanding when a state- 
 ment of the business is made, require an interest inventory as a 
 means of ascertaining the exact value of the business. The 
 interest accrued on bills receivable represents a resource inven- 
 tory; the interest accrued on bills payable represents a liability 
 inventory. 
 
 1. The student will find the interest inventory on the follow- 
 ing bills receivable : 
 
 a. A note for $620 that has run for 3 months and 20 days. 
 
 b. A note for $56.75 that has run for 5 months. 
 
 c. A note for $326 that has run for 84 days. 
 
 d. A note for $575 that has run for 7 months and 7 days. 
 
 e. A note for $1000 that has run for 9 months and 8 days. 
 /. A note for $237.54 that has run for 8 months and 3 days. 
 
 2. Is the interest just obtained a resource or a liability inven- 
 tory? Why? 
 
38 TEACHER'S MANUAL 
 
 3. Create an interest account and enter the above inventory, 
 closing the account. 
 
 4. What effect does the inventory used have upon the Interest 
 account? Why? 
 
 5. If the above inventory was omitted when a business state- 
 ment was made, what effect would it have upon the results shown 
 by the statement ? Why ? 
 
 6. If the above inventory was used when a business state- 
 ment was made, what effect would it have upon the results shown 
 by the business? Why? 
 
 7. The student will find the interest inventory on the follow- 
 ing bills payable : 
 
 a. A note for $453.25 that has run for 2 months and 13 days. 
 
 b. A note for $747 that has run for 4 months. 
 
 c. A note for $87.60 that has run for 6 months and 23 days. 
 
 d. A note for $912.15 that has run for 7 months and 11 days. 
 
 8. Is the interest just obtained a resource or a liability inven- 
 tory? Why? 
 
 9. Create an interest account and enter the above inventory, 
 closing the .account. 
 
 10. What effect does this inventory have upon the Interest 
 account? Why? 
 
 11. If the above inventory was omitted when a business state- 
 ment was made, what effect would it have upon the results shown 
 by the statement ? Why ? 
 
 12. If the above inventory was used when a business state- 
 ment was made, what effect would it have upon the results shown 
 by the statement ? Why ? 
 
 13. Create an interest account and enter both the interest 
 inventories, closing the account. 
 
 DISCOUNT INVENTORIES 
 
 All notes on hand or outstanding that are not interest-bearing 
 require that discount should be reckoned for the time the notes have 
 yet to run, in order that a correct result may be obtained in the 
 statement. The discount thus obtained is a discount inventory. 
 
INVENTORIES 39 
 
 The discount on bills receivable is a liability inventory, and the 
 discount on bills payable is a resource inventory. 
 
 1. The student will find the discount inventory on the follow- 
 ing bills receivable : 
 
 a. A note for $620 that has yet 3 months to run. 
 
 b. A note for $565 that has yet 89 days to run. 
 
 c. A note for $98.45 that has yet 5 months to run. 
 
 2. Is the above inventory a resource or a liability? Why? 
 
 3. Create a discount account and enter the above inventory, 
 closing the account ? 
 
 4. What effect does this inventory have upon the Discount 
 account? Why? 
 
 5. The student will find the discount inventory on the follow- 
 ing bills payable : 
 
 a. A note for $435 that has yet 4 months and 6 days to run. 
 
 b. A note for $368 that has yet 6 months to run. 
 
 c. A note for $875 that has yet 9 months to run. 
 
 6. Is the above inventory a resource or a liability? Why? 
 
 7. Create a discount account and enter the above inventory, 
 closing the account. 
 
 8. What effect does this inventory have upon the Discount 
 account? Why? 
 
 9. Create a discount account and enter both of the above 
 inventories, closing the account. 
 
 10. If the above inventories were omitted when the business 
 statement was made, what effect would it have upon the results 
 shown by the statement? Why? 
 
 DOUBTFUL ACCOUNTS 
 
 Another form of discount inventory is the estimate that is 
 made for losses on accounts receivable. The teacher will illustrate. 
 
 From time to time there collects on the books of merchants a 
 class of accounts known as doubtful accounts. Such accounts are 
 with persons from whom full collections are not likely to be made. 
 These accounts may be grouped together and an estimate made 
 as to their probable value, such an estimate being treated as an 
 
40 TEACHER'S MANUAL 
 
 inventory. By using a number of personal accounts, the use of 
 such an inventory may be clearly illustrated. 
 * 1. If doubtful accounts are inventoried, is the inventory a 
 resource or a liability ? Why ? 
 
 2. If such an inventory is used, what is the effect upon the 
 results shown by the business statement? Why? 
 
 3. Stocks and bonds may be inventoried. These securities 
 fluctuate in the market, and they should be inventoried at the 
 current market price when the business statement is made. 
 
 4. Open an account with a certain kind of stock either at par, 
 or below par, or above par. Close the account by using the market 
 price as a means of finding the inventory. Note the result. 
 
 EXERCISE XXVI 
 A REVIEW SET 
 
 SUGGESTIONS. Use journal, cash book, and ledger. 
 
 September 1. John Jones commenced business with the follow- 
 ing resources and liabilities : 
 
 Resources 
 
 Cash $5700. 
 
 Store and Lot 5500. 
 
 Note of E. C. Hunter 2000. 
 
 Interest accrued on the same 20. 
 
 Merchandise in store worth 10250. 
 
 Liabilities 
 
 Owes W. J. Jenkins & Co. on account $1250. 
 
 Adam Bros, hold a mortgage on store and contents 3500. 
 Interest accrued on the same 17.50 
 
 2. Sold merchandise worth $1275 to E. M. Spring. Terms: 
 3/10, net 90 days. 
 
 3. Bought a farm of H. S. Scott for $8500. Paid cash, $5500 ; 
 assumed payment of a mortgage on the farm, $2000 ; and gave an 
 interest-bearing note, secured by a second mortgage, for the balance. 
 
A REVIEW SET 41 
 
 4. Received of E. C. Hunter his check for $1021 and an 
 interest-bearing note for $1000, in full payment of his old note 
 of $2000 and interest to date, $21. 
 
 5. Gave our 60-day note for $1262.50 to W. J. Jenkins & Co. 
 to balance account of $1250, now due, and to cover interest on 
 same to maturity of debt. 
 
 6. Received of E. M. Spring his note at 90 days in settlement 
 of account, $1275. Discounted same at bank, receiving credit for 
 the proceeds, $1255.87. 
 
 Post the above entries to the ledger and make a trial balance. 
 
 NOTE. After the trial balance is completed, if the teacher will 
 supply inventories, both a balance sheet and a business statement can 
 be made. Vary the amounts given to different members of the class 
 and compare the results, and give the reasons therefor. 
 
 EXERCISE XXVII 
 A REVIEW SET 
 
 James Worley began business with the following resources and 
 liabilities : 
 
 Resources 
 
 Store Building and Lot $4250. 
 
 Cash in Market Bank 1750. 
 
 Cash in safe 357.28 
 
 Wilton & Co.'s 10-day note, dated July 28 658.50 
 
 Liabilities 
 
 Account, in favor of John R. Steeves $450. 
 Note, in favor of E. P. Coleman, dated July 20, 
 
 due 60 days after date 1893.75 
 Interest, accrued at 6% to date 4.10 
 
 August 4. Bought with check 10 shares Union Bank stock at 
 69 (par value 100). 
 
 6. Bought of Davis Bros, merchandise worth $3000. Gave in 
 payment check for $400, balance on account. 
 
42 TEACHER'S MANUAL 
 
 7. Wilton & Co.'s note for $658, mentioned in resources, has 
 been protested for non-payment. Protest fee, $1.65. 
 
 10. Sold J. Burson merchandise valued at $2628.50. Received 
 in payment at its present worth my note for $1893.75, in favor of 
 E. P. Coleman, mentioned in liabilities, present worth $1900.38 ; 
 balance on account. 
 
 12. Drew a sight draft on J. Burson for $325 and remitted 
 it to Davis Bros., on account. 
 
 13. Sold to Amos Smith 10 shares Union Bank stock at 71 
 and received his check on Union Bank for amount. 
 
 14. Received of J. Burson on account his draft at 30 days' sight 
 on E. P. Coleman for $560. Presented the above draft for accept- 
 ance, and Coleman has accepted the same payable at Union Bank. 
 
 14. Due W. H. Lease $50 salary for one-half month. Paid 
 W. H. Lease one-half the amount due him in cash. 
 
 16. Discounted at 8% my note for $1800 given for 60 days at 
 Union Bank and received credit for proceeds. Discount, $25.20. 
 
 Enter the above items in either the cash book or journal, post, 
 and make a trial balance. 
 
 NOTE. After the trial balance is completed, if the teacher will 
 supply inventories, both a balance sheet and a business statement can 
 be made. Vary the inventories given to different members of the 
 class and have the results compared. 
 
 EXERCISE XXVIII 
 OPENING ENTRIES FOR PARTNERS 
 
 1. If you were in business and admitted Nelson Burr as an 
 equal partner, what steps must be taken in connection with your 
 business in order that you may know just how much Burr should 
 invest ? 
 
 a. If he made a cash investment, how would the entry be 
 made? 
 
 b. If he invested cash and real estate, what entry would be 
 made? 
 
 c. If he invested cash and a note, what entry would be made ? 
 
OPENING ENTRIES FOR PARTNERS 43 
 
 d. If he gave you a note for the entire amount of his invest- 
 ment, what entry would be made ? 
 
 e. If entirely new books were opened, how would the old books 
 be closed and the new books opened ? 
 
 2. Henry M. Johnson admits you as an equal partner in his 
 business. A statement shows the following : cash on hand, $750 ; 
 merchandise, per inventory, $4780 ; furniture and fixtures, $220 ; 
 accounts receivable, $2325; accounts payable, $1136; bills receiv- 
 able, $896 ; discount allowed on bills receivable, $6.84 ; bills 
 payable, $612 ; interest accrued on bills payable, $5.08 ; unpaid 
 rent amounts to $65 ; 5% of the accounts receivable are not col- 
 lectible ; there is an unpaid freight bill of $22.45. The good will 
 of the business is estimated at $1000. You purchase a half 
 interest in the business, giving Johnson your note, indorsed by 
 S. M. Winn, for $1500, for one year, with interest at 5%, and cash 
 for the balance of your investment. 
 
 a. Make a statement of the business, showing Johnson's present 
 worth. 
 
 b. What is the amount of your investment, and what are the 
 proper entries for the same ? 
 
 c. It is decided to open an entirely new set of books; how 
 would the old books be closed and the new books opened ? 
 
 3. Provin, Hasson & Little begin business under the following 
 conditions : capital, $25,000, of which sum Provin invests $15,000 ; 
 Hasson invests $6000, and Little borrows $4000 of Provin for 
 the purpose of investing it, each partner then making his invest- 
 ment in cash. What is the proper entry for the above when they 
 begin business ? 
 
 4. Pratt & Hardy are equal partners. They decide to borrow 
 $3000 in cash as a means of increasing their business, giving a 
 real estate mortgage as security. 
 
 a. What entry would be made when the money was borrowed ? 
 
 b. If the money borrowed was used as a permanent increase of 
 the firm's capital, what advance would have to be made by the 
 partners when the mortgage was paid ? 
 
 c. What entries would be made when the mortgage was paid ? 
 
 d. What ledger accounts would be affected ? 
 
44 TEACHER'S MANUAL 
 
 5. Warren Phelps and H. M. Brown are each engaged in the 
 dry goods business. They decide to unite their business interests 
 and form a partnership. Phelps invests cash, $9000 ; merchandise, 
 $5280 ; accounts receivable, $4235 ; of the accounts receivable, 5% 
 are not collectible; bills receivable, $1350; interest accrued on 
 bills receivable, $62.50. Brown invests cash, $4000 ; merchandise, 
 $3250 ; accounts receivable, $2320 ; 10% of the accounts receivable 
 are not collectible ; bills receivable, $650 ; discount allowed on bills 
 receivable, $8.90. 
 
 a. How would each partner close the books of his old business ? 
 
 b. How would the books of the new business be opened ? 
 
 6. Horace Duncan and Win. Porter begin a partnership business 
 under the following conditions : 
 
 Mr. Duncan invests $10,000 in cash ; Mr. Porter makes no 
 cash investment, as he is without capital, but is especially skilled 
 in the details of the business undertaken. Mr. Porter is to con- 
 duct the business and direct all its affairs. All gains realized are 
 to be divided equally. 
 
 a. Name some things that should be noted in the articles of 
 agreement between the partners. 
 
 b. What opening entry would be made at the beginning of the 
 business ? 
 
 c. What entries would be recorded in Mr. Duncan's ledger 
 account ? 
 
 d. What entries would be recorded in Mr. Porter's ledger 
 account ? 
 
 EXERCISE XXIX 
 
 CLOSING ENTRIES FOR PARTNERS 
 
 1. Dewey & Clark are partners. At the close of one year's 
 business the accounts of the proprietors were as follows: 
 
 Dewey's account: Dr.^ $350; Cr., $7500. Clark's account: 
 Dr., $300 ; Cr., $7500. The Loss and Gain account showed the 
 following items: merchandise, gain, $2356.70; expense, loss, 
 $543.20 ; interest, loss, $32.75 ; discount, gain, $58.93 ; collection 
 and exchange, loss, $6.12. Close the Loss and Gain account, 
 
CLOSING ENTRIES FOR PARTNERS 45 
 
 dividing the gains equally, and then show the present worth of 
 each proprietor. 
 
 a. Analyse the closing of these accounts. 
 
 b. What per cent of the total investment is the net gain ? 
 
 c. How do withdrawals affect present worth ? Why ? 
 
 2. Hart & Crowson are partners. At the close of one year's 
 business the accounts of the proprietors were as follows : 
 
 Hart's account : Dr., $250 ; Cr., $5000. Crowson's account : 
 Dr., $320 ; Cr., $5000. The Loss and Gain account showed the 
 following items : merchandise, loss, $2186.45 ; expense, loss, $450 ; 
 interest, loss, $56.25; discount, gain, $84.50. Close the Loss and 
 Gain account, dividing the losses equally, and then show the 
 present worth of each proprietor. 
 
 a. Analyze each account. 
 
 b. What per cent of the total investment is the net loss ? 
 
 c. The proprietors are worth less than the amount shown by 
 the net loss. Why? 
 
 d. What two things diminish the proprietors' present worth ? 
 
 3. Mitchell & Alden entered into a partnership, beginning busi- 
 ness January 1, 1900. Each made cash investments, Mitchell of 
 $5000, and Alden of $2500. During the year each withdrew as 
 follows: Mitchell's withdrawals, March 1, $60; Aug. 10, $125 ; 
 Oct. 25, $100. Alden's withdrawals: April 1, $50; Sept. 25, 
 $80 ; Nov. 12, $75. Open an account with each proprietor and 
 enter the amounts given. 
 
 The Loss and Gain account contained the following items at the 
 end of one year: merchandise, gain, $1387.54; expense, loss, 
 $256.33; interest, loss, $22.55 ; discount, gain, $54.12 ; collection 
 and exchange, loss, $11.34; insurance, loss, $25; office fixtures, 
 loss, $13.75. 
 
 The partnership agreement provided that each partner should 
 receive interest on all his investments and should pay interest on 
 all withdrawals. Adjust the interest account between the part- 
 ners, the rate of interest being 6 %. This interest may be carried 
 to the Loss and Gain account, but a better way is to adjust the 
 amount by making a journal entry and posting directly to the 
 proprietors' accounts. 
 
46 TEACHER'S MANUAL 
 
 After adjusting the proprietors' Interest account, close the Loss 
 and Gain account, dividing the gain according to the investment 
 of each partner. 
 
 4. This exercise should be followed by a careful explanation and 
 full discussion of the adjustment of the interest between partners 
 when both investments and withdrawals are subject to interest. 
 
 The teacher may vary the above exercise by opening a private 
 account with each proprietor, as well as an investment account, 
 carrying both the interest items and the net gain to the private 
 accounts. Discuss the value of the private account. 
 
 5. Dean and Lowell were partners. Dean invested $1800, and 
 Lowell $900. In the course of the first year Dean withdrew $400, 
 and Lowell $600. Open an account with each partner and enter 
 the items of investment and withdrawal. 
 
 The Loss and Gain account showed the following : merchandise, 
 loss, $843.50 ; expense, loss, $236.58. Close the Loss and Gain 
 account, dividing the loss equally between the partners. 
 
 a. What is the net result shown by Dean's account ? 
 
 b. What is the net result shown by Lowell's account ? 
 
 c. Why is there such a marked difference between the results ? 
 
 d. Where there are two partners is it possible for one of them 
 to be insolvent and the other solvent ? Why ? 
 
 6. Ellis and Lee were partners. Each invested cash, ! 
 During the first year of the business each partner withdrew I 
 Open an account with each partner and enter the investments 
 and withdrawals. 
 
