Illi)5tfMve COIVIPLETE COORS REVISED AND ENLARGED LIBRARY OF TIIK University of California. Class MODERN Illustrative I-ookki-eplng COMPLETE COURSE BY E. VIRG L NEAL and C. T. CRAGIN REVISED AND ENLARGED 1!V D. D. MUELLER and J. E. KING SCRIPT ILLUSTRATIONS BV E. C. MILLS :• CINCINNATI •:- CHICAGO ^ BOOK COMPANY Oui W'..UAMS & ROGERS ■9°'. 1909, Axo W.P.I PREFACE s book is designed to teach bookkeeping and accounting in a rational \\ a , , and in mce with the practices of progressive business houses and leading accountants. No :.• wasted on unnecessary theorizing. The student is given actual liookkeeping work ^r-om the very outset, and is made to feel at all times that his work is similar in reality , portance to that which is done in the business office. ;cial attention is called to the teaching plan of the book, which embraces the presen- ')f one principle at a time, an explanation of the principle, followed by a script illus- : and the employment of the principle in such a way that it may be mastered easily licklv. Thus the student is grounded thoroughly in the principles, and is given ])ractice in bookkeeping and accounting at every stage of the work. The aim of hors has been to present the subject in such a simple and logical manner that the : can readily understand it. the preparation of the transactions which form the basis of the student's work, and : the exercises for supplementary practice, great care was taken to grade them prop- d to make them conform to modern business customs. I models of books, statements, and balance sheets illustrated throughout the book .:nt the best current forms for the various purposes for which they are designed to be The incoming vouchers, which form a part of the business practice feature of the ire made out practically complete ; and, like the forms for outgoing papers to be nit by the student, are facsimiles of similar documents used by the best business : principles of double-entry bookkeeping have undergone no change since they were ited several centuries ago, but many changes have taken place since then, and espe- luring recent years, in the application of these principles, and in bookkeeping and :ting practices. is book, in its original form, was the first bookkeeping textbook published for use in iian schools to present the modern forms of trading, and profit and loss statement, and ■ " sheet, thereby recognizing the changes which had taken place in these important s of accounting practice in this country, as the result of the then recent adoption of porate form of business. For obvious reasons, the authors omitted the accounting logy in connection with the new forms, and used bookkeeping terms instead. In /ised edition, accounting terms are used in the more advanced part of the book, and jgjins of statements, balance sheets, and books of original entry have been changed to . g. I'ith the best current practice. ; entire book has been revised and enlarged, both as regards the text matter and the or the student, and the special lines of business treated in the advanced part have (-jjg, ranged in progressive order. Qj^ |he revision of the book, valuable assistance was received from leading mercantile 'our 'lufacturing concerns, and from accountants and commercial teachers, to all of whom (^g^fisers desire to acknowledge their obligations, and to express their sincere thanks courtesies extended. 3 (complete) .,'P rst 223780 TO THE STUDENT Accuracy is the first essential of business ; without it you cannot hope to hold a paying position in the commercial world. Accuracy can be accjuired only by painstaking, thought- ful work on \ our part from the start. Read carefully all instructions, and do just as vou are told to do. Do not make mistakes in simple mathematical operations. Errors in addition, subtrac- tion, and multiplication are inexcusable, and will not be tolerated in business. Vcnj'y till additions and multiplications. Kmno you are right before \'ou go ahead. Neatness and Legibility. — A neat, legible style of handwriting which can be executed at a fair rate of speed, and absolute legibility in figures, are necessities in the modern office. The acquirement of these attainments will necessitate constant practice on the part of most students. The script illustrations in the book are excellent models to follow. Do not allow yourself to do careless and slovenly work cither in writing or in making figures. Ruling should be done in red ink. The metal or thin edge of the ruler should be used to guide the pen, the ruler being placed with the beveled side on the paper and the metal edge up and farthest from you. This will prevent the ink fiom collecting on the ruler and dropping on the paper. It will also enable you to draw double lines without moving the ruler for the second line, by holding the pen at a slightly different angle. The ruled lines should be of uniform thickness, neither too heavy nor too light. Many bookkeepers make them about as heavy as the vertical red lines in the blank books; but it is perhaps better to make tiiem about twice as heavy as those lines. In double ruling, the two lines should be reasonably close together, but not so close as to look like one hea\y line. Ruling should be done very neatly and carefully. When so done it will greatly enhance the appearance of a set of books. On the other hand, the appearance of an otherwise neat set of books may be ruined by careless and slovenly ruling. Details. — Inability to estimate the importance of a thorough mastery of detaiyiis the cause of more failures in life than all other causes combined. Learn to pay attcnron to the little things. Follow your instructions implicith- ; do not be content with doing nearly right, but do it exactly right. Remember, " Perfection is made up of trifles, b il per fection itself is no trifle." The successful business man must master multitudinous ( thing tail. MODERN ILLUSTRATnE BOOKKl-EPIXG Bookkeeping consists in making a systematic record of business transactions. The Object of Bookkeeping is to show the proprietor at any time wliether his business is being conducted at a profit or a loss ; to indicate the sources from which the profits and losses arise ; and to afford a record of all debts owed by the business, and of all debts due and all property belonging to the business. Single-Entry Bookkeeping usually provides for keeping accounts with persons only. Double-Entry Bookkeeping provides for keeping accounts with persons, property, expenses, and allowances. The Books Required depend upon the nature of the business, but a complete record of any business may be kept in two books — the journal-daybook and the ledger. The Journal-Daybook contains a record of all transactions in the order in which they took place, and also the names of the accounts affected by each transaction, showing which accounts are debited and which are credited. The Ledger contains all the accoimts named in the journal-daybook, and records the same debits and credits, but in a different arrangement. Each debit is carried from the journal-daybook to the debit or left-hand side of the proper ledger account, and each credit to the credit or right-hand side ; so that a ledger account will show all transactions by which that account has been affected in the course of the business as recorded in the journal- daybook. EXERCISES FOR THE STUDENT Ex. 1. — On a sheet of journal paper copy neatly the model journal-daybook shown on pages 6 and 7, following carefully the script forms of both letters and figures. Always write the current year in full, instead of 19 — . Ex. 2. — On a sheet of ledger paper, rule clear across the page, in red ink. double lines exactly in the middle of the spaces between blue lines, as Blue line 1-11 1 /T^ 1 • T-. 1- \ = Double red line here illustrated. (Read page 4, section on Ruung.) Blue line Ex. 3. — On a sheet of ledger paper copy carefully the model ledger shown on pages S and 9, writing four accounts on a page. Make the ledger headings larger than ordinary writing; write each one on a blue line, and center it so that the triple vertical line will come exactly, or nearly, in the middle of the heading. Rule a double red line in the space under each heading, except the one at the top of the page, as in Ex. 2. In the account at the top of the page, write the finst entry (month, day, folio, and amount) on each side on the first blue line under the heading, and write the year in the blank space.over the month, In other accounts, write the first entry on the second blue line under the heading, and the year on the first blue line, over the month. Your teacher should not accept your work in these exercises unless the writing is legible and neat, the figures plain, and the ruling accurate. 5 MODERN ILLUSTRATIVE BOOKKEEPLNG /-. J.7/ / /^ _ y/^^^U.^^, /- x:^szl^^.,&< 2 (?(?-«C-t^, Ol^to^ ^. Z? ^ o o e> ^ ACro /(?(?- >jr^- =y2>t£.c*^-^f /J- s^jr. ^7 / / tP c /3 . yk^6^^. 2e ■^,^...6^-i^iy':z^of>^/^^. / i> £: / fif^ rza ^^^i;6^L^^, so J/ — i^r'i^. v.^^?*^-4^ ^ZJ . r:/a^/eiyi'C^^^^^^ '^'^^^'^^^ <^ "^ Z3 7^'' •3/ zjp^ sa 6 fi\ MODERN ILl.LSTKATIVt: lii )i )KKi:i:Pl.\G .<«-«-;■ J" / /J J- ' 7 - J ,f- / /' J ,7 /z z ' zi\ / / 3 t? a J) I r t i Z ^rf '7' Z2S- J3y^ ■i •^^ /- y-i FI.OL'R AND (]R.\IN BUSINESS — JANUARY JOURNALIZING Journalizing is the process of determining the debits and credits of business transactions. General liiilc for JoiiriKiliziug Debit what comes into the business or 'ivhat costs viiluc. Credit what goes out of the business or what produces value. Make, on journal paper, the journal-daybook entries required for the following transac- tions, similar in form to those shown in the model journal-daybook on pages 6 and 7. No. 1. — Jamakv I, 19 . I (your name) engage in the Flour and Grain business, investing cash, $4000. Instructions. — First wuiQ Januarj i and the current year on the blue line at the top of the first page of your journal-daybook. This shows the date of the transaction. Next consider what account is to be debited. Remember that you should debit what the business receives, or what comes into the business. In this instance cash to the amount of S4CHX) has come into the business, hence Cash should be debited. Do this by writing the word Cash at the loft-hand side of the first wide column, and 4.000 on tlie same line in the left-hand money column. The left-hand side is the debit side. Whatever or whoever produces value for the business should be credited. In this trans- action the proprietor has produced value for the business to the amount of $4000 by giving that sum of money to the business as an investment ; hence the Proprietor s\io\\\& be credited. Do this by writing your name (you are the proprietor) on the line below the debit entry, about half an inch to the right of where the word Cash begins, and writing 4000 in the right-hand money column, on the same line with your name. The right-hand side is the credit side. In the second wide column write a brief record of the transaction, as in the illustration below; this illustration shows the form of the whole entr}-, though the amount and the proprietor's name are different. 3J-c! C ^S0 c 10 JOURNALIZING — JANUARY 11 The daybook part ofthis entry consists of the explanatory record ••Commenced the Flour and Grain business. investing cash," together with the amount, $3500. The journal entry would be read or stated as follows: •■ Cash. To F. W. Leonard, S3500." The name of the account debited is always read first, followed by the word "To" and the name of the account credited. The amount is named but once. For the sake of brevity, tlie journal-daybook is often called simply the journal. The amount placed in the left-hand money colimin of your journal (the debit) should be the same as that placed in the right-hand column (the credit); in other woriXii, your titbits and credits should always be equal . From the bookkeeper's point of view, every business transaction is an exchange of equal values. . Rule 1. — Debit Cash for all cask received. The term "cash" includes specie (gold, silver, nickel, and copper), treasury notes, national bank notes, gold and silver certificates, checks, post-office money orders, express money orders, bank drafts, and certificates of deposit. Hale 2. — Credit the Pa'opkietok with all avtounts 'which he invests in the business. No. 2. — January 2. Paid J. C. Smith §75 for rent of store for this month. Instructions. — Rent is one of several expenses incurred in carrying on a business. Whatever costs the business value should be debited. In this instance you have paid S75 rent for the benefit of the business. This expense has cost the business value, hence llxpciise should be debited. Cash has gone out of the business, hence Cash should be credited. The following illustrates the form of your entry, though the amount and explanation tre different. / e> / c c Before attempting to make your entry, examine the model journal-daybook on page 6, as well as the above illustration, so as to be sure of the form and arrangement. Never copy the illustrations, but make entries similar to them. Your entries must be made for the transactions given, and your amounts must be the amounts given in the transactions, and not the amounts shown in the illustrations. After each entry, leave one line blank, except that the day of the month should be written in the center of this line. liHle 3. — Debit Expexse for all the expenses of the business. The term "expense" comprises such outlays as for rent, postage stamps, stationery, I [fuel, light, clerk hire, and advertising — all for the use or benefit of the business. RtiJc 4 Credit Cash for all cash paid out. No. 3. — January 2. Bought of Scrantom & Wetmore books and stationery for office ise, for which I paid cash, S 15. Instructions. — This transaction is of the same nature as the preceding one. Debit ^jcpense (see rule 3); credit Cash (see rule 4), MODERN ILLUSTRATIVE BOOKKEEPING The explanation written in the second wide column in your journal-daybook should be a complete record of c transaction. This explanatory record should be as brief as possible, yet it must show exactly what took ace, for should any dispute arise, this is the record that will be used as evidence — not the journal entry )r the ledger record. The explanatory record for transaction No. 3 should be as follows : Bot. of Scrantom & Wetmore. for cash, )oks and stationery for office use. No. 4. — Janl'.\kv 3. Bought of the Upton Coal Co., for cash, for use in store, 5 tons : coal at $5.50 per ton; total, S27.50.. Instructions. — As the coal is to be used for fuel, in carrying on the business, it is an vpense. Make entry similar to those for transactions Nos. 2 and 3. Determine the debit Y rule 3 ; detertnine the credit by rule 4. No. 5. — January 3. Paid $10.50 for 500 stamped envelopes. No. 6. — January 4. Bought of P. D. Hamlin, for cash, 100 brls. flour at S3. 90 per brl., 30 bu. oats at 35^ per bu. ; total S530. Instructions. — Goods which you buy with the intention of selling are called " mer- landise." You have bought $5 30 worth of flour and oats for this purpose, and as the erchandise has cost the business value, I\Icrchandise should be debited. Cash to the nount of $530 has gone out, hence Cash should be credited. The following is the form your entry, though the amount and explanation are different. -^a-J^ -^z^ ^^i.^>- fS^ / i^ff a \ /^^ l^<;z^ /-z^ A. Next enter the page number of the ledger page containing cash account (/) in the folio column of the journal. The following shows the form. / i^. ^^tce^eii^'-fzZe/ y^t^i^y^t^' ^ ■^e>e>ff In posting always write in the folio column of your ledger the number of the page of the journal from which the amount is posted, and write in the folio column of your joumal the number of the page of your ledger on which the account is written. This is termed " postmarking," and is done to make it easy to find the place in the book to which or from which any item has been jjosted. Second Step. — The next debit item in your journal is Expense, S/j. Turn to your Ex- pense account in the ledger and write js in the amount column on the debit side. Write POSTING — JANUARY 15 the journal pag;e number (/) in the folio column, and the date of the transaction i^Jan. 2 and the current year) in the date column. The following shows the entry. ^ Z^^^2^'y?^Z^£^' 3<>2■ Sixteenth Step. — Transfer the remaiiiint; credit items of your journal to your ledger. The Cash account in your ledger will then contain eight credit amounts, and the Merchan- dise account four credit amounts. All the debit items of. your journal have now been transferred to the debit or left- hand side of your ledger, and all the credit items to the credit or right-hand side. As the amounts in the debit and credit columns of the journal are equal, it is evident, if you have made no mistake in transferring the entries, that the amounts on the debit and credit sides of your ledger must also be equal ; that is, that the sum of the amounts on the debit side of your ledger should equal the sum of the amounts on the credit side of your ledger. To as- certain if this is true, we take what is known as a " trial balance." TRIAL BALANCE At the top of a sheet of journal paper write the words Trial B.ilaiice, and the proper date. Under this at the left-hand side of the wide column write the names of all the accounts that appear in your ledger, with the ledger pages in the folio column. The following illus- trates the form. ^^^^i:^-^ J^^^^^^ ^, /^ - The names of the accounts in your trial balance must be the names of the accounts in vour ledger. 18 MODICKN II.l.USTKATIVt; BOOKKEEPING The footing of the debit side of each account in your ledger must be entered in the debit or left-hand money column of your trial balance. The footing of the credit side of each account in your ledger must be entered in the credit or right-hand money column of your trial balance. The first account in the ledger is the proprietor's (your own) account. There is nothing on thje debit side, hence no entry will be made in the debit column of your trial balance on the first line. There is S4000 on the credit side of your account. Enter this amount in the credit or right-hand column of your trial balance. The following illustrates the form ; the amount is different. iZ^ y(^,^^-t^Z^^^^€Z^^^'Z.'€L^ V^^^ r y-7-z^-ez^^?->-z.^^ J <> (? ff Add the several items on the debit side of your Cash account and write the sum in very small, light pencil figures directly underneath and close under the last debit item. Foot the credit side of your Cash account in the same way, writing the total in very small pencil figures close under the last credit item. The following illustrates the form of a Cash account properly footed ; the amounts and other particulars are different from those shown in your Cash account. A / So e> / ZZ^ z y^ff z ^z 3 /oT^ ' ■ ^ / , jf c 7 / Z £^ ^ z 7^ z / js6 'ill Transfer the debit footing of your Cash account {$4617) to the debit cohinin of your trial balance, writing the amount directly opposite the word Casli. Transfer the credit footing ($1388) to the credit column of your trial balance, directly opposite the word Cash. The following illustrates the form ; the amounts are different. TRIAL liALANCK — JANUARY 19 ^J^C^^^^-i^l^ y'.J^i^c^€Z'<^-Z---C^ie'!:^^ / 'f - yyz-tZ'-'-->'Z-d^ 4^/ 7/ 3 C? O / 6j / Foot the debit and credit sides of your Merchandise account, and write the footings in neat pencil figures, as in the Cash account. Transfer the footing of the debit side to the debit column of your trial balance, and the footing of the credit side to the credit column of vour trial balance. Make all pencil footings in the ledger with a sharp pencil and as small as possible, so that tliev will a])pear neat and businesslike. This is important for the reason that such footings are not erased, but are pLimitted to stand in the ledger for future reference. Foot the debit side of your Expense account, and transfer the footing to the debit side of your trial balance. There is nothing on the credit side of your Kx])ense account. (For form of complete trial balance, see below.) Foot the debit and credit columns of your trial balance; the two footings should be equal. If the footings of the debit and credit columns of your trial balance are not equal, it is evident that an error has been made, and you should review your calculations, or both your posting and your calculations, until you find the mistake. If the error is in a pencil footing, you may erase it; but never erase anytliing written in ink. In business a correction is made by drawing a red-ink line through the erroneous entry and writing the correct one over it. But in this preliminary work you should rewrite the whole page. The following is the form of a trial balance containing the same number of items as in vour trial balance. The amounts are different. a-i^'^z^, /, /^ — 2. (O^^Z-/i.'€.^?'Z..<:L.^^ 3 o (7 o ^ z £> I? ^>"/ e^ ff ff 40 4^2] / ^2. \ / Z^'f^Z / Z-A^^il 20 , MODERN ILLUSTRATIVE KODRKFEnXG Exercise. — On another sheet of journal i)a|)er practice the rulings indicated below. The light lines stind for the blue and red lines already on your paper; tlie heavy lines are the on^s you are to draw in red ink. The single line across the money columns, and the upper line of the double rulings at the left and'across the money columns, may be drawn either on the blue line, or slightly below it. Whichever style is adopted should be followed consistently. (Read page 4, section on Ruling.) 1— If the footings of your tri;il balance arc equal, write them in ink, rule the trial balance as in the above e.xercise (see last form on paj^e 19), and present it with your journal and ledger to your teacher for approval. Do not do any further work until your teacher certifies to the correctness of what you have already done. QUESTIONS 1. Define bookkeeping. Define double-entry bookkeeping. 2. What books are required to make a complete record of any business? 3. What should the journal-daybook contain? 4. Wliat should the ledger contain? 5. What is a business transaction? 6. Define journalizing. 7. What is the general nile for journalizing? 8. Why should the deliits and credits of every journal entry be equal? g. What does the term •• cash " include? 10. When should the Cash account be debited? 11. When should the Cash account be credited? 12. When should the Expense account be debited? 13. What items should be charged to the Expense account? 14. What are the two leading points to be borne in mind in writing the explanatory record in your journal entries? Explain. 15. What do you understand by the term " merchandise " ? 16. When should the Merchandise account be debited? 17. When should the Merchandise account be credited? 18. Explain and illustrate the difference between Merchandise .and Expense. 19. Define posting. When should posting be done? ^ 20. Upon which side of the ledger accounts should all items in the left-hand inoney column of the journal appear ? L'pon which side, all those in the right-hand money column of the journal? 21. What is the object of a trial balance? 22. How often should a trial balance be taken? 23. What names should appear in a trial balance? 24. Why should the debit and credit columns of a trial balance show equal footinu;s? 25. Does a trial balance prove your work to be absolutely correct? 26. Ex|)lain the pencil footings in the ledger. 27. Is it possible to have mistakes in the work and yet have the trial balance in balance? Explain in detail. FLOUR AND GRAIN BUSINESS — FEBRUARY Make the journal-daybook entries required for the following transactions, either on jour- nal paper or in Blank No. i, as your teacher directs. No. 1. — February i, 19 — . I (your name) engage in the Flour and Grain business, investing cash, ^2500. Instructions. — Write February i a.nd the current year at the top of page i in your journal-daybook (see model, page 6). Determine the debit by rule i, page 11 ; determine the credit by rule 2, page 1 1. For form of entry similar to this see page 10. No. 2. — February 2. Paid Henry Jones rent of store for two months, in cash, $50. Instructions. — Determine the debit by rule 3, page 1 1 ; determine the credit by rule 4, page II. For form of entry similar to this, see page 11. No. 3. — February 3. Bought of R. C. Thompson, for cash, 200 brls. flour at $4 per brl. ; total, S Soo. Instructions. — Determine the debit by rule 5, page 12 ; determine the credit by rule 4, page II. For form of entry similar to this, see page 12. No. 4. — -February 5. Sold A. H. Warren, for cash, 50 brls. flour at S4.5oper brl., total, $225. Instructions. — Determine the debit by rule i, page 1 1 ; determine the credit by rule 6, page 12. For form of entry similar to this, see page 13. No. 5. — February 6. Bought from Winter Bros., for cash, 600 bu. of corn at 35 ^ per bu. ; total, $210. (Entry similar to that for transaction No. 3.) No. 6. — February 7. Sold Wm. Archer & Co., for cash, 50 brls. flour at $4.50 per brl., 200 bu. corn at ,\o'^ per bu. ; total $305. (Entry similar to that for transaction No. 4.) No. 7. — February 8. Bought of Arthur McMillan, for cash, 100 brls. flour at $3.90 per brl., 1200 bu. oats at 33 ^ per bu.; total, $786. (Entry similar to those for transactions Nos. 3 and 5.) No. 8. — -February 9. Paid cash for clerk hire, $15, for insurance, $10; total, $25. (Determine the debit by rule 3, page 11.) No. 9. — February id. Sold E. H. French & Co., for cash, 25 brls. flour at $4.50 per brl., 300 bu. oats at 38^ per bu., 200 bu. corn at 40)^ per bu. ; total, S306.50. No. 10. — February 12. Bought of John C. Cornell, for cash, 200 bu. rye at 55^ per bu. ; total, $110. No. 11. — Open the following accounts in your ledger, at the places indicated. (Student's name), top of the third page in the blank (first two pages are for inde.x); number this page I, and number the following pages in order. Merchandise, nth line, page i (rule as directed in Exs. 2 and 3, page 5). Expense, top of page 2. Cash, top of page 3. No. 12. — Post the transactions from your journal-daybook to your ledger. Forexplana:- tion of posting, see pages 13-17. 21 •2-2 MODERN ILLUSTK.MIVK liOOKKEEPING No 13. — Take a trial balance from your ledger. See form and explanation on pages 17-20. No. 14. — Submit your journal-daybook, ledger, and trial balance to your teacher for in- spection and approval. After the trial balance has been approved, copy it in HIank No. i, a portion of which is set apart for a trial balance book as indicated by the inde.x on the front cover. Special Rtilf'>t for Personal Accounts Unit' 7- — Debit persons tvhen they be- Rule S. — Credit persons when the busi- comc indebted to the business or when the ness becomes indebted to them or tuhen they business pays them on account. pay the business on account. No. 15. — February 14. Bought of A. J. Lane, on account, 30 days, 250 bu. oats at 33 ^ per bu. ; total, $ 82.50. ^ Instkuctions. — When you buy goods from a person without paying for them at the time of the purchase, the goods are said to be bought on account, that is, on time or on credit, and the Person from whom you buy should be credited, because the business becomes indebted to him for the amount of the ])urchase. In this instance you have bought goods for the purpose of selling, hence Merchandise should be debited for the cost of the goods. Tlie purchase was made from .\. f. Lane on your promise or implied |)romise to pay for the goods in 30 days, hence A. J. Lane should be credited because you have become indebted to him on account. The following illustrates the form of the entry. X%zi^^a-, -*< 7' Rule !). — When yon purchase goods zvithout paying for them at the time of the purchase credit the Person from whotn the goods are bought, because the business has become indebted to him 071 account. No. 16. — Fehruakv 15. Bought of W. 11. Stevens, on account, 600 bu. oats at 33/ per bu. ; total, $198. Instruction.s. — This transaction is similar to the precetling one. Debit Merchandise (sec rule 5); credit \V. H. Stevens (see rule 9). No. 17. — Fkbkuarv 15. Bought of F. A. Smith & Co. on account, 10 days, 300 bu. rye at 55 ^' per bu. ; total, S 165. No. 18. — February 16. .Sold W. A. .Scott on account, 10 days, 200 bu. oats at 36 >^ per bu. ; total, $ 72. Instructio.ns. — When you sell merchandi.se without receiving payment for it at the time of sale, the goods are said to be sold on account, that is, on time or on credit, and the person to whom the goods are sold should he ticbited. In this instance W. A. Scott has JOURNALIZING — l-KBRfAKY 23 purchased from you $72 worth of nierchandise without payiiii; for it; you simply ha\e his promise or implied promise to pay. Therefore IV. A. Scott has become indebted to the business and should be debited. Credit Merchandise because merchandise produces value for the business. The following illustrates the form of your entr ry. ^^Wi /^i> A^^£> Rule 10. — IV/ien yon sell gooifs ivithout receiving f^njment tJierefor at tJic time of the sale, debit the Person to whom the goods are sold, because he has become indebted to the bnsiness on account. No. 19. — Februarv 17. Sold S. A. Dodge & Co. on account, 60 days, 50 bris. flour at $4.75 per brl. ; total, ^237.50. Instructions. — This transaction is similar to the preceding one. Debit 5. A. Dodge & Co. (see rule 10); credit Merchandise. No. 20. — February 17. Sold J. S. Sumner, on account, 500 bu. rye at 60^ per bu., 500 bu. oats at 36^ per bu., 600 bu. corn at 40^ per bu. ; total, $720. (Determine the debit by rule 10; determine the credit by rule 6.) No. 21. — February 19. Sold E. H. French & Co. on account, todays, 50 brls. flour at $4.60 per brl., 200 bu. oats at 36^ per bu., 100 bu. of corn at 40^ per bu. ; total, $342. No. 22. — February 20. Sold E. R. Adams, for cash, 400 bu. oats at 38^ per bu. ; total, $152. (Determine the debit by rule i ; determine the credit by rule 6.) No. 23. — February 23. Bought of Rice, Miller & Co. on account, 30 days, 250 bu. rye at 57^ per bu., 600 bu. corn at 35^ per bu. •, total, $352.50. (Entry similar to that for transaction No. 15.) No. 24. — February 24. Sold Roberts Bros., for cash, 200 bu. r)'e at 60-' per bu. ; total, $120. No. 25. — February 26. W. A. Scott has paid you $72 cash in full settlement of his account. Instructions. — In transaction No. 18 W. A. Scott became indebted to you to the extent of $72. He now pays you this amount in cash on account, that is, in settlement of what he owed you ; therefore, credit IV. A. Scott. Cash comes into the business, hence Cash should be debited. The following illustrates the form of your entry. z6 cZ'OC'^^T-.^ -;2^<^-£--?^.-,i<^<^ .^^-'^-Z-' ^-«>«Z<^«^-^-.i-<----«S^,tfzii«.Z^i^ X2.^rff ^2 ^O Hule 13. — Debit Merchandise for al! aiiiomits paid for fright, c.r/>n-ss; cartage, drayagc, etc., on mcrclumdise. No. 43. — March 8. Sold E. H. French & Co. on account, lo days, 300 bu. corn at 40^ per bu., 400 bu. oats at 38^ per bu. ; total, ^xxx. No. 44. — Makch 9. You have withdrawn from the business, for private use, cash, $2^^. Instructions. — As the Proprietor is credited with money, property, etc., which he in- vests in the business, it is evident that he should be debited for anything which he takes out of the business for his own use. In this instance he has withdrawn cash, hence the Pro- prietor should be debited for $23. The following illustrates the form of your entry. ■z-d^t^ ^~& O-^.d'^ ^0 oT^ Rule 1 J:. — Debit the Proprietor for ail cash, merchandise, etc., which he takes out of the business for his private use. No. 45. — March 10. Bought of Kidder & Hill on account, 30 days, 1000 bu. corn at 36^ per bu., 200 bu. rye at 54)^ per bu. ; total, ^.xxx. No. 46. — March 12. Paid H. S. Clough & Co. cash, $ 100, to apply on account. No. 47. — March 12. Sold F. W. Garland, of Rochester, N.Y., on his note at 10 days, 50 brls. flour at $4.60 per brl. The following illustrates the form of the note which F. W. Garland gives you, the amount and time being different. F. W. Garland is the " maker " of this note ; the student is the " payee." 2-.J'a> ^^wZa/^^.a: ^ ^^^. ■^^-^J.9o_ _!^^^^.^£.,yt,^^_^!3^^^:,;2^L^ -y. ^jl^^t/y€s^a^^C^.jL,^.e'?mJ^i/i:^ia'i^ y^^.^-'^r-'-^^^..r^.-».^^ te^yC _£:2Z2s% Z-y 28 MODERN' ILLUSTRATIVE BOOKKEEPIXG IxsTKCCTiONS. — Vou havc sold merchandise, and F. W. Garland has given you his written promise to pay in 30 days the amount of the bill. This kind of written promise to pay is called a promissory note. When such notes, or promises, are in favor of the business, they are called " Hills Receivable," and, like any other property, their account is debited when they are received and credited when they are disposed of; hence in this instance Bills Receivable should be debited. The following illustrates the form of your entry. /2. _ sz. z^ ^r^ j i 1 1 i liule l'>. — Debit L'/LCS RECEIVABLE zulieii another's xvrittcu promise comes into the business. No. 48. — March 13. Sold Wm. Archer & Co., on their note at 15 days, 150 brls. flour at S4.60 per bri. (Entry similar to that for preceding transaction.) No. 49. — M.\KCH 14. S. A. Dodge & Co., who owe you S 237.50, have requested you to accept their note at 30 days in payment of the account. This you have done. Instructions. — In this instance you havc received S. A. Dodge & Co.'s written promise to pay, hence Bills Receivable should be debited (see rule 15). As S. A. Dodge & Co. havc paid you on account, S. A. Dodge & Co. should be credited. The following illustrates the form of your entry. ^/2j,'.^-^^ -^C-C-!i-'C--ej - -#?-£-./ / 3^yS- 'Z^ No. 50. — March 15. J. S. Sumner sends you his note at 10 days, dated March 14, to apply on account S250. (Entry similar to that for preceding transaction.) No. 51. — March 16. Sold S. A. Dodge & Co., on account, 600 bu. corn at 40^ per bu., 50 brls. flour at S4.S0 per brl. No. 52. — March 17. Bought of M. S. Clough & Co., on account, 100 brls. flour at S4 ])er brl., 500 bu. corn at 35^ per Ini. No. 53. — March 19. Sold J. B. Fulton, on his note at two months, 400 bu. oats at 38^ per bu., 200 bu. corn at 40^ per bu. No. 54. — M.\rch 19. Bought of Kidder & Hill, on your note at 10 days, 200 brls. flour at S4 per brl., 500 bu. corn at 35;^ per bu. JOURNALIZING — MARCH 20 The following is the form of the note which you will give Kidder & Hill. The amount, and jMobably the address, will be different. r :^rA.-Arjt.VTrit;gr3afa7^f>rAra^^ ^ grTiiLfar grj ^raM[g*fjjJBJA gAa. - B;^ - y *5*' rp^ ^W/T^ 0L/^k^^,Ml^^ 'Z^^^/o' J.O '-^f^v-^>- r/^^^/^ % .<^^=^,^J^yfe_L-£^ ^/fy^'>y^/^^- ^' t C! ::r U ::rC ^^ >'^?^ . ^ > -^ JZi;-1^^^.-.^^^.^K7,^^^^ 7/ /W\ -^^^^ \ %?M4J \m^. - -C^^^,-^^.^^^-vd^ .^y7,- e .^ , a^ B ^^ M ^^ a^m1c^«^^^H^»VBl'^w»^»^»^^»^w^m^g'T»^^>!^Mllw^l^B p^iT■ ^L^^ B l^ B ^^ m v,^ ^y .:^ Instructions. — You have bought merchandise and have given Kidder & Hill your note or written promise to pay the amount of the bill in 10 days. Written promises to pay, given by you for the benefit of the business, are called " Bills Payable," and, like any other property, their account should be credited when they are issued or disposed of. Hence Bills Payable should be credited for the amount of the note. The following illustrates the form of your entry. ■?t2^^/6l. '9 £ O (P 1^ No. 63. — March 24. You have paid your note, favor of Warner & Freeman, in cash, $210. (Entry similar to that for preceding transaction.) No. 64. — March 26. Received of K. 11. I-rench & Co., to apply on account, their note at 30 days for S 200. No. 65. — March 26. Transfer, by indorsement, A. H. Warren's note of the 21st inst. for S306 to H. S. Clough & Co., to apply on account. Instructions. — Instead of keeping A II. Warren's note (bills receivable) until it becomes due, and collecting the money yourself, you have given the note to II. S. Clough & Co. to apply on account, and they agree to accept it at its face value. You have paid Clough & Co. on account, therefore they should be debited ; you have disposed of another's written promise, hence Bills Receivable should be credited. The following illustrates the form of entry. JOURNALIZING— MARCH 31 2-r a^^^i-c^ J(?i? ^S^-f^E^ /X--01 Indorsing a note consists in writing a signature, with or without other words, on the back of the note. The left-hand end of the note should be turned away from you as you turn the note reverse side up, and the signature should then be written about one and one-half inches from the ujiper end. The effect of an indorsement is to make the person who writes his name on the back of a note responsible for its payment in case the maker fails to pay the note when it is due. The indorsement of the payee is necessary also for the purpose of trans- ferring the ownership of the note to another person. Here is a form of indorsement commonly used in transferring notes like that referred to in transaction No. 65. No. 66. — March 26. Paid cash for clerk hire, $ 15, for stamps, etc., $2. No. 67. — March 27. Gave Kidder & Hill your note at 30 days, for $340, to apply on account. No. 68. — March 27. William Archer & Co. paid their note of the 13th inst. in cash, $690. No. 69. — March 28. The freight and drayage bills to date are $12; they have been, paid in cash. No. 70. — March 28. You have taken from the store, for personal use, 2 brls. flour at $4 per brl. INSTRUCTION'S. — You (the proprietor) have taken from the business, for your own pri- vate use, merchandise valued at $8. The Proprietor should be debited for the withdrawal from the business, and Merchandise should be credited, as it has been sold to the proprietor. No. 71. — March 29. Bought of A. J. Lane, on account, 600 bu. oats at 32^ per bu., 200 bu. rye at 55;^ per bu. No. 72. — ■ March 29. Paid F. A. Smith & Co. cash, $ 165, in full of account to date. No. 73. — March 29. Received of W'm. Archer & Co. cash, on account, $ 150. No. 74. — March 30. Bought of Rice, Miller & Co. on account, 30 days, 50 brls. flour at $395 per brl., 400 bu. corn at 35^ per bu. No. 75. — March 30. Sold W. A. Scott on account, 30 days, 400 bu. oats at 38?^ per bu., 50 brls. flour at $4.50 per brl. No. 76. — March 31. Bought of F. A. Smith & Co. on account, 30 days, 75 brls. flour at S 4 per brl. 32 MODERN ILLLSTRATIVK BOOKKEEPING No. 77/ — Open the following accounts, at the places indicated. Loss mid Gain, I2th line, page 2. Bills Receivable, top of page 4. Wm. Archer & Co., 22d line, page 5. \\\s!oii Cr Hill, 33d line, page 5. Roberts Bros., top of page 6. Bills buyable, top of page 7. //. J>. Clongli & Co., nth line, page 8. Kidder & Hill, 22d line, page 8. Select addresses for the personal accounts and insert them on the ledger as directed at the end of February, page 24. No. 78. — Post from xour journal, following directions for posting on pages 13-17. Rule off all accounts which are in balance, or a portion of which balances, as directed on page 26. No. 79. — In the trial balance for March 31st, you may write, in the proper money col- umn, only one amount for each account — namely, the difference between the two sides of that account in the ledger. Pencil foot your ledger accounts as usual, using a hard, sharp- pointed pencil. On the larger side of the ledger account, in the explanation space, near the top of the account, write in small pencil figures the footing of that side of the account; underneath it write the footing of the smaller side ; subtract, writing the remainder under- neath, and leave these pencil figures in your ledger. Carry this remainder only into the trial balance opposite the name of the account, and place it on the larger side. (See Cash and Merchandise accounts in model ledger, page 8, for the method of finding the difference between the two sides of an account.) The following is a trial balance taken in this manner from the model ledger on pages S and 9. f^z^^n-C'^:^ .J^ / - y JL '-fsj-^ ^ (^ X . VffA^^ 220. 390, 830.70 STAIEMKNTS Uf RESULTS — MARCH 36 y■Ci-u.J^4^-?'^.l^d.J^■(^^l^^fi^^ T Z-fZ.^C^yt^ / 2.^ Vro ^^r sT-fJ" ^•J'tff 1. The amount of merchandise which you have on hand, as shown by your inventory, is $2416.20. VsIniQihis snva&ii&r ATerchandise, value of unsold ; write it short, as shown in the above model. 2. The excess of the debit over the credit side of your Merchandise account, as shown by your trial balance, is $1736.50. Enter this amount after IFej-cliandisc, excess of cost over sales, writing it directly under the amount of the inventory, as shown in the model. 3. It is evident, from the above, that you have paid out $1736.50 more than you have received for merchandise, and if you had no goods on hand, your loss would be $1736.50; but it is estimated that the goods you have on hand are worth $2416.20, and could be sold immediately for this amount, so in reality you haveaprofit of $679.70 ($2416.20— $ 1736.50 — $679.70). Write the amount of your profit in the Gain column after Mercliandise, Gain. (See model.) 4. The debit side of your Expense account is $104 greater than the credit side, indicat- ing a loss of $ 104 on expense. Place this amount after Expense in the Loss column. 5. Find the totals of Loss and Gain columns. The total of your Gain column is $679.70, and the total of your Loss column is $104; the difference between these totals is $575.70. As the Gain column is the greater, it is evident that the business has made a profit, during February and March, of $575.70. Write this amount in the left-hand column in red ink after the words Net Gain, which should also be in red ink. Now rule and foot both col- umns, and write the footings as illustrated in the model. The net gain item is written in red ink, because that is the rule whenever the entry indicates the difference between two columns, or between two sides of an account. Such red ink entries are always placed oa the smaller side, and show that the opposite side or column is greater than the column con- taining the red ink entry by the amount of such entry. HOW TO MAKE OUT A FINANCIAL STATEMENT Accounts which, as a rule, show either a resource or a liability are called Finance Ac- counts, since they represent money value or money indebtedness. They represent the re- sources, or property, of the business, and its liabilities, or debts, and include such accounts as Cash, accounts with persons. Bills Receivable, and Bills Payable. The difference at any time between the resources and the liabilities of any business 36 MODERN ILLUSTRATIVIC BOOKKEEPIXG will show the present worth of that business, and the Proprietor should have credit for this amount. To ascertain the present worth of your business on March 31, you should make out a financial statement, such as is illustrated by the following form. / 3/,-^, y ^SZ-t^ -/^tJ^-i^. ^r^i^ '^lyC/i^ '^'z^^f-i^^ ^-t^-^T^ .^/Ltt^n^ef^ /zia r r / i- ! -T ^r/t 2^ At the top of a paije of journal paper write Fitiaitcia! Statement, Mar. 31, 19 — (current year). Write on the statement the names of all accounts in your ledger except your own, Expense, and Loss and Gain, as shown in the above model, but do not yet put any figures in the amount columns. The left-hand or debit column of your statement is used for your resources; the right-hand or credit column is used for your liabilities. In making up your statement all resources should be given first, then the liabilities. It will be noted that Mercli.inclise account appears in both the busine.ss and the financial statements. Since Merchandise account shows a gain or a loss, it is a business account, and must be made a part of the business statement ; but it also shows a resource in the form of an inventory, and therefore most be included in the finan- cial statement. Any business account that has an inventory must be included in the financial statement as well as in the business statement. 1. After Meychandisc, in the Resource column, enter the value of merchandise you have on hand, as -shown by your inventory (S 24 16.20). 2. The debit side of your Cash account, as shown by your trial balance, is Si 145. 50 more than the credit side. Write this amount after Cash in the Resource column. 3. The debit side of vour Bills Receivable account, as shown by your trial balance, is $619.50 more than the credit side. Enter this amount in your Resource column. 4. The debit side of the account of W. A. Scott, as shown by your trial balance, is S m more than the credit side, which indicates that W. A. Scott owes your business this amount. This is a resource, and should be entered after W. A. Scott in the Resource column. 5. Treat the accounts of S. A. Dodge & Co., J. S. Sumner. E. H. French & Co., Emerson & Sons, Wm. Archer & Co., Weston & Hill, and Roberts Bros, in a similar manner. FINAXCIAL STATE>rEXT — MARCH 37 6. By referring to your trial balance, you find that the credit side of your Bills Payable account is $845 more than the debit side, hence you have a liability of $845 in outstanding notes. This amount should be entered after Bi//s Payable in your Liability column. 7. Your trial balance shows that the credit side of the account of A. J. Lane is $302 more than the debit side, which shows that you owe A. J. Lane ^ 302. This is a liability of the business, and should be entered after A.J. Lane in the Liability column. 8. Treat the accounts of W. H. Stevens, F. A. Smith & Co., Rice, Miller & Co., H. S. Clough & Co., and Kidder & Hill in a similar manner. 9. Tind the difference between your Resource and Liability columns. It is $3042.70. Write this amount in your right-hand column, in red ink, after the words Present Worth. The difference between the resources or property of any business and its liabilities or debts will show the present worth of that business. In case the liabilities or debts should exceed the resources or property, it is evident that there would be no present worth, and that the business would be insolvent ; that is, it could not pay its debts if called upon to do so. Rule and foot as in model. Now make out a proof of your financial statement, following the form shown below. ^y, A- t.-^iz^L^'rL.^-''^'t^ ^/C-^^L^. /f- ^^~^yk^^4^ fnOi-ItlETOR. •SJffl:>. S^A-Xi^ ^^P^^ii-/ 3 /S/" ZoT J S^f o The amount of the Proprietor's investment is taken from the credit side of his ledger account. In your ledger this amount is $2500. The amount of his withdrawals is taken from the debit side of his ledger account. In your ledger this amount is $33. Subtract the withdrawals from the investment, to find the net investment, in your case ^2467. Enter this in the left-hand money column, as illustrated in the model. The net gain of the business, as shown by your business statement, is $575.70. Write this amount after Net Gain. Your net gain added to your investment should give the present worth of the business, which is $3042.70. Write this after Present Worth, in red ink, as in the model. The amount $3042.70 agrees with the amount shown in the financial statement, hence the state- ment is correct. If the business shows a loss, the amount of the loss should be subtracted from the net investment to find the present worth. HOW TO CLOSE THE LEDGER The ne.xt two pages represent a model ledger properly closed and ruled, should carefully examine the form and ruling. The student 38 MODEKN U.l.U-STRATlVE BOOKKEEPING • y •■ /\y'£^^^*JieL.€:-f^ / ^ 7 i'j-z ■// €^/z^gZy:f'Z^!L.d.^ /' tZ-'f^J zs J/ '.:^' -J<^^isz-&-«>2-^ -i-r / 1 (_-^i^:^2.-*SJ'?«-' / / fj ^ '(f'\ V *4 / zi .J- kT f^y jr^>^L<£.ey ■^ ^ S-:^^^-pO /?\ 'fA7 my /I^^^U,^ t /- ^7 F-^^' MODEL LEDGKR CLOSED 3!1 ^ /■ ■'7 ..C^ -/Pa./^ .2/ ^. ^ ^ ^^^^^^y ^-r3^ y y /^^i-Cr/-^ A /f - r a^ / in the day column, the word Gain in the explanation column, and 6jg.-o in the amoimt column. (See illustration below; also page 38.) Rule and foot the Merchandise account, as shown below, and enter your inventory again, in black ink, below the ruled lines on the debit side, with date Apr. i and the current year. ' ' / ^ ';-'^^ ^ ^/Z CLOSINCi THE Lr.nr.ER — MARCH 41 When you began the closing process, your ledger was in balance, as shown by the trial balance. A double-entry ledger should always be in balance; that is, its debits should always equal its credits. In closing the Merchandise account you made a credit entry of ^2416.20 with no corresponding debit. But by transferring this amount, in black ink, to the debit side of Merchandise on the first line below the ruling under date of April i, you restore the equilibrium of the ledger, so far as this entry is concerned. You also show what the merchandise has cost which you now have on hand. All red-ink entries which you make in your ledger must be transferred to the ojiposite side of the account in which they are made, or to the opposite side of some other account; otherwise the ledger will be thrown out of balance. You made an entry of the gain (S 679.70), in red ink, on the debit side of your Mer- chandise account, with no corresponding credit. Transfer this amount, in black ink, to the credit side of the Loss and Gain account, writing the ledger page of Merchandise account in the folio column, Mdsc. in the e.Nplanation column, and the date in the date column (see illustration below); also write the ledger page of Loss and Gain account in the folio col- umn of the Merchandise account. You have now restored the equilibrium of the ledger J -Z'-^Z^'^^^n^ /7xd^ J^ei^i^/J / J'^^riU-£^, /ze> V .fa and placed the amount of your gain from merchandise on the gain side of the Loss and Gain account. All gains of the business are placed on the credit side of this (Loss and Gain) account, and all losses on the debit side. In the space for the explanation we write Aldsc. to indicate the source from which the gain was derived. On page 38 the student should trace the gain from the Merchandise account to the Loss and Gain account. Expense. — The debit side of the E.xpense account is $ 104. As there is nothing on the credit side, it is evident that expense has cost the business $ 104. Write the amount of this loss, with date, explanation, and folio, on the credit side of the Expense account, in red ink, and rule and foot the account. (See illustration below.) ?>^^2..£y9^Z-J^^ 'V - /^ z SJ .: ^^ /^ vjT ^ 1 ^^ 2J- / Cz i 7 •» J:a Zf / A^-J" 3/ / z 6d- J'^ ZJ-i> ^3Z.\-S-fl \ MODERN ILLUSTRATIVE 150UKKEEPIXG Transfer the loss (S 104) of the Expense account to the debit side of the Loss and Gain account, thus restoring the equilibrium of the ledger. Write Expense on the same line with the amount to show what account caused the loss. Do not forget to write the page of ex pense account in the folio column of Loss and Gain account, and the page of Loss and Gain account in the folio column of Expense account. (See illustration below.) JJ Y^' J" ^ '' 1:'^^ --<;^^^«^^/^-;^;^Cf^*z<^^^<^ 3 ^-^z^^-^?^-/ A' V i^ei^ / / Z (?/ ^if As the proprietor has increased the value of the business by conducting it so as to make a net gain, the amount of the net gain (S 575.70), as shown by the Loss and Gain account, should be transferred to the credit of the Proprietor's (your) account. Write, in black ink, on the credit side of the Proprietor's account. Mar. ji, Net Gain, $S75-7o- Write the proper page number in the folio column of each account. (See illustrations above and below.) ZJ^s yT^ixA^ / V \/z ^^2Z-!S-^»2^ y iP ff O CLOSING THE LEDGER — MARCH 43 Proprietor's Account. — The debit side of the Proprietor's account shows withdraw;ds to the amount of $33; the credit side shows an investment of $2500 and the gain $575-70, malting a total of $ 3075.70. It is evident that the present worth of the business is the difference between the two sides of the Proprietor's account. This difference is $3042.70. Mat:e an entry on the debit side of the Proprietor's account, in red ink, for this amount, and rule and foot the account. Transfer the amount, in black ink, to the oi)posite side of the Proprietor's account on the first line below the ruling, with the date Apr. i and the current year. (The following represents the form of a Proprietor's account properly ruled and footed.) / i^zyi^^^'t.-^y z/^ yV^t:id^.'S ::...^i^.^ 7 / z^ /z'i /s-^ \ 7 ■¥ /? fi y /^y.A ? o ^-zz-^-^^z-^ / y i> IP a s I {^y^^^^i-i!^ Y'^'^'^^^ I Closing Finance Accounts. — It is not customary to close any accounts but the business accounts and Proprietor's account. If a personal account balances at any point, it should be ruled, as directed on page 26 and illustrated on page 39. If it is desired to close any finance account at any time, this may be done by finding the difference between the two sides and entering it on the smaller side, in red ink, writing the word Balance in the explanation coUmni. (See Cash account in model ledger, page 39.) The account should then be ruled and footed and the balance transferred, in black ink, to the opposite side of the account below the ruled linos, with the date of the following day. Use of Red Ink. — Notice the fact that the closing entries in the ledger are made in red ink, and that all transfers are made in black ink. When an entry is made in red ink in closing the ledger, it signifies that the amount is on the opposite side from where it belongs according to the rules for journalizing. Never enter the same item twice in succession in red ink ; but always see that an item entered in red ink is entered on the ojiposite side in black. (Some accountants use no red ink, but make all entries, and even rulings, in black. The beginner, however, will find that the proper use of red ink will help him to avoid errors.) Inspection by Teacher. — ^ Your ledger is now closed. Present the work to your teacher for inspection, after making sure that every detail has received proper atention, and that no dates, page marks, or explanations have been omitted. PROOF TRIAL BALANCE After closing the ledger, the student should take off a proof trial balance in order to be sure that the ledger is in balance before making additional entries in it. At the top of a sheet of ordinary journal paper, write the heading Proof Trial Balance, Mar. ji, and the current year. Do not write the names of the accounts in the explanation 44 MODERN ILLUSIRATIVE BOOKKEEPING column, as the amounts are sufficient for this work, but insert the ledger papje numbers, as usual, in the folio column. Begin with the first account in your ledger. If the balance is on the debit side, write the balance in the debit column of your proof trial balance; if the balance is on the credit side, write the balance in the credit column. In the present instance the balance as shown by your Proprietor's account is S 3042.70. Enter this in the credit column of your trial balance. The balance as shown by your Merchandise account (as brought below the ruled lines) is S 2416.20. Enter this in the debit column of your trial bal- ance. There is no balance shown by E.xpense account or Loss and Gain account, so omit these accounts from your trial balance. The balance shown by your Cash account is Si 145.50. Enter this in the debit column of your trial balance. Continue this process until the balances of all the accounts in your ledger have been placed on your trial balance, then foot your trial balance. If it balances, present it to your teacher for examination and approval. TEST LEDGER NO. 1 You are now ready to proceed with test ledger No. i, as follows: 1. Rule off all personal accounts that balance. 2. Take a trial balance. 3. Make business and financial statements ; inventory of merchandise is $ 2530.45. 4. Close the ledger according to instructions given below. 5. Take a proof trial balance. 6. Present all your work to the teacher for examination and approval. How to close Test Ledger No. 1. — -Write, in red ink, on the credit side of the Merchan- dise account, Invoitory, with the amount, $2jjo.4j, and the date Sept. 30. Then find the difference between the two sides of the account, being sure to add the inventory to the credit side. Enter the difference on the smaller side of the account, the debit side in this instance, in red ink, writing also the word Gain, and the proper date and page number. Rule and foot the account. Transfer the inventory to the debit side of the Merchandise account with date of Oct. i, ig — , and transfer the gain to the credit side of Loss and Gain account, writing the date Sept. 30, the Merchandise folio, and the amount. In what color should transfers be made.' (See pages 41, 43.) Write on the credit side of Expense account, Sept. 30, Loss, 7, S /^i, in red ink. Rule and foot the account. Transfer the red-ink entry to the opposite side of Loss and Gain account. Close your Loss and Gain account into the Proprietor's account by writing, in red ink, on the smaller side of the Loss and Gain account", T. M. Hunter, and the difference between the sides. Rule and foot the account. Transfer the red-ink entry to the opposite side of T. M. Hunter's account, in black ink, with the explanation, Xct Gain. Close T. M. Hunter's account by writing, in red ink, Pirsint JFort//, on the debit side with the amount necessary to balance the account. Rule and foot. Transfer the present worth to tiie opposite side of T. M. Hunter's account, with date Oct. /. Remember that closing or balancing entries are always first made in red ink, and trans- fers in black ink. TEST LEDGER NO. 2 Test ledger No. 2 is a little more extensive than test ledger No. i. The amount of the merchandise inventory is S 4502.96. Rule off all accounts that balance, take a trial balance, make statements, close the ledger. TEST LEDGERS 45 take a proof trial balance, and present all the work to }our teacher for examination and approval. How to close Test Ledger No. 2. — Close Merchandise account as in tesc ledger No. i, and as in your ledger for March. Close Expense account as in test ledger No. i, and as in your ledger for March. Close Loss and Gain account as in test ledger No. i, and as in your ledger for March. Close T. \\". Bowen's account as the Proprietor's account is closed in test ledger No. i, and in your ledger for March. Be sure that you transfer all red-ink entries to the o]iposite side of the ledger. Always make closing or balancing entries in red and transfers in black. Make sure that all dates and page numbers are properly entered. QUESTIONS 1. Define buying on account. Define selling on .-iccount. 2. When are personal accounts credited.' When debited? 3. Give full directions tor cliecking the posting. What is the object of this checking? 4. Why should tlie Mercliandise account be debited for freight and dnivage on merchandise? 5. Why should the proprietor be debited for money taken from the business? 6. Define a promissory note. 7. What are bills receivable? S. Wlien should Bills Receivable account be debited? When credited ? g. What are bills payable? 10. When should the Bills Payable account be credited? When debited? 11. Why are others' written promises spoken of as Receivable and your own written promises as Payable? 12. Whicli side of Bills Receivable account is always the larger if tliere is any difference? Why? 13. Which side of Bills Payable account is always the larger if there is any difference? Why? 14. Name other accounts on which you may always know which side is the larger if there is a difference- Give reason. 15. Define indorsement. What is the effect of an indorsement ? 16. How does the trial balance of IVIarch 31 differ from those previously taken? 17. Name and define the statements of results. By what other names are these statements known? 18. What is the purpose of making out these statements? When and liow often are they made? 19. Define an account ; a loss; again; a resource ; a liability. 20. Define an inventory. 21. Why is it necessary to take an inventory of merchandise before making a statement? 22. How is a merchandise inventory taken? 23. What price is given the goods? 24. Define business accounts. Give exampbs of such accounts. 25. What information should a business statement contain? 26. Define finance accounts. Give e.vamples. In what statement should these accounts appear? 27. What accounts should be included in both statements ? 28. How is tile present worth of any business determined ? 29. Explain tlie method of taking a proof of the financial statement. 30. What cl.iss of accounts should be closed first ? ji. What should 1)6 done with inventories ? Why? 32. Why is it necessary to enter the resource inventory on the credit side in order to find the loss or gain on the account ? •^3. In what color should inventories appear on the ledger ? Wliv ? 46 MODKRN ILLUSTRATIVE BOOKKKKPING 34. In what color should closing entries always be first written ? Why ? 35. In wliat color should transfers always be written ? Why ? 36. What is the object of opening a Loss and Gain account in the ledger ? 37. When all transfers have been made, what should the credit side of the Loss and Gain account show ? 38. What should the debit side of the Loss and Gain account show ? 39. What should the dilTcrence between the two sides of the Loss and G.iin account show ? To wliat ac- count should this difference be transferred ? Why ? 40. How should the Proprietor's account be closed ? 41. W'here should the Proprietor's present worth appear after the ledger is closed ? 42. Where should the inventory of merchandise appear after the ledger is closed ? 43. If finance accounts are closed, what is the process ? 44. What is the object of a second trial balance after closing the ledger ? I low is it taken? BRIEF SUMMARY OF RULES FOR JOURNALIZING Each Account Representing Property, Kjrpenses, or Allowances — General Itule Debited when the thing represented Credited when the thing represented comes into the business or when it costs goes out of the business or when it produces the business wikie. value for the business. The following are special cases of the above ; notice that eacli special rule agrees with the general rule. (■(I si, Debited for all cash received. Rule i. Credited for all cash paid out. Rule 4. Merchandise Debited for the cost price of all goods bought for Credited for the sale price of all goods sold, the purjxjse of selling ; and for freight, cartage, etc., Rule 6. on merchandise. Rules 5 and 13. licdl Kstate Debited for the cost of houses and lands \m\- Credited for the sale price of houses and lands chased, and for sums paid for their improvement and sold, and for any returns such as rent, permanent repair. I'..rpvnse Debited for all expenses of the business. Rule 3. Credited with returns on anything previously debited to expense. mils Receivable Debited when another's written promise comes Credited when the business disposes of, or gives into the business. Rule 15. out, another's written promise. Rule 17. Hills rai/ahle /debited when the business redeems, or pays, its Credited when the business issues, or gives out, own written promi.se. Rule 18. its own written promise. Rule 16. liiicrtst Debited when interest is allowed by the business Crifr/V/tVi' when interest is allowed to the business by to others (for then it costs the business value). others (for then it produces value for the business). Iti scon lit Debited when discount is allowed by the business Credited when discount is allowed to the business to others (for then it costs the business value). by others (for then it saves or produces value for the business). Each Personal Account Debited when the person becomes in- Credited when the business becomes in- debted to the business or when the business debted to the person or when he pays the pays him on account. Rules 7, 10, and 12. business on account. Rules 8, 9, and 11. JOURNAL ENTRIES OF MORE THAN TWO ITEMS 47 The I'roprletor Debited for all cash, merchandise, etc., Credited for all amounts which he in^ which he takes out of the business. Rule 14. vests in the business. Rule 2. JOURNAL ENTRIES OF MORE THAN TWO ITEMS The ability to determine readily the debits and credits of any given business transaction is an essential qualification of a competent bookkeeper. If the teacher considers additional drill necessary for developing this ability, the following exercises (pages 47-52) will be found useful. We have learned that the debits and credits of every transaction must be equal in amount. In the preceding work each transaction requires but one debit item and one credit item. However, an entry may consist of several debits and one credit, several credits and one debit, or several debits and several credits; but in every instance the sum of the debits of any transaction must equal the sum of the credits. lournalize the following transactions on loose journal paper, making constant use of the rules on pages 46, 47. Several Debits and One Credit January i, 19 — . — Sold F. E. Clark 25 brls. beef at $16; total, $400. Received in part payment cash, S150. Balance on account, $250. Instructions. — In this case it is clear that Qrs// is to be debited for $ 1 50, and F. E. Clark for $250; while Merchandise is to be credited for $400. The following illustrates the form of entry required for this kind of transaction. ■^zy /s^ -~^b-tzyi^^^-yi-<: ' 2.J-. /^(Pt? Instead of an entry in the above form, many bookkeepers would make two separate entries, one debiting F. E. Clark and crediting Aldse. for $400, and the otlier debiting Cash and crediting F. E. Clark for $150. That is, the transaction would be treated as though divided into two separate ones. Either method is correct ; notice that the final result in the ledger accounts would be the same by both methods. Every one of the following transactions could in a similar way be divided up into two or more transactions each requiring a journal entry of one debit and one credit. The teacher will find it a helpful exercise to require entries in both forms, with a comparison of tlie results in each case. January 2. — Sold Albert Stewart 30 brls. apples at $3; total, $90. Received in part payment cash, $55. Balance on account, 30 days, $35. January 3. — Sold J. D. Lawrence 55 brls. flour at $7, 25 brls. beef at $16.50; total, S797.50. Received in payment cash, $275, and his 30-day note for the balance, $522.50. (What are the two accounts debited .-") January 4. — Sold D. C. Schneider 100 brls. apples at $3.50, 50 bu. potatoes at 60^ total, S3S0. Received in payment his 30-day note, $100; John Smith's lo-day note, $80 cash for the balance, S 200. (Debit Bills Receivable separately for each of the two notes the entry will have three debit items.) 48 MODERN ILLUSTRATIVE BOOKKEEPING January 5 — Frank Miller, being unable to pay in full his 6 months' note for $ 1000 which you hold and which is due to-day, arranges with you to renew one-half of the note for 30 days. Consequently, he gives you, for his old note, S 500 cash and a new note for S 500. Set'ertU Credits anil One Debit January 6. — Bought of Marion Douglas 250 brls. flour at S7; total, $ 1750. Gave in part payment cash, S875, and my 60-day note for S 500. The balance, $375, is to remain on account. The following illustrates tlie form of entry for this kind of transaction. / /^^. / 3. 'i^i?