 At the end of the first year their losses equaled $18,425.60. 
 Open a loss and gain account, enter the loss item, and then 
 close the account, dividing the loss equally between the partners. 
 After entering the net loss in each partner's account, close them. 
 
 a. What is the net result shown by each partner's account ? 
 
 b. In this connection the teacher may prepare a class exercise 
 on insolvency and discuss it with his class. 
 
 c. If an insolvent business is continued, how may the insolvency 
 be lessened ? 
 
 d. If an insolvent business is continued, how may the insolvency 
 be increased? 
 
INTERMEDIATE TEST 47 
 
 7. In closing a set of books, if one partner draws a salary, the 
 amount of his salary should be charged to the expense or salary 
 account just the same as if it were paid to a person outside of the 
 firm. The writer once knew of a partnership being dissolved 
 chiefly because of the kind of entry one partner made for himself 
 in payment of the salary he received as bookkeeper. He simply 
 charged his partner and credited himself. To illustrate : If A's 
 investment was $900, and B's $900, and A received $75 per month 
 for keeping the books and made this entry : 
 
 B. $75 
 
 To A $75 
 
 At the close of twelve months B's account would balance and A 
 would have all the investment. 
 
 The teacher may prepare a class exercise fully illustrating the 
 above. 
 
 8. Smith and Wesson are engaged in business as equal part- 
 ners. Wesson wishes to retire and sells his entire interest to 
 Smith, receiving cash therefor. 
 
 a. What necessary steps must be taken before the partnership 
 can be dissolved? 
 
 b. What public notice of dissolution should be given ? 
 
 c. What entry would Smith make on the books of the busi- 
 ness, upon paying cash for Wesson's interest ? 
 
 d. What change would be made in the ledger ? 
 
 e. How many accounts would be affected ? 
 
 /. If Smith opened new books when Wesson retired, how would 
 the old books be closed and the new books opened ? 
 
 EXERCISE XXX 
 INTERMEDIATE TEST 
 
 1. What is the acceptance of a draft ? How made ? 
 
 2. What are the uses and advantages of personal drafts? 
 
 3. Apply the following to as many kinds of inventories as you 
 can think of. 
 
 Why and how are inventories taken ? 
 
48 TEACHER'S MANUAL 
 
 4. What is the advantage of keeping money in a bank and of 
 making payments by check ? 
 
 5. What is a check stub, and what are its uses ? 
 
 6. How do you determine whether an account shows a 
 resource or a liability, a loss or a gain ? 
 
 7. What is the chief distinction between single entry and 
 double entry f 
 
 8. Why is it necessary that bills receivable and bills payable 
 should be always debited and credited at their face value ? 
 
 9. How is your answer to the last question modified if a 
 partial payment is made? 
 
 10. There are some errors that do not affect the equality of 
 the ledger ; mention as many errors of that kind as you can. 
 
 11. Why is the equality of the ledger not affected when an 
 account is closed by balance ? 
 
 12. Why does the proprietor of a business keep an account 
 with himself? 
 
 13. Name the uses of red ink, and illustrate each use named. 
 
 14. Why does a bank require you to indorse checks when you 
 deposit them ? 
 
 15. Give brief answers to the following : 
 
 a. Meaning of classes of accounts. 
 
 b. How open an account with a bank ? 
 
 c. How prove a check book ? 
 
 16. What personal habits are cultivated by the study of book- 
 keeping ? 
 
INTERMEDIATE TEST 49 
 
 EXERCISE XXXI 
 INTERMEDIATE TEST 
 
 1. What facts are disclosed when the present worth of a 
 business is shown ? 
 
 2. Under what conditions does a business man make an 
 assignment ? 
 
 3. When the assignment is made, does it mean that the 
 business is insolvent ? 
 
 4. In closing a set of books is it absolutely necessary to open 
 a loss and gain account ? 
 
 5. Would the Bills Payable account under any circumstances 
 ever represent a gain or a loss ? 
 
 6. Would the Bills Receivable account under any circum- 
 stances ever represent a gain or a loss ? 
 
 7. What is a financial statement, and what facts does it set 
 forth? 
 
 8. What is a statement of an account? When issued, and 
 for what purpose ? 
 
 9. Would it be possible to close the Expense account by a 
 journal entry? 
 
 10. Does a personal account ever show a loss ? Illustrate. 
 
 11. What is meant by closing the ledger, and is it necessary to 
 close all accounts? 
 
 12. Under what circumstances is it desirable or necessary to 
 close a personal account ? 
 
 13. Under what conditions would the Cash account show a 
 liability? 
 
 14. Would it be possible for the Cash account to show a loss ? 
 
 15. What is the relation of the proprietor's account to the 
 business, that is, is it a resource or a liability ? 
 
 16. How are resources and liabilities affected when a gain is 
 made ? when a loss is sustained ? 
 
 17. What is the business of an auditor? 
 
 18. How is his work done ? 
 
50 TEACHEE'S MANUAL 
 
 19. Tell something of the work of some auditor with whose 
 work you are familiar. 
 
 20. Banks require identification of strangers. How is a 
 stranger identified? 
 
 21. Is it possible for an insolvent business to be continued? 
 Why? 
 
 22. Why do we keep accounts with persons? 
 
 23. What do such accounts show? 
 
 EXERCISE XXXII 
 INTEEMEDIATE TEST 
 
 1. What are the proper heading and entry in a journal when 
 a man begins business under the following conditions ? (a) when 
 simply an investment of cash is made ; (b) when there is a series 
 of items representing several different resources. 
 
 2. What does the proof of the cash book prove? 
 
 3. How is cash proved when there is cash "over" or cash 
 short " ? 
 
 4. If the bank account were overdrawn, what would the cash 
 book show if all cash were on deposit ? 
 
 5. How could a journal entry be made in a cash book ? 
 
 6. If a note is interest-bearing, how is it indicated in the bill 
 book? 
 
 7. How do you prove the check book when the balance differs 
 from the balance shown by the pass book ? 
 
 8. What journal entry does the proprietor make when begin- 
 ning business under the following conditions ? (a) an investment 
 of cash, real estate, and bills receivable ; (&) an investment con- 
 taining both resources and liabilities ; (c) an investment when he 
 begins business without capital of his own, having borrowed the 
 money to start in business. 
 
 9. When a red ink entry is made in a ledger, what is the 
 effect on the equality of the ledger? Why? 
 
 10. Could we close a set of books without using inventories ? 
 
INTERMEDIATE TEST 51 
 
 11. If we closed the books without using the inventories, how 
 would the results affect the proprietor's account ? Why ? 
 
 12. After closing a set of books, how would the ledger be 
 affected if no inventories were brought below the ruling ? 
 
 13. How do we find an interest inventory? 
 
 14. When is an interest inventory a resource ? 
 
 15. When is an interest inventory a liability ? 
 
 16. When does a business have a discount inventory ? 
 
 17. How are discount inventories obtained? 
 
 18. When is a discount inventory a resource? 
 
 19. When is a discount inventory a liability ? 
 
 EXERCISE XXXIII 
 INTERMEDIATE TEST 
 
 1. Under what conditions would the Merchandise account 
 have a liability inventory ? 
 
 2. Is it possible that the Merchandise account might have 
 both a resource and a liability inventory ? (Yes. How?) 
 
 3. If an inventory is estimated too high, what effect will it 
 have on the business statement? Why? 
 
 4. Under what conditions would there be a resource inventory 
 in the Expense account ? 
 
 5. Under what conditions would there be a liability inventory 
 in the Expense account ? 
 
 6. If the trial balance shows equal debits and equal credits 
 and yet there is an error, how is such error likely to be discovered ? 
 
 7. How is the trial balance affected if auxiliary ledgers are 
 used? 
 
 8. What important facts regarding the business does the 
 resource and liability statement show ? 
 
 9. What important facts are shown by the loss and gain 
 statement ? 
 
 10. Do the statements show all the facts relating to the 
 business ? 
 
52 TEACHER'S MANUAL 
 
 11. Each ledger account must show one of four things ; name 
 them. 
 
 12. How may we determine whether an account shows a 
 resource or a liability, a loss or a gain ? 
 
 13. When should merchandise on hand be inventoried either 
 above cost or below cost ? Why ? 
 
 14. Name as many different inventories as you can and tell 
 how each one would be found in business. 
 
 15. If an error is made in estimating the amount of a resource 
 inventory, what effect will such error have upon the results shown 
 by the business statement ? 
 
 16. If an item were posted to a wrong personal account, in a large 
 business, how would such an error be discovered and corrected ? 
 
 17. What is the effect upon the business if resources decrease 
 and liabilities remain the same ? 
 
 18. What is the effect upon the business if resources increase 
 and the liabilities remain unchanged? 
 
 19. What is the effect upon the business if liabilities increase 
 and the resources remain the same ? 
 
 20. What is the effect upon the business if liabilities decrease 
 and the resources remain the same ? 
 
 21. In business how are checks, New York drafts, and sight 
 drafts treated? If the above were included in a deposit, how 
 would the bank receiving them enter them to your credit? 
 Would they be regarded as cash? 
 
 EXERCISE XXXIV 
 INTERMEDIATE TEST 
 
 1. What things should be carefully observed when you receive 
 a check ? 
 
 2. How is a check certified ? 
 
 3. Under what conditions will a bank certify a check ? 
 
 4. What is the value to the holder of certification ? 
 
 5. In what ways may it be shown that a note is not interest- 
 bearing ? 
 
INTERMEDIATE TEST 53 
 
 6. In what ways may it be shown that a note is interest- 
 bearing ? 
 
 7. Who is originally responsible for the payment of a note 
 both before and after transfer ? 
 
 8. Members of the class will write the following : 
 
 a. A note without interest. c. An accommodation note. 
 
 b. A note with interest. d. A joint note. 
 Each of the above should be freely discussed. 
 
 9. When is a note protested? Why protested? How pro- 
 tested? 
 
 10. When a business is insolvent, has the proprietor lost all 
 his investment? 
 
 11. Is it possible for a man to continue an insolvent busi- 
 ness ? (Yes.) 
 
 12. If an insolvent business is continued, how can the insol- 
 vency be lessened or overcome ? (By the business showing a gain.) 
 
 13. If an insolvent business is continued, how can the insol- 
 vency be increased ? (By incurring additional losses.) 
 
 14. What is a voucher ? Give several illustrations. 
 
 15. Under what circumstances are the following vouchers? 
 
 a. An invoice. c. A check. 
 
 b. A note. d. A sight draft. 
 
 16. What is the value of the following? 
 
 a. A canceled check. c. A receipt. 
 
 6. A canceled note. d. A receipted invoice. 
 
 17. Sometimes a check is written payable "to order," and 
 sometimes payable "to bearer." What is the value of these 
 different forms to the maker of the check ? To the holder of 
 the check? 
 
 18. How is a bank account overdrawn ? Do banks allow over- 
 drafts ? 
 
 19. Under what conditions would the following show a loss? 
 
 a. A personal account. c. Bills Receivable account. 
 
 b. The Cash account. d. The Merchandise account. 
 
64 TEACHER'S MANUAL 
 
 EXERCISE XXXV 
 INTERMEDIATE TEST 
 
 1. Is the proprietor's account a resource or a liability to the 
 business ? Why ? 
 
 2. Is it a resource or a liability to the proprietor? Why? 
 
 3. How do you close the proprietor's account under the follow- 
 ing conditions ? (a) when the business shows a net gain ; (b) when 
 the business shows a net loss ; (c) when the business is insolvent. 
 
 4. Under what conditions would a personal account show a 
 loss? 
 
 5. If a personal account shows a loss, how is it closed ? 
 
 6. Under what two general accounts may all personal accounts 
 be included? 
 
 7. How is the Merchandise account closed when there is both 
 a resource and a liability inventory ? 
 
 8. Explain fully what is meant by negotiability of a note and 
 responsibility of an indorser. 
 
 9. Write a check that is negotiable and a promissory note 
 that is non-negotiable. 
 
 10. Of what does protest consist ? 
 
 11. Under what conditions should a note be protested? 
 
 12. Give a rule for debiting and crediting interest, bills payable, 
 persons, and commission. 
 
 13. Explain how a double-entry ledger is made to exhibit the 
 net gain. 
 
 14. What does the balance of the proprietor's account show 
 before it has been credited with the net gain? What does the 
 account show after it has been credited with the net gain ? 
 
 15. Explain how worthless accounts are treated. How are 
 doubtful accounts treated? 
 
 Define the following : 
 
 Inventory Consignment 
 
 Shipment Account of sales 
 
 Invoice Open account 
 
CLOSING THE LEDGER 55 
 
 16. Define the following : 
 
 Bill of exchange Power of attorney 
 
 Bill of lading Bill 
 
 17. A business man made an assignment, and after closing out 
 his business and paying all debts the assignee had left a balance 
 of $40,000. Why was an assignment necessary? 
 
 18. Write briefly upon the advantages of classifying the Mer- 
 chandise account. 
 
 EXERCISE XXXVI 
 CLOSING THE LEDGER 
 
 Open an account with the Student as proprietor, using the 
 following items: 
 
 Dr. Cr. 
 
 $255. - $5600. 
 
 NOTE. The teacher should supply dates and pages for each item. 
 
 Open an account with Merchandise, using the following items : 
 
 Dr. Cr. 
 
 $1543.25 $1164.20 
 
 876.54 425.30 
 
 1143.38 786.45 
 
 587.50 1764.25 
 1056. 
 Merchandise inventory, $2156. 
 
 Open an account with Expense, using the following items : 
 
 Dr. Cr. 
 
 $132. $45.65 
 
 65. 
 43.50 
 38.10 
 12.58 
 
 Expense inventory, liability, $76.40. 
 Expense inventory, resource, $98.60. 
 
56 TEACHEB'S MANUAL 
 
 Open an account with Office Fixtures, using the following items : 
 
 Dr. 
 
 $225.50 
 45.20 
 
 Office Fixtures inventory, $175. 
 
 Open an account with Collection and Exchange, using the 
 following items : 
 
 Dr. 
 
 $1.65 
 
 3.10 
 
 .89 
 
 .11 
 
 The above may be used as a test, the student opening a loss 
 and gain account and closing all the accounts. 
 The following is suggested for a class exercise : 
 
 1. Analyze each of the above accounts. 
 
 2. If the inventory were omitted in the Merchandise account, 
 what effect would it have upon the result shown by the account ? 
 
 3. Close the Merchandise account, omitting the inventory. 
 
 4. Close the Expense account, omitting the resource inventory. 
 
 5. Close the Expense account, omitting the liability inventory. 
 
 6. Compare the net results of the Expense account after the 
 above closings. 
 
 7. How does each compare with the net result shown by the 
 account when both inventories were used ? 
 
 8. How does a change in any one of the above accounts or 
 inventories affect the proprietor's account ? Why ? 
 
 9. Distinguish between the Expense account and the Office 
 Fixtures account. 
 
 10. What kind of business transactions give rise to the Collec- 
 tion and Exchange account ? 
 
CLOSING THE LEDGER 57 
 
 EXERCISE XXXVII 
 CLOSING THE LEDGER 
 
 Open an account with the student as proprietor, using the 
 following items : 
 
 Dr. Cr. 
 
 $210. $5000. 
 
 Open an account with Merchandise, using the following items : 
 
 Dr. Cr. 
 
 $1486.25 $1120.33 
 
 723.54 383.55 
 
 1045.28 654.87 
 
 476.52 1521.33 
 
 993.28 
 
 Merchandise inventory, resource, $1946.53 
 Merchandise inventory, liability, 185.43 
 Open an account with Expense, using the following items : 
 
 Dr. Cr. 
 
 $110. $33.24 
 
 54. 
 23.50 
 18.58 
 
 Expense inventory, resource, $86.75 
 Expense inventory, liability, 13.48 
 Office Fixtures may be opened as follows : 
 
 Dr. Cr. 
 
 $186.25 $25. 
 
 38.40 
 
 Office Fixtures inventory, $145. 
 
 Open an account with Horse and Wagon, using the following 
 items : 
 
 Dr. Cr. 
 
 $350. $50. 
 
 22.50 
 Horse and Wagon inventory, $310. 
 
58 TEACHER'S MANUAL 
 
 Open an account with Insurance, using the following items : 
 
 Dr. 
 
 $65.40 
 Insurance inventory, unexpired premium, $40. 
 
 Open an account with James H. Harlan, using the following 
 items : 
 
 Dr. Cr. 
 
 $65.25 $50. 
 
 32. 
 25.75 
 
 As Mr. Harlan has failed in business, the proprietor will realize 
 but 50/ on the dollar on the balance of his account, cash having 
 been received for that portion of the account. Close as follows : 
 credit the account for the cash received, and then close the 
 remainder to the Loss and Gain account. 
 
 NOTE. If a class has been carefully drilled on the principles 
 involved in the above accounts, the exercise may be used as a test ; 
 otherwise class drills should be given on the separate accounts, follow- 
 ing the suggestions given below. 
 
 EXERCISE XXXVIII 
 
 CLOSING THE LEDGER 
 
 SUGGESTIONS. Dictate the following accounts to be written on 
 ledger paper, three accounts to the page, and closed by the student. 
 Supply explanations and folios. 
 
 William Eldred, Proprietor 
 
 Dr. Cr. 
 
 June 1, $200. May 8, $3000. 
 
 Merchandise 
 
 Dr. Cr. 
 
 June 30, $4160. June 30, $3190. 
 
CLOSING THE LEDGER 59 
 
 Expense 
 Dr. 
 June 30, $760.50 
 
 Real Estate 
 
 Dr. 
 
 June 3, $4000. 
 
 Interest and Discount 
 
 Dr. Cr. 
 
 June 8, $7.60 June 12, $20.40 
 
 The following are the inventories to be used in closing the 
 above accounts : 
 
 Merchandise (resource) 
 
 Stock on hand per schedule "A" $2100. 
 
 Merchandise (liability) 
 
 Unpaid freight bill 39.40 
 
 Expense (resource) 
 
 Office safe 200. 
 
 Expense (liability) 
 
 Unpaid telephone service $10.50 
 
 Unpaid gas bill 9.30 19.80 
 
 Real Estate (resource) 
 
 Estimated value of store property 4100. - 
 
 Real Estate (liability) 
 
 Unpaid taxes 200. 
 
 Interest and Discount (resource) 
 
 Interest accrued on bills receivable 9 .40 
 
 Interest and Discount (liability) 
 
 Interest accrued on bills payable 40.50 
 
 Use a half sheet of ledger paper for the above exercise, and drill 
 upon the principles involved until the student can readily close 
 accounts having resource and liability inventories. If it is desired 
 to show a net loss, reduce the inventory on the Merchandise account 
 
60 TEACHER'S MANUAL 
 
 to $500. The student should be drilled on closing loss and gain 
 accounts when the business shows a net loss. 
 
 The exercise may be used as an examination test or for any 
 general review work. 
 
 EXERCISE XXXIX 
 
 LOSS AND GAIN 
 
 1. A begins business January 1, with the cash capital $2500. 
 At the close of the year his net insolvency is $500. Eequired the 
 net gain or loss. 
 
 2. B's net insolvency January 1 is $600. At the close of the 
 year his net capital is $750. Required the net gain or loss. 
 
 3. C's net loss for one year is $1240. His insolvency at the 
 close of the year is $240. Required the net capital at the beginning. 
 
 4. D's net gain for one year is $1940. His net capital at the 
 end of the year is $1000. Required the net insolvency at the 
 beginning of the year. 
 
 5. E's resources January 1 were $7000, and his liabilities 
 $6000. At the close of the year his resources are $6000, and his 
 liabilities $7000. Required the net gain or loss. 
 
 6. F's resources January 1 were $4000, and his liabilities $5000. 
 At the close of the year his resources are $5000, and his liabilities 
 $4000. Required the net gain -or loss. 
 
 7. G's net loss at the close of one year is $1250. His net 
 insolvency is $250. Required his net capital at the beginning. 
 
 8. H & Co.'s net investment at the beginning of the year is 
 $1800, and the net insolvency at the close $400. A's share of 
 loss and gain is to B's share as one is to three. Required each 
 man's net gain or net loss. 
 
 9. The net insolvency of a business at the end of one year is 
 $920, the net loss for the year is $1460. Required the investment 
 of each partner if they share the gains and losses according to net 
 investments. A's investment is to B's investment as one is to five. 
 
 10. J began business January 1 with $500, borrowed money. 
 At the end of six months, outside of borrowed capital, his net 
 insolvency is found to be $260. Required his net loss. 
 
BUSINESS FORMS CHECKS 61 
 
 11. K's net gain at the end of one year is $1465. If his capital 
 is found to be $750, what was the condition of his business at the 
 beginning of the year? 
 
 12. L's net loss for one year is $6248, his net insolvency is 
 $3000. Required his net investment. 
 
 13. M began business with a bequest of $1500 from a friend. 
 At the end of one year his net insolvency is $300. What is his 
 net loss? 
 
 14. N's investment January 1 was $1500. Six months later 
 he made an additional investment of $200. At the close of the 
 year his net insolvency is $200. What is his net loss? 
 
 15. O's net loss at the end of a year is $1290 ; during the year 
 he made an additional investment of $400. If his net insolvency 
 at the end of the year is $300, what was his net investment at the 
 beginning of the year? 
 
 EXERCISE XL 
 BUSINESS FORMS CHECKS 
 
 SUGGESTIONS. The following outlines may be used to give 
 emphasis to special forms of checks. The student may use current 
 dates. 
 
 1. Write your check for 750 on First National Bank, in favor 
 of William Joiner & Co. 
 
 2. Write your check on Central Bank, in favor of William 
 Smith, 64 Grant Ave., Chicago, for $92.56. Write the check so 
 that there will be no possible chance of its falling into the hands 
 of the wrong Mr. Smith. 
 
 3. Write your check on National Bank of Redemption, in 
 favor of New York draft, $500 ; exchange $1. 
 
 4. Write your check on Merchants Bank for $512, in payment 
 for your note, protested at Colonial Bank, City, yesterday. Face 
 of note, $500; interest, $10.50; protest fees, $1.50. 
 
 NOTE. In the above check write : 
 
 Pay to the order of Protested Note ($500), interest ($10.50), 
 fees ($1.50)-, 
 
62 TEACHER'S MANUAL 
 
 5. Write your check on Merchants Bank in payment for note 
 due to-day, in favor of Charles Williams, $750. The note is 
 made payable at Merchants Bank. 
 
 NOTE. In the above check write : 
 
 Pay to the order of Note, favor Charles Williams, $750. 
 
 6. Write your check on Merchants Bank for $516.50, which 
 you wish to use for the weekly pay roll. 
 
 NOTE. In the above check write : 
 
 Pay to the order of Pay Roll, $516.50. 
 
 7. Write your check on Merchants Bank for $100, which you 
 wish to appropriate for private use. 
 
 8. Write a certified check : drawer, your name ; drawee, 
 Merchants Bank ; payee, Henry Osgood & Co. 
 
 9. Write a cashier's check for $175 on First National Bank: 
 cashier, Charles H. Lapham. 
 
 EXERCISE XLI 
 
 CHECKS SUGGESTIONS FOR DISCUSSION 
 
 1. A check dated on Sunday is not void. Why? 
 
 2. Checks drawn payable to " bearer " should, under some cir- 
 cumstances, be issued in preference to checks drawn payable to 
 " order." Explain. 
 
 3. Checks drawn for remittance purposes should never be 
 written payable to bearer. Why ? 
 
 4. Banks prefer the usual prescribed form for checks. Would 
 they be justified in refusing to pay checks drawn up (a) in the 
 form of a letter ? (&) in lead pencil ? 
 
 5. It is not safe to draw up checks as shown in the form 
 on page 63. Why? 
 
 6. Banks require that checks payable to bearer shall be indorsed 
 before they are cashed. Is this necessary ? Why ? 
 
 7. Is it ever desirable to write the payee's address on a check ? 
 Explain. 
 
 8. Checks are usually numbered. Is this important ? Explain. 
 
CHECKS SUGGESTIONS FOR DISCUSSION 63 
 
 {Boston, ^Mass. t cAov. 22, 19 Jfo. 
 
 c/ fie Ltnion 
 
 to the order of <. 
 
 ^Dollars 
 
 - ty &o. 
 
 per (A}-. <S. 
 
 9. Merchants sometimes exchange checks. Are there any 
 advantages to result to the merchants from this practice ? Dis- 
 advantages? What do banks call transactions of this sort ? How 
 are banks disposed to treat customers who frequently exchange 
 checks? Why? 
 
 10. A check has been issued by you payable to the order of 
 Charles H. Wentworth. Mr. Wentworth notifies you that he has 
 just lost it. What can you do to prevent any loss of money? 
 Explain fully. 
 
 11. The holder of a check should present it for payment with- 
 out any unnecessary delay. Why ? Give three good reasons. 
 
 12. A check has been certified and subsequently lost. Can 
 the drawee stop the payment of the check ? Why ? 
 
 13. You receive an uncertified check of Taylor & Co. in pay- 
 ment of the balance due you on account. Is the indebtedness 
 canceled ? Explain. 
 
 14. A note made by you is to-day due and payable at your 
 bank. You write a check in settlement. In whose favor should 
 the check be drawn ? Explain. 
 
 15. You wish to draw money from your bank for your own 
 account. Explain how the check should be written. 
 
 16. A bank check has no date. Is it void? Why? 
 
 17. A check is dated ahead thirty days. Is it good? Why? 
 Why are checks sometimes dated ahead? 
 
64 TEACHER'S MANUAL 
 
 18. You are a comparative stranger in Boston. You receive a 
 check for $275, and desire to get it cashed. You call upon a 
 business acquaintance and ask him to identify you at his bank, 
 but he is too busy to do so. How can he secure for you the 
 prompt payment of the check without accompanying you to his 
 bank for the purpose of identification ? 
 
 19. You identify Albert Curtis at your bank. The check he 
 presented for payment 'proves to be worthless. Are you respon- 
 sible to the bank ? 
 
 20. Give a definition of money. 
 
 EXERCISE XLII 
 BUSINESS FORMS DUE-BILLS 
 
 SUGGESTIONS. The following outline may be used to show how 
 due-bills are employed in business. 
 
 DEFINITIONS. A due-bill is a written acknowledgment of a debt. 
 It may be payable in money or in merchandise, on demand or at any 
 specified time. When it is payable in money it has the nature of a 
 note, and is recorded in much the same manner as a note. 
 
 As a due-bill is ordinarily drawn up it is not negotiable. 
 
 Form of Due-Bill payable in Money 
 
 NOTE. The above form of due-bill is not very common in business, 
 as, it will be noted, if it is drawn up in this form it contains all the con- 
 ditions of negotiability and may pass hands by ordinary indorsement. 
 
BUSINESS FORMS DUE-BILLS 65 
 
 Form of Due-Bill payable in Merchandise 
 
 90 {Boston, ^Alciss., c/W. /6, 19 
 
 IS. T 
 
 in groceries from my store. 
 
 The following outlines may be used in drilling students upon 
 forms of due-bills. 
 
 1. Write a due -bill in favor of E. M. Delano, a carpenter, who 
 has just put up some shelving in your store, valued at $20. Make 
 the due-bill payable in groceries from your store. 
 
 2. Write a due-bill for $12.50, in favor of B. E. Valentine, 
 payable on demand in groceries from your store. 
 
 3. Write a due-bill in favor of F. O. Grey for country produce 
 purchased of him to-day, $7.96. Make the due-bill payable on 
 demand in groceries from your store. 
 
 4. Write a due-bill for $11.50, payable in money, in favor of 
 Charles N. Dutton. Make the due-bill negotiable in form. 
 
 JOURNALIZING DUE-BILLS 
 
 The following memoranda are intended to give drills on the 
 principles of debit and credit as applied to due-bills. 
 
 1. Assuming that you are a retail grocer, make the journal 
 entry for the due-bill called for in outline 1 above. 
 
 Ans. Expense to E. M. Delano. 
 
 2. Assuming that you are a retail grocer and have just issued 
 William McDonald a due-bill for $7.90, payable in groceries, in 
 payment for repairs on delivery wagon, make your journal entry. 
 
 Ans. Expense to William McDonald. 
 
66 TEACHER'S MANUAL 
 
 3. Assuming that you are a commission merchant and have 
 bought of Charles A. Lyman 10 barrels of apples at $2 a barrel, 
 and given him a due -bill for the amount payable in money, make 
 your journal entry. 
 
 Ans. Merchandise to Bills Payable. 
 
 NOTE. Some business houses consider a due-bill payable in money 
 nothing more than a receipt issued to acknowledge an indebtedness, 
 and do not make any entry until the bill is paid. If a due-bill is 
 drawn payable in money u to order" it should be journalized as a 
 bills payable, since it may pass hands by indorsement. 
 
 4. You are a retail grocer, and give C. H. Dean a due-bill 
 for $19.40, payable in groceries from your store, in payment for 
 country produce. Make your entry. 
 
 Ans. Merchandise to C. H. Dean. 
 
 EXERCISE XLIII 
 
 BUSINESS FORMS INDORSEMENTS 
 
 SUGGESTIONS. The following exercises may be used to emphasize 
 some of the important facts relating to indorsements. 
 
 1. C. E. Mills receives of the White Mfg. Co. a check on 
 Traders Bank for $165. The check is drawn payable to E. C. 
 Mills. Write the check and show the indorsement of C. E. Mills 
 when he offers the paper for deposit. 
 
 2. Write a check on Merchants Bank in favor of David 
 Harmon. Mr. Harmon is unknown at your bank. Draw up the 
 check in such a way that he may get it cashed without personal 
 identification at your bank. 
 
 NOTE. What is desired in the above check may be accomplished 
 in two ways, viz. : 
 
 1. By using a check printed payable "to bearer." It is never 
 advisable to let a check pass your hands with interlineations, erasures, 
 or alterations of any kind. Therefore never strike out the words 4 ' or 
 order " and insert the words " or bearer," but draw the check payable 
 
BUSINESS FORMS INDORSEMENTS 67 
 
 to your own name and then indorse it payable to bearer, and it may 
 be cashed without identification. 
 
 2. By drawing the check payable to David Harmon and then sign- 
 ing your name across the back. This makes you an indorser of the 
 check and serves the purpose of identification. 
 
 3. You are at a bank and have with you a check made pay- 
 able to your order. You desire to get it cashed and take the 
 money with you. Would you indorse in blank or in full ? 
 
 Can you name another instance where a blank indorsement is 
 as good as or better than a full indorsement ? 
 
 4. The following form of indorsement is frequently found on 
 checks sent by one bank to another : 
 
 Pay National City Bank, 
 
 Chicago, or order, 
 National Bank of Redemption, 
 
 Boston. 
 
 E. M. Ruggles, Cashier. 
 Indorsements Guaranteed. 
 
 Explain the meaning of the term " indorsements guaranteed." 
 
 5. Write a form of indorsement which is best for all paper 
 deposited with a bank. 
 
 6. Do business men indicate by their indorsements whether 
 paper has been given to the bank for collection or for deposit ? Is 
 it necessary that they should ? Give reasons for your answer. 
 
 7. You receive a check drawn payable to Smith & Brown for 
 $75. The check when received by you bears only the blank 
 indorsement of Smith & Brown. Have you a legal right to write 
 over the indorsees signature the necessary words to convert the 
 blank indorsement to a full indorsement ? Explain. 
 
 8. You have two notes in your possession. One bears no 
 indorsement ; the other bears three indorsements. The notes are 
 for equal amounts. Which is the stronger? Why? 
 
 9. You are the second indorser on a promissory note. Should 
 you indorse above or below the first indorser ? Why ? 
 
 NOTE. Parties who sign their names above the first indorser are 
 sureties. 
 
68 TEACHER'S MANUAL 
 
 EXERCISE XLIV 
 BUSINESS FORMS NOTES 
 
 SUGGESTIONS. The following exercise may be used to emphasize 
 some of the important facts relating to notes. 
 
 1. A note is dated on Sunday. Is it binding? Why? 
 
 2. A note payable " on demand " is not dated. Is it binding ? 
 Why? 
 
 3. A demand note bears a date two years since. Would you 
 readily accept it on account ? Why ? 
 
 4. What is a chattel note ? 
 
 NOTE. A chattel note is a written promise to pay value in goods, 
 wares, etc. Except that it is not payable in money and is not nego- 
 tiable, a chattel note closely resembles an ordinary promissory note. 
 
 Form of Chattel Note 
 
 && to 
 
 at owis / mA;tt& ty tA& cl&ivv-eAAf to- 
 at, ii 
 
 5. Write your chattel note for $150 in favor of D. C. Munroe, 
 to be paid for in good timothy hay at $12 per ton. 
 
BUSINESS FORMS NOTES 69 
 
 6. If you are in the grain and feed business and give D. C . Mun- 
 roe the above note to apply on account, what is your journal entry ? 
 
 Ans. D. C. Munroe to Chattels Payable. 
 
 7. At maturity you pay the chattel note called for in example 6 
 above by the delivery of 12 tons of hay. What is your journal 
 entry ? 
 
 Ans. Chattels Payable to Merchandise. 
 
 8. Write a demand note : drawer, your name ; payee, Arthur 
 Harrington. 
 
 Give your entry when the note is issued. 
 
 Give Arthur Harrington's entry when he receives the note. 
 
 9. Can a negotiable note be made non-negotiable ? Explain. 
 Can a non-negotiable note be made negotiable ? Explain. 
 
 10. Write a judgment note. 
 
 Form of Judgment Note 
 
 . 16, f<?02 
 
 {&& to 
 . W*. Bt&M&& ty* ^on, ov oi^de^,, ffh^o 
 
 &eeA/v&ij w~iA imtsAsZ&t at 3^. 
 b, c/ do 
 
 AAs&i&> am^d 
 to- Lriau^QAkiiyvv am/d a/jo/fataL, and to 
 ati taw& s/^ 
 
 and 
 
 (owvzAsU 
 
 11. You receive a judgment note against Alfred Simpkin in 
 settlement of his indebtedness to you, $125. 
 
70 TEACHER'S MANUAL 
 
 a* Make your journal entry. 
 
 Ans. Judgments Receivable to Alfred Simpkin. 
 
 b. Give Alfred Simpkin's entry when he issues the note. 
 
 Ans. Payee to Judgments Payable. 
 
 EXERCISE XLV 
 BUSINESS FORMS DRAFTS 
 
 SUGGESTIONS. The following exercise may be used with an 
 advanced class to illustrate some of the important facts relating to 
 drafts. 
 
 1. Is there any difference between a draft payable " on 
 demand " and a draft payable " at sight " ? 
 
 NOTE. In almost all of the states drafts payable "at sight" and 
 44 on demand," as regards payment, are alike. In Massachusetts, and 
 a few other states, drafts payable " on demand " are due on the very 
 day they are presented to the drawee, while drafts payable " at sight " 
 are entitled to three days of grace. 
 
 2. Explain the meaning of " acceptance for honor " as applied 
 to drafts. 
 
 NOTE. An acceptance for honor is the volunteer acceptance by a 
 person not a party to the draft. Such an acceptance is made after 
 a draft has been protested for non-acceptance to promote the negotia- 
 tion of the draft. An acceptor for honor makes himself a party to the 
 draft for the face value of such paper plus the charges for protest. 
 The following is the wording of an acceptance for honor : 
 
 Accepted for the honor of 
 Bates Mfg. Co., 
 June 11, 1906, 
 
 Payable at 
 
 Union National Bank 
 Charles H. Palmer 
 
 Such an acceptance will hold the acceptor responsible the same as 
 the first indorser of a note. At maturity the holder should present 
 
BUSINESS FORMS DRAFTS 71 
 
 the draft to the drawee for payment, and if payment is refused, 
 then to the acceptor for honor. Should the acceptor for honor 
 pay the draft, he has a legal claim upon all prior parties to the 
 instrument. 
 
 3. June 15 you drew a 30-day draft on King & Co., in favor of 
 yourself, for invoice of merchandise this day, $300, and left the 
 draft at the bank for collection. 
 
 Give your journal entry, assuming that the sale has already 
 been entered in the sales book. 
 
 4. June 22 the above draft was protested for non-acceptance. 
 Protest fees, $1.75. Pay the protest fees in cash. 
 
 For the purpose of promoting the negotiation of the draft, 
 Ball & Hill accepted it for your honor and accommodation. 
 Give your entries. 
 
 5. At the maturity of the draft it is presented to King & Co., 
 and they pay it, together with the protest fees, by check. 
 
 Give your entry. 
 
 6. Assuming that King & Co. refuse to honor the draft at 
 maturity, and Ball & Hill are called upon to pay it, give your 
 journal entry. 
 
 7. Are time drafts negotiable before acceptance? Explain 
 fully. 
 
 8. Differentiate the following: 
 
 a. Check and sight draft. 
 
 b. Check and bank draft. 
 
 c. Promissory note and due-bill payable in money. 
 
 d. Chattel note and due -bill payable in merchandise. 
 
 EXERCISE XLVI 
 ORDERS PAYABLE IN GOODS 
 
 SUGGESTIONS. A very profitable class period may be devoted to a 
 discussion of orders payable in goods. While these orders closely 
 resemble drafts, there are many points of difference with which the 
 accountant ought to be familiar. 
 
72 TEACHER'S MANUAL 
 
 The following matter covers the salient points relating to orders 
 payable in goods. 
 
 Definition. An order payable in goods is a written request of 
 one party on a second party to deliver goods to a third party, or 
 to the bearer. 
 
 Compared with Drafts. Orders payable in goods resemble 
 drafts in the following particulars : 
 
 1 . There are three parties to both orders payable in goods and 
 drafts, viz., drawer, drawee, and payee. 
 
 2. The drawee of an order payable in goods, like the drawee of 
 a draft, is not bound to honor the requests made upon him. 
 
 3. An order payable in goods may be accepted in a manner 
 similar to a draft. 
 
 Contrasted with Drafts. The points of contrast in orders and 
 drafts may be stated as follows : 
 
 1 . An order payable in goods requests the delivery of goods ; a 
 draft requests the payment of money. 
 
 2. A draft under certain conditions may be a bills receivable 
 or a bills payable ; an order payable in goods can never be a bills 
 receivable or bills payable. 
 
 3. Drafts are generally negotiable ; orders payable in goods 
 are not. 
 
 Limited Order Payable in Goods 
 
 ' {Boston, ^4tass., c/W, <? , 19 
 
 A Tn. Sfwutifi, &o.: 
 
 ^Deliver to TftoAJLim, (d. (k^food/ 
 
 goods to the value of cA\syi%Af 
 and charge the same to the account of 
 
ORDERS PAYABLE IN GOODS 73 
 
 Open Order Payable in Goods 
 
 ^Boston, ^Atass. t cAw-. /&, /9 
 
 ft. A lAtiHUmos 1? &o-. .- 
 
 )e liver to &. &. (^AsWve&t&Gul 
 
 suc/i groceries 'as fie may require, and 
 charge the same to the account of 
 
 ff&nton ft 
 
 EXAMPLES FOR PRACTICE 
 
 1. You owe E. C. Mason, your bookkeeper, $18.50 for wages, and 
 give him an order on S. S. Pierce & Co., grocers, for the amount, 
 payable in groceries from their store. 
 
 a. Write the order. 
 
 b. Make your journal entry. 
 
 NOTE. Debit Expense and credit S. S. Pierce & Co. Should 
 S. S. Pierce & Co. refuse to deliver groceries as requested, debit 
 them and credit Expense when the order is returned to you by 
 E. C. Mason. 
 
 2. Issue an order on Cobb, Bates & Co. for $17, payable in 
 groceries, to be given to W. A. Lyman, your shipping clerk, to 
 apply on his salary. 
 
 a. Write the order. 
 
 b. Make your journal entry. 
 
 c. Make Cobb, Bates & Co.'s journal entry when they deliver 
 groceries to W. A. Lyman amounting to $7.90, to apply on the 
 above order. 
 
 d. Who will hold the order after a partial delivery of goods 
 has been made, the drawee or the payee ? 
 
74 TEACHER'S MANUAL 
 
 EXERCISE XLVII 
 CREDIT MEMORANDUMS 
 
 SUGGESTIONS. Explain to the class the usual method of recording 
 goods returned for credit. If blank forms are available, have the 
 examples for practice prepared. Credit memorandum blanks may be 
 obtained from any large stationer, or blank forms may be prepared 
 by the students from an outline written upon the blackboard. 
 
 Recording Returned Goods. When goods are returned by the 
 buyer to the seller with a request that such goods be applied on 
 account, memorandums in duplicate similar to those on the next 
 page are generally issued by the seller. 
 
 The original is sent to the customer who returned the goods, 
 and when received by him is usually entered in his sales book the 
 same as any regular sale. 
 
 The duplicate is made at the same time as the original by 
 means of carbon paper. It is usually pasted in the invoice 
 book, or entered in the purchase book of the concern allowing 
 the credit. 
 
 NOTE. The records for goods returned are sometimes made in the 
 journal. 
 
 EXAMPLES FOR PRACTICE 
 
 Write credit memorandums for the following : 
 
 1. 7 bu. clover seed, at $4.50, returned by C. W. Jefferson to 
 Macey & Cooper on account of inferior quality. 
 
 2. 4 bbls. XX soda crackers, at $5.60, returned by Snow & Co. 
 to Kennedy & Son. The crackers were unsalable when received 
 by Snow & Co., having the appearance of having been damaged 
 by water. 
 
 3. 9 bbls. XXX starch and 3 bbls. Standard A sugar returned 
 by Mason & Harper to Bengal & Son. 
 
 4. Explain just what records would be made for the above 
 transactions : (a) on the books of the parties returning the goods , 
 (&) on the books of the parties allowing the credit. 
 
CREDIT MEMORANDUMS 
 
 75 
 
 ORIGINAL 
 
 
 
 >~ ' JtX Jll/ JD I I Goods returned to us 
 
 
 she 
 
 ula De accom 
 
 paniea 
 
 
 by a complete invoice, 
 .Voo/y/^x/ A/t and all other claims 
 
 tsssuea oy ghould algo be bmed) 
 
 
 ^--^ i* * o O stating the date 
 
 D. ^rt. Sampson Cr Son charge. 
 
 of our 
 
 
 {Boston, ^Lass. f fan. 21, 19 
 
 Tn. Tn. tfatiofruAAf &o., t/fiviru?l 
 
 1 ,ieLL, ft 
 
 %M4/. 
 
 WE HAVE THIS DAY GIVEN YOU CREDIT ON ACCOUNT FOR 
 
 THE FOLLOWING: 
 
 ,0 ^. *&*' KLcL gtove*, 7. * 
 
 
 
 75 
 
 
 CREDIT 
 
 DUPLICATE 
 
 Issued by 
 . Sampson & Oo/z 
 
 ^Boston, ^jtass., 
 
 WE HAVE THIS DAY GIVEN YOU CREDIT ON ACCOUNT FOR THE FOLLOWING: 
 
 10 
 
 fdci 
 
 7 . 5 
 
 75 
 
76 TEACHER'S MANUAL 
 
 EXERCISE XLVIII 
 KEEPING A BANK ACCOUNT 
 
 SUGGESTIONS. The following outline of the result of a series of 
 exercises on " Keeping a Bank Account " may suggest to the teacher 
 a method of bringing out and emphasizing some of the salient points in 
 this connection. Develop such outlines by skillful questioning ; have 
 them written on the blackboard and copied by each student. 
 
 I. How TO OPEN A BANK ACCOUNT 
 
 1. Select a bank of sound financial standing. 
 
 2. If a stranger, provide yourself with a proper introduction. 
 
 3. Apply to the cashier when making application to open an 
 account. 
 
 4. If doing business for another, bring with you your power 
 of attorney, etc. 
 
 5. Sign your name in the signature book just as you propose 
 to sign it on checks, notes, etc. 
 
 6. Have the proper bank officer receipt in the pass book all 
 sums deposited. 
 
 II. HOW TO PREPARE ITEMS FOR DEPOSIT 
 
 1. Count all money carefully. 
 
 2. Place the bills of one denomination together. 
 
 3. Place the classified bills all one way and right side up. 
 
 4. Separate the gold and silver, and sort the silver by denomi- 
 nations. 
 
 5. Be careful to arrange the items correctly on the deposit slip. 
 
 6. Indorse the checks, etc., properly. 
 
 a. Write across the back, never lengthwise. 
 
 b. If yours is the first indorsement, write it about an inch from 
 the top. 
 
 c. If there are other indorsements, write immediately under 
 the last one. 
 
 d. Indorse right side up. 
 
KEEPING A BANK ACCOUNT 77 
 
 7. Always take the pass book to the bank when making 
 a deposit. 
 
 III. THINGS TO OBSERVE IN KEEPING A CHECK BOOK 
 
 1. Number all checks and check stubs. 
 
 2. Give a detailed list of all items of deposit. 
 
 3. Show at all times the amount on deposit. 
 
 4. O.K. all records that agree with the vouchers returned by 
 the bank. 
 
 5. If the check book does not agree with the pass book, find 
 out why. 
 
 6. Payment of an uncertified check may be stopped by request- 
 ing the bank not to pay it. 
 
 7. Payment of a certified check cannot be stopped. 
 
 8. When a check is certified make a note of it in red ink on 
 the check stub. 
 
 9. When a duplicate check is given for any reason, the word 
 " duplicate " should be plainly written or stamped on the check 
 and check stub. 
 
 10. When sending a check to a person who is not likely to 
 be well known in banking circles, give the residence of the payee 
 in the body of the check. 
 
 IV. THINGS TO AVOID IN DOING BUSINESS WITH A BANK 
 
 1. Exchanging checks. 
 
 2. Giving checks to utter strangers. 
 
 3. Overdrawing your account without permission. 
 
 4. Giving a check to a person on condition that it is not to be 
 used until a certain time. 
 
 5. Dating checks ahead, or not dating them at all. 
 
 6. Making deposits without your bank book. 
 
 7. Writing checks not taken from your own check book. 
 
78 
 
 TEACHER'S MANUAL 
 
 EXERCISE XLIX 
 SPECIAL LEDGER TRANSFERS AND RULINGS 
 
 Forwarding Accounts. When the space allotted to any ledger 
 account has been filled, the account should be forwarded to 
 another page; In most cases it is desirable to carry forward the 
 footings of accounts instead of the balances. In transferring 
 such accounts as. Merchandise never carry forward the balance, but 
 the debit and credit footings. The Merchandise account should 
 exhibit the purchases and sales of the business, and if only the 
 balance were forwarded in a transfer the account would not 
 furnish the proper information. In all property accounts it is 
 generally desirable that each account shall show the aggregate 
 debits and credits for any given period. 
 
 The following illustrations show an account closed and for- 
 warded. 
 
 Merchandise 
 
 Jan. 
 
 31 
 
 LB. 
 
 6 
 
 750 
 
 
 Jan. 
 
 31 
 
 S.B. 
 
 16 
 
 6400 
 
 
 
 31 
 
 C.B. 
 
 7 
 
 920 
 
 
 Feb. 
 
 27 
 
 S.B. 
 
 31 
 
 5960 
 
 
 Feb. 
 
 1 
 
 C.B. 
 
 9 
 
 726 
 
 
 Mar. 
 
 31 
 
 S.B. 
 
 45 
 
 8240 
 
 
 
 27 
 
 LB. 
 
 11 
 
 9250 
 
 
 Apr. 
 
 30 
 
 S.B. 
 
 61 
 
 5420 
 
 60 
 
 Mar. 
 
 1 
 
 C.B. 
 
 17 
 
 177 
 
 20 
 
 
 
 
 
 
 
 
 31 
 
 LB. 
 
 17 
 
 7217 
 
 
 
 
 
 
 
 
 Apr. 
 
 2 
 
 C.B. 
 
 29 
 
 126 
 
 50 
 
 
 
 
 
 
 
 
 30 
 
 LB. 
 
 21 
 
 8741 
 
 
 
 
 
 
 
 
 May 
 
 6 
 
 C.B. 
 
 37 
 
 132 
 
 50 
 
 
 
 
 
 
 
 
 6 
 
 Forw'd to 
 
 24 
 
 28040 
 
 20 
 
 May 
 
 6 
 
 Forw'd to 
 
 24 
 
 26020 
 
 60 
 
 
 
 
 
 
 
 
 
 
 
 Merchandise 
 
 May 
 
 6 
 
 For w'd from 
 
 i 
 
 28040 
 
 20 
 
 May 
 
 G 
 
 Forw'd from 
 
 \ 
 
 26020 
 
 60 
 
SPECIAL LEDGEK TRANSFERS AND RULINGS 79 
 
 As soon as the individual amounts of any personal account 
 balance they should be ruled out, as shown by the following 
 illustration. 
 
 Charles M. Williams 
 
 Jan. 
 
 2 
 
 S.B. 
 S.B. 
 
 18 
 
 79 
 
 40 
 
 Jan. 
 
 12 
 
 C.B. 
 
 12 79 
 
 40 
 
 Feb. 
 
 30 
 
 28 
 
 126 
 
 
 
 
 
 From the above illustration it will be noted that it might not, 
 in many cases, be practicable to forward the entire footings of 
 personal accounts when it becomes necessary to carry such accounts 
 to a new page. Unless there is some good reason for showing 
 the aggregate debits and credits of personal accounts, only the 
 balance of such accounts need be forwarded in making trans- 
 fers. Sometimes merchants have agreements with each other to 
 the effect that after the sales or purchases have reached a stated 
 amount, usually quite a large sum, a certain per cent rebate will 
 be allowed. In such, and all similar cases, the personal accounts 
 should be at all times in such condition that the aggregate 
 debits and credits may be readily determined, and the entire 
 footings should be forwarded in making transfers to a new 
 account. 
 
 Generally, however, personal accounts may be forwarded as 
 shown in the following illustrations. 
 
 Mason & Hamlin 
 
 Jan. 
 
 16 
 
 S.B. 
 
 9 
 
 240 
 
 
 Feb. 
 
 1 
 
 C.B. 
 
 12 
 
 300 
 
 
 
 30 
 
 S.B. 
 
 14 
 
 60 
 
 
 
 8 
 
 Balance to 
 
 21 
 
 73 
 
 60 
 
 Feb. 
 
 8 
 
 S.B. 
 
 19 
 
 73 
 
 60 
 
 
 
 
 
 
 
 
 
 
 
 373 
 
 60 
 
 
 
 
 
 373 
 
 60 
 
 
 
 
 
 
 
 
 
 
 
80 
 
 TEACHER'S MANUAL 
 Mason & Hamlin 
 
 Feb. 
 
 8 
 
 Balance from 
 
 11 
 
 73 
 
 60 
 
 
 
 
 
 
 
 Accounts with Successors. When a merchant learns that one 
 of his customers has been succeeded by a new firm, the new firm 
 taking the resources and assuming the liabilities of the old firm, 
 he should make the proper transfer on his ledger. In most cases 
 it is considered desirable to close the old account and open an 
 account with the successors. The following illustrations show 
 the proper rulings and records for such a transfer. 
 
 Jones & Co. (Succeeded by Smith & Co.) 
 
 Jan. 
 
 16 
 
 S.B. 
 S.B. 
 S.B. 
 S.B. 
 
 14 
 
 140 
 
 
 Jan. 
 
 29 
 
 C.B. 
 C.B. 
 J. 
 
 Smith & Co. 
 
 8 
 
 140 
 
 
 
 27 
 
 28 
 
 160 
 
 
 Feb. 
 
 25 
 
 16 
 
 160 
 
 
 Feb. 
 
 9 
 
 36 
 
 380 
 
 40 
 
 Mar. 
 
 1 
 
 9 
 
 380 
 
 40 
 
 Mar. 
 
 6 
 
 8 
 
 59 
 
 120 
 60 
 
 60 
 
 Mar. 
 
 18 
 
 29 
 
 180 
 
 60 
 
 180 
 
 60 
 
 180 
 
 60 
 
 
 
 
 
 
 
 
 
 
 
 Smith & Co. (Successors to Jones & Co.) 
 
 Mar. 
 
 18 
 
 Jones & Co. 
 
 16 
 
 180 
 
 60 
 
 
 
 
 
 
 Work for Practice. Dictate the following accounts, to be 
 opened on a half sheet of ledger paper, three accounts to the 
 page. Supply explanations and folios. 
 
 Jones & Co. 
 
 Dr. 
 
 Julyl 
 
 July 20 
 Aug. 2 
 
 Cr. 
 
 $200. 
 90. 
 
SPECIAL LEDGEK TRANSFERS AND RULINGS 81 
 
 A circular has been received, announcing that the above firm 
 
 has been succeeded by Osgood & Co., the new firm taking the 
 resources and assuming the liabilities of the old firm. 
 
 Open the old account, and make the proper entry to close it 
 into the new account. Open the new account. 
 
 2 
 
 Merchandise 
 
 Dr. Cr. 
 
 Jan. 31 $1200.40 Jan. 31 $900. 
 
 Feb. 28 1100. Feb. 28 800. 
 
 Mar. 31 1640. Mar. 31 1100.60 
 
 Apr. 30 1500. Apr. 30 1200.40 
 
 May 31 1900. May 31 1400.90 
 
 June 30 1100. June 30 1250. 
 
 July 31 1050. July 31 800.40 
 
 Open the above account, and transfer the totals to a new space 
 in the ledger. 
 
 3 
 
 Smith, Taylor & Co. 
 Dr. Cr. 
 
 July 15 $900. June 16 $1200. 
 
 19 400. 
 
 30 750. 
 
 Open the above account, and carry forward the balance to a 
 new space in the ledger. 
 
 EXERCISE L 
 
 RESOURCES AND LIABILITIES CLASSIFIED AND 
 EXPLAINED 
 
 Resources 
 
 Classes. The resources of a business may be divided into 
 three distinct classes as follows : 
 
 1. Fixed. 
 
 2. Floating. 
 
 3. Speculative. 
 
82 TEACHER'S MANUAL 
 
 Fixed Resources. Fixed resources are the assets of the business 
 which are of a permanent and essential nature ; as, roadbed of a 
 railroad, land and plant of a mining concern, franchise of a street 
 railway, machinery and tools of a manufacturing concern, etc. 
 
 Floating Resources. Floating resources are assets of the busi- 
 ness which have no fixed or permanent value, but which change 
 from day to day on account of sale, exchange, etc.; as, bills 
 receivable, accounts receivable, goods in stock, cash, etc. 
 
 Speculative Resources. Speculative resources are assets of the 
 business which are subject to fluctuation in value from time to 
 time ; as, stocks, bonds, etc. 
 
 Liabilities 
 
 Classes. The liabilities of a business may be divided into two 
 distinct classes as follows : 
 
 1. Fixed. 
 
 2. Floating. 
 
 Fixed Liabilities. Fixed liabilities are debts of the business 
 which are of a permanent character ; as, capital, mortgages, etc. 
 
 Floating Liabilities. Floating liabilities are the ordinary trade 
 debts of a business ; as, bills payable, accounts payable, etc. 
 
 WORK FOR PRACTICE 
 
 SUGGESTIONS. Discuss with the students the classes of resources 
 and liabilities. Write the following names of accounts on the black- 
 board and ask for : 
 
 1. A separation of the accounts into resources and liabilities. 
 
 2. A classification of the resources under (a) fixed resources; 
 (6) floating resources ; (c) speculative resources. 
 
 3. A classification of the liabilities under (a) fixed liabilities; 
 (6) floating liabilities. 
 
 NAMES OF ACCOUNTS 
 
 1. Cash. 
 
 2. Bills Receivable. 
 
 3. Bills Payable. 
 
 4. Stocks and Bonds. 
 
STATEMENTS, TRIAL BALANCES, ETC. 83 
 
 5. Kent (owed by the business, per inventory). 
 
 6. Salaries (unpaid, per inventory). 
 
 7. Expense (coal on hand for office use, per inventory). 
 
 8. Taxes (unpaid, per inventory). 
 
 9. Accounts Payable. 
 
 10. Accounts Receivable. 
 
 11. Good Will (debit balance). 
 
 12. Capital Stock. 
 
 13. Treasury Stock. 
 
 14. Machinery and Tools. 
 
 15. Mortgages Receivable. 
 
 16. Mortgages Payable. 
 
 17. Franchise. 
 
 18. Surplus Fund. 
 
 19. Real Estate (debit balance). 
 
 20. Interest (accrued on bills payable, per inventory). 
 
 EXERCISE LI 
 STATEMENTS, TRIAL BALANCES, ETC. 
 
 1. June 16 Charles Williams and Frank Poole commenced a 
 provision business with resources and liabilities as follows : 
 
 Resources 
 
 Cash $1200. 
 
 Merchandise 3500. 
 
 Fixtures 350. 
 
 Accounts Receivable 700. 
 
 Liabilities 
 
 Notes outstanding $500. 
 
 Accounts Payable 600. 
 
 The partners have equal interests in the business. 
 September 30 of the same year the resources and liabilities of 
 the business were as follows : 
 
84 TEACHER'S MANUAL 
 
 Resources 
 Cash on hand 
 
 Merchandise in stock 4270. 
 
 Fixtures in stock 720. 
 
 Accounts Receivable, per ledger 1120. 
 
 Notes due the firm 450. 
 
 Liabilities 
 
 Notes outstanding $562.50 
 
 Accounts Payable, per ledger 495.60 
 
 Their books have been kept by single entry. 
 
 a. Prepare a statement showing the net gain for the period 
 June 16 to September 30 ; also the present worth of each partner. 
 
 b. Make the entry necessary to change the books to double entry. 
 2. The following is a trial balance of an insolvent business in 
 
 which the proprietors have equal investments. 
 
 Cash $884.23 
 
 Merchandise 8400. $5200. 
 
 Accounts Receivable 3400. 
 
 Bills Receivable 1065.80 
 
 Furniture and Fixtures 950. 
 
 Expense 1962.87 
 
 Interest and Discount 126.90 
 
 Accounts Payable 7500. 
 
 Bills Payable 1739.80 
 
 John W. Radcliffe, Proprietor 1150. 
 
 Eton M. Closs, Proprietor 1200. 
 
 A summary of the resource and liability inventories of the 
 business is as follows : 
 
 Value of fixtures on hand $900. 
 
 Value of expense items on hand 152.90 
 
 Unpaid telephone bill 16.90 
 
 Value of merchandise in stock 1600. 
 
 Unpaid freight bill 79.20 
 
 Interest accrued on bills payable 4.40 
 
 Interest accrued on bills receivable 9.20 
 
RECORDS OF AN ADMINISTRATOR 85 
 
 a. Make a statement of losses and gains. 
 
 b. Make a statement of resources and liabilities. 
 
 c. Prove the statements. 
 
 d. Open the accounts on a sheet of ledger paper, four to the 
 page. Close the loss and gain accounts and show the net insolv- 
 ency of each partner. 
 
 e. Determine at what per cent on a dollar Radcliffe & Closs 
 can pay their liabilities. 
 
 EXERCISE LII 
 
 RECORDS OF AN ADMINISTRATOR 
 
 SUGGESTIONS. The following memoranda may be used to show 
 the accounts of an administrator appointed to close up the estate of a 
 person deceased. The student may be represented as administrator. 
 Use journal, cash book, and ledger. Post all the transactions and 
 show the closing of the accounts on the ledger. 
 
 May 1 
 
 You have this day been appointed administrator of the will of 
 the late Charles N. Sanborn. The will provides that the widow 
 of the deceased, Mrs. Mary Sanborn, shall have one-third of 
 everything belonging to the estate, and that the three children, 
 Charles L., Eliza E., and Margaret W., shall each receive one- 
 third of the remainder of such property. 
 
 May 2 
 
 You have completed a statement of the resources and liabilities 
 of the estate of the deceased as follows : 
 
 Resources 
 
 City homestead, consisting of house and barns $30000. 
 Summer residence at Summerland Island, Alexandria 
 
 Bay, KY. 3750. 
 
 Household furniture 6500. 
 
 Judgment against F. E. Gorham 750. 
 
 Interest accrued on above 45. 
 
86 TEACHER'S MANUAL 
 
 One carriage horse $125. 
 One carriage 250. 
 
 Two sets harness, worth $85 each 170. 
 
 Kodak bonds 9000. 
 Interest accrued on above 450. 
 
 Note of C. B. Ellis 800. 
 
 Interest accrued on above 72. 
 
 C. D. Miller owes on account 160. 
 
 W. E. Avery owes on account 240. 
 
 Cash in Union Bank 7250. 
 Cash in safe 217.50 
 
 Liabilities 
 
 Raymond Dann, store account $60.50 
 
 James Harmon, blacksmithing 10.60 
 
 NOTE. Debit the different resources above and credit Sanborn 
 Estate for the total. Debit Sanborn Estate for the total liabilities, and 
 credit each liability. The other entries following do not differ mate- 
 rially from those of any mercantile business. The city homestead 
 and summer resort may be entered under Real Estate, and the 
 carriage horse, carriage, and harnesses may be entered under Horse 
 and Carriage account. 
 
 May 3 
 
 Dispose of property as follows : 
 
 Carriage horse, carriage, and the two harnesses to Charles D. 
 Elwell for $450, on his note at 3 months, indorsed by Traver 
 &Co. 
 
 City homestead has been bought by Mrs. Mary Sanborn for 
 $30,000, and charged to her account; also household furniture, 
 
 The summer residence has been deeded to Margaret W. Sanborn, 
 and charged to her account, $3750. 
 
 Pay by check the balances due Raymond Dann and James 
 Harmon on account. 
 
 Receive of C. D. Miller cash, $160, in full of account. 
 
RECORDS OE AN ADMINISTRATOR 87 
 
 May 9 
 
 Receive of C. B. Ellis cash for his note and interest to date. 
 Face of note, $800; interest, $72.40. 
 
 Sell Kodak bonds to Ely & Co. at par, with accrued interest 
 added. Par value of bonds, $9000 ; accrued interest, $454.50. 
 
 Eliza E. Sanborn takes the judgment against F. E. Gorham, 
 with interest, to apply on her share in the estate. Face of 
 judgment, $750 ; interest accrued, $45.38. 
 
 Pay Charles L. Sanborn $200 by check, to apply on his share 
 in the estate. 
 
 May 16 
 
 Appropriate by check on Union Bank your fee as administrator 
 of the estate, $375. 
 
 Receive of W. E. Avery his check in full of account. 
 
 May 27 
 
 Charles L. Sanborn takes the note received for the sale of the 
 horse, carriage, and harnesses at its face value, and the same is 
 charged to his account. 
 
 Post and make a trial balance. Close the accounts showing 
 loss or gain into Loss and Gain account. Close the net loss or 
 gain into Sanborn Estate. Close all other accounts in the ledger 
 that balance. 
 
 May 31 
 
 Make an entry to divide properly the net estate between the 
 heirs. 
 
 NOTE. Debit Sanborn Estate, and credit each heir for his or her 
 interest. 
 
 Receive from Mrs. Mary Sanborn cash for the balance due by 
 her to the estate. 
 
 Deposit in Union Bank the check and all cash on hand. 
 
 Give Charles L. Sanborn, Eliza E. Sanborn, and Margaret W. 
 Sanborn checks for their respective interests in the estate. 
 
 Post the above entries to the ledger. All accounts should now 
 balance. Rule and foot them. Rule and foot the cash book. 
 
88 TEACHER'S MANUAL 
 
 EXERCISE LIII 
 A KEVIEW OF DRAFTS 
 
 SUGGESTIONS. The following exercise may be used as a review of 
 drafts. The work may be journalized on regular journal paper, posted 
 to a ledger, and a trial balance made. 
 
 April 15. C. W. Benton began business with resources and 
 liabilities as follows : 
 
 Resources 
 
 Stocks and bonds on hand $3200. 
 
 Interest accrued on above 96. 
 
 Merchandise, per inventory 7200. 
 
 Cash on hand 1700. 
 
 Store and lot 3800. 
 
 Coal on hand 85. 
 
 Bills receivable, per bill book 400. 
 
 Interest accrued on above 12. 
 
 Account against C. E. Williams 500. 
 
 Account against W. O. Avery 1700. 
 
 Account against C. D. Snow 900. 
 
 Mortgage on property, 24 Main Street 1200. 
 
 Liabilities 
 
 Due R. O. Odell $1500. 
 
 Due Keeler & Co. 1200. 
 
 Due Mason & Frey 1400. 
 
 Due Doe & Co. 1200. 
 
 Unpaid freight bill 1 90. 
 
 Unpaid taxes 300. 
 
 Unpaid telephone bill 12. 
 
 16. He drew a sight draft on C. E. Williams, in favor of 
 K. O. Odell, for $130. 
 
 17. He accepted Keeler & Co.'s 30-day draft on him, in favor 
 of themselves, for 
 
EXAMPLES FOR JOURNALIZING 89 
 
 18. He prepaid by check Mason & Frey's 30-day draft on him, 
 in favor of themselves, for $200. 
 
 19. He drew a sight draft on C. D. Snow for $300, in favor of 
 Keeler & Co., and remitted it to the latter to apply on account. 
 
 20. He paid freight bill to date by a sight draft on W. O. 
 Avery, in favor of City Carting Co., $190. 
 
 22. He paid taxes due on store and lot by a sight draft on 
 
 C. E. Williams, in favor of M. L. Coleman, City Treasurer, $300. 
 
 23. He paid a sight draft in favor of Doe & Co. for $1200, by 
 assigning his mortgage on property, 24 Main Street. 
 
 24. He received of W. O. Avery a 30-day draft on Keeler & 
 Co., $200, to apply on account. 
 
 25. He received of C. D. Snow a 30-day draft on C. F. Joiner, 
 in his own favor, accepted, $100. 
 
 26. He remitted C. L. King's note to R. O. Odell to apply on 
 account. Face of note, $200; interest accrued, $6.36. 
 
 27. He sold M. O. Long merchandise amounting to $560, drew 
 a 30-day draft for the amount of the bill, and left it at Union 
 Bank for collection. 
 
 EXERCISE LIV 
 
 EXAMPLES FOR JOURNALIZING 
 
 1. You have received from the executors of the estate of a 
 deceased relative, as a bequest, a house and lot at 792 Causeway 
 Street, valued at $4500, and have invested the same in a business 
 of which you are sole proprietor. Make your entry. 
 
 2. D. O. Beach & Co. owed you $692.50. One week ago they 
 disposed of their business to Charles M. Congdon. Mr. Congdon 
 is to have all the resources and assume all the liabilities of the 
 retiring firm and he remits you his note at 10 days, to apply on 
 account. The full balance of $692.50 now stands charged to 
 
 D. O. Beach & Co. Make your entry. 
 
 3. J. E. King retires from the firm of Coffin, King & Co., receiv- 
 ing City Water Works Bonds, $7500, and a note for $7500, pay- 
 able in six months, with interest at 6%. On balancing the books 
 
90 TEACHER'S MANUAL 
 
 his net capital is found to be $15,461.90. The note and bonds 
 are accepted by King as full payment for his entire interest in 
 the firm of Coffin, King & Co. Make the entry for Coffin, King & 
 Co.'s books. 
 
 4. Geo. W. Dunkle and E. M. Demerest are equal partners in 
 a furniture business under the firm name of Demerest & Co. 
 Dunkle offers to sell his entire interest in the business to Demerest 
 for $25,000, which offer Demerest accepts and gives Dunkle a check 
 on Union Bank for the amount. The balance to the credit of 
 Geo. W. Dunkle's account in the firm's books is $19,982.60. 
 E. M. Demerest continues the business under the old firm name. 
 What entry should be made by Demerest in the firm's books for 
 his purchase of Dunkle's interest? 
 
 5. F. O. Wolven owes you $1515. He gives you in full 
 settlement of account A. J. Morley & Co.'s note, $1500, due in 
 30 days, with 60 days accrued interest. Make your entry. 
 
 6. C. A. Wesp and W. D. Lyman are partners in a furni- 
 ture business under the firm name of The Wesp Furniture Co. 
 A. B. Curtis buys for cash W. D. Lyman's entire interest for 
 $15,000, and is admitted as an equal partner with C. A. Wesp, 
 Curtis's net capital to be the present worth of the retiring 
 partner, $13,790.69. Make the firm's entry for the change in the 
 partnership. 
 
 7. John E. Williams owes Sidney & Clark $1000. Sidney & 
 Clark offer to discount the claim 2% for cash. The offer is 
 accepted ; but Williams not having the ready money is obliged to 
 get accommodation at his bank by discounting his 90-day note 
 at 6%, the note producing just the amount necessary to effect a 
 settlement with Sidney & Clark. A New York draft is issued to 
 Williams for the proceeds, which draft he immediately remits to 
 Sidney & Clark. Make Williams's entry. 
 
 8. You bought at auction $2000 worth of merchandise on your 
 note at 10 days, with interest at 6%. Before entering the purchase 
 on your books you sold the goods for $2500, receiving a note pay- 
 able in 30 days, with interest at 6%. Make your journal entry. 
 
 9. Charles M. Langdon owes you $720. In payment he hands 
 you an acceptance drawn by R. H. White & Co., in their own 
 
EXAMPLES FOR JOURNALIZING 91 
 
 favor, and indorsed by them to Charles M. Langdon, $1142.50. 
 The acceptance being due to-day, you give Langdon a check for 
 the difference between his indebtedness to you and your acceptance. 
 
 a. Make your entry. 
 
 b. Make Charles M. Langdon's entry. 
 
 10. Frank H. Congdon pays one month's rent of his store, $250, 
 by a sight draft on debtor customers, Ellery & Davis. Make 
 Congdon's entry. 
 
 EXERCISE LV 
 EXAMPLES FOR JOURNALIZING 
 
 SUGGESTIONS. The following transactions may be used as an oral 
 or a written exercise in journalizing. If used as a written exercise, 
 full journal explanations should be required. 
 
 You are a retail merchant and during the month of July have 
 transactions for your journal as follows : 
 
 1. E. D. Snow owes you $73. You accept his 30-day note 
 for $50, indorsed by Williams & Rogers, in full of account. 
 
 7. Receive of Bender Bros. 4 tons of coal, at $5.50, in payment 
 for interest accrued on their note which you hold. The coal is 
 for use in your office. 
 
 9. Pay your acceptance in favor of Jordan, Marsh & Co., 
 $126, due to-day, by a sight draft on Hill & Co., who owe you on 
 account. 
 
 12. You owe Henry Wheeler & Co. $723, and make full payment 
 as follows : 
 
 J. O. Bell's note in you-r favor 
 
 Interest accrued on above 3.92 
 
 Your 30-day note, with interest at 6% 494.08 
 
 15. Pay tailor bill, $42.90, by a sight draft on Ely & Co., who 
 owe you on account. 
 
 16. Palmer & Co.'s note for $350, with 90 days accrued interest, 
 is due to-day. Not being able to pay it, he gives you his renewal 
 note at 30 days, with interest, for the old note and the interest due. 
 
92 TEACHER'S MANUAL 
 
 18. Sell Henry Clark 1 office safe, $250, on his note at 60 days. 
 The safe was originally bought for use in your office. 
 
 26. Pay F. M. Taylor & Co.'s coal bill rendered to C. O. Miller, 
 your bookkeeper, $17.50. The amount is to apply on Mr. Miller's 
 salary. 
 
 27. Pay taxes on the store and lot owned by you, $125, by a 
 sight draft on C. M. Snow, a debtor customer. 
 
 28. Give J. M. Cox, a salesman, an order payable in goods from 
 your store for one-half his weekly wages, $9.50. 
 
 29. Pay your note in favor of Briggs & Co., $700, and interest 
 accrued, $19.70, by a sight draft on Frank Mason & Son, who owe 
 you on account. 
 
 EXERCISE LVI 
 THE TRIAL BALANCE 
 
 The following outline is suggestive of results that may be 
 obtained from a class discussion of the trial balance. 
 I. Purpose. 
 
 1. To test the correctness of posting : (a) the amounts posted; 
 (&) the side to which amounts are posted. 
 
 2. To furnish a basis from which to formulate business and 
 financial statements. 
 
 3. To show the equality of the ledger, and to serve as a 
 preliminary step in the process of closing the same. 
 
 4. To furnish information for : (a) a comparison of the present 
 results of the business with the results for former periods ; (5) a 
 thorough analysis of the general progress and condition of the 
 business. 
 
 II. What a trial balance does not prove conclusively : 
 
 1. That individual items have been posted to the right accounts. 
 
 2. That the records upon the books of original entry have been 
 made correctly. 
 
 3. That all the computations are correct. 
 
 4. That the additions in the ledger, or even in the posting 
 mediums, are correct. 
 
THE TEIAL BALANCE 93 
 
 III. The accounts of a trial balance that under ordinary 
 circumstances show a debit balance : 
 
 1. Cash. 
 
 2. Bills Receivable. 
 
 3. Accounts Receivable. 
 
 4. Expense and various subdivisions. 
 
 IV. The accounts of a trial balance that under ordinary circum- 
 stances show a credit balance : 
 
 1. Investment accounts. 
 
 2. Bills Payable. 
 
 3. Accounts Payable. 
 
 V. Causes of errors in trial balances. 
 
 1 . Mistakes in addition : (a) in the posting mediums ; (5) in 
 the ledger ; (c) on the trial balance. 
 
 2. Faulty figures: -(a) too large or too small; (&) illegible; 
 (c) out of column or not properly spaced. 
 
 3. Omissions of accounts or parts of accounts that are necessary 
 adjuncts to the equality of a double entry ledger. Among these 
 omissions are : (a) the balance of cash from the cash book ; 
 (6) inventories from the last closing of the ledger not brought 
 below the rulings ; (c) accounts closed to show balance, but the 
 balance not brought below the ruling. 
 
 4. Loss and gain items closed into the Loss and Gain account 
 at the last trial balance, but not ruled off, and so counted again 
 in making the present trial balance. 
 
 5. Transposition of figures. 
 
 6. Transplacement of figures. 
 
 7. Improper checking or no checking at all for the posting. 
 
 8. Carelessness of any sort. 
 
 9. Lack of concentration. 
 
 10. Lack of system. 
 
 11. Omission of items in posting. 
 
 12. Posting to the wrong side of accounts. 
 
 13. Posting items twice. 
 
 14. Neglect to fill out the cents column for all amounts. 
 
 15. Failure to prove such books as cash book, bill book, etc., 
 before posting. 
 
94 TEACHER'S MANUAL 
 
 EXERCISE LVII 
 HOW TO AVOID ERRORS IN TRIAL BALANCES 
 
 1. Study to gain a thorough knowledge of the fundamental 
 principles of accounting. 
 
 2. Work systematically. 
 
 3. Learn to focus the attention. 
 
 4. Exercise great care in transferring amounts from one book 
 to another. 
 
 5. Verify all calculations, additions, multiplications, etc. 
 
 6. Make good figures. Good figures should be (a) of the 
 proper size, (b) uniform in size, (c) properly spaced. 
 
 7. Be self-reliant. 
 
 8. Be especially careful in forwarding amounts in sales books, 
 invoice books, etc. If ledger accounts are forwarded, be sure to 
 carry the footings or balances to the proper sides of the new 
 accounts. 
 
 9. When an account balances, immediately close it in the 
 ledger. 
 
 10. Before posting from a journal, examine the individual 
 entries in same to determine that they are in balance. 
 
 11. Before transferring amounts from such books as the sales 
 book, purchase book, etc., see that every item to be posted is 
 extended into the proper column and counted in determining the 
 total to be carried to the ledger. 
 
 12. Prove the cash book before posting it to the ledger. . 
 
 13. As far as possible keep the books posted to date. 
 
 14. Trial balances are usually made periodically, monthly, 
 quarterly, semiannually, etc., and at times when the work in the 
 countingroom is the heaviest. At such times the bookkeeper 
 cannot afford to spend valuable time locating errors. All work 
 should be done so thoroughly from day to day that few, if any, 
 errors exist. After the records for any period have been trans- 
 ferred to the ledger, the posting of every item should be retraced 
 and checked. Some books are ruled with a column for check 
 marks, in which case these marks should always be written in 
 
HOW TO LOCATE ERRORS IN TRIAL BALANCES 95 
 
 this column. Where the column is not provided for, place a 
 small lead-pencil check mark (\J) on the double line to the left 
 of each item examined in the ledger, and by the side of the folio 
 mark of each item in the books of original entry to be posted. 
 After checking the items for any period, examine the ledger to 
 see if any errors are indicated. All items not checked indicate 
 errors. 
 
 15. When closing the ledger be sure to transfer the items of 
 balance, inventory, etc., to the proper side below the ruling. 
 
 16. If a trial balance is made of the differences of the ledger 
 accounts, great care should be exercised to ascertain the correct 
 balance of each account. 
 
 17. Always fill out the cents column in all books of record. 
 If there are no cents, either write in ciphers or fill in the space 
 with a waved line. This will have a tendency to do away with 
 the habit of misplacing even dollars or even cents. 
 
 18. Accuracy in accounting, like accuracy in all departments 
 of activity, is a habit which can be cultivated until it becomes 
 fixed. The accountant who wishes to stand at the head of his 
 profession should give careful attention to all those things which 
 contribute to accuracy. They not only have a bearing upon his 
 special work, but upon all else which he may attempt along any 
 line. 
 
 EXERCISE LVIII 
 HOW TO LOCATE ERRORS IN TRIAL BALANCES 
 
 The most conscientious and painstaking accountant will some- 
 times make mistakes in his records. It is therefore well to 
 suggest a system for locating errors common to many of those 
 engaged in the business of accounting. 
 
 An error should, first of all, be known to exist before an 
 attempt is make to locate it. Be sure of the additions on the 
 trial balance, and of the proper transfer of the items from the 
 ledger to the trial balance. If it is palpably certain that an 
 error exists, proceed as follows to locate it : 
 
96 TEACHER'S MANUAL 
 
 1. Determine the exact amount of the error. 
 
 * a. If it is a large sum, see if the footings of the sales book, 
 invoice book, etc., have been posted. 
 
 b. If it is an amount similar to many records in the original 
 books of entry, carefully examine the individual amounts recorded 
 in the sales book, journal, cash book, invoice book, etc., since the 
 last trial balance. 
 
 c. If an amount equal to the error is found, that particular item 
 may have been omitted in posting or may have been posted twice. 
 
 d. If one-half of the amount is found, that particular item may 
 have been posted to the wrong side of the ledger. 
 
 2. Examine the transfer of the footings from the ledger to 
 the trial balance. 
 
 3. If the amount of the error is ten or some power of ten, 
 look for the error (a) in the additions on the trial balance ; (b) in 
 the additions of the ledger accounts ; (c) in the additions of all 
 books the totals of which are posted. 
 
 4. If the posting has been checked as explained on page 95, 
 examine the ledger items to see if there are any amounts that are 
 not checked. If any items are not checked, ascertain the cause. 
 
 5. See if the error can be located by experimenting with some 
 of the curious mathematical properties of 9. All errors divisible 
 by 9 may be caused by a transposition of figures. The principal 
 application of the properties of 9 in locating errors in trial 
 balances may be referred to as follows: 
 
 a. If any two consecutive figures have been transposed, the 
 amount of the error caused by such transposition divided by 9 is 
 equal to the difference between the figures transposed. 
 
 Examples: $1272.71 written $1272.17 would make an error 
 of 54^. 54 -4- 9 = 6, or the difference between the figures trans- 
 posed. Thus we should look for figures in the cents column 
 whose difference is 6. The following is a complete list of the 
 figures which may have been transposed in the cents column to 
 produce an error of 54 : 
 
 17 written 71 and vice versa. 
 28 " 82 " " 
 39 93 
 
HOW TO LOCATE ERRORS IN TRIAL BALANCES 97 
 
 In each of the foregoing it will be noted that the difference 
 between the figures given as possible transpositions is 6. 
 
 $731 written $713 would make an error of $18. 18 -*- 9 = 2, or 
 the difference between the figures transposed. Thus we should 
 look for two consecutive figures in the units and tens columns 
 having a difference of 2. The following is a complete list of the 
 figures which may have been transposed to produce an error of 18 : 
 
 13 written 31 and vice versa. 
 
 24 " 42 " " " 
 
 35 " 53 
 
 46 " 64 " " " 
 
 57 " 75 " " " 
 
 68 " 86 " " " 
 
 79 " 97 " " " 
 
 In each of the above it will be noted that the difference between 
 the figures given as possible transpositions is 2. 
 
 b. When the amount of the error caused by a transposition of 
 two consecutive figures has ciphers at the right, divide the amount 
 by 9, the same as in (a). If there is one cipher in the quotient, 
 ignore it and look for the difference in the tens and hundreds 
 columns ; if there are two ciphers in the quotient, ignore them and 
 look for the difference in the hundreds and thousands columns, etc. 
 
 Examples: $321 written $231 would make an error of $90. 
 90 -4- 9 = 10. Look for figures in the tens and hundreds columns 
 having a difference of 1. $3742 written $7342 would make an 
 error of $3600. 3600 -f- 9 = 400. Look for figures in the hun- 
 dreds and thousands columns having a difference of 4. 
 
 c. If any three consecutive figures have been transposed, the 
 amount of the error caused by such transposition divided by 99 is 
 equal to the difference between the first and third figures in the 
 number transposed. 
 
 Examples : $875 written $578 would make an error of $297. 
 297 -f- 99 = 3, or the difference between the first and third figures 
 in the number transposed. 
 
 $3657 written $5637 would make an error of $1980. 1980 -f- 99 
 = 20. Ignore the cipher and 2 is the difference between the figures 
 in the thousands and tens columns which have been transposed. 
 
98 TEACHER'S MANUAL 
 
 d. Figures which have been transplaced always cause an error 
 that is divisible by 9. If an amount has been transplaced one 
 column to the right or to the left, divide the difference by 9 and 
 the quotient is the number transplaced; e.g., $24 written $240 
 would make a difference of $216. 216 -5- 9 = 24, or the number 
 transplaced. 
 
 If an amount has been transplaced two columns to the right or 
 to the left, divide the difference by 99 and the quotient is the 
 number transplaced ; e.g., $3.65 written $365 would cause an 
 error of $361.35. 361.35 + 99 = 3.65, or the number transplaced. 
 
 If an item has been transplaced three columns to the right or to 
 the left, divide the difference by 999 and the quotient is the number 
 transplaced ; e.g., $4.65 written $4650 would make an error of 
 $4645.35. 4645.35 -r- 999 = 4.65, or the number transplaced. 
 
 Thus when figures have been transplaced it will be observed 
 that the carrying of an amount one column to the right or to the 
 left causes an error divisible by 9 ; two places to the right or to 
 the left, an error divisible by 9 or 99 ; three places to the right or 
 to the left, an error divisible by 9, 99, or 999, etc. 
 
 6. Should none .of the above tests suggest the error, check in 
 regular order all the items that have been posted since the last 
 trial balance was completed. In doing this, watch closely to 
 determine whether in posting (a) any amounts have been trans- 
 posed ; (6) any amounts have been transplaced ; (c) any figure 
 or figures have been omitted or substituted. 
 
 7. After checking the items from the books of original entry 
 to the ledger, examine the ledger to see that all amounts stand 
 checked. 
 
 EXERCISE LIX 
 THE PAY-ROLL MEMORANDUM 
 
 SUGGESTIONS. The teacher may supply amounts for a short pay 
 roll, and have the class make up a pay-roll memorandum. An exer- 
 cise of this kind may be made very interesting and instructive as well. 
 
 Checks are sometimes used in paying off employees, but most 
 business concerns use the envelope system. 
 
THE PAY-KOLL MEMORANDUM 
 
 99 
 
 A cash check is usually drawn for the amount of the pay 
 roll, but it is necessary that the bookkeeper have not only the 
 amount of money, but the exact change required to pay every 
 employee. In order to do this the bookkeeper makes out a 
 pay-roll memorandum. 
 
 Suppose we use three names to represent a pay roll: John 
 Smith, $18.27 ; Alfred Jones, $17.20 ; Austin Phelps, $40.67. To 
 
 pay Smith he would need 
 
 . ,.,, 1A K Outline for a Pay-Roll Memorandum 
 in bills one 10, one 5, one 2, 
 
 one 1, and in change one 
 25^ and two pennies ; to 
 pay Jones he would need 
 one 10, one 5, one 2, and 
 two dimes ; to pay Phelps 
 he would need two 20 's, 
 one 50<^, one dime, one 
 nickel, and two pennies. 
 If the above items were 
 arranged in columns, by 
 footing the columns he 
 would know just the 
 total for each denomina- 
 tion, and the totals of 
 all the columns would 
 equal the amount re- 
 quired for the pay roll. 
 He would draw a cash 
 check, or a check payable 
 to Pay Roll, for the total 
 amount required. 
 
 After securing the above amounts, the envelopes containing 
 the names or pay-roll numbers of the employees, the amounts due 
 being placed on the outside, are "filled," that is, the required 
 sum is placed in each. At the hour of paying off, the employees 
 pass a stated place and each receives his envelope. 
 
 ffirst 
 
 1 National Bank 
 
 WESTFIELD, MASS. 
 
 7) 7> // A// t 
 
 :zra.i/-3 
 
 NELSON & CO. 
 
 require the following : 
 
 Pennies 
 
 .... 86 
 
 86 
 
 Nickels 
 
 . .... 30 
 
 1 50 
 
 Dimes . 
 
 .... 23 
 
 2 30 
 
 Quarters 
 Halves . 
 Dollars 
 
 2's . . 
 
 .... 18 
 . . . . 35 
 
 4 50 
 17 50 
 83 
 82 
 105 
 140 
 80 
 
 . . . .83 
 .... 41 
 
 6's . . 
 
 .... 21 
 
 10's . . 
 
 .... 14 
 
 20's . . 
 
 4 
 
 
 516 66 
 
100 TEACHER'S MANUAL 
 
 EXERCISE LX 
 ADVANCED TEST 
 
 1. Outline the fundamental principles of double entry book- 
 keeping. Show clearly wherein it differs from single entry book- 
 keeping. 
 
 2. In planning a system of accounts for a business what are the 
 principal subjects for consideration, and in what order should 
 they have attention ? 
 
 3. Define and show the difference between : (a) sinking fund 
 and surplus fund ; (6) preferred stock and common stock. 
 
 4. Describe the nature of the following accounts : (a) suspense ; 
 (&) dividend ; (c) good will. 
 
 5. What are the functions of a real estate account ? What 
 entries may it properly have on each side? 
 
 6. State in the form of journal entries the following trans- 
 actions. 
 
 a. A note of a customer returned protested from the bank, 
 where it was left for collection. 
 
 6. Compromising with a creditor, receiving in full settlement 
 only fifty cents on the dollar. 
 
 c. The payment of your protested note, together with interest 
 and protest fees. 
 
 7. Formulate, in an imaginary case, a journal entry or entries 
 for changing a partnership to a joint stock company, with the 
 same resources and liabilities. 
 
 8. Describe a voucher record for the expenditures of a corpora- 
 tion. 
 
 9. May the good will of a business be sold ? 
 
 10. As bookkeeper for a firm that has no articles of copart- 
 nership, what would be your duty on learning of the death of a 
 partner ? 
 
 11. In a tabular outline show the principal differences between : 
 (a) a partnership and a joint stock company; (b) a joint stock 
 company and a corporation. 
 
ADVANCED TEST; , 101 
 
 12. In what respects does a national banking corporation differ 
 from the ordinary corporation ? 
 
 13. In what respects is the double entry system of accounting 
 preferable to the single entry system? In changing from single 
 entry to double entry what additional accounts are required ? Is 
 it necessary to disturb any accounts already opened in the ledger 
 or to keep such accounts differently after the change? 
 
 14. What should be done on the books of a partnership on the 
 admission of a new partner into the firm ? 
 
 15. State what is meant by each of the following ledger 
 accounts (a) when the account shows a debit balance, (&) when 
 the account shows a credit balance : insurance, rent, interest, loss 
 and gain, merchandise, accounts receivable, accounts payable. 
 Explain fully. 
 
 16. In bookkeeping why are the debits on the left and the 
 credits on the right ? 
 
 17. Classify the following terms as resources and liabilities, 
 and give reasons in each case : surplus fund, sinking fund, good 
 will, capital stock, treasury stock, subscription. 
 
 EXERCISE LXI 
 ADVANCED TEST 
 
 1. State a comprehensive general rule for journalizing. 
 
 2. Explain the uses and relations of the petty cash book to the 
 principal cash book. 
 
 3. What difference in books and accounts would exist between 
 a partnership and an incorporated company carrying on a similar 
 business ? 
 
 4. State the scope and value of the trial balance. 
 
 5. Describe several economies in accounting made possible by 
 the introduction of special columns in books of original entry. 
 
 6. You ship goods by freight and draw a sight draft on the 
 purchaser; how can you keep control of your goods until your 
 draft is paid ? 
 
102 . TfiACHEK'S MANUAL 
 
 7. Enumerate some of the commercial advantages derived from 
 4he general use of checks and other instruments of credit. 
 
 8. Is a credit system an advantage to a community ? Explain 
 fully. 
 
 9. Enumerate some of the advantages which a large business 
 has over a small one, and vice versa. 
 
 10. Name the various ways in which a San Francisco merchant 
 may discharge debts due in (a) Boston, (&) Montreal, (c) London. 
 
 11. Describe in detail all the things that pass as cash. 
 
 12 . Why are drafts attached to bills of lading usually drawn 
 at sight or at one day's sight ? 
 
 13. What are the advantages to a business house of making 
 its notes payable at a bank? If there are any disadvantages 
 name them. 
 
 14. In the reports of banks and other large corporations, large 
 sums of money are classed as surplus fund. How and why is 
 this fund formed? 
 
 15. A invests $10,000 in the stock of a joint stock company 
 organized for manufacturing purposes ; B invests $10,000 in the 
 stock of a national bank ; C invests $10,000 in a corporation formed 
 for manufacturing purposes ; D invests $10,000 in an ordinary 
 partnership business. All four concerns fail and in each case the 
 existing resources are but thirty cents on the dollar. What are 
 the liabilities of A, B, C, and D, respectively? What is C's 
 loss? 
 
 16. In the annual statement of a street railway company the 
 following items appear : unpaid dividends, franchise, sinking 
 fund, surplus fund, capital stock. Which are assets and which 
 are liabilities ? 
 
 17. You are called upon to assume the general duties of book- 
 keeper in an establishment where the accounting has been meager 
 and primitive ; state the steps that you would take to reform 
 existing conditions. 
 
 18. A pays a creditor $1500 to apply on account. How has 
 the net capital of his business been affected ? He receives pay- 
 ment for a non-interest-bearing note, $1700. Has his net capital 
 been increased or diminished, and if so how much ? He pays a 
 
GENERAL TEST QUESTIONS 103 
 
 maturing note, $1500, with interest, $150. In what way has the 
 net capital been affected ? Explain fully. 
 
 19. Formulate an imaginary entry to change single entry books 
 to double entry. 
 
 20. Describe the uses and advantages of the three distinct 
 ledgers which are found in many large mercantile houses. 
 
 EXERCISE LXII 
 GENERAL TEST QUESTIONS 
 
 1. Richard Roe, Charles Hall, and Harvey Bates are partners 
 in a retail hardware business with net investments as follows : 
 
 Richard Roe $7296.40 
 
 Charles Hall 9250.70 
 
 Harvey Bates 8272.60 
 
 Richard Roe retires from the business, disposing of his interest 
 to Messrs. Hall & Bates for $7500, in two notes of equal amounts, 
 payable in 60 days and 3 months, respectively. New articles of 
 agreement are entered into between Charles Hall and Harvey 
 Bates without additional investment, and the business is carried 
 on substantially as before the retirement of Richard Roe. 
 
 a. Make the proper journal entry on the books qf Hall & Bates 
 for the notes given to Roe. 
 
 b. After purchasing Roe's interest, what is the capital stock 
 of Hall & Bates? 
 
 2. J. B. Murray and J. E. Lehman become equal partners in 
 a dry goods business, each with an investment of $4000. One 
 year later their liabilities exceed their resources by $2165. 
 
 a. What is the net insolvency of each ? 
 I. -What is the total loss of the firm ? 
 
 3. C. E. Frey enters into business January 1 with resources 
 $7000 and liabilities $3000. Three years later he finds his 
 resources $3000 and his liabilities $7000. 
 
 a. What has been his net loss ? 
 
 b. What is his net insolvency? 
 
104 TEACHER'S MANUAL 
 
 4. A. M. Snow & Son of Springfield, Mass., draw a draft, pay- 
 able one month after date, on Henry Holt & Co., Boston, Mass., 
 in favor of C. O. Loveless, Lynn, Mass. 
 
 a. Presuming that the. draft takes its usual course, trace it 
 from the time it leaves A. M. Snow & Son until it is filed away 
 as a canceled bills payable by Henry Holt & Co. 
 
 b. Why are drafts usually collected through a bank instead of 
 direct ? Explain fully. 
 
 5. A national bank has a capital stock of $40Q,000. J. H. 
 Crandall, a depositor, applies for a loan of $45,000. 
 
 Can the bank legally make the loan ? Why ? 
 
 6. A buys a bill of goods April 6 on the following terms : 
 3/10, net 60 days. 
 
 a. State the last day upon which payment may be made and 
 discount claimed. 
 
 b. If A should not pay his bill until June 5, what rate of 
 interest has he been paying on the amount due May 6 ? Analyze 
 fully. 
 
 7. You have overdrawn your bank account, $126.42. You 
 have $79.26 in currency, and a check for $40.60 on hand. The 
 cash receipts in the cash book aggregate $7246.90, and the cash 
 payments $7253.46. 
 
 a. Make a statement, showing whether the cash proves or not. 
 
 b. Explain -how the overdraft should be shown in the check 
 book. 
 
 c. Draft a short cash book, showing the above totals. 
 
 d. Close the cash book just drafted, using red ink, and show- 
 ing all necessary rulings, etc. 
 
 e. If a business statement were made at this time, what would 
 the cash account show, a resource or a liability ? 
 
 8. You have made the following errors in your accounting 
 during the last month : 
 
 1. You have entered $17.90 on the debit side of the Merchan- 
 dise account, and it should have been entered on the debit side 
 of the Expense account. 
 
 2. C. E. Randall should be charged $217.90, and you have 
 charged Armour Bros, for this amount. 
 
BANKING TEST 105 
 
 3. In footing the credit side of O. D. Murray's account you wrote 
 the total $20 too small. 
 
 4. In footing the credit side of Swift Bros/ account you mis- 
 took a " 3 " for a " 5 " in the tens column. 
 
 a. If no other errors have been made, is the ledger in balance ? 
 Why? 
 
 b. Will the loss and gain statement show any discrepancies in 
 gains or losses ? Why ? 
 
 c. In real business what is sure to locate eventually the errors 
 made in personal accounts as above ? 
 
 EXERCISE LXIII 
 BANKING TEST 
 
 1. A has overdrawn his bank account, $64.10. He has on 
 hand in currency $11.90 and a check for $90.42. Show the 
 entry and explanation necessary to close his cash book. Explain 
 in what books of the bank overdrafts are recorded. 
 
 2. How should overdrafts be indicated in the depositor's check 
 book ? In the depositor's pass book ? 
 
 3. Your check book shows an overdraft of $40.60. You make 
 a deposit of $50.80. Explain how the balance in the bank is 
 determined. 
 
 4. You make a deposit of $75 without your pass book. Are 
 you taking any risks ? Explain. You write a check on a blank 
 note taken from your check book. Why should this practice be 
 avoided ? 
 
 5. Your pass book has just been written up. A certified check 
 is out. The amount of this certified check is shown in the pass 
 book. Will the bank give you any voucher to explain such pass- 
 book record ? 
 
 NOTE. Should the bank write up a depositor's pass book at the 
 time when there is a certified check unpaid, it will give to the depositor 
 a charge ticket explaining the pass-book record for such check. The 
 usual form for such a ticket is shown on the next page. 
 
106 TEACHER'S MANUAL 
 
 traders 
 
 ffioston, ^ALciss., $wn& 2, 19- 
 
 ge 
 
 /SOO 
 
 St 
 
 aying 
 
 6. John Smith transfers a check to you by blank indorsement. 
 It is then payable to bearer. Can you legally make it payable to 
 your order ? 
 
 7. State the advantages of a clearing-house association to the 
 banks of any given city. 
 
 8. A is debtor to B. B wishes to know the amount of A's 
 bank account. Would any bank officer have the right to give 
 out such information? Explain. 
 
 9. A bank retires $1000 of its own circulating notes. Give the 
 proper entry. 
 
 10. To whom does (a) the surplus fund of a national bank 
 belong ? (&) undivided profits ? (c) the surplus fund of a savings 
 bank? 
 
 11. Write a certificate of deposit. 
 
 12. Are national bank bills legal tender? 
 
 13. Name the largest bank in the world ; in the United States. 
 
 14. Two shares of the stock of Chemical National Bank, New 
 York City, with the par value of $100 each, were recently sold 
 for $6250. Account for the fact that the stock of this bank sells 
 at such enormous figures. 
 
 15. Compare state and national banks. Contrast state and 
 national banks. 
 
BANKING TEST 107 
 
 16. A check is drawn up so that it can be easily raised. It is 
 certified by a bank and afterwards raised. Can the bank be held 
 for the payment of the amount after raising? 
 
 17. Write the face of a general letter of credit. 
 
 18. For what purpose are notes, drafts, etc., certified by banks ? 
 Explain fully. 
 
 19. You have a note dated January 31 and payable in one 
 month. Upon what date is it due? If the same note were pay- 
 able 30 days after date, when would it be due? 
 
 20. You have a note dated January 29, payable in one month. 
 Upon what date is it due ? Would the extra day for leap years 
 be taken into account in your state ? 
 
 EXERCISE LXIV 
 BANKING TEST 
 
 1. Alliance National Bank is organized with a capital stock of 
 $300,000. The capital stock is fully paid in at once, and a surplus 
 of $10,000 is also created and fully paid in. United States bonds 
 with a par value of $100,000 are purchased for $101,500 ; circulat- 
 ing notes to the extent of $100,000 are received from the Comp- 
 troller of Currency, duly signed and put in circulation. $5000 is 
 forwarded to the Treasurer of the United States, as provided by 
 the National Bank Act, to redeem worn-out and mutilated circu- 
 lating notes. Disbursements, ordered by the board of directors, 
 amount to $250. 
 
 a. Give in ordinary journal form the necessary opening entries 
 for the above transactions. 
 
 b. What premium would have to be paid for the purchase of 
 2% gold bonds to-day? 
 
 2. The above bank is offered for discount a note the face value 
 of which is $32,500. 
 
 Can it legally accept it ? Why ? 
 
 3. At the end of six months the loss and gain accounts of 
 Alliance National Bank show the following balances. 
 
108 TEACHER'S MANUAL 
 
 Dr. 
 
 Expense 
 
 Salaries 5100. 
 
 Furniture and Fixtures 4100. 
 
 Keal Estate 18000. 
 
 Taxes 500. 
 
 United States Bonds 100000. 
 
 Stocks and Bonds 15900. 
 
 Cr. 
 
 Interest and Discount $21500. 
 
 Collection and Exchange 11650. 
 
 The above loss and gain accounts are inventoried as follows : 
 Keal Estate $18500. 
 
 Furniture and Fixtures 3900. 
 
 United States Bonds 100000. 
 
 Stocks and Bonds 17000. 
 
 Interest and Discount 1000. 
 
 a. Make a journal entry to take the gains out of the several 
 gain accounts and carry them to the Loss and Gain account. 
 
 b. Make an entry to take the losses out of the several loss 
 accounts and carry them to the Loss and Gain account. 
 
 c. Make an entry to close the Loss and Gain account, dividing 
 the net gain as follows : To Dividend account, 4% of the capital 
 stock ; to Surplus Fund, 10 % of the net gain ; to Undivided 
 Profits, the balance of the net gain. 
 
 4. What account in the general ledger of the bank should be 
 referred to (a) in proving the discount tickler? (5) in proving 
 the individual ledger? (c) in proving the out-of-town banks 
 ledger? 
 
 5. If Alliance National Bank is organized in a city with a 
 population of 17,000, what is the minimum capital stock required ? 
 
 6. A has a balance of $3651 to his credit at Alliance National 
 Bank, and he presents a check of $3500 for certification. 
 
 Can the bank legally certify the check? Why? 
 
 7. On what conditions can a national bank hold real estate ? 
 
CIVIL SERVICE TEST 109 
 
 8. Tell which of the following accounts show resources and 
 which liabilities : surplus fund, undivided profits, dividends, bills 
 discounted, deposits, circulation. 
 
 EXERCISE LXV 
 CIVIL SERVICE TEST 
 
 The following is a good illustration of the kind of examinations 
 given by the United States Civil Service Commission. 
 
 An expense account has three debits as follows : January 16, 
 $80 ; January 23, $165 ; and February 10, $66. There is an 
 unpaid bill of $63 that belongs to it. Represent the account on 
 a ledger and close it. 
 
 Represent a merchandise account of six items and an inventory, 
 and close it. 
 
 Smith, Jones & Brown are engaged in a manufacturing business, 
 and have decided to form a stock company, with a capital of 
 $50,000. Each partner is to take stock for his net investment in 
 the business, and the remainder of the stock is to be subscribed by 
 other parties. Capital stock is to be credited with the full amount 
 of authorized capital. 
 
 A trial balance of the ledger shows the following : 
 
 Dr. Cr. 
 
 Real Estate $10000. Smith $16000. 
 
 Machinery 12000. Jones 10000. 
 
 Merchandise 10000. Brown 8000. 
 
 Material 5000. Bills Payable 7000. 
 
 Cash 5000. Personal Accounts 6000. 
 
 Bills Receivable 2000. 
 
 Personal Accounts 3000. 
 
 $47,000. $47,000. 
 
 From the above statement and conditions, accepting resources at 
 face value as per above balances, and assuming the liabilities of 
 the old firm, what journal or cash-book entries are necessary to 
 open a new set of books for the company ? 
 
110 TEACHER'S MANUAL . 
 
 EXERCISE LXVI 
 GENERAL TEST 
 
 1. M. D. Shepard & Co. have resources and liabilities as follows : 
 
 Resources 
 
 Real Estate $50,000. 
 
 Plant and Machinery 75,000. 
 
 Accounts Receivable 36,000. 
 
 Finished Products 42,000. 
 
 Liabilities 
 Bills Payable $16,000. 
 
 The firm disposes of its entire resources and liabilities to a 
 joint stock company for stocks and bonds as follows : 
 
 Bonds $75,000. 
 
 Preferred Stock 75,000. 
 
 Common Stock 60,000. 
 
 Make the necessary entry on the books of the joint stock com- 
 pany for the purchase of the business of M. D. Shepard & Co. 
 
 2. From the following trial balance of the Union Whip Co. 
 make (a) statement of losses and gains ; (&) statement of resources 
 and liabilities : 
 
 December 31, 19 
 
 Dr. Cr. 
 
 Capital Stock $54000. 
 
 Real Estate $13227. 
 
 Machinery and Tools 12500. 
 
 Cash 3750. 
 
 Sundry Expenses 750. 
 
 Bills Receivable 6000. 
 
 Gas and Water 250. 
 
 Taxes 250. 
 
 Freight and Drayage 350. 
 
 Office Expenses 450. 
 
GENERAL TEST 111 
 
 Merchandise 
 
 Salaries 1200. 
 
 Insurance 200. 
 
 Printing and Advertising 200. 
 
 Traveling Expenses 1250. 
 
 Agents' Salaries 950. 
 
 Labor 3400. 
 
 Whalebone 1140. 
 
 Rawhide 720. 
 
 Reeds and Rattan 120. 
 
 Thread 72. 
 
 Butts 460. 
 
 Accounts Receivable 15000. 
 
 Accounts Payable $6000. 
 
 Bills Payable 4000. 
 
 Repairs 90. 
 
 Loss and Gain 1009. 
 
 The inventories are as follows : 
 
 Real Estate $13000. 
 
 Machinery and Tools 12000. 
 
 Freight and Drayage (liability) 350. 
 
 Merchandise 17640.90 
 
 Insurance 90. 
 
 Traveling Expenses 75. 
 
 Agents' Salaries (liability) 120. 
 
 Whalebone 720. 
 
 Rawhide 240. 
 
 Reeds and Rattan 90. 
 
 Thread 50. 
 
 Butts 390. 
 
 Open the accounts in ledger form, and (a) close the classified 
 expense accounts into Sundry Expenses, (&) the classified mer- 
 chandise accounts into Merchandise, (c) Merchandise into Loss 
 and Gain. 
 
112 TEACHER'S MANUAL 
 
 Make a journal entry to close the Loss and Gain account. 
 Dividends, 3% of the capital stock; surplus fund, 5% of the net 
 profits ; undivided profits, the remainder of the net gain. 
 , 3. Reardon & Radcliffc'e of Boston owe D. O. Frey of Spring- 
 field $721.62, and Raymond Bros, of Albany owe Reardon & 
 Radcliffe $1275. January 6 Reardon & Radcliffc'e draw a sight 
 draft on Raymond Bros., in favor of D. O. Frey. They mail the 
 draft to Frey, who immediately upon its receipt deposit it in 
 Union National Bank of Springfield. Union .National Bank 
 sends the draft to Central National Bank, Albany. On presen- 
 tation, January 9, Raymond Bros, accept the draft, payable at 
 City Bank, Albany. It then goes through the clearing house 
 at Albany, is received by City Bank, charged to the account of 
 Raymond Bros., and returned to them when their pass book is 
 written up. 
 
 a. Show both sides of the draft as it appears after payment. 
 
 6. Give the entries recording the transaction in the books of 
 the drawer, drawee, and payee. 
 
 4. J. E. Farley, C. N. Sperry, and F. E. Raines are equal 
 partners in a wholesale clothing business under the firm name of 
 J. E. Farley & Co. August 1 their stock of clothing, fixtures, 
 etc., is destroyed by fire. A trial balance which was locked up 
 in their fire-proof safe shows the following condition of the 
 accounts of the business July 31 : 
 
 Dr. Cr. 
 
 J. E. Farley $5200. 
 
 C. N. Sperry 5150. 
 
 F. E. Raines 5165. 
 
 Cash $3610. 
 
 Furniture and Fixtures 1500. 
 
 Merchandise 12100. 
 
 Bills Receivable 900. 
 
 Bills Payable 2845. 
 
 Accounts Receivable 4750. 
 
 Accounts Payable 4620. 
 
 Interest 120. 
 
GENERAL TEST 113 
 
 The stock of clothing and the fixtures are covered by insurance, 
 and the insurance company makes payment as follows : 
 For Stock $15210. 
 
 For Fixtures 1100. 
 
 On the basis of the above figures prepare (a) a statement of 
 losses and gains ; (&) a statement of resources and liabilities. 
 
 EXERCISE LXVII 
 GENERAL TEST 
 
 1. The following are the single-entry ledger accounts of 
 Demerest & Co. : 
 
 Dr. Cr. 
 
 C. M. Demerest (proprietor) $23400. 
 
 F. E. Dunkle (proprietor) 20300. 
 
 O. M. Powers & Co. 7000. 
 
 E. W. Hasten $2500. 
 
 C. W. Delaney 2500. 
 
 Warren & Frey 1500. 
 
 E. O. Breezee 800. 
 
 L. M. Berriman 1000. 
 
 The following are the resources and liabilities not shown in 
 the ledger: 
 
 Resources 
 
 Merchandise, as per inventory $36000. 
 Notes, in favor of Demerest & Co., as per bill book 31800. 
 
 Cash in Bank 14000. 
 
 Office Furniture 3100. 
 
 Fuel 25. 
 
 Real Estate 7500. 
 Liabilities 
 
 Notes issued by Demerest & Co. $38000. 
 
 Unpaid freight bill 490. 
 
 Unpaid telephone bill 120. 
 
114 TEACHER'S MANUAL 
 
 The partners share the profits and bear the losses in equal 
 proportions. 
 
 a. Make a statement, showing the condition of the business 
 and the net gain or loss of each partner. 
 
 1. Make an entry by single entry to carry the proper share of 
 the net gain or net loss to each partner's account. 
 
 c. Make a journal entry to change the single-entry books to 
 double entry. 
 
 d. Make a trial balance, showing the ledger accounts after the 
 books have been changed to double entry. 
 
 2. A corporation with a capital stock of $200,000 is about to 
 declare dividends. The net gain since the last dividend period is 
 $21,792.50. The stockholders agree upon the following distribu- 
 tion of profits : To Dividend account, 6% of the capital stock ; to 
 Surplus Fund, $7000 ; to Undivided Profits, the balance of the 
 net gain. 
 
 All of the loss and gain accounts have been closed. Make a 
 journal entry to close the Loss and Gain account. 
 
 3. Messrs. Raymond & Co. are partners in a jobbing furniture 
 business, sharing gains and losses equally. A trial balance of 
 their business at the close of the fiscal year shows the following 
 debits and credits : 
 
 Dr. Cr. 
 
 W. D. Raymond, investment $8405.26 
 
 C. E. Reardon, investment 8405.26 
 
 Cash $9017.32 
 
 Merchandise 3424.89 
 
 Bills Receivable 12000. 
 
 Bills Payable 8350. 
 
 Expense 576. 
 
 Interest and Discount 129.75 
 
 Merchandise Discounts 250. 
 
 Accounts Receivable 3566. 
 
 Accounts Payable 3803.44 
 
 $28963.96 $28963.96 
 
GENERAL TEST 115 
 
 The inventories are as follows : 
 Merchandise (resource) 
 
 Goods on hand $8000. 
 
 Merchandise (liability) 
 
 Unpaid freight biU 179.70 
 
 Expense (resource) 
 
 Fuel on hand 100. 
 
 Expense (liability) 
 
 Unpaid gas bill $15.60 
 
 Unpaid telephone service 20.40 36. 
 
 A personal account receivable for $790.40 is known not to be 
 worth more than 25^ on the dollar. 
 
 a. Make a statement of resources and liabilities. 
 
 b. Make a statement of losses and gains. 
 
 4. A partnership contract between A and B provides that each 
 partner shall contribute $15,000 to a new business, and that on 
 any capital brought in by either partner in excess of this amount, 
 he shall receive interest at the rate of 6%. One month later A 
 contributes $7500, and the bookkeeper makes .an entry in the 
 books at the end of the year, crediting A $450 and debiting B 
 $450. Is this the correct entry to adjust the interest account? 
 Give reasons. 
 
 5. A, B, and C unite as partners to carry on business with a 
 capital of $60,000, of which A's share is $30,000; B's, $20,000; 
 and C's, $10,000. By the articles of agreement each partner is 
 entitled to receive interest on his capital at the rate of 6% per 
 annum, and to share the profits and losses in the following pro- 
 portions : A T V, B J, C J. Three months later A drew out $1000 
 and B $500. Six months later C drew out $750. One year after 
 the formation of the partnership a journal entry is made to adjust 
 the interest account, preparatory to making financial statements 
 and closing the ledger. Formulate the entry to adjust the interest 
 between the partners. 
 
116 
 
 TEACHER'S MANUAL 
 
 EXERCISE LXVIII 
 EXTENDING BALANCES IN THE INDIVIDUAL LEDGER 
 
 It is possible to extend the balances in the individual ledger 
 mentally with accuracy and rapidity. The explanations following 
 are based upon the general principle that to subtract one digit 
 from another the result may be accomplished by deducting the 
 subtrahend from 10, adding the remainder to the minuend, and 
 subtracting 10 from the sum; thus, 9 5 = 10 5 + 9 10, or 4. 
 Applying this principle to the amounts on an individual ledger, 
 we may proceed to extend the balance of the following account 
 mentally : 
 
 
 BALANCE 
 
 CHECKS IN DETAIL 
 
 TOTAL CHECKS 
 
 DEPOSITS 
 
 BALANCE 
 
 R. Roe 
 
 1465 
 
 
 200 
 
 
 540 
 
 
 621 
 
 
 
 
 
 
 
 340 
 
 
 
 
 
 
 
 
 The first figure in the Deposits column is 1 ; to this add 10, 
 the difference between -the first figure in the Total Checks column 
 and 10 ; to this sum add 5, the first figure in the Balance col- 
 umn. The- result is 16. Deducting 10, we write 6 in the Balance 
 column. The second figure in the Deposits column is 2 ; to this add 
 6 (10 4) ; and to this sum add 6 ; deducting 10, we write 4 in the 
 Balance column. The third figure in the Deposits column is 6 ; to 
 this add 5 (10 5) ; and to this sum add 14 ; deducting 10 from 
 the last sum, we have 15, which we write in the Balance column. 
 The new balance of the account is therefore $1546. 
 
 
 BALANCE 
 
 CHECKS IN DETAIL 
 
 TOTAL CHECKS 
 
 DEPOSITS 
 
 BALANCE 
 
 J. Doe 
 
 6128 
 
 
 1161 
 
 
 1261 
 
 
 1299 
 
 
 
 
 
 
 
 100 
 
 
 
 
 
 
 
 
EXTENDING INDIVIDUAL-LEDGER BALANCES 117 
 
 We may extend the balance of the foregoing account in prac- 
 tically the same manner as explained on page 116. 9 + 9 (10 
 1) + 8 = 26. Deducting 10, we have 6 to write in the Balance 
 column and 1 to carry. 1 + 9 + 4 (10 - 6) + 2 = 16. Deducting 
 10, we have 6 to write in the Balance column* 2 + 8 (10 2) + 
 1 = 11. Deducting 10, we have 1 to write in the Balance column. 
 1 + 9 (10 - 1) + 6 = 16. Deducting 10, we have 6 to write in the 
 Balance column. The new balance of the account is therefore- 
 $6166. 
 
 
 BALANCE 
 
 CHECKS IN DETAIL 
 
 TOTAL CHECKS 
 
 DEPOSITS 
 
 BALANCE 
 
 E. King 
 
 5160 
 
 
 1249 
 100 
 
 
 1349 
 
 
 1111 
 
 
 
 
 The balance of the above account may be extended practically the 
 same as in the other two accounts. 1 + 1 + = 2. Write 2 in the 
 Balance column. Since 10 cannot be deducted from 2, we deduct 
 10 from 11, or the first two figures in the Deposits column. We 
 then proceed to add as usual ; thus, + 6+6 = 12. Write 2 in the 
 Balance column. 1+7 + 1 = 9. Write 9 in the Balance column, 
 and deduct 10 from the third and fourth figures in the Deposits 
 column. Then proceed to add as usual ; thus, + 9+5 = 1 4. 
 Deducting 10, we have 4 to write in the Balance column. The 
 new balance is therefore $4922. 
 
 From the above explanation the following rule may be deduced : 
 
 Add the digits in the Deposits column to the difference between the 
 digits in the Total Checks column and 10, and add to the sum obtained 
 the digits of the old balance. The result thus obtained will be the new 
 balance. 
 
 In the account of R. Roe it will be noticed that when the sum 
 to be written in the Balance column is more than 10 and less 
 than 20, there is nothing to carry. In the account of J. Doe it 
 will be noticed jthat where the sum to be written in the new 
 Balance column is 20 or more (the sum of any three digits can 
 never be more than 27) there is always one to carry. 
 
118 
 
 TEACHER'S MANUAL 
 
 From the account with E. King it will be noticed that where 
 the sum to be written in the new Balance column is less than 10, 
 there is nothing to carry, and 1 should be deducted from the next 
 figure in the Deposits column. 
 
 Exercises for Practice. Dictate the following amounts and 
 request that the new balances be extended mentally : 
 
 
 BALANCE 
 
 CHECKS IN DETAIL 
 
 TOTAL CHECKS 
 
 DEPOSITS 
 
 BALANCE 
 
 M. Hart 
 
 2430 
 
 
 100 
 
 
 550 
 
 
 432 
 
 
 
 
 
 
 
 320 
 
 
 
 
 
 
 
 
 
 
 
 130 
 
 
 
 
 
 
 
 
 G.Wild 
 
 1050 
 
 
 436 
 
 
 1204 
 
 
 3300 
 
 
 
 
 
 
 
 768 
 
 
 
 
 
 
 
 
 J. Lord 
 
 432 
 
 
 153 
 
 
 353 
 
 
 221 
 
 
 
 
 
 
 
 100 
 
 
 
 
 400 
 
 
 
 
 
 
 
 100 
 
 
 
 
 
 
 
 
 S. Gray 
 
 5830 
 
 
 98 
 
 
 248 
 
 
 110 
 
 
 
 
 
 
 
 150 
 
 
 
 
 
 
 
 
 K. Long 
 
 5325 
 
 
 118 
 
 
 843 
 
 
 8670 
 
 
 
 
 
 
 
 25 
 
 
 
 
 
 
 
 
 
 
 
 700 
 
 
 
 
 
 
 
 
 O. Gay 
 
 
 
 125 
 
 
 360 
 
 
 524 
 
 
 
 
 
 
 
 235 
 
 
 
 
 
 
 
 
 M. Oaks 
 
 1000 
 
 
 150 
 
 
 650 
 
 
 500 
 
 
 
 
 
 
 
 500 
 
 
 
 
 2000 
 
 
 
 
 T. Mann 
 
 4415 
 
 
 300 
 
 
 590 
 
 
 1115 
 
 
 
 
 
 
 
 15 
 
 
 
 
 
 
 
 
 
 
 
 275 
 
 
 
 
 
 
 
 
 H. Dunn 
 
 541 
 
 
 100 
 
 
 100 
 
 
 590 
 
 
 
 
 R. Neal 
 
 2215 
 
 
 210 
 
 
 658 
 
 
 365 
 
 
 
 
 
 
 
 448 
 
 
 
 
 
 
 
 
 A. Cook 
 
 8100 
 
 
 35 
 
 
 112 
 
 
 385 
 
 
 
 
 
 
 
 77 
 
 
 
 
 
 
 
 
 K. Roy 
 
 449 
 
 
 140 
 
 
 259 
 
 
 200 
 
 
 
 
 
 
 
 119 
 
 
 
 
 160 
 
 
 
 
8635 
 
YB 18635 
 
 .SITY OF CALIFORNIA LIBRARY