-?'Z^Lyr-zi^^ January 8. — Bought of Henry Lindlinger 100 bu. peas at $2.35, 25 bu. clover seed at $4.50; total, S 347.50. Delivered in payment my 30-day note for S200, and cash for the balance, S 147.50. January g. — Received cash, $ 750, from Benj. D. Collins in payment of balance due on his account, $ 1 50; in payment of his note due to-day, S 300 ; and also to pay for bill of goods sold him to-day as follows :-*5 hf. chts. Japan tea, 375 lbs., at 30^ per lb.; 10 mats Java coffee, 750 lbs., at 25 >^ per lb. ; total, $ 300. Several Debits and Several Credits January 9. — Bought of C. N. Brown 10 brls. sugar, 2600 lbs., at 5 P*, $130; 5 shares City Bank stock at S 125, S625. Gave in part payment cash, S 200, and my note for S200; the balance to remain on account, $355- The new feature here is the purchase of City Bank stock. The general rule applies : debit what comes into the business or costs value. The only question in any such case is what name to give the account. Some would make it Stocks and Bonds ; others. City Bank Stock. The following illustrates the form of entry required for this kind of transaction. ■£-e^. /ay'j:^^ -i^^^ No. 2. — Ai'RiL I. Mr. Hastings has rented the building at 146 Elm St. from R. B. Hines; he is to pay $ 100 per month rent. Pay the rent for April in cash, placing the cash in your "Cash Paid Out " envelope. In paying out money always make payment in bills of the largest denominations pos- sible. In this instance you should take a hundred-dollar bill. If you have occasion to pay out S75, you should make payment by using one fifty-dollar bill, one twenty-dollar bill, and one five-dollar bill. Take from the incoming voucher ])ad the lease and receipt numbered 2. All the vouchers, cards, etc., on this pad are numbered to correspond with the numbers of the transactions in this book. Be sure that the voucher number in each case agrees with the transaction number before making a book entry. Read the lease carefully and see BUSINESS PKACTICF, — Al'KII. 55 what rights and restrictions it mentions. Put it and the receipt in your "Voucher File" envelope. Determine the dehit by rule 3, page n or 46; determine the credit by rule 4, page 11 or 46. The following illustrates the form of your entry. ~^.-'tZ-J^Jz^ J ^-o-yL-^ 7^ 7^ No. 3. — April 2. Incoming voucher No. 3 shows a cash purchase from Daniels Bros, of 200 brls. flour at $4-20 per brl, and 400 bu. oats at 23 ^ per bu. Detach from the pad the invoice or bill, and the merchandise cards representing the flour and oats. See that you have on your cards the quantity of flour and oats called for in the bill, and if so, check each item on the bill, using pen and ink and placing a check mark in the vertical column at the left of the bill. See that the multiplications and the addition are correct, placing a check mark against each correct amount at the right. If the bill is correct, write O.K. with your initials underneath, in the lower left-hand corner. The following represents the form of a bill after it has been treated as explained above. imil^ Mi®!D^^CIIRllCa Directors- ^^W^ ^' /.Vt Sir'' ^^^rA^:^4f^ ^ ^. /,. -/^ . 5old to -^ ^^^ ^^^ ^ ^. ^ ^'.K'.-J-^^, ^-^-^^^-x.^-^^^-^^ i^ Z^- -^-.^l^. -d^Z^.^ _i£i /P^.'^^tC^^.-. ~V7. -^.^r7-r^-^^.^i^^.^ ?.-^ ^.^r7-7i~ -J^rS^ 7!^^-^^ Z^g'Ti^^^?^ /i^ ^ z_ z_ / 2.,r/A/^ /7 o6 MODERN ILLUSTRATIVE BOOKKEEriNG If anything is wrong with the invoice or the merchandise, ask your teacher (representing Daniels Hros.) to correct it. If they are correct, take from your Cash Drawer the money to pay the bill, and place it in "Cash Paid Out" envelope. Place the merchandise in the envelope marked "Store Room." Determine the journal entry by referring to the rules on page 46. The following illus- trates the form of your entry. As you have the invoice to refer to at any time, there is no need of inserting the items in the journal entry. ^■j-c'^o 2.^0 Fold the bill lengthwise, face outward, and write across the face, Entonl, with tlie date underneath. Place it in the envelope entitled " Voucher File." No. 4. — April 2. Tliis bill (No. 4) shows a purchase from D. Deavenport & Co., for cash. Check and O.K. the liill as in No. 3. Take cash to pay the bill from your Cash Drawer, and place in the "Cash Paid Out" envelope. Place the merchandise in the "Store Room." Your journal entry will be similar to that for No. 3. Fold the bill, write Entered zcross the face, with the date, and file as in No. 3. Follow all instructions in the e.\act order in which they are given. No. 5. — April 3. Mr. Hastings has taken this order from J. A. Barker, and received the cash for the goods, 50 brls. fiour, 50 brls. apples. Copy the selling price-list which your teacher assigned you on voucher No. 5 o, and paste it on the inside of the. front cover of your text-book. Select from your Store Room the merchandise which the order calls for, and make out a bill to J. A. Barker at your selling price on one of the blank billheads which you will find in your envelope of Business Forms. Use one of the bills in your Voucher P""ile as a model. Place the order in yuur Voucher File. After making out the bill, review your multiplications and addition so as to be positive that they are correct. Remember that bills sent from an office viust be right. If the bill is correctly made out, its amount will agree with the cash received with the order (No. 5), and you may receipt the bill (by writing on it Received Payment, J. J/. Hastings, by and your initials) and place the cash in your Cash Drawer. Make the proper journal entry for the transaction. Place the merchandise and the re- ceipted bill in the envelope entitled " Vouchers for Others." The following illustrates the form of the journal entry. v^ osting. and they are opened in the ledger in the order in wliich they appear in the journal; but separate sections of the ledger should be taken for each class of accounts. No. 44. — Post your journal entries (see directions, pages 13-17). Check buck your postings (see directions, page 25). Rule off each account, or portion of an account, which balances (see page 26). Take a trial balance of ledger balances and submit to your teacher. If the trial balance is correct, take an inventory of your merchandise from the cards foimd in your Store Room. You should have on hand 305 brls. apples, 200 brls. flour, 25 bu. barley, 675 bu. corn, 800 bu. oats, 1025 bu. jiotatoes. If you have this quantity of goods in your Store Room, find the value at the latest cost price as shown on your latest invoices. Submit the result to your teacher, and if it is correct, copy the inventory in your Blank No. i, as you did the one on page 34. Then make statements according to forms on pages 35 and 36. After the statements are approved, close the ledger (see directions, pages 37-44). STATF.MEXTS OI-" ACCOUNTS 07 STATEMENTS OF CUSTOMERS' ACCOUNTS An important part of any bookkeeper's work is that attention to customers' accounts which insures prompt payment of bills as they fall due. In order to call the attention of customers to the fact that pa\-ment is desired, many business houses send a statement whenever a bill is due ; r.g:, if John Smith & Co. bought merchandise billed at $ 165, lanuary loth, at ten days, then on January 20th, or perhaps a day or two later, a statement like the upper one on this page would be sent him. In the ordinary course of busi- TO ness, however, it is a more common practice to send each customer, at /? ■"> "osE / fp ,-ry!-^^^^-^^ /^.^ y the first of the month, a statement showing the debit balance of his account up to date, whether this balance is due or not, thus calling Statement POLIO l3 y/7^^v /.ifl '„t\" "J. M. HASTINGS 146 ELM STREET ^fy/l^y .-r ^/^T^^^^^ 4/.<-^ .-T^ 1 / / arr /UUy ^rn his attention to his indebtedness -i^^y. and enabling him to compare the Of^^y r /V3-7V ~6i^r:) .A^^ ,-?/9^ statement with the account in his /^ ^■TfJO rr^^y ledger, and note any difference y ^^-r .i-f? which may appear between his books and the statement. See the second form of statement on this page, and the statement on the fol- lowing page. A competent bookkeeper will have his statements ready to send out on or soon after the first of the month, as most of them can be prepared considerably in advance of that date. ! Customers statements are pre- 68 MODERN ILLUSTRATIVE BOOKKEEPING pared entirely from the ledger accounts, and of course the posting must be completed before the statements can be made out. No, 45. — You may now prepare statements of accounts for all customers who owe you a balance. Turn to Chas. E. Hayes's account in your led<;er, and from it prepare a statement like the second form given on page 67, writing also, of course, your place and the current year. Study the form carefully, in all its details. The debits in the form are not your debit amounts. Prepare similar statements for all others who owe you a balance. Place them in properly addressed envelopes and hand to your teacher. Take note that the first column in a statement is an item column and is to be used only when there are two or more debit or credit items. When a statement has only one debit or credit item, enter it in the second column only. The following illustrates a form of statement required when an account has a debit bal- ance at the beginning of the month for which the statement is made. Ciphers in the Cents Column. — When the amount to be written, either in a statement or in a book, consists of an even number of dollars, some book- keepers write two ciphers in the cents column, while others place a dash in that column. Both of these methods waste time without accomplishing any good, and the latter tends to destroy neatness, because of variation in the length, form, and position of the da.sli. The best method to pursue when there are no cents is to leave the cents column blank, as shown in the preceding models and in the form of statement on this page- No. 46. — Present your books to your teacher for inspection, after having carefully examined them yourself to see that all rulings are correct and that page marks, dates, and transfer pages have not been omitted. See that all closing entries and rulings in your ledger are in red ink, and that all transfers are in black ink. Do not allow yourself to be care- less in these small matters; they are more important than they ap- pear. In your small ledger it is an easy matter to find an account, even if the page mark is ni)t in the journal, but in business where the ledger sometimes has lOOO pages the omission of page marks causes much unnecessary work. Polio C2 Statement ,^^ c:Cei;iiy,-C<.AJ S"/, ^ o i> c prz/ fa Z ''f /TO Ceo I fZ z6e> —■^i-^ yS'-f^^ —■f^-iZ.^ --^3-e?^ rC-j-i/s 'ft^^ ^J- . .fds if The Cash Book. - Cash transactions are numerous in almost anv business, and from this fact it has been found advisable to take the Cash account from the ledger and place it in a book called the "Cash Rook." On the left-hand page of the cash book arc entered all cash debits, with the name of the account to be credited in the first wide column, and in the sec- 72 THE CASH BOOK _ MAY 73 ond wide column a brief description of the transaction. The amount is entered in the left- hand money column. All items of cash paid out or cash credits are entered on the right- hand page of the cash book, with the name of the account to be debited in the first wide column, and a brief description of the transaction in the second wide column. The amount is entered in the left-hand money column. The e.xtra column at the left of the first wide column is for the ledger page when the item is posted. Since the debit of the cash book shows all cash received, and the credit all cash paid out, it is evident that the difference between the two sides of the cash book should show at any time the amount of cash on hand. It is unnecessary to keep a Cash account in the ledger, although some bookkeepers do so, carrying the total receipts for each day or month to the debit side of it, and the total payments for each day or month to the credit side. The cash book should be balanced at frequent intervals. If a considerable amount of business is done in cash, it is well to balance the cash daily. In this and in all following sets, the Cash account will be kcjjt in the cash book only, and not carried into the ledger. ^2-^^<^^^ i\ f/ fZ 'J ^^^ tZ-'J^Z.^VZ.^^ y^-yi<>-t£^£z^i^,d't>'.'t^ iZ.OoA'^ d t; i? ^ If 1^_ ■'iT/i-J-^S Remember that the cash book is the Cash account of the ledger; therefore, the balance of the cash book must be carried into the trial balance when that is taken from the ledger. The Sales Book. — It is customary in business to enter all sales of merchandise, whether for cash, on account, or for a note, in a book called the "Sales Book." The footing of this 74 MODERN ILLUSTRATIVE BOOKKEEPING book will at aii)^ time show the total sales of merchandise, for the month or other period, to date. This book does away with a long Merchandise account in the ledger, as the footing of the sales book is carried to the credit of Merchandise in the ledger at the end of each month, or as often as may be desired. The first or left-hand money column of the sales book contains the separate items of each bill. The second or right-hand money column contains the total amount of each sale, which is to be posted to the debit side of the customer's account in the ledger. Form of S.vles Book ^7y / V >cr (^, rS-^U^ /■ r /■ . .-r-. ^^ " / '- ^ - sS ^ /f^.. /J or 'M: I 1/ 7lt.-t^y. ^yy^z-iHiy, 2^, J = ^/, If tr // / ^ ^ /\ Joo^ /SC? 7^' so I y^zso z^o -J.J ■i yj -2J2Ji^ /Z2.7 ZS BUSINESS PRACTICE— MAY 75 TRANSACTIONS No. 1. — Mav I, 19 — . Mr. Adams gives you a power of attorney. Take the document from the incoming vouclier pad, fill in the proper names in tlie blank spaces, and file it. No. 2. — Mav i. Ask your teacher to assign you a price-list from the numbered lists on pages 102 and 103, and take from your incoming voucher pad the cash required for Henry F. Adams's investment, $8800. Make an entry in your journal-daybook, giving a description of the conditions under which the business is begun. Do not extend the amount of cash received in the money column. The following illustrates the form of your journal-daybook entry. /J 'y,y y It is customary in commencing business to write in the journal-daybook a brief statement of the conditions under which the business was commenced, and if it be a partnership, a brief summary of the partners' agree- ment. This record is made in the journal-daybook as a matter of convenience only. The amount is not ex- tended in the money column, as this is a cash transaction, but the entry therefor is made in the cash book. Sometimes such a record as the above, an abstract of the principal accounts, and a record of the results of the business are kept by the proprietor, one of the partners, or a confidential clerk in a private set of books. Cash Book Entry. — Enter the amount of cash received in your cash book, which you should begin in Blank No. i at the place indicated by the index on the front cover; notice that this is a left-hand page, which should be numbered 2. The following illustrates the form of the entry, but the amount and proprietor's name are different. ,/^^tzy / -yC>,>^7^=J,::^^^^-?'Z^'tiyyz^ '.^f'Z.yZ^-d,,ai'^>3'J'Z,£.^'7.^/~^ C^2 O / The amount is entered in the first money column of the debit or left-hand page of the cash book. The date is written at the left, as in a ledger. In the first wide column is writ- ten the name of the account to be credited, and in the second wide column a brief descrip- tion of the transaction. Place the cash in your Cash Drawer. 76 MODERN' ILLUSTRATIVE BOOKKEEPIN'G No. 3. — Mw I. Pay one muiUh's rent in advance to, and take a receipt from, the National Real Estate Co., which owns the building at 246 Main St. Put the receii^t in your Voucher File. Make an entry for this transaction on the credit or right-hand page of the cash book. The following illustrates the form of cash book entry. t?Q. y/ii^-ez-y (j^;^^^/i,c-'yz..d-€y -^■t^-?^ y/Zn^ f. I The first wide column contains the name of the account to be debited, and the second wide column a brief description of the transaction. All cash received or paid out must be entered in the cash book. No. 4. — Mav 2. You have purchased of the Upton Coal Co., for cash, 5 tons coal at 35.25, amounting to $26.25. This is a cash transaction and the entry will be made on the credit side of the cash book, since cash is paid out. The following illustrates the form of the entry. 0-. ■ — 25i!"-»z-=/ ^«-*?-zz-^ No. 5. — ]\I.\v 2. "S'ou have bought on account an invoice of merchandise from West, Stone & Co., New York : 20 half chests Japan tea, containing altogether 1200 lbs., at 23^ per lb., etc. In this scries of transactions you will not receive cards to represent merchandise, but will assume that the merchandise has been received, and will check each item on the invoice after verifying the calculations. If you find the invoice correct, O.K. it. If not, ask your teacher (representing West, Stone & Co.) what to do. This transaction calls for an entry in the journal (sec rule 5, page 12 or 46). Write Entered, with the date, on the invoice, and put it in your Invoice File. Terms of Payment are of great variety. .\ few of the more common terms, and tlie method of indicating them, are as follows : '•Terms on account,'' often aljbreviated "/,., usually means tliat the bill is due on the first of the following month. "Terms -/- 30 das.," or "30 das.," signifies that the bill is due in 30 days from date of invoice. "Terms Net" or "Net Cash" indicates tliat no discount will be allowed for cash. "Terms Cash 2%" or "2% Cash" indicates that an allowance of 2/0 will be made off the amount of the in- voice if it is paid at once or within a certain short time, as ten days. The custom of business houses varies as to the lime ; some insist that only three days should be allowed ; many allow ten days : and others allow thirty days. If a bill is paid promptly, it is customary with many to take otT2%, even though the terms are not so stated. "Terms 30 das., 3/10," signifies that the amount of the bill will be due in 30 days, but 3"/^ will be allowed ofi" tlie amount if it is paid within ten days. "Terms 2/ro, 1/30, net 60." indicates thai 2% discount will be allowed if paid within ten days, 1% if paid within 30 days, and that the amount of the bill will be due without discount in 60 days. "Terms C O.D. Am. Ex." means that the goods have btvn sent C.O.D. (cash 10 be paid on delivery) by the American Express, and thai no discount will be allowed. BUSINESS PRACTICE— MAY 77 "Terms C.O.D., less 2%, U. S. Ex." means that merchandise has been sent by United States Express, C.O.D., and that 270 discount will be allowed from amount of invoice. No. 6.' — Mav 2. Goods have been purchased of L. Hennes & Co., New York, by Mr. Adams, who has agreed to give a note at 60 days in payment. Verify the calculations. Write the note required by the transaction. Fill out the stub of your note book; then detach the note and place it in Bills Payable File. In this transaction you will debit McrchatuUse in the journal and credit L. Hennes &■ Co. for the amount of the invoice, and debit L. Hennes Sr Co. and credit BiV/s Parable for the amount of the note given them in payment, making two complete but separate journal entries. The one journal entry, Mdse., To Bills Payable, would be sufficient to record the transaction (see transaction No. 54, pages 28, 29) ; but Mr. Adams expects to purchase of L. Hennes & Co. also on account, and it is ad- visal)le that their personal account in your ledger should show all transactions made with tlieni, hence the entries should be made as directed above. No. 7. — May 2. Deposit in the Commercial Bank all your cash, except $200, which you may retain in the Cash Drawer. Make out a deposit slip and hand it to the cank teller with the currency and bank pass book. Do not fail to enter the deposit on the stub of your check book. No. 8. — May 3. This invoice of merchandise has been purchased of Shields Bros., City, for cash, and you receive a discotnit of 2%. Verify the calculations. Make a journal entry for the purchase of goods, debiting Mer- chandise and crediting Shields Bros, for the gross amount of the bill, this being the amount before the discount is subtracted. Write a check in favor of Shields Bros, for the net amount of the bill, which is the amount after the discount has been taken off. Do not forget to fill out the stub first, and to subtract the amount from the amount in bank. Show the gross amount and the discount on the stub of check book, in the blanks left for the purpose. Make the following entry in the cash book, credit side, debiting Shields Bros, and credit- ing Cash for the full amount of the purchase. 3 ■^lA^C-c/^^ ySuh^. --^X?^-'^^ /3 ',2^ z J^^so\ This entry credits Cash with $ 5.69 (the amount of the discount) more than the amount actually paid. To offset this, enter on the debit side of the cash book the amount of the discount, crediting JMerchandisc Discount. This is the entry. 3 ./^^W:l:^-.€-<-c^Z^2-<;£'i:^ .--{yyi^t/r- ■^^JA^i^^/dJ Siy:^/3,x7- -J'h The difference between the amounts entered on the debit and credit sides of the cash book is the same as the amount of cash paid out, and represents a net credit to the cash account. Shields Bros, are debited for the full amount of the invoice, because this is the amount of the debt settled, and Merchandise Discount is credited because it produced value by saving to the business the amount of the discount allowed. ^ale 19. — Merchandise Discou.xt is credited ivhcn a discount is allowed to the busi- ness for the payment of a bill of merchandise at a given time ; for such a?i allowance saves or produces value for the business. 78 MOm.RX ILLUSTRATIVE BOOKKEEPING No. 9. — Mav 3. This order calls for a sale of merchandise to A. W. McKey, on account. Make out the bill, checking each item on the order as soon as entered on the bill. Verify your calculations and be sure the bill is right. The number of pounds in a half chest of Japan tea varies somewhat. In .ictual business the number of pounds in each lot sold is found loy weighing. In your work here, however, you may assume th.at each half chest of Japan has tlie atteragc weiglit (60 lb.) shown by voucher No. 5. A similar assumption may be made concerning other goods (see Price Lists, p. 102). In this month's work all sales of merchandise in wholesale lots, whether on account or otherwise, will be entered in the sales book. Therefore, enter this bill in the sales book, which you should begin in Blank No. i at the place indicated by the indc.ic on the front cover. See form of entry below. The names and items are different. No. 10. — iM.w 4. F"ill F. C. Tenney's order and allow him 3 % off for cash ; also deposit his check in the bank. Make out the bill and deduct 3 % discount from the gross amount. Use bill No. 8 in your Voucher File as a model. After Terms write Cash j^/c. If the net amount of the bill agrees with F. C. Tenney's check No. 10, S611.10, receipt the bill and place it in Vouchers for Others. Enter the sale in your sales book, one line below your last entry, debiting F. C. Tctimy. Write the date in the middle of the line, as in the journal. Do not deduct the discoiuit in the sales book, but enter the sale for the full amount, which will be posted to the debit of Tenney's account in the ledger. The following shows the form of your sales book to date, the names and amounts being different. Notice the addresses of customers, and the terms given. (2?,// 32-^ (p. 3-', 3 y^c-ffL-ISCOln«TKD POR Facb \S(!^ /^ i?J~i IwT. Total : Dix-fPir',^ ■<^rH:oLi.. Total : ^ /^^T.Ui-^-yi.^f-tey.^^h^U^-til^^^^ ^f7 j-a After the amount has been entered in your pass book, make an entry in the blank space immediately below the last stub filled out in your check book, as shown in the following illustra- tion ; and add the proceeds, $4897.50, to the balance in bank after deducting the last check. Cash Book Entry. — Make an entry on the debit side of the cash book for the face of the note, $ 5000. The following is the form of your entry. DcpQiiud _ '^J^fyso JT J3c//jp^ iZ^. iS^-^^J. c^-c-tA^ A^.--7'?'i.^.^^yu^i!iy S0OC This entry on the debit side of the cash book debits CasJi and credits Bills Payable. Make an entry on the credit side of the cash book for the amount of the discount, $102.50. The following is the form of your entry. c^CZ-'<^J.'€^t?-t^.--ri^ o-u.yLyy^'i.^Htey, / 23 ,-z:^. /CPZ ■SO This credits Cash and debits Discount. The bank really gave you only $4897.50; but if the bank had given you $5000, you would have been required to take from the $5000 the sum of $102.50 and pay it to the bank for discount; and this is the principle u])on which the cash book entries are made. Mule 21. — Discount is debited zuken a diseonnt is alloiued to others on a note oV draft ; for such an allowance costs the business value. It is evident that the accounts affected by the transaction in tlie above c.\ami)le are Cash, since cash has been received by the business; Discount, since discount has been allowed the bank for cashing the note 123 82 MODIiRN ILLUSTRATIVE BOOKKEEPING days before it is due; and Bills Payable, since Mr. Adams has given a note payable in four months. It is evi- dent that C'lis/t should be debite-i.i-f-z^ Cc-C-C^-.-^'l^y'T^Z'^^'-i!^ .i^/Vs^, <^ -2-«?^ /J-'^ Z3 84 MODEUX ILLUSTRATIVE BOOKKEEPING * A ledger account is forwarded to a new page when the space originally allotted to the account has been filk-d. For instance, if the account of A. H. Harper on page 15 is to be continued on page 24., the following entries might be made (note the page numbers in tlie folio columns). Form of Entkv and Ruling on Old Ledger Page (15) ^i;-t(pf ?¥ iy.f ■^^^. lit i-i.Q«iioii, if on iis ro«d, oiHennse to deliver to •noiherc»rner on rhe rouie to said desi-fimon. It Is mutuili^ •erecil, — .- v-^>. «. ...v. ■ny of said pi^jpc.-iy over all or any pon.on o( said route lo destmaiion. and as tu each pirty at any lime iniertiied in all or any of said properly, ihai every service lo be performed here- utiJer shall be subifct to all ihe condiiioos, wtieilier prioied or written, herein contained (ipcluding coodiiioni oa bact hereof), and which are aareed to by (be ibipper and iccepied (or bimseir and bis as»igaa. The Rate of Freight frow __ to is in. Cents 7>cr 100 Lbs. \\ ifsmcWI IF Specfil IF.Tliini Isl inn CItu IF 2d CIm IF Ma 25 IF 3d Clisi IF >iili 26 IF Rul, 28 IF4tliCliss IFSttriiss IFGUiCliisil "" por ! 1 1 II er«ia ooataiMiidocIadingcoDditlons oa back berwl). *na "blch •« »pt« l© bribe rtlpper and •cc«pie« lof from ■pDcreaigood ord:r.cxctpi to Ha usual place of delivery 90 MODERN ILLUSTRATIVE BOOKKEEPING cirbon paper and a lead pencil, all three bills can be filled in at one writing. Many shippers use rubber stamps in filling in parts of their bills of lading. (For further information concerning bills of lading, see Appendix II.) Form of Shipping Order {Heading) For use in connvclion with Uie Stmtfard lerm of Stnlght Bill of UAiig appr«vc4 by Ute Intonlals Comncrc* Cennluien by Order No. 787 ol June 27. 1908. /re^-n^^-L.4^2^.J.^/-?rt^,^.,<^^!^ Railroad Company. Stlgseis No. — THIS SHIPPING ORDER *■■"' ^ '<*">'' ''"*' ''^ '" '"''■ '" '"<"'■'"' f*""'. °' '" c•rbo^ •»! " ratalMd br IM Agenl Ijeitt III. y^ .IU3CEIVK, subject to the classificatiouji lUlil turiflu ilk eiivcl iju Ow uu:u of issuo^f tiiia Shipping Onlcr, at...._...M^£:d.,-^.id-S^£S^l.'^^ u'Lm.'<2f.^Ly-^ 19 , (rem /Yr.^.^:^LC^-:JZ*r:^y^-y:Z^^iL;^. _ _ __.ib« prepcrtr dfMr^bc4 bele*. l« • pparcni food order, OMpi ai soicd (conitnts Bod coodiiioa el cvaicqit ol pickaps uotaove), marked, conal^acd and drat,Bcd aa lodtcatcd bclov, vhicb aaid Cwmpanr acrt«a le cairr 10 in uaual place oldclirrrir ai taid deaiiaatloo. If on lia road, oibrr*iM lo dtiircr lo aooibcr earner ea ihc rouie to aaid dcanaaiioB. It la maiuallr acievd, aa to each cimcr vl all or an, of aaid propen, oixr allor aa, portion of aaid route to deatiaatloo. and aa lo eacb pan, at aoy time lotcrcated in all or aor olaatd prt^penj. tkat ercrr aervite to be parlofmed bee*- under atiall be aubject to all tbe coodlilooa, vbctber phated or wrlttca, hervip cocialaed (locludiag coadlliOAa oo fa«ck havti, and vbtCh an aci«cd le k]r ite ablppce kkd Kxcpted ft>r kimtelf aod bia aaufna Ihc liatc of Freight from ^ . Make out a set of the forms which you will fiud among your supplies ; fill them out at one writing by the use of the carbon paper. Take them to your teacher or freight agent. He will sign and return to you the bill of lading and memorandum copy, and will retain the ship- ping order. Inclose the bill of lading, with a bill of the goods, in an envelope properly directed to Rice & Pond. Hereafter you must make out similar forms whenever merchandise is sold to out-of-town customers and sent by freight. No. 35. — M.w 1 8. Write a check for $ 800 and send it to ]•;. Wcsten Tea & Spice Co., accompanied by a letter advising them of the remittance. The Telegram is an important feature of modern business, and is used very extensively in ordering goods for immediate delivery. The charge for a telegnim depends somewhat upon the distance, and. excejit in the c.ise of cable messages, it is a fi.ved sum for a ten-word me.ssage. with an additional charge for each word in excess of th-it number, no charge being made for the name and address of tlie person to whom the message is sent or the name of the sender. Night messages, that is, mess.iges sent at the convenience of the Company after 6 P.M.. are taken at about half the regular rate, and a large proportion of business messages are of this kind. In writing a telegram care should be taken to avoid the use of all superfluous words, and yet the mess.ige must be clear and definite, that mistakes may be avoided. Numbers should be written out in full, since the charge is the same for a figure as for a word ; for instance, 20 written in figures (20) would be charged for as two word.s, while written in full (twenty) would be charged for as only one word. In sending important mess,ages, those in which a mistake would mean the loss of a large sum of moncy.it is better in every case to have the telegram repeated; that is, have the operator at the point to which the message is sent telegraph it back to the operator at the sending point, so that the .sender may know that his message has been received as it was sent : for telegraph operators are only human, and mistakes in unrepeatcd messages are by no means uncommon. The charge for repeating a message is one half more than the original cost. The cost of cablegrams is a certain amount for each word, and the same charge is made for the address and signature as for the words which make up the body of the message. Business houses generally have a code address for cablegrams ; that is. the name and .address are represented by one word ; for instance. Smith. Jones & Robinson, 42 Soho Square, London, E.C., England, would be represented by a single word, .as " Extract."' The following form of telegram shows the correct method of writing a message con- taining numbers. BUSINESS PRACTICE — MAY 91 THE COMMERCIAL TELEGRAPH COMPANY. -INCORPORATED 21.000 OFFICES IN AMERICA. CABLE SERVICE TO ALL THE WORLD. PHILO M. BECKLEY. Pucsidcnt and Gcncral Manao^r. Recelver'a No, ^tWU the following message subject to the terms on back hereof, which are hereby agreed to. To (^^V^C-r?-t<^^^ Z-t^ y/Z-s?^-€^,.i7 et!^^n^^f^^ n^^ri^.^ The amounts of these two items are entered in the first cohimn, and their sum extended into the second column. It is evident that the difference between the amount of merchandise on hand in the beginning of the month plus the amount purchased during the month, and the amount of merchandise sold during the month plus that on hand at the end of the month, will be the loss or gain on merchandise. In the above statement the gain is found to be $1440, and the amount is written after Gain carried dtnvn, in red ink, on the debit side. In the second section of the business statement we have, on the debit side (6) the total cost of e.xpense ; (7) the amount of unexpired insurance and stationery, which, paid for under expense, has not yet been used; the difference between (6) and (7), extended into the second money column as the loss on expense; (S) the loss on discount; (9) the loss on furniture and fixtures on account of depreciation in value. In the second section of the business statement, on the credit side, we have (10) the gain on merchandise, which is written after Gain brought down (that is, this gain is brought down from the first section); and (i i ) the gain on merchandise discount. The difference between the sum of the debit amounts and the sum of the credit amounts will show the net gain of the business. The net gain is written in red ink on the debit side of the state- ment (12). When the proprietor examines the above statement, he can tell at a glance the amount of merchandise purchased during the month, the amount of sales, the amount on hand, his gain on merchandise, and his net gain on the business as a whole. 98 MODERN ILLUSTRATIVE BOOKKEEPIXG If he has purchased and sold stocks and bonds, bank stock, real estate, or anything of this character, the re- sult of such tnmsactions would be shown in a third section of the business statement. In this case the net gain of the second. section would be the net gain of the business proper, and this would be carrietl down to the third section. The ditTercnce between the two sides of the third section would be the net gain or loss on his entire transactions. A business might be paying, and the proprietor still be losing money on account of losses sustained by out- side transactions. The profit on merchandise might be sufficient, and still the business be conducted at a loss, on account of enormous expenses. For this, and various other reasons, it is essential that the loss and gain statement should be closed in sections, so that the proprietor may determine at a glance the exact condition of his business. How to Make out Your Business Statement for May. — The following paragraphs are numbered to correspond with the numbers before the items in the statement on pages 96 and 97. These numbers indicate the order in which the various items are to be j)laced on the statement, but the stitdcnt should omit them in making out his statement. 1. Turn to the merchandise account in your ledger. As this is the beginning of the business, there was no merchandise on hand at the beginning of the month, hence nothing will be written after J\Tc)xluindisc on luind at the elose of last month, but you may write these words in your business statement (see model, page 96). 2. The sum of the items on the debit side of your Merchandise account in your ledger represents the cost of merchandise during the month. Write the amount 'Ai\.cx Merchandise, cost of, during the month. 3. The sum of the items on the credit side of your Merchandise account represents the amount of merchandise you have sold during the month. Place the amount after Merchan- dise sales du7-ing the vionth (see model, page 97). 4. Write the amount of your inventory after Merchandise on hand no7i'. 5. Find the difference between the sum of the items on the debit side and the sum of the items on the credit side of your business statement, and write this difference, in red ink, after Gain carried doivn on the debit side of your business statement in the second column, after which rule and foot the first section of your business statement, as in the model. 6. Write the total cost of expense, as shown by your trial balance, after Expense, cost for the month. 7. KiXxx Less inventory of unexpired insurance and stationery, write the amount of your expense inventory. Subtract this from cost of expense, and extend the difference into the second column (see model, page 96). 8. After Discount, write the amount of the loss on discount, as shown by your trial balance. 9. A depreciation of 10% has been allowed for wear and tear on office furniture. Write the amount of this depreciation, which is a loss to the business, opposite Furniture and Fixtures, under the heading Depreciation as under: (see model). 10. Bring down the amoimt of the gain shown in the first section of the business state- ment, and write it under Gain brought down in the second section. U. After Merchandise Discount, write the gain on merchandise discount, as shown by your trial balance. 12. I-"ind the difference between the sum of the items on the debit side and the sum of the items on the credit side of your business statement, and write the amoimt, in red ink, after Ket Gain. Rule and foot the second section of your statement, as in the model. Form of Financial Statement. — A financial statement, or balance sheet, should begin with the most available resource. Cash. The amounts of cash in safe and in bank arc writ- STATEMENTS — MAY 09 ten separately in the first column, and their sum in the second column (see model, pages loo and loi ). Various kinds of property owned by the business are next listed under the title, Prop- erties as under: Real estate, in the model, is listed at its ledger valuation, on the pre- sumption that it is worth at the present time the amount paid for it. Naturally there has been wear and tear, or depreciation, upon office furniture and fixtures : their cost is shown in the first column ; under this is written the amount charged off for depreciation ; and the difference, or present value of the furniture and fixtures, is extended into the second column. Goods on hand are inventoried usually at their cost price, and the amount is written in the second column. If there is any property on hand which was charged to Expense when bought, it is considered a resource inventory and listed in the second column. The next title, Sundry trade debtors as under, covers all amounts owing the business by firms and individuals. The amount of notes held is written after Bills Receivable, and the amount due the business on personal accounts is written after Open book accounts considered good. Usually an amount is deducted from Open book accounts as a reserve for bad debts. Open book accounts are also frequently divided into two classes — Open book accounts consid- ered good dcnd Open book accounts considered doubtful. In connection with this statement, it is customary to make out a list of all debtors and creditors of the business. If there were any other assets, they would be enumerated in detail on the debit side of the financial statement. The liabilities are written on the credit or right-hand side of the statement. The first title, Sundry trade creditors as under, covers all persons or firms whom the business owes, either on note or on account. The amount owed on notes is written after Bills Payable. The amount owed on personal accounts is written after Open book accounts. If the busi- ness had other liabilities, they would be here enumerated. The sum of the liabilities is writ- ten in below a red line, as shown in the model. The amount the proprietor has invested in the business is next written down in the first column, and from this is subtracted the sum of his withdrawals. To the remainder is added the net gain from the business statement, and the sum is extended to the second cohnnn, in red ink, after the title, Present worth of business. Notice the footings and ruling of the model. A financial statement, or balance sheet, made out as above, will show in classified form the actual assets (resources) and liabilities of the business. The proprietor of a business, in examining such a balance sheet, can tell at a glance the amount of property he has on hand, and the basis of its valuation ; for the statement shows any amount that has been charged off for depreciation, or anything that has been added on account of an increase in value. How to Make out Your Financial Statement. — Follow the style of the model on pages lOO, lOi, inserting the headings as you reach them. The following paragraphs are num- bered to correspond with the numbers in the model. Do not write these numbers. 1. Ascertain the amount of cash in the safe or drawer, and write it in the first cohuim after Cask in safe. 2. Ascertain fiom your check book the amount of cash in bank, and write it after Cask in bank. The amounts of cash in bank and in safe should be addeil, and written in the second money column of the statement (see model, page lOO). The amount of cash shown by the statement should be the same as that shown on the trial balance. 3. Ait^r Real Estate, Ledger valuation write the amount of real estate (512,125), as shown bv your t ial balance, in the second column ot your statement. 100 MODEIO*" ILLLSTRATlVlL BOOKKEEPING K^jrty'^7..'€Zy9'l^'C-C-t^l^-^2Z^^i^^ 4 •^^:^^U^i^i.f^~^,.^i'€^'L■^^ K^^^ti«^5e>£.^£-0^, c-&-^^J^<~^t:^i^yC■^^^■^rv^ t Z Z'^O ^ff JJ^JZ^/J^ 4- Find the amount charged to Furniture and Fixtures, as shown by your trial balance (S231), and write it after Funittiitr and Fixtures in the first money column of your state- ment. 5. A depreciation of 10 % is allowed on furniture and fixtures. Write the amount of depreciation (S 23.10) after Less depreciation, subtract this amount from the amount of furniture and fixtures, and e.xtcnd the difference to the second column of your statement. 6. Write the amount of the inventory of merchandise after the proper title, in the second column. You should write Mr. Adams's name in place of Mr. White's, as the value of the merchandise is estimated by him. 7. Write the inventory of expense (S98.75) after the proper title. 8. Write in the i)roper place the amount of bills receivable, as shown by your trial balance. 9. Find the sum of the amounts owing the business on account by different persons, as shown by your trial balance, and write it after Open book accounts considered good. The persons who owe H. F. Adams are A. A. Knowles & Co., Dickson & Young, A. W. McKey, F. C. Tenney, F. H. Randall & Co., Rice & Pond, and E. Mason & Co. 10. Next come the liabilities. Write the amount of bills payable, Siiown by your trial balance, in the proper place. 11. Find the sum of the amounts that II. V. .\dams owes different pi^rsons on account, as shown by your trial balance, and write this sum after Open book accounts. Find the sum STATEMENTS — MAY 101 y^^-n.^e^'in.-r, ^^: j/,/f- iX-.d^^C^^f-Z'Cliii.^^.- 13 .*' // z-^:-i?2^ 15 —Z^?U..^-€^^?-2-^...'C<^c>-t^^^^ i;^c--z:^-i,«^^>^-2-^<^^ ^fCi^ / /pa 7^ i8 3-'3 3.08 4.28 423 4.18 3.56 3^6. 3^66 •055 ■06S .06J ■o6i ■osJ •05»! 1.06 ■90 .98! •99 i.iS 1.07 1.03 .86 1.02 7-05 7.22 7.06 13 4^32 436 2.88 3.22 432 3.52 .053 .061 .91 1. 14 .87 7.21 rKKE LISTS FOR MAV A\l) JUNK 10:5 Price Lists fok May and Juxic (C(intinucd) I 14 15 Japan . . . Oolnng . Ceylon . . Y. Hyson . Enj;. Breakfast Mocha . . Java . . . Maracaibo . Rio . . . W. Pepper . Cinnamon . Cloves . . Nutmegs Ginger . . The small inde; 25' equals 25^. lbs. I Ilf. Ch. 60 j 50 I Case 50 iHf. Ch. 70 60 Bale Mat Bag Box Pail Bo.\ Pail Box Pail Box Pail 150 75 1=5 125 10 25 10 25 10 25 10 25 32 55 61 43 50 28= '5 I6-! 27 40 23 65 29 •38 ■49 •52 ■37 .56 .27' .28= .16 •14' ■25 •38 ■25 .67 .38 16 40 52 47 35 53 30= 25'' ■3 17' 32 32 18 73 43 17 18 29 64 39 46 41 31 3'- 12 19 20 I 21 22 .28 •57 ■37 •47 .48 •29- .2& .14 .28 .40 .65 •53 23 .26 .69 •36 •49 .36 •24 •23 •19- .20 .29 •35'^ .21 .69^ •54 24 •30 .66 ■42 ■45 ■39 .28 .24- •I5'- .i8- •31 ■33 ■>9 •72 ■48 25 ■29 •58 .46 .46 •47 .26^ •29' •17 •13- ■27 •34 ■23 •71 •44 X figures used in the above price li-^ls iiulicate " fourths." Price Lists for June (Continued) luals 25- equals 25 ^. lbs. Flour, Northern Star Brl. '• Searchlight Pastry .... •• Graham Case H. O. Buckwheat •' Oatmeal. Pawnee Brl. Quaker R. O Case Sugar, Granulated Rice Corn Tomatoes . . . Beans, Lima . . Soap. Ivory . . Brl. Doz. Box 300 150 14 15 ' 16 I 17 4^34 4^36 4^34 4^32 293 3^i7 4.27 357 •05 1 •06J 1.04 1. 01 I 01 7.07 2.98 3^'2 4.22 3.62 •05 i .06J •92 '•I3 .89 7.19 4-38 4^30 303 3.07 4.17 3^67 .o6| .05} 1.03 1.02 •99 7.09 4.40 4.28 3.08 3.02 4.12 3-72 .051 .06J •93 1. 12 .90 7.18 18 4.42 4.26 2.89 3.21 4^3i 3^53 .06J •05? 1.02 • ■03 .98 7.10 19 4.44 4.24 2.94 3^i6 4.26 3^58 •osi .o6| •94 I. II .91 ^17 20 21 4.46 4.48 4.22 4.20 2.99 3.04 3^i' 3.06 4.21 4.16 3.63 3.68 .06J .055 1. 01 1.04 ■97 7.11 •051 .065 •95 I 1. 10 .92 7.161 22 4.50 4.18 2.80 3^30 4.40 344 •05 1 .061 1. 00 1.05 .96 7.12 23 4.52 4.16 2.84 3.26 4^36 3-48 •05 s .06; .96 1.09 •93 7^I5 24 4-54 4.14 2.82 3.28 4^38 3-46 .05 i .06J •99 1.06 •95 7-13 25 4.56 4.12 2.83 3^27 4^37 3^47 .061 •OS* •97 .08 94 14 104 MODKRN ILl.USrUATIVK BOOKKEEPING QUESTIONS I Explain the use of the cash book. 2. Where should cash received be entered? 3. Where should cash paid out be entered? 4. Wliat should the ditTerence between the sides of the cash book show? 5. Why should the cash book be balanced frequently? 6. When should it be balanced daily? 7. What ledger account does the cash book enable us to dispense with? 8. How sliould you show the balance of cash in the trial balance? 9. Explain the use of the sales book. 10. To what account in the ledger, and to which side of the account, should the footing of the sales book be carried ? 11. What should be the first entry in tlie journal-daybook of any business? i:. Why are persons debited from the sales book for merchandise sold them for cash, and then credited from the cash book for the cash paid ? 13. What is meant by indorsing a note? 14. What is bank discount? 15. For what length of time is bank discount always calculated? 16. How would you proceed to find the time of discount? 17. What entry should be made on the debit side of the cash book when a bill receivable is discounted? 18. What entry should be made on the credit side of the cash book in this case? 19. What entries should be made when a bill payable is discounted? 20. Define merchandise discount. 21. When is merchandise discount debited? When credited? 22. What is the difference between discount and merchandise discount? 23. To which side of the ledger should amounts on the left-hand side of the cash book be carried? To which side the amounts on the right-hand side? 24. How should the cash book posting be designated in the ledger? 25. Why sliould the terms of sale be shown in posting the sales book items to the ledger? 26. What is a bill of lading? What other forms are made out at the same time with a bill of lading ? 27. Explain in full the process of making and handling a set of these forms. 28. What care should be taken in writing a telegram? 29. How should figures be indicated in a telegram? 30. What is meant by repeating a message? What is a code? 31. Describe the process of shipping goods C. O. D. bv express. 32. Describe the method of entering C. O. D. sales in the sales book and in the ledger. 33. How should petty cash sales be entered? 34. In liow many scctioiis is the business statement closed? 35. What does the first section of the business statement show? The second section? 36. If there are outside speculations, what further closing would be necessary? 37. What three classes of resources are shown in the financial statement? 38. In making a financial statement, where would you find the cash on hand? 39. Where would you find the items comprised in "Properties as under" ? 40. What is comprised in " Sundry trade debtors '" ? Explain where tliese items are found. 41. Wh.it does "Sundry trade creditors"' include ? Where mav these be found ? 42. How is the proprietor's net investment found ? 43. How is the present worth of the business determined ? 44. Why must the present worth added to the liabilities equal the resources ? 45. What entries in your books should be made in red ink? SUPPLEMENTARV KXERCISK — MAY 105 SUPPLEMENTARY EXERCISE — No. 3 BANK DISCOUNT AND INTEREST On a sheet of journal paper arrange a cash book for the following transactions. You will need to rule one additional vertical line. Get a sheet of foolscap, on which to write the notes. For each of the following transactions, write the note and make the proper cash hook entries. Reckon interest and discount at 6% per annum unless otherwise stated. In discounting notes, always find first the due date of the note, tlien find the actual nuniljcr of davs from the date of discount to the due date, and calculate the discount for this time. TRANSACTIONS May I, 19 — . — You have on hand D. H. Farlev's note for $ 1200, dated this day, at four months. Have it discounted at the City Bank at 6 %. M.\Y 2. — Desiring to borrow money, you arranged with E. M. Parker to indorse a note of 54500 for you, pa\able at the City Bank in 90 days, and the City Bank has dis- counted this note and placed the net proceeds to your credit. (See No. 14, pages 79, 80.) May 3. — You have on hand H. G. Smith's note for $800, dated Jan. 16, at four months. Have this note discounted at the City Bank. May 4. — You have outstanding a note in favor of Reed & Barton, dated April 25, at three months, for 39SO, and you pay it to-day less the bank discount for the ime.xpired time. (Credit Discoitiit.) May 5. — You have on hand J. B. Freeman's note for $728.50, dated April 5, at four months. He pays it to-day in cash, less discount for the unexpired time. May 5. — You have on hand J. C. Schlueter's note for $2400, dated April 5, due 30 days from date, with interest ; he pays you to-day in full. In the above problem the interest should be found for the time of the note at 6 ';(,. In the cash book Cash should be debited and Bills Receivable credited fur the face of the note, with the explanation, /. C. Schtiieter note 4 1 5. Cash should also be debited and Interest credited for the amount of interest on the note ($ 12) with the explanation on above note. May 5. — Paid cash for my 6-months' note due to-day, favor of Clark & Harris, for ;Siooo, with interest. This problem is exactlv the reverse of the preceding one. Cash is credited and Bills Payable dil)ited. with Clark &-' Harris note 11I3 as explanation ; and Cash is credited and Interest debited, witli on above note as explanation. May 7. — You have on hand C. B. Fenner's note for $ 1 100, dated April 25, at 90 days. Have it discounted to-day at 5 %. May 7. — You have a note outstanding in favor of Charles Langdon for $ 1200, dated April 20, at four months. Langdon offers to allow you bank discount at 9 % for the un- expired time if you will pay now, and you accept the proposition, paying cash. May 8. — D. W. Evans & Co. owe you a note of $7000, dated Apiil 30, at four 1(1(3 MODERN ILLUSTRATIVE BOOKKEEPING months. Needing the money, you offer them bank discount at 8 % if they will pay the note to-day, which they do. M.w 9. — You have on hand Sam. F. Curtis's note for S I2CX3, dated April 20, at 60 days, with interest at 6%. Have it discounted at the City Bank to-day. In discountinsj an interest-bearins; note, the bank will first find the amount due at maturity. S. F. Curtis's note of .April 20, at 60 days, will be due June 19. and the interest on $ 1200 from April 20 to June 19. 60 davs, equals S12, which, added to $1200, makes $1212, the amount due June 19. This amount should be written on tlie face of the note, in red ink, by the bank teller. V'ou have the note discounted May 9. The bank teller will find the time from May 9, the date of discount, to June 19. the date of maturity (41 davsV and will compute the discount on ? 1212. the amount due at maturity, and deduct this discount from $ 121 2. leaving S 1203.72, the net proceeds of the interest-bearing note. In this transaction, you have received $1200 for the face of the note. In the cash book debit Casli and credit Bills Receivable for $ 1200, with the explanation i". /•"■. Curtis note 4/20. The bank allowed you S12 interest. Debit Cash and credit /«/rrrj/ for this amount, with the explanation on above note. The bank charged you discount, S8.28. Credit Cash and debit Discount for this amount, with the explanation 5. F. Curtis note 4/20. May 10. — You have outstanding a note for $ 1500 in favor of Barnes Bros., dated April 17, at 90 days, with interest at Y/t ■ Barnes Bros, need the money, and agree to allow you bank discount at 6% if you will pay the note to-day, which you do. (Credit Casli for interest; debit Cash for discount.) In this problem calculate tlie interest at 5 % and the discount at 67o- May 12. — You have on hand the noteof The Allen Chemical Company for $2650, dated April 12, at four months, with interest at 6%- Have it discounted to-day at the City Bank at 5%. May 12. — O. M. Curtis gave you a note March 13, at 60 days, for $890.75, with in- terest. The note is due to-day, and Curtis has paid you the amount due to redeem his note. May 14. — Your note for $746, in favor of G. W. Longlcy, dated Feb. 14, at three months, with interest, is due this day, and you pay the note and interest. May 14. — A. S. Hewitt's note of March 14, at two months, for S 722.87, with interest, is due to-day, and he has given you a check for the note and interest. May 15. — Your note for $ 1262.25, in favor of L. E. Pearson & Co., dated March 31, at 45 days, with interest at 5%, is due to-day, and you pay the note and interest. May 15. — You have your note for S825, favor E. C. Aver, and indorsed by him, dated this day, at three months, discounted at the Commercial Bank at 6^, and receive cash for the net proceeds. May 16. — Bank messenger returns to you the check of A. S. Hewitt, received by you and deposited May 14, marked " No Funds," with a request for your check to cover same, which you give. (Debit A. S. Hewitt.^ May 17. — The note of H. G. Smith, which you discounted at bank May 3, has been protested for non-payment, and you have been obliged to "give your check for the face of the note plus protest fees, §2.50. (Debit Protested Paper for the total amount, which you wUl endeavor to recover from Smith.) DRAFTS — JUNE The business practice for the month of June, beginning on page 1 15, is a continuation of that for the month of iVIay, with several additions, including drafts. As the subject of drafts sometimes gives trouble, the student should study it now until it is clear to him, before being called upon to handle that form of commercial paper in his vouchers. A Draft is an order from one person, firm, or company on another to pay a certain sum of money, unconditionally, to the order of some person, firm, or company named in the body of the draft. Form of Sioht Draft, Three PARxrES '■''"->**^~t^-i^~^^^-t^4+M^HiP ^E£| ^g^-gst^^-:?-? jx^^ ^^^(^^^ ^y^//i/AJ ^^. C^M/^.^^ry/fA?r/';y7//7^/^rA^^ ^:'-?^^ t4aH4 W-H ' H444tWiliWM 'n»ffi In the above draft Chas. Rand orders \Vm. French to pay to the order of Adams & Raker ^300. It is presumed that Wm. French owes Chas. Rand this amount, and that Chas. Rand is indebted to Adams & Baker, and gives them this order on Wm. French in payment of his indebtedness. Parties to a Draft. — The "drawer" is the person, firm, or company that writes or draws the draft. In the form of draft given above the drawer is Chas. Rand. The "payee" is the one to whom the draft is made payable. In the form of draft given the payee is the firm Adams & Baker. The "drawee" is the one on whom the draft is drawn. In the preceding form W'm. French is the drawee. General Rule for •ToiiriKtlizhiij Draffs Tlic draiucr akvavs credits the drazucc, and the drawee always debits the drawer. COURSE OF PROCEDURE WHEN A DRAFT IS DRAWN Chas. Rand owes Adams & Baker and wishes to pay them S 300 on account. Wm. French owes Chas. Rand and is willing to pay to him, or to his order, §300. Therefore the 107 108 MODERN ILLUSTRATIVE BOOKKEEPING following transaction is carried out: Chas. Rand writes an order, or draws a draft, June i, on Wni. French, requesting him to pay to the order of Adams & Baker S300. The drawer should, in every case, notify the drawee that he has drawn on him ; or. better still, notifv him in advance that he will draw on him at a certain date, for no one is obliged to accept or pay a draft drawn on him by a creditor. Drawer's Entry. — Having drawn the draft, Rand gives it to Adams & Baker and makes his journal entry, since the transaction is completed so far as he is concerned. Rand has given Adams & Baker the order, which will be worth S300 to them when presented to Wm. French for payment; therefore, Adams &■ Bahrr should be debited $300, the amount they will be paid. This amount, $300, will be paid by Wm. French, therefore Wm. Frcucli should be credited the same as if he had paid the amount to Rand instead of to the person Rand designated in the draft. The following is the journal entry required in the drawer's books for the above draft. J <^ c ^ e> 9i^f tf-rty^ -^,^^2 L^*a*yU^ .a.^-«^*^^»^ ^^^'^ J a o DRAFTS — JINE 109 Rule C — Drazvcc s entry for a sight draft paid is Drazver, Dr. and Cash, Cr. When a draft is paid, it is kcjit by the drawee, as evidence of the payment. Ex. I. — Edward Martin draws a sight draft on B. W. Hammond, June i, requesting him to pay to the order of Chas. Carter $400, which he does the same day. Write the draft and make the entry of each party to the transaction. For this and the following e.\amples, page 1 10, use foolscap paper, or foolscap and joiu-nal paper. Form of Time Draft, Thrke P.\rties $ f/9tP.- Bocbrstrr, fi. ^.. /.^ ^^ Z 10 ^ y^^^J^y .^^^^l^^.^-z^fUy^^.^.-^'f'^f^^^ tbf ortcr ^ap to ^^,^>7 ^^--^^^^^^ BoIIars JPalut receitorb anD cljargr tbr oaim to account of Co r^ ^ -A-f T-Z-T^y, ftti.^A^ ^^y-^-^T^^y^^^^A,-' '^^^.^^^y. Time Drafts. — The above draft, instead of being payable at sight, is not payable until 30 days after its date, or July 2, and is called a time draft. This draft, as soon as received by the payee, Edward Curtis, should be taken to the drawee, D. H. Parsons, who, if he decides to pay it, will write Aeeepted across the face, and sign his name, as shown above. This is generally done in red ink, though the color of the ink is unimportant. For this draft, the drawer's entry will be the same as in the case of the sight draft, for the payee has received value, and should therefore be debited, while the drawee is to pay the draft when it falls due, and should therefore be credited. The payee, however, instead of receiving cash from the drawee, Parsons, has received a promise to pay in 30 days ; for writing the word " Accepted," and signing the name across the face of a draft, constitutes at law a promise to pay. This promise to pay is a bill re- ceivable to the holder, therefore the payee's entry should be as follows. ^017 t^i'd' Sule D. — The payee's entry for a time draft accepted is Pills Receivable, Dr. and Drawer, Cr. When this draft is presented to D. H. Parsons, and he writes Accepted, D. If. J\irsotis across its face, he agrees to pay it in 30 days after June 2, anil the draft at once becomes 110 MODERN ILLUSTRATIVE BOOKKEEPLVG to him a bill payable. He should debit the drawer, ^^. F. Archer, since it is for him that he has assumed this obligation, and should credit Bills Payable, since he has issued his written promise to pay S900 in 30 days after June 2, or on July 2. The following should be Par- sons's entry when he accepts the draft. ^e>ff t^iffi HxUe E. — T/ic draivcc's entry for a time draft is Drawer, Dr. and Bills Payable, Cr. Ex. 2. — Geo. W. Allen draws a draft on Chas. W. Clinton for $500, June 2, at 45 days from date, in favor of P. Y. Black. Write the draft as accepted by Chas. W. Clinton, and make the journal entry of each party to the transaction. Two-party Drafts. — The draft is used extensively in business for the purpose of collect- ing accounts that are past due, and instead of the promissory note in ordinary sales of merchandise. In these cases, the draft is made payable to the order of the drawer, and is generally collected through his bank. Form of Snarr Dk.\ft, Two Parties . .f^/ / ^.■■. a linU- /•'. — When the drazcer is also the payee, he credits the drai>. ::i ^rook.l>^, N.Y.,. 7. the order of 1 yC/^.^17-1-^^^-. a C >f^^ . <^^7^ ^y'/, 19. /) Pay to -N ^.^^vk — '^-^^^^^.^f^^. \ ■^^^-^ y ^TTT^ Dollars Value received and charge ^te same t<^ ace6lint of To_ No BANK DRAFTS In business a large proportion of remittances are made by means of bank drafts, which are accepted as cash. Form of Bank. Draft A bank draft, it will be seen, is an order from one bank on another, requesting the pay- ment of a sum of money, unconditionally, to some person, firm, or company named in the body of the draft. Such drafts can be purchased at any bank for a small sum in excess of the amount for which they are written. It is the custom of every bank to keep on deposit a certain amount at some bank in the commercial center nearest to its place of business. For instance, each bank in the northeastern states will have a deposit with some bank in Boston ; each bank in the middle west with some bank in Chicago; each bank in the southwest, with some bank in St. Louis ; each bank on the Pacific coast, with some bank in San Francisco ; and every leading bank in the United States will have a deposit with some bank in New York, since New York is the Commercial center of the United States. In the case of the draft shown in the illustration, let us suppose that Emerson Bros, of St. Louis, Mo., wish to send the Eastman Kodak Co. of Rochester, N.Y., $590.50, to pay 11: MOUERN ILLUSTRATIVE BOOKKEEPING for an order of goods to be shipped at once. If the Eastman Kodak Co. are not acquainted with F.merson Bros., they would probably hesitate to accept their personal check for so large an amount as S 590. 50, and would delay shipment of the goods until they found out whether or not the check was good; therefore, Emerson Bros, make out a check like the following. 5^^.£^.: ^ KTrfK! n ■^-<»7-^-^-4 //J^ . ^f^>^. '/ Emerson Bros, take the above check to the Traders National Bank of St. Louis. The bank will charge a small fee for exchange (in this case 50^), which is included in Emer- son Bros.' check, and will make out a draft similar to the form on page in. Some business hou.ses have these remittance drafts made payable to the order of the person to whom they arc to be sent, but the better way is to have the draft made payable to the order of the sender, who will indorse it over to the order of the person to whom it is sent. When this is done, the draft itself, after it has been presented and paid, becomes a receipt for the amount named in its face. In this case, the draft would be indorsed as shown below. It would be accepted as cash by the Eastman Kodak Co., and they would place it as a deposit ■rh:::^^^^^^^^ DRAfTS — JUNE 113 ill their bank in Rochester. Tliis bank woiikl forwartl the draft to the bank with which it does business in New York, and the draft woukl be presented to the Seaboard National Bank of that city, and that bank would pay it and charge the amount to the Traders Bank of St. Louis. The draft would be returned to the Traders Bank as a voucher and would be kept by that bank. EXERCISES IN JOURNALIZING DRAFTS In the following exercises it is required that the student write each draft, with such indorsement or acceptance as it should bear, and make his journal and cash book entries on foolscap or journal paper. If the te.icher dt-t-ms it advisable, lie may require the student to make the journal and cash book entries of all parties to these drafts. JuxE I, 19 — . — Emmons, Hvde & Co., of Chicago, III, have agreed to honor your draft at sight for $600, favor of K. L. Martifi, and you draw on them accordingly. (See rule A, page 108.) June 2. — Draw on Geo. C. Chase, Manchester, N. H., for $275 at 10 days' sight, in favor of Wm. Darling & Co. (See rule A, page 108.) June 3. — S. A. Dodge & Co., Millbury, Mass., have accepted your draft, dated June 2, for $ 800 at 60 days after date, in favor of yourself. (See rule F, page 1 10.) JuxE 4. — Draw on John Reynolds & Co., St. Louis, Mo., for $250 at sight, in favor of yourself. Deposit the draft in your bank (College Bank; indorse correct!}'), and receive credit for its face. (For proper cash book entry, see rule F, page iio.) June 5. — O. H. Waters, Boston, Mass., has accepted your draft, dated June 5, for $ 1200 at four months after date, favor of yourself. Have it discounted at the College Bank and the net proceeds placed to your credit. Prepare a discount slip, treating the draft exactly as you would a four months' note of a similar amount and date. For the above transaction, some bookkeepers would make a journal entry, debiting Bi7/s Receivable (see rule F, page no) and crediting O. H. Waters, after which they would make a cash book entry, debiting Casli and crediting Bills Receivable ; also crediting Casli and debiting Discount for the discount. But the journal entry is unnecessary, since the bill receivable does not remain in your possession. The better method would be to debit Cash for the amount of the draft and credit O. H. Waters in the cash book, writing draft at 4 ntos. in the second wide column of the cash book; then credit Cash and debit Discount, writing O. H. Waters dft., 122 das. in the second wide column on the credit side of the cash book. June 6. — Wm. Parsons & Co., Worcester, Mass., have drawn on you at sight through the College Bank, for $650. You pay it by check on the College Bank, where you have a deposit. (See rule C, page 109.) June 8. — You receive from T. W. Preston, Toledo, Ohio, a draft dated June 5, drawn on you at 30 days after sight, favor of himself, for $200. Accept the draft, payable at your office. (See rule E, page no.) June 8. — Ward Bros., El Paso, Texas, who owe you on account, send you a sight draft on Thomas Traynor & Co., Buffalo, N.Y., in your favor, for $ 300, and you place the draft in the College Bank with your daily deposit, receiving credit for its face. (See rule B, page 108.) June 9. — Fred Kemble & Co., Concord, N.H., owe you on account, and they send you 114 MODERN ILLUSTRATIVE BOOKKEEPING a draft at ten days from date, for S4000, on A. B. Collins, Pittsburg, Pa., to apply on account. Receive it at its face value, and give it to the College Bank for collection. Do not forget to indorse properly. (See rule D, page 109.) June 10. — You owe Chas. Farnham & Co. S510 on account, and you give them a sight draft on H. A. Bowen, Portsmouth, N.H., for the amount. Ju.\E II. — You owe O. D. Byron S240 on account, and in payment you give him a draft on C. P. Larcuni, Syracuse, N.Y., at 10 days after date for this amount. Ju.NE 12. — Geo. P'arrish & Co., who are indebted to you, indorse over to you a draft drawn by them, in their favor, on Amos Martin, Philadelphia, Pa., for S4S5, dated June i, at four months from date, and accepted by Martin. You receive the draft and give Farrish & Co. credit for its face, less bank discount at 6% for the unexpired time. (Find the due date of the draft, and discount it for the time between June 12 and the due date.) June 13. — You have in your possession a draft drawn by yourself, June 4, on J. C. Dennis & Co., Brooklyn, for 1S915, at 90 days from date, and accepted by J. C. Dennis & Co. You give this acceptance to J. L. Osborn & Co. on account, indorsing it properly, and they allow you its face, less bank discount at 6% for the unexpired time. (Find due date and discount for unexpired time.) June 13. — You have the acceptance of S. A. Dodge & Co., dated June 2, discounted at the College Bank, and the net proceeds placed to your credit. 1 land the journal sheet containing the journal and cash book entries for the above trans- actions, and the drafts which you have written, to your teacher for examination. Be sure you understand each transaction before proceeding. WHOLESALE GROCERY BUSINESS — JUNE H. F. Adams is desirous of adding a line of standard groceries to his tea, coffee, and spice business, and has admitted you as an equal partner. Mr. Adams is to do all the buy- ing for the new firm and also to spend a part of his time as traveling, or outside, salesman, while you are to take full charge of the books and attend to the payment of bills, write all notes, checks, drafts, and other negotiable paper of the firm, and attend to the management of the store. Books Kept. — In this month's work you will use, in addition to the books already in use, the invoice book and bill book. The Bill Book contains a list and a brief description of all notes which come into the business or which are given by the business. When notes are received or given, the infor- mation called for should be written under the proper headings, as shown in the bill book (see model, page Ii6). This model contains the proper entries for all notes received and given during the month of May. N.B. — You may copy the entries found in the model bill book into your bill book e.xactly as they appear in the model. Your bill book will then show all notes on hand and outstanding at the beginning of the month of June. The Invoice Book is generally made up of the original invoices, which are pasted in the book as shown in the model on page 1 17, the amount of each invoice being carried into the money column of the invoice book, as shown in the model. When bills are received, after they have been O. K.'d, paste them in your invoice book, taking care that the right-hand edges of the bills do not extend into the money column of the invoice book. A good plan to pursue in tliis work is to lay the invoices in the invoice book as you receive tliem, until you have accumulated from four to six bills. Then ask your teacher to show you how to paste them in the book. In actual business, the bills are usually pasted in the invoice book at the end of each day. It will be seen that the money ciiliuTin of the invoice book should contain the amoimt of all merchandise bought by the business, and therefore the footing of this money column should be the debit of the Merchandise account. It will no longer be necessary to enter merchandise purchases in the journal, but at the end of the month, or at such periods as may be desired, the total footing of the money column of the invoice book should be carried to the. debit side of the Merchandise account; postmark by writing the page number of the invoice book in the folio column of the ledger, and the ledger page of the Merchandise ac- count in the folio column opposite the footing in the invoice book. The amoiuit of each bill should be posted directly from the invoice book to the credit of each person or firm from whom the merchandise is purchased, and the page of the account in the ledger should be written on the invoice itself, as shown in the model on page 1 17. Grouping Invoices in the Invoice Book. — It is customary in some houses to file the invoices until the end of the month. Then they are pasted in the invoice book, but all invoices of any one firm are placed togetlier and only the total amount posted to the firm's account in the ledger. Where this plan is practicable, consider- able labor is saved in posting, and the accounts in the ledger are considerably condensed. 115 110 MODERN' ILLLSTKATlVIi UOOKKELPING -J oa < > E U UJ ' >h— .1: * > i w J S J cy , \ -Y 5 i >- < £ f k » ) < i 11 4^ -J '^ •»' C/) -J -J ? ^ 1'. « MODEL INVOICE liOOK 117 118 modern illustii-vtlvk u(jokk.eeping Form of Articlks of Copartnership Articles of Copartneksiiip, made the fust day of June, one thousand nine hundred and . . . , beliceen f. B. Lauison, of Manchester, X.H., of the first part, and Frank W. Garland, of Boston, Mass., of the second part, zvitnesseth as follows : The parlies hereunto, Iiaving mutual confidence in each other, do this day form with each other a copartnership under the firm name of J. B. Lamson & Co., for the purpose of couduct- iug a wholesale business in tea, coffee, spices, and general groceries, at 241 Chestnut St., Man- chester, N.H., under the following terms and conditions, to wit: First. That the said f. B. Lamson of the first part shall contribute the entire resources of his late business located at 241 Chestnut St., Manchester, N.H., as shozvn by his financial statement prepared May ji, jgoo, less the liabilities, as shozvn by that statement, which liabilities are to be paid by the firm off. B. Lamson & Co. The total net investment off. B. Lamson, as shown by these statements, is $ 724J. Second. The said Frank IV. Garland of the second part shall contribute cash to the amount of $ 724^. Third. The capital so formed is to be used and enjoyed in common bctzveen them for the prosecution and management of said business, to their mutual benefit and advantage. Fourth. Both parties shall devote their entire time to the business, and shall share gains and assets equally, and bear losses equally, f. B. Lamson is entitled to drazv a salary of $ J2j per month, and Frank IV. Garland is entitled to drazo a salary of $100 per month from the funds of the business. Fifth. The said f. B. Lamson hereby guarantees that all notes and personal accounts due J. B. Lamson, and invested by him in the firm of f. B. Lamson & Co., shall be zvorth their face value, less any regular trade discounts to which they may be entitled. In Witness Whereof, the parties hereto have hereunto set their hands and seals, in dupli- cate, the day and year first above written. J. R. Lamson. [l. s.] Signed, sealed, and delivered) Frank. W. Garland, [l. s.] in the presence of \ F. W. Earl. TRANSACTIONS No. 67. — June i, 19 — . H. F. Adams and you have agreed to form a partnership, to carry on a wholesale grocery business as a continuation of Mr. Adams's tea, coffee, and spice business. You are to invest a cash sum equal to the present worth of Mr. Adams at the close of May. The gains and losses of the business are to be shared equally. Each partner is to give his full time to the business, and H. F. Adams is to draw a salary of $125 per month and you a salary of $ 100 per month. The firm name is to be H. F". Adams & Co. Prepare articles of copartnership between the two partners, yourself and H. F. Adams (see model above). For amount of each one's investment, sec H. F". Adams's present worth, financial statement May 31. Present this co]:)y to your teacher for approval, and make such changes as he may suggest. Copy carefully, in ink, on legal cap, the corrected articles of copartnership and present to your teacher, who will sign for H. F. Adams. Sign your own name below that of H. F. Adams, and affix seals. Ask some one to sign as witness in the left-hand corner opposite the names of yourself and H. F. Adams. In busine.ss a lawyer experienced in partnership affairs should prepare these articles of copartnership. Two copies should be made, one for each partner. BUSINESS PRACTICE — JUNE 11<) Fold the articles of copartnership twice from bottom to top, and brief them by writinj^ on the back, of the left-hand end, at the top, the following : Artichs of Copartnership between H. F. Adams rt«(/ (Student's namQ), June i, ig — (current year). Fill the blanks in the bill of sale (No. 67), attach a copy of the May financial statement, and put it in your Voucher File. In your Cash Drawer is A. W. McKey's note. Indorse it Pay to the order of H. F. Adams &• Co., and sign the name H. J''. Adams. Write a check in favor of H. F. Adams & Co. for the amount of II. F. Adams's balance in Commercial Bank, as shown by the stub of your check book ; sign it as yiiu signed checks in May. The transactions described in this paragraph are necessary to transfer the property of the business of H. F. Adams to the new firm H. F. Adams & Co. Make no book entry for them, because you are going to treat the June business as a continuation of the May busi- ness, instead of opening a new set of books. Make your investment in the business by check No. 67 on your own private account in the Bank of Monroe. Detach the check from the voucher pad and fill it out for the proper amount. Sign your own name to it. Enter the amount in the cash book on the first line below the balance for June i, crediting yourself for investment. Deposit Adams's check and your own check. Be sure to enter this deposit on your check book stub so that your check book will show the correct balance in bank. How will you indorse these checks .' N. B. Ytiu should no longer sign or indorse checks and other papers with your name as attorney, for you are now a member of the firm of H. F. Adams & Co., and have the same right to sign checks and other papers that Mr. Adams has; but, in order that your teacher may be able to identify your work re.adily, write By and your own name under that of H. F. .-^dams & Co. on all paper you may have occasion to indorse or sign. No. 68. — JuxE I. Write a cash check on the Commercial Bank (see form below) for $200, get the cash for it, and put the money in your Cash Drawer. Such a check requires no indorsement. ^^.t^fi^, viffe^r. // ///_ , fo ^^ e f^^ '"order of -1^..^.^y ^ f/'^ ^^ y- No. 69. — June i. Pay this bill for stationery. Write a check for the amount and place the receipted bill in your Voucher File. Place the check in Cash Paid Out. Make the proper entry in your cash book. No. 70. — June 3. Bought merchandise of the City Mills Company. E.xamine the invoice and see that the multiplications and addition are correct. Mr. Adams's " O.K." appHes only to the terms, quantity of goods, and prices. If you find any 120 Mor)i:RX illustrative bookkkepixg error, ask your teacher (representing City Mills Company) what to do. If you find the invoice correct, O.K. it, paste the invoice in your invoice book, and write the amount of the invoice in the money column of the invoice book (see model, p. 117). No journal entry is required for this transaction, for, as e.xplained on p. 115, postings are made directly from the invoice book. No. 71. — June 3. Bought merchandise of Reynolds, Davis & Co. This transaction should be treated in the same manner as No. 70. No. 72. -June 4. You now take out a policy of insurance on your stock of merchan- dise for S 3000 at I % premium. Write a check for the amount of the premium. Place it in your Cash Paid Out envelope. Place the policy in your Voucher File, and make the proper cash book entry (see transaction No. 30, page 86). No. 73. — June 4. You have outstanding a note in favor of L. Hennes & Co., for S 1505, which is due 60 days after date. May 2. This note will not fall due until July i, but as you have money in the bank which you do not need to use in your business at present, you may pay it now. It is the custom in business to allow discount for the unexpired time on all notes paid before due, and L. Hennes & Co. have agreed to allow bank discount at the rate of 6% per annum. Calculate the discount on the amount of this note for the time which it still has to run (from June 4 to July 1 = 27 days). Subtract the discount, S.x..\x, from the amount of the note, and write a check for the balance. Place the check in Cash Paid Out. Receive the note from L. Hennes & Co. by taking it from your Bills Payable File ; write Paid, June 4, ig — , across its face, and ask the teacher to sign the name L. Homes &■ Co.; and place the note in your Voucher File. This transaction calls for two cash book entries. Credit Cash for the full amount of the note, and debit Cash for the amount of the discount. In your bill book under "When and how disjjosed of" write ijoj in the amount column, J/itie 4 in the date column, and Dis. and the amount of the discount in the explanation column. Rule 23. — Discount is credited zuhen discount is a/loived to the business on a note or draft ; for then it saves or produces value for the I'usiness. Form of Notification of Dr.\ft Rome, N. Y., June 1, 19 — . Messrs. White, Smith & Perry, 262 Brown St. , j Providence, R. I. Gentlemen, — We have this day drawn upon you at sight, in favor of A. V. Jackson & Co., for $225. Please honor the draft. Yours truly, ' ■ Williams & Raymond. ^ BUSINESS PRACTICE — JUXE 121 No. 74. — June 5. Draw at siyht 011 Rice & Poml, of Georj^etown, for $265, in favor of E. Westen Tea & Spice Co., and .send the draft to balance your account with the latter firm. Write the draft, following the model on page 107. Inclose it with a letter properly ad- dressed to E. Westen Tea & Spice Co., advising them of the remittance. Write a letter to Rice & Pond, notifying them that you have drawn on them at sight for $265, and request them to honor the draft (see model, page 120). Referring to Rule A, page loS, make your journal entry. Place both letters in Vouchers for Others. No. 75. — June 5. F. C. Tenncy has agreed to honor your draft at sight for $90. Draw on him in favor of C. K. Fo.x. This transaction is similar to No. 74. Proceed in the same way. Why do you debit C. K. Fox? Why do you credit F. C. Tenncy? No. 76. — June 5. On A. W. McKey's order of goods you will allow 1% discount in consideration of McKey's accepting a draft at 30 days from the date of the sale. Make a bill, checking off each item on the salesman's order. Enter the sale in your sales book for the full amount and place the bill in your Vouchers for Others. Using the forms on pages 109, 11 1, as models, draw a draft at 30 days for the amount of the bill, less l %. Do not write Accepted ?lcxos>s the face, but take the draft to your teacher, who will accept it for Mr. McKey by writing Accepted, with the name A. IV. Jl/cA'cr, across the face of the draft. When he has done so, enter the accepted draft in your bill book, after which place it in your Cash Drawer. This transaction requires a journal entry of two debits and one credit. (.See rule F, page 1 10, and rule 20, page 79.) Submit entry to teacher before placing it in your journal. No. 77. — June 6. Mr. Adams sends in this order from F. C. Tenncy. This transaction is like No. ^6, except that you allow a discount of 3 '/c for payment by a ten-day acceptance. Make out a bill and verify your calculations. Draw a ten-day draft on F. C. Tenney for the amount of the bill, less 3 %, get it accepted, and make proper entries. No. 78. — June 6. Bought merchandise of West, Stone & Co. Mr. Adams has agreed to accept a draft at 10 days, and the draft ready for acceptance accompanies the invoice. See that the invoice is correctly made, and if the amount is correct, write across the face of the draft, in red ink. Accepted, payable at Commercial. Bank, H. F. Adams & Co. by, and your own name. Return the draft thus accepted to West, Stone & Co. (by placing it in your Bills Payable File), after you have entered it in your bill book. Paste the invoice in your invoice book, and enter the full amount in the money column (at the proper time you will post it from this book to the credit of West, Stone & Co., and will include it in the amount posted to the debit of Alercliandise'). Make a journal entry for the draft and the 3 % discount allowed. (See rule 16, page 29, and rule 19, page "]?>.) No. 79. — June 7. This order from A. A. Knowles & Co. comes in with a check for $600 to apply on account. Make bill, verify your calculations, and enter in the sales book. Place the check in your cash drawer and make the proper entry in your cash book. No. 80. — June 7. Deposit in your bank the check received from A. A. Knowles & Co., and have the two acceptances received June 5 and 6 discounted and the net proceeds placed to your credit. Also leave for collection the note of A. W. McKey, which is due June 10. See that your note and acceptances, as well as the check, are properly indorsed. ]±2 MODERN ILLUSTRATIVE BOOKKEEPING Make out a separate discount slip for each of the acceptances. Make cash book entries and enter the acceptances in the bill book under " When and how disposed of," on the same line with the original entries, writing the face of each in the amount column, and Dis. and the amount of the discount in the space for " Remarks." Your bank pass book should show a separate entry for each acceptance. Do not forget to enter the net proceeds of the two acceptances and the deposit separately on the stub of your check book. Make no entry in your journal or cash book for the note left for collection, but in the " Remarks" column of the bill book, write For coll. Coml. Bank, June 7, ig — . This note should be entered on the last page of your bank pass book under the heading Collections. (If you have no bank, write the heading Collections at the top of the last page, and below it, in proper columns, ig — , June 7, A'ote A. IV. McKcy, joo.) You will be notified when the note is paid, and the amount will then be placed to your credit in the pass book the same as a deposit. Some banks give a receipt for notes and other paper left for collection, instead of entering them in the back part of the pass book. Others enter all sucli paper in the regular place in the pass book, short extending the amount (th.it is, writing the amount in the explanation column and not in the money column). Then after the collection has been made, the amount is entered in the regular money column by the bank bookkeeper. No. 81.— JuxE 7. EIGHTH Rl-:PORT. Make out your report and hand it, with Vouchers for Others and Cash Paid Out, to your teacher. Do not balance the cash book at this point, but if your cash book pages are nearly filled, rule and foot them in red, writing the word Ford, on the line with the footings on both pages ; and transfer the footings to the following pages, in black ink, with the explanation Brot. Ford. See page 83 for these forms. No. 82. — June 8. Pay City Mills Co. for bill of June i, deducting a discount of 3%. Calculate the discount and make out a check for the balance. Write a letter to go with the check, inclose them in an envelope properly addressed, and place in Vouchers for Others. Be sure to make proper entries in the cash book and on the check stub. No. 83. — June 8. Purchased merchandise of City Mills Co. Verify the invoice and paste it in your invoice book. What should you do if you find an error in it .'' No. 84. — June 10. Pay invoice of Reynolds, Davis & Co. by check, less discount. No. 85. — June 10. Fill E. Mason & Co.'s order, making an invoice and bill of lading as usual ; draw a draft as requested; enter the draft in your bill book; and leave the draft at your bank for collection, having it recorded under Collections in your bank pass book. This draft, when accepted, will become a bill receivable. If you should send the draft to Mason & Co. for acceptance, you would make no entry at the time, in either bill book or journal, but would await its return from them. Instead of doing this you have placed the draft in the bank for collection, which is the ordinary method of handling such paper. As Mason & Co. have agreed to accept it, you may debit Bills Receivable and credit them. No. 86. — June 1 1. This order for Fletcher Bros, has been handed in by Mr. Adams. Make a bill, and do not forget to check off the items. Be sure your calculations are right. Charge Fletcher Bros, in the sales book with the full amount of the bill. No. 87. — June 12. This check has been received in payment of merchandise delivered yesterday to Fletcher Bros., less 3 % cash discount. Credit them on the debit side of cash book for the full amount of the bill, as shown in your sales book. Debit Merchandise Discount on credit side of cash book for the amount of the discount. BUSINESS rRACIICE — JUNE 123 No. 88. — June 12. This hill is for freight and drayage on all goods received up to date. Pay it in cash. Place the proper amount of cash in your Cash Paid Out envelope, and place the receipted bill in your Voucher file. No. 89. — June 12. On May 5th H. V. Adams borrowed from the bank $ 5000, to pay for the building and lot, No. 246 Main St., giving a four months' note for the amount. As you now have several thousand dollars in the bank, for which there is no immediate use, you have decided to pay this note, as discount will be allowed for the unexpired time. The note has 85 days to run, and the discount on $ 5000 for 85 days is $7x.x^. Make a check for $4gxx.xy, take it to the bank teller, and receive the canceled note. If no bank is used in connection with these transactions, the note will be found in Bills Payable File. Take it from the tile, write PtuW, June 12, ig—, across the face of tlie note and ask the teacher to sign for the bank. Place the check in Cash Paid Out, instead of giving it to the bank teller, and place the note in your Voucher File. Make proper entries in your cash book and bill book. In the bill book, under "When and how disposed of," on the same line with the original entry of the note, enter the face of the note in the amount column, and write Z^w. and the amount of the discount under " Remarks." No. 90. — June 12. This order from F. H. Randall & Co. comes in with a check for $500 to apply on account. Make the bill and enter in the sales book. Credit F. H. Ran- dall &• Co. in the cash book for the amount of the check. No. 91. — June 13. This invoice has been purchased from Reynolds, Davis & Co. Verify the calculations and paste the invoice in the invoice book. No. 92. — June 13. Take from your Cash Drawer ^100 in currency, and also the checks of Fletcher Bros, and F. H. Randall & Co. Deposit these in the bank, and ask the teller if the interest-bearing note of A. W. McKey, dated May 31, and left by you for collec- tion, has been paid. It has been paid. Therefore, ask him for the proper credit in the bank pass book. On a slip of paper calculate the interest on this note for 10 days, and add the amount of the interest to the face of the note. This is the amount which should be placed to your credit in the bank pass book. If your interest calculation is correct, the bank clerk will give you credit for the amount of the note, which is its face plus the interest. ( If no bank is used, enter the ainount yourself.) Add this amount to your bank balance on the stub of your check book, and also add the amount of the deposit slip. You have received $701.17 in cash. Of this amount $700 is for bills receivable, the amount of A._W. McKey's note ; therefore. Bills Receivable should be credited for $ 700 in the cash book, with the explanation, A. W. McKc/sjiote j/ji. The remaining $1.17 has been received for interest, and therefore Interest should be credited in the cash book for that amount, with the explanation, on above note. Make proper entry in the bill book. liule 24. — -Interest is credited zvkcn interest is allowed to the business by others ; for then it produces value for the business. No. 93. — June 13. Your acceptance of June 3 is due to-day, and as it was made pay- able at the bank, it should be charged to your account. Take this acceptance from the Bills Payable File, and present it to the bank teller, requesting him to charge it to your account. (In business the draft would be presented by West, Stone & Co.'s bank.) He will keep the draft and return it to you canceled, together V2i MODERN ILLUSTRATIVE BOOKKEEPLN'G with the paid checks, when your bank book is written up. If you have no bank, write Paid, June 13, ig — , across the face of the draft, and enter it on the credit side of your bank pass book, pkicing the canceled draft in your Voucher File. Make an entry in your cash book, to show that the acceptance has been paid. What account should be debited .' Why .'' In your check book on the stub deduct this amount, Shi 1.62, from the amount on deposit, as shown by the balance of the stub. Why should this be done.' Some banks would require a check in favor of the bank for the amount of the acceptance and would deliver the paper at once. No. 94. — June 14. This order for Rice & Pond has been sent in by Mr. Adams, who is on an out-of-town trip. Desiring to take advantage of the discount, Rice & Pond have given him their note at four months, with interest, for S 1000, to pay the balance of their old account and to apply on this order. They agree to accept a sight draft for the balance of the order, whatever it may be, or will send check on receipt of bill. Deduct 3% on the face of the invoice, but enter the full amount in the sales book. Make proper entry for the discount and note in the journal. Also enter the note in the bill book. Do not draw at sight for the balance, as the amount is small, but allow it to remain on account. No. 95. — June 14. This order from Thos. Varick & Co. is sent in by Mr. Adams, who vouches for the financial standing of the firm. They ask regular ten-day cash discount, and agree to honor a sight draft in ten days. Make out the invoice and bill of lading as usual, and draw a sight draft for the amount of the invoice less 3 %, dating it ten days ahead, or June 24. Write a letter to accompany the bill, informing Varick & Co. that you will draw on them in ten days for the amount of the hill less 3%- Inclose invoice, letter, and bill of lading in an envelope properly addressed. Put the draft in your Cash Drawer after pinning to it a memorandum of the cash book entries to be made when the draft is disposed of — namely, Cash Dr. and TIios. Varick Sf Co. Cr. for the gross amount of invoice, and Casli Cr. and Mdse. Discount Dr. for the discount. On June 24, or two or three days before, you will place the draft in bank for collection, or deposit it. You will be reminded when to do this. No. 96. — June 14. Pay your invoice of June 5, City Mills Co., S1266, less 3% dis- count. Calculate the discount, which will be $3.\.x8. Write a check for the amount due. Inclose the check with a letter, advising them of the remittance, in a properly addressed envelope, and place in Vouchers for Others. Make the proper entries for the transaction. No. 97. — June 15. This jnirchase has been made from Smith, Perkins & Co., and you get 3 % discount in consideration for giving an interest-bearing note. Write a note at 15 days, with interest, for the amount of the invoice less 3%. Make proper entries. Place the note in Bills Payable File. No. 98. — June 15. SHIPMENTS. This letter suggests a shipment of merchandise to another person, to be sold on commission; such transactions are not at all uncommon in business. When, for any reason, goods are not selling well in any particular locality, it is often good policy to send them to a commission merchant in some place where there is likely to be a better demand for them. The commission merchant sells the goods, and after taking a certain per cent for commission, and deducting other charges, sends the balance to the person who shipped the goods. A quantity of goods shipped to be sold on commission is designated as a " shipment." The shipment is entered in the sales book under the title SHIPMENTS — JUNE 125 " Shipniciit to (the name of tlic commission mcrcliaiil)." The shipment is charged for the regular cost price of the merchandise, and if any charges have been paid, the shipment is also debited for these in the cash book. An account is opened in the ledger with each shipment. If two or more shipments are sent to the same firm, separate accounts are opened with Slupiiuiit (lirm name) No. i, Sliipvicnt (firm name) No. 2, and so on. Send Thos. W. Bowen & Co., Dover, a trial shipment of 50 barrels Xorthern Star and 25 barrels Searchlight. Fill out a shipment invoice found in your business forms, figuring the goods at the latest cost price as shown in your invoice book. Also fill out a bill of lading and inclose both shipment invoice and original bill of lading in an enveloi)e addressed to Thos. W. Bowen & Co. The following form illustrates the proper method of entering the shipment in the sales book. /CO c-e.'sz^/oooii'' 4< — so, / /^o Rttle 25 S///PAf£:i\'TS air debited for the cost priee of tlic vicrcliaiidise sliippcd, and for all advance charges paid upon it. No. 99. — June 15. Payyour clerks as follows: R. E. Leavitt, ;^30; D. J. Allard, ;S20. As you have not enough money in your Cash Drawer, make out a cash check for the amount required, $50. (See transaction No. 68.) Get the cash from the bank and place it in Cash Paid Out. (If there is no bank, present the check to your teacher, who will give you the money.) No. 100. — June 15. NINTH REPORT. Make out your report and hand it, with Vouchers for Others and Cash Paid Out, to your teacher. Although on the report it is desired to show only the amounts of cash received and paid since the last report, the cash book should be pencil footed so as to show the totals of cash received and paid since the last of May, when the cash book was last balanced. Do not rule the cash book again until the end of June. No. 101. — June 17. Fill D. W. Perry & Co.'s order for the small lot of tea ( 100 lb.), and on the bill deduct a discount of 3 %. Hold the order for the larger lot of goods until you and Mr. Adams are satisfied as to the reliability of the firm. Make out a C. O. D. envelope and enter the sale in your sales book, as in No. 55, ]>age 94. (The discount will be entered through the cash book when the returns come in.) No. 102. — June 17. You have received but few orders for Ceylon tea recently, so you have decided, with Mr. Adams, to make a shipment of 20 cases of this tea, closing out your stock. Send it, with 10 mats Java coffee, to Thos. W. Bowen & Co., of Dover, to be sold on commission. Pav freight in advance, $3.60, in currency. Enter the shipment in your sales book {Shipment Thos. IV. Boiven &■ Co. No. 2), and make the proper entry in your cash book for the $3.60 paid as freight. What account should be debited for this amount } Why .'' (See No. 98.) 126 MODKKN ILLUSTRATIVE BOOKKKEPING No. 103. — June 17. This purchase of merchandise has been made from Geo. C. Buell & Co. Paste the invoice in your invoice book after verifying the calculations. No. 104. — June 18. Write a check for the amount due Shields Bros., and send it to them with a letter. Make the proper entry. No. 105. — June 18. This draft has been drawn on you by L. Hennes & Co., and is the amount due for bill of May 24. Accept the draft, and return it to L. Hennes & Co. (by placing it in your Bills Payable File). Why should you write the date in your acceptance .' What account should be debited.' Why.' (See transaction No. jS, page 121.) No. 106. — June 19. The references given by D. W. Perry & Co. prove satisfactory; fill the main part of their order of June 15 (No. loi); make the terms 4 mos., 3/10. No. 107. — June 19. These two express money orders are a return of C. O. D. sent June 17. The express company has retained 50^ for return charges. Make the proper entries in cash book (see No. 58, page 94). No. 108. — June 19. Take from your Cash Drawer the note of Rice & Pond received June 14th, and have it discounted and the net proceeds placed to your credit. This is a four months' interest-bearing note ; therefore, on a discount memorandum, write the amount of interest which will be due Oct. 1 2, on which date the note is payable, and add the interest to the face of the note. The interest on S 1000 for four months is S 20. From June 19 to Oct. 12, the due date of the note, is 1 15 days. Calculate the discount on $ 1020, the amount due Oct. 12, for 115 days, subtract this amount from $ 1020, and you will have the amount to be placed to your credit in your bank pass book and on the stub of your check book. In the cash book debit Cas/i for the note, $1000, and also for the interest, S20. What account should be credited for the $1000.' Why.' What account should be credited for the S20 interest.' Why .' On the credit side of your cash book you should enter the amount of discount you have allowed the bank, which is S 19.55. Make proper entry on your check book stub. No. 109. — June 19. F. H. Randall & Co. have ordered goods and sent you a check sufficient to jiay the balance of their bill of June 12, and part of the merchandise ordered in their letter accompanying the check. Allow them 3 % discount on as much of the goods as this check will pay for. At 3 % discount, 97^ will pay for S i.OO worth of goods as invoiced at their regular price, therefore it is evident that S600 will pay for as many dollars' worth as 97^ is contained in S600. S600 -i- .97 = $618.56, and F. H. Randall &■ Co. should be credited for this amount. Enter $6i8.s6 on the debit side of your cash book, and on the credit side enter $iS.j6, the amount of merchandise discount allowed F. H. Randall & Co. Enter the sale as usual in the sales book. No. 110. — June 20. This account sales has been received from Thos. W. Bowen & Co., together with a check for the net proceeds. It is the amount you have received for the shipment made June 15, and shows you how much Bowen & Co. received for the goods, also the amount they paid for freight and their conmiission. What account should be debited .' What has produced value to the business in this case .' Mule 20. — Shipments are credited with the net proceeds shown on the account sales re- ceived from the person to whom the shipment was sent. Place the check in your Cash Drawer, and the account sales in your Voucher File. BUSINESS PRACTICE — JUXE . ll^T No. 111. — June 20. Take from )'our Cash Drawer and iudor.se properly the express money orders received June 19; also the checks of V. II. Randall & Co. and Thos. W. Bowen & Co. Enter the amounts on a deposit ticket, and take it with the checks, orders, and your bank pass book to the bank. Make the proper entry on your check book stub. No. 112. — JuxE 20. Purchase of merchandise on account from Shields Bros. No. 113. — June 20. Pay Reynolds, Davis & Co.'s invoice of June 10, less 2 %, by check. No. 114. — June 21. This bill from City Carting Co. is for freight and cartage to date. Write a check for the amount, and place it in Cash Paid Out. What do you do with the receipted bill .'' What account should be debited for this amount in your cash book.' No. 115. — June 21. Mr. Adams has purchased this invoice from E. Westen Tea & Spice Co. and has agreed to accept a draft at 30 days for $800, the balance to be paid in four months. Accept the draft which accompanies the invoice, and place it in Bills Payable File. Why is it unnecessary to write the date in your acceptance.' Make the proper entries. No. 116. — June 21. Bought merchandise of West, Stone & Co. Enter as usual. No. 117. — June 22. Mr. West, of West, Stone & Co., has called ujjon you, soliciting orders, and being short of money has agreed to allow you 2 % discount on the invoice of May 20, which is not due until July 19, if you will accept a ten-day draft. You agree to this proposition, and accept a draft for the amount, less 2%. Submit your journal entry to your teacher for approval before writing it in the journal. No. 118. — June 22. Smith, Perkins & Co. have decided to retire from business, and have offered Mr. Adams a trade discount of 12.]% from regular market quotations for such goods as he can use from stock. This invoice has been selected on the terms indicated. Write the check and note, and make proper entries in cash book, journal, and bill book. (If in doubt, show entries to your teacher before writing them in the books.) Place the check in Cash Paid Out and the note in Bills Payable File. A trade or commercial discount is an allowance deducted from the catalogue or list price of goods in order to meet the current market quotations or to encourage or effect a sale. It is deducted on the invoice, to show the net price really asked for the goods, and this net price is the one extended to the money column of the invoice book or sales book, to be carried to merchandise account ; for no Trade Di.scount account is kept in the books. Merchandise Discount account includes only such allowances as are otTered for the purpose of securing prompt payment ; these allowances are commonly called cash discounts. A cash discount is always allowed oil conditioti of prompt payment ; if the purchaser does not pay within the given time, he becomes liable for the gross amount. But a trade discount is allowed without conditions ; the purchaser does not become liable for the gross amount in any case. No. 119. — June 24. Take the sight draft on Thos. Varick & Co. from your Cash Drawer, detach memorandum, and enter the draft on a deposit ticket. Take this ticket and the draft, with your bank pass book, to the bank, and ask the teller to enter the draft to your credit. You drew this draft at the time of sale, but made no entry. What account should be debited, now that you have received credit for the draft at your bank .' It is the custom of most banks to place sight drafts to the credit of responsible depositors, when requested, the same as checks. If not paid, the depositor is notified, whereupon he gives the bank his check for the amount, and takes the draft back. No. 120. —June 24. TENTH REPORT. Make out your report and hand it, with Vouchers for Others and Cash Paid Out, to your teacher. Do the pencil footings of your cash book show the total cash received and paid since the last of May 1 128 MODERN' ILLUSTRATIVE BOOKKEEPING No. 121. — June 24. This account sales has been received from Thos. \V. Bowen & Co., who have placed the net proceeds to your credit subject to your sight draft. What account should be debited for this amount .' Why .'' What account should be credited ? Why .' Where should you keep the account sales ? No. 122. — June 24. Fill this order from Fletcher Bros, as requested. Allow a mer- chandise discount of 3 % ; and draw a draft at 30 days on them for the net amount of the bill, with 30 days' interest at 6 % added. (AddinQ>/.. ' . '.jy-^^-i^a^t^^- t/^l^tU^.. » M //ft ..^^^2Z-«i^. f / a^ f / a i> i POSTING, ETC. Post your entries from journal, cash book, invoice book, and sales book. For instructions in regard to the posting of the invoice book, see page 1 1 5. Check back your postings ac- cording to instructions on page 25. Make out your monthly statement to each customer and take a trial balance. Verify the bill book by comparing it with the Bills Receivable and Bills Payable accounts in the ledger. The footing of the left-hand money column of the bills receivable book should agree with the total debit of Bills Receivable account. The footing of the right-hand money column must equal the total to the credit of Bills Receivable account. In comparing the bills payable book, the left-hand money column must tally with the credit side of Bills Payable account in the ledger, and the right-hand money column of the bills payable record must agree with the debit side of the Bills Payable account. Consequently the difference between the money columns of the bill book must be the same as the balance of these accounts in the ledger. How to Make the Business Statement. — Using the above form as a model, prepare a statement of the gains and losses of the month just closed. The names of the accounts used in the model are those of your June accounts, but the amounts are different, and are used only to show you the exact form of a complete statement. The Mcrcliandisc on hand at the beginning of June, and the cost of Merchandise purchased during the month, will be found on fhe debit side of the Merchandise accoimt in the ledger. The sales of Merchandise during the month of June will be found on the SFATEMENTS — JUNE 131 V -G^UC-€-Ji^Mt~?C'-z'2^'-.*^2--' f^^.^-e^ -^ / .^'J't.^e^ -^~^^^€>-C-^^^^z^^ credit side of the Merchandise account in the ledger. This amount inckides the amount received for insurance. Find the loss, and close the first section of your business statement, bringing down the loss in the second section. Find the cost of Shipment to Thos. W. Boivcii &■ Co. No. 2, from the debit side of that account in the ledger ; find the net proceeds from the credit side. Find the vahie of Real Estate at the end of May from the financial statement of May 31. The lot on which your building stood is estimated to be worth $6000. The amount received for insurance is shown on the credit side of Real Estate account in your ledger. The amounts of Expense and Office Fixtures will be found on the debit side of those accounts in the ledger. Net proceeds of Shipment to Thos. W. Boiven & Co. No. i will be found on the credit side of that account in the ledger; the cost on the debit side. The excess of Merchandise Discount will be found by taking the balance of that account, as shown in your trial balance, and the same is true of Interest and Discount. Write the net loss in red ink, and close the business statement. How to Make the Financial Statement. — Using the form on the following pages as a model, prepare a financial statement for the month of June. The names used in the model are those of your accounts for the month of June, but the amounts are different, and are used merely to give you a complete form. Cash in bank will be the amount of cash shown in your trial balance ; also on the stub of your check book. Real Estate will be shown by your inventory at the end of June, S 6000. The ledger valuation of Shipment to Thos. IV. Bo'Men & Co'. No. 3 will be shown by the trial 132 MODERN ILLUSTRATIVE BOOKKEEPING y- & a ^ //'J-^/ balance. The amount of Bills Receivable will be the balance of that account, as shown in your trial balance. Open book accounts considered good will comprise the eight personal ac- counts having a debit balance, as shown in your trial balance. The amount of Bills Payable will be the balance of that account, as siiown in your trial balance. Open book accounts will comprise the balances due the four firms which you owe on account. Close all accounts in your ledger showing losses or gains; also the Loss & Gain account, and the ])artners' accounts. No. 141. — June 30. It has been decided to discontinue the business. You take as a part ot your net worth the amount of the shipment to T. W. Bowen & Co. No. 3, at its ledger valuation. Si 95 5, and receive a check for the balance. Make out the check, and enter in the cash book. Make a journal entry to show the transfer of the shipment. Post these two entries and balance the cash book. H. F. Adams retains the remaining resources of the business, you agreeing to make up half of any losses which may occur from bad debts, and he agreeing to pay all the liabilities of the business. The real estate is valued at S6000. Draw a check to the order of II. F. Adams for the balance of cash remaining in hank. Prepare a memorandum of this agreement, and sign it and ask your teacher to sign for 11. F. .Adams. Get your check cashed and hand the amount to your teacher. Prepare a notice of dissolution of partnership (see model on ne.xt page), and inclose a copy with your monthly statement to each customer. In business sucli a notice would be sent to all persons with whom this firm had dealings, and it would als be published in the local newspapers. STATEMENTS — JUNE 133 /^ -2^ '.^n^/. y ■' 7t.z^3^,/f- 7 Z t, Bliven & Mead, and credit M'dse. in the journal for the amount allowed.) July 3. — Receive of Sewell & Clark their note dated June 15th, at 60 days, payable at First Nat. Bank, Greenville, in full of their account and 60 days' interest on same. (Instead of writing an interest-bearing note, they have given you a note for an amount equal to the original debt plus interest on the same from June 15 to maturity of note.) SUPPLEMENTARY EXERCISE — JUNE AND JULY 145 July 3. — Give H. N. Smith a check for one month's rent of store, in advance (p. 141). July 3. — Receive by Commercial F. F. Line, from Hart, Bliven & Mead, goods as per invoice dated July i, terms, cash in 10 days: 10 doz. P. G. Coal Hods; 5 doz. C. S. Axes; 10 doz. Hand Saws; 15 doz. Pore. Knobs; 10 doz. R. Braces; 5 doz. R. R. Picks; 5 doz. Try Squares ; 5 doz. \V. Wrenches ; 200 lbs. Washers. July 3. — Sell Barber & Swift, at 10 days, 5 doz. C. S. A.xes; 10 doz. Pore. Knobs; 100 lbs. Washers; 4 doz. R. Braces; 5 B. S. Drills. July 6. — Sell L. B. Mason, at 10 days, 5 doz. Knives and Forks; 10 kegs Cut Nails; 50 lbs. B. Metal ; 3 doz. R. R. Picks ; 5 doz. pr. Strap Hinges ; 2 doz. A. E. Hammers. July 6. — Receive of Wm. Peet his check on Traders Bank, to balance account ; also receive of Geo. B. Gordon his check on Merchants Bank, to apply on account, S400. July 6. — Deposit the checks received of Wm. Peet and Geo. B. Gordon. July 6. — Give Swift, Ennis & Co. your check to apply on account, S500. July 6. — Receive cash of French & French in full of invoice, June 23. July 8. — Sell Oliver & Brayton, City, at 10 days, 3 Copying Presses; 2 doz. P. G. Coal Hods ; 2 doz. Try Squares ; 50 lbs. Washers ; 3 doz. J. Planes ; 2 U. C. Wringers. July 10. — Accept, payable at F. C. Bank, D. B. Pond & Bro.'s draft at 30 days' sight, favor themselves, in full of invoice received June 15. July io. — Deposit cash in F. C. Bank, S250. July 10. — Pay June gas bill, in cash, S5.25. July ii. — Receive, via P. & W'. R. R., from Pratt, Conway & Mills, 100 kegs Cut Nails. Invoice is dated July 6, at 10 days. July ii. — Receive cash of Geo. B. Gordon, on account, $200. July 13. — Receive credit at F. C. Bank for draft on E. Langworthy, left ist instant, less charges for collection, j %. July 13. — Receive of Daniels & Baker their check on Citizens Bank, Cedar Grove, in full of invoice, ist inst. July 13. — Deposit cash, $200, and Daniels & Baker's check. Bank charges collec- tion on check, iV%- July 13. — Buy a New York draft at F. C. Bank, by check, at -| % exchange, and remit to Hart, Bliven & Mead, in full of invoice received 3d inst., less amount charged to their account for allowance on coal hods, July 2. July 14. — Accept, payable at F. C. Bank, A. B. Smith's draft dated July 8, at 5 days' sight, favor John H. Boyd, in full of account. July 15. — Receive cash of Barber & Swift, in full of their invoice of 3d inst. July 18. — Sell Sewell & Clark, at 10 days, 5 doz. R. Braces; 5 doz. Knives and Forks; 50 lbs. Washers; 3 Copying Presses; 25 kegs Cut Nails; 3 B. S. Drills; 10 Grind- stones ; 5 doz. pr. Strap Hinges. July 18. — Receive cash of L. B. Mason, in full of invoice of 6th inst. July 18. — Sell A. G. Steele & Co., City, 5 doz. Pore. Knobs; 5 doz. C. Stretchers; 10 pr. B. D. Hangers; 3 I. C. Freezers; 5 doz. W. Wrenches. Receive cash, S50; balance on account, 10 days. July 19. — Your acceptance of July 14, favor John H. Boyd, due to-day, has been paid and charged to your account at F. C. Bank. July 20. — Receive cash of Oliver & Brayton, in full of invoice of the 8th inst. July 20. — Deposit cash in F. C. Bank, $300. July 20. — Student draws from the business for his individual use, by check, $300. 146 MODERN ILLUSTRATTVK BOOKKEEPING July 21. — Buy of Hemingway & Selden, 60 days, 2% 10 days, 10 doz. Hand Saws; 10 doz. W. Wrenches; 5 doz. C. S. A.xes; 10 doz. Knives and Forks; 20 doz. M. Locks. July 23. — Draw on Carter & Weeks at sight for S500 in your favor, and leave the draft for collection. Jui.v 24. — Discount at F. C. Bank, Sewell & Clark's note received on the 3d inst. and have the proceeds placed to your credit. The bank charges ] % collection in addition to the discount. (The collection, as well as the discount, is computed on the face of the paper.) Jii.v 24. — Pay Pratt, Conway & Mills's sight draft on you for invoice received on the I ith inst., by check on F. C. Bank. July 26. — Pay freight bills for the month, in cash, $21.60. July 27.— Sell E. Langworthy, at 10 days, 5 doz. pr. S. Hinges; 5 doz. W. Wrenches; 10 doz. M. Locks; 5 pr. B. D. Hangers; 5 doz. J. Planes; i Copying Press; 5 doz. C. Stretchers ; 50 lbs. Washers. July 27. — Receive of Carter & Weeks their note dated July 24, at 30 days, payable at Fir.st Nat. Bank, Plainfield, to balance account, Siooo. July 28. — Received cash of A. G. Steele & Co. for balance due on invoice of the 1 8th inst. July 29. — Receive credit at F. C. Bank for draft on Carter & Weeks, left 23d inst., less collection, | %. July 30. — Give Hemingway & Selden check in full of invoice 2ist inst., less 2 'Jo. July 30. — Pay salaries of employees for the month, in cash, S 100. July 31. — Receive Sewell & Clark's check on First Nat. Bank of Greenville, in full for invoice of i8th inst. July 31. — Deposit Sewell & Clark's check and all the currency on hand. Bank charges -^^ % collection on the check. INVENTORIES, JULY 31, 19— Mdsc. as follows. Inventory at buying price. 8 doz. A. E. Hammers, 70 Grindstones, 5 doz. R. R. Picks, 32 B. S. Drills, 27 doz. Hand Saws, 5 doz. pr. Strap Hinges, 150 lb. B. Metal, 9 I. C. Freezers, 10 doz. Steelyards, 10 pr. B. D. Hangers, 24 doz. Knives and Forks, 8 doz. Try Squares, 165 kg. (16,500 lb.) Cut Nails, 15 doz. M. Locks, 8 U. C. Wringers, 11 doz. C. S. A.xes, 5 doz. P. Knobs, 12 doz. W. Wrenches, 5 doz. Carpet Stretchers, 9 dt)z. P. G. Coal Hods, 50 lb. Washers. 3 Copying Presses, 5 doz. R. 15races, Office Furniture and Fixtures. Office safe, S200; desk, S 75 ; total, $275. Fxprnsc. Coal on hand, $50. Copy the above inventories in the journal. I-"ind the value of the mdse. by using your buying price list. You will now balance the cash book, foot the sales book, and complete the posting, after which make business and financial statements. If your teacher wishes, make also a balance sheet of the kind described on page 148. Close the ledger, and hand your books and statements to the teacher for approval. surrLEMExrAKV exi:rcise— junp: axd julv 147 Buying Price Lists for Jim: and July No. 1 Adz Eye Hammers . . Bl.icksmiths' Drills . . Babbitt Metal .... Barn Door Hangers . . Cut Nails, 8d., loo lb. ke Cast Steel Axes . . . Carpet Stretchers . . . Copying Presses . . . Grindstones Hand Saws, 26 in. . . Ice Cream Freezers . . Jack Planes Knives and Forks . . . Mortise Locks .... Porcelain Knobs . . . Plain Galv'd Coal Hods Ratchet Braces .... Rail Road Picks. 8 lb. . Strap Hinges, 8 in. . . Steelyards Try Sqnares, 8 in. . Universal Clothes Wringers Wrought Wrenches . . Washers, i in 4.75 doz. 5.00 each .I2j lb. 3.00 pr. .031 lb. 10.00 doz. 2.2-5 (^'o^- 4.50 each 1.50 each 15.00 doz. 4.00 each 5.00 doz. 4.00 doz. 2.25 doz. .75 doz. 10.00 doz. 8.75 doz. 6.50 doz. 3.00 dz. pr. 6.50 doz. 3.50 doz. 4.00 each 11.50 doz. .06 lb. 2 3 4 5 6 7 8 9 4.60 4-55 4.65 4.50 4.60 4-55 4-75 4.60 5.00 5-25 4.90 5.00 4.90 4-95 4.90 5.00 .12 .12.', .11 .12 .11,1 .12,1 .12 .1 1 1.90 1-75 I. So 1.90 '•75 2.00 1.80 1-75 •03 •03i .03.} .04 •03 i -03 J •03:; -03 9.00 9.25 g.oo 9.50 9.00 9.25 9.50 10.00 2.10 2.00 2.05 2.50 2.25 2.00 2.20 2.25 4.00 3-90 3 95 4.00 4-25 3-90 3^95 4.00 1.40 1.50 1.40 1-35 1-45 1.50 1.40 1-45 14.00 13-50 14.25 14.00 13-25 13.50 14.00 14.50 3-75 3.60 3-5° 3.60 3-75 4.00 3.60 3-75 5.00 4.90 4.85 4-75 4.80 4.90 5.00 4-95 4.00 3.80 3-9° 3-75 3-9° 3-«5 4.00 3-75 2.10 2.00 2.05 2.00 2.05 2.10 2.25 2.10 ■75 .70 •75 .65 .70 •75 .70 -75 9.50 10.00 10.25 9-75 10.00 9.50 9.25 9-75 8. 50 8.10 8.50 8.25 8.50 8.75 8.50 8.25 6.25 6.20 6.25 6.00 6.25 6=0 6.50 6.20 2.90 2.75 3.00 2 75 2.90 3.00 2-75 2.80 6.40 6.35 6.40 6.30 6.40 6.35 6 50 6.40 3-25 3.00 3-25 3.00 3.50 3-25 3-50 3.00 4-25 4.00 4.10 4.00 4-25 4.10 4.50 4-25 11.25 10.00 10.50 10.00 10.25 10.75 1 1 .00 11.25 .05 .04J -OS J ■OS •05 i .06 .06J -05i 10 4.50 5-2S .iii 1.90 .04 9.25 2.10 3^90 '•35 1^00 3-50 4.80 3-90 2.05 .70 9.50 8.50 6.50 2.90 6.45 3-25 4.50 1 1. 00 .06 Selling Price Lists for June and July No. 1 2 3 4 5 6 7 8 9 10 Adz Eye Hammers .... 5.7s doz. 5-75 5.70 5-75 5.50 5-55 \ 5-50 5.60 S-50 5.40 Bl.acksmiths" Drills .... 6.00 each 6.25 6.10 5.80 5-90 5-75 5.S0 5^75 5-90 6 00 Babbitt Metal .15 lb. -15 ..61 -14 .14J .14 -15 •14 •'3i •14 Barn Door Hangers .... 2.50 pr. 2.50 =•331 2.25 2-35 2.20 2.45 2.25 2.10 2.30 Cut Nails, 8d., 100 lb. keg . . .04 lb. •04^ ■04l .04 .05 .04} .05 .05 .04 .05 Cast Steel A.xes 12.50 doz. 12.25 11.75 11.50 12.00 1 1.60 11.75 12.00 12.50 11.75 Carpet Stretchers 3.00 doz. 3.10 3-25 2-75 3-00 2.90 2-75 2.95 3-00 3^i5 Copying Presses 5.50 each 5-25 5.00 4-75 4.85 5.00 4.80 4.S5 4-75 4.40 Grindstones 2.25 each 2.25 2.00 2.10 2.00 2.15 2.25 2.15 2.20 2.10 Hand Saws, 26 in iS.oo doz. 18.00 17.00 17.50 17.00 16.75 16.85 17.00 17.25 18.00 Ice Cream Freezers .... 5.00 each 5.00 4-75 4.50 4.60 4-75 4-95 4.50 4.70 4.25 Jack Planes 6.00 doz. 6.25 5-75 S-70 5.60 5-75 5-85 S-75 5.50 5.40 Knives and Forks 5.00 doz. S-25 5-20 4.80 4-75 4-85 4.80 4.90 4-75 4.80 Mortise Locks 3.00 doz. 3.00 2-7S 2.70 2.65 2.70 2-75 2.8s 2.70 2.65 Porcelain Knobs 1.25 doz. 1.30 1-25 1.20 1. 15 1.20 1.25 1.20 1.2s 1.15 Plain Galv'd Coal Hods . . 12.50 doz. 12.25 12.00 12.50 11.75 12.25 U.50 11.00 12.00 11,75 Ratchet Braces 10.75 ''o^- 10.75 10.10 10.50 10.25 10.50 I0.7S 10.50 10.75 10.50 Rail Road Picks, 8 lb. . . . 9.00 doz. 9.00 8-75 8.S0 8. 50 8-75 S.70 8.65 8.50 8-75 Strap Hinges, S in 4.50 dz. pr. 4-50 4.00 4.25 4.00 4.25 4-50 4-25 4-30 4.40 .Steelvards 8.50 doz. 8.50 8.25 8.40 8-35 8.40 8.25 8-45 S.30 8-35 Try Squares, 8 in 4-75 doz. 4-75 4-30 4.50 4.25 4-75 4.50 4-75 4.25 4.50 Universal Clothes Wringers . 5.50 each 5-75 5.00 5-50 5.40 5-65 S-50 5-75 5.50 5-75 Wrought Wrenches .... 14.75 doz. 14^75 13-50 13-75 13-50 13-25 14.00 14.25 14.50 14.00 Washers, 1 in .o7i lb. •07^ .06J .07 .06 J .07 ,07 •071 .07 .07! 148 MODERN ILLUSTRATIVE BOOKKEEPING SIX-COLUMN BALANCE SHEET The form of balance sheet given below is in use to some extent. It includes in one state- ment the trial balance, losses and gains, resources and liabilities, and proprietor's account. In making out this balance sheet, first enter the names of the proprietors' or partners' accounts, and of all the business accounts, extending the total debits and credits into the trial balance columns. Enter the inventories in connection with their respective accounts, in red ink, as shown by Italic type in the following form. Enter the balance of cash. Add all personal accounts and enter as Accounts Receivable. Do likewise with personal accounts having credit balances and enter as Accounts Payable. Add the trial balance columns to see that they balance. •Next extend the results of the various accounts into their proper columns. All accounts showing a loss or a gain should be extended into the losses and gains columns for the proper amount of loss or gain. Extend all resources and liabilities (except proprietor's account) into the resources and liabilities columns. Find the total results by adding all columns. It will be noted that all accounts have now been condensed into three accounts, namely, Proprietor's, Loss & Gain, and Resource & Liability. Close the Loss and Gain account by finding the difference between the debit and credit sides and placing it on the smaller side in red ink with the wording, Net Loss or Net Gain. This difference will represent either the net loss or net gain of the business. To the net vTedit of the proprietor's account add the net gain or from it deduct the net loss, and the result will be the present worth. Extend the amount into the liabilities column, which will put the two columns in balance. In a partnership determine each partner's interest separately, and extend to the liabilities column, as shown in the form below. Balance Sheet of Jonas. Smythe & Browne, Dec. 31, 1909 John Jonas, part. . Henry Smythe, part. . Frank Browne, part. . Mdse. Inv. 4^96.14 . . Expense /nv. /3/J0 Collection .... Mdse. Disct Real Estate, fnv. 23^0.00 Cash Accts. Kcc Accts. Pav Net gain John Jonas' Inv. " ■• withdrew Yi net gain Henrv Smvthe's Inv. . Frank Browne's Inv. . . " " Yi net gain Trial Balance 7326 I 82 5 28 92 23 176 2250 2458 1478 14442 97 3000 200 3000 2500 2500 4678 243 220 1300 90 76 31 14442 97 Losses and Gains 407 23 430 tgo4 233s 75 1948 66 93 320 2335 233s 75 75 Resources and Liabilities 4596 121 2350 2458 1478 11005 1 1005 «9 •9 1300 1300 31 3t 3434 96 3'34 96 3134 ! 96 1 1005 19 ADVANCED COURSE TO THE STUDENT The Advanced Course is designed to show the application of the principles of bookkeep- ing to the records of special lines of business ; the development of the simple forms of books into special forms ; and the classification and subdivision of accounts. The lines of business selected are rej^resentative of four important departments of busi- ness activity — retailing, commission, wholesaling, and manufacturing. In connection with each, approved forms of records are shown, and modern methods of business procedure are explained and illustrated. Terminology. — The technical terms used in the Introductory Course are those commonly employed by bookkeepers. They are used where the business is of small or ordinary size and is conducted either by an individual or a firm. The rapid growth during recent years of the corporate and trust forms of business organization, and the development of the forms of business records in connection with them, have resulted in a wider classification of the accounts, and a somewhat different terminology than was necessary in the older forms. Following are some of the accounting terms generally used, and their equivalent book- keeping terms, distinguished by A for accounting and B for bookkeeping : A — Frame an entry: B — Make an entry. A — Construct an account, raise an ac- count, set up an account: B — Open an account. A - Rule off an account: B — Rule an account. A — Close up an account : B — Close an account. A — Assets: B — Resources. A — Profits: B — Gains. A — Trading Account and Profit and Los.s Statement : B — Busi- ness Statement, Statement of Losses and Gains. A — Balance Sheet, Statement of Assets and Liabilities: B — Financial Statement, Statement of Resources and Liabilities. Bookkeeping and Accounting. — The records of the older and newer forms of business organization are distinguished by the terms Bookkeeping and Accounting. Accounting includes Bookkeeping, as the term is generally understood, and covers the whole field of account keeping; while Bookkeeping is restricted to a particular part of the field, namely, the records of the transactions. Accounting deals chiefly with the scientific arrangement of the forms of the record mediums, such as the books, etc., the classification of the accounts, so as to cause them to show in detail the results and condition of the business, and with the statements of these results and condition. Bookkeeping deals chiefly with the making of the records, accord- ing to the classification of the accounts, and the arrangement of the forms of the record mediums, suggested by the principles of accounting. A person who makes the records of business transactions is called a '• bookkeeper." One who performs the work of classify- ing accounts, arranging the forms of record mediums, supervising the records, and making statements of the results and condition of a business is called an "accountant." A person who examines the records for the purj^ose of verifving their accuracy is called an "auditor." In the Advanced Course both bookkeeping and accounting terms will be used, and the student will perform the duties of bookkeeper, accountant, and auditor. Cl-t* 150 (COMrLETE) RETAIL GROCERY BUSINESS The following transactions are designed to illustrate a system of bookkeeping for a modern retail grocery business, at first by single-entry, after which will be shown the method of changing from single-entry to double-entry, continuing the business by double-entry, and incidentally showing the use of the card ledger system of bookkeeping. Single-entry books differ from those used in double-entry bookkeeping chiefly in the fact that a single-entry ledger contains only accounts with persons, all property and loss and gain accounts being omitted. The ]3rinciple of equal debits and credits, belonging to d juble-entry, is not a part of single-entry bookkeeping, and consequently no equality exists between the debit and credit sides of the ledger, and no trial balance can be taken of a single-entry ledger. An account with cash should be kept in the cash book, as in double-entry bookkeeping, and by means of a bill book it is easy to keep a record of notes receivable and notes payable. A record of merchandise may be kept by the use of an invoice book, or purchase book, and a sales book. In a well-arranged set of single-entry books it is possible to show as complete a record of the business as in a set of books kept by double-entry ; but it will not be in so compact a form, and will require more work on the part of the bookkeeper. Proof of Posting. — While no trial balance can be taken of a single-entry ledger, the correctness of the posting can be determined with the same degree of accuracy as in a double-entry ledger, by proving the posting. This is done by finding first, the total of the charge postings in the ledger for the month, and the total of the charge entries in the books of original entry, and comparing the two amounts ; second, by finding the total of the credit postings, and the total of the credit entries in the books of original entry, and comparing the two amounts. This is called a proof of posting. Books Used. — In order that a complete record of the following business may be obtained by single-entrv, the books used will be as follows: journal, cash book, abstract sales book, purchase book, bill book, general ledger, and card ledger, using the card ledger only for customers' accounts. A simpler, but less effective, set of single-entry books would consist of journal, cash book, and ledger. Journal. — The journal contains such debits and credits to personal accounts as are not entered in the cash book and on the sales sheets, from which the abstract sales book is made up. The abbreviation Dr. or Cr. is written after the title of the account, in each entry, and the explanation underneath. The form on page 152 illustrates the journal. Sales Slips. — In most modern grocery stores sales slips are used, and when sales of merchandise on account are made, the slips are written in duplicate by means of carbon paper by the salesman as he takes the order, verbally or from an order book. The form on page 153 illustrates the sales slip. The original and duplicate sales slips are sent to the office to have the prices O.K.'d. The original is retained by the bookkeeper, and the duplicate is sent with the goods when lol 152 modern illustrative bookkeeping Journal 'f .1^ t-/. x7 ^^_ '• ,5 »7 18 jL. -^^ y^y^ ukv^^ d^^ o'>'--r- 2,jL. 7f PLEASE RETURN THIS BILL IN CASE OF ERROR, H*au«*cruttCB uooia r*T(iii l.">4 MODERN ILLUSTRATIVE BOOKKEEPING »o.^^<5' Al'.sriv'AC'l^ SALLCS SHEET, V3^-^^^.^ ^Zf / z z. / J z Z '/J\ ^^i dnily to the monthly statement sheets, and when the posting is completed, should file away the sales slii's al- phabetically, or each day"s slips in a separate package, so that they may be Teadily accessible, should thcv be required to verify a customer's monthly statement after it has been rendered. Cash Sales. — For sales of merchandise for cash, a sales slip is used similar in form to that used for sales on account, as shown on page 153, except that it is receipted when the goods are delivered ; or. if tiie sale is made in the store, the customer is given a cash ticket, which is presented with the mone\' to the cashier, who files the ticket with the cash sales slips on a spindle, or in some other manner. The sum of the amounts of these tickets and of the cash sales slips represents the sum of the cash sales of the day, and should be carried to the Sales for Cash colimin of the abstract sales book, and also to the debit side of the cash book. (See form of abstract sales book, page 155, and form of cash book, pages 156 and 157.) The sum should also be entered at the end of the abstract sales sheet for the day, as shown above. In retail stores where a cash or partly cash business is done, the cash register is now quite generally used. Tliis is a combination cash drawer and record macliine, and is desijined. among other thinjjs. to prevent mistakes and fraud in handling the casli. The cash register records the amount of tlie purch.ase on a strip within the machine, and at the same time indicates this amount on the outside where it can be easily seen by the customer. The cash in the register at any time should, of course, agree with the record on the strip. Some cash registers have special arrangements for recording and exhibiting the various sources from which tlie cash is received, and for other information, as "Cash Sales," "Cash Rec'd on Acct.," "Charge Sales."' etc. .A. c.ish register of this kind is generally used in connection with a suitably adapted charge and credit .system for customers" accounts. Abstract Sales Book. — The abstract sales book contains colimms for date, number of daily abstract sales sheet, sales on account, cash sales, total daily sales, total weekly sales, and total monthly sales, so that the book will show at a glance each day's business, both cash and credit, the sum total, and the total sales at the end of each week and month. RE'IAIL GROCERY BUSINESS Abstract Sales Book. 155 '^ - Dati From Sales Sheet No Salks om Account Sales for Cash. Total Dailv. Total Weeklv. Total Monthly. Oo^. / V^ V-f Z^ dJ yz /// f^ z ^7/ y ^ z ze 7^ ^^ ^ ^^ £j - J zyr 7f fKtx or Imtdicc L.P, NAME AND WHEN DUE, WHEN PAID. Nvoici DiseouHi ^^ / z .s / 7 / ff /J //• ze ZJ ZJ zr \/ 3-="?/ Gi{-&/r::&.d.€L^P^c^^^^i>.^^7i^^' ■^.■ t^f^'Z^-e^-i^^ --=^j4 y/: yf^/- 7. 777e7.^^£y..-.;7!-'e.i--i-i>^i.-e!^Z _ 'c^ A s7 A. '^/n^^ Om 2y '/ / zrf'Z/! /AzJ\\ vzz ZJ ZSJTff rzz 7^ '/J ^j / Z'. ^'Zjfiti /-i^iZz 4ZiiL •J W y^^'- rA-. ^7 '/i Z/J ftf 'Zzzrs /2¥ zVf ^7 J'/Z 3 /^lif Co '/iZ r^ Purchase Book. — The purchase book is an abstract of the invoices of merchandise pur- chased in the rei;ular course of business. Where the ordinary invoice book is kept, it would be unnecessary to keep the purchase book, since all the records of the nurchase book and 156 MODKKN ILLUSTRATIVE BOOKKEEPIXG Z^ .^ ^^^ O^ ^c^ .^^ ^ ^^ ^. /. .-^■^p-i^ 6U .j- / iZ-^^.^-^^^-'f'...^ -r^U-^ ^j^^-T*^^ -2 '-<^-^i*'-Z?-^'t>-fZ^-^3!^f-^ •t^^^ -T<^ 4^ '^<:^/. ^3 2J 7^k ^r\j.f f^jy. '7^J JZ/ J/ Z2. also the items of these purchases would be found in the invoice book. Many bookkeepers, however, keep a purchase book, and file the invoices loose, instead of pasting; them into a book. In this series of transactions, no invoices are received by the student, but an abstract of invoices is kept in the purchase book, which contains columns for the date of the invoice, the ledger folio, the name of the person or firm from whom the goods were bought, the terms of payment, the due date, the date of payment, the amount of the invoice, the dis- count, and the amount paid. The form on page 155 illustrates the purchase book. It is evident that the footing of the .Amount of Invoice column in the purchase book will, at any time, show the amount of merchandise purchased, and tliis amount, less the footing of the Discount column, will be the net cost of merchandise at any date. The total footing of the columns of the abstract sales book will show the amount of merchandise sold at any time. To this amount add the inventory of merchandise unsold, and the difference between this sum and the net cost of merchandise will show the gain or loss on trading. Cash Book. - The cash book does not differ materially from the cash book kejit in double- entry. The left-hand page contains a record of all cash received, and the right-hand page RETAIL GROCERY liUSIXESS ~~^^ Q^ ~y\^^^^'g/^^i.-i.^>^^--fi^--?',.---7^ z-'tf-^-Z-CA^ i^ CJ^c-^. — :#C-^t-^-C-^^ '~y^U^^-;^^^t>-if-^ I ^ •£.2«-2:--5 '' 7^' ¥7- Z ^^^^i'-^-z-^ . •:>x^-z:i^>^-L^c'-A-(P-;^ i-tmr-!^ i^.C^;^3^. ^iZ^-C-i>^. Z-'Z s Zip ?z CT O^l^L't/^ a^.- / v'VZ 2 zy^J fJ- ^'C-i'-z^—^^-'iz-'fZ'iffr* 6zz ,fz/_ 4^/ ^VJZZ a record of all cash paid out; also a special column for merchandise discount allowed on bills paid within the specified date. When such accounts are posted, two debit entries should be made on the personal account affected, one for the merchandise discount, and one for the net amount paid, thus canceling the amount of the invoice. It is not necessary in a single-entry cash book to write the name of the account affected by the transaction, e.xcept when it is a personal account, as only accounts with persons are kept in the ledger, and only those entries in the cash book which affect personal accounts will be posted to the ledger. The form on pages 156 and 157 illustrates the cash book. Customers' Statements. — In most grocery establishments where modern methods are in use, the items from the sales slips are not posted to the ledger account of the customer, but instead are posted directly from the sales slips to a monthly statement sheet, which at the end of the month is handed, or mailed, to the customer, and the total only of this sheet is posted to his account in the ledger. When a statement sheet is handed in with cash to make payment of the account, the sheet is receipted and returned to the customer, who re- ♦ All balance entries and rulings, of course, are to be in red ink. 1.".8 MODi:UN Il.lXSTRATlVl-: liOOKKKKI'ING ccivcs credit in the ledger for the amount of his pa}iiient in the rcj;u- lar posting from the cash book, where the payment should be entered when made. The postings to the state- ment sheets should be made at the end of each day before the sales slips of that day are filed away for refer- ence. The accompanying form illus- trates a customer's statement sheet. A shorter method would consist in post- ing to tlie customer's statement sheet only the totals of the sales slips, not repeating the items on the statement sheet. This would save a large amount of work to the book- keeper, and if the customer keeps his sales slips delivered with each order, he can readily compare his statement sheet with his sales slips : but in practice it is found that custom- ers do not inv.ariably keep these sales slips, and there are more likely to be disputes about the amount of the monthly statement than when the items are repeated on the stateinent sheet as here illustrated. Many small retailers keep only two books — cash book and ledger — in connec- tion with the sales slip and statement system. They keep the original sales slips in alpha- betical order in a cabinet, which contains wire racks or clips, and the statements in an account file, as explained below. Ledger Account File. — Each day after the customers' statement sheets are jiosted, they should be placed in an indexed file where they are read- ily accessible, and from whicii they Lt:iK;KK Account Fii.k MONTHLY STATEMEST. Thos. E. Sears, GROCER, Liberty Building, Main Si. East. 14, IS and 20 Lake Avenue, Plymouth Avenue, cor. Spring Si. Rochester, N. K., Jf.^<-^^ / >o Sold to C-o^. C^-a.-rZ-.d.^ ^^ JJ y 30 23 3e 3 A 'C:iSZie>-C<^' /<£■ *^e should be removed as soon as the month's work is posted, and handed, or mailed, to the customer. An excellent form of file is the ledger account file shown in the accompanying illustration, which can be init ill the safe at night, the same as an ordi- nary ledger. Loose Leaf and Card Ledger Systems. — The system of bookkeeping b\' means of loose sheets and cards, properly indexed, in place of books, has grown rapidly in favor during the past few years ; especially is this true in business houses where RETAII, GROCERY BUSINESS I.IO there are numerous departments, and where a large number of books would be necessary in order to keep a complete record. The records of the day are made on loose sheets, and these sheets are handed to the head bookkeeper, who places them in properly arranged files, so that the record of each day's business in every department is readily accessible. Out of this system of account keeping has grown what is known as the card ledgir, a method of keeping- ledger accounts on cards which possesses many advantages, among which are the followin"-: First, the ledger kept by this system contains no accounts with persons who have ceased to do business with the firm, for as soon as a customer closes his account, either by remov- ing from the place, or by transferring his custom to some other business house, his card is taken from the receptacle containing the ledger cards and placed in a file kept for accounts which have been closed. Should the customer return, the card may be taken from this file and replaced in the ledger receptacle. In taking a trial balance, or an abstract of his cus- tomers' ledger, therefore, the bookkeeper has only live accounts to deal with, and there is less liability to make mistakes. Second, the cards are easily handled, and once the cabinet has been purchased, the ledger can be extended at a small expense, the cards costing little more than ordinary writing pa[)er. In case statements are desired promptly, a ledger of a thousand customers' accounts could be worked upon at the same time by the entire office force, while with a book ledger but one per- son can work on statements at a time. In case of disputes regarding accounts, where it is necessary to produce the books in court, the ledger card or loose sheet containing the account in dispute can be produced without interfering with the work of the accountants at the office. .\n objection sometimes urged against the card system is that it is difficult in posting to find the individual cards, and the cards are liable to get misplaced ; but if properly indexed, and carefully placed, there is no difficulty from this source. The cards can be found as readily and as surely as the pages of cus- tomers' accounts in an ordinary ledger. The accompanying cut illustrates the form of a card ledger indexed numerically. If the number of customers is not too large, the alphabetic arrangement is preferable, as it requires no other index. If the business is very extensive, however, it is better to num- ber each customer and divide the ledger into hundreds, then subdivide the hundreds into tens. A small tab at the top of each card is provided for a number, and an index book or a card index is kept for the names corre- sponding to the niunbers. The card itself does not differ in ruling from the ordinary ledger page. In posting to the ledger card, first enter in the explanation column the dates of the sales slips which make up the customer's statement sheet, then enter the total of the statement in the debit money column. It may require two or three lines of the explanation space to write the dates of the sales slips, but these dates will .save a great amount of labor in looking up sales slips from the daily files in case of a disagreement between a customer's account as kept by him and as kept by the bookkeeper. The following cut illustrates a form of ledger card. Form of Card Ledger 160 MODERN ILLUSTRATIVE BOOKKEEPING FoKM OF Ledger Card a^iC Residence ^ ' 2.(-2.7-2.f/'i3 C ^ v<^-^rvif-/if- jg ^-■^-2rr-;Lr-Ja-J 1^^^^^ ^JL.2^^ /'2 PRELIMINARY WORK October i, 19 — You have this day purchased of Adams & Hackland their entire stock of groceries, in the store situated at #222 Division St., and invoiced at S 2993.33, for 75 % of the invoiced value, for which you have paid cash. The net vahie of this stock of merchandise repre- sents your merchandise investment; you also invest S 300 in cash. You have agreed to collect the accounts due Adams & Hackland and allow them 95 % of their face value, and become responsible yourself for any losses which may arise from bad debts. The following customers of Adams & Hackland owe the amounts opposite their names. .Mrs. S. T. Worthcn, 26 Laurel St., ^23.45 A. B. Ryder, 61 Spring St., 44.28 C. H. Stratton, Elm House, Central Square, 212.40 Mrs. Wm. Hanson, 28 Summer St., 31.42 Wm. Harper, 62 East St., 38-49 Edward Austin, 31 Green St., 28.74 Mrs. F. Gilford, 44 lirown St., ,. 21-39 E. L. Corey, 54 Brown St., 18.96 Mrs. A. Waldron, 82 Chestnut St., 3948 P. J. McGuire, Cottage Hotel 52 Ann St., 169.34 S627.95 \'ow have agreed to pay Adams & Hackland the amount of 95 % of these bills within three months after Oct. i. You have also agreed to continue the lease of the store #222 Division St. until Jan. i, at the present rental of S 50 per month, and to retain the store clerks, Thos. Stuart and Eugene Canfield, at a salary of S12 per week each, and J. M. Marsh as delivery clerk at $ 20 per week, he furnishing a horse and delivery wagon. Make an entry in the journal, giving yourself credit for the net value of the merchan- dise ; in the cash book credit yourself with $ 300 invested. In the journal credit Adams & Hackland with 95 % of the value of accounts purchased of them ; also enter a memorandum of the clerks and rental agreements. (See model journal, page 152.) RETAIL GROCKKV BUSINESS 161 In this series of transactions the card ledger is used, as explained and ilhistrated on pages 159, 160. Take from your package of business forms the blank cards for your customers' card ledger, and enter on the debit side, after the name and address of each person have been written, the amount due, under date of Oct. i, writing Ba/aiicc \n the explanation column. Use the alphabetic arrangement for your card ledger, and keep the ledger cards in the original envelope, in front of the blank cards. TRANSACTIONS October i, 19 — Bought of Hackett Bros., City, on account, 60 ds., 2 % 10 ds., 10 brls. N. S. flour at $5 ; 10 brls. Redcloud at $4.50; 5 brls. pastry at $5.50. Enter your purchases in the purchase book. (See model, page 155.) Bought of E. J. Dunn Grocery Co., City, 4 mos., 5 % 10 ds., 2 hf. chts. Young Hyson tea, 140 lbs., at 32^; 2 hf. chts. Oolong, 100 lbs., at 47 ^ ; 2 hf. chts. Eng. Breakfast, 120 lbs., at 30^; 2 bags Rio coffee, 250 lbs., at 10^; I bale Mocha, 150 lbs., at 22^; 2 mats Java, 150 lbs., at 21 ^. Bought of the American Sugar Refining Co., New York, on account, 30 ds., i % 10 ds., i brls., 1565 lbs., G. sugar at sJj*; 2 brls., 622 lbs., C. sugar at 5^. Purchased, for cash, of Gray Bros., City, 20 bu. potatoes at 40^; 5 brls. apples at $ 1.50. Purchased, for cash, of Williams & Andrews, City, 60 doz. fresh eggs at 20^; 120 doz. case eggs at 15^. The following ten sales slips have been handed in by the salesmen. No. 1. — Mrs. S. T. Worthen, #26 Laurel St., 3 lbs. butter at 25/; 12 eggs, 20^; i pk. api- les, 20^; I pk. potatoes, 15^; i gal. K. oil, 12^; i lb. M.&J. coffee, 32^. Make out a statement sheet for each person named on the sales slips, and enter the items of each day's sales on the statement sheets, allowing a line for each item. Keep your state- ment sheets in alphabetic order in your large envelope. In actual practice, the statement sheets would be placed in the ledger account file, and at the end of the day the slips would be p.'aced in an envelope or file and marked with the current date, as, Oct. j, ig — , so that if any ciispute arose regarding the sales slips, they could be readily referred to. (See model of statement sheet, page 158; see illustration of ledger account file, page 158.) No entry for a sale is made in the books. The grocer who keep.s his books in the old stvie enters all his credit sales on a blotter, posts from the blotter to the ledger, and makes out his statements from the ledger at the end of the month. The modern grocer posts the sales slips directly to the customers' monthly statement sheets, and at the end of the month the statements are ready for the customers, as the bookkeeper should do his posting at the end of each day. The footings only of the statement sheets are carried to the customers' ledger. No. 2. — A. B. Ryder, #61 Spring St., i lb. E. B. tea, 60^; i lb. M. & J. coffee, 32^; I pkg. gelatine, 15^; 2 lbs. raisins at 16^; 10 lbs. butter at 23)^; 12 S. F. eggs, 24^. No. 3. — C. H. Stratton, Elm House, i tub butter, 40 lbs., at 22 i^; 10 doz. case eggs at 18^; 2 brls. apples at Si. 75 ; i brl. N. S. flour, $ 5.50; 4 sacks pastry flour at $ 1.50. No. 4. — Mrs. Wm. Hanson, #28 Summer St., 2 pkgs. rolled oats at I2.U^ 2 jikgs. Germea at 15^; 5 doz. case eggs at iS^; 6 cans tomatoes at 10^; 6 cans corn at \of ; 20 lbs. G. sugar at 6^ ; 2 lbs. Rio coffee at 20^; \ lb. VV. pepper at 40^. No. 5. — Wm. Harper, #62 East St., 2 lbs. butter at 26^; i box boneless codfish, 45?; I can tomatoes, 10^; i bu. potatoes, 6oJ^; i pk. apples, 20^; i lb. Y. H. tea, 50^. 1(;2 MODERN ILLUSTR-VriVE BOOKKEEPING No. 6. — Edward Austin, # 31 Green St., i brl. N. S. flour, S5.50; 2 lbs. cream cheese at i6t'; I lb. Y. H. tea, 50^; 12 S. F. eggs, 24}^; 5 gals. K. oil at i^f^- No. 7. — Mrs. F. Gilford, #44 Brown St., 12 S. F. eggs, 24/^; 2 lbs. butter at 26<^; i pk. potatoes, 15^; I head cabbage, 6^; 2 bunches beets at 5^; i pkg. Germea, 15^; 5 cakes Ivory soap at 5 ^; 5 lbs. rice at 10^; i gal. molasses, 60^. No. 8. — Kdward L. Corey, #54 Brown St., i brooni„35>^; ^ gal. maple sirup at S1.25; I can tomatoes, 10^; i bu. potatoes, 60^; I brl. apples, $2. No. 9. - Mrs. A. VValdron, #82 Chestnut St., 2 lbs. butter at 26 f^; i lb. cheese, 16^; i sack pastry flour, Si. 50; i pkg. Germea, 15;^; 12 S. F. eggs, 26?; i pkg. H. O. pancake, 10^: I qt. maple sirup, 35)^. No. 10. V. J. McGuire, Cottage Hotel, # 52 Ann St., i lb. M. & J. coffee, 32 ^; i wash- board, 50>'; I lb. raisins, 10^; i bottle bluing, 10^; i broom, 30?^; i pkg. rolled oats, i^f: 12 oranges, 35 p. The amount of cash sales, as shown by the casii tickets handed in by the salesmen and the customers, is $ 121.45. Enter this amount in the cash book, on the debit side, with the explanation, Ciis/t sales, as per tickets. Enter the total of each customer's sales slip against the customer's name on an abstract sales sheet, dated Oct. i, and numbered // also enter the total cash sales underneath, and carry these amounts to the j^roper columns of the abstract sales book. (See models, pages 154 and 155.) File the abstract sales sheets in numeric order in your large envelope. Paid cash as follows: Books and stationery, $6.25; postage stamps. Si; one month's rent in advance, S50; merchandise purchased of Gray Bros., Si 5-50; merchandise pur- chased of Williams & Andrews, $30. Enter in the cash book. (See form, pages 157.) Balance your cash book, entering the difference in red ink on the credit side. Bring down the balance on the left-hand, or debit, side, in the second column, under date of Oct. 8. In this series of transactions the cash book will be balanced at the close of each day's business, in accordance with the custom in actual retail business. October 8, 19 — Purchased of S. M. Crockett & Co., City, on account, 30 days, 3 '/c 10 ds., 5 doz. tomato ketchup at S i-50; 1 gro. bluing, S7.50; 3 doz. brooms at S2. Purchased of Gray Bros., for cash, 50 heads cabbage at 4^; 60 bunches beets at 2^. Bought, for cash, from wagons, 20 doz. S. F. eggs at 20 f ; 60 lbs. cream cheese at 12^. The following sales slips have been handed in by the salesmen. No. 1. — Mrs. S. T. Worthen, 10 lbs. G. sugar at 6\^ ; i bottle bluing, io>^; 2 lbs. cheese at 165-'; I lb. Y. H. tea, 50^. No. 2. - Wni. Harper, i lb. M. & J. coffee, 32^ ; i brl. N. S. flour, S 575 ; 2 qts. molasses at 12,', t"; 5 cakes Ivory soap at 5^. No. 3. — A. B. Ryder, 10 lbs. G. sugar at 6.]/^; i pkg. R. oats, 12/; i pk. potatoes, 15^; 5 gals. K. oil at 13^; 5 lbs. lard at 12^. No. 4. — Mrs. F. Gilford, 10 lbs. G. sugar at 6.]^; i lb. M. & J. coffee, 2>2f\ U lbs. cheese at 16^; 1 sack flour, $1.50; i can corn, 10^; 1 can tomatoes, \o^ : i broom, 35^. No. 5. — E. B. Woods, #44 Laurel St., 2 lbs. print butter at 305^; i bu. potatoes, 60 f : I pk. apples, 20^; 12 bananas, 20^; 5 lbs. G. sugar at 6\f^; i lamp chimney, 10^; i brl. N. S. flour, S 5.75. No. 6. — Edward Austin, 10 lbs. tub butter at 24^^; i lb. M. & J. coffee, 32 ^ ; 5 lbs. lard at 125*; 1 broom, 35^; 10 lbs. G. sugar at 6.]^; 3 lbs. codfish at 15^. RETAIL GROCERY lUSINESS 163 No. 7. — Mrs. A. Waldron, i bri. ajiples, $2.25; 10 lbs. lard at 12^; 10 lbs. sugar at 6]^; 2 lbs. Rio coffee at 20^; i lb. Y. H. tea, 50^. No. 8. — C. H. Stratton, Elm House, 10 bu. potatoes at 55^; i hf. cht., 50 lbs., E. B. tea at 50^; i bale, 125 lbs., M. & J. coffee at 30^; 5 doz. S. F. ei,'gs at 22^'; i case Germea, 36 pkgs., $4.50; i brl. oatmeal, $4.75 ; i bx. prunes, 50 lbs., $6. No. 9. — Chas. A. Dodge, #57 Chestnut St., i lb. E. B. tea, 60 f' ; i lb. M. & J. coffee, 32«'; 6 lemons, 18^ ; 12 S. F. eggs, 24^; i brl. flour, $5 75 ; 5 lbs. lard at 12?. No. 10. — P. J. McGuire, Cottage Hotel, i gal. vinegar, 25^'; I brl. N. .S. Hour, S5.75; 5 lbs. butter at 24^; 2 cans C. milk at 15^'; i bottle O. oil, 75^; i bunch celery, 15''; I can chicken, 40 ^. Cash sales for the day, per cash tickets, $214.12. (Abstract sales sheet and cash hook.) Do not forget to make proper entries on a daily abstract sales sheet (No. 2), and also in the abstract sales book. Number the abstract sales sheets consecutively. Received car.h from customers as follows: Mrs F. Gilford, $21.39; ^'- J- McGuire, $50; Wm. Harper, $18.49; Mrs. \Vm. Hanson, S20. (See form, page 156.) Deposited $550. In this set you will not be required to use a check book, but will keep an account with the bank on last page of your Blank No. i. Head this page. Account ivi/Zi City Bank. Write the date the same as in the cash book ; in the first explanation space write Deposit ; in the second explanation space. Currency ; in the first money column the amount, $550. When a check is called for in the transactions, write the date, the name of the part)- to whom the check is given in the first explanation space, for what given in the second ex- planation space, and carry the amount into the second, or right-hand money column. The difference at anv time between the two money columns will show the amount of cash in bank. Paid cash as follows: (Checks) Hackett Bros., invoice of Oct. i, less 2% (enter mer- chandise discount on credit side of cash book, in first column, and net amount of bill in second column); E. J. Dunn Grocery Co., invoice of Oct. i, less 5%. (Currency) Gray Bros., invoice of even date, $3.20; merchandise purchased from market wagons, S 11.20; salaries, Stuart, $12; Canfield, $12; Marsh, $20; freight, $3.42. Balance your cash book, and bring down the amount the same as in double-entry. October 15, 19 — Bought of Park &Tilford, New York, net 2 mos., 3 10, merchandise as per invoice, $287.90. Bought of S. S. Pierce & Co., Boston, net 2 mos., 2 10, merchandise as per invoice, $468.32. Purchased of St. Louis Milling Co., St. Louis, net 4 mos., 5/10, merchandise as per invoice, $450. Purchased of Gray Bros., City, for cash, 50 heads cabbage at 4.''; i bu. turnips, 45^; 80 brls. apples at $2. Purchased of Trent Commission Co., City, for cash, 4 tubs C. butter, 200 lbs. at 17^; 10 baskets late peaches at 65^. The following sales slips have been handed in by the salesmen. No. 1. — C. H. Stratton, Elm House, i pail mackerel, 20 lbs., $4.25; i tub lard, 60 lbs., at loS^; I doz. tomato ketchup, $2.25; 6 doz. S. F. eggs at 22^; 4 sacks pastry flour at S1.50; I brl. N. S. flour, $5.50. No. 2. — Mrs. S. T. Worthen, i brl. apples, $2.50; i bu. potatoes, 60 f^, 5 lbs. butter at 25^; 12 S. F. eggs, 24^; I lb. M. & J. coffee, 32^. 1,;j MODERN ILLUSTRATIVE BOOKKEEPING No. 3. - Mr. \Vm. Harper, 20 lbs. G. sugar at 6.\^; 10 lbs. lard at I2f*; 3 cans corn at 10^; I lb. E. B. tea, 60^; 4 lbs. raisins at 15 ^; i broom, 35^. No. 4. — E. L. Corey, i brl. flour, S5.75; 10 lbs. tub butter at 24^; \ lb. pepper at 40^; I box sardines, 35^; 12 pickles, 15^. No. 5. — P. J. McGuire, Cottage Hotel, i case, 36 cans, tomatoes at 8^; i case, 36 cans, corn at S^; i tub lard, 40 lbs., at 1 1 ^; i brl., 212 lbs., sugar at 6^; 3 doz. lemons at 25^. No. 6. K. B. Woods, 1 brl. apples, S2.50; i lb. E. B. tea, 60^; i lb. M. & J. coffee, 32^; 5 lbs. print butter at 30^; i clothesline, 30^. No. 7. — Chas. A. Dodge, 20 lbs. tub butter at 24^; i bu. potatoes, 60^; i sack pastry flour. S1.50; I gal. M. .sirup, S1.25; i jug, i^^'- No. 8. — Mrs. F. Gilford, i bu. potatoes, 60^; 2 pkgs. shredded wheat biscuit at 12.]^; 10 lbs. tub butter at 24^'; i ham, 12 lbs., at 12^^; 12 S. F. eggs, 25^. No. 9. —Mrs. A. Waldron, i brl. N. S. flour, $5.75; 5 lb.s. tub butter at 24^; i lb. E. B. tea, 60^; I broom, 35^; i pkg. gelatine, 15^; i pkg. Cream of Wheat, 15^. No. 10. — Edward Austin, 12 S. F. eggs, 25? ; i brl. apples, $2. 25; i bu. potatoes, 60?; 1 can salmon, 24^; i bottle O. oil, 35^; i head lettuce, 5^. No. 11. — Mrs. Wm. Hanson, i brl. N. S. flour, $5.75; i bu. potatoes, 60^; 20 lbs. (. sugar at 6}J; | cht., iS lbs., Y. H. tea at 45^. No. 12. — A. B. Ryder, i brl. N. S. flour, S 5.75 ; i bu. potatoes, 60 >^; i brl. apples, $2.25; 1 bottle ketchup, 22^; i qt. beans, 10?'; i lb. pork, 12^. Cash sales for the day, per cash tickets, S 184.96. Received cash from customers as follows: Mrs. S. T. Worthen, Sept. account, S 23.45; A. B. Ryder, S44.28; Wm. Harper, $20; Edward Austin, S 28.74; E. L. Corey, S 18.96: Mrs. Wm. Hanson, Su.42. Received of C. H. Stratton his note at 4 mos., with interest, for S 21 2.40, to balance his account to Oct. ist. (ICnter in journal and bill book.) Had your note at 90 days for $ 100 discounted at the City Bank, and received credit for the net proceeds. Deposited $ 125. Paid cash as follows: (Checks) second-hand safe, purchased of Diebold Safe Co., Sioo; S. M. Crockett & Co., invoice of 8th inst., less 3 %; American Sugar Refining Co., invoice of Oct I, less i % ; Gray Bros., invoice of even date, $162.45; Trent Commission Co., invoice of even date, S40.50. (Currency) office desk and fixtures, S30; salaries, Stuart, S12; Marsh, $20; Canfield, S12; freight, S 57.42. (Student) drew cash for i)rivate use, S50. Remember to balance your cash book. October 22, 19— Purchased of Gray Bros., City, for cash, 10 brls. apples at $2; 50 bu. ])otatoes at 45 f'; 30 doz. case eggs at 15^. Bought for cash, from market wagons, 40 doz. S. F. eggs at 22^; 50 hds. cabbage at 5^; 400 lbs. squash at i^. Bought of American Sugar Refining Co., 30 ds., i/io, merchandise as ]3er invoice, $124.72. Bought of S. S. Pierce & Co., Boston, net 60, 3/10, merchandise as ]ier invoice, S468.75. Purchased of F. H. Leggett & Co., New York, net 60, 3/10, merchandise as per invoice, $344-70. RETAIL (JROCERV BUSINESS Kw") The following sales slips have been handed in by the salesmen. No. 1. — A. B. Ryder, i pail mackerel, 20 lbs., $3-75; i sack pastry flour. Si. 50; 12 S. F. eggs, 25^; I bo.x cigars, $5.50; 5 lbs. coffee at 30,'' : 12 oranges, 35?^. No. 2. — Mrs. \Vm. Hanson, i b.v, 5 lbs., codfish at 12?; i ham, 18 lbs., at I2.l,<^; i case C. corn, 36 cans, at 8^; i case C. tomatoes, 36 cans, at S t* ; 4 sacks pastry flour at S1.50; 2 brooms at 30*^. No. 3. — Edward Austin, i ham, 12 lbs., at I2,l P ; 12 eggs, 25.^ : 10 lbs. G. sugar at 6.\)^; 2 lbs. coff(;e at 32^; i sack pastry flour, $ 1.50; i bottle bluing, lof-'; i can chicken, 40^. No. 4. — Mrs. A. Waldron, i can chicken, 40?^; i bunch celery, 15^; i bottle O. oil, 75 '■• ; I 5-lb. can coffee. Si. 50; i lamp, 50''; 5 gals. K. oil at 13?; i clothesline, 30,^. No. 5. — Mrs. F. Gilford, i brl. N. S. flour, $5-75 ; i can tongue, 75 f-; 5 bars I. soap at 5^; 1 bottle ketchup, 22^; 10 lbs. G. sugar at 6.]^'. No. 6. — Chas. A. Dodge, 5 lbs. lard at 12^; i ham, 15 lbs., at 12.',?; 5 gals. K. oil at 13?; I box cigars, S2.50; i broom, 35,*'; 12 eggs, 25^; 12 bananas, 25)^. No. 7. — Mrs. S. T. Worthen, i cake Sapolio, 10^; 2 lbs. coffee at 32, «^; 5 lbs. lard at I2t': I brl. N. S. flour, $5-75; 12 bananas, 25,«.'. No. 8. --- C. H. Stratton, Elm House, 500 cigars at S35 per M. ; 200 cigars at S55 per M. ; I ham, 26 lbs., at 12^; i brl. N. S. flour, $5.50; 6 doz. S. F. eggs at 22 P ; 20 doz. ca.se eggs at le.c'; i tub butter, 52 lbs., at 22?; i brl. G. sugar, 216 lbs., at 6,'*; I cht. Y. H. tea, 60 lbs., at 40^. No. 9. — W'm. Harper, i sack pastry flour, $ 1.50 ; 10 lbs. tub butter at 24 C ; 2 lbs. cheese at 161'; 5 gals. K. oil at 13^; i brl. apples, $2. 50; 12 oranges, 35?. No. 10. — E. L. Corey, i ham, 16 lbs., at 12^^; 20 lbs. G. sugar at 61^; i lamp, 40t'; I 5-lb. can coffee, $1.50; 3 gals. K. oil at 15^. No. 11. — P. J. McGuire, Cottage Hotel, 200 cigars at $35 per M. ; i brl. N. S. flour, $5. 50; I doz. T. ketchup, S2 ; i tub butter, 50 lbs., at 22(^; i cht. Y. H. tea, 60 lbs., at 40.^; 5 gals. K. oil at i3,<^; i lb. baking powder, 50,^. No. 12. — E. B. Woods, i sack pastry flour, S1.50; 2 lbs. Rio coffee at 20«'; 5 lbs. lard at 12C; I lb. chocolate, 30^; i can tongue, 75 P; i bottle Worcestershire, 40^; i pail mackerel, 10 lbs., S2.25. Cash sales for the day, per cash tickets, S 242.36. Received cash from customers as follows : P. J. McGuire, S50; Mrs. A. Waldron, S20. Had your note at 4 mos. for $500 discounted at the City Bank, and received credit for the net proceeds. Deposited S225. Paid cash as follows: (Checks) Park & Tilford, in\'oice of 15th inst., S2S7.90, less 3%, St. Louis Milling Co., invoice of 15th, $450, less 5%. (Currency) Gray Bros., S47; goods from market wagons, Si5-3o; freight and cartage, $11.32; salaries, Canfield, S12; Stuart, S 12 ; Marsh, $20. October 29, 19- Is your cash book balanced .' Purchased of Williams & Andrews, City, for cash, 2 b.xs. oranges at S3. 50; 2 bxs. lemons at S3 ; 4 tubs Cr. butter, 240 lbs., at 19.^ ; 5 b.xs. cheese, 252 lbs., at 1 1 ?. Purchased of Cobb, Bates & Yerxa, Boston, subject to sight draft in 10 days, merchan- dise as per invoice, S 262.74. Bought of Park & Tilford, New York, net 60, 210, merchandise as per invoice, S68.74. lljtj MODERN ILLUSTRATIVE BOOKKEEPING Bought of F. H. Leggett, New York, net 4 mos., 310, merchandise as per invoice, $ 168.94. Purchased of S. S. Pierce & Co., Boston, net 60, 3 '10, merchandise as per invoice, S 88.45. Purchased, for cash, country produce amounting to S 16.42. The following sales slips have been handed in by the salesmen. No. 1. — E. B. Woods, 20 lbs. tub butter at 22^; 15 lbs. G. sugar at 6]/^; 5 gals. K. oil at 13^; i cht. V. 11. tea, 15 lbs., at 40^; i lb. baking powder, 50^. No. 2. — P. J. McGuire. Cottage Hotel, 2 hams, 47 lbs., at I2>?; i brl. oatmeal, $4.75 ; I case Cr. of Wheat, 36 pkgs., at I2i^; 6 brooms at 25^; 6 doz. oranges at 25^; 3 doz. lemons at 20^. No. 3. — K. L. Corcv, i jcal. maple sirup, 3125 ; 5 bu. potatoes at 60? ; i broom, 35.C ; I can o.\ tongue, 75^; i b.\. mustard, 15^. No. 4. — Wm. Harper, i ham, 18 lbs., at 12.I?; 3 cans peaches, 50^; 5 lbs. coffee at 30^; 10 lbs. G. .sugar at 6.]^; i b.\. gelatine, 15^; 12 oranges, 35^. No. 5. — C. H. Stratton, Elm House, i tub lard, 54 lbs., at 10^; 20 lbs. print butter at 23^; 10 doz. S. F. eggs at 24^; i case Germea, 36 pkgs., at I2.V^; 12 b.xs. sardines at 25*^: I b.\. lemons, S4.50; i brl. pastry flour, S6; i ham, 24 lbs., at 12^; | cht. E. B. tea, 15 lbs., at 50 «. No. 6. — Mrs. S. T. Worthen, 20 lbs. G. sugar at 6i«': 5 lbs. Y. H. tea at 45^; i can ox tongue, 75^; 6 lemons, 15,'-'; 5 gals. K. oil at 13^^. No. 7. — A. B. Ryder, J cht. E. B. tea, 15 lbs., at 50^; i bu. potatoes, 60^; 12 S. F. eggs. 26,^'; I lam]) chimney, 10^; i can tomatoes, 10/; i ham, 14 lbs., at 12.]^. No. 8. — Mrs. Wm. Hanson, i brl. N. S. flour, S5.75; 25 lbs. oatmeal at 5^; i pail mackerel, 10 lbs., $2. 25 ; i brl. apples, $2.50; 20 lbs. G. sugar at 6.]^ ; 5 gals. K. oil at 13^. No 9. — Edward Austin, 12 S. F. eggs, 26^; 5 lbs. E. B. tea at 50^ ; 10 lbs. tub butter at 22 V'; I b.\. mustard, 15)^; 2 cans corn at 10^. No. 10. -Mrs. A. Waldron, 3 lbs. print butter at 26^; i sack pastry flour, S1.50; i ham, 12 lbs., at 12.!^; 10 lbs. G. sugar at 6i^; i gal. molasses, 40^; i lb. baking powder, 50)^^. No. 11. — Mrs. F. Gilford, 5 gals. K. oil at 13^; i brl. apples, S2.75; 5 lbs. coiTee at 30^; I lamp, 35^; I broom, 30^; ] gr. matches, 25^. No. 12. — Chas. A. Dodge, 12 S. V. eggs, 26^; i lb. coffee, 32^; i brl. apples, $2.50; I wash tub. Si- 10; i lb. chocolate, 30^. Cash sales for the day, {)er cash tickets, $2 16.48. Received cash as follows: P. J. McGuire, S50; Mrs. A. Waldron, $10. Deposited S 1 50. Paid cash as follows: (Checks) Williams & Andrews, invoice of even date, SS6.32; 5 tons coal, S25. (Currency) salaries, Canfield, S12; Stuart, S12; Marsh, S20; country produce, S 16.42; freight, S6.88. Gave -S. S. Pierce & Co., Boston, your note at 20 days, dated Oct. 25th. with interest, for amount of invoice of Oct. 15th, less 2 %. Posting. — You will now post your books. Remember that in single-entry you post only such transactions as affect personal accounts, and that only personal accounts appear in either the general ledger or the card ledger. The card ledger debits will be taken entirely from the statement sheets. Remove these statements from the file, and post only the totals to the corresponding cards of the card ledger, placing the date of each sale in the explanation space. (See model ledger card, p:i'.;e 160. ) Remember to keej) your card ledger in alphabetic order. RETAIL GROCERY BL'SIXESS 1(17 Statement of Resources and LiABii.iTrEs Henrv T. Brown, October 31, 19 — 1 Rksoukces Cash, balance on hand. 253 72 Merchandise, per inventory. 349' 18 Furniture and fixtures. 250 00 1 . Notes receivable, per bill book. 197 25 1 Accounts receivable, per card ledger, as under : Mrs. S. T. Wood. 25 to H. }!. Runyon. 36 25 John Stratton. 114 87 Mrs. U'm. Howard, 175 23 Wm. Harper. 212 '5 Charles Kennedy. 25 20 Edward L. Corlis. ■3 10 Mrs. A. Wallace, 45 12 P. J. McGuire. 26 30 Mrs. Fred Young. 52 10 E. B. Woodrut^", 29 75 Charles Doyle. Total resources 18 50 4965 82 Liabilities Notes payable, per bill book. 985 95 Accounts payable, per general ledger, as under : Adams & Hackland. 482 35 American Sugar Refining Co., 216 20 Park & Tilford. 75 68 J. J. Powers Co.. 517 22 F. H. Leggett & Co.. 35' 46 Cobb, Bates & Young. Total liabilities Present Worth, 162 47 2791 33 2174 49 The card ledger credits will be found on the debit side of the cash book and in the journal. Turn to your cash book and post all cash entries which affect the accounts of persons whose names appear in the card ledger. (See form, page 160. ) Place a check mark against each name in the cash book. Turn to your journal and post any items which may affect customers' accounts, placing a check mark against each item to indicate posting. Your own account and the accounts with those business concerns of whom you purchase goods, and all other personal accounts, except those with customers, will be kept in the general ledger, and the postings to these accounts will be made from the journal, the purchase book, and the cash book. Open these accounts in your general ledger (Blank 'No. 2). Allow one third of a page to each account beginning on page 2 of the blank. Use the first page of the blank for an alphabetic inde.x to your general ledger. Index an account immediately after it is opened. Post from the purchase book the amount of each invoice of goods bought on account, to the credit of the account named ; then post from the journal and the cash book such items as should be carried to these accounts. Place a check mark against each cash item. See explanation of cash book, page 1 56. 108 MODERN U.I.ISTK.\TIVE BOCIKKEEPIXG Foot and rule the purchase book and the abstract sales book. Having completed your posting, prove the same (see Proof of Posting, page 151"). Make an abstract of your card ledger on a sheet of paper, showing the amount due from each customer, and total amount due. From your bill book find the amount of the notes receivable in your possession, ami from your cash book find the amount of cash on hand and in bank. l-"rom vour general ledger find tiie amount due \our creditors, and from vour bill book the amount of notes you have outstanding. Your inventory shows the following : Merchandise on hand, valued at S4400.63, Furniture and fi.xtures, " " 125.00. From the above data jirepare a statement of resources and liabilities, according to the model on page 167. Find the net gain or the net loss according to the form given below. Pkopkietor's St.xtement October 31, ig — lltni-y T. BruA :., a U il invested withdrew 1 net investment present worth • A'V/ Z.OSS i 250 2250 2174 49 7S ' ; 16 one-gallon cans M. siruj) at 95*^. Bought of Gray Bros., Citv, net 30, 2 10, 5 cases eggs, 60 doz., at 15^; 130 lbs. turke\ at \l't \ 65 lbs. chicken at 12^. Purchased produce from market wagons, for cash, S 28.65. Purchased of American .Sugar Refining Co., New York, net 30, i '10, invoice amounting tu S 69.98. Bought of Armour & Co., Chicago, net 30, 2 10, invoice of ])ork and sausage, S98.37. Bought of Swift & Co., Chicago, net 30, 2 10, invoice of beef and mutton, S 102.40. Purchased of M. Newton & Sons, Boston, net 30, 2 10, invoice of fish and oysters, S 19.69. The following sales slips have been handed in by the salesmen. No. 1. — E. L. Corey, 6 lbs. chicken at iji'; .', brl. Graham flour at S5.50; i gal. maple sirup. Si. 25; ] bu. beans, 80.C'; 5 gals. K. oil at \l'r \ 12 lbs. G. sugar at (>\^ \ i gal. pickles, 50^. No. 2. -Wm. H;u|)er, 10.] lbs. chicken at 16^; i brl. pastry flour, S6; 2 doz. case eggs at 22^; 12 oranges, 35^; i bottle extract vanilla, 40^; 2 pkgs. shredded wheat, 25<'; I broom, 35^. No. 3. — Mrs. W'm. Hanson, 6 lbs. jiork chops at I2>'; S lbs. round steak at 14^; 12 lbs. sirloin roast at 15^; \\\ lbs. pork roast at I2>'; i brl. jiastrv flour, S6; 3 doz. bananas at 20/; I gal. vinegar, 25,^'. No. 4. — Mrs. S. T. Worthen, S lbs. sirloin roa.st at 20>'; A brl. G. flour, S2.75 ; 12 S. E. eggs, 28^; 2 lbs. cheese at xdf; i 5-lb. can Java coffee. Si. 50; 12 lemons, 25^. No. 5. — Edward Austin, 2 lbs. round steak at id? \ 8 lbs. corned beef at 12^; i hd. cabbage, 10^; i bu. potatoes, 6o,<'; i cht. \\. B. tea, 15 lbs., at nf \ i bottle T. ketchup, 24'' ; 12 eggs, 28.^. No. 6. — Mrs. A. Waldron, 8 lbs. lamb roast at i6<' ; 20 lbs. G. sugar at 6.] ^' ; 5 lbs. tub butter at 25^ ; i brl. Graham flour, S5.25 ; i gal. pickles, 50? ; 2 pkgs. shredded wheat, 25;^. No. 7. — Chas. A. Dodge, 9 lbs. turkey at i6<'; 2 qts. cranberries at 10''; i bu. {pota- toes, 60^^; 12 case eggs, 22 f ; i bo.\ cigars, S5.50; i gal. vinegar, 25.^'. RETAIL (IKliCKKY BUSINESS 173 No. 8. — James Ix Longlev, i sack buckwlieat tlour. Si. 50; i gal. M. sirup, S1.25; 5 gals. S. pickles at 40'"; i brl. K. oil, 42 gals., at 1 1 ^ ; 20 lbs. chicken at 14''; 28 lbs. lib roast at 14^; 16 lbs. pork roast at 11''; 15 lbs. sir. roast at 15 f^' ; 17 lbs. porterhouse at i8,t'. No. 9. — Mrs. F. Gilford, g.i lbs. turkey at i6f' ; i qt. oysters, 40''; 20 lbs. G. sugar at 6.5^'". I bu. potatoes, 60^; i lb. baking powder, 50^; 12 oranges, 35'^'. No. 10. — P. J. McGuire, lo lbs. sirloin roast at i6'-; 20 lbs. rib roast at 14^'; 10 lbs. pork roast at 12^ ; 16 lbs. turkey at i6t"; i brl. N. S. flour, S5.50; i brl. pastry flour, S5.75 ; I doz. T. ketchup, $2; 6 doz. oranges at 25^. No. 11. — E. B. Woods, II I lbs. sirloin roast at 16^; 5 bu. E. R. potatoes at 55^; i brl. apples, $2.75; 10 lbs. lard at 12.}^; 20 lbs. G. sugar at 61 'i \ i bottle bluing, 10^; \ hrl. (i. flour at S5.50. No. 12. — Thomas B. Tucker, 12 doz. S. F. eggs at 26^; 15 lbs. sirloin steak at 16^; I brl. N. S. flour, $5.50; i brl. pastry flour, $575; i brl. oatmeal, 35-25; i sack buck- wheat, $1.50; 5 gals. M. sirup at Si. 15. No. 13. — C. H. Stratton, 22 lbs. porterhouse at 18/; 31 lbs. beef, sirloin, at 15^; 26 lbs. lamb at I 5 ^ ; 12 lbs. pork chops at 10^; 10 bu. potatoes at 55^; i mat Java coffee, 75 lbs., at 28^; 48 lbs. butter at 25? ; 30 doz. case eggs at 18^. Cash sales for the day, per cash tickets, $ 388.74. Received cash as follows: A. B. Ryder, October account, S 38.30; Mrs. S. T. VVorthen. on account, S15; P. J. McGuire, balance of September account, S 19.34; T. B. Tucker, on account, S30. Had the note of E. VV. Lawrence discounted at the City Bank, and received credit for the net proceeds. Face of note, $942.68; discount, $8.96. Deposited S300. Paid cash as follows: (Checks) Cobb, Bates & Yerxa, draft at sight for invoice of Oct. 29; Park & Tilford, invoice of Oct. 29, less 2%; F. H. Leggett & Co., invoice of Oct. 29, less 3 % ; Armour & Co., invoice of Nov. i, less 2 % ; Swift & Co., invoice of Nov. I, less 2%; M. S. Newton & Sons, invoice of Nov. i, less 2%; bay horse, S125 {Horses and Wagons account); delivery wagon, Sioo. (Currency) merchandise from market wagons, S28.65; cleaning windows, $1.25; board of horse, S5; harness, S31; freight, S1.96; salaries, Canfield, S12; Stuart, S12; Carter, Si5; Holt, 5 15. Received of C. H. Stratton his note at 60 ds., with interest added, to settle October account. Amount of account, $266.09; interest, 60 ds., $2.66. Returned to E. J. Dunn Grocery Co., i bale Mocha coffee, 150 lbs., at 25^. Too much of this kind was ordered. November 15, 19 — Purchased of Armour & Co., Chicago, net 30, 2/10, invoice amounting to $116.20. Purchased. of Swift & Co., Chicago, net 60, 3 10, invoice amounting to $178.95. Bought of M. S. Newton & Sons, Boston, net 30, 2/10, invoice amounting to $28.44. Bought of S. S. Pierce & Co., Boston, 60 ds., 3/10, invoice amounting to $246.39. Purchased of Park & Tilford, New York, net 30, 2/10, invoice amounting to $63.44. Bought of Cobb, Bates & Yer.xa, Boston, acceptance 30 ds. from date, invoice, S213.42. Bought merchandise from market wagons, for cash, $63.42. The following sales slips have been handed in by the salesmen. No. 1. — C. H. Stratton, i brl. G. sugar, 217 lbs., at 6/; i brl. N. S. flour, $5.50; i brl. pastry flour, S5.75 ; i b.\. oranges, S4.75 ; 20 doz. S. F. eggs at 25^; 20 lbs. fresh fish 174 MODERN ILLUSTRATIVK liOOKKEEPING at 1 1 5^ ; 12 lbs. sirloin steak at I5>^ ; 22 lbs. sirloin roast at 15)?; 500 cigars at $35 per M.; 200 cigars at $55 per M. No. 2. —A. B. Ryder, S lbs. beef roast at idj-'; 12 S. F. eggs, zS,^ ; \ brl. G. flour at S5.50; 10 lbs. lard at 12.]^; \ bu. beans at S3. 20. No. 3. — W'm. Harper, i qr. lamb, 16 lbs., at 15^; 10 lbs. lard at 12.U'; 6 lemons, 15''; 12 -S. V. eggs, 25^; 2 lbs. cheese at 16^; i sack buckwheat flour, S1.25. No. 4. — Mrs. Wm. Hanson, 5 lbs. iamb chops at 16^; 18 lbs. ham at 11^; 8 lbs. round steak at 14^- ; i case C. tomatoes, 36 cans, at 8?; i case C. corn, 36 cans, at 8 / ; i brl. G. flour, S5.25; I lb. pejjper, 65^; i lb. ginger, 60^. No. 5. — Edward Austin, 2 lbs. halibut at 20^; 6 lbs. sir. roast at \6^ \ 20 lbs. G. sugar at 6.',''; 12 S. F. eggs, 28^; i brl. apples, S2.75; i bottle T. ketchup, 24^; i lamp, 40^. No 6. — Thomas H. Tucker, i tub butter, 42^ lbs., at 22^; i cheese, 28.', lbs., at I2i^; I case C. tomatoes, 36 cans, at 8 ^ ; i case C. corn, 36 cans, at 8f^; i case C. peas, 36 cans, at 12.]^; 22.] lbs. fresh fish at 12^; 26.] lbs. chicken at 14^; 18 lbs. sirloin steak at 15^; 24 lbs. sirloin roast at 15^. No. 7. — J. B. Longley, i brl. X. S. flour, S5.75 : 1 brl. pastry flour, $6; 32^ lbs. turkey at 15^; 21 lbs. lobster at 16^; 5 gals, oysters at S1.20; 15 lbs. codfish at \2\^ ; i brl. G. sugar, 231 lbs., at 6^. No. 8. — Chas. A. Dodge, 6\ lbs. veal roast at \6'r ; 12 lbs. G. sugar at 6.] << ; 12 S. F. eggs. 28^; I b.\. dried peaches, 10 lbs., at 15^; | gr. matches, 25^. No. 9. Mrs. A. Waldron, q.\ lbs. turkey at 16^; 10 lbs. lard at 12,',^; i gal. vinegar, 25 P; 1 lb. K. B. tea, 60'^; i qt. pickles, is?'; 2 lbs. raisins at 15^. No. 10. — P. J. McGuire, i tub butter, 43.] lbs., at 22^; i tub lard, 48 lbs., at 11/ ; 22i lbs. rib roast at 14^; 11.^ lbs. pork roast at 10^; 8 lbs. sirloin steak at i 5 4^ ; i case eggs, 30 doz., at 20^; I doz. C. tomatoes, $ i. No. 11. — E. B. Woods, 7.] lbs. chicken at isf; 15 lbs. tub butter at 22''; 3 lbs. raisins at \$^ \ 2 lbs. citron at 20^ ; 2 lbs. dried currants at 12.] ^ ; 8 lbs. beef at 8;^. No. 12. — Mrs. F. Gilford, 4^ lbs. chicken at 15^; i .sack buckwheat flour, S1.25 ; i gal. M. sirup, S1.25 ; 5 lbs. lard at 12.]^; i b.\. dried apricots, 5 lbs., at 20J!'; 2 pkgs. shredded wheat, 25^. Cash sales for the day, per cash tickets, S 362.28. Received cash as follows : E. B. Woods, balance of October account ; Mrs. A. Waldron, on account, S20; E. L. Corey, to balance October account; C. A. Dodge, to balance October account; James B. Longley, on account, $25. Had C. H. Stratton's note of Oct. 15 discounted at the City Bank, and net proceeds placed to credit. Face of note, S212.40; interest, 4 mos., $4.25 ; discount, 92 ds., S3. 32. Deposited, S400. Paid cash as follows: (Checks) Adams & Hackland, on account, S2C)0; E. J. Dunn Grocery Co., invoice of Nov. i, less 5 % (deduct S37. 50, amount of goods returned); note in favor of S. S. Pierce & Co., due Nov. 14, with interest; face of note, S 458. 95; interest, S1.53 ; Armour & Co., invoice of Nov. 8, less 2% ; American Sugar Refining Co., invoice of Nov. 8, less i %; insuring stock of groceries and fi.vtures one year from date; policy, S3500; premium, 1%. (Currency) purchases from market wagons, S63. 42 ; shoeing horse, Si.25; board of horses, S 10; salaries, Canfield, S 12 ; Stuart, S 12; Holt, S 15; Carter, Si 5; telegrams and telephone service, S1.87; freight, Si7-42. J. M. Marsh drew cash for private use, S60. (Student) drew cash for ])rivate use, S 50. RETAIL GROCERY BUSINESS 175 Received of P. J. McGuire his note at 90 ds., with interest, to balance October account. Accepted Cobb, Bates & Yerxa's draft at 30 ds. for the amount of their invcjice received this day. November 23, 19 — Bought of Gray Bros., City, 60 ds., 3 10, 92 lbs. turkey at 14,'' ; 56 lbs. chicken at I2.1^; 60 doz. S. F. eggs at 22, <^. Bought of Armour & Co., Chicago, net 30, 2 '10, invoice amounting to $ 112.20. Purchased of Swift & Co., Chicago, net 60, 3/10, invoice amounting to $ 168.30. Purchased of M. S. Newton & Sons, Boston, net 30, 2 10, invoice amounting to $34.62. Bought merchandise from market wagons, for cash, amounting to $46.28. The following sales slips have been handed in by the salesmen. No. 1. — ;\Irs. A. W'aldron, 2 lbs. sirloin at 16 f; gl lbs. rib roast at 14^; i 5 lbs. G. sugar at 6.!«^; i bx. dried peaches, 10 lbs., at 12^'; i can peas, 15^'; i bu. potatoes, 6o!^. No. 2. — P. J. McGuire, 2 brls. Baldwin apples at $2.50; 10 bu. E. R. potatoes at 55^; 24 doz. case eggs at 18^; 20 hds. cabbage at 8^; 42 lbs. beef, sirloin, at 15^; 18 lbs. fresh fish at I2t'; I brl. N. S. flour, $5.50. No. 3. — Mrs. S. T. Worthen, 20 lbs. G. sugar ai e)J\ 10 lbs. lard at \2\f \ 12 S. F. eggs, 28 f'; I brl. apples, S2.75 ; .] brl. pastry flour at ^6; 6|- lbs. sirloin roast at 16P; i bot- tle bluing, 10^; I bx. stove polish, 12^. No. 4. — A. B. Ryder, i bx. dried peaches, to lbs., at 12^; 12 S. F. eggs, 28,^; 15 lbs. G. sugar at 6\'r \ 9.] lbs. turkey at 16^; i bx. poultry dressing, 2^i \ i qt. oysters, 351^. No. 5. — C. H. Stratton, 2 brls. N. S. flour at S5.50; i brl. pastry flour, $5.75; 2 brls. apples at $2.50; i bx. oranges, $4.25 ; 16 lbs. sirloin steak at 15^; 24 lbs. sirloin roast at 14^; 18 doz. S. Y. eggs at 25^; i bu. beans, $3. No. 6. — Mrs. Wm. Hanson, 2 pkgs. rolled oats, 25^; 5 doz. case eggs at 22.^'; 25 lbs. G. sugar at 6.]-^; 12 lbs. rib roast at 14^; i 5-lb. can Java coffee, $1.50; i can E. B. tea, 10 lbs., at 50!^. No. 7. — Wm. Harper, 9 lbs. chicken at 15^; 4 lbs. salt pork at 10^; 12 S. F. eggs, 28^; 12 oranges, 35^; i lb. F.. B. tea, 60'*; 15 lbs. G. sugar at 6.]^. No. 8. — E. L. Corey, 2 lbs. sirloin steak at 16^; 5I lbs. veal roast at 18^; i bx. dried prunes. 10 lbs., at i 5 <^ ; 1 brl. apples, $2.75; i lb. chocolate, 40^. No. 9. — T. B. Tucker, 25 doz. S. F. eggs at 24'' ; 20 bu. E. R. potatoes at 50? : 40 hds. lettuce at 2^; i case Cream of Wheat, 36 pkgs., at \2\'f ; 42.^ lbs. beef, sirloin, at 15^; I hf. cht. E. B. tea, 50 lbs., at 60/; i mat Java coffee, 75 lbs., at 28^. No. 10. — James B. Longley, i mat Rio coffee, 75 lbs., at 15^; i hf. cht. Jajjan tea, 50 lbs., at 35^; 2 gal. oysters at $1.25; i tub butter, 40.] lbs., at 22^; 28 lbs. fresh fish at 13'*; 12 doz. case eggs at 18^. No. 11. — E. B. Woods, I qt. oysters, 40^; 6 lbs. pork loin at \2\i \ 10 lbs. lard at 12A'': I lamp, 65^; I lb. chocolate, 40,^; i lb. baking powder, 50^. No. 12. — Edward Austin, 8] lbs. corned beef at 12^; i hd. cabbage, 10^; 5 gals. K. oil at 13^; 12 S. F. eggs, 28;^; 12 oranges, 35 (^; i 5-lb. can Java coffee, $1.50. Cash sales for the day, per cash tickets, S422.16. Received cash as follows : Mrs. S. T. Worthen, balance of October account; Mrs. Wm. Hanson, $25, to apply on account; Wm. Harper, to balance October account; E. Austin, to balance October account; T. B. Tucker, $50, to apply on account. Discounted at the City Bank G. .M. Kelly's note, dated Sept. 19, at 4 months, with ITi", MODEKN lUaSTKATlVE BCMJKKEEPINt; interest. Face of note, S622.85 ; interest, S 12.46; discount, S6.14; net jiroceeds placed to credit. Deposited S400. Paid cash as follows: (Checks) Hackett Bros., invoice of Nov. 8, less 2%; S. M. Crockett & Co., invoice of Nov. 8, less 3 % ; Swift & Co., invoice of Nov. 8, less i %. (Currency) board of horses, Sio; railroad mileage ticket, 500 miles, Sio; salaries, Canfield, S12; Stuart, S12; Holt, S15; Carter, $15; freight, S1.45; purchases from market wagons, S46.28. Gave S. S. Pierce & Co. our note at 60 ds., with interest, to pay invoices of Oct. 29 and Nov. 15, less 3 %. November 29, 19 — Purchased of Cobb, Bates & Ver.xa, acceptance 30 ds., merchandise invoiced at S 182.77. Bought of Armour & Co., Chicago, net 30, 2 10, invoice amounting to S 83.49. Purchased of Swift & Co., Chicago, net 30, 2 10, invoice amounting to S87.96. Bought of M. S. Newton & Sons, Boston, net 30, 2- 10, merchandise invoiced at S28.42. Bought of S. S. Pierce & Co., Boston, net 60, 3 ro, invoice amounting to S63.14. Purchased produce from market wagons, for cash, S62.46. The following sales slips have been handed in by the salesmen. No. 1. — Mr. S. T. Wortiieii, 2.1 lbs. sirloin steak at 16^; I lb. Ceylon tea, So^; 12 oranges, 35^'; i broom, 30^; 2 lbs. raisins at 15^. No. 2. — A. B. RydL-r, i b.\. cigars, S5.50; i brl. pastry flour, $6; 12 oranges, 35^; 8,1 lbs. lamb roast at i6t'; 15 lbs. G. sugar at 6.] ^ ; 12 S. F. eggs, 28^. No. 3. — C. H. -Stratton, 42^ lbs. butter at 24^; 64 lbs. turkey at 15^; 2 gals, oysters at $1.20; 1 brl. G. sugar, 217 lbs., at 6^ ; i case Ceylon tea, 50 lbs., at 52^; 22 doz. S. F. eggs at 26^. No. 4. — F.dward Austin, 9.I lbs. turkey at i6f^; \ brl. pastry flour at S6; 12 bananas, 25 P; I pkg. gelatine, 15^^; i bx. honey, 225^. No. 5. — F. L. Corey, 12J lbs. turkey at 16^; i qt. oysters. 35^ ; i bx. cigars, S3. 50; I can peas, 1 5 1' ; i gr. matches, 25^; 6 lbs. loaf sugar at 8^. No. 6. P. J. McGuire, 200 cigars at $55 per M.; 500 cigars at S35 per M. ; 42 lbs. lamb at I2f'; i brl. G. sugar, 231 lbs., at 6^^'; 22 lbs. beef, sirloin, at 15)''; 1 mat Java coffee, 75 lbs., at 28.*^. No. 7. — Mrs. A. Waldron, i brl. pastry flour, S6; 20 lbs. tub butter at 25^; 6.] lbs. veal roast at 18^; i can peas, 15^; .1 lb. pepper at 80^; 2 pkgs. shredded wheat, 25^. No. 8. — Mrs. Fred Gilford, 8.] lbs. sirloin roast at 16^; i brl. pastry flour, S6; 4 lbs. dried peaches at I2f'; 12 S. F. eggs, 28,''; i can peas, 15,*^. No. 9. — Chas. A. Dodge, .1 brl. pastry flour at $6; S.l lbs. sirloin roast at 16^; i lb. cocoa, 40*'; I s-lb. can Java coffee, Si-5o; i qt. pickles, 15^; 2 lbs. cheese at i6f ; 5 lbs. print butter at 30^. No. 10. — ^T. B. Tucker, i hf. cht. E. B. tea, 60 lbs., at 50,^*; i gal. Olive oil, $2.50; 22 lbs. fresh fish at 12P; 48 lbs. beef, sirloin, at I5<'; i doz. T. ketchup, S2; i brl. G. sugar, 226 lbs., at 6<^ ; 10 bu. E. R. potatoes at 55 ,<^; i brl. pastry flour, S6; 103 lbs. winter squash at 2^. No. 11. — James B. Longley, 26 lbs. lobster at i6«'; 3 gals, oysters at S 1.25; 500 oysters. New York count, at 60^ per C; 52 lbs. turkey at 15^; i gal. Olive oil, S2.50; 22 lbs. sirloin steak at 15/. RETAIL GROCERY BUSINESS 177 No. 12. — Mrs. Win. Hanson, i brl. N. S. flour, >S5.75; 4 doz. case eggs at 20^; 23^ lbs. turkey at iS f ', 9^ '^^- ^resh fish at 12 >-' ; i case corn, ^6 cans, at S" '' ; i case tomatoes, 36 cans, at 8 ^. Cash sales for the day, per cash tickets, $436 98. Received cash as follows: Mrs. A. Waldron, to balance October account; Mrs. W'm. Hanson, to balance October account ; J. R. Longley, on account, S25. Sold one of the horses on account of being too light for the service, for S90. Had C. H. Stratton's note of the 8th inst. discounted. Face of note, $268.75; discount, $1.75 ; net proceeds placed to credit. Deposited $350. Paid cash as follows: (Checks) Adams & Hackland, on account, $200; Cavanaugh Bros., for bay horse to replace the one sold this day, $ 125 ; M. S. Newton & Sons, bills of Nov. S and Nov. 15, less i % ; Armour & Co., invoice of Nov. 15, less 2 % ; Swift & Co., bill of Nov. 15, less 3%. (Currency) purchases from market wagons, $62.46; freight, ^4.27; board of horses, Sio; shoeing horse, $[.25; salaries, Canfield, $12; Stuart, S12; Carter, $15; Holt, $ 15. J. M. Marsh drew cash for private use, $25. (Student) drew cash for |:)rivate use, $25. Balance, foot, and rule your cash book, including the Mdse. Disct. column, and foot and rule your purchase book and sales book. Following is a model form for the closing of the credit side of your cash book. 30 Mdse. Disct. Balance ott hand 98 231 76 1461 1 13_ 92 Posting. - — First. — Post from your statement sheets, from the debit side of the cash book, and from the journal to the card ledger, as in October. Second. — Post the footing of the Amount of Invoice column of the purchase book to the debit side of Merchandise account in your general ledger, and post each separate invoice, except cash items, to the credit of the proper account in the general ledger. Third. — Post the amount in the Monthly Sales column of the abstract sales book to the credit side of Merchandise account in your general ledger. Fourth. — Post the amount of the Merchandise Discount column, on the credit side of the cash book, to the credit of Merchandise Discount in the general ledger. Post each item in this column to the debit of the person or firm allowing the discount. Post the other cash entries as heretofore in double-entry. Fifth. — Post the journal as in all double-entry sets. The inventory of unsold merchandise amounts to $4595.21. Horses, wagon, and harnesses are valued at $500; furniture and fixtures valued at $112.50; unexpired insurance, S 32.08. Take an abstract of the customers' ledger and a trial balance. Include in the trial bal- ance the amount due from customers, as shown by the abstract, and the amount of cash on hand as shown by the cash book. Make a statement of losses and gains (see form, page 178), and a statement of resources and liabilities (see form, page 178). Close the general ledger. Hand your books and vouchers to the teacher for inspection. 17X MODKRN II.l.USTKATIVK ]!( KJKKKKPING Statement of Losses and Gains White & Marsh, November 30, 19 — Sales for month Inventory, November i, 19 — Purchases for month Deduct: Inventory, November 30, 19 — Turnover for November • Gain from Sales Add : Merchandise Discount, allowed us Interest, on notes receivable Gross gain from tlio business Deduct : Expense Less unexpired insurance Salaries, for month Discount, allowed others Kreight. for month Depreciation of horses and wagons •• furniture and fixtures Net gain A. U. White, \ net gain C. D. .Marsh. ', " " * Cost of goods sold. Sec page 216. 87.29 32-08 Statement of Resources and Liabilities White & Marsh, November 30, iq — Rksoukces Cash, on hand and in bank 984 ' 06 Notes Receivable, debit balance 215 98 Accounts Receivable, per card ledger I 236 ; 69 1 Mdse., on hand 3005 65 Insurance, unexpired 32I08 1 Horses and Wagons, valued at 450 Furniture and Fixtures, valued at LlAHILITlES 125 6049 46 Notes Pavable. credit balance 529 25 ■ Account Payable, per general ledger Present worth 798 75 .328 1 4721 46 A. H. White, investment 2742.78 1 1 A net gain 117.95 2860 ' 73 C. D. Marsh, investment 2742.78 J net gain 117.95 2860 73 4721 46 1 . RKi'Aii, i;koceky businkss 179 EXERCISES Note. — The entries, statements, etc., called for in these exercises should be made on loose journal piper. 1. Determine the percentaf^e of loss for the month of October on the capital invested. The percentage on capital invested is found hy comparing the net gain with the net ca|)ital. 2. Determine the percentage of gross gain from sales in the month of NoNcniher a.s shovvia by your statement of losses and gains. The percentage of gross gains from sales is foinul by dividing the amount of (lie gross gain bv the amount of the sales; and the percentage of net gain is found by dividing the amount of the net gain bv tlie amount of the sales. 3. Determine the percentage of net gain for November, as shown by your statement of losses and gains. 4. Determine the percentage of net gain for November on the capital invested, as shown by your statement of resources and liabilities. 5. Determine the percentage of e.\i)ense for running the business for the month of November, as shown by your statement of losses and gains. 6. H. C. Bo wen has been conducting a retail dry goods business and keeping his books by single-entry. His present worth at the beginning of the year, as shown by his books, was $5826.13, and his ])resent resources and liabilities at the end of the year are as follows: Resources: Merchandise inventory, S4783.24; Furniture and fixtures, $450; Motor delivery wagon, S 1500 ; Cash as per cash register, $36.46 ; Cash in bank as per check book, $1242.81; Accounts receivable as per customers' ledger, $375.52; Unexpired insurance, $39.25. Liabilities: Accounts payable as per impaid bills, $1275; Note payable as per bill book, $300. Determine (i) Bowen's present worth ; (2) the net gain or net loss for the year; (3) the percentage of gain or loss for the year on the capital investment. 7. Show the journal entry you would make if you were emplo)ed by Mr. Bowen to change his books from single-entry to double-entry, and explain the steps you would take in making the change. 8. T. H. O'Meara is doing a retail business and has been keeping his books by single- entry. He engages you as bookkeeper and instructs you to open and keep a set of double- entry books. Suppose, after you have opened the new books, you should discover that Jones & Co. hold Mr. O'Meara's note for $250, ar.d that it had not been included in the list of resources and liabilities. Show the entry or entries that would be made for this item, to correct the omission. 9. You have changed a set of books from single-entry to double-entry, and the pro- prietor's investment account shows his present worth to be $7836.51. Suppose a customer's account, amounting to $28.75, which the proprietor had considered worthless, and which was not included in the new books, is paid in full in cash. Show the entry or entries you would make for this item. 10. J. M. Irwin is conducting a retail grocerv and meat business in two adjoining stores. T. A. Coleman, desiring to purchase a going business, offers Irwin S3500 cash for the good will, stock in trade, and fixtures of the grocery part of the business, and the lease rights of the grocery store. Assume that Mr. Irwin has accepted the proposition, that a bill of sale has been executed, and that the cash has been paid. All bills for the grocery stock have been paid by Irwin, and he will collect all bills due him for groceries. 18U Modern iLi.usTii.\TivE iiookkeeping If the books are kept by single-entr)-, show the entry or entries on Irwin's books for the above transaction. Show the same on Coleman's books. 11. Assume that Coleman will keep his books by double-entry. Show the proper entry or entries for the transaction in lO, estimating the good will at S500, the fixtures at S300, and the stock of groceries at S2700. 12. Eden & Kline are conducting a retail business, and their books on Dec. 31, 19 — , showed that their sales lor the year were S 12687.92; their purchase, $9454-45 ; and stock on hand at beginning of year, S 7675.86. The following accounts showed debit balances: Freight, S64.32; Salaries, S 1575 ; E.xpense, S254.93 ; Furniture and Fixtures, $850; Horses and Wagons, S425 ; Notes Receivable, S246.39. An abstract of the customers' ledger showed amounts due, S2916.57; cash on hand and in bank, $891.27. The following ac- counts showed credit balances: F. R. Eden, S5cxdo; J. B. Kline, $5000; Notes Payable, S 1227.46; Accounts Payable, S3 14.39; Interest, $6.74; Mdse. Discount, $117.28. The inventories were as follows: Merchandise, $7886.25; Horses and Wagons, $375; Furniture and Fixtures, S750; Insurance, unexpired, $54.65; Interest accrued on notes jiayable, $ 1 1.04. From the above data make a trial balance, a statement of losses and gains, and a state- ment of resources and liabilities. Show the percentages of gross gain and net gain from the business, and the ]jercentage of net gain on the capital. 13. Assume that l-klcn & Kline decided to keep their books by single-entry after Dec. 31, 19 — , running personal accounts only, and that the ledger has been closed as of that date. Show the journal entry you would make to change their books from double- to single-entry, using the data on their statement of resources and liabilities (No. 12). Since only personal accounts are to be nin (kept), it will be necessan,' for you to make such an entr^- as will, when posted, close all other accounts. Make an entry as if you were going to close all of the accounts, then check the personal accounts : the remaining items, when posted, would close the impersonal accounts, and the ledger would then be in single-entry form. 14. Suppose that Eden & Kline's business year ended June 30, instead of Dec. 31, and that they decided to change their books on the latter date, without taking inventories, or determining the condition of the business. Show the journal entry you would make to effect the change. While it is necessary to know the actual resources and liabilities of the business to change from single- to double-entry, only the open accounts need be considered in changing from double- to single-entry. A trial balance should be taken which will serve as the basis of the journal entry. The following exercises are given for practice in schools which have adding machines : 15. Pro\e the abstract of your customers' ledger by listing (on the adding machine) the November charges and the November credits, and comparing the difference between the amounts of these two lists with the footing of the abstract. Since vou have no sales slips you may use your monthly statements from which to get the data forlhe above exercise, and for other exercises of a similar nature. 16. Prove the November charges and credits to your customers' ledger by listing the November sales slips and the entries for customers' payments in your cash book, and coni- l)aring the footing of the sales slips list with that of the ledger charges list, and the footiii of the cash entries list with that of the ledger credits list. 17. Determine from the daily sales slips the number of eggs sold on account in October by listing the quantities in units (single articles); the number sold on account in November; show the quantity in dozens below the footing of each list. KETAII. GROCERY P.L'SIXESS 181 iS. Recapitulate the daily sales and ]iro\'e \'oiir abstract sales sheet for October by listing first, your charge sales for that month, and show sub-totals ; and second, \-our daily cash sales, and show total sales for each day. 19. Prove your daily charge postings to customers' accounts for November by listing the charge items to these accounts and comparing the footing of each day's postings with the amount of the charge sales, or sub-totals, for each day on the recapitulation list. 20. Prove your monthly statements for October by listing your charge postings for that month, showing the amount of each statement as a sub-total, and the total of the statements. QUESTIONS 1. In what respect docs a .single-entry ledger difTer from the ledger of a business in which the books are kept by double-entry ? 2. How would you keep a record of cash transactions, and how would you determine tlie amount of notes receivalile and the amount of notes payable at any st.ited time ? 3. How would you keep a record of your merchandise .' 4. Is it possible to show as complete a record of the business by single-entry as by double-entry ? 5. What does the single-entrv iournal contain ? 6. Describe the sales slip, and explain its use in the retail grocery business. Why are sales slips written in duplicate ? 7. Describe the method ot making cash sales and of recording the amounts of such sales. 8. To what books are the cash sales of the day carried ? 9. Explain the abstract sales sheet and the abstract sales book. 10. Of what is the purchase book an aljstract, and what will the footing of its -Amount of Invoice column show ? 1 1. What will the total footing ot the abstract sales book show at any time ? 12. Where are the items of the sales slips carried, and when should this be done ? 13. What should the customers' monthly statement contain, and what should his account in the ledger con- tain ? 14. \\ hat advantages has the card ledger over the ordinary book form of ledger ? 15. How should customers" statements be posted to the card ledger ? 16. What is the first step you would take preparatory to changing a set of books from single- to double-entry ? 17. What additional stejjs would vou take ? 18. How do you obtain the necessary balances of the additional ledger accounts ? 19. What additional accounts must be opened in the ledger when changing from single- to double-entry ? 20. Suppose a resource or a liabilitv item liad been omitted in making the statement ot resources and lia- bilities and was not discovered until after the bonks had been changed to double-entry. How would you correct the omission ? 21. Name an account which will always be affected by the correction of such an omission. 22. How would you change a set of books from double-entry to single-entry ? 23. How would you change from double- to single-entry ? 24. Which method of bookkeeping do vou jirefer. single- or doulile-entry, for an ordinary retail business ? 25. I'nder what conditions would you prefer the other method ? COMMISSION, SHIPPING, AND MERCHANDISING BUSINESS A larfjje variety of jjrocluce and manufactured products are shipped to trade centers, and there sold to the wholesale and retail trades through the medium of correspondents who are known as Commission Merchants. A Commission Merchant is a person engaged in receiving and selling goods belonging tu others, for a compensation called a commission, which is generally a certain per cent on the sales. Tlic property is generally sold at the current market rates. Sometimes the shipper leaves the matter of price and terms to the judgment of the commission merchant. This is generallv done in the ])roduce commission business, and in other branches of the commission business which deal with perishable property ; but in case of manufactured products, the shipi)er usually limits the price below which the goods must not be sold, and also establishes the terms of credit. Some commission merchants do both a shipping and a commission business, and a few do a general merchandising business in connection with the shipping and commission business. Shipments and Consignments. — When property is shipped to be sold, it is called a " Ship- ment," and the party who ships it is called the " Consignor." When property is received to be sold, it is called a "Consignment," and the party who receives the property is called the " Consignee." The consignor generally sends the consignee notice of a shipment in the form of a letter of advice, or a consignment invoice, and a bill of lading. Shipments Account. — The .Shipments account is in its nature the same as a Merchandise account, — it is, in fact, an account with the goods (merchandi.se) which we have shipped to others to be sold on commission. The debit side represents the total cost of all goods shipped, and the credit side shows the jiroceeds of the goods which have been sold for us, and for which we have received an account sales. When we have received accounts sales fcr all goods shipped, the difference between the debit and credit sides of the Shipments account will be either a gain or a loss. If all our shipments have not been closed out and accounted for, ths value of the unsold shipments is a resource inventory, and must be added to the credit of Shipments before taking the difference between that and the debit side of the account. This inventory is found bv taking the total cost of unsold shipments as shown in the ship- ment ledger. This includes the original cost of the goods shipped, as well as any additional cost, sucli as freight, insurance, and drayage. We consider any un.sold goods which we liave shipped to be sold on our account and risk as worth wdiat we have put into them. Consi?r. ■ ints Account. — The credit side of the Consignments account represents the total ^ .cs from all consignments, and the debit side includes all costs, charges, and net pr ceeds, and since the net jjroceeds on each consignment are determined by taking the diffei- ence between the sum of the costs and charges (including advances) and the amount of the sales, it aIU be seen that when all consignments have been sold out and accounts sa' rendered, the Consignments account must balance. IH-2 SHIPPINT, AND COMMISSION' BUSINESS 183 If the account has a debit balance, it signifies that the costs and advances whicii have been made upon ojien consignments are greater than the sales from these consignments. In such a case the difference is a resource or asset, since it is the amount due from the consignors. If the Consignments account is larger on the cretlit side, it indicates that the total of the sales from consignments for which you have not rendered accoLmts sales is greater than the costs and any advances which you have made. This difference would be due the con- signors, and therefore is a liability. It is clear, then, that if the Consignments account does not balance, it will show cither a resource or a liability, and will appear on one or the other side of the Statement of Resources and Liabilities. Although the student will receive special instructions in regard to the entries for the vari- ous transactions as they occur, it will be well for him to bear in mind continually the follow- ing general rules, which govern all entries for shipment and consignment accounts. Rule for Sliiptnents Shipments Accoi/nt is debited for the total cost of the goods shipped, and is credited fo7- the net proceeds. liilfi- for ('oiisitjiiiiiriifti CoNS/GNAfE.VTS Accoi^NT is debited for all costs, charges, and net proceeds retnrned to the consignor, and is credited for all sales. Books Kept. — The books kept in a shipping and commission business depend upon the kind of goods handled and the magnitude of the business. The following set is designed to illustrate a method of bookkeeping adapted to the requirements of the produce commission business. The books to be kept in this work are sales book, account sales register, shi]Mnent ledger, cash book, invoice book, journal, general ledger, and loose-leaf consignment ledger. The forms of the invoice book and the journal will be the same as those you have kept in the Introductory Course. As but few notes appear in these transactions, the bill book will be dispensed with. It is the custom of most commission houses to enter a description of each lot of goods \ received in a book called the receiving book, which is usually a book about six inches wide with rulings like those of an ordinary daybook. The entries in this book are made in pencil. i and the book is kept by the clerk in the store or warehouse. The receiving book is left in the office at the close of the dav, or at other convenient times, so that the bookkeeper can make the necessary entries from it. Commission houses generally use two sets of receiving books, so that those which are in use by the receiving clerk on one day will be in the office on the next. An account is opened with each lot of goods under an appropriate name in a book called the consignment ledger. Each account contains on its credit side all sales made from the lot of which it is the record, and on its debit side all charges against this lot. When the lot is all sold, an account sales is rendered to the consignor. By the use of the loose-leaf consignment ledger, a description of which follows, the receiving book, consignment ledger, and account sales are combined in one, and the book- keeping is greatly simplified. Each consignment should be accompanied by a letter of advice, containing the list of goods, and this letter should be compared with the goods when they are received, and if 1S4 MfiDERX ILLUSTRATIVE BCMDKKEEriNG LoosE-LKAF Consignment LEiHiEK *LC or MCRCHANDISC FOR ACCOUNT OF (/^^ ^//l^ ' i=^U- yPZ^-/ J^^:A/r.-,^ °' E. H. Reed &. Company, COMMISSION MERCHANTS. lYAvr pU£« b«rF ) V?-^:*/, /^^^a;^, ^-2Si,<<^:?^ii,ZS^ '*y '' / e'-^ti-c.J^r:i^ /, ^ 2-<^ J-(? , 0^'a^ /a. iT .2.-».^i^ iJ'*' ^^^ --P-^ ^.i' iC^ there is any shortage, the consignor should be notified at once. The receiving clerk gener- ally enters the goods on a blotter as they are unloaded from the trucks, and from the blotter the bookkeeper transfers the items to a loose leaf of the consignment ledger. (See model, above.) Wlicii \\ consignment is received, the lot number given it is stenciled or marked upon each package, if tl>e package is not already so marked, and the goods are thereafter known, while in the store or warehouse, and when sales are made from them, by that number. Goods whiclt are not in pack.iges. and which are of such a nature that a lot number cannot conveniently be put upon them, are placed in stalls or apart from other goc" , and a placard bearing the lot number is posted up over them. .-V knowledge of the sources from which t commission merchant obtains his consigned goods is valuable to him. and he desires to conceal it from his com- petitors and customers. It is jwrtly for this reason that he uses lot numbers or arbitrary marks to identify the goods while they are in his store or warehouse. The Consignment Ledger. — In this business, when goods are received to be sold on com- mission, the consignment will be entered on a loose leaf of the consignment ledger, as shown in the illustration on this page. The consignment ledger is an underlying or au.xil- iary ledger ; also called sectional ledger. In the small square at the upper right-hand corner of this loose leaf is written the SHIPPING AND COMMISSION BUSINESS 185 Stencil, or private mark, of this consignment, and every package in the consignment will be marked with the same stencil. These stencil marks are arbitrary, and any letter, num- ber, or symbol may be used. In this business the initial letter of the consignor and the number of his consignment will be used as a stencil mark. The loose leaf is now fastened to its cover and becomes a part of the consignment ledger. The amount of freight as shown by the freight bill, which will accompany the goods, should be entered in the left- hand or debit column of the loose leaf opposite Freight. This may be done at the time the goods are received, or later, when the amount is taken from the cash book. As the goods are sold, the items are entered in the space under Sales on the loose leaf, and the amounts carried to the right-hand or credit column. These amounts should be taken from the sales book, where they will be found in the special column for sales from consignments. The contents of this column should be carried to the consignment ledger at the close of each day. When all the goods which make up the consignment have been sold, the right-hand or credit column is footed and the amount placed at the bottom of the loose leaf. If any sight drafts have been paid or time drafts accepted on account of this consign- ment, the amount should be placed opposite Advances in the debit colunui of the loose leaf. Such amounts will be found in the consignment column on the credit side of the cash book. Everything in this column should be carried to the debit side of the consign- ment ledger at the close of each day. The commission should now be calculated, and also any charges which may be due for cartage, insurance, storage, or other items of e.xpense. In this business these items, ex'cept commission, will be combined under the head of " Charges." Enter the amount of commission and of charges in the left-hand or debit column of the loose leaf. The difference between the footing of the right-hand column and the sum of the items in the left-hand column of the loose leaf will show the net pro- ceeds or amount due the consignor, and will, of course, balance the two columns of the loose leaf. All writing upon the consignment ledger should be done in copying ink, for the leaf is now removed from the ledger, and a copy of it taken in the impression account sales book, the leaf itself being sent to the consignor with a check or draft for the amount of his net proceeds, unless the net proceeds are placed to his credit. In the latter case, the account sales should be sent without the remittance, and after Xet proceeds the words Placed to credit should be written. Ic is important that a good copv of the account sales be taken in the impression book, for should any dispute arise this impression book will be accepted in court as your book of original entry, and many houses post charges, commission, and net proceeds directly from this book to their respective accounts in the ledger. Shipment Ledger. — When goods are sent to other persons to be sold on commission, the date of shipment is written in the shipment ledger, with the name and address of the con- signee, and the number of the shipment ; then follows a description of the merchandise shipped, with the price, which, in a regular shipping business, should be the cost of the goods. (See form of shipment ledger, page i86.) The shipment ledger is an underlying or au.xiliary ledger ; also called sectional ledger. In the debit column, under Ledger Accounts, should be written the value of the merchan- dise as shown in the Merchandise column, and to this column is also posted, from the cash book, all expenses incurred on account of this shipment. When an account sales of a shipment is received, the shipment is credited for the net ]8rt Ml iDKKN ll.l.L SI K.Vin K K'K iKKEEPING Shipment Ledger Im>kx, Check, AND Folio Jan. 2, 19- 3/2 jM. Archer. 1 1. Brooklyn, N. Y. 100 brls. Apples, N. S., 2.80 30 tubs Butter, i8co lbs., 20' 20 CSS. Eggs. S. F.. 480 (loz., 1 5 '' Via National Despatch, F. W. Smith Com. Co.. -i, Boston. 250 brls. .Apples, Baldwin, 2.50 30 CSS. Eggs, S. F.. 720 doz., 1 5 « Via National Despatch, D. W. Parks & Co., -4. Pittsburg, Pa. 2400 bu. Potatoes, 35" 20 brls. .-Xpples, Baldwin, 2.45 \'ia Interstate Line. Jas. F. Brennam. «i, New York. 50 tubs Butter. 3050 lbs. 20' 12 bxs. Cheese, 1260 lbs., 1 1 f> Via Interstate Line, Shipments. Dr. .Mdse., Cr. MnsB. 280 360 ■/2 62s 108 912 49 3154 l.EDC.RR ACCOLNT^ Debits 712 7J 610 138 60 60 go _7g5_.9g. 733 961 17 so 748 978 50 60 Credits 785 785 90 50 Folio and Explanation Date C. 4 Gain Jan. C. 5 C. 4 Loss Jan. I'- proceeds from the ca.sh book or journal, and since this disposes of the shipment, the ledget jiart of it is closed by writini; in the usual way the amount of gain or loss on the smaller side of the account, and ruling and footing. (Sec models, A. 'SI. Archer and D. W. Parks i\ Co., in the above illustration.) When the books are posted preparatory to the taking of a trial balance, the total of thi Merchandise column in the shipment ledger is carried to the debit of Shipments and to tlu credit of Merchandise in the general ledger. (See form of shipment ledger.) The shipment ledger is a combined journal or sales book and ledger, the portion to the left of the Ledger Accounts columns partaking of the nature of a journal, and the part t.' the right of the Mdse. column being the ledger proper. When a shipment is made ami entered in the Shipment ledger, it is equivalent to debiting Shipments and crediting Mdse. in the journal and then posting the entries to the ledger. Each account in the shipmei ' ledger is closed the same as in an ordinary ledger. SHIPPING AND COMMISSION BUSINESS Sales Book. 18« Const. Lot No L. F Invoice Extension, Sales from CoNSiOXMENTl Sales mow Wdse- -,5-2 / J- // ■3 c o ■Sff 7-^ 3 C . / 03 ■ za / 3-0 7-^ 7^ Z-i 9^ f 7^ 7^ z^ tG-z 7 4//' ZO ^7 7^ 7^ Zo/ z^ 7 '7 ^c; ^/-JT ISSi MuUliKN ll.LL'STRATU'E UO >KKi;t:riNG Account Sales ;TOTAL SaLE/> Jan. 10 24 26 30 K i .M-r K-2 J. M. Kendall E. M. Jackson C. D. Martin J. M. Kendall Rochester. N.Y. lilmira. N.Y. L'tica. N.Y. Rochester, N.Y. -03 774 5S2 60 Cartage COKVISSIOX Lhakoes 10 10 '5 ' 75 64 60 38 70 4 21 40 29 •3 2 50 7 50 II 25 1 50 89 23 9,75 Sectional or Auxiliary Ledgers and Controlling Accounts. — The student will remember that in arranging the accounts in the ledger in some of his earlier work, he divided them into sections, all accounts of the same nature being placed together in one section. All personal accounts showing liabilities (creditors of the firm) were placed in one section, the ])ersonal accounts showing resources (debtors, or customers, of the firm) in another section, and all remaining accounts (the general accounts of the business) constituted the general ledger. This principle of dividing the ledger into sections will now be carried a step farther by making the general ledger independent of the other ledgers. This is done bv opening an account in the general ledger with each one of the other or sectional ledgers. These accounts are known as coiitrolliu;::; accounts, and all the debits and credits which arc posted to the sectional ledgers from dav to day are posted to these controlling accounts in aggregate at the end of the month. This will enable the bookkeeper to take a trial balance of the general ledger independently of the sections, while the debits and credits of each sec- tion must ecjual those shown on its controlling account in the general ledger. This method of handling ledgers is illustrated in this set by placing all shipment accounts in the shipment ledger, all consignment accounts in the consignment ledger, and all the remaining accounts in the general ledger. The accounts in the sectional ledgers are said to underlie the controlling accounts which represent them in the general ledger. In the general ledger there will be opened a Shipments account, representing or controlling the shipment ledger, and a Coiisigum.nts account representing or controlling the consignments ledger. Note that all debits and credits of shipments and consignments when originally entered in the cash book, sales book, account sales register, and the journal portion of the shipment ledger, are placed in separate columns so that they may be footed at the end of the month and posted to the Shijjments and Consignments accounts in the general ledger. When the trial balance is taken, the general ledger will balance by itself. If it is desired, an abstract may be taken of the shipment and consignment ledgers, and it will be seen that, if the work is correct, the balance of the shi]5mcnt ledger will agiee with the balance of the Shipments account in the general ledger, while the balance of the consignment ledger will be the same as the balance of the Consignments account in the general ledger. Sales Book. — The sales book contains a special column for sales made from consign- ments, anil an Invoice extension column, which should contain the items and the total of the bill given the purchaser, who, as a rule, does not know whether the goods are i)urchased from a consignment or from the stock of the business. (See model, page 187.) When sales are entered in the sales book, the stencil mark of the consignment should SHiprixt; Axu commission business 189 Register PACKAGES KEruRNED Ti.TAL Chakc.es ADVANLt> 1 - L.HEt_K OR Dkaft Amount to BE Posted L. F. Name of AccoifNx 21 90 181 10 181 10 107 30 300 366 70 366 70 74 E. M. Jackson, Cr 5 D.XS. 53 20 03 25 200 329 204 57 75 329 204 57 75 8g 23 9175 58 59 47 Commission, Charges, Consignments, Cr Cr 465 68 Dr be written opposite those items which are taken from consignments, and the amounts should be placed in the Sales from Consignments column, as well as in the Invoice Extension column. The amounts of such items as are sold from the stock of the business should be placed in the Sales from Merchandise column. When the sales book is posted, the total of Sales from Consignments should be carried to the credit of Consignments (controlling account) in the general ledger, and the total of the Merchandise column to the credit of Merchandise in the general ledger. In this month's work cash sales will not be posted to the debit of the person making the purchase, as in prev'ious work, and then posted back to his credit from the cash book, but such sales will be checked off in the sales book and also in the cash book, and not posted to the personal account from either book. This method of handling sales for cash is used where there is no special desire to keep a record of the amount of business transacted with each customer, and it will be seen that it saves a considerable amount of posting where cash sales are numerous. (See E. M. Lacy entries in form of sales book and form of cash book, pages 187 and 190.) Account Sales Register. — The account sales register is kept for convenience in posting ciiminission and charges, and contains columns for the date, stencil mark of the consign- ment, name and address of the consignor, amount of gross sales, freight, commission, charges, goods returned, total charges, advances, net proceeds, cash remitted, amount to be posted, folio, name of account. If accounts are kept with insurance, cartage, storage, etc., of course columns would be added for these accounts, as well as for commission and charges. In this month's work all these accounts are included under the general head Charges. When an account sales is rendered, the necessary information should also be entered in the account sales register ; and at the time of the general posting before a trial balance is taken, the footings of Commission and Charges columns should be carried to the Amount to be posted column, and the names Commission and C/iargcs written in the Name of Account column opposite these atnounts in the account sales register. The total ot Amount to be Posted column should be posted to the debit of Consignments, and the items which make up this total posted in the general ledger to the credit of the accounts to which they belong. If an impression of the loose leaf of the consignment ledger is taken when an account sales is rendered, the account sales register may be dispensed with, as the commission charges, net proceeds, and total to con- signments may be posted directl)' from the impression book. 190 MODLIiN ILLfSTR ATIVE HOf)KKEEriNG ^^./- D«r»- L>'.j SAME AND EXPLANATION I ""*" Dik CuiiUL J^' 7 // /■J- 2i! ^7 J/ ^i^^C^ Z-' \.-,il!l-C£^ I ./.../^ '^^ c>c2'C-<:i-C >^2,^-r-iii^' -7-*^*^.' 7^.> ^V2 VJJL ie V I Cash Book. In this set the use of special columns in the cash book is illustrated. Whenever there are frequent entries for an\- account, a special column should be set aside for that account. Such a column will show all entries to that account separately from other accounts, and will save labor in jiosting, since the footinj; of the column is posted to that account in the ledger at the end of the month, instead of each separate item. In this business, the accounts to which there are frequent entries in the cash book are Merchandise Discount, Shipments, and Consignments. Therefore, special columns are provided foi these accounts. Debit Side of Cash Book. — The Merchandise Discount column on the debit side of thi cash book will contain all discounts allowed by us to others on bills of merchandise sold. The actual amount of cash received is entered in the General column. The Shipments column contains all amounts of cash received from shijiments. The General column contains also all cash received from the ordinary accounts of the business. In posting from the debit side of the cash book, all amounts in the General column aro posted in the regular way, with the e.xception of amounts representing cash sales, which are SIIirriXG ANT) CfiMMISslON I'.L'SIXKSS V. i ^.-^..J, r'^^^v-fz^ ••■AME A\[> EXPLANATION /^ 7 /J 23 -^ i-^.^^a.^ ->-z^ ■y/. 'it-22ii^-^. -^i^jt^3^/ ^^U^. i-ZZ-^^^t^ K— 2;^32-1»2^^ /J Z i' ^7 y-i^Ai fi^Ja 9 /^ -iffj /^ not posted from the cash book at all. All cash sales are included in the footing of the sales book and posted from there. The amounts in the Merchandise Discount column are posted separately to each account, as shown on page 200. The total of this column is posted to the debit side of Merchandise Discount in the ledger. At the close of each day, the amounts in the Shipments column are posted separately to the credit of the respective ship- ments in the shipment ledger. The total of this column is posted to the credit side of the proper controlling account, namely, the Shipments account, in the general ledger. Credit Side of Cash Book. — The Merchandise Discount column on the credit side of the cash book will contain all discounts allowed to us in payment of bills ot merchandise, the actual cash paid being entered in the General column. The Shipments cokunn includes all payments on account of shi]3ments, and the Consignments column all money paid out on consignments. In posting from the credit side of the cash book, the amounts in Merchandise Discount column are posted to the debit side of their respective accounts in the ledger, and the total of this column is posted to the credit side of Merchandise Discount in the general ledger. The items in the General column are posted in the usual way. All amounts in the Ship- r.ii MUOliKN ILLLSIRATIVL l;i n JKKICEPING O o 1 ^ Nl \.\ V. V: ^^ ^*: Ci O^r^Jo SHirPINX; AND COMMISsinX msiN'ESS 193 merits column are posted to the debit siile of their accounts in the shiinucnt ledger, and the total of this column is posted to the debit side of Shipments account (controlling account) in the general ledger. The amounts in the Consignments column are posted to the loose-leaf consignment ledger, and the total of this column is posted to the debit side of the Consign- ments account (controlling account) in the general ledger. The posting of items from the various columns of the cash book should be ilone daily, but the footings of the columns are not ]iosted until the end of the month. Note carefully how the cash book is closed and ruled preparatory to posting the footings at the end of the month. Letter Impression Book. — In most business houses it is the custom to keep a copy of every written order, letter, postal card, account sales, deposit slip, etc., which leaves the house ill the course of its business, as it is often of great importance that ready reference may be made to copies of such papers. This copy is obtained by means of a roller copying machine, or of a letter impression book, which is made up of leaves of tissue paper, and a copy may be taken in this book from either a pen-written or a type-written sheet. If proper ink is used, several copies may be taken from the same original. When letters or invoices are copied in the letter impression book, they should be indexed at once for ready reference. (See form of letter impression book, page 192, showing the proper indexing.) When copied on the machine, the tissue copy is filed with the original communication. Indexing. — It is important that all ledgers, as well as letter impression books, be properly indexed. The vowel index shown in the model letter impression book is an excellent method of indexing, when the index is a part of the book itself, but the ledger index is generally a separate book, of which there are several labor-saving varieties on the market. The card form of index is another and popular method of indexing accounts, where the number of accounts is large. A card is used for each account, and it may contain the name of the account, the number, address, ledger page, terms, etc. The cards are kept in trays in a cabinet, and are arranged in alphabetic or numerical order, with proper guide cards showing the important divisions. The advantages of the card index are similar to those of the card ledger, explained in the Retail Grocery Business. Some bookkeepers, before posting a book, take the index, and from it page each item in the book from which posting is to be done, by writing in the folio column the page of the account in the ledger. After all the items to be posted have been paged, then each amount is carried to the ledger page indicated, and a check mark (y ) is placed next to the folio figures. If the ledger contains a large number of accounts, this method of posting will save time and also prevent errors, as the check mark is a double proof that the posting has been done. In actual practice everv good bookkeeper will soon memorize the pages of all his principal ledger accounts, and not be obliged to refer constantly to his index. Bank Account. — Instead of entering the deposits on the face of the check stub and de- ducting each check as heretofore instructed, you will keep the bank account, hereafter, in accordance with the following method. Use the left-hand check stubs for a record of the deposits, and the right-hand check stubs for a record of the checks. The amount column of each of these stubs will be footed and carried forward from page to page, until it is desired to show a balance. This is done by deducting the total checks from the total deposits, on the left-hand check stubs. ];'4 MiiDKK.N 11.I.L>1 K.\ri\ li llM' iKKEKl'ING In entering deposits on the left-hand stubs, write the amount of each item comprising the deposit a little to the left of the money column, and extend only the total, or net amount, of the dejiosit in the money column. The record for a deposit should be a copy of tiie deposit slip, ;is heretofore. Sonic business houses keep a detailed record of deposits in a separate book, called a deposit book, and enter only the net. or total amount, and the date in the check book. Others take an inipre.ssion of the deposit slip in a tissue book, like a letter book, or on a roller copying machine, and enter only the amount and date in the check book. This is one of the many labor-.saving methods used in modern business hou.ses. When checks are paid by the banks, they are stamped Paid, or are otherwise canceled, and if drawn by their own depositors, they are filed imtil the depositors' pass books are written up, or statements are inade out, when they are returned to the makers. On account of the freedom with which checks circulate, and the consequent liability of their getting into the hands of dishonest or unscrupulous persons, several means are employed to prevent the raising or altering of checks and other similar negotiable instruments. Two of the most common means of safeguarding checks are by the use of safety paper on wliicli erasures cannot be made without showing, and by the use of mechanical cliock protectors, of which there are several varieties. Some of these protectors rough or partly perforate the written figures in the amount, while others cut out or perforate in figures (omitting the cents) the amount ex- pressed in the check. Another form cuts out or perforates the expression "not over S too," or any other de- sired amount. The cancellation of checks in banks is done either liy rubber statnps or by canceling or perforating machines, which are operated either by hand or by electricity. These m.ichines will cancel from ten to fifty or more checks in one operation, depeiuiiiig U|)on the kind of macliine and the power used. REco.NXiLi.vriox OF Bank. B.\L.\XCE July 31 i Total deposits Total checks 1 True bank balance 10205 94 6009 48 4196 46 19- .Aug. Checks out Nos. 352 103-63 361 66.37 365 90.04 369 283.69 1 1 1 543 73 Bank's balance 3652 73 True balance 1 4196 46 Reconciliation of Bank Balance. — The balance in the bank on any given date, as shown by the pass book when written up as of that date, or by the bank statement, will agree with the check book balance only when all checks issued prior to the balancing of the check book, and the writing ii]) of the pass book, have been presented at the bank, and either certified or paid. This will rarely occur in a going business, and consequently there will generally be a difference between the two balances, which should be adjusted in the check book. This is done by deducting from the check book balance the amount of the outstanding checks, as shown by the vouchers returned with the jiass book or statement. Tnesc checks should be listed in detail on the check book stub. This is called nccyiiciliiis: tlic hank balance. The check book balance is the true balance, and is the amount to be carried forward in the check book. PRELIMINARY WORK Jui.v I, 19- You have formed a partnership, under the name of E. H. Reed & Co., with Ellis H. Reed, who has been engaged in the Country Produce and General Merchandising business, at 312 South St., your city. You are to invest S5000 cash, and also a shipment to Thos. \V. Bowen & Co., Dover, \o. 3, valued at S 1955, making a total investment of S6955. Ellis H. Reed owns the o SHIPPIN'C. AM) tOMMISSIOX BUSINESS 195 building at 312 South St., valued at $9500. He transfers this property, bv deed, to K. H. Reed & Co. He also owns two horses and a delivery wagon, valued at S325, and office furniture and fixtures, valued at $250. He has on hand the following goods : 600 bu. pota- toes, invoiced at 60!-' per bu.; 140 brls. api)les, invoiced at S3.50 per brl. ; i i boxes cheese, fio;; lbs., invoiced at 1 1 ? per lb. The following personal balances from customers are due Ellis II. Reed: Theodore Crosby & Co., $ 129.33; A. W. Noone & Co, S528.44; Public Market Co., S244.60; Geo. 11. Tucker & Co., S204.13; City Hotel Co., S 250.45. Ellis H. Reed owes the following balances : Russell & Birkett, S426.45 ; Curtice, Olnev & Co., S 1326.40; Lutz Bros., S714.50; Gillette & Hennigan, S541 20; and a note in favor f the Fischer Flour Co., St. Louis, dated June 16 at 30 days, S 845 27. The new firm assumes all the liabilities of Ellis H. Reed, and takes ovjr his resources, as listed above. Each partner is to receive interest at six jier cent on his net investment, after which the gains and losses are to be divided equally. The form on page 196 shows the journal and cash book entries for the investments of Ellis H. Reed and yourself which you will now make. Enter the shipment to Thos. W. Bowen & Co., Dover, No. 3, $ 1955, in the shipment ledger. Write for explanation, sliippcd June 24, Investment of {Student). No. A 1. — Take your investment, SSOOO cash, from your voucher pad, and place it in Cash Drawer. Prepare a circular letter, soliciting shipments of country produce or general merchan- dise, and mail a copy to each out of town customer with whom 3'ou did business in June (wholesale grocery business). These are all country merchants, and are likely to have such goods to dispose of. The following is a form of circular letter : Form of Circul.xr Letter Mr. Geo. H. Ailing Albany, N.Y. July 1, 19 — . Utica, N. Y, Dear Sir, — We desire to call attention to the fact that we have openei at 348 Central St., this city, a large and commodious store for the handling of every variety of country produce — butter, eggs, fruit, vegetables — and canned goods, to be sold on commission. We shall also conduct a general merchandising business, and are prepared to buy any- thing in the above line at the highest market rates. We solicit shipments of first-class goods only, and are prepared to .;.ake cash advances for all staple goods on receipt of bill of lading. We render accotants sales and send cash remittances as soon as consignments are disposed of. Our charges are 57b of sales and 1^ for storage and insurance . We refer, by permission, to the First National Bank and the Empire Storage Company of this city. Soliciting your patronage, we are. Very respectfully yours. The Geo. H. White Commission Co. 196 MODERN ILLUSTRATIVE BOOKKEEPING JoLK.NAi, Entry July i, 19 — Ellis H. Reed and (student's name) have this day entered into a part- nership to carry on, at 312 South St.. a Commission and General Mer- | ch:indisin MiiDKKN U.i.iM KAl 1\ K l;' 11 iKKKEPING No. 6. -This invoice from Lutz Bros, is for goods ordered by you July lo. (See \o. 4.) Sales from Blotter. — In this month's work a large number of sales will be made to local persons, whose orders are given verbally and are entered in an order book or blotter. You will receive among your incoming vouchers a list of these sales each day, and will make out the bills as usual. In entering these sales in the sales book be sure that the stencil mark of the consignment appears opposite each item sold from that consignment, and that these items are carried to the loose-leaf consignment ledger from the Consign- ments column of the sales book. A blotter was originallv a kind of day book in which all transactions — purchases, sales, receipts and dis- bursements of cash, etc. — were first entered in memorandum form and from which the entries were transferred to the main books. .Sometimes it is used for orders only, in wliich case it is equivalent to an order book. The blotter is generally made of heavy, coarse paper, and the records are made in pencil. No. 7. — These sales have been made as per blotter, and should be entered in the sales book (see model, page 1S7). Be sure that the cash sale is entered in the cash book, and checked off both in cash book and in sales book (see explanation, page 189). Place the voucher in Voucher File. In this month's work an account will be ke])t with freight, and all amounts paid for freight on your own merchandise will be charged to Freight account instead of to Merchan- dise account. The items from the Consignments columns of the cash book and from the sales book should be carried to the loose-leaf consignment ledger at the close of each day, as it is necessary that they appear there before an account sales can be rendered to the consignor ; and it is also necessary that the items in the Shipments columns of the cash book be carried to the shipment ledger in the .same manner, as they must appear there before the closing of any accounts in the shipment ledger. If there are any entries to shipments or consign- ments in the journal, these should also be posted at the end of each day. The following is an illustration of the sales book with the first charge for July 16. showing the method of entering sales from consignments and regular merchandise sales together. The check marks show that the amount of merchandise sold from the consign- ment has been transferred to the consignment ledger. Commission S.vles Book July 16, 19 — IsV.UCE COSSTS. Mpm .M-i .\I-l V City Hotel Co. 5 cases Eggs 2 tubs Butter 2 boxes Lemons a c 30 days 120 dz. .22 120 lbs. .24 475 26 40 28 80 9i 50 55 20 9 50 64|7o No. 8. This is an order on the cashier to pay various bills. Pay the items in currency. Enter in your cash book, debiting the i)roper accounts (see model, page 191)- Allow a line for each charge for freight jiaid on consignments. (Place the money in Cash Paid Out. ) Post all freight charges on consignments from the cash book to the proper consignment in the loose-leaf consigiunent ledger, placing the amount opposite the printed word Frciglil. Remember to debit Freight in the cash book for all freight paid on your own merchandise. SHIPPING AND COMMISSION BUSINESS lUi) No. 9. — This account sales and draft are received from Thos. W. Bowen & Co., and as they have been notified of the change in your business, they have made the draft i)ay- able to E. H. Reed & Co. Enter in yoyr cash book, crediting Shipment to Thos. W. Bowen & Co., No. 3, for the amount of the !iet proceeds, and carrying the amount of net proceeds to the credit of ship- ment No. 3, in siiipment ledger. There has been a gain on this shipment. Close the ship- ment in shipment ledger by entering the amount of the gain in the debit column, the word gain in the explanation column, and the date in the date column. Make proper use of red ink as in closing other ledger accounts. (See page 1S6. ) No. 10. —This check has been received from Theodore Crosby & Co., in full of account, and is indorsed by Ellis H. Reed to E. H. Reed & Co. No. 11. — Open an account with the Traders Bank, and deposit $4900 cash, the check of Theodore Crosby & Co., and the draft received from Thos. VV. Bowen & Co. Copy the items from your deposit ticket on the left-hand stub of your check book, and extend the total into the money column. Do not enter the deposit on the right-hand stub, as that will be used only for a record of the checks drawn. It is a good practice, as well as the usual custom, to deposit checks on the day they are received or on the following day. If a check is not deposited within a reasonable time, usually considered to be twenty-four hours, and the bank on which it is drawn should fail, the maker of the check would be discharged from loss occasioned by the delay of the depositor. You will now prove the cash and post the entries in your books in accordance with the following instructions. Posting. — Open accounts in your general ledger, as follows, treating the third blank page as page i: Page i, E. H. Reed, (Student), Merchandise, each one-third page. Page 2, E.xpense, Furniture and P~ixtures, Real Estate, Commission, each one-fourth page. Page 3, Charges, Horses and Wagons, Office Supplies, Merchandise Discount, each one-fourth page. Page 4, Shipments, 11 lines, Discount, 5 lines, Freight, 12 lines, and Loss and Gain, 17 lines. Page 5, Consignments, Notes Receivable, Notes Payable, one-third page each. Page 6, Theodore Crosby & Co., A. W, Noone & Co., Public Market Co., Geo. H. Tucker & Co., each one-fourth page. Page 7, City Hotel Co., one-fourth page. (Space is allowed on this page and the two following pages for additional accounts, to be opened later.) Page 10, Russell & Birkett, Curtice, Olney & Co., Lutz Bros., Gillette & Hennigan, each one-fourth page. Page 11. (This page is reserved for additional creditor accounts.) Ins|3ect the votichers for the addresses of personal accounts, and enter them on the ledger. Prepare an index of the ledger on the first two pages of the book, these having been specially ruled for the purjiose. You will note that each page is divided into two equal parts by a vertical red line. Write a capital A in the middle of the first line at the top of the left-hand side. In middle of the ninth line below this, write V>. On the ninth line below B, v.rite C, and so on, going from the bottom of the left-hand part to the top of the right- hand portion of the page, and then to the next page, until every letter of the alphabet has been assigned a space. Assign only one space to each of the following groups: H — I — J, P— O, U— V, X— Y— Z. Write the names of all the accounts in the ledger in their proper alphabetic place in the index, and after each account write the page of the ledger on which it appears. In personal accounts, the initial letter of the surname or of tne first principal word determines its place in the index. 200 MODERN ILLL'STRATIVt: IIOOKKEEPING In this month's business the posting is somewhat more complicated than in the previous u'ork, and it is well to get a clear idea of the books from which the entries in the general ledger are taken, and the manner in which they are posted. The general ledger should be divided into sections, as in the previous work, the first containing the partnei^s' accounts and all accounts showing losses or gains, including an account with Shipments and the Loss and Gain account. Notes Receivable, Notes Payable, and Consignments are placed in the general ledger because they are of a general character. The second section, called the customers' ledger, should contain all personal accounts which are resources to the business. The third section should contain all personal accounts which are liabilities, namely, accounts ■with the creditors of the business. Posting the Journal. — Post your journal as usual. Posting Debit Side of Cash Book. — Post all items in the General column of the cash book on the debit side as in previous cash books, except that cash sales of merchandise which are entered in the sales book are not posted, but checked off both in the cash book and in the sales book (see model, page 190). Do not forget to credit each personal account with merchandise discount which may appear on the same line in the Merchandise Discount column, as well as with the net amount of cash received (see model below). W. B. Andrews 19— Jan. .S.B. .1 >9- 250 Jan. 7 7 C Dis 2 ^37 1 "* 1 5° Posting Credit Side of Cash Book. — Post the items in the General column as heretofore. Do not forget to debit each personal account with the merchandise discount, as well as with the net amount of cash paid out. Posting the Sales Book. — Post as in jjrcvious work to the debit side of personal accounts in the ledger, except that cash sales should not be posted at all, but checked off in the sales book (see model, page 187). Posting the Invoice Book. — • Post as usual to the credit side of the personal accounts. Posting the Account Sales Register. — Post any amounts which may be in the Accounts to be Posted column to the credit of the accounts indicated in the Name of Account column. At the close of each day it is well to go over your work and note the following : First, that you have posted the sales from consignments from the sales book to the loose-leaf consignment ledger under Sales. Second, that you have posted eacli item jiaid for consignments from the credit side of the cash book to the consignment ledger op[)osite F"reight, Charges, etc. Third, that you have |)osted anv cash received from shipments from the debit side of the casii book to the credit side of the res])ective shipment accounts in the shipment ledger. Fourth, that you have posted any cash paid on account of shipments from the credit side of the cash book to the debit side of the respective shipment accounts in the shipment ledger. Fifth, that you have posted all other entries in the original books of entry that should be posted. SHIPPING AND CUMMlSSKiX BUSINESS 201 July 17 No. 12. — This invoice has been received from Curtice-Olney & Co. No. 13. — This advice of shipment accompanies goods received from Fischer Flour Com- [jany, and incloses a draft at ten days' sight for S300, which you will accept, payable at Traders Bank, and place in Notes Payable File. Enter the consignment on a loose-leaf sales leaf, and under Advances write the amount of the draft, $joo. Make a journal entry, debiting Consigmncnts and crediting Notes Pay- able for the amount of the draft, as follows : Consignments Notes Payable Accepted Fischer Flour Co.'s draft at 10 days, on account of goods received to be sold on their account and risk. 300 300 No. 14. — This order is received from Thomas Varick & Co. Take the canned goods from lot W-i — peas, $1.30; corn, $1.10; tomatoes, $1.25 ; and the balance of the order from your own goods — apples, $3.75; potatoes, 75^. (Enter in the sales book, as per model, page 187.) Do not forget the stencil mark. No. 15. — This letter from F. H. Larkin & Co. solicits a shipment from you. Make a shipment invoice — apples, $3.50; potatoes, 6o>-' — and enter in your shipment ledger (see form, page 186). Pay for insurance, 'j^'?, currency, and enter in the cash book. In business a straight bill of lading would, of course, be made out for a shipment of this kind, but in view of the practice which you have had in the introductory work, the bills of lading will be omitted in this set. The following is the form of the shipment ledger as it will appear after this entry has been made, and after the cash paid for insurance has been posted from the Shipment column of the cash book at the close of the dav. Shipment Ledger Index, Check, AND Folio July 16, 19— Ledger Accounts Mdse. Debits Credits Folio and Explanation Date Thos. W. Bowen i Co., -3. Dover, Shipjied June 24. Investment of (Student's name). 17 F. H. Larkin & Co., Northboro, 50 brls. Apples. 3.50 200 bu. Potatoes 601? I 1 175 120 1955 7l> ,' 2058 62 C. 2 Gain C.3 19- July 16 - (-") _T ' ' 6j 2058 62 295 75 17 No. 16. — These sales have been made from the blotter, and should be entered in the .sales book. The cash should be entered in the cash book. (See transaction No. 7.) The small cash sale of merchandise, $6. is not entered in your sales book, but posted direct to the credit of Merchandise from the cash book. In every business there will be more or less of these small .sales, even though it be strictly wholesale business, for it is quite a common practice among business houses to send in friends with a request that, as a favor, a small quantity of goods be sold them at wholesale prices, and it is customary for a 20i MODERN ILLUSTRATIVE BOOKKEEPING wholesale house to comply with such a request. If such sales are made from consignments, it is necessary that thev be entered in the sales book, Ijut when made from your own ^oods. it is customary to enter them in the cash book onlv. and post to Merchandise account direct from that book. If many such sales are occurring, it is well to have a special column for merchandise sales in the cash book. In this business, as there are only a few sales of this nature, they will be carried to the General column of the cash book, and Merchandise account credited from that book. (See entries of the nth and 27th in cash book, page 190.) No. 17. —This invoice from Russell & Birkett is for goods ordered by you July 10. No. 18. — -These items should be entered in the cash book, and the item of S55 also entered in the consignment ledger, opjiosite Freight, Cartage, etc., on the loo^e leaf for Fischer Flour Co.'s con.signment. Make checks for all bills, e.vcept the one of Sio for care of horses, which jjay in cash. No. 19. — This check is received with an order from A. \\'. Xoone & Co. Make cash book entry, but carry the order over in Voucher File until the i8th. No. 20. — Deposit checks of \V. H. Alden & Co. and A. W. Noone & Co. Jli.v 18 No. 21. — Render an account sales to Edwin Mason & Co., and inclose a New York draft for the amount of the net proceeds. Turn to your consignment ledger and see that all sales from this consignment, M-i, have been transferred from the sales book to the second, or sales, column of the loose leaf stenciled M-i in the consignment ledger. Foot this second, or sales, column, and place the amount at the bottom of the page. Find the commission at 5 %. and write in the first col- umn of the loose leaf the amount, $13.34. Take i % of the sales for insurance, storage, etc., and place it opposite the word Charges, under which head insurance, storage, etc., will be kept in the ledger. Subtract the sum of the amounts in the first column from the footing of the second column, and place the difference opposite Net Proceeds in the first column of the loose leaf. (See model, page 184.) If you have made no mistake in addition or sub- traction, the account will now balance. To show this, rule and foot. The amount of the net proceeds is to be sent to \L Mason & Co. by New York draft, the cost of which you will pay. Wake out a check for the amount of the net proceeds of the consignment plus 25 cents. The following is a form of check to be used in the purchase of New York drafts : r .//i--^ Til! ©anriTr tbnU ^ (^./:^yl^^. ^^^^:^rAe?t^i, mcnt or invoice is not received with the remittance, an acknowledgment should be sent. No. 33. — The Traders Bank presents Chas. Hunter & Co.'s draft at sight. Accept it by writing Accepted, July ig, ig — , payable at Traders Bank across the face, and place in Vouchers for Others. In business, the draft would be returned to the bank, and the amount would be deducted from your balance on deposit, and the draft would come back to you when your vouchers are returned to you by your bank. Make an entry on the stub of your check book immediately below the record for the last check as follows : "7/9 — . Chas. Hunter & Co.'s d/t. joo," placing the amount in the money column to be added with the checks. Enter in the cash book, debiting Const. Hunter & Co. Xo. i. Some banks, in a case like the above, or where a note or time draft is made payable at the bank, would require the drawee of tlit draft, or the maker of the note, to meet the obligation by check. No. 34. — Sales for the day as per blotter. No. 3.5. — Cashier's payment for the day. No. 36. — This invoice has been received from Dock & Coal Co., for your order given to the salesman of the house, who has recently called upon you. Prove the cash and post. Open new creditor accounts on page 11, allowing one-fourth of page to each. July 20 No. 37. — .Ship to J. M. Marsh & Co., Boston, Mass., to be sold on commission, 25 b.xs. cheese, 2625 lbs., at 12^; 25 tubs butter, 1500 lbs., at 21^. Pay insurance, S1.50, in cash. No. 38. — .Sliip to \V. A. .Simonds & Co. to be sold on commission 1000 bu. potatoes at 62!.^^, and jmy for insurance, $1.25. No. 39. — Draw at 30 days, on J. M. Marsh & Co., for S300, and place the draft in Traders Bank for collection. Make journal entry, crediting Shipments and debiting Notes Receivable, since it is understood that Marsh & Co. will accept the draft; also credit Shipment to J. M. Marsh & Co. in shipment ledger for S300. Make no entry on the stub of the check book. .Vn entry will be made in the back part of your bank pass book by the teller under the head of collections. When the draft is collected you will receive credit for it the same as for a deposit, and you will then enter it on the stub of the check book. No. 40. — Memorandum of advice from the Iowa Packing Co. No. 41. — I-"ill this order from Fischer Plour Co.'s consignment — Redcloud, S4.75, Snowfiake, S4.90. No. 42. — Sales from blotter. No. 43. — Render an account sales of the Fischer Flour Co.'s consignment, and send them a check for the net proceeds, less draft for S300 accepted July 17. No. 44. — Invoice from Curtice-Olney & Co. No. 45. — Invoice from Russell & Birkett. No. 46 — Cashier's payments. SHIPPING AND COMMISSKJX iiUSINESS 205 No. 47. — Check from the City Hotel Co., for the amount due July i, less sfe- (See model in the cash book, page 190.) No. 48. — Deposit all cash and checks on hand. Prove your cash, and post. Allow one-fourth of a page for new accounts, lie sure to open them in the proper sections of the ledger. July 23 No. 49. — This check has been received in payment of bill of July 16, less 3 % on the part of the sale which was made from your own merchandise. See if the check is for the correct amount, and if so, enter it in your cash book. Debit Mercliatidise Discount for the difference between the amount of the check and the amount of the bill. No. 50. — This check is in payment of bill of the 17th, less 3% on that part which was taken from your own merchandise. (Enter as in No. 49.) No. 51. — Memorandum of shipment by the Fischer Flour Co., under an order bill of lading, with the accompanying sight draft for $500, which is presented by your bank. .Accept the sight draft and make entry on stub of check book, similar to that for transaction No. 33. Enter in your cash book, debiting Const., Fisclicr No. 2 advance payment. Enter the goods on a loose leaf, with the stencil mark F-2. Opposite Advances, in the debit col- umn, write the amount of the sight draft you have accepted. For an explanation and illustration of tlie order bill of lading, see Appendix II, Bills of Lading. Note care- fully the difference between the form and use of the order bill of lading and the straight bill. When goods are shipped under an order bill of Lading, the usual notice of the arrival of the goods is sent .md the receipt forms are made out by the railroad company, but the goods are delivered only on presentation >f the bill of lading, properly indorsed, and. of course, the payment of freight charges, if any. In No. 51, after vou had accepted the draft, which in this case was equivalent to issuing your check for the amount, the bank would indorse the bill of lading to E. H. Reed & Co., which would give you title to the goods, and enable vou to get them from the railroad company. No. 52. — Memorandum from Rice & Pond. No. 53. — Render an account sales to Rice & Pond for consignment No. 2, which is sold out, and send them a check for the net proceeds. Close the consignment in your consignment ledger, and remove the leaf from the book. No. 54. — This draft on you by the Western New York Preserving Co. is presented by the bank. Accept the draft. No. 55. — Fill this order from Theo. Crosby & Co., taking apples, $3-75 per brl., butter, 24^ per lb. from Mason's consignment No. 2, and XXX flour, $5.25 per brl., XX flour, $5 i)er brl., Pastry flour, $5.50 per brl, from your own merchandise. Do not fail to write the stencil number of the consignment opposite the items in the sales book that are taken from Mason's consignment, and enter these amounts on the credit side of the loose leaf in the con.signment ledger. No. 56. — Sales of the day from the blotter. No. 57. — Cashier's payments for the day. Be careful in calculating your discounts. Prove the cash, and post. July 24 No. 58. — Invoice from Dock & Coal Co. No 59. — Check from F. H, Larkin & Co., with an account sales of shipinent sent 206 MODERN ILLUSTRATIVE BOOKKEEPING them the 17th. Enter in your cash book, placing the amount in the Shipments column, and post to shipment ledger in credit column. Close this shipment account. No. 60. — Check from the National Market Co. in payment of bills of July 17 and 18. less 3 % on the part of the bills which have been sold from your own merchandise. No. 61. — -Take from your Cash Drawer, D. W. Ferry & Co.'s acceptance at sixty days from July 18, for S220.25, and have it discounted at the bank. (Prepare discount slip as usual.) Notice that the draft is not discounted for 60 days, but for the time it has to run. See that the net proceeds are placed to your credit in your bank pass book. Enter in your cash book and on the left-hand stub of your check book. No. 62. — Memorandum of goods received, freight paid, from the Western New York Preserving Co. No. 63. — Render an account sales of consignment received from the Iowa Packing Co., and remit net proceeds by New York draft, for which you will pay 25 ^ (see No. 21 j. Make the check for amount of draft and exchange. Indorse the draft properly, and inclose it with the account sales in an envelope addressed to the Iowa Packing Co. No. 64. — Sales as per blotter. No. 65. — Ship to Warren Jordan, New York, to be sold on commission, i 50 brls. apples at S2.75, 800 bu. potatoes at 55 ^'. No. 66. — Cashier's payments for the day. Prove the cash, and post. JULV 25 No. 67. — Memorandum of shipment by the Iowa Packing Co., under an order bill of lading, with the accompanying sight draft, which is presented by the Traders Bank (see No. 54). No. 68. — Memorandum of shipment from Edwin Mason & Co. ( M-3). No. 69. — Send 500 bu. potatoes at 55^, and 10 tubs butter at 21 >^, to F. H. Larkin & Co., Northboro, to be sold on commission. Take these goods from your own merchandise. No. 70. — Deposit all checks on hand. No. 71. — Order received from 1). W. Pcrrv & Co. p-ill order as usual, taking apples at S 3.50 and butter at 22 ^ from H-i ; plums at S 1.50 and peaches at Si. 75 from W-2. No. 72. — Sales from blotter. No. 73. — Cashier's payments for the day. Make out a check for the bill for building stable, and pay the freight bills in cash. Do not forget to charge each consignment and each shipment with its freight bill. To what account would you charge the check given for building the stable .' No. 74. — Render an account sales of Edwin Mason & Co.'s consignment No. 2, and send them the net proceeds by New York draft. Make out a check for the amount of the draft and 50 ^ exchange. Prove the cash, and post. JuLV 26 No. 75. - Invoice from Gillette & Hennigan. No. 76. — Fill D. W. Perry & Co.'s order, taking oranges at $6. lemons at S4.75, pine- apples at S 1.80, from your own merchandise ; plums at S 1.50, cherries at S 1.50, from W 2. SHIPPING AXU COMMISSION BUSINESS 207 No. 77. — This order is received from G. H. Tucker & Co., and, as requested, you will draw a sight draft for the amount of the bill. Fill the order, less 3 %, taking goods from your own merchandise — pineapples, $i.So; lemons, S4.75; cheese, IS^'; ketchu]5, $2.50. Since the sale is, in effect, for cash, you allow them a discount of 3 %. Draw the draft and place it in your Cash Drawer for deposit at the close of the day with other drafts and checks received. Enter the amount in your cash book the same as though you had received a check, and check off the debit entry in the sales book and the credit entry in the cash book. No. 78. — Memorandum of sundry small sales made from your own merchandise (see No. 16.) No. 79. — Letter from Russell & Birkett, inclosing a draft. Accept this draft. No. 80. — Check from the City Hotel Co. in payment of bills of July 16 and 17. No. 81. — Cashier's payment. Pay the freight on Gillette & Hennigan's invoice in cash. No. 82. — Deposit sight draft of G. H. Tucker & Co. and check of City Hotel Co. Enter the sight draft on your deposit slip under C/iccks, with the explanation, Sight draft, opposite the amount. The acceptance of the sight draft on G. H. Tucker & Co. by the bank as a deposit was by agreement with the cashier. The draft is treated as a check, and if not paid will l)e charged Iwck to you by the bank. This is not a common practice, but wliere the depositor is responsible and his account is satisfactory, some banks will e.xtend this courtesy. Prove the cash, and post. Jui.v 27 No. 83. — Return 10 tubs of butter received from Chas. Hunter & Co., as it is found upon examination to be unfit for your trade. This transaction requires an entry in your consignment ledger. Under Snlts write 10 tubs butter returned, 600 lbs. Write a letter to Hunter & Co., telling them why the goods have been returned. No. 84. — Render an account sales to Rice & Pond for consignment No. 3. -Send them a check for the net proceeds. No. 85. — Sales from blotter. No. 86. — Cashier's payments. Pay these amounts in currency. No. 87. — Check from A. W. Noone & Co. for invoice of the i8th inst. No. 88. — Check from E. B. Dean & Co., in payment of bill of the 17th, less 3 % discount on that part of the bill taken from your own goods. No. 89. — Render an account sales to Chas. H miter & Co., and place the net proceeds to their credit. Enter in Packages Returned colimin of the account sales register the 10 tubs butter returned July 27. No. 90. — Account sales of shipment to J. M. Marsh & Co. No. 91. — .^n account sales from W. A. Simonds & Co., New York, with cashier's check for your net proceeds. A cashier's check answers the same purpose as a bank draft. Note closely the form of the check. No. 92. — Your acceptance of July 17, favor Fischer Flour Co., is due this day at Traders Bank. No. 93. — Deposit all checks and cash on hand. 208 MODERN ILLUSTRATIVE BOOKKEEPING Statement of Ward and Gray Expense Real Estate Furniture and Fixtures Horses and Wagon Office Supplies Discount Gain from the business Interest due Geo. Ward •• A. H. Gray Geo. Ward, Vi net gain A. H. Grav. ]i net gain cost no j insurance unexpired 4S!68 64 32 cost 7200 valued at 7050 150 cost 200 valued at '75 1 -5 1 cost 275 valued at 250 ^5 cost 35 valued at 30 5 excess of debits 2 469 40 52 741 24 '3 26 12 7« 25 97 221 78 221 77 443 55 469 52 • Prove the cash, and post all unchecked original entries. Before proceeding further, turn to pages 199 and 200 and carefully read the explana- tions given there of the various books used in this set. Closing Books of Original Entry. — Rule and foot the journal, cash book, sales book, in- voice book, shipment ledger, and account sales register in accordance with the models shown on preceding pages. Final Posting. -Vou will now post to the general ledger the footings of the special col- umns of your books of original entry, in accordance with the following instructions. Cash Book. — Debit side. Post the footing of the Mdse. Dis. column to the debit of Merchandise Discount. Post the footing of the Shipments column to the credit of Shipments. Credit side. Post the footing of the Mdse. Dis. column to the credit of Merchandise Discount. Post the footing of the Shipments column to the debit of Shipments. Post the footing of Consignments column to the debit of Consignments. Sales Book. — Post the footing of Sales from Consignments column to the credit of Con- signments. Post the footing of Sales from Mdse. column to the credit of Merchandise. Invoice Book. — Post the footing to the debit of Merchandise. Shipment Ledger. — Post the footing of the Mdse. column to the debit of Shipments and to the credit of Merchandise. ^ Account Sales Register. — Post the footing of the .■\mount to be Posted column to the SHIPPING AND COMMISSION liLNlNESS 2 Oil Losses and Gains July 31, 19— Shipments Merchandise Mdse. Discount Commission Cliarges Gain from the business brouirlit received from sales vahie of unsold cost sales value of unsold cost freight excess of credits 6844 30 HS'30 down 2800 I44S 4245 4115 4461 2747 7208 6959 75 75 42 '30 27 38 65 60 249 215 122 23 33 °5 68 47 71 741 4'-y 469 -4^ 5^ il debit of Consignments, and the Commission and Charges amounts to the credit of their re- spective accounts. Your posting is now completed, but you should check back, to be certain that there are no errors or omissions. Take a trial balance and submit it to your teacher for approval. You have the following goods on hand : Inventories, July 31, 19 — 50 brls. Apples, 53-50 94 doz. C. Beans, i. 7 tubs Butter, 420 lbs., .21 27 bxs. Cheese, 2735 lbs., .11 72 bxs. C. Corn, 1.05 105 brls. 3X Flour, 4.50 70 " 2X Flour, 4.25 55 " Pastry Flour, 4.75 30 doz. Ketchup, 2. Other inventories: Real estate, estimated to be worth S9700; Unearned premium on insurance policy, $45.83; Office supplies on hand, S35; Furniture and fixtures, valued at $225; Horse and wagon, valued at $292.50. Unsold shipments, valued at cost as shown by the shipment ledger, $1278.10. Statement of Losses and Gains. — Make a statement of losses and gains of the business, using the model on pages 208 and 209 as a guide to the arrangement of the items, ruling, etc. 16 bxs. Lemons, 5 " Oranges, 72 doz. C. Peas, 3 brls. S. Pickles, 3 " Sw. Pickles, 4S9 bu. Potatoes, I doz. Pineapples, 133 " C. Tomatoes, 5- .85 7- 9- .621^ 1.20 •95 210 MODERN ILLUSTRATIVE BOOKKEEPING Statement of Ward & Gray Real Estate Expense Office Supplies Horses and Wagon Shipments Merchandise Furniture and Fixtures Cash Notes Receivable Accts. Receivable Consiirnments valued at 7050 1 insurance unexpired 45 68 valued at 30 250 .. 1445 75 '■ 2747 38 '• •75 in bank '795 60 notes on hand ' 375 personal debit balances 3446 48 advances made in excess of sales 520 17880 89 Total resources 17880 S'.i 1 Note th;it the arrangement of the accounts in the statement is slightly different from the form used in the Introductory Course. Merchandise not being the leading account in this business from which the ])rincipal profit is derived, it is not given the leading position in the statement as heretofore, but is placed with such other accounts as Shipments, Com- mission, and Charges, all of which are prominent sources of income. In this set you have kept a number of subordinate accounts. For instance. Freight account is really a part of the Merchandise account, but has been kept separately to show definitely on the face of the ledger the amount of that item of cost on your goods. In entering the Merchandise account on the Loss and Gain Statement, the freight must be considered as a part of the cost of your goods. Other subordinate accounts are F"urniture and Fi.xtures, Horses and Wagon, and Ofifice Supplies. These are really expense accounts, but by keeping separate accounts with these items, the losses of the business are shown in greater detail. They may be closed sepa- rately as shown on the statement. Still other items of expense, with which separate accounts are sometimes kept, are Rent, Wages, Insurance, Advertising, and Postage. In fact, a separate account may be kept with any item which occurs frequently or is of sufficient importance to make it desirable to know what it amounts to in any period. All these accounts, being identical in nature with the K.\i)ense account, are treated in the same manner. After all accounts showing losses or gains have been entered in the Loss and Gain Statement, the difference between the two sides will show the net gain or loss from the business. Enter this on the smaller side, close the statement, and drop the gain or loss from the business below the rulings and to the opposite side. According to agreement, each partner is to receive interest on his net investment at the legal rate. This equalizes in part their investments and also makes it possible to show on the records how much of the net gain as shown by the statement is creditable to the capital itself, and how much to the handling of that capital in the conduct of the business by the firm. I'ind the interest on K. II. Reed's investment as shown by his account in the ledger for 31 days, the length of time it has been invested in the present business. Find SHirPIXG AND COMMISSION BUSINESS :u Liabilities and Resources, July 31, 19— Notes Payable Accts. Payable Geo. Ward A. II. Gray notes outstanding personal credit balances total liabilities net in\-estment 2652. interest 13.26 4000 8217 37 12217 2887 2776 266; 221 26 78 37 }i net gain present worth net investment 2542. interest 12.71 2554 221 7' 77 04 '4 net gain present wortli Total liabilities and present wortli 48 17880 89 the interest on Student's investment in the same manner. Enter the amounts of these interests on the debit side of the statement as shown in the form. Deduct the sum of the interests from the gain from the business, and the remainder will be the net gain. Divide this gain equally between the partners and close the statement. Statement of Resources and Liabilities. — Make a statement of resources and liabilities of the business, using the model on pages 210 and 211 as a guide. The debit side of this statement comprises cash and the various accounts having in- ventories, followed by Notes Receivable, Accounts Receivable, and Consignments. Ac- counts Receivable includes all personal accounts showing debit balances. The credit side of the statement contains the debts due by the firm on notes and on accounts, the latter being designated as Accotmts Payable, also the present worth of the partners. Submit vour statements to }'our teacher for approval before closing the ledger. No. 94. — Bank voucher slip. Enter the amount of the slip on the credit side of your pass book, and balance and rule up the book. Take your checks from the file and compare them with the slip ; place a check mark against each item as it is found to agree with the check. Return the unpaid checks to the file. Cancel the paid checks by writing Paid across the face of each, and then compare them with the amounts on the check stubs, checking each amount for which you have a canceled voucher. The unchecked amounts represent unpaid checks. Place the canceled checks in \'()ucher File. Reconcile xowx bank balance. (See Reconciling Bank Balance, jiage 194.) Instead of writing up the depositor's pass book in detail, as \va,s formerly the general custom, many banks now list the charge items on a strip of paper by means of the adding machine, and enter only the total and the I balance in the pass book. Other banks render regular montlily statements to their depositors, the forms of which vary. Some of these statements are in envelope form, and show on the outside: the deposits in detail; elites of same ; total credits, including previous balance ; total debits ; and present balance. The vouchers are ■ inclosed in the envelope, but no detailed statement of them is giv-en. .■\nother form of statement, and one whicli : is much appreciated by depositors, is similar to the monthly statement of business concerns. The charge items are listed in detail and footed under Vouchers, on the left side of the form, and the credits, balance, deposits — dates and amounts — are listed under deposits on the right side. This side also shows the total credits, total debits, and balance. This work is also done on the adding machine, and the vouchers are returned with the statement. 212 MODERN ILLLSTKATU K BOr7^'^> ■■AUf. AMI LXTLASATIOS ^ / •v.'^^s^ ^-^i^^-sz-^J r %^^^^. —^i^/ri^l^4^^c-^yylr if^p^>^?-t^i^^z^ r^^.^^ ^C rr/ ^r-v f . — ii^.^ V'o ^y ^ ■'-'/£ 'P The journal is provided with the following columns on the credit side : General, Accounts Receivable, Notes Payable. Whenever a customer gives a note on account, he is creditcil with the amount of the payment in the column entitled " Accounts Receivable." The several items in this column are posted to the credit of the proper accounts in the sales ledger. The footing of this column is posted to the credit of the controlling account. Accounts Receivable, in the general ledger. When a note is issued on account, the credit entry is made in the Notes Payable column. The footing of this column is posted to the credit of Notes Payable in the general ledger. The several items are checked but not ]iosted. All credit journal amounts other than those provided for above are entered in the General column. The several items in this column are posted to the credit of the proper accounts in the general ledger. The footing is not posted. The special columns, Accts. Pay. and Notes Rec. on the debit side of the journal, and Accts. Rec. and Notes Pay. on the credit side, are footed at the end of the month, and the amounts are transferred to the General columns, and the proper ledger titles are written oppo.site them in the explanation columw. The journal is then ruled up (see page 217). Cash Book. — On the debit side the cash book is provided with the following columns: Accounts Receivable, Disc. Allowed, Amount Received, Sales, General. (See above form. ) WHOLESALE DRY GOODS BUSINESS 210 NAMB AND EXPLANATION C6...^ ^a .-■■^-t't^.'C.-^t-^/ , /^_^^. j:i.-C^^, ^(J'y&i •j:;>s!-^!<^, f'^0^t:f all notes received and issued will be macl> in it, but no posting will be done there- from. Some bookkeepers post the items directly from the bill hook to their respective accounts, and the monthly footings to the Notes Receivable and X(jtes Payable accounts in the general ledger. Ledgers. — Three ledgers are used in this work, viz., purchase ledger, sales ledger, and general ledger. The purchase ledger contains the accounts of all persons from whoiv goods are purchased on account. The sales ledger contains the accounts of all persons t whom goods are sold on account. Both these ledgers are provided with special columns. The purchase ledger and sales ledger are subsidiary to the general ledger, and are con- nected with it by their controlling accounts. Accounts Payable, and Accounts Receivable. The difference between the sides of the Accounts Payable account in the general ledger should always agree with the difference between the sides of the purchase ledger. Th^ difference between the sides of the Accounts Receivable account in the general ledgci should always agree with the difference between the sides of the sales ledger. The general ledger contains all the accounts of the business which are not ke|)t in the purchase ledger or the sales ledger, together with the controlling accounts of those ledgers. The Balance Ledger. — In this month's work you will use what is known as the "balance ledger" for the form of your purchase ledger and sales ledger. See form of Balance Ledger, page 223. , _ ,^ ^^ — ^^M^^^^^^^MM:^:) **=*^ -'"^OT-^^V-r-ryz^^-^ -^3R m ^.rxr~- 'i '■"■■: ■-: ;:^r gTS-^rae iXl^ffi^/i^r-J^/jf occcstcr 31. 1909. 1 Sold to >u- U< H. Kolcci. f(. 1. c _^_- _^ -m-tL'-n-^-::-* s. HI. *" " D«c 1 Pr. L..-...*. ovo 5 Mkl». )1 Ydi. Klbtea 10 I Packet Sook ;o 1 Pr. CurtAlci y,ii 11 2 rii** 12 Ka-mtt t «705 " 1 SOBl- 1 T. Peeler 6 Orar^a Stick* 2 To«ttk finjthc* p 2£04 16 3 Books I Book p 1701 1 PC. BltboB t)C \t p 3«01 1 T«anl« tecquet 1 CoT«r 3 ;o 50 4 - p VtOOJ 17 3i Ydo. Vftlitlnc 12* " :} idi. *»i*iiae ^^ et . - y v^ 19 4 Towels n so b Towel ■ 1 Oi p 4 Ydi. Outing Flannel 10 1 ya. Cu'.lnc 7lKnael 20 p ^^^^^vCouch Cover 9u 8 ;u p 00 1 c: ^^^^^ . * BMicer 10 1 :■• ^^^^^^^^ . M y- t 1508 2^^^^^^ . . ''^ P 2201 ^^^^^^X 6 43 . ,- P 17D1 £3 ^^^^^^^^N. 60 58 00 2302 ^^^^^^^K^ i^l ' ^^^^^^mM* " at Ret'd . . . " ' \( [ WHOLESALE DRY GOODS BUSINESS 223 Warner, DeForest & Co., Amsterdam, N.Y. Pat e Descrip- tion Terms FOL Debit Balan CE Credit Date FOL, ExPLAr.ATION i9 — 812 70 19 — July I BaL J I 812 70 1 ' 812 70 July 10 12 c 9 S. B. 5 7j 10 ds. 7 215 70 2 ^2.5- 70 19 14 c 14 i. 2/20 Net 30 9 168 70 4 3 210 25 21 •4 c 18 1 1 415 60 5 •1 168 70 23 16 c 20 a Net 60 ds. 12 388 70 5 415 60 28 18 Note 4 mos. Int. 20 *' 2/10 12 412 20 «4I2 20 3° 18 C 21 a Cash '3 210 2? 3 26 Net 30 ds. 14 160 40 549 10 The headings of the columns of the balance ledger explain their uses. The Debit and Credit columns are placed near together, with the Balance column between. This form of subsidiary ledger is specially adapted for use in any business where the terms are specific and induce or require prompt settlement of every sale or purchase. When any particular bill has been paid, instead of ruling off the items, a small figure is written opposite each of the amoimts. (See model form, above.) A glance at the account shows what bills remain unpaid, and in taking a balance of the account only these amounts are considered. The balance of an account is written in the Balance column at the end of the month, and should agree with the monthly statement sent to the debtor or received from the creditor. Only the balance at the end of the current month should be included in the schedule of balances or proof of the balance ledger. Sectional Sales Ledgers. — When it is not convenient or desirable to keep all of the ac- counts with customers in one sales ledger, these accounts may be divided, and each division kept in a sejiarate or sectional sales ledger. The accounts may be divided alphabetically, geographically, or in any other way that may be desired, and the separate ledgers will be known bv the accounts which they contain, as Sales Ledger A — D, Ohio Sales Ledger, City Sales Ledger, Dept. G. Sales Ledger, etc. Each sales ledger will have its own sales book or books, and may have a separate controlling account, or all of them may be con- trolled by the main controlling account. Accounts Receivable account. Self-Balancing Ledgers. — -A subsidiary ledger from which a trial balance can be taken without reference to its controlling account in the general ledger is called a Si-if-balanciiig hdgcr. A subsidiary ledger may be made self-balancing by constructing in it a controlling accoimt, and posting to that account the amounts which are posted to the controlling account in the general ledger, from the original books of entry, such as the footings of the sales book or purchase book, and of the accounts receivable or accounts payable columns in the cash book. Since the items represented by the footings have been posted to the proper sides of the separate accounts in the subsidiary ledgers, these footings must be posted to the opposite sides of the controlling accounts in the subsidiary ledgers. The advantage of the self-balancing ledger is that the assistant bookkeepers can prove their ledgers at the end of the month, or at other times, without having to refer to the general ledger, or to obtain from the head bookkeeper the balances of their controlling accounts. 2-2i MODERN ILLLslRATlVK I'.CXJKKEEPING The title of the controlling account in a subsidiary ledger may be the same as that in the general ledger, as Accounts Receivable, or Sales, for the sales or customers' ledger; or it may have the title Controlling Account, or the title General Ledger. In the work for September the student will convert his purchase ledger and his sales ledger into self-balancing ledgers, by constructing a controlling account in each of these ledgers, under the title Controlling Account, and after posting the footings of the original books of entry to the proper controlling accounts in the general ledger, as heretofore, he will re-post these footings to the ojiposite sides of the controlling accounts in the subsidiary ledgers, checking the amounts posted in the usual way. The two check marks against each footing will show that the amount has been posted to both controlling accounts. Private Ledger. — When it is desired not to have the general ledger show the capital accounts of the proprietors, and other accounts which may be considered of a private nature, these accounts are kept in a subsidiary ledger, called a "private ledger," and a controlling account, Private Ledger, is opened in the general ledger. The private ledger and the private books, which are used in connection with it, are usually kept bv a member of the firm, or by the confidential man of the concern. Accounts Kept. — The accounts kept in any business will depend chiefly upon its char- acter and size, and the detailed informaticm which the proprietor desires to have the books show. Some accounts are applicable to nearly all lines of business and will usually be found in nearly every set of books. In a mercantile business. Merchandise account is the principal trading or revenue account, and in a wholesale business this account may be represented by subdivisions, as Inventory, Purchases, Sales, Disccunt on Purchases, Discount on Sales, Returned Sales, Returned Purchases, Allowances by Others, Allowances to Others, Freight Inward. The principal deduction from revenue in a mercantile business is expense, and in a wholesale business the expense account may be represented by subdivisions, as Salaries, Rent, Insurance, Horses and Wagons, Taxes, etc., and these may be classified as Selling e.xpenses. General and .Administrative expenses. It is desirable to have the number of accounts in the general ledger as few as possible, consistent with good accounting, and at the same lime have proper regard for the classification and details of the business. This can be accomplished by tlie use of special books of original entry, and subsidiary or underlying ledgers. Analyzing Accounts. — When more detailed information is desired regarding anv phase of a business tlian is shown by the footings or balance of the account which it represents, this may be obtained by "analyzing the account." This is done by drawing off the items in the account on an "analysis sheet," where they are classified and entered in separate columns, headed according to the information which it is desired to obtain. Division of Accounts. — Accounts are usually divided into three general classes; namely, Real accounts. Personal accounts, and Nominal accounts. Real accounts are accounts which represent property or values, such as Cash, Merchan- dise, Inventory, Real Estate, etc. Personal accounts are accounts with debtors and creditors of the business, and include the capital account, which, although not a liabilitj', represents the amount for which the business is accountable to the proprietor. Notes Payable, Notes Receivable, Mortgages Payable, Mortgages Receivable accounts are also classed as Personal Accounts. Real accounts and Personal accounts are called " continuing accounts," because they are not opened or set up for any definite period. Nominal accounts are accounts which are opened or raised for teniporarv purposes, and WHOLESALE DKY GOODS BUSINESS 225 are closed at the end of a business period, such as Rent, Salaries, Insurance, Taxes, Pur- chases, Sales, Profit and Loss, etc. Most nominal accounts show profits or losses, but the subdivisions of the merchandise account show "activities," namely, the trading of the business, and the main account shows the profit or loss. Nominal accounts possess the elements of real accounts when tlicy represent assets or liabilities, such as interest accrued and not paid, unearned insurance, and property on hand at the beginning of a fiscal period which was previouslv charged to nominal accounts, such as office supplies, shipping supplies, etc. Accounts to Construct. — In addition to most of the accounts with which you are already familiar, you will construct other real and nominal accounts in this business. These will be indicated and explained as they arise in the work. i The general ledger will be both opened and closed by passing the entries through the journal. Assets and Liabilities. — The assets of a business consist of all property and rights belonging to the business which have a money value. The liabilities of a business are the amounts due to outside parties, as distinguished from its obligations to the proprietors or the stockholders. The assets and liabilities of a business may be divided into fi.xed assets and floating assets, fixed liabilities and floating liabilities. Fixed assets are the permanent assets which are necessary for conducting the business, such as the furniture and fi.xtures of a store, plant and machinery of a factory, office equip- ment, etc. Floating or current assets are the assets which are constantly changing in quan- tity and value as the result of the operations of the business, such as cash, merchandise, notes receivable, accounts receivable, supplies, etc. These assets may be sold or realized without interfering with a business or its operations. Floating assets are aLso called circu- lating assets. Floating as.sets which con.sist of cash, or can be readily converted into cash, such as checks, demand notes, securities which have a ready market, are called quick assets ; also called liquid assets. Fixed liabilities include obligations which are not payable for a long time, such as mortgages, mortgage bonds, etc., and are liens on some of the fixed assets. Floating or cur- rent liabilities are the claims of creditors which will have to be met with in a short time, as notes payable, accounts payable, interest accrued but not due, etc. Liabilities which are not absolute, but which may come into existence as the result of the happening of some events, are called contingent liabilities. PRELIMINARY WORK August i, 19— You have entered into partnership this day with Henry W. Taylor and Clark F. Wood, who have been conducting a wholesale dry goods business under the style of Taylor & Wood. The name of the new firm will be Taylor, Wood & Co., and its purpose will be to purchase and develop the business of the firm of Taylor & Wood. In accordance with the Articles of Copartnership, which were drawn up in triplicate by an attorney, and executed this day by the partners, the partnership is to continue five years, unless sooner dissolved by mutual consent of the partners. You are to invest $2500 cash in the business, and Mr. Taylor and Mr. Wood are to invest their respective interests in the business of Taylor & Wood, as they appear on the books of that firm when closed as of July 31, 19 — • 226 MODERN' ILLUSTRATIVE BOOKKEEPING The new firm is to take over the assets, and to assume the liabilities of the old firm at their book values. By '' book values '" is meant the balances of the accounts as shown by tlie ledger, no allowances being made for possible failure of debtors to pay in full, nor for depreciation of property. The partners are to be allowed salaries, monthly, for their services, as follows : Taylor, S 1 50 ; Wood, S 1 25 ; yourself, S 1 75. The books are to be closed annually, as of July 31, during the life of the partnership, and at the termination of the same. At the time of closing the books, each partner shall be charged with interest at 6 V on such sums as he may have withdrawn from the business for his personal use, from the date of such withdrawals to the date of closing, and he shall receive interest at 6 '/ on his invest- ments. No member of the firm shall draw to exceed S250 per month for his personal use. The profits and losses of the business are to be shared equally by the partners. No. 1. — This cash represents your investment, which you will turn over to the business by placing it in the Cash Drawer. The proper record will be made when the books are opened. Place the notes receivable on hand in the Cash Drawer also. The assets and liabilities of the firm of Taylor & Wood, at the close of business July 31 19 — , and the interests of the partners are shown by their Balance Sheet and supporting schedules, which are given below. H.\i..\NCE Sheet T.wi.OK & W'oon, July 31, 19 — Assi/s Cash in Commercial Bank $ 5!tal H. W. Taylor capital % $16431.95 C. F. Wood " " S 24693.89 Present worth, S41 125.84 WHOLESALE DRY GOODS BUSINESS 227 Schedule i. Accounts Receivable, per Sales Ledger Harris & Smith, 139 Main St., City, $4577.94 Brown & Wilson, Troy, 1324. 11 Jas. H. Wood & Son, Newton, 1016.42 L. H. Parker, Lima, 1203.86 Sibley & Co., Gardner, • 2943.01 W. B. Snow, Akron, S36.8S Ingham & Case, Alton, 66.35 B. C. Wiley, Waverly, 122.44 J. G. Smith, Ottawa, 91 4- '3 W. O. Harrison, Randolph, 1682.12 Lewis W. Chase, Jackson, 3695.42 Charlton, Sons & Co., Dansville, 2360.07 S 20442.7s Schedule 2. Accounts Payable, per Purchase Ledger Sibley, Lindsay & Curr Co., New York, $10184.23 Burke, FitzSimons, Hone & Co., Boston, 2837.90 Gimbel Bros., Philadelphia, 4628.71 Granite ]\Iills, Fall River, Mass., 904.85 Little Falls Woolen Co., Little Fails, N.Y., 709.00 S 19264.69 Schedule 3. Notes Receivable Note of C. F. Jenkins for $407.32, dated May 18, payable at First National Bank, Marietta, Ohio, drawn at 3 months with interest, at 6 V . Note of Wilson & Randolph for S654.90, dated June 14, payable at Merchants Bank, Buffalo, N.Y., drawn at two months with interest, at 6'/, . Note of Warren & Co. for S 325.00, dated July 23, payable at Traders Bank, Scranton, Pa., drawn at sixty days without interest. Note of Isaac Holman & Sons for $715.23, dated June i, payable at Second National Bank, Newark, N.J., drawn at three months with interest, at 6 '/, . Interest accrued on the above, $17.24. Schedule 4. Notes Pav.xbi.e Note in favor of Commercial Bank for $10000, dated May 20, drawn at four months with interest, at 6 ',, . Note in favor of Little Falls Woolen Co. for $500, dated April 24, drawn at four months with interest, at 6 V . Interest accrued on the above, $ 128.25. When a legal change is made in the ownership of a business it marks the end of a current period, and the books must be closed for that period. When such a change does not permanently interrupt the progress of the business, it is customary to continue the use of the old books. Sometimes, liouever, advantage is taken of such a situation to effect a partial or complete change in the system of records and accounts. In this work, it will be assumed that a new set of books is opened, and an improved system of accounts installed. Opening the Books. — \'ou will now frame an opening entry in the journal to represent the assets and liabilities of the business, and the investments of the partners. The assets which Mr. Tavlor and Mr. Wood have contributed, and their net capital, together with the 228 MnriERX ILLUSTRATIVK 1' i, iRKKEPING Price Lists fok 1 2 3 4 5 6 1 1 -8 9 10 I. Amoskeng Denim . . . yd. .I2'' •25 •'3 ' ■24-- 23= •24 .14 ■23- .I4» ■23 2. Ulk. \'enctian •• 1.25 '•37 1.24 1.36 I 23 '■35 1.22 '•34 1. 21 '■33 3. Blue Flannel •• ■37 .24-' .36^ ■25 26 •25-^ •35- .26 ■35 .26- 4. Brondcloth '• 4.13 4.01 4.14 4.02 4 '5 4-03 4.16 4.04 4.17 4.05 5. Creton I'laid .12- •'^5 .I2» .I2| I2> •'3| •'2;- ■'3J ■'3J .13^ 6. C. Lining •07- .07-^ ■07' •07; 1 o7i ■07l •07 i .08J ■oSi .08' 7. Cashmere •• .60 .58 .62 .56 64 •54 .66 ■52 .68 •50 8. Coates Thread d07. •55 •54 .36 •53 37 •52 •35 ■5' .38 •50 9. Duchess Satin vd. 2.00 '•95 1.90 1. 98 I 96 '■94 '•92 1.88 1.86 1. 84 10. Kniit of Loom Sheeting .08- .08' .09-' .08' 09> .09» .IO> .07' .10- •07' 1 1 . French Crepon .... '■75 1.77 '•73 1.79 ' 71 1.81 ..69 '■83 ,.67 1.85 12. Kersey, 54 in 1. 15 1.16 '■34 1.17 I 33 1. 18 '•35 1.19 1.32 1.20 13. Monument L'nlilchil. Cotton .o6'i .o6j .06' .06J 06' ■065 .065 ■05 i -o=;J •OS' 14. O.xford Gray Homespun 1.00 1.05 r.io 1.02 I 04 1.06 1.08 1. 12 1. 14 1. 16 15. I'lain French Poi)lin . . . 1.20 1.18 1 .22 1.16 I 24 1. 14 1.26 1. 12 1.24 1. 10 16. Pique Muslin •• ■'5- ..53 .14- •'5' '4" .14' Af .161 •'3-^ .16" 17. Smoked Pearl Buttons . . gro. •75 ■n ■73 •79 71 .81 .69 .83 ■71 •85 18. Surah Silk yd. .48 .50 .46 •52 1 44 ■54 ■42 .56 ■40 .58 19. Sateen .10- .10' .10^ AO\ 'Oj ■lol ,ioi ■09* ■09i .09 20. Storm Serge. Navy Blue ■75 •73 ■77 •71 79 .69 .81 ■67 ■83 .65 21. Talljot Flannel .... •• ■27 .28 ■39 •29 38 ■30 ■n 3' .36 •32 22. Torchon Lace doz. .65 .70 ■75 .80 66 ■71 .76 .67 ■72 •77 23. Velveteen (24S) .... vd. •35 •25 ■34 .26 33 ■27 •32 .28 ■3' .29 24. Whipcord •• 1. 10 1.05 1. 00 •95 ' 09 1.04 ■99 1.08 1.03 .98 25. Wash Silk .50 .60 ■5' •59 52 .58 ■53 ■57 ■54 .56 26. Corduroy ■75 ■74 ■63 •73 64 •72 .65 ■71 .66 .70 Note. — Where fractions are not expressed in full in the price lists, fourths are understood. For example: liabilities as.sumed by the new firm, are shown in the balance sheet of Taylor & Wood and the accomi)anying schedules, given above. Your investment is the amount of the cash in safe. (See form of opening journal entry, page 217, and note carefully all of the details.) Inventory account is one of the subdivisions of the Merchandise account, and will represent the merchandise inventories in this work. Supporting Records. — You will note that the opening entry in the journal contains only a brief e.\()lanation of the several items which represent the assets and liabilities, and that ref- erence is made to other records, as " per check book " and " per schedule." These records arr in detail, and support the record made in the journal. Every record in books of accounts should be comjjjete in itself, or should be supported by other records which will make it complete. Make an entry in the cash book, and on the stub of the check book, for the cash in bank. Enter the cash which you invested, writing for exjilanation, investment per J, and check the entry, as tiie credit to your accoiuit will be jjostcd from the journal. These entries support the record in the journal. Enter tiie notes receivable and notes payable as per schedules, in the bill book. Construct (open) accounts in the general ledger and post the opening journal entry. Allow one-third of a page to each account. Construct the partners' capital accounts on page I, and leave page 2 for their personal or drawing accounts, to be opened later. For WHOLESALE DRY GOODS BUSINESS 229 Dry Goods Business 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I. IS ->->*j ■15- .22 .21- .16 .16'^ .21 •7 .20- ■17- 20 .18 .19- .182 2. I 20 1.32 ; 1. 19 I-3I l.iS • 30 1. 17 1.29 I 16 1.28 1.15 I 27 1. 14 1.26 '•13 3- 34^ .27 ■34 ■27- .28 •33- ■3i .?S' 32- .29 •32 29' •3>-^ ■30 ■31 4- 4 18 4.06 4.19 4.07 4.20 4.08 4.21 4.09 4 22 4.10 4-23 4 II 4.24 4.12 4.2s 5- '3^ •'3' •'31 •13' .11 J .ui .IlS .III "J •"s .11- lol .I03 .loj .I02 6. o83 .o8| •08J .08^ •09} ■09j .091 .093 09I •09S •09' loi .10' .10^ .I02 7- 70 •59 .61 •57 •63 •55 .65 ■53 67 •51 .69 73 ■72 •74 ■71 s. i 39 •49 .40 .48 .41 •47 .42 .46 43 ■45 ■44 40 .-,8 •39 .42 9- ' I 82 I. So 1. 78 1.76 '•75 1.74 1.72 1.70 I 68 1.62 1.64 1 I 56 1.58 1.66 1.60 !0. 108 •07' .til .08I .11- .o8-^ .11" .08^' 09* .09I ■09- loi .IO» .10- .07-^ II. I 65 1.76 1-74 1.78 1.72 1.80 1.70 1.82 I 68 1.84 1.66 I 62 1.63 1.61 1.64 12. I 3' 1. 21 1.30 1.22 1.29 1.23 1.28 1.24 I 27 1. 25 1.26 ! I 30 '•32 1.31 1.28 13- ost ■°5' -oSi .053 •07I •o7s .07' .073 07] ■07J .072 oS' .081 ■°H .08-^ 14. I 18 1.20 1.22 1.24 1.25 1.26 1.28 1.30 I 32 ■ ■38 1.36 I 44 1.42 1.34 1.40 15. I 32 1.08 1.24 1.06 1.26 1.04 1.28 1.02 I 30 1. 21 1.29 'I 23 1 27 1.25 1.05 16. ■3' .16^ .12^ .15" .12-^ ■'5- .12' •'5' 1 4' .143 • 14' 13' .'3' •13- .161 17. 73 .87 •71 .89 .69 .91 .67 •93 65 ■74 .66 72 .68 .70 .90 18. 47 •57 •45 •55 •43 ■53 ■41 •51 60 •39 •38 37 •63 .61 .62 19- 091 •°9j .09' .09-^ .08 1 •08 1 .083 .081 08 1 .08; .08- 07 1 .07^ ■07| .07" 20. 76 .66 .78 .68 .80 .70 .82 •72 63 .84 •85 86 .60 .62 .61 21. 35 ■33 •34 .26 .41 •25 .42 ■24 43 •39 ■34 29 •43 •37 .28 22. 68 •73 .78 .69 •74 •79 .81 .87 82 .86 ■83 85 .84 .72 .69 -3- . 30 •36 .50 •37 •49 .38 .48 •39 47 .40 .46 41 •45 .42 •44 24. I 07 1.02 ■97 1.06 1. 01 .96 •94 .88 93 .89 ■92 90 •91 1.03 1.06 25- 55 ■49 ■35 .48 •36 ■47 ■37 .46 38 •45 •39 44 .40 •43 .41 26. 67 .69 .68 .76 .61 ■77 .60 .78 59 •63 .68 73 •59 .65 ■74 12- me ans t2i : .0 7^ mear it,^ All IS .071 .iqI n 1' fr\r leans .1 0^ \tr\ TiiT-n itiii* :i n r 1 ri vti 1 r^ic lir> rc»^c Q nrl wrr. crrvnc interest, real estate, insurance, and shipping supplies. For all others, excepting Inventory account, write balance. No explanation is necessary for the Inventory account. Arrange an index for the three ledgers on the index pages of blank No. 2, and index your general ledger accounts. Construct accounts in the sales ledger as per schedule of accounts receivable, and enter the balances. Allow one-fourth of a page to each account. Index the accounts. Construct accounts in the purchase ledger as per schedule of accounts payable, and enter the balances, allowing one-third of a page to each account. Index the accounts. You have now completed the opening of the books, and the general ledger shows the assets and liabilities of the business and the capital or investment of the partners. The purchase and sales ledgers show the accounts with creditors and debtors in detail, and support the controlling accounts in the general ledger. Test the accuracy of your work by taking a trial balance of the general ledger, and a proof of each of the other ledgers. Carry the amount of cash from the cash book to your trial balance. Compare the footing of the balances of the purchase ledger with the balance of Accts. Payable account, and the footing of the balances of the sales ledger with the balance of the Accts. Receivable account, to see if they agree. The books are now in proper form to receive the records of the current business. 230 MODERN IJ.LUSTRATIVE HOOKKEEPING TRANSACTIONS August i No. 2. — Invoice of W. O. Harrison, Randolph, being overdue, draw a sight draft on him for the amount, $750. On the back of the draft make indorsement as follows : Pay to tJic Commercial Bank, or order, Taylor, Wood &■ Co., Per (Your name). (Sign the firm name to all vouchers, per your own name.) Place the draft in Vouchers for Others, or leave it at the bank for collection. No. 3. — Give a check for the amount of this bill, from Tower Mfg. and Stationery Co. {Office Supplies, General column of the cash book. Place the bill in your Voucher File.) When you post this entry, you will construct an OtSce Supplies account. This account represents a sub- division of the Expense account. No. 4. — Make a bill for this order from B. C. Wiley, and enter in sales book. . Note the term.s. ^'our teacher will assign you a price list from the lists on pages 228, 229. Indicate on the bills how the goods were shipped, using the names of the railroad trans- portation companies, and express companies which operate through your city or town ; as, Wabash K.R., Merchants Despatch, American Exp., etc. The orders in this work provide excellent practice for students who are proficient with the typewriter, and the bills may be made on the machine instead of with the pen, at the option of the teacher. Terms, 67© 10 days, ^'/, 30 days, s pes. Monument cotton, 62, 59, 58, 64, 63] yds. 2 pes. Creton plaid, 41, 38 yds. 3 pes. French crepon, 36, 40, 37 yds. 5 pes. wash silk, 48^, 49i 51. 52, 51.] yds. 2 pes. Duchess satin, 48, 51 yds. 10 doz. lace. In the dry goods business there are two kinds of terms for different classes of goods — regular and net : and no bills are to run more than sixty days, unless they arc "X" bills or carry post datings. An "X" bill is a bill on which an extension of time is allowed, usually sixty days beyond the time allowed by the usual terms. A post-dated bill is a bill which is dated ahead, after the delivery of the goods. Goods (subject to post-dating) delivered after December I, carry April i dating. 2';',. 10 days net. Regular terms are 5% 30 days (expressed 5/30) and 6% 10 days. Net terms are 2% 10 days and 1% 30 days. If a regular bill is paid in thirty days, 5% discount will be allowed from the amount of the bill ; and, if paid in ten days, 6'% will be allowed. If a net bill is paid inten days. 2% will be allowed, and if paid in thirty days. I %. Extra and post-dated bills are subject to but one discount, namely. 2/10. In this work, the terms will be given for each sale. Before an order is sent to the shipping department to be filled it is passed or approved by the credit depart- ment, and the approval is indicated on the order, usually by means of a rubber stamp containing the date, the word Approved, and the initials of the credit man or of his assistant who approved the order. Only the actual goods shipped are billed, and the bills are made out from the shipping records or order sheets, which show the quantities shii)pe(l, the routing of the goods, etc. When an order is not filled complete, ow- ing to lack of stock, the unshipped items are indicated on the shipping record or order sheet. These unfilled parts of orders are known .as "back orders'" or " B O's." The unshipped items are indicated by the letter T (transfer) placed before each item. Back orders are handled the same as regular orders when the goods re- quited to fill them are in stock. It will be a.ssumed that all out-of-town orders are shipped by freight under straight bills of lading m.ade out by the shi])i)ing clerk, unless othenvise stated, and that all freight, both inw.ard and outward, is hauled in our own wagons. Freight companies, unlike express companies, do not call for or deliver goods. Therefore, all freight packages must be hauled to and from the freight houses of the freight transportation companies. \vhr:)i.esale drv goods business 231 August 3 No. 5. — Your traveling man, II. R. Judson, draws $200 cash for expenses. {Traveling Expiiiscs in the General column.) The Traveling Expenses account represents a selling expense. In this work both the salary of the traveling salesman and his expenses are charged to Traveling Expense.s, the object being to show in one account the cost of securing orders by means of traveling salesmen or agents. Another method of treating these two items would be to keep separate accounts with Agents' Salaries and Agents' Expenses. August 4 No. 6. — Give check to C. H. Garfield, Agt., $ 300, for rent for August. {Rent in General column.) Rent is a general expense item, as it forms no part of the expenses of selling the goods or of administering the busine.ss. When a Rent account is maintained and the expenses are classified it is placed under General E.xpenses in the Profit and Loss Statement at the close of each business period. No. 7. — Sold to Geo. M. Walker, City, for check, i piece O.xford gray homespun, 50 yd. 3 pes. storm serge, 43, 45, 46 yds. i piece Duchess satin, 50 yds. 3 pes. surah silk, 49], 4U, 43 yds. Make entry in the cash book, crediting Sales in special column. Enter sale in sales book, and extend total into Cash column ; check the entries as in previous work. No. 8. — Check from L, H. Parker in full of invoice of July 18, $826.30, less 2% discoimt. Enter on the debit side of the cash book as follows: $826.30 in Accounts Receivable column, amount of discount in Discount Allowed column, and amount of check in Amount Received column. No. 9. — Deposit cash $ 2000, and checks of L. H. Parker and Geo. M. Walker. Collec- tion, Jj 'I'l of Parker's check. {Collection and Exchange in special column of the cash book.) Deduct the collection from the amount on the deposit slip. Make proper explanation of the cash book entry to support the record in the check book. You will keep your bank account on the stub of your check book, the same as you did in the Commission Business. Daily Posting. — The accounts in the sales ledger should be kept posted to date, in order to have them show their true current condition. This is important both to the credit dei)artment in approving orders, and to the collection department in handling collections. This requires the daily posting of the sales book and of the Accounts Receivable items in the cash book and journal. The items in the invoice book and the Accounts Payable items in the cash book and journal should also be posted daily, if possible, so that the accounts in the purchase ledger will show their true current condition. The items in the general columns of the cash book and journal may be posted daily, or whenever convenient, but they should all be posted in time to permit of the prompt posting of the monthly footings of the principal books, and of the prompt taking of the monthly trial balance. The cash book should be proved daily. You will keep your books posted and your cash proved to date, in accordance with the above suggestions. In posting the accounts in the purchase and sales ledgers, enter the terms of each purchase or sale in the explanation column. Review carefully the instructions for posting the items from the various books, under Books to Keep, pages 216 to 22r. In 232 MODERN' ILLUSTRATIVE BKKEEPING constructing new accounts allow the same spaces in the ledgers as for similar accounts already constructed. After completing your daily i)osting, check the posting. August 6 No. 10. — Make a check in favor of Little Falls Woolen Co. for invoice of July 15, ^409, less discount 5 '/ . Enter on the proper side of the cash book as follows: S./09 in Accounts Receivable col- umn, amount of discount in Discount Allowed column, and amount of the check in Amount J-'aid column. No. 11. — Note from W. B. Snow, in payment of balance due Aug. i. ( IV. />'. Snoiv, amount in Accounts Receivable column of the journal.) Make entry in the bill book, and write /;//. over the luiniber of days in the Time column. No. 12. — Discount Snow's note at the Commercial Bank, and receive credit for the proceeds. Find the interest on S 536.88 for the full time, and add it to the face of the note; then find the discount to maturity on that amount. Enter in the General column on both sides of the cash book, — Xotes Receivable and Interest ; Discount. Indorse the note in full to the Commercial Bank, leave it at the bank, and have the net proceeds credited in your bank pass book. Add the proceeds to your bank balance on the left stub of the check book. If there is no bank, make the entr)- yourself in your bank jiass book, and place the note in Vouchers for Others. Remember to make ])roi)er explanation of these entries to support the record in the check book. No. 13. — This is what is known as a shipper's order (freight C. O. D.) Bill the goods to Ingham & Case in the usual way. Note the terms. 4 pes. Talbot flannel, 44, 40, 45, 47 yds. 2 pes. storm serge, 48, 42 yds. 4 pes. corduroy, 40^, 49, 47^, 39 yds. 2 pes. surah silk, A,l\, 46] yds. No. 13 a. — Make a sight draft in favor of the Union National Bank for the amount of your bill, pin it to the order bill of lading, and send it to the Union National Bank. (Place in Vouchers for Others.) For various rea,sons it is often desirable to make the collection of the ]iurchase price before the goods are delivered to the customer. Such shipments by express are sent C. O. D.. and by freight, subject to shipper's order. It is customary to collect in tliis manner when the credit of the customer is limited, or has not been fully investigated. Returns on freiglit C. O. D.'s. or shippers' orders, are usually made by bank draft which is issued and remitted by the bank to whose order the goods were consigned. When a shipment is made by express C. O. D., the returns are received in currency or by express money order, or express check. If the shipment is handled by more than one express company, the returns are made in currency, which is placed in the original C. O. D envelope and delivered to the shipper by the express company which first received the goods. On straight C. O. D's. that is shipments which are handled by only one express comp.my. the returns are made by express money orders, or special express C. O. D. checks, and these are .sent through the mail in the original C. O. I), envelopes direct to the shippers. These money orders and checks can be cashed at the offices of the express companies, whicli issue them, or they may be deposited in the bank. Except by special agreement between shipper and consignee, which must be noted on the C. O. U. envelope accom])anving the shipment, express companies will not accept p.iyment for C. O. D. ship- ments in any form other than currency. Goods shipped by express may be put up in paper packages, or inclosed in boxes, at the option of the shipper; but if shipped by freight, they must l>e boxed, baled, or crated, unless in car load lots, or the nature of the goods is such that they can be handled and transported without being damaged. I WHOLESALE DRY GOODS BUSLVESS 233 No. 14. — Invoice, Burke, FitzSimons, Hone & Co. Check the items, O. K. the bill, and paste it in the invoice book. Note the terms. Invoices should be attached to the leaves of the invoice book in such a way that any of them can be quickly found, readily referred to, and easily removed. They may be attached in the order in which they are passed by the bookkeeper ; by serial number or department letter ; or arranged in sections according to departments or to the names of the creditors. The latter method is not desirable when the invoice book is used as an original book of entry or posting book, unless the posting is done before the invoices are pasted into the invoice book. The tirst invoice in the book should be gummed on the upper edge, and the others on the lower edge. No. 15. — Check from Jas. H. Wood & .Son in payment of invoice of July 28, 5550, less 2 '/( discount. (Enter as in No. 8.) No. 16. — Mr. Taylor draws $200 cash for his private use. (//. W. Taylor, Personal, amount in General column.) Construct an account, H. VV. Taylor, Personal, when you post this entry. No. 17. — Pay freight bill 54.36, in cash. {Freight Inward in General column.) Transportation companies usually require that freight charges be paid before the goods can be removed from the freight house, but frequently arrangements are made whereby this requirement is waived, and the freight charges are paid after tlie removal of the goods. In the absence of an agreement, the transportation charges are paid by the purchaser. Payments for freight and cartage on goods bought are properly chargeable to Purchases, as these items increase the cost of the goods. Since, however, we want to know both the first cost of the goods and the freigln paid on them, we charge Purchases for the invoice price from the invoice book, and contruct (open) a Freight Inward account, and charge all payments made on inbound freight to that account from the cash book. Tlie amount or balance of Freight Inward account will be added to Purchases at the end of the business period. Some bookkeepers add the freight to the invoice, and include the amount in the montlily posting to Pur- chases from the Invoice book. August 8 No. 18. — Check from J. G. Smith in full of account to Aug. i. No. 19. — Deposit the checks on hand. Bank charges $2 for collection. No. 20. — Pay Sibley, Lindsay & Curr Co. tor invoice of July 28, $3200. Deduct 5% discount, and write a check for the net amount. August 10 No. 21. — Cash sales. Perkins & Brown, 50 doz. Torchon lace. 40 gross smoked pearl buttons. Carroll & Marsh, i piece whipcord, 50 vds. i piece plain French poi^lin, 40 yds. Strong & Carlisle (check), 3 pieces black Venetian cloth, },6, 38, 40 yds. 2 pes. broad- cloth, 55, 59 yds. (See No. 7.) Remember to prove the cash daily, and to keep your books posted to date. August i i No. 22. — Check from B. C. Wiley for invoice of July 15, 8122.44, less 1% discount. No. 23. — Two pieces, 43 and 38 yds., of the French crepon received from Burke, Fitz- Simons, Hone & Co. on the 6th inst. are found to be damaged. Return the two pieces to them, billing at cost price. Write a letter and inclose the bill. Enter in the journal, debiting Burke, FitsShnons, Hour &• Co. in Accounts Payable column, and crediting Returned Pitrcliases in the General column. For explanation write Returned Purchases, page ii6. 234: MOUliKN ILLLSTKAIUE liOOKKEEPIXG In this work merchandise returned by us will be credited to the Returned Purchases account, and goods returned to us charged to Returned Sales. Separate books, called Return Books, are generally kept for detailed records of goods returned, and the entries in these books are transferred to the journal in the form given above. The accounts Returned Pur- chases and Returned Sales are subsidiary to the Purchases and Sales accounts, and are offsets to those accounts. Forwarding. — When a page of the journal, sales book, invoice book, or cash book is about full, rule a red line across the dollar and cent columns on both sides and foot all the columns. Place the footings on the first blue line below the red line, with the word " Ford." in the explanatory space, also in red ink. Transfer the footings in black ink to the first blue line at the top of the following page, writing " Hrot. Ford." on the same line in the explanatory space, in black ink. August 12 No. 24. — Note received from Brown & Wilson on account. (Notes Receivable and Accounts Receivable columns in journal.) No. 25. - Pay, by check, invoice of Gimbcl Bros., July 15, S 1250, less i '/,' . No. 26. — Cash sales. National Emporium, 5 pes. wash silk, 47], 49.1, 53, 54, 46J yds. 2 pes. cashmere, 41, 39 yds. Sherman & Co., 2 pes. French crepon, 43, ^y yds. 6 pes. 24S velveteen, 40, 45, 36, 38, 45. 46 yds. August 13 No. 27. — Ten shares of Wamsutta Mills stock is offered at private sale at S 105 per share, to close an estate, and the firm has decided to purchase the stock as an investment. Give J. L. White, Trustee, a check for the amount of the stock, and place the stock certificate in Voucher File. ( U'ainsiittii Mills Slock, General column of cash book.) When stocks and bonds arc purchased for investment by a mercantile or manufacturing concern, an account may be constructed to represent each class or kind of security : as Stocks, Bonds. Aiiierimn LocoDiolh'C /'re- ferred, U.S. S/eel Coininon, Baltimore &" Oliio Gold 4s. or a Securities account may be constructed to rejjre- sent all such investments. No. 28. — Check received from Sibley & Co. in payment of invoice of July 20, $ 1540, less I % discount. No. 29 — The bank has collected your draft of the ist inst. on W. O. Harrison, $750. Collection charges, 75 ^. Proceeds placed to your credit. Credit W. O. Harrison in the cash book for the full amount of the draft, and debit Col- lection and E.vchangc. Add the proceeds to your bank balance. Make proper e.xplanation of the entries. August 14 No. 30. ^ Check from Wilson & Randolph for note and interest due to-day. Consult your bill book and mark the note paid. No. 31. — Salesman's orders. Note the terms. Thompson & Bulkeley, Easton, 6 pes. Fruit of Loom sheeting, 58, 60, 55, 64, 66, 58 yds. 8 pes. Monument cotton, 54, 58, 68, 62, 55, 65, 63, 60 yds. 50 doz. Coates thread. 5 pes. wash silk, 48I, 50J, 52, 48], 55 yds. James H. Wood & Son, Newton, 6 pes. pique muslin, 68.1, 66, 74, 75, 71, 70] yds. 4 pes. broadcloth, 57, 65, 66, sr yds. 2 pes. Creton plaid, 40, 42 yds. 25 doz. torchon lace. Brown & Wilson, Troy, 5 pes. sateen, 48.!, 47^, 50, ^,///Vi-,- foroffice help to Office Salaries ; and for shipping clerks and porters to Shipping Dept. Salaries.) Shipping Dept. Salaries account represents a selling expense, and Ofifice Salaries account an administrative expense. No. 37. — -Invoice of merchandise from Sibley, Lindsay & Curr Co. No. 38. — Check from Carlton, Sons & Co. for the net amount of invoice of July 16. No. 39. — Make your check in favor of Little Falls Woolen Co., for invoice of July 29, S 300, less 2 \', discount. August 17 No. 40. — This remittance is for proceeds of the draft of the 6th inst. on Ingham & Case, sent to the Union National Bank for collection. Charges for collection, 50,'-'. Sometimes the collection charges "follow" the drat't, and are then paid by the drawee. In such cases the draft is drawn as usual, and the words '"and exxhange " are written on it. No. 4L — Cash sales. Geo. M. Walker, City, 50 gross smoked pearl buttons, i piece Duchess satin, 48 yds. H. W. Johnson & Son, City, i piece plain French poplin, 50 yds. i piece Oxford gray homespun, 48 yds. No. 42. — Pay freight to date on goods received per agent's request, by check, Si 3.04. (See No. 17.) August i 8 No. 43. — Check from C. F. Jenkins for note and interest due to-day. No. 44 Invoice of merchandise purchased from Granite Mills. No. 45. — Check from Harris & Smith on account. (No discount.) No. 46. — Deposit all checks and drafts. Collection, $2. No. 47. — Draw $ 100 in cash for your own private use. No. 48. — Remit Burke, FitzSimons, Hone & Co. check in payment of invoice of July 22, S 2837.90, less I ')', discount. August 19 No. 49. — Pay freight bill in cash, $1.19. No. 50. — W. O. Harrison is unable to settle his account at present, and it has been de- cided to take his note, with interest, for the balance due from him, $932.12. No. 5L — Pay cash for i ton hay and 5 bu. oats for stable, 313.50. {Delivery Expenses.) When you post this item you will construct a Delivery Expenses account. This account represents a selling expense. 236 MODERN ILLUSTRATIVE BOOKKEEPING ACGUST 20 No. 52. — Memorandum order from J. G. Smith. 8 pes. denim, 38|. 39, 41 J, 46, 35, 37I, 35, 42 yds. 7 pes. sateen, 48, 45, 46^, 50, 49.I, 51^, 49 yds. 5 pes. sheeting, 60, 62, 65, 55, 59 yds. 8 pes. Crown lining, 52, 55, 54, 56, 60, 51, 58, 50 yds. 4 pes. Duehess satin, 48}, 49], 52, 50 yds. 4 pes. blue flannel, 50, 48, 49, 54 yds. 10 gross buttons. No. 53. — Salesman's order from L. W. Chase. 5 pes. denim, 38.',, 41, 42, 37.',, 43 yds. 4 pes. blue flannel, 51, 47, 55^, 46| yds. 3 pes. cashmere, 39, 41, 42 yds. 8 pes. Fruit of Loom sheeting, 58, 60, 60, 61, 57, 63, 65, 55 yds. 7 pes. pique muslin, 68. 72, 75, 70, 65, 68, 70 yds. No. 54. —Give Sibley, Lindsay & Curr Co. your note at 20 days (no interest), S2500. No. 55. — Pay Granite Mills, by cheek, for invoice of July 21st, S904.85, less S "^l . No 56 — Purchase of merchandise from Gimbel Bros. August 21 No 57. — One piece of kersey, 46J yds., received on the 20th inst. from Gimbel Bros., is damaged. Return it, and render your bill for the same at cost price. ( Enter as in No. 23. ) No. 58. — Check from Warren & Co., to prepay their note of S325. less discount to maturity. Mark the note prepaid in the bill book. Make proper e.xplanatioii of the entries to show tliat they are supported by the vouclier. No. 59. — Salesman's orders. Brown & Wilson, Troy, 2 pes. Talbot flannel, 45, 42| yds. 2 pes. whipcord, 40.], 43I yds. 5 pes. Monument cotton, 58, 63, 65, 60, 62 yds. 6 pes. denim, 38, 43, 37, 44, 40, 36 yds. Sibley & Co., Gardner, 2 ')',. 10 days, i "Jp 30 days, 6 pes. Fruit of Loom sheeting, 60, 63, 55. 58, 65, 61 yds. 2 pes. corduroy, 40, 34.] yds. 2 pes. black Venetian cloth, 38, 33^ yds. 50 doz. Coates thread. B. C. Wiley, Waverly, 6 'I, 10 days, 5 *},' 30 days, 3 pes. O.xford gray homespun, 48, 50, 5i| yds. 4 pes. cashmere, 36, 38.], 42, 43.', \-ds. 7 pes. Crown lining, 50, 54, 58, 52, 55, 51, 57 yds. 6 pes. sateen, 45, 50, 49, 53, 48, 49 yds. 50 doz. lace. August 22 No. 60. — Check from Jas. H. Wood & Son for invoice of July 21, $466.42, less 5 9c. No. 6L — Pay freight bill in cash, S4.58. August 24 No. 62. — Note from Lewis W. Chase on account. No. 63. — Draw a sight draft on Brown & Wilson for invoice of July 15, $504.11, and leave it at the bank for collection. No. 64 -Make a check in favor of Little Falls Woolen Co., in full for your note and interest due to-day. Write them a letter and inclose the check. No. 65. — Remit Gimbel Bros, check for invoice of July 29, S 1293. 80, less 5 9' discount. August 25 No. 66. — Salesman's orders. Carlton, Sons & Co.. Dansville, 2 '/ 10 days, i *;,' 30 days, 2 pes. broadcloth, 60, 58 yds. 4 pes. Creton plaid, 37, 39i, 41. 38 yds. 5 pes. sateen, 47, 51, 48, 4^, 46 yds. 3 pes. black Venetian cloth, 48^. 35.], 34 yds. 100 gross buttons. WHOLESALE DRV GOODS DUSIXESS 237 L. H. Parker, Lima, 30 days net, 2 pes. whipcord, 40, 42 yds. 6 pes. Fruit of Loom sheeting, 56, 64, 58, 62, 59, 62 yds. 5 pes. Monument eotton, 58, 59, 57, 62, 60 yds. 8 pes. pique musUn, 70, 72, 65, 75, 69, 73, 66, 68 yds. i piece broadcloth, 60 yds. W. B. Snow, Akron, 2 7© 10 days, i % 30 days, 6 pes. wash silk, 47I, 48, 46.], 49, 53|, 55 yds. 3 pes. surah silk, 47^, 49I, 52 yds. 3 pes. corduroy, 36, 38, 37 yds. 6 pes. Crown lining, 52, 56|, 55^, 57, 50, 54 yds. Levy & Garson, Somersworth, 6 % 10 days, 5 '/,' 30 days, 90 gross buttons. 40 doz. thread. 2 pes. plain French poplin, 48, 42 yds. i piece kersey, 40 yds. No. 67. — Invoice of merchandise purchased of Sibley, Lindsay & Curr Co. August 26 No. 68. — Discount Chase's note received on the 24th inst., and have proceeds credited. No. 69. — Remit Gimbel Bros, your note at 30 days for $2000, to apply on account. (No interest.) No. 70. — Purchase of merchandise from Little Falls Woolen Co. August 28 No. 7L — Receive credit at the bank for draft on Brown & Wilson, $504.1 1, left for col- lection Aug. 24th. Collection charges, 50 <. No. 72. — Fill the following telephone order received from Harris & Smith, City. Terms, 2' J, 10 days, I ',, 30 days. 4 pes. Talbot flannel, 44, 45.], 45, 43 yds. 3 pes. velveteen, 36. 32, 38] yds. 2 pes. unbleached cotton, 60, 62 yds. 3 pes. Fruit of Loom sheeting, 61, 60, 6O2 yds. 25 gross smoked pearl buttons. August 30 No. 73. — Carlton, Sons & Co., Dansville, return, for credit, the goods as per their bill. {^Retiinifd Sales. See No. 23.) When returned goods have been duly accepted, it is customary to send what is called a " credit memorandum." Send Carlton, Sons & Co. a credit memorandum for these goods. Form of Credit Memor.wdum New York, Aug. 19, 19—. Memorandum of Amount placed to the Of Taylor, Wood & and Co. CREDIT By The H. B. CLAFLIN CO. pes. Blk, Cashmere, 90 yds ,75 67 50 No. 74. — Check from Sibley & Company on account. No. 75. — Cash sale. W. E. Dennis & Co., City (check), i piece storm serge, 48 yds. 4 pes. velveteen, 38, 36, 37, 39 yds. 2 pes. French crepon, 40, 38 yds. 2 pes. cashmere, 41, 37 yds. I piece surah silk, 48 yds. 3 pes. wash silk, 49, 56, 45 yds. •S^S .M(-»Ut.RN ILLLMKATIVE BOOKKEEPING No. 76. — Deposit all checks. Collection S 150. Draw currency for office use, by check. (Make the check payable to Casli.) August 31 No. 77. —Pay freight bill in cash, S3.49. No. 78. — Pay cash for horseshoeing and repairs on wagon, S 5.43. (Delivery Expenses.) No 79. — Pay H. R. Judson by check for August salary, S150 (see No. 5), and K. F. Nol.m by check for rent of stable for August, S 50. (Delivery Expenses.) No. 80. — Pay office help, S 100, shipping clerks and porters, S70, and teamster, S44.50 in cash. The wage.s of the teamster are a delivery expense. No. 81. — (Student) draws S 100 by check for private use. A month's salary is now due each partner, as per partnership agreement. Frame proper journal entry. {Office Salaries.) Salaries of the partners are an aciiiiinislrative expense, and do not affect their capit il accounts. You will now complete the daily posting to the three ledgers, including all the General column items in the cash book and journal. Preparatory to posting the monthly footings, prove the cash, and rule up and close the books of original entry, as explained and illustrated on pages 216 to 222. Be sure that your footings are correct and that the total of the two sides of the journal are alike. In constructing new accounts give each account in the sales ledger one-fourth of a page, and in the purchase ledger and general ledger, one-third of a page. Since all the entries in the sales book and invoice book, and all the General column entries in the journal and cash book, have been posted in the daily posting, there remain to be posted only the footings of the invoice book and sales book, and the footings of the special columns in the journal and cash book. These are all general ledger items. Invoice Book. — The closing entry in the invoice book is Purchases, (Dr.), S , Accounts Payable, (Cr. ). Post these items. Sales Book. — The closing entry in the sales book is Accounts Receivable (Dr.), S , Sales, (Cr. ). Post these items. Journal. — The closing entry in the journal contains the debit items. Accounts Payable, S , and \otes Receivable, S ; and the credit items, Accounts Receivable, S , and Notes Payable, S . Post these items. ,'_ Cash Book. — The closing entry in the cash book, on the debit side, contains the credit items. Accounts Receivable, S , Discount on Purchases, S , and Sales, S ; and on the credit side, the debit items, Accounts Payable, $ , Discount on Sales, S , Collection and E.xchange, S , and Purchases, $ . Post these items. Having completed the monthly posting, check the posting, after which pencil foot the accounts in the general ledger jjreparatory to taking a trial balance. Trial Balance. — Take a trial balance of balances of the general ledger and include in it the cash balance as shown by your cash book. Pencil foot the accounts in the purchase ledger and sales ledger, e.\tend the balances into the Balance column, and make a schedule of balances of each of these ledgers on loose journal paper. After making the schedules, prove them by comparing the footings with the balances of the controlling accounts, Accounts Payable and Accounts Receivable, in the general ledger. WHDLKSAI.E DRY GOODS BUSINESS 239 Monthly trial balances are generally taken for the purpose of testing the accuracy of the posting, but they may also serve for other purposes. The trial balance, which is taken at the end of a business period called the ante-closing trial balance, and the schedule of the inventories of assets and liabilities, taken at the same time, contain the data from which the statements of the condition and results of the business are made. No. 81a. — Assuming that the checks issued on Aug. 31 are outstanding, make a bank voucher slip, similar to that received in the Commission Business, and after entering tlie total in the pass book, balance and rvile up that book, and reconcile yoiu" bank balance. Dissolution of Partnership. — Mr. Taylor, having decided to retire from business, has arranged with his nephew, Mr. I'rank H. Taylor, an e.xperienced dry goods man, to take over his interest on September i, and Mr. Wood and yourself have agreed to the arrangement. Closing the Books. — In business the books are closed at the end of a fiscal period, usually annually, and also in an individual or partnership business, when a legal change takes place in the business. Inventories. — Inventories are taken for the purpose of ascertaining the quantities or values, or both, of property on hand, or of assets or liabilities, which are not shown by the books. Merchandise inventories are usually taken quarterly, semiannually, or annuall)- at the end of a business period. A quarterly or a semiannual inventory of merchandise is usually taken for stock purposes, and quantities only are considered. This is necessary when no stock books are kept; and when they are kept, the quantities shown by the physical inven- tories are compared with the quantities shown by the stock books. The value of merchandise on hand is usually determined by adding to the invoice cost of this merchandise, the cost of acquisition — i.e. freight and cartage. When any of the goods on hand have become damaged, or unsalable, for any reason, proper allowance should be made for this condition in the inventory, in order that it will represent its true asset value for the period. In making all property inventories it is better to be conservative in the matter of values rather than to overestimate or inflate them, thereby causing the records to show fictitious profits. In order to determine the true profit of any business period, only the expenses which belong to the period should be charged, and only the profits which belong to the jaeriod should be credited. The expense accounts in the trial balance may show more or less charged or credited than rightfully belongs to the period and, therefore, adjustments must be made in these accounts before the true profits can be ascertained. For this reason, inventories are taken of property on hand at the end of the period, which has been charged as expenses, such as shipping supplies, office supplies, etc., and accrued assets and liabilities are determined, such as interest on notes receivable and notes payable, unpaid insurance, rent due and unpaid, etc., and the amounts are carried to their respective accounts. Depreciation of property is treated in the same way when no Reserve for De- preciation of property account is maintained. Keeping up Stock. — It is important in every mercantile business to have on hand, at all times, an adequate stock of goods, with which to fill all orders promptly, and in order to be able to do this, it is necessary that some reliable system of reporting stock on hand to the buying department be maintained. The nature of the business and the ease or difficulty with which stock can be replenished will, in a measure, determine what system of stock reporting will be required for that busi- ness. Some concerns can safely rely upon the quarterly inventories for the necessary infor- 240 MODERN ILLUSTRATIVE BOOKKEEPING mation concerning the condition, as regards quantities of the stock, while others are obliged to have monthly, weekly, or daily stock reports. Where stock books are kept, reports can be easily made from the books; where such records are not kept, it is necessary that the stock clerks, or warehouse clerks, make fre- quent reports of the stock in their departments. This is usually done on stock report sheets or slips, which may contain merely the names of the goods and the quantities on hand ; or they may contain a statement of the minimum and maximum quantities required by the manager, which are based on i^ast sales or special demands, and the quantities received since last report, and any other information that may be desired. Stock reporting, also, serves to guard against " overstocking." In anticipation of the change in the firm, inventories have been taken of all of the assets and liabilities of the business not shown on the books, which are as follows: Invkntokies, August 31, 19 — Assifs Merchandise, per schedule No. 5, $23525.05 Furniture and F"i.\tures, cost, S2500. Depreciation, i '/, , 25. 2475. Horses and Wagons, cost. Depreciation, i '/, , Shipping supplies, per schedule No. 9, Office supplies, ' 8, Insurance, ccst. Earned, Interest accrued on notes receivable, Real Estate, cost, Appreciation, Rent due on fiat, Wamsetta Mills stock, Appreciation, Interest accrued on notes payable, 166.67 You will now prepare statements of the business in accordance with the instructions which follow. Trading and Profit and Loss Statement. — In the preceding work, these statements were called statements of losses and gains, and statements of resources and liabilities. In this work, the former will be called the Trading and Profit and Loss Statement (see form on pages 242 and 243), and the latter, the Balance Sheet (see form on pages 244 and 245). The first section of the Trading and Profit and Loss Statement will be referred to as the Trading account, and the other sections as the Profit and Loss account. The Trading account shows the gross \nof\t on trading. This account shows, on the debit side, the items. Inventory at beginning of present period, purchases for the present period, freight paid, goods returned from ])urchases, and inventory at close of present period. The credit side shows the goods sold during the period, and the goods returned from sales. Adding to the amount of the inventory at the beginning of the present period, the pur- 750. 7.50 74-^50 196.50 182.75 275. 7.50 267.50 12.75 12000. , 250. 12250. 100. 1050. TOO. 1 1 50. WHOLESALE DRY GOODS BUSINESS 241 chases and the cost of acquisition (freight), and from this amount deducting the amount of the returns and the inventory at the close of the present period, gives the cost of the goods sold during the present period, or the "turnover." The difference between the proceeds of the sales and the cost of the goods sold represents the gross trading profit, which should be written in red ink. The balance of the trading account, or gross profit on trading is brought down in the first section of the Profit and Loss account in black ink. Prepare a Trading account from your trial balance and merchandise inventory, after which rule it off as shown in the form. There is considerable difference of opinion among accountants as to wliat should be included in the Trading section of the Trading and Profit and Loss Statement. Some contend tliat this section should sliow only the trading activities of the business and the prime cost of the turnover, the difference between which is the true gross profit on trading. This is the opinion of leading .American and EngHsh accountants, and is in accordance with the practice followed in this book. Other accountants include in the Trading section, in addition to the main items mentioned above, the cash discounts on purchases and on sales ; while some include all expenditures directly connected with sales, or which directly reduce the price realized for the goods, but do not include the cash discount on purchases. In matters of this kind, however, as in many others connected with business records, the wishes of the owners or directors of the business should be observed by the accountant. The first section of the Profit and Loss account shows, on the debit side, the deductions from the gross trading profit, which comprise selling expenses, general and administrative expenses, interest and discount allowances to others, and depreciation of property. The credit side shows the gross trading profit and the interest and discount allowances to us. The difference between the two sides of this section shows the net trading profit, which is entered in red ink, and brought down to the ne.xt section in black ink. Property in use is certain to depreciate, and in almost every business losses are sure to occur from the failure of some debtors to pay their obligations in full. Since no Reserve for Depreciation of property account is maintained in this business, the depreciation of furniture and fixtures and of horses and wagons will be charged direct to the Profit and Loss account in closing. (See explanation of Reserve accounts, page 244. ) Prepare the first section of the Profit and Loss account, taking the amounts from your trial balance and schedule of inventories. Rule off the section. The second section of the Profit and Loss account shows, on the credit side, the items real estate, Wamsetta Mill stock and rent, which have no connection with the dry goods business. These are investment items, while the items in the preceding section are revenue items. After the profit from investment is added to that from business, we have the total net gain of the partnership. Prepare the second section of your Profit and Loss account and rule it off. The last section of the account shows the disposition of tJie net profit, a part of which has been set aside as a reserve for bad debts, a part deducted for allowances for interest on the partners' net capital, and the remainder divided equally among the partners. It has been decided to reserve out of the profits of this period one per cent of the amount of the outstanding Accounts Receivable for bad debts. Enter this amount in the section. Compute the interest on the partners' accounts according to the partnership agreement and enter the net amounts in the account. (See partnership agreement, page 226.) Com- plete the Profit and Loss account, after which foot and ride off the section and submit the Trading and Profit and Loss Statement to \'our teacher for approval. MipliKkN ll.LLM RATIVE BOOKKEEPING Trading, and Dow, Jones & Co., Inventory Aug. i Purchases Freif,'.t Inward Deduct Returns Inventory .Aug. 31 Cost of sales Cross profit on trading Selling Expenses Traveling Expenses Shipping Department Salaries Delivery Expenses Shipping Supplies, cost Inventory Aug. 31 General and .Xdministrative Expenses Office Salaries Office Supplies, cost Inventory Aug. 31 Office Expenses Rent Insurance, cost Unearned Interest accrued on notes pay. Less credit balance Discount Collection and Exchange Discount on Sales Depreciation as under Furniture and Fixtures Horses and Wagons Net profit on trading Net profit Disposition of net profit Reserve for bad debts Interest Dow's Capital " Jones' '• '• Cox's " Dow J net profit Jones \ " " Cox \ '• " 27598.69 ! 2763-47 !, I 126.98 \ 30489 14 156.66 f 24641.85 : 24798 jj_' 435 1 ■ 150 '3' 34 329-70 ■ 279.80 49 50 766 24 1 475 315-75 23525 80 25 50 200 150. 135- '5 «92-53 165.15 i 27 38 31 09 1 . 53 96 35 «5' 965 507 55 ■ 40 2329 '9 ,• '534 go '534 90 i6s 213 59 '79 83 57 61 306 29 306 29 306 29 _i5.34 2? 1 ; u <)0 WHOLESALE DRY GOODS BUSINESS 243 Profit .and Loss St.\tement, Aug. 31, 19— Sales Deduct Retuiiis Net sales Gross protit on trading, down Discount on purchases Interest accrued on notes receivable Net profit on trading, down Real estate, present value Rent due Cost United Dry Goods Stock, market value Cost Net profit, down 8205 643 7562 7562 12 1871 436 21 49 >3 57 2329 19 2329 19 10500. 100. 597 375 562 40 SO 1534 10600. 10225. 1 1400. 10837.50 qo '534 90 1534 90 •534 i 90 244 MUUtKN ILl.LMKAllVL i;0(.iKK.t;EPl.\G Balance Sheet, Assets Casli on hand in bank United Dry Goods Stock, market value Notes Receivable, per schedule No. 3 Interest accrued on above Accounts Receivable, considered good doubtful less reserve for bad debts Merchandise, per inventory, schedule No. 5 Shipping supplies, per schedule No. 6 Office • No. 7 Insurance unearned Horses and Wagons, per schedule No. 8 Furniture and Fixtures. " No. 9 Real Estate. Tenement • 61 Jones St. Total assets 116. S97^- 24 57 '343' 165 1359''-' 165 24 24 9088 81 1 1400 2577 S4 •> 1 57 '343' 24 24641 85 279 80 =35 -5i '35 S25 3-/3 10600 765II ^7651 1 36 Reserve Accounts. — Reserves are apportionments of the earnings of a business withheld from the net profits, and are credited to reserve accounts, which are created to sup])ort di- minishing assets, such as depreciation of property, or to meet contingencies, such as losses which occur from unforeseen causes. A general Reserve for Depreciation account may be raised to support the former con- dition, and a general Reserve for Contingencies account raised to support the latter possi- bility ; but it is customary to raise special reserve accounts for particular purposes, which are indicated in the titles of the accounts, such as Reserve for Depreciation of Office Equipment, Reserve for Bad Debts, Reserve for Collections. When reserve accounts are maintained and the depreciation of any propertv is written off, the depreciation account is debited for the amount, and the property account is credited ; and when a contingent loss occurs, the amount is charged to the proper reserve account and credited to the account through which the loss occurred. Interest on Partners' Investments. — Under the partnership agreement, interest is to be allowed the partners upon the capital contributed less interest on their withdrawals. (See page 226.) The purpose of this allowance is to reduce to an equitable basis the unequal con- tributions by the partners to the cajjital. The interest allowed the partners is not an expense for conducting the business, and the net profit is determined regardless of the adjustment of the partners' accounts. Ivich partner is credited in the last section of the Profit and Loss Statement witli the amount of interest allowed on his capital, and the total of these amounts becomes a charge to Profit and Loss account. Balance Sheet. — Having completed your Trading and Profit and Loss Statement, you will next make a Balance Sheet from your trial balance and schedule of inventories. (See AYHOLESALE DRY GOODS BUSINESS Dow, Jones & Co., August 31, 19— 245 Liabilities Notes Payable, per schedule No. 4 Interest accrued on above Accounts Payable, per schedule No. 2 Total liabilities Dow. Capital % add interest on capital " ^ net profit less debit balance personal "/c net capital Jones. Capital ",(• add interest on capital " 3 net profit less debit balance personal % net capital Cox. Capital % add interest on capital " \ net profit " credit balance personal % net capital Total liabilities and capital 15400 192 '7354 21372 213 306 21892 75 22c 15087 04 179 306 15573 175 60C0 57 306 •35 16 32946 55 '1667 15398 6498 90 765iJ_l.36 form of Balance Sheet, pages 244 and 245.) The debit side shows the current and fi.xed assets of the business, and the credit side shows the current liabilities, and the net capital, or present worth, of the proprietors. In making up your Balance Sheet arrange the assets in the order of floating and fi.xed. (See Assets and Liabilities, page 225.) Begin with current assets, and follow with the others in the order in which they could be most easily realized, or converted into cash. Arrange the fixed assets in the order in which they could be most easily realized. Arrange the floating liabilities in the order in which they would have to be met. It is customary to state Notes Payable first on the Balance Sheet, and Accounts Payable next. Since the business has no fixed liabilities, none will appear in your Balance Sheet. State the separate interests of the partners as shown in the form. After completing the Balance Sheet rule it off, and submit it to your teacher for approval. Closing the Ledger by Journal Entries. — Heretofore you have closed the ledger by making red ink and cross entries directly in the accounts. This is called "direct closing." In this work you will close the ledger by passing the entries through the journal ; that is, by making the closing entries in the journal and posting them to the general ledger in the regular way. This dispenses with red ink and cross entries in the ledger, and conforms to the now well-established accounting axiom that "no entry should be made in the ledger except through some book of original entry." The first step in closing the ledger will be to dispose of the accounts represented by the items in the first section of your Trading and Profit and Loss statement, or Trading account. The entries which you will make in the journal, for each section of the Trading and Profit and Loss statement, will correspond to the red ink entries which you would make in the ledger if you were to close the 240 MODERN ILLUSTRATIVE BOOKKEEPING ledger by direct closing. Therefore, determine wli.it red ink entries you would make for these accounts by direct closing, and make corresponding entries (in black ink) in the journal, debiting or crediting Protit and Loss for the total, or net amount, instead of for each amount, as you would do by direct closing. Your Trading account shows the following debit items : sales, returned purchases, in- ventory (close of present period); and the following credit items: inventory (beginning of present period), purchases, returned sales, freight inward, and profit and loss for the gross profit. Frame the journal entry, using the explanation To close, after each item, exxepting the inventory iteins, for which write the dates of the respective periods. When this entry has been posted, the accounts represented by the Trading account will balance, and the Profit and Loss account will show the gross trading profit for the ])eriod. Some accountants construct a Trading Account account in the ledger, and carry to it the items which appear in the trading section of the Trading and Profit and Loss statement, and transfer the balance to Profit and Loss account. The effect is the same in either case, but since the statement shows all the trading facts in detail, and can be referred to inore readily and conveniently than could a book, many accountants regard it unnecessary to keep a Trading Account account. The next step will be to dispose of the accounts represented by the items in the first section of the Profit and Loss account. In order to have these accounts show their true profits and losses for the period it will be necessary first to enter in their respective accounts the amounts of the asset and liability inventories as shown by the schedule of inventories. Frame a journal entry debiting Sundry Inventories (for the total amount of the credits) and crediting Furniture and P'ixtures, Hor.ses and Wagons, Shipping Supplies, Office Supplies, Insurance, and Interest for the individual amounts. For explanation write Sundry Inventories, to close. Next frame a journal entry debiting Interest and crediting Sundry Inventories for the amount of the interest liability, as shown in the schedule. Make explanation similar to that for the preceding entry. Next frame a journal entry for the credit items in the first section of the account, debit- ing Discount on Purchases and Interest for the amounts shown, and Loss and Gain (for the difference between the amount of the debit iteitis and the amount of the credit items in the entry); and crediting the debit items for their respective amounts. For explanation write Profit and Loss to close. When this entry has been posted, the accounts represented by the section will balance, and the balance of Profit and Loss accoimt will show the net trading profit. The second section of the Profit and Loss account shows on the credit side the item- Real Estate, Rent, and Wamsetta Mills stock, and by referring to the schedule of inventories, we find that these are included in the assets. Frame a journal entry, debiting Sundry In- ventories and crediting Real Estate (two items, present value and rent accrued) and Wam- setta Mills stock, with proper explanation. Next frame a journal entry debiting the credit items for the gains shown in the second section of the account, and crediting Profit and Loss, with proper explanation. When thi- entry has been posted, the accounts represented by the .section will balance, and the balance of the Profit and Loss account will show the net jirofit of the firm. The last section of the statement shows on the credit side the net profit of the firm, and on the debit side, the items. Reserve for Had Debts, Interest on partners' capital, and the partners' net gains. The net profits of a business m.ay be credited to the capital accounts, thereby increasing the working capital of the business, or they m.\v be credited to the personal accounts of the partners and withdr.iwn, or used to otT>' withdrawals. In this work the net profits will be left in the business and credited to the partners" capital accouni- WHOLESALE DRY GOODS liUSIXESS 247 Frame a journal entry debiting Loss and Gain for the net profit and crediting Reserve for Bad Debts, and the partners' capital accounts for the interest amounts and for their respective shares of the net profit, with proper explanation. When this entry has been posted the Profit and Loss account will balance, as will also all profit and loss (nominal) accounts. Frame a journal entry debiting each partner's capital account for the balance of his personal account and crediting his personal accoimt for the amount. Post the above journal entries. Foot and rule off all general ledger accounts that balance. Rule off by single lines the item in Inventory account which represents the inventory at the beginning of the present period. Close the partners' cajntal accounts by red ink entry, writing for explanation net capital. Rule off the accounts and bring down the balances in the usual way. See if these balances agree with the Balance Sheet. The closing of the capital accounts by direct entry instead of by journal entry is apparently a violation of the accounting axiom mentioned on page 245. but these entries do not affect any other account and. therefore, cannot be journalized. You have now completed the closing of the ledger, and the accounts represent the assets and liabilities, and the capital of the business. A part of the assets and liabilities, however, are represented by the Sundry Inventories account, which controls the separate accoiuits to which these inventories belong. In order to have the separate accounts represent their true assets and liabilities at the beginning of the next period, as shown by the Balance Sheet, it will be necessary to credit or charge them with the amounts of the inventories represented by the controlling account. From your Balance Sheet frame a journal entry under date September i, ig — , debiting the asset balances represented by the Sundry Inventories account, and crediting that account for the total amount. For explanation write " Balance." Frame another entry debiting Sundry Inventories for the amount of the liability balance and credit Interest account for the amount, with proper explanation. Post the above entries, and rule off the Sundry Inventories account. Post-closing Trial Balance. — A post-closing trial balance is a trial balance of the general ledger taken after it has beeti closed for a business period. You will now take a post-closing trial balance of your general ledger, and submit it to your teacher for approval. Before proceeding further, read again the paragraphs relating to the purchase journal, sales journal, and the bill and charge system, pages 221 and 222. WHOLESALE DRY GOOD.S BUSINESS — Gw//;^?/.vi' PRELIMINARY 'WORK Septe.mber I, 1 9 — Henry W. Taylor has this day withdrawn from the firm of Taylor, Wood & Co., and a new firm has been formed, consisting of Clark F. Wood, (Student), and Frank H. Taylor, to continue the business heretofore conducted under the name of Taylor, Wood & Co. Henry W. Tavlor has assigned his interest in the old business to Frank H. Tavlor as of this date. 248 MiUitkN ll.l.rSTKAIIVL l;c"iKKEEriNG and articles of copartnership have this clay been executed by the partners of the new business. According to the articles of copartnership the new partnership agreement is the same as the old one (see page 225), excepting that Wood is to receive a salary of S200 a month, (Stu- dent), S225, and Frank H. Taylor, S 150. There is to be no change in the style of the firm name, and the capital of the new firm is to be the same as that of the old one, as shown by its books, closed as of Aug. 31, 19 — . The capital of Henry W. Taylor in the old business is to become the investment of Frank II. Taylor in the new business. The books of the old firm are to be used as the books of the new firm, and are to be closed annually, as of September 30. Make a brief statement of the above conditions in your journal under date Sept. i, 19 — , and frame an entry to transfer Henry W. Taylor's interest to Frank H. Taylor, making proper explanation of the entry. Post the entry, and rule off the account of Henry W. Taylor. Set up the new capital account under the old one. Books Kept. — You will use the same books for September as you did for August, except- ing the sales book, which will be replaced by the sales journal; and the purchase journal will be added to the set. TRANSACTIONS SeI'TE.MBER 1 No. 82. — Check from Isaac Holman & Sons in payment of note due to-day. No. 83. — A, B, C. Duplicate charge bills. Jas. H. Wood & Son ; Thompson & Bulkeley ; Sibley & Co. Enter the bills in the sales journal, beginning with the number 100, and number all succeeding bills consecutively. Head your sales journal, Sc/il. /, ig — . Enter only tlie .serial number of tlie bill, name of the purchaser, and the amount of tlie bill, extending the amount into the Items column and the daily total into the Total column. The separate entries in the sales journal will not be posted, but the footing will be posted at the end of the month. Post from the charge bills directly to the accounts in the sales ledger, in the daily posting, and place the folio of the account ^ each bill to indicate that it has been charged. Remember to enter the terms in the ac- count. Cash sales bills will not be entered in the sales journal. Place the bills in your Voucher File. No. 84. — Send II. R. Judson, your traveling salesman, check for $75 for traveling expenses. September 2 No. 85 — Cash from E. V>. Kerns for rent of flat, # 74 Center St., August and September, $ 200. ( Real Estate % . ) No. 86. — Check from Levy & Garson for invoice of Aug. 25, loss 6%. No. 87. — Invoice from Burke, FitzSimons, Hone & Co. Enter the invoice in the ])ur- chase journal. Number this invoice i. Head your purchase journal the .same as you did your sales journal, number the entries conseaitively, and enter only the name of the creditor and the amount of the invoice. Write the entry number on the upper right- hand corner of the invoice. The separate entries in the purchase journal will not be posted, but the footing of the book will be posted at the end of the month. Post from the invoices directly to the accounts in the purchase- ledger, in the daily posting, and place the folio of the account on each invoice to indicate that it has been cred- ited. Remember to enter the terms in the account. No. 88. — Pay invoice Burke, FitzSimons, Hone & Co., due to-day, as follows : Deduct from the amoimt of the invoice the charge for goods returned on Aug. 11, as per ledger. WHOLESALE DRY GOODS BUSINESS 249 and from this amount deduct i %, as per terms of bill. Write a check for the net amount. No. 89. — An order was received to-day from Ingham & Case, but as they owe a balance which has been running a long time, it was not deemed advisable to sell them rfiore goods on account. In response to our telegram they instructed us to ship the goods subject to bank order, and allow special cash discount. No. 89 a. — Make a sight draft favor of Commercial Bank for the net amount of the bill, pin it to the bill of lading, and leave both at the bank for collection. Treat the transaction as a charge sale. No. 90. — Duplicate charge bill. C. H. Roberts. No. 91. — Check from Harris & Smith to ap[)ly on account. September 5 No. 92. — Duplicate cash bill. Weston & Hill, City (check). Enter in cash book only. No. 93. — Deposit all checks. Bank charges for collection, 75^ No. 94. — Duplicate charge bill. W. O. Harrison ; terms, 6% 10 ds., 5 % 30 ds. September 6 No 95. — Invoice from Burke, FitzSimons, Hone & Co. (See No. 8/.) No. 96. — Pay Little Falls Woolen Co., by check, for invoice of Aug. 12, ^163.22, less I %. No. 97. — This check from Jas. H. Wood & Son is on account. September 7 No. 98. — Check from Sibley & Co. is in full for bill of July 25. No. 99.— A, B, C. Duplicate charge bills. B. C Wiley; Carlton, Sons & Co.; L. H. Parker. No. 100. — Duplicate charge bill. Burke, FitzSimons, Hone & Co. for goods returned. No. 101. — Check from Brown & Wilson for note due to-day. September 8 No. 102. — Invoice from Sibley, Lindsay & Curr Co. No. 103. — Send check to Sibley, Lindsay & Curr Co., for note due to-morrow. September 9 No. 104. — Mr. Taylor draws $200 from the business, by check, for personal use. No. 105. — Note from Harris & Smith to apply on account. No. 106. — Received notice from your bank that the draft of 3d inst. on Ingham & Case has been paid. Collection, yoK Note. — When in doubt as to how to clas.sifv a transaction, refer to the entry of a similar transaction in the August work. September 10 No. 107. — Bill from L. H. Parker, Lima, for goods returned. Send L. H. Parker a credit memorandum. No. 108. — Mr. Wood draws S250, by check, for personal use. 250 MODKRN ll.LLSTkATlVE 15O0KKEEPING September 12 No 109 —A, B. Duplicate cash sales bills. T. D. Winch, and Allen & Co. No. 110. — Deposit S300 currency and all checks. Collection charges, $1.25. No. 111. — Send Sibley, Lindsay & Curr Co. a check for 34484.23, in payment of invoice of July 14. No. 112. — Ingham & Case have paid no attention to letters from Mr. Taylor regarding the scltlement of their account. Make a sight draft on them for S66.35 and leave it at the bank for collection. Write in pencil, in their account in the ledger, Sight draft, 9, 12. September 13 No. 113. — Check from W. O. Harrison for bill of Sept. 5, less 6%. No. 114. — Pay cash for stamps and office supplies, S 10. No 115. — Check from Lewis \\. Chase to apply on account. September 14 No. 116. — Draw for your own personal use, $150, by check. No. 117. — Invoice Gimbel Bros. No. 118. —A. B, C. Duplicate charge bills. J. G. Smith; Lewis W. Chase; Levy & Garson. No. 119. — Discount the invoice of Granite Mills, dated Aug. 15, and send check, for the net amount. No. 120. — Duplicate charge bill. Gimbel Bros. No. 121. —A. B. Duplicate cash sales bills. E. H. Marcy & Co. ; Wallace Bros, (check). No. 122. ~ Pay clerk hire, S75, in cash. No. 123. ^ Pay freight bills to date, per agent's request, by check, S 27.45. September 17 No. 124. — Check W. O. Harrison is for note due to day. No. 125. — Deposit all checks. Collection, S2. No. 126. — The bank informed you, at time of making above deposit, that your draft of the i2lh inst. on Ingham & Case has been returned unpaid. No reason assigned. Write in lead-pencil, in their account in your ledger, Draft returned, 9/17. Sei'tiimker 19 No. 127. — Invoice from Little Falls Woolen Co. No. 128. — Pay rent for September, S300, by check. September 20 No. 129. — You have outstanding an interest-bearing note, due to-day, and, as you have not enough funds to meet it, the bank has agreed to renew one-half of the face of the note for 10 days. Make your note at 10 days (with interest), in favor of the Commercial Bank, S5000. Receive credit for the face of the note. Enter in the bill book, and add to your deposit on stub of the check book. You have in etTect discounted a note at the bank and received credit for the proceeds. Therefore you have increased your bank balance that amount. WHOLESALE DRY GOODS BUSINESS 251 No. 130. — Draw a check, in favor of the Commercial Bank, in full for the old note as above and four months' interest. This is your first " renewal," and you should study the transaction carefully. No. 131. — Check from W. B. Snow to apply on account. September 21 No. 132. — Note received from Lewis W. Chase on account. No. 133. — Discount the note received from Lewis W. Chase to-day, and receive credit for the proceeds. No. 134. — A, B, C, D. Duplicate charge bills. Jas. H. Wood & Son; Thompson & Bulkeley ; Sibley & Co. ; Brown & Wilson. September 22 No. 135. — Check received from J. G. Smith is on account. No. 136. — Deposit the checks on hand. Collection, 75^'. September 23 No. 137. — 'Sir. Taylor draws cash, $50, for private use. No. 138. — Check from B. C. Wiley to apply on account. No. 139. — Invoice from Sibley, Lindsay & Curr Co. No. 140. — Invoice from Burke, FitzSimons, Hone & Co. September 24 No. 141. — Pay grain and feed bills in cash, $ 16.75. No. 142. — Check from J. G. Smith for bill of 14th inst., less 6 ^/, discount. No. 143. — Pay Burke, FitzSimons, Hone & Co., by check, for invoice of Aug. 31, less 5 '/, . September 26 No. 144. — Duplicate charge bill. W. B. Snow ; terms, 2 '/(' 10 ds., 1 '/ 30 ds. No. 145. — Send Gimbel Bros, check for note due yesterday. When notes or other obligations mature on Sunday, it is customary to pay them the following day, but in the states where days of grace are yet allowed they are payable on the preceding day. No. 146. — Check from Levy & Garson in payment of invoice of 14th inst., less 2 '"/(.. No. 147. — Duplicate charge bill. Carlton, Sons & Co. No. 148. — Check from Darius D. Miner for $5000. This money has been raised to meet the "renewal" note due in a few days at the bank, and was borrowed on the firm's demand note, with interest, 6 ''/, , secured by first mortgage on the flat at 74 Center St. Make the note, and the proper entries for the transaction. Apparently the firm has issued liabilities of double the value of the asset received. Ijut since the payment of the mortgage is conditional on the non-payment of the note, the lialiilities have actually been increased by only the amount of the increase in the assets. Since the money was obtained on the note and not on the mortgage, Mortgage Payable account is not, of course, charged at this time. No. 149 Deposit cash, S200, and all checks. Collection and exchange, $2. 252 MODEIO; ILLUSTli-VllVE liUOKKEEPlNti September 28 No. 150. — Pay freight bills to date by check, S20.14. No 151. — Pay cash for clerk hire, S70; teamster, S45. No. 152. — Pay telephone bill by check, Si 5. (Office Expenses %.) September 30 No. 153. — Draw cash for your own personal use, S40. No. 154. — Pay, by check, note and interest due at bank to-day. No. 155. — Pay II. R. Judson his salary for September by check, S 150. No. 156. — Pay rent of stable for September, S50, by check favor of P. F. Nolan. Make proper entry for salaries due the partners. Construct a controlling account in each of your subsidiary ledgers, thereby making them self -balancing. (See Self-balancing Ledgers, page 223.) Complete the daily posting and prove the cash. Foot, post and rule off all books of original entry, as in the work for August. Take a trial balance of the general ledger and of each of the subsidiary ledgers, and see if the subsidiary ledgers are in agreement with the controlling accounts in the general ledger. Use loose journal paper for your subsidiary trial balances, and remember to include only the current balances. No. 156 a. — .\ssuniing that the checks issued Sept. 2S and 30 are outstanding, make a bank voucher slip, balance your pass book, and reconcile your bank balance. Dissolution of Partnership. — It has been apparent to your partners and yourself that the present conditions in the trade, and the outlook for increasing the business, do not justify a continuance of three active partners. Therefore it has been decided that Mr. Wood will withdraw from active management, leaving his capital in the business, and that you will retire from the firm on Oct. !, to engage in the shoe manufacturing business. The following is a schedule of the assets and liabilities of the firm, Sept. 30, 19 — , not shown on the books. Inventories Merchandise, per schedule No. 5, Furniture and Fi.xtures, cost. Depreciation, i > . say, Horses and Wagons, cost, Depreciation, i '/'c , say, Insurance, cost. Earned, Shipping Supplies, per schedule No. 6, Office Supplies, " " No. 7, Real Estate, ajipraised value, Wamsetta Mills stock, market value. Compute the interest on the partners' accounts. Prepare a Trading and Profit and Loss statement from your trial balance and schedule of inventories, and submit it to your teacher for approval. Reserve one-half of i "^ of the amount of the gross sales for September for bad debts. 322372.76 ►^3475. 2^5. 2450. 752.50 7.50 735- 267.50 7.50 260. 9325 106.50 12250. II 50. WtiOLESALE DRY GOODS BUSINESS 253 Prepare a Balance Sheet and submit it to your teacher for approval. Transfer to their proper accounts, through the journal, the items shown in the Trading account and Profit and Loss statement and the inventory items. Close all profit and loss accounts through the journal, and rule off the accounts. Close the Profit and Loss account and the partners' personal accounts through the journal, and rule off the accounts. Close through the journal the Sundry Inventories account, and re-open the accounts which it controls. Rule off the Sundry Inventories account and the Inventory account. Close the partners' capital accounts by direct entries, and bring down the balances. Rule off the accounts. Take off a post-closing trial balance, and submit it to your teacher, together with your books and vouchers, for approval. EXERCISES 1. Rule a half sheet of paper to represent two pages of a general ledger, and construct a Trading account on one of the pages, and a Profit and Loss account on the other. Transfer from their respective accounts in your ledger to the Trading account such items as will cause that account to show in detail the trading results for August. Close out the account, and transfer the gross trading profit to the Profit and Loss account by direct entries. 2. Transfer from their respective accounts in your ledger to the Profit and Loss account such items as will cause that account to show in detail the profits and losses for August. Close out the account by direct entry for the amount of the net gain. 3. Make such direct entries in the Trading account from your ledger as will cause the account to show the trading results in detail for September. Close out the account, and transfer the gross trading profit to the Profit and Loss account. 4. Make such direct entries in the Profit and Loss account from your ledger as will cause that account to show, first, the net trading profits for September, and second, the division of the net gain for the month. This will require two closings of the Profit and Loss account for the month. 5. State which of the two methods of treating the Trading account and the Profit and Loss account, as illustrated in the Dry Goods business and in the above exercises, you think is the better, and give the reasons for your opinion. 6. Rule one side of a half sheet of cap paper to represent a page of a general ledger, and construct a Merchandise account. From their respective accounts in your ledger, transfer by direct entries such items as will cause the account to show the merchandising results for August. Balance and rule off the account, transfer the gain, and bring down the current inventory. Next cause the account to show the merchandising results for September. Balance and rule off the account the same as for August. 7. The check book of the Bigelow Dry Goods Company on October 31 showed an over- draft of S53-92, and the bank pass book when written up as of that date showed a credit bal- ance of S416.27. The deposits and collections for November amounted to Si 375 1.84, and the checks issued amounted to S 8527.39. When the pass book was written up for November, it showed a credit balance of $6532.28. The checks outstanding were: #389, $156.82; 4^412, $ 1309.02; #415, $87.12. Rule a form of check book stub, and show how you would reconcile the bank balances on October 31 and November 30, using the above figures. 8. Prepare a Cash Differences slip (see Cash Differences on page 220), and make the •254 MODERN ILLUSTRATIVE BOOKKEErLXG necessary records on it for the following "outs" which you will assume occurred in your cash book for February: i, over, S2.ig. 2, over, S2.19. 3, over, S2.19. 4, short, $2.81. 6, short, S2.Sr. 7, O. K. 21, short, $3.65. 22, short, §3.65. 23, O. K. 24, short, S 1.25. 25, short, S 1.25. 27, short, S 1.25. 28, over, $8.75. Rule a journal form and frame an entry for the monthly cash difference. 9. Your bank has notified you that the check of J. T. Carpenter, in your deposit of February 28, contains a discrepancy of S 10 between the amounts as expressed in words and in figures. You find upon investigation that Carpenter was credited from his letter, which accompanied the remittance, for S 132.75, the amount as expressed in words, and that the check was included in the deposit for the amount Si 22.75, as expressed in figures. Frame proper entries to adjust Carpenter's account, the Cash Differences account, and the bank account. 10. Assume that you have been keeping a General Expense account for all expenses, except selling expenses, and that you have a General Expense column in your cash book. You are instructed to submit an analysis of the General Expense account, to be used in making up a semiannual Trading and Profit and Loss Statement, and are informed that the subdivision of the General Expense account is to be as follows : Office Supplies, Oflfice Ex])enses, Office Salaries, Shipping Supplies, Shipping Expenses, Deliver}' Expenses, Rent, Miscellaneous Expenses. Prepare an analysis sheet by ruling as many money columns on a sheet of cap paper as you have subdivisions of the account to be analyzed, and head each column with the name of a subdivision. Assume that your cash book shows the following general expense entries for the period : Bo.xes, S 14.25, S 17.10, S 13.05, S 24.60. Automobile repairs, S3.75, $7-50, S 18. Store rent, $200, S200, S200, S200, S200, S200. Gasoline, S3. 60, $4- 50, Si. 80, $9. Stationery, S 12.50, S26.30, S3.85, S 14-60. Office salaries, S750, S750, S675, S725, S87S, S775. Shipping De- partment salaries, S325, S325, S450, S425.75, S375, S410. Typewriters, Sioo, S162.50. Nails and bands, S3. 25, S6.15, S8.50. Garage rent, S25, S25, S30, S30, S25, S25. Postage, S5, S3. 75, S5, Sio. Telephone, Sio, S 10.75, Si 1.25, S 10, S 13.25, S10.85. Typewriter re- pairs, S1.75, S2, Si.25. Typewriter ribbons, S4.80, S2.50. Wages, chauffeur and helper, 5 100, S95, Sioo, S105, Sioo, S90. Taxes, Sii3-75- Insurance, S68.75. Pens, pencils, etc.. Si- 10, S.75, S2.25. Telegrams, S.40, S.25, S.72, S.45. S.30, S.25, S.60, S.93- Elec- tric light, S4-25, S4, S3.75, S3. 60, S3-25, S2.75. Roll-top desk and chair, S85. Rubber tires, S70, S36. Extra trucking, S3. 75, S4-25, S2.50, S7.2S. Wrapping paper and twine, $ 14.25, S 1.85, S3.60. Carry the above items to the proper columns on the analysis sheet, total the column.-;, and make the required analysis on a separate sheet. 1 1. Goodwin & Mackey had merchandise on hand July i, 19 — , inventoried at S 12209.2C. They dissolved partnership August 31 of the same year. Their net purchases, including freight, during July and August were S6928.34, and their net sales, S I3775-50. Their stock on hand August 31 was inventoried at S6353.50. Prepare a Trading Account section of 5 Trading and Profit and Loss Statement, and show the gross profit on trading, and the percentage of gross profit on the turnover. 12. The merchandise inventory schedules of James Sheffield & Company on June 30, ig — , were as follows : l-"urnishing Goods, S 1458.50; Gloves and Mittens, S 1S04. 50; Knit Goods, S 1990.75. Their net purchases during the period were: Furnishing Goods, S 1391.25 ; Gloves and Mittens, 51600.50; Knit Goods, S3987.25. Their net sales were: Furnishing ■WHOLESALE DRY GOUDS IJfSLXESS 255 Goods, S3303.60; Gloves and Mittens, S3919.60; Knit Goods, S6555. 25. Their stock on hand at the beginning of the period was as follows : Furnishing Goods, S 2500.90; Gloves and Mittens, S 2600. 50. Knit Goods, 53500.50. Construct separate accounts for each depart- ment, and show the gross profit on trading, and percentage of profit on each class of goods. 13. Using the data in No. 12, prepare a Trading account section of a Trading and Profit and Loss Statement, and show the gross trading profit and the percentage of the profit of each department, the total gross trading profit, and the percentage of total gross profit on the total turnover. 14. From the data given on the Profit and Loss section of your Trading and Profit and Loss Statement for September, prepare a Profit and Loss section which will show the selling e.xpenses, and the percentage of cost for selling, based on the turnover; the actual general and administrative e.xpenses, and the percentage of cost for conducting and administering the business based on the turnover. In doing this work distinguish between allowances and expenditures. Complete the Profit and Loss section. 15. The assets and liabilities of D. F. Beattey & Co. for the period ending December 31, 19 — , were as follows : Assets — Cash on hand, $43.29 ; In bank, $ 6790.24 ; Notes Receiv- able, S9909.76; Accounts Receivable, $8552.76; Real Estate, $6000; Merchandise, S6713.30; P'urniture and Fixtures, S 1789.48. Liabilities — Accounts Payable, S 1736.16; Notes Pay- able, S2000. The partners' accounts were as follows: D. F. Beattey, Capital, S 20000; Personal (Debit balance), S480. E. H. Sprague, Capital, $ 15000; Personal (Debit balance), S433.67. The open nominal accounts were: Debits — Discounts on sales, S302. 57 ; Interest, $21.34; Agents' Salaries and Expenses, $764.12; Office Salaries and Expenses, $564.80. The net purchases were $8514.27, and the net sales, $13009.57. The merchandise on hand at the beginning of the period was inventoried at $7362.91 ; real estate at $6180; and furni- ture and fixtures at $1826. P'rom the above data make a Trial Balance, a Trading and Profit and Loss Statement, and a Balance Sheet. The following exercises are given for use in schools which have adding machines: 16. Prove the charge postings to your sales ledger for August, by listing, first, the charge sales from your sales book, and second, the charge entries in the ledger, and comparing the totals of the two lists. 17. Prove the credit postings to your sales ledger by listing, first, the credit payments by customers from the cash book and journal, and the return sales ; and second, the credit entries in the ledger, and comparing the totals of the two lists. Compare the difference between the above charge entries list and the credit entries list, with the balance of Accounts Receivable accounts as shown in your balance sheet for August. 18. Prove the credit postings to your purchase ledger for September by listing, first, the invoices in your invoice book; and second, the credit entries in the accounts, and comparing the totals of the two lists. 19. Prove the debit postings to your purcha.se ledger by listing, first, the payments to creditors from your cash book and journal, and the return purchases ; and second, the debit entries in the accounts, and comparing the totals of the two lists. Compare the difference between the above credit entries list and the debit entries list, with the balance of the Accounts Payable account, as shown by your balance sheet for September. 20. Prove your bank balance for September as shown by your check book by listing, first, your deposits and collections from your check book stub, and second, the checks, from the vouchers, and comparing the difference between the totals of the two lists with the balance shown in the check book. 256 MODERN ILI.USrUATIVE BOOKKEEPING QUESTIONS 1. What is wholesaling ? 2. From what do wholesalers chiefly obtain their revenue ? 3. What is the principal revenue account of a mercantile business ? 4. What is meant by "trading" ? By "turnover" ? 5. Describe the form of journal used in the Wholesale Dry Goods business, and exj.lain the posting. 6. Describe the cash book, and explain the posting. 7. How may the cash be proved at any time, when this form of cash book is used .'' 8. What are ''cash differences'' ? Explain how they are treated and adjusted. 9. What is a purcliase journal ? A sales journal ? 10. Explain how the posting is done from these two books. Explain the bill and charge system. 11. Describe the auxiliary ledgers used in this work. 12. How may accounts with customers be divided when sectional sales ledgers are used ? 13. What is a private ledger ? 14. What controlling accounts did you construct in this work ? 15. Upon what does the accounts to be kept in any business usually depend ? What determines the special accounts to be kept ? 16. What is the principal deduction from revenue in a mercantile business ? How may the account which it represents be divided ? 17. Explain "analyzing an account." 1 8. How are accounts usually divided ? Explain each division. 19. Detine assets and liabilities. Explain fixed assets : floating assets ; fixed liabilities ; floating liabilities. 20. When a legal change takes place in the ownership of individual or partnership business, what is the effect, and what must be done ? 21. Is it necessary to open a new set of books when such a change takes place ? 22. How would a new set of books be opened ? 23. What are supporting records ? 24. What is a shipper's order ? Explain the difference between this and a C. O. D. express shipment. 25. What are return books ? Explain how returns are treated in this work. 26. What are the diflercnt classes of expenses .' Explain each. 27. When are merchandise inventories usually taken ? For what purposes ? At what price ? 28. How can the true profits of any business period be determined ? 29. What is a " trading and profit and loss statement " ? Expl.ain each section in detail. 30. What is the difference between the terms ■' gross profit on trading " and " net profit on trading " ? 31. What are reserves ? Explain "depreciation." 32. What is a balance sheet ? 33. How are the assets and liabilities usually arranged on a balance sheet in a mercantile business ? 34. What is the principal difference between a profit and loss statement and a balance sheet ? 35. What are "quick assets'" ? Give some e.xamples. 36. How is the general ledger closed in this work, and in accordance with what accounting axiom ? 37. Why are not the partners' capital accounts closed by passing the entries through the journal, instead of by making direct entries ? 38. What purpose does the Sundry Inventories account serve ? 39. What is a post-closing trial balance ? 40. What new features of bookkeeping and accounting have you learned in this work ? CORPORATIONS A Corporation is an artificial body created by law for certain purposes, which are stated in its charter, or articles of incorporation. It is composed of indi\'iduals, and differs from a partnership chiefly in that it is limited in its activities to the specific purposes for which it was created ; that it has a capacity of perpetual succession ; and that the members which compose it are not liable for the debts of the corporation, excepting in certain cases, and then only for a limited sum. Corporations are divided into two general classes ; namely : public corporations, which are created for the purposes of government and the management of jniblic affairs ; and private corporations, which are created for private purposes, and the management of private affairs in which the members are interested. Some private corporations are engaged in enter- prises which are of a public nature, but which are conducted and managed for private pur- poses or private gain. Some of these corporations, such as railroad, gas, water, telegraph, telephone, and street car or traction companies, etc., are called " public service corporations." Banks, trust companies, and insurance companies are called " financial corporations," and those engaged in manufacturing or trading are called " business corporations." Only business corporations will be treated in this work. Business Corporations. — Until comparatively recent times, most of the manufacturing and trading done in this country was conducted under two forms of management ; namely, the single proprietorship form, and the partnershijo form. Each of these forms possesses certain advantages and disadvantages as compared with the ccrporate lorm. Among the ad- vantages are : the ease with which they may be established, the freedom of action allowed, and the benefit to the business from the active, personal efforts of the ])roprietor or partners. The disadvantages are : the usual inability of a single proprietor or of several partners to command the necessary capital to conduct a large enterprise; liability of the individual owner or of each member of a firm, for all the debts of the concern ; and the dissolution of the partner- ship, and the possible discontinuance of the business, upon the withdrawal or death of a partner. For the development of great natural resources, and for the distribution of both natural and manufactured products to meet great demand, large capital and organized effort are required, and these are usually best ob- tained by the corporate form of business. During recent years the corporate form has made great strides in this country, until now it dominates most of the important lines of business, such as mining, manufacturing, merchandising, or trading, as well as transportation and other public service activities. Holding Companies. — A corporation which is formed for the purpose of controlling other corporations is called a " holding company " ; corporations so controlled are called "subsidiary companies." The larger part of the stock of each subsidiary company, or in some cases all of it, is transferred to and owned by the holding company, which issues its own stock in exchange. The subsidiary companies retain their corporate identities, and de- clare dividends like other corporations. The holding company may thus have a large incom-i, which is distributed in dividends to its stockholders. 207 2o8 MODERN II.LLSTKAilVi; UOOKKEEPING Subsidiary companies are operating concerns ; tlie holding company is usually an executive concern. Some of the larger corporations partake of the nature of holding companies, as they both control other cor- porations, and operate .separate plants or systems. Holding companies are monopolistic in nature, and their creation and conduct are closely regulated by law. Trusts. — A combination of business corporations formed for the purpose of controlling the output, and maintaining a monopoly of any product or products, and fi.xing the prices of the same, is called a " trust." Somt; business corporations, owing to their practically un- limited capital, enormous output, wide activities, and their control of a large part of the kinds of products which they handle, arc commonly called trusts. Corporations : How Created. — Formerly corporations were created by special acts of the legislatures, but the statutes of all of the states now provide other methods for the formation of corporations. Government Supervision. — Corporations, being creatures of government, are subject to the sujiervision of the power which created them. The supervision is expressed in their charters, and in various acts of the legislatures, and is exercised by special governmental bodies, such as Railroad Commissions, Public Service Commissions, etc. Corporations which do an interstate transportation business are subject to the supervision of the national government, and this supervision is exercised by the Interstate Commerce Commission. The e.\tent of the .supervision of corporations ditTers in the various states. In some states, it is compara- tively slight . while in others it amounts to the control of such important matters as issuance of stocks and bonds, method of accounting, forms of reports or statements, rates for service.s. and in some instances, ma.\i- mum or specific prices of products. The Interstate Commerce Commission has power to control the rates of railroads which do an interstate liusinc.ss. Corporations : How Formed. — Corporations are formed in accordance with the require- ments of the statutes concerning corporations, and these differ more or less in the various states. A corporation may be formed in the state in which it is domiciled, that is, in which it has its main office, or it may be formed, unless the statutes restrict, under the laws of any other state. A corporation formed in the state in which it is domiciled is called in that state, a "domestic corporation," and in all other states, a "foreign corporation." The statutes of the various states specify how many persons are required to organize a corporation. In mo?'' states, at least three persons of full age must unite to form a cor- poration ; in some states, five or more are required ; and in at least one state, any number may so unite. These persons meet and make a certificate of incorporation which usually contains: the name of the projiosed corporation; purpose or purposes for which it is formed, and location of its principal business office ; amount of capital stock, kinds ot stock, and number and par value of its shares: duration of incorporation ; number of directors; and such other information as the statutes may require. Puljlic corporations, and some private corporations, as hospitals, colleges, etc., do not issue stock, and are called •■ non-stock corporations." After the certificate of incorporation has been signed by the incorporators, and acknowl- edged before a notary public or some similar officer, it is then submitted to a projier state officer, usually the Secretary of State, who, if he accepts it, indorses it to that effect and returns it to the incorjjorators. When the incorporation fees and the annual tax have been ])aid, the certificate, accom- panied by the State Treasurer's receipt, is then filed in the office of the County Clerk (or other recording officer) of the county in which the ]>rincipal business office of the company is to be located. Some states require that the certificate of incorporation shall be filed in all CORPORATIONS 259 the counties of the state in which the corporation intends to do business. Foreign corpora- tions are required to file a certificate of designation with the secretary of state. After the certificate of incorporation has been filed, subscription books are opened and the capital stock is disposed of by subscription or otherwise. If the corporation is to be formed to take over a going business, the subscription list is usually dispensed with, the former subscriptions of the incorporators taking its place. A certain amount must be subscribed for and paid before the corporation is permitted to begin business. After such stock has been subscribed for, and such payment has been made as required by the statutes or stated in the certificate, a meeting of the stockholders is called, at which the officers are elected and by-laws are adopted. The record of these proceedings is filed with the Secretary of State, and a certificate is issued by him to the effect that the corporation is fully organized and authorized to do business under the laws of the state. In a few states, the statutes require that the meeting of the incorporators and the arranging of the organization must take place before the application for the charter is filed. Kinds of Stock. — The capital stock of a corporation is divided into shares, each share repiesenting a proportionate part of the authorized capital. In this country the shares of a business corporation are usually of two kinds, called "preferred stock" and "common stock." Preferred stock is stock to which some preference has been given, such as regards the payment of dividends, or the assets in case of liquidation, over other stock issued by that corporation. There may be more than one kind of preferred stock, such as first preferred, second preferred, etc. The dividends payable on preferred stock are usually limited in amount; they may be either cumulative or non-cumulative. If cumulative, the stated divi- dends attach to tlie stock each year whether or not they are earned, and all arrearages of such ]3referred dividends must be paid before the common stock receives any dividend. Non-cumulative dividends do not attach to the stock during any period when they are not earned. Common stock is the ordinary stock of a corporation, with neither special privileges nor restrictions. When all the stock is on the same equality as to voting, dividends, and par- ticipation in assets, it is common stock. When there is more than one i.ssue of stock, it is customary to keep separate accounts for each issue, as Pre- ferred Stock, First Preferred Stock, Second Preferred Stock, Common Stock, etc. The amount of sti)ck authorized as specified in the charter is called the " capital stock of the corporation." The amount of stock subscribed, paid for, or issued is the "paid-up capi- tal," also called the "outstanding stock." Stock which has been issued and has afterwards been purchased bv, or donated to, the corporation is called "treasury stock." Stock which has not been subscribed for and not issued is sometimes called treasury stock, but since such stock has no existence, it can have no value, and therefore should not be treated as an asset. .Such stock is called "unissued stock." Stock Certificates. — The shares of stock in a corporation are issued in the form of cer- tificates, each of which states the kind of stock, par value, and the number of shares which the certificate represents. Stock certificates are transferable by assignment, either wholly or in part, at will, but such transfer is not complete until the proper record has been made on the books of the corporation. Bonds. — A bond is an obligation, and is in effect a ]iromise to pay a certain sum and interest on the same ; the amount of the sum, the date of payment, the rate of the interest and when payable, being specified in the bond. It is one of the functions of corporations to 260 MODEKN ILLfSTRATIVE BOOKKKEriNG issue bonds, and the bonds of business corporations are usually issued against tangible assets. To secure payment of these bonds, the corporation is required by statute to execute a mort- gage, or some other form of lien on its property, to some trustee or trustees, to be held as security for the payment of the bond at maturity, and of the interest as it falls due. Bonds are issued for the purpose of raising funds for the use of the corporate business, and in accordance with the provisions of the statutes, and with the consent of the stock- holders. Forms of Bonds. — There are two general forms of bonds; namely, coupon bonds and registered bonds. Coupon bonds are usually payable to bearer, and have interest coupons attached which arc also payable to bearer, and which are promises to pay the amount of interest due at each interest period, as specified in the bond. Registered bonds are bonds which are issued in the names of particular persons, and are transferable only on the books of the corporation. Interest on registered bonds is paid only to persons in whose names the bonds appear on the books of the corporation, or to their assignees. Some coupon bonds are registered as to the princi])al of the bond, the coupons being payable to bearer. Kinds of Bonds. — Bonds are of various kinds, and are usually designated by the nature of the lien by which they are secured, or by the more important or distinctive feature of the issue, such as mortgage bonds, equipment bonds, sinking fund bonds, income bonds, con- vertible bonds, debenture bonds, etc. From a bookkeeping .standpoint, bonds are treated the same as are notes payable or mortgages payable, a general Bond account or separate accounts for each kind being constructed. Sinking Fund. — A fund created out of net earnings and set aside for the purpose of paying off a ti.xed obligation at maturity is called a " sinking fund." The money so set aside is taken out of the business and either deposited with a trustee or invested in market- able interest-bearing .securities. .Such money is called "invested capital" to designate it from "working capital," or the capital actively used in the business. A sinking fund is an asset to tlie business. For commercial purposes the usual way of providing a sinking fund sufficient to pay off a bonded indebted- ness is to set aside each year from earnings eitlicr a proportionate part of the amount of tlie debt tor tlie number of years the bonds have to run. or such a sum as will, with accumulated interest, am nmt in the given number of years to the amount of the bonds. In l)oth cases, the sum .set aside each year would be immediately invested. The rate of interest on the invest- ments in the second case would be that necessary to accomplish the purpose of the fund, and the interest would be credited to -Sinking Fund account. The interest on the investtnent in the first case would be credited to a revenue account, and the interest on the bonds charged to a revenue expense account. Dividends. — The profits and losses of a corporation are found through the trading and profit and loss accounts, the same as in any other business, and the net profits are carried to the Surplus account. The division of profits among stockholders is made by means of dividends, which are declared at fixed percentages, such as i^'/r , 3'/o 6"^/, etc., on the out- standing stock. Dividends are payable only to stockholders of record at the time the stock books are closed, or at sijecified dates, excepting in cases of a few stocks which have coupons attached to the certificates, when the dividends are paid on presentation of the coupons. Separate accounts are usually kept for different cla.sses of dividends, when there is more than one kind of stock, as Preferred Dividend account, Common Dividend account, etc. Surplus. — The term "surplus" usually applies to a portion of the profits withheld from distribution, either for the purpose of establishing a permanent addition to the capital of CORPORATIONS 2(Jl the corporation, or for such other purposes as the board of directors may designate. In practice, as above stated, the net profits are carried to Surphis account, and after the divi- dends have been charged to it, the balance is the actual surplus for the period. The sur- plus frequently serves to enable business corporations to maintain their ilividends at regular rates during periods of depression. Directors. — The affairs of a corporation are managed by a board of directors. In a few states, the directors for the first year are named in the certificate of incor]joration. In other states they are elected by the stockholders at their first meeting. The number of directors of a corporation is either specified in the charter application or is fi.xed by the by-laws. The minimum number allowed by law is usually three. In the larger corporations, where the board of directors is generally composed of a con- siderable number of members, the powers of the board are given during the interim between board meetings, to an executive committee, which must be composed of members of the board, and that committee becomes the real managing body of the cor])oration. In addition to an executive committee, a finance committee is often appointed to supervise the financial affairs of the company. Officers. — The officers of a corporation are usually president, secretary, and treasurer, who are elected by the board of directors. There may be one or more vice-presidents, and other similar officers, and sometimes two offices may be held by one person. The President. — In most corporations the president is the chief executive officer. In the \-ery large corporations, some of the duties usually performed by the president are assumed by the chairman of the board of directors. Generally the president presides over the meetings of the board of directors, and if authorized to do so by the by-laws, also over the meetings of the stockholders. He can bind the corporation in most routine matters, and usually affixes the corporate signature to instruments recjuiring such signature. Other matters of unusual importance or outside of the regular routine must be specially authorized by the board to bind the corporation. The president is usually required to exercise a general supervision over all the corporate business, and when necessary or required, make reports to the board of directors and to the stockholders of the condition of the affairs of the corporations. He is generally required, with the secretary or treasurer of industrial corporations, and with the secretary or treasurer of financial corporations, to sign the certificates of stock. The president must be a member of the board of directors, and as a director, he must be a stockholder in the corporation. The Secretary. — The duties of the secretary of a corporation are, among other things, to keep a record of the proceedings of the stockholders and directors, and such other records as do not pertain to the work of the treasurer. The secretary is usually custodian of the corporate seal. He need not be either a member of the board of directors or a stockholder in the corporation, although he is sometimes both of these. He is usually required to take an oath of office, binding himself to the faithful performance of his duties. The Treasurer is the financial officer of the corporation. His duties vary in different con- cerns. In the smaller corporations, besides having custody of the funds and securities of the company, he has direct supervision of the accounts, and keeps the general or business books. In the larger corporations, the accounting is under the direction of a controller or an auditor, and the purely financial operations are in charge of the treasurer and his assist- ants. The treasurer is responsible to the board of directors, or to the finance committee 2&2 MODERN 1I.LUSTR;\T1VE BOOKKEEPING Stock Ckktificate Book ci_/^^^ ^fr •.& ^&v>^fc>t/aa\t J (Of^yf/rrr/Zr fihOhgiiial OHtTtcalf XoOngitiat Sha/rx. Tnuis/ffml. ^r f' .-^irt^^ Mair.: when such a committee exists. He need not be either a stockholder or a member of the board of directors, although he may be either or both of these. He is usually required to give a bond ; and in some states must give a bond in such amount as the by-laws shall fix and determine. Books of a Corporation. — Tiiere is no system of bookkeeping peculiar to a corporation. The business transactions of a corporation do not dilTer in form from those of a partnership or of an individual i)roprietor. The volume of business is usually greater than that done bv an individual, but this affects only the number, and not tlie kind nor necessarily the form of the books used. ICach corporation, excepting where the form of its accounts is regulated by law, keeps its books, like all other concerns, in accordance with its own methods and the general principles of accounts. A few of the accounts of a corporation will differ from those of a private concern, and the form of its statements may also be different, but otherwise the general records are ])ractically the same in both cases. Corporate Books. — The only books which are peculiar to a corporation are those which show ilie operations connected with the corporate form of the concern, and contain a record of tlie corporate proceedings, and of the issuance and transfer of its stock. The special books of a corporation are the minute book, subscription book, stock certifi- cate book, stock ledger, stock transfer book, and dividend book. The minute book contains a record of the proceedings of the stockholders and of the board of directors. Sometimes sc]5arate minute books are kept for the proceedings of the stockholders and those of the board of directors. All entries in the minute book should be made bv the .secretary, and the book retained in his custodv. The usual form of a minute book is that of an ordinary " record " book, the pages of which are ruled like a sheet of legal taj) iiaper. CORPORATION'S 208 The subscription book contains a list of the subscribers to the stock, with the number and par vakie of the shares subscribed for by each. If stock is paid for in installments, a sepa- rate space for each installment should be provided in the subscription book, or a separate installment book may be used. The stock certificate book is a book of blank certificates and stubs, and the.se certificates are issued to the stockholders as soon as their subscriptions are fully paid. (.See form, page 262.) The stubs are filled out before the certificates are detached, and from them is made up the credit side of the stock ledger, in which each stockholder receives credit for tlie num- ber of shares held by him. On the back of each certificate is a blank bill of sale or form of assignment, by which a stockholder may transfer his stock to any other person. When a certificate is surrendered, it is stamped "canceled," and pasted on to its own stub in the stock certificate book. The transfer book is a book of printed forms and blanks to be filled in whenever a stock- holder sells his stock, or any part of it, to another person. A stock certificate, when signed by the seller or his attorney, authorizes the transfer of a certain number of shares of stock from the account of the seller to the account of some other person named in the certificate. The transfer book serves as a journal to the stock ledger, and from it are made all entries after the original stock issue of the business has been entered in the stock ledger. Stock Tk.wsfer Book 3a^ ^ 2-/70 ^^ TRANSFERRED BY 4^r ? ^ ., Jor Dalue K^ccicsb, I, tr; f doi hereby assign and transfer to ;. jC/^y-r^^ '::^At^.^^P9..f^^^L-^ _ Shares of the Capital Stock of Cb« Central Hational BanR of Pittsburgh, Pa. IPittlcss^jiiiia^hand and seal , this .jil day ei i;,^,/,;; ^^ 1 R9 ^ Sealed and delivered in the presence of ^'^~^^^^^ ^^^ — ^ /^ The stock ledger is auxiliary to the general ledger, and its credit balance should always agree with the Capital Stock balance in the general ledger. The stock ledger contains the name of every person holding stock of the company, either bv original issue or by transfer. It is made up originallv from the stubs of the stock certificate book, and as the stock is issued, each holder is credited in the stock ledger with the par value of the stock. After the opening entries, all entries in the stock ledger should be made from the stub of the trans- fer book. These entries always consist of a debit to a seller of stock whose name is already in the stock ledger, and a credit of an equal amount to the buyer, whose name must be entered in the stock ledger. The dividend book contains the names of all persons who have open accounts in the stock ledger, and opposite the name of each person is recorded the amount due him when a divi- dend is declared. This book may contain a space for the signature of each stockholder 2f.4 M(i|)1;KN II.l.l si RAl IVK BOOKKKKI'ING acknowledging the receipt of liis dividend, but in the larger corporations these dividends are generally paid by voucher checks which are in themselves receipts. The following forms illustrate the dividend book and the dividend check. DivinENn Book ft^A^ Semi- Annual Dividend, iu-c/^ /. /^//. / ^ NAME OP STOCkHOLI'tr Z^^^'^.^. / ffff /J'H 4^ 13250. At a meeting of the stockholders, it was decided, in view of the prospects of the company, to meet the deficiency by a voluntary assessment. When the books are closed as of December 31, 19 — , an Impairhient account should be con- structed to represent the deficit. The entry which would be framed to close the Profit and Loss account would be : Impairment, S 13250. Profit and Loss, $13250 When the assessment is levied, each stockholder should be charged with his proportion- ate share in the stock ledger, and a journal entry should be framed, debiting Assessment and crediting Impairment for the amount of the assessment. When this entry has been posted, the Im])airment account will balance, and when the assessment has all been paid, and the proper entry framed and posted, Assessment account will balance. EXERCISES The entries for the following exercises, with proper explanations, are to be framed on loose paper. No posting is required. L A, H, and C have organized a corpi)rati<)n for the purjiose of building and operating an electric light plant, and of selling current to the public. The authorized capital stock is CORPORATKJN.S 269 S2000000, par value of the shares S lOO. A subscribed for 500 shares, H, 300 shares.'and C, 200 shares. Other subscriptions aggregated 7000 shares. The subscriptions were all paid in cash, and later 1000 additional shares were subscribed for and paid in cash. Frame proper entries for the above transactions, and state the amount of stock remaining unissued. 2. To raise working capital, the stockholders of the Oro Mining Comi)any donated loooo shares of the stock of the company to the treasury. The par value of the stock is S5, and it was estimated that it would sell for an average of S 2.50 per share. The treasurer reported that he had sold 1000 shares at $3, 2500 at S2.75, 5000 at $2.50, looo at $2.25, and 500 at $2. Frame proper entries for the above transactions, using the first method explained in proposition 2, page 266. 3. A corporation is formed with an authorized capital of S 200000, par value of the shares Sioo, to take over a manufacturing business conducted by A and B as a partnership. The assets are to be taken at their book values, and the partners are to guarantee the full pay- ment of all outstanding notes receivable and accounts receivable. Each partner is to receive 575000 in stock for his interest in the old business, and ;S 50000 of stock is to be offered for subscription at par, to provide additional working capital. The balance sheet of the old business shows the following assets and liabilities : Assets. — Cash, S 10375.25 ; Accounts Receivable, $34216.81 ; Notes Receivable, S 18642.34 ; Fin- ished Products, S 242 11.96 ; Goods in Process, $13687.25 ; Materials, $ 1 5134.52 ; Machin- ery and Equipment, $35917; Furniture and Fi.xtures, $1252; Office Supplies, §875.50; Shipping Supplies, $217.75; Insurance on Goods, $ 1 12.25. Liabilities. — Notes Payable, S15875.25; Accounts Payable, $ 13767.38. A's capital, $62500 ; B's capital, $62500. Assuming that a new set of books is to be opened, and that C has subscribed for 200 shares, and D 300 shares, frame the journal entry that should be made on the corporation books when the old business is taken over. Frame the entry that should be made when the subscriptions are paid, and state in what other books records would be made for the trans- actions. 4. The balance sheet of the Consolidated Electric Manufacturers Company for Dec. 31, 19 — , showed the following assets and liabilities, exclusive of surplus or deficit; Assets. — Cost of properties, including trade marks, patent rights, real estate, building and machinery, S 16359861.95; Investments in affiliated companies, $575000; Deferred charges to operations : insurance, interest and other periodical expenses, $143146.89. Current assets. — Invento- ries of raw material, manufactured products, and supplies on hand, $4077973.79; Accounts Receivable, $ 1892705.86, less reserve for discounts, S50000. Notes Receivable, $ 128680.01 ; Cash on hand and in banks, $572680.22. Current liabilities. — Notes Payable, $2661563; Loans, $372176.64; Accounts Payable, $158544.33. Capital stock authorized and issued — Preferred shares, $100 each, $5000000; Common shares, $100 each, $15000000. From the above data prepare a balance sheet, including surplus or deficit, and arrange the assets and liabilities in the order of fixed and floating, with the quickest or most liquid asset last. If the balance sheet shows a surplus, assume that a dividend of i| '/> was declared on the preferred stock for the period by the directors, and frame the entry that should be made for such declaration. 5. Assume that the balance sheet of the above corporation showed a deficit for the period ending June 30, 19 — , of $75162.19, and that there was no previous surplus, and that no assessment had been levied. State first, what the net earnings for the current period, avail- 270 MODKKN U.l.LSI'KAinE BOUKKEEI'INU able for cliviclciids, must have been in order to wipe out the deficit and siiow the surphis as disclosed by the balance sheet. Second, frame the entry that would be made as of De- cember 31, 19 — , which would balance the account which represented the deficit, and create an account which would represent the surplus shown by the balance sheet. QUESTIONS 1. What is a corporation .' 2. Of what is a corporation composed, and how does it differ from a partnership ? 3. How many general classes of corporations are there ? -State what they are. and describe eacli class. 4. What advantages and disadvantages do individual and partnership forms of business organization possess over the corporate form ? 5. Define a trust ; a Iiolding company. 6. Wliat is meant by government supervision, and liow is it exercised ? 7. How are corporations created ? 8. How are corporations formed ? Explain in detail how a corporation may be formed in your state. 9. Explain the difference between a -domestic corporation"' and a '-foreign corjjoration." 10. How is the capital stock of a corporation represented .' E.\plain the different phases of this represen- tation. Wliat is treasury stock ? How is it treated on the books .' 1 1 . What is a bond, as the term applies to corporation securities ? Describe the different kinds of bonds, and state how bonds differ from stocks. 12. How^ arc the profits and lo.sses of corporations found ? How are the net profls distributed ? 13. What is meant by "surplus" ? What purpose does it frequently serve ? 14. I!y wliom are corporations managed? Explain how their autliority is obtained. 15. What are the usual officers of a corporation ? Tlie additional officers ? 16. What arc tlie duties of the secretary ? How is he sometimes relieved of a part of his duties ? 17. What relation does the treasurer sustain to the corporation .' Explain his duties (1) in small corpora- tions, and (2) in large corporations. 18. Is tliere a system of bookkeeping peculiar to corporations ? Give a reason for your answer. 19. What books are peculiar to corporations, and for what purposes are they used ? 20. What accounts are peculiar to corporations, and what accounts do they take the pl.ace of in proprietarv and partnership businesses ? 21. What Is meant by "good will."" and how is Its value determined ? How is it treated on the books ? How may it be disposed of on the books ? 22. When a going business is transferred to a corporation, what are the names of some of llie new accounts which will be constructed ? 23. Explain the steps to be taken, and the entries to I)e made, when a going business is transferred to a cor- poration, and a new set of books is opened. 24. What entries, when the old books are continued ? 25. What entries would be made when stock Is donated to the company and afterwards sold for cash ? Explain both methods. MANUFACTURING Manufacturing is tlie converting of materials into finished products. All materials in their natural or raw state are the products of nature, and when used for manufacturing purposes are called "raw materials." Converted materials are called "manufactured prod- ucts," or " finished goods." Things which are called finished goods in some industries are classed as raw materials in others. Production. — Production is of two kinds, natural and industrial. Originally, industrial production, or manufacturing, was done almost entirely by handicraft, but now machinery has largely supplanted hand work in many of the operations. The substitution of me chanical for human forces in manufacturing results generally in saving of labor, increase of output, reduction in cost, and improvement in products. Disposition of Products. — Some manufacturers dispose of their products through jobbers, commission merchants, or manufacturers' agents, while others maintain regular sales depart- ments, through which their products are distributed to the wholesale trade. Concerns of the latter kind are both manufacturers and wholesalers. Still other manufacturers dispose of their products direct to the consumers, through the medium of retail stores, established and conducted as a part of their business. This class of concerns are both manufacturers and retailers. The Factory System. — In the early stages of industrial production, manufacturing was carried on by the individual, working independently, or by the family working as a unit. Since the invention of machinery, and especially of the steam engine, which enlarged the field of machine operation, the old systems have been practically superseded by the " factory system," which combines the forces of labor, machinery, and administration into definite and effective units. The factory system is a universal method of industrial production, which can be applied to practically all kinds of manufacturing. Factory Organization. — The purpose of organization is to increase the effectiveness of action. It enables a number of persons to operate more effectively as a concrete unit than they could as independent imits. It jiermits of division of labor, which, in industrial opera- tions, results in increase of skill and of productivity. Division of labor also results in specializing, or the concentration of thought and effort on a particular thing, thereby greatly increasing the efficiency of the operator. The modern factory is a model of industrial organization. It is thoroughly department- alized, and every department is so operated as to contribute its due share to the purpose of the factory, and to the success of the business, and results in greater efficiency, increased output, and lower costs. Factory Efficiency. — Efficiency, as applied to manufacturing, is based on a comparison between the quantity and quality of output, and the time, labor, and money expended upon it ; or results compared with costs. Efficiency is obtained by saving in labor, the result of 271 270 MUUEKN U.LLSlUAinE BOOKKEliPlNtJ able for dividends, must have been in order to wipe out the deficit and show the surphis as disclosed by the balance sheet. Second, frame the entry that would be made as of De- cember 31, 19 — , which would balance the account which represented the deficit, and create an account which would represent the surplus shown by the balance sheet. QUESTIONS 1. What is a corporation ? 2. Of what is a corporation composed, and how does it differ from a partnership ? 3. How many general classes of corporations are there ? State what tliey arc. and describe eacli class. 4. What advantages and disadvantages do individual and partnership forms of business organization possess over the corporate form ? 5. Define a trust ; a holding company. 6. What is meant by government supervision, and how is it exercised ? 7. How are corporations created ? 8. How are corporations formed ? Explain in detail how a corporation may be formed in your state. 9. Explain the difference between a "domestic corporation"' and a "foreign corporation." 10. How is the capital stock of a corporation represented ? E.xplain the different phases of this represen- tation. What is treasury stock ? How is it treated on the books .' 1 1 . What is a bond, as the term applies to corporation securities ? Describe the different kinds of bonds, and state how bonds differ from stocks. 12. How are the profits and lo.sses of corporations found ? How are the net prof^ls distributed ? 13. What is meant by "surplus" ? What purpose does it frequently serve ? 14. I5y whom are corporations managed? Explain how their authority is obtained. 15. What are the usual officers of a corporation ? The additional officers ? 16. What are the duties of the secretary ? How is he sometimes relieved of a part of his duties ? 17. What rehition does the treasurer sustain to the corporation ? Explain his duties (i) in small corpora- tions, and (2) in large corporations. iS. Is there a system of bookkeeping peculiar to corporations ? Give a reason for your answer, ig. Wliat books are peculiar to corporations, and for what purposes are they used ? 20. What accounts are peculiar to corporations, and what accounts do they take the pl.ace of in proprietarv and partnership businesses .' 21. What is meant by "good will." and how is its value determined ? How is it treated on the books ? How may it be disposed of on the books ? 22. When a going business is transferred to a corporation, what are the names of some of the new accounts which will be constructed ? 23. Explain the steps to be taken, and the entries to be made, when a going business is transferred to a cor- poration, and a new set of books is opened. 24. What entries, when the old books arc continued ? 25. What entries would be made when stock is donated to the company and afterwards sold for cash ? Explain both methods. MANUFACTURING Manufacturing is the converting of materials into finished products. All materials in their natural or raw state are the products of nature, and when used for manufacturing purposes are called "raw materials." Converted materials are called "manufactured prod- ucts," or " finished goods." Things which are called finished goods in some industries are classed as raw materials in others. Production. — Production is of two kinds, natural and industrial. Originally, industrial production, or manufacturing, was done almost entirely by handicraft, but now machinery has largely supplanted hand work in many of the operations. The substitution of me chanical for human forces in manufacturing results generally in saving of labor, increase of output, reduction in cost, and improvement in products. Disposition of Products. — Some manufacturers dispose of their products through jobbers, commission merchants, or manufacturers' agents, while others maintain regular sales depart- ments, through which their products are distributed to the wholesale trade. Concerns of the latter kind are both manufacturers and wholesalers. Still other manufacturers dispose of their products direct to the consumers, through the medium of retail stores, established and conducted as a part of their business. This class of concerns are both manufacturers and retailers. The Factory System. — In the early stages of industrial production, manufacturing was carried on by the individual, working independently, or by the family working as a unit. Since the invention of machinery, and especially of the steam engine, which enlarged the field of machine operation, the old systems have been practically superseded by the " factory system," which combines the forces of labor, machinery, and administration into definite and effective units. The factory system is a universal method of industrial production, which can be applied to practically all kinds of manufacturing. Factory Organization. — The purpose of organization is to increase the effectiveness of action. It enables a number of persons to operate more effectively as a concrete unit than they could as independent units. It jierniits of division of labor, which, in industrial opera- tions, results in increase of skill and of productivity. Division of labor also results in specializing, or the concentration of thought and effort on a particular thing, thereby greatly increasing the efficiency of the operator. The modern factory is a model of industrial organization. It is thoroughly department- alized, and every department is so operated as to contribute its due share to the purpose of the factory, and to the success of the business, and results in greater efficiency, increased output, and lower costs. Factory Efficiency. — Efficiency, as applied to manufacturing, is based on a comparison between the quantity and quality of output, and the time, labor, and money expended upon it ; or results compared with costs. Efficiency is obtained by saving in labor, the result of 271 272 MODKRN ILLLSTIvATIVK BOOKKEEPING the use of machinery; by saving in time, the result of the division of labor; by proper organization and supervision ; and by other improved factory methods. The. efficiency of the human agencies, or workmen, is dependent generally upon their intelligence, ability, and skill, and that of the mechanical agencies is dependent generally upon their usefulness, construction, power applied, upkeep, and the proper service of the operatives. Efficiency is also dependent upon factory conditions, as light, air, space, etc. Manufacturing Activities. — The activities of a manufacturer comprise: the purchase and use of materials, machinery, and supplies; the application of, and payment for, light, heat, and power ; of labor, and the supervision of the same ; and the distribution of the finished products. For these activities, and the expenditures connected with them, careful and systematic records are kept. A record of the quantities of materials purchased and used, received and delivered, is called "stock keeping," and a record of the costs for pro- ducing the finished products is called "cost keeping." Manufacturing Records. — The records of a manufacturing business relate both to the production of the commodities and to the distribution of the same, and therefore are more comprehensive than are the records of any of the other kinds of business heretofore treated in this book. Some manufacturing concerns that are also wholesaling concerns keep one set of books, or records, for their manufacturing activities, and another set for their distributing or selling and general activities, while others combine the records of all classes of activities in one set. When two sets of records are kept, the manufacturing records are usually sub- sidiarv to the other records, or regular business books. Manufacturing Accounts. — The distinctive account in a manufacturing business is the Manufacturing account, which shows on its debit side the cost of materials, the productive labor cost, and the manufacturing e.\]ienses, and on its credit side the productive cost, or the market price of the finished products. This account is represented b\' its subsidiary ac- counts, Material.s, Labor, and Manufacturing Expenses, or the subdivisions of the latter account, as Indirect Labor account, Rent account, etc. Other accounts peculiar to a manufacturing business are Machinery and Tools, Repairs and Renewals, Patterns, Patent Rights, Pay Roll, Finished Products, Depreciation, and such other accounts, real or nominal, as the nature of the business may require. Classifying Expenses. — The expenses of a manufacturing business may be classified under three heads, manufacturing expenses, selling e.xpenses, and general and administra- tive expenses ; and by constructing accounts to represent these three classes of expenses much time, as well as much space in the general ledger, can be saved. The trial balance and the profit and loss statement are simplified by this classification, and can be more easily and quicklv made than when numerous nominal accounts are ke]5t. Analysis Book. — When the expenses are classified, as explained above, an analysis book is kept. This book contains a summary by months, of the expenses, classified in detail, and is compiled from analysis sheets, which are made up from the original records. In this way any desired information regarding the expenses of the business can be readily obtained. Purchases. — When materials are required in a manufacturing business, this is indicated by the receipt of a " purchase requisition " from the superintendent of the factory, or of a "stock report" from the stock keeper. An order called a "purchase order" is then sent to the producer of, or dealer in, the materials wanted, and a copy of the order is sent to the accounting department to be filed until the invoice of goods is received, when it is compared MAXUl-ACrURINU rs with the invoice after it has been O. K'cl by the bookkeeper from the stock clerk's report of goods received. The invoice is then recorded, and both purchase order and invoice are filed either separately or together. A copy of the purchase order is also usuallv sent to the stock department for a record of "stock ordered." (See forms of purchase order and duplicate below.) PuRCH.ASE Okdkr Blank. B''>I<'5(J Thi.Uu«r>ndN<.mbd ORDER . C*n(r* and 0__»_._ Blckfard St*.. DOBtOn, To M Send us PRICE ^■r NO tTTtNTiea To THESE COLUMN* (« QUANTrTY CLA«« OIL. (2) (3) (4) CB) (6) (Ji .... MAIL INVOICE SAME DAY GOODS ARE SHIPPED. THOMAS G. PLANT COMPANY. PuRCHAKiNo Agent. H ihera are jut Inqulrlts aboul ths aboTS call for i a- Duplicate Purchase Order Blank. Date 1911 N9 S1056 INVOICES RECEIVED DAT(5 Ship PRICE rMV,r: "vr" 1 o 1 2 ^/-v 3 w^ 5 /~N 6 u """""""" O i Ack'cl Hum>d For Bill (duplicate of order.) Acc*»lcd WiD.W D*1Wc»d Record of Invoices. — In a merchandising business, invoices are charged to Purchases account, or to the department for which the goods were bought. In a manufacturing busi- ness, invoices are dissected and the items distributed to various accounts representing the purchases for which the transactions were made, as materials, machinery, tools, supplies, etc. In like manner, the bills for the e.xpenditures are dissected, and the items distributed 274 MOKERX ILLUST1^\TIVE BOOKKliEl'ING to their respective accounts. To make this system of records complete, and have it cover all the items of purchase and expense, it is necessary to have a voucher for every purchase and cxi)enditure, and to make a systematic and comprehensive record of the same; and this is j)rovided by the voucher system of accounting. The Voucher System. — During recent years, there has been a great advance in the sys- tematiziiiL? of accounts, and in the proper distribution of the various items of expenditure; and this is shown in its highest stage of development in the voucher system. This system requires a voucher for every transaction or for every entrv on the principal books, and the use of a "voucher jacket " and a " voucher register." The Voucher Jacket. — A voucher jacket, as its name indicates, is a jacket or cover for the voucher, which may be either an invoice or an expense bill. The face of the jacket is in the form of an invoice blank, with the form of a receipt blank below. It jjrovides for the number of the jacket, name of the creditor, date, particulars, and amount of invoice, signa- tures of bookkeeper and manager, and for the acknowledgment of payment. Several vouchers from the same creditor or several expense bills may be included in one jacket. (See form, page 275.) The back contains a form for a brief record of the voucher, and the proper distribution of the same, which includes the number of the voucher, name of creditor, amount of voucher, when ]iaid, check number, and accounts to be charged. After the i)ro])er records have been made, both on the voucher jacket and in the books, the voucher is attached to the jacket, which is then folded with the back out, record side up, and filed under "Unpaid Jackets." When jjayment of the voucher is made, the proper record is made in the voucher record and on the back of the jacket, which is then sent wMth the remittance, to be receipted and returned. When the jacket is returned, it is again fiied, with the original voucher securely attached to it, under "Paid Jackets." In sonif voucher systems the voucher jacket is not sent out with the remittance, and hence does not contain the receipt blank. Many business houses pay all invoices received from the first to the tenth of the month on the tenth, those received from the tenth to the twentieth on the twentieth, and tliose received from the twentieth to the end of the month on the first of tlie following month, and regard these as cash payments : and their creditors, having been notified of this method of payment, generally do not object to receiving such payments and allowing cash discounts. Vouch i:k Check (Your pl«c« here-) t.N r-fW, P.WMENT OP VOfCHER KO. i. C-Tv^ ^,.^^^.^.,^.^^=^^^;f^ MANUFACTURING 275 Voucher Jacket No. 2678 St. Louis, Mo., Dec. 1, 19l2. Gould & Lincoln Chicago, 111. in account luitij THE DARLINGTON SHOE CO. Nov. 1 20 30 Invoice < < 2^ net 2/10 2/10 345 400 85 85 92 275 730 85 745 14 93 1006 78 AI'FRi VED : ipz^^ '^^'^^^^^ ^z-c-i^y^^^^ BOOKKEEPER. $1006tV''7 TTTTT Chicago , 111. , 19 12 lUffilirt) of THE DARLINGTON SHOE CO. Ten hundred six and ^-^ Dollars !n Full for Above Account C\( I-H = = f> H rH 02 o 1— f , ^ C OUI rH O p t4-» n 1 ^ O ■H O 1 ». ^ JZ c« r" o o E ^ 3 < n bi X v: V) S5 tej 0. « m tr. "A !r. y. ^ X w L^ U c a < Q "^ y. /^ X o ^ 276 MODERN lI.I.USTkATIVE E<:)OKKEEPlXG Voucher Distribution of Voucher Jackets X ' VnicHEKs -^^•'■•>"<^- ^^''"^ C > Credit 1 . - ■''"'■ General Accts. Rcc. :8iq 19— , R T. Prince G/A Sal. 70 215265 2820 3 I. B. Stone Inv. 1 2/ 1 (off. sup.) =5>5 2821 5 1 A. H. Henrv Nov. S. 200. Exp. 139.52 339 32 2S22 12 Brandt Mfg. Co. Inv. 12/10 16450 M"chv & Equip. 16450 2823 '9 Union Leather Co. •• 12/14 56219 1 2824 21 Munn & Son " 12/20 1365 1 2S2? 25 Cox Casting Co. Bill 12/24 O.Frt. 1^-79 6742 1 1 18 75'' 2S26 27 ' I. T. Lvman •• 12/26 11875 Real Estate 2827 V Imprest Fund Dec. disb. > 8936 V Accts. Rec. 250 2828 V Dodd Leather Co. Inv. 12/31 1 13627s 2829 V L'nited ShoeM'chyCo. Royalties 12/31 30761 2830 ^' A. H. Henry Dec. S. 200. Exp. 1 52.60 352 60 , -5556.5 1 283 25j-«2'5o Payments of vouchers are made by voucher checks, and if a jacket is not returned as requested, the check is a receipt for the payment of the voucher. (See form of voucher check, page 274.) When a voucher is paid, the usual entry is made in the cash book, with the exception that the number of the voucher should be written in the number column, the number of the check being written in the check number column. (See form, page 279.) Voucher Register. — The voucher register contains a record of all vouchers, and is the distinctive book of the voucher system of accounts. By its use the purchase ledger may be dispensed with ; the total amount of Vouchers Payable Credit column, as shown in the reg- ister, will show the total credits to be carried to Accounts Payable account, while the total amount of Vouchers Payable Debit column in the cash book will show the debits to be carried to Accounts Payable. Of course the amount of the unpaid items in the Vouchers Payable Credit column should show at any time the amount of vouchers unpaid, which will be the accounts payable of the business, and these can be readily proved by comparing with the unpaid vouchers on file. The voucher register is provided with special columns for the num- bers and particulars of the vouchers, and for the distribution of the amounts. As many columns may be provided for distribution purposes as the nature of business, or the classifi- cation of the accounts, may require. .Accounts for which no special columns are provided are entered under ".Sundry Debits." The vouchers are numbered in consecutive order in the special number column. (See form, jiages 276 and 277.) As soon as an invoice or an expense bill has been O.K'd, a voucher jacket is made out and certified by the proper persons, after which the distribution of the amount or itLMiis is made to the proper accounts on the back of the jacket, and from this the distribution is made in the voucher register. Some accountants do not record the voucher jackets until llie time arrives for the payment of the vouchers. When the vouchers for the month have been recorded, the Vouchers Payable Credit column and the special distribution columns are footed, and the columns ruled off. The MANUFACTURING 277 Register Month of Dece mber lO Paid Prime Lost Manufactcrini; Lxienses Sell. Exps. G. AND A. Exps. Vmc Ck. No. Materials 1 i Freight Labor Factory Supplies Lasts and Patterns Indirect Labor Miscella- neous MiscelU- neoiis Miscell.1- ' nenus Dec. I 1307 i876'5o 206 •5 70 3 I318 ) 25 15 5 1324 1 1 339 52 ■9 1332 562 •9 21 1340 ! 1 13 65 25 •356 j 48 65 1 18 77 1 31 Imp. Fd. 46 [8 29 ■5 It 53 13627s 1 [ — -206 3°7 61 7"9~ 352 :;74o 60 04 v' 924,94 ^■48 65 ^^i«76 50 1 r-n 65 •5 'J 353 « 106 68 1 i _ total of the footing of the Sundry Debit.s and distribution columns should agree with the footing of the Vouchers Payable Credit column. The footing of the \'ouchers Payable Credit column is posted to the credit of Accounts Payable in the general ledger. The items in the Sundry Debits column and the footings of the various dis- tribution coUmms, excepting the General column, are posted to their respective accounts in the general ledger. The items in the Miscellaneous columns are analized and entered in the Analysis Book. A check mark with the folio of the account written over it should be placed opposite the footing of each posted column to indicate that the amount has been posted. Cash Book. — The form of cash book used in a manufacturing business is essentially the same as that used in a wholesale business. It usually contains special columns which adapt it to the requirements of the business. The form of cash book shown on pages 278 and 279 is well adapted to any manufacturing business w^here the voucher system is used. It provides for a record of the actual receipts and disbursements, and can be easily and quickly audited. Imprest Fund. — In almost every business it is necessary to have some ready money for various purposes, usually of a petty nature, where it would not be convenient or desirable to issue checks ; and where it is the practice to deposit the entire cash receipts daily, this ready money is provided by creating an "imprest fund." A check is drawn for the esti- mated amount of money that will be required for petty e.xpenses for a given period, and cashed, and the amount is charged to Imprest Fund account through the general cash book. When it is necessary to replenish the fund, another check is drawn to bring the fund up to the original amount. In making up the balance sheet, the balance of the Imprest Fund account is treated as cash on hand. Petty Cash Book. — The currency received from the imprest fund, and all disbursements of the same, are entered in the petty cash book, and the entries in this book should be sup- y MODERN ILLUSTRATIVE liOOKKEEPING Cash l..»Tli AcCOtNT I'Ati 1 K I I.AK-. ;£ Accounts Receivaiilb Cash Salss ! Discount ON Sales 19- 1 Nov. I Balance in E.xchange Bank 13942 26 -> G. H. Deane & Co. inv. 10/20-2 7o 7S6 40 "5 73 770 67 3 Sales L. B. Smith V 132 60 '32 6o 3 El<;in Tradinj^ Co. inv. 10/25-2% 1268 70 25 37 1243 3j 4 Notes Keqeivable Field & Co. disc. 60 ds. X 1500 '^ , 14S5 4 Sales Sherwood & Co. V 194 89 1 1 194 89 S Dodge & Pond inv. 10/26-2% 942 80 iS 85 923 95 s limpire Shoe Co. on acct. 500 500 6 Marsh & Cox Co. inv. 1 1 /(-net 1988 75 1988 75 6 Notes Payable Sundries our note 4 mo. disc. X V 4200 I 43 70 4156 30 S700 .Accounts Kec. Cr. 5486 65 Sales Discount on Sales Cr. Dr. 327 49 59 95 Interest Dr. 58 70 ?5337 75 J FoKM OF Stock Ledger Card ported by proper vouchers. At the end of the month, when the petty cash book is balanced, the debit entries are analyzed, and a voucher jacket is made out for the amount of the disbin-sements, and showing the distribution. These disbursements are then passed through the voucher record in the usual way, and a journal cnlrv is framed debiting Vouchers Pay- able and crediting Imprest Fund, for the amount of the voucher jacket. Stock Keeping. — The keeping of an accurate record of materials is of special importance in a manufacturing business. It serves to show not only the quantities received and used, but also the quantities which should be on hand at any time. Tills not onl\' prevents the necessity of taking frequent physical inventories, but also serves as a basis for ordering stock, keeping up stock, and for otlier purposes, including the checking or proving of the physical inventories, thereby detecting waste or theft of material. Such a record is called a "perpetual inven- tory." The nature of the goods manufac- tured will determine somewhat the kind and form of stock books, or of stock records, w h i c Ii should be kept in any particular manu- facturing business. The stock ledger is tlie chief book in any stock keeping system. It contains accounts by quantities with every kind of material used in the manufacture of the finished products. The debits of these accounts are made from the invoices after they have been checked by the Arltcle Location Unit Max. M;n. RECEIVED DELIVERED | Dile Ordered Received Date Quantity Balance Date Quantity Balance | Dale Quanlily Balance L. _ ,.^»J ■ -""^ U"""'''^ "**— *'^— 1 MANUFACTURING 279 Book Date In Favor of I'A„.:^L..AK_, Check No. Vol-cm No. J'.VVAULE Disc. ON PfRCHASES Net Dis- DUKSEMENTS 19— Nov. I Imprest Fund R. T. Prince 388 100 I Union Leatlier Co. inv. 10/2 net \/ 389 2749 654 3° 654 30 I C. B. Tliomas Co. Acct. sale and exp. V 39° 2750 576 40 2 United Slioe M"cliv Co. inv. 10/2 net V 391 27S3 43' 62 43' i 62 3 Banning Poindings Co. inv. 10/12-270 V 392 2752 276 21 5 52 270 69 5 R. B. Johnson & Co. inv. 10/13-2% si 393 2751 1200 60 1 140 5 Dodd Leather Co. inv. 10/28-5% . \f 394 2754 1896 75 94 84 1801 91 5 R. T. Prince Pav roll V 395 2755 3600 .50 5 E.xcelsior Thread Co. inv. 10/3- V 306 2756 64 48 64 48 6 Coll. and E.xch. Accounts Payable Discount on Purchases per slip Dr. Cr. 36 5 50 4523 160 36 8645 40 Balance in Exchange Bank 16692 35 25337 75 receiving department, or from the receiving book or other receiving record, and the credits are made from the requisition slips after the requisitions have been filled by the stock department, or from the stock journal or other record. The card ledger form of record is admirably adapted for use with any stock keeping system. The illustration on page 278 shows a common form of stock ledger card. A record should be kept of factory supplies, and, of course, of finished products. The records of these three classes of stock can be readily distinguished bv the use of different colored cards. ' For storing material or stock so that it can be easily located, and conveniently obtained when wanted, bins are generally used. The bins are arranged in divisions according to de- [lartments, and each bin bears a label containing the number of the bin, and the name of the material or stock for which it is used. Production Methods. — There are two general methods of production in manufacturing, called "the production order method" and "the process method." The production order method is used where the natin-e of the product is such that accurate records can be ke]3t of each article or lot from the beginning of its manufacture until it becomes a finished product. This method is applicable to a very large list of commodities. The process method is used where it would be impossible or difficult to apply the production order method, as where the workmen's time on each lot cannot be definitely reported. Cost Keeping. — As applied to manufacturing, cost keeping is a systematic record of every item of cost connected with the production of commodities. The principal objects of these records are : to determine the actual cost of each article or lot of articles manufactured, so as to be able to fi.v a selling price which will net a desired profit, or to show the profit when the selling price is fixed by competition or other causes; to ascertain the productivity and efficiency of the productive agencies ; to serve as a guide in regulating output and 280 MODERN' ILLUSTKATIVK HoOKKKKPIXiJ DiAtiKAM t)F Cost Findinc; expenditures ; and to show where profits may be increased by increase in efficiency, f)r by reduction in expenditures. There are numerous cost keeping, or cost finding, systems applicable to the various lines of business, or to different conditions in the same line. Most of these systems are the results of careful study, experiment, and experience. The best cost keeping system for any particu- lar business is the one which will give the desired information with the least expenditure of time, effort, and moncv. Cost keeping may be applied to almost any kind of business, but it is especially valuable in a manufacturing business. Elements of Cost. — The elements of cost arc : prime cost, which is the combined cost of materials and direct labor; factory cost, which is direct factory expense added to the prime cost; total cost, which includes factory cost,*general expense, and selling expense. The selling price combines all of the above elements, and the profit. The accomi)anying diagram illustrates the method of building up costs to find a selling price which will net a desired profit, or to find the amount of the profit when the selling price is fixed by competition or other causes. In the lat- ter case the producer gets as profit, the difference between the total cost of the article and the price at wliich he is obliged to sell it, while in the former case he gets the profit he desires to have. The selling price represents the whole, or one hundred per cent, and each of the parts of which it is composed represents such a percentage of the whole as the cost of the part or the ratio of the profit, bears to one hundred per cent. If an article which is priced at S5.4O has in it material which cost S 1.08, and the other costs were $ 1.35 for labor, 97.2 cents for burden, and S 1.188 for expense, and the profit was 81 cents, the percentages would be 20, 25, 18, 22, and IS respectively. Production Order. — Tiie manufacture of goods is authorized by a " production order," which is issued by the office to the factory, and which contains the order number, date of order, description of the articles to be made, the quantity, etc. There are numerous forms of production orders. Those generally used in connection with cost systems are designed to contain, in addition to the information mentioned above, data relating to quantity and cost of material, workmen's time, and cost of operations. Several copies of the jiroduction order are usually made, one of which is sent to the cost department. Material Requisition. — The materials rec|uired for the articles called for in the produc- tion order are obtained by each of the different factory departments from the stock depart- ment by a " material requisition " made out by the foreman. This requisition contains the date, number of the order, name or number of the department, quantity and description of materials required, signature of the foreman, or person who authorized the requisition. After the stock clerk has filled and recorded the requisition, it is sent to the cost depart- ment. Labor Ticket. — The time spent bv a workman u]>on an article or on anv part of the work is recorded bv him on a labor ticket, or time card, which he turns in to the foreman 1 'i.'' SELLING PRICE 100% EXPENSE 22,"- TOTAL COST -J ... ; :2^Ci ^" . BURDEN 1 .M ; ; fa;tory cost 1 \ 63JJ 1 J LABOR 25r. PKIME COST : . MATERIAL 45'",' MANL'FACrUKIN(; 281 when he has finished his work. There are man\- forms of labor tickets, or time cards, and the form used in any business will depend upon the information required, and the conditions under which the goods are manufactured. A typical labor ticket, or time card, provides for a record of the workman's name, or number, date, article or part, time spent, or quantity made if piece work, rate, amount, and foreman's O. K. The purposes of the labor ticket are to determine the cost of i)roductive labor anil the efficiency of the workmen. After the labor tickets have been turned in and recorded, they are sent to the cost dei)artment. Pay Roll. — A record of the total amount of time worked, or of the total number of pieces done by each workman, and the amount of money he has earned is kept in a " time book" or a "piece book." There are numerous forms of pay rolls, and various ways of recordint;- the time of the workmen. In factories where the wages are paid by the day or the week, the time of the workmen is taken either by time keepers or by means of me- chanical time recorders. The time keeper records daily in the time book, the time, both morning and afternoon, when each employee enters and leaves the factory. The mechani- cal time recorder registers automatically on a strip of paper or on a card the " in " and " out " time of each workman, which he has " rung up " by means of a key or lever punch. The pay roll is made up from the time book, or from the time cards or time slips after they have been removed from the time recorder, and also from the piece book. Division of Cost. — For cost keeping purposes, cost has been divided into three parts: cost of materials, cost of labor, and indirect expense ; also called overhead charges and burden. The cost of materials is found through the material requisitions, and the cost of labor through the labor tickets. The cost e.xtensions on these requisitions and tickets are made by the cost clerks, and a record is made of each article or lot on a " cost record " or on a "cost ledger." The cost record shows the production cost of each article manufactured, and includes the cost of materials, the direct or productive labor cost, and the indirect ex- pense or burden. It is therefore a record of prime cost of pi'oduction. The cost ledger shows the productive cost, selling cost, and the general and administrative expenses, and is a complete cost record. Wage Systems. — There are several systems or plans of paying wages, among the most common of which are, the day rate plan and the piece work plan. Others are the preferen- tial, the premium, the bonus, and the profit-sharing plans. The day rate wage plan consists of paying the workman a certain rate per day or per hour. The piece work plan provides for paving the workman for the exact amount of work done by him, measured by the number of articles or parts he turns out. The other wage plans are too comprehensive for proper treatment in this book. Burden. — The indirect factory expense or burden includes the salary of the superin- tendent, wages of the foremen and other unproductive or indirect labor, cost of factory supplies, rent, light, fuel, and power, insurance, maintenance or upkeep, taxes, depreciation, etc. In other words, burden includes every expense connected with the production of an article except the cost of materials and the direct labor cost. The indirect expense or burden cost is found in the accounts in the general ledger. The costs of materials, and of direct or productive labor, are found separately in the cost ledger, and collectively in the general ledger. Separate accounts and separate pay rolls may be kept for direct and indirect labor, or only one account and one payroll maybe kept for both; in the latter case it would be necessary to analyze the account or pay roll to find the two- labor costs. 282 MODERN ILLUSTRATIVE UOOKKEEPING Distributing Burden. — When the cost of burden has been found, it is distributed ever each of the articles manufactured during the period in one of several ways. The following are some of the methods of distributing burden most commonly used in connection with modern cost systems : direct labor cost method ; direct labor hour method ; direct labor and material method ; new machinery method ; new pay rate method. The method to be u.sed will depend upon the wage system under which the factory is operated, the nature of the products, and other factory conditions. When the direct labor cost method of distributing burden is used, the ratio is found bv dividing the total burden cost by the total labor cost for any given period. Thus if the total burden cost for a month is $3000, and the total labor cost is S6000, the ratio of burden is 509,', and this percentage is added as burden to each article manufactured during that month. Hence, if the material in one of these articles cost 65 cents, and the labor on it cost 95 cents, the prime cost would be S 1.60, and the cost of burden would be 80 cents; the cost to make or factory cost would be S2.40. The direct labor hours method of distributing burden is based on workmen's time instead of labor cost, the hour being taken as the unit of time. The rate per hour is found by divid- ing the total cost of burden for the period by the total number of labor hours, and the per- centage thus found is added as burden to the prime cost. This method is regarded by cost accountants as more equitable and satisfactory than the direct labor cost method. By the direct labor and material method the total cost of burden is divided by the cost of both material and labor for the period, to find the percentage of burden. This method is practicable only when the material forms the greater part of the prime cost of the article. The student is referred to the special books on cost keeping for a further explanation of the methods of distributing burden, their treatment here being necessarily brief. Production Reports. — When the finished products are sent to the stock rooms, or to the sales department, a " Production Report " is made out, which shows the names or numbers of the goods, the quantities, and the factory cost. From this report an entry is framed in the Finished Stock record, or purchase journal, debiting Finished Goods and crediting Materials, Direct Labor, and Manufacturing Mxpenses. The Finished Goods account cor- responds to the Purchases account in a mercantile business. When the goods turned over to the sales dejartment are charged to Finished Goods account at market price instead of at factory cost price, some nominal account sliould represent the difference between the two prices to show the manufacturing profit. Some accountants use the general Profit and Loss account for this purpose, while others construct a special account. Goods in Process. — At the end of a fiscal period, the goods in process of manufacture are inventoried at their factory cost, and this is found in the same way as for the finished products. SHOE MANUFACTURING BUSINESS Shoe Manufacturing. — The statements of principles and practices heretofore made re- garding manufacturing, and the forms illustrated therewith, will apply to almost any kind of manufacturing industry. The transactions which follow are especiallv designed to illustrate the application of these principles and practices to, and the use of some of the forms in, a shoe manufacturing business. The shoe business was selected to illustrate modern manufacturing because the industry of making shoes ranks near the head of the manufacturing activities of the United States. MANXKACTURING 283 This typical American industry employs over S200,ooo,cx)0 of capital, and nearly 2CO,coo persons, and turns out over 250,000,000 pairs of shoes a year. Organization. — The modern shoe factory is usually organized into five departments, viz: Leather Room, where the soles are cut and heel pieces are put together; Cutting Room, where uppers and linings are cut; Fitting Room, where uppers are made (upper parts put together); Bottoming Room, where the uppers are lasted, the soles and heels put on, and the shoes finished ; Shipping Room, where the sock linings and laces are put in, and the shoes are ironed, dressed, inspected, and made ready for shipment. Each room is under the charge of a foreman, and the entire factory is under the direction of a superintendent. In some of the very large shoe factories, where nearly all of the work is done by machinery, the organization of the factory and the work done in each department differ somewhat from that described above. Materials. — In the manufacture of shoes, leather is the principal material used for the outside, and leather and cloth for the inside. Some shoes have cloth uppers, and leather or rubber outsoles. Other materials which enter into the making of shoes are thread, eyelets, buttons, etc., and are called " findings." Lasts and Patterns. — For the shaping and making of shoes, lasts and patterns are re- quired. Lasts are wooden and iron forms, known as "first lasts," and "second lasts." First lasts are the exact sizes and shapes which the finished shoes will be, and are used when the uppers are being attached to the soles. The second lasts are only approximately the sizes and shapes of the finished shoes, and are used in the supplementar\- operations, after the shoes have been lasted ; that is, after the uppers have been sewed to the soles. Patterns are used for cutting uppers and linings. This cutting is done by hand in some factories, and by machines in others. When machines are used for cutting, dies are used instead of patterns. Dies are also used for cutting insoles and outsoles. Production. — From the earliest times until about the middle of the nineteenth century, foot wear was made entirely by hand, with the aid of simple tools, such as lapstone, ham- mer, awl, and pincers ; but during recent years, the ancient wav has been displaced by a system of machines which turn out perfect shoes by the hundred in the time it took the old- style workman to make a single pair. In the making of every good shoe in the modern shoe factory, no less than 58 different machines are used. These machines are of the most delicate and intricate nature, are nearly human in their operation, and more than human in the accuracy and perfection of their results. Shoes are made by several processes, and in various styles, sizes, and widths, and the customer's order indicates what is wanted in these respects. Each kind and style of shoe is designated by a name and a number, and each shoe bears the factory number and size on the top lining. Each lot is given an order number, and this number, together with the details affecting the preparation of the shoe upper, are written on tags — one for each lot of shoes — which are sent to the foreman of the cutting room. Others containing the details regarding the sole leather are sent to the leather room, while a third set of tags is sent to the foreman of the bottoming room. On the back of each set of tags are printed the names of the different operations covered by the tag, with spaces opposite for the names of the operatives who do the work. These tags are production orders ; they follow the shoes from one department to another ; then, after being checked, they are sent to the superintendent's ofifice, and from there to the cost department, and finally back to the office from which they originated. 284 MODERN ILLUSTRATI\E BOOKKEEPING Shoe Production Oroer Tag CO o Case No. ' Pa.i- Description 1 Grade Qual Wt H Pattern Foxing Perf. Fly. Or. L. S.Lin' Lace Stay Perf. \ Butt. Fly Collar Tip Vamp Perf Back Stay Laces Cartons Bows Lining Topband Eyelets Buttons , Labels Emb's'ng St No I on Lid 'g Sizes 1 Bot. St'p O Cutting Instructions Fitting Instructions Special Instructions Pairs Width . '^ 2 •i 3 ^k 4 \% 5 ',a 6 ■i 7 '.i 8 '.i 9 Entered 1 ! o Last Heel i Edge Sh Dk St p Fr. St. T hd Welt Pimsh ! Sole In- ICoun Sock sole ter Line Sp ecial For Wanted B.\CK OF Shoe Production Order Tag S B !=> O o c o to 1- -a •n*^ o >2 3 o a> % >^ >i T3 « ... CS o..^ E c o o (11 o *- =t xa p a* 0) i-J < S; -a & •= -1, c ^ 77^ 't/3 1-. o ^ a u -t H « ^ a. H o O o M ■5 g n o rs W to -a W u pa a o >v (t] > C fl s U 01 a: 3 f o g c 'o. E > (0 A. > e 1 1 CO C 1 (0 c o •a CO E ci -a 4) _ U c %= c> ^ 4> c 1 H CO 3 s [^ E= CO c ^ OJ k. S^ CO M .- F s ej iJ H S CO C^ O •-] ES CO ffl ^ » E en 'C 5 I: 51 Tlie form of production order, or shop tags, and the metli(Kl of (hstribiitins; them, vary in dilTerent shoe fac- tories, owing to the (Hffeience in the organization of tlie factories, and in the grades of shoes manufactured. In some factories .sevcial copies of the production order which are printed on ordinary paper, are fastened to the shop tag, or complete order, tlie back only of which contains the names of the operations, and spaces for the names of the operatives. The production particulars are typewritten on all copies of the order, by manifolding, and the set is .sent to the superintendent of the factory, or direct to the leather room, if there is no superintendent. After the soles and heels have been cut but. and the proper records have been made on the back of the tag, the leatlier order is detached, and the remainder ot the set is sent to the cutting room, where it is handled in the same way, after which the remainder of the set is sent to tlie next department, and so on until the lot is finished. The shop tag is sent to the shipping room, or packing room, with the finished goods. MANUFACTURING 28.5 Processes. — There are three general processes of sewing the uppers to the soles of the shoes by machines, known as the "McKay Process," "Goodyear Welt Process," and the "Goodyear Turn Process." By the McKay Process, stitches are passed through a groove or channel in the outsole, and into and through the underlaps of the upper and insole, inside the shoe. By the Goodyear Welt Process, which is similar in method to the hand-sewed process, the sole is sewed to a narrow strip of leather called a " welt," which has been previously sewed along the edge of the shoe, beginning where the heel is placed, and ending at the same point on the opposite edge. By this process the inside of the shoe is left smooth, as the stitches are on the outside, instead of on the inside, as in the ])rocess previously de- scribed. By the Turn Process the sole is sewed to the upper, with both parts turned inside out, after which the shoe is turned right side out, and finished. As there is no inner sole in turned shoes, they are more flexible and easier to the foot than are shoes made by the other processes. Finished Goods. — After the goods are finished, they are packed in cartons (paper boxes), properly labeled, one pair in each car- ton, and the filled cartons are packed in wooden boxes, or cases, and shipped. In this work, it will be assumed that the shoes are made " on order," by both the Good- year Welt Process, and the Turn Process, the original orders being taken and sent in by traveling salesmen. Duplicate orders, or " re-orders," are sent by the customers direct to the house, or given to the salesmen when they call. .IP OF INSOLE. ■...-■ COBRflLLlNa UP OF INSOLE STITCM UNITINO NiOLC UPPCa *»N0 WELT GENERAL EXPLANATION Records. — Only the general records of the business are kept in the accounting depart- ment. All orders are handled by the sales and shipping departments. The bill and charge system is in operation in the sales department. All freight shipments are made under the straight bill of lading, unless otherwise required, and all bills are made in triplicate on billing machines, the original bill being sent to the customer, the duplicate to the bookkeeper, and the triplicate being placed in the sales binder for reference. Books Kept. — The books which will be kept in this business are journal, general ledger, sales ledger, general cash book, petty cash book, sales journal, voucher register, analysis book, and bill book. The forms of these books are illustrated, or are the same as hereto- fore used, with the exception of the journal, which has two debit columns, — Xotes Re- ceivable, and General, — and two credit columns, — General, and Accounts Receivable. Distribution. — The distribution charges in the voucher register will be made in accord- ance with the following classifications: 2S6 MODERN ILI.USTR.VnVK KOOKKKKPIN'G Real Estate, for cost of all permanent improvements made on the land and buildings. Maintenance of Real Estate, for cost of repairs on buildings. Macliinciy and Equipment, for cost of new machinery purchased, borlers, engines, motors, inside electric wiring, piping for heat or light, belting, etc., and cost of setting up or installing machinery purchased, and for cost of equipment. Tools, for cost of new tools, and movable articles used about the factory in connection with production, as rollers, trucks, movable scales, time recorders, etc. Materials, for invoice cost of all materials used for production purposes, as leather and findings. Freight Imvard, for cost of freight on materials purchased. Direct Labor, for cost of productive labor on goods manufactured. Office Equipment, for cost of safes, desks, chairs, ty])ewriters, billing machines, adding machines, filing cabinets, letter copying devices, time recorders other than those purchased for use in the factory. Manufacturins; Expenses, for cost of all indirect expenses connected with production. Subsidiary distribution is made for some of these expenses under Factory Supplies, Lasts and Patterns, and Indirect Labor. All other manufacturing expense items are entered under Miscellaneous. Factory Supplies, for cost of all supplies used for production or factory purposes. Lasts and Patterns, for cost of lasts, patterns, and dies. Lndirect L^abor, for cost of superintendence and other indirect factory labor, as salaries of superintendent, foremen, and wages of assistants, clerks, and unskilled laborers. Selling Expenses, for cost of e.xpenses connected with the sales of the goods. These charges are distributed under Miscellaneous. They include salesmen's salaries and ex- penses, advertising, circularizing, jiostage on same, shipping department wages and sup- plies, freight outward, insurance and taxes on finished goods, etc. General and Ailniiiiistrative Expenses, for cost of administration and general ex]5enses. These items are distributed under Miscellaneous. They include salaries of officers and office help, office e.xpenses, office supplies, office postage, telephone charges, telegrams, cor- poration ta.xes, etc. PRELIMINARY WORK Decembkk I, 19 — The W. J. Hilton Shoe Company was organized as a business corporation Jan. i, 1910, with a capital stock of 8200000, par value. S 100 a share, of which S 180000 worth has been issued. The present stockholders, and their holdings, are as follows: \V. J. Hilton, S85000; L. M. Hilton, S40000; K C. Wardner, S35000; (Teacher), Sioooo; K. M. Merriam, S9000; (Student), S 1000. The president of the corporation is W. J. Hilton ; vice |)resident, V.. C. Wardner; secre- tary, R. H. Merriam; treasurer, (Student) ; manager, (Teacher). The members of the board of directors are W. J. Hilton, K. M. Hilton, L. C. Wardner, (Teacher), and (Student). The salary of the president is S3000; of the treasurer, 52400; of the secretary, $ 1800; and of the manager, J>36oo. The low salaries of the officers are due to their large lioldings of the stock, which insures their getting .1 pro- portionately large share of the profits in dividends. If much of the .stock were held by outsiders, these salaries would be much larger, and more in kecjjing with the .services rendered. MANUFACTURING 287 The business has been continued since its organization, and is at present in active opera- tion. For the purpose of giving the student practice in malting the business records and the statements of results of a going manufacturing concern, he will take up the work at the beginning of the last month of a fiscal period, and continue it until the end of the [leriod, making the records in his own set of books. The trial balance taken Nov. 30, 19 — shows the following balances in the general ledger. You will enter these balances, e.xcept cash, in your general ledger. Allow one- fourth of a page space to each account. Make the date of entry Dec. /, ig — and write Balance in the explanation column. Trial Balanxe, November 30, ig — ■ The \V. J. Hilton Ccmpanv Real Estate, Machinery and Equipment, Tools, Lasts and Patterns, Office Equipment, Good Will, Materials, Goods in Process, Finished Goods, Freight Inward, Factory Supplies, Accounts Receivable, Notes Receivable, Interest, Collection and Exchange, Cash, Capital Stock, Reserve for Depreciation, Reserve for Bad Debts, Accounts Payable, Notes Payable, Surplus, Sales, Returned Purchases, Returned Sales, Allowances to Customers, Discount on Sales, Direct Labor, Manufacturing Expenses, Indirect Labor, Selling Expenses, General and Administrative Expenses, Discount on Purchases, 73742.50 55903-25 4376.85 12589.60 3580.40 30000. 156163.65 84 1 09. 20 13416.60 3339-32 4951-53 43996.47 4895. 126.70 448.20 22582.78 2685.40 362.75 8491.14 132440.60 11463.47 4580. 22616.36 10390.29 I 80000. 27951.75 2895.10 30629. 13500. 21893. 422189.85 1362.10 6831.26 707252.06 707252.06 11463.47 10468.70 7906.60 220O.75 1033-40 287.48 223. IS 496.28 288 MODIiRN ILLUSTRATIVE KOOKKEEPING Enter the following abstract in your Analysis Book, extending the amounts into the first money column, over which write Jan. to Nov. Leave si.x blank lines after each of the main divisions. (See Classifying Expenses, and Analysis Book, page 272.) Abstract of Analysis Book, November 30, 19— Jan. to Nov. Manufacturing E.xpenses: Fuel, Light, and Power, 3547-50 Repairs and Renewals, 1 125. Royalties. 6371.20 Insurance on Machinery, etc., 203.25 Taxes on Machinery, Materials, etc., 216.52 Selling Expenses: Salesmen's Salaries, Salesmen's Expenses, Shipping Department Wages, Shipping Department Supplies, Insurance on Finished Goods, Taxes on Finished Goods, Freight Outward, 22616.36 General and Administrative Expenses: Office Salaries, 6416.67 Office Help, 3542.85 Office Supplies, 185.40 Insurance on Plant, 126. Taxes, Corporation, 1 19.37 10390.29 Accounts Receivable In your sales' ledger construct accounts with each of the following concerns, allowing one-fourth page to each account, and enter on the proper side the date, terms, and amount due from each. See that the total of these debit footings equals the amount of Accounts Receivable, as shown in your general ledger. The accounts receivable arc as follows : Hub Shoe Co., Boston, Nov. 25, net 30, 2 10, 2786.45 Dodge & Rice, Boston, Aug. 4, 4 mos., 4210. Pond & Eaton, Boston, Nov. 3, net 30, 1782.45 Providence Boot \- Shoe Co., Providence, R. I., Oct. 5, net 60, 1242.50 E. F. Woods & Co., Providence, R. I., Nov. 24, net 30, 2 10, 1446. Sam Stone & Co., Danbury, Conn., Nov. 20, net 30, 2 10, 798-50 Geo. H. Deane & Co., Hartford, Conn., Nov. 28, net 30, 2/10, 1342-75 New Haven Trading Co.. New Haven, Conn., Nov. 27, 2/10, 2836.70 E. M. Lyons & Co., New Haven, Conn., Oct. 30, net 30, 628.50 Bay State Shoe Co., Worcester, Mass., Nov. 25, 3 15, 3245.50 MAN1.FACTUR1.\G 289 Marsh, Fieldiiij,' Co., Chicago, Nov. lo, 2 30, 4697.50 Quaker Shoe Co., Phihidelphia, Nov. 15, 3 '30, 6255.75 Hamilton, l^rown Shoe Co., St. Louis, Mo., Oct. 5, .sight draft 60 ds., 4875.20 Pittsburg Furnishing Co., Pittsburg, Pa., Nov. 20, 215, 4219.70 Rich, Lantz & Harris, Cleveland, O., Sept. 14, 90 ds. net, 3628.97 Unp.\td Vouchers — Accounts Payable In your envelope marked "Voucher Jacket File" you will find invoices from other persons which make up Vouchers Payable, as shown by the credit side of Accounts Payable account in the general ledger. Remove these invoices from your envelope and prepare a voucher jacket for each invoice, according to the instructions given below. (See form of voucher jacket and back of same on page 275, and read again what is said on page 274 regarding the voucher jacket. No purchase ledger will be used in this work, as the voucher register takes the place of that book. No. 2780. — Invoice, J. Russell & Co. Number the voucher jacket, but do not date it. You will be instructed to do that later. Next write the name and address of the creditor, date of the invoice (in the left-hand date column), and on the same line write the word Invoice, the terms, and the amount. Attest the correctness of the record on the jacket bv writing your name on the line over the word "Bookkeeper," and have your teacher, or whoever he may designate, sign as manager. An analysis of the invoice shows that it represents a purchase of machinery and equip- ment, amounting to S283.57, of tools, $ 3-75, of materials for use on addition to factory, $6.88. These and the other facts should be recorded on the back of the voucher jacket. Write the number, and the amount of the voucher, and the name of the creditor on the top of the form, on the back of the jacket. Next write Machinery and Equipment, $283.57, on the first blank line under Sundries, Tools, $3.75, on the next line, and Real Estate, $6.88 on the following line, and November (current year) on the top line. You have now completed the work on the voucher jacket for the present, and made the distribution of the invoice. Pin the invoice face upward on the front of the voucher jacket, fold the same and place it in }'our \'oucher Jacket File. No entries will be made in the voucher register for the unpaid vouchers on hand at this time, as they represent the business of the preceding month, at which time proper records were made on the books. No. 2781. — Invoice, Bracket Mfg. Co. This shows a purchase of production materials. Prepare a voucher jacket in general accordance with the instructions given above. No. 2782. — Invoice, Parry Bros. & Co. This represents a purchase of materials to be used in enlarging the factory. No. 2783. —Invoice, Cutler & Porter. Proceed as in No. 2781. No. 2784. — Bill, Frank C. Perkins. Charge the full amount to Machinery and Equip- ment under Sundries. Nos. 2785, 2786, 2787, 2788. — Invoices, Collieson Bros. ; Cutler & Porter; H. M. Scripple & Co. ; Collieson Bros. When in doubt about the distribution of an invoice, see Distribution, page 285. No. 2789. — Invoice National Brass and Iron Works. Charge to Office Equipment under Sundries. 200 MODHkN II.LfSTRATlVE l;i >i iK K H riNT. In order to take advantage of discounts allowed on purciiases. or to pay invoices promptly when due. it is customary to either file tlie invoices under proper dates, usually a few days before maturity, in •• tickler files." or to record them under proper dates in a "tickler" book. A tickler file has numerous comp.irtments, numbered to correspond to the days of a month, with the name of the month on the outside. The tickler is usually an ordinary record book, the months and days being written in it as required. Notes Receivable In your envelope marked " Cash Drawer" you will find the following notes which consti- tute the Notes Receivable balance in the general ledger: Nos. 233. 234, 235, 236. Take these notes from your envelo|)e and enter thera in your bill book, after which return them to the envelope. See that the footing of the amount column in your bill book agrees with the balance of the Notes Receivable account in the general ledger. Notes Pavable The following notes are outstanding and constitute the Notes Payable balance in the general ledger. Enter the notes in your bill book, and see that the total agrees with the balance of the Notes Payable account. No. 174. — Date, Nov. i, in favor of E. J. Leonard, for mone\- borrowed, payable at your office on demand, with interest, at 69,', S5000. No. 175. — Date, Nov. 10, in favor of the Commercial Bank, for money borrowed, jiayable at the Commercial Bank in 30 days, S3 500. No. 176. — Date, Nov. 20, in favor of the Commercial Bank, for money borrowed, payable at the Commercial liank in 30 days, S5000. No. A I. -Enter the balance of cash, which is the balance in the bank, in your cash book and on the stub of your check book, extending the amount into the net receipts column in the cash book and on the left stub of the check book. You will keep the debit of the account with the bank on the left stub of your check book in this work, and the credit of the account on the right stub. TRANSACTIONS December 1, 19 — No. 1. — Check. Sam Stone & Co. Payment of invoice of November 20. linter the check in the cash book crediting Sam Sfonc & Co. for the full amount of the in- voice in the Account Receivable column, and debiting Discount on Sales in the special column for the amount of the discount. E.xtend the amount of the check into the Net Receipts column. Ail payments bv customers who discount their bills will be handled in this manner in the following transactions; and in every case, the net or actual amount of cash received, will be entered in the Net Receipts column, as well as in the other column to which it belongs. Some of tlie larger business concerns divide the general cash book into two books, one of which is called tlie "credit cash book," and is used for a record of the receipts: the other is called the "debit cash book," and is used for a record of the payments. The general cash book or books are kept by the cashier or trea.surer. but the posting is done by the bookkeepers. This is called an "internal check," and provides for the checking of the work of one employee by another, the object being to prevent fraud or peculations on the part of those who handle the cash of the concern. Post daily all accounts receivable entries, for reasons heretofore explained. MANUFACTURING 201 No. 2. — Regular weekly pay roll. This i.s made up by the superintendent of the factory, and by the secretary, who has charge of the office force, as indicated by the signatures. Prepare a voucher jacket No. 2790, payable to R. II. Merriam. Dale it both at top and side with the current date, and write Pay Roll in the explanation column, and the projier amount in the outside money column. Attest the jacket and have it api^roved by the man- ager. It is unnecessary to fill out the receipt form at the bottom of the jacket. Acting as treasurer make a voucher check (see form on page 274) to the order of the secretary for the amount of the voucher. Number the check, and write on it the number of the voucher in the proper place, and enter it in the cash book. (See illustration of cash book on page 279.) Be sure to write the number of the check and the number of the voucher in their respective columns in the cash book, and to extend the amount into both the Vouchers Payable debit column and the Net Disbursements column. Check the eutr)-. Place the check in " Vouchers for Others." Fill out the back of the jacket by writing the number, amount, name of payee, when paid, and number of the check. Charge $^82S to Direct Labor, $83 to Indirect Labor, and S 72 to Salaries, under General and Administrative Expenses. Next enter the voucher jacket in the voucher register as shown in the illustration on pages 276 and 277, extending the total amount into Vouchers Payable Cr. column, and the amount of the separate items into the proper distribution columns. Write G. A. Sal., $72 in the Particulars column, which will assist you in analyzing the miscellaneous G. and A. Exp. column at the end of the month. Wiite the date, and the number of the check, in the proper Paid columns. Ne.xt write the current month and year at the top of the back of the voucher jacket, to show that it has been recorded. Pin the pay roll to the jacket, fold the same, and file as a paid voucher in the Voucher Jacket file. Fo. 3. — Invoice, J. H. Steele & Co. For office supplies. Prepare a voucher jacket. Number the jacket with next consecutive nimiber, and as treasurer draw a voucher check for the amount of the bill, and enter it in the cash book. Write the name of the creditor in the Name column, Invoice 12/1 net, in the Particulars column, the number of the check, and the number of the voucher, in their respective columns, and the amount in the Vouchers Payable column and in the Net Disbursements column. Check the entry, since it will not be posted, as you are not keeping a purchase ledger. All payments to creditors whose in- voices we discount will be handled in this way ; in every case the actual amount paid will be entered in Net Disbursements coJumn, as well as in the other column to which it belongs. Make the proper record on the back of the jacket, charging the purchase to Office Supplies on one of the blank lines under General and Administrative Expenses. Record the jacket in the Voucher Register, writing lire. 12/1 {Off. Sup.) in the Particulars column, and the amount in the Miscellaneous column, under General and Administrative Expenses. This column will be analyzed at the end of the month, and the explanations in the Particulars column will identify the items. Complete the record on the jacket, after which proceed with it as heretofore instructed. No. 4. — Duplicate charge bill. Dodge & Rice. Enter in the sales journal, numbering the entry and the bill, 8975 and charge direct to the account in the sales ledger from the bill. Number the bills consecutively. F. 0. B. — The abbreviation F. O. B. or f. o. b. means free on board ; that is, the goods are to be delivered either free to the transportation company at the place of sliipment, or free of cartage and transportation charges to the place of destination, depending upon the agreement of the parties or the custom in the trade, and tliis is indicated by the word or words following the abbreviation. 2ft2 MOUKUN ii.ixsTK.vnvi: huokkeeping In the above cise the goods are to be (iclivereil free at IJoston : that is. free to the place of destination, but the delivery does not include cart.ige from tlie freight house or dock of the transportation company to the ware- house or store of the purchaser. On f. o. b. receiving point shipments, the transportation charges are usually prepaid by tlie sliipper. but if not so paid, as in the above case, they are paid by the customer, who deducts the charges from the invoice at the time of settlement, sending the freight expense bill with his remittance. No. 5. — Pay voucher No. 2780. Take voucher jacket No. 2780 from the Voucher Jacket File, detach it from the invoice, date it at the top (current date), deduct the discount, and draw a check for the net amount. Fill out the receipt blank, excepting the date and signature, and attach the check to the jacket. Complete the record on the back of the jacket, and make the proper record in the cash book. Remember to check the entry in the cash book. Place the voucher in Vouchers for Others, for the present. No. 6. — Draw a check, favor of the secretary, R. H. Merriani, for S 50 for petty cash uses. Charge Inif'irst Fund in the general cash book, and extend the amount into the Net Disbursements column. Remember to write the number of the check in the Check Num- ber column, and the date in the Date column. (.See explanation of Imprest Fund, page 277, and illustration of entry on page 279.) You will assume that Mr. Merriam has had the check cashed and has turned in the cur- rency. You will not be required to handle the petty cash in this work, but will make the records in the petty cash book. Enter the amount in the left-hand money column of the Petty Cash Book, writing for explanation, Rccd front Iiitprcst Fund. The petty cash book is usually kept by the cashier's assistant, but it may be kcjjt by another, and there may be more than one such book in use. Of course, the person in charge of the petty cash book would handle tlie cash and make the payments, which should be supported by proper vouchers. December 3 Nos. 7, 8. — Duplicate charge bills, Hamilton, Brown Shoe Co. ; E. E. Woods & Co. (See No. 4.) Remember to post all charge sales direct from the bills, as soon as the bills are received and entered in the sales journal, and to post daily all credits to customers, so that the ac- counts will show tiieir true current condition. Also to keep the cash book posted to date. No. 9. — .Memorandum, J. VV. Evans, salary and expenses for November. Prepare a voucher jacket, draw a check, and make the proper entry in the cash book, extending the amount into the Net Disbursements column. Check the entry. Under Selling Expenses on back of the jacket, charge $350 to Salesmen's Salaries and $241.2^ to Salesmen's Expenses. Record the voucher in the Voucher Register, writing A^cv. Sn/. S Jjo, £.i-/>. $ 24/. 2-, in the Particulars column, extending the full amount under Selling Expenses. Remember to enter the date and number of the check in the Date column when a voucher is paid, and complete and file the voucher jacket in Vouchers Jacket File. No. 10. — Memorandum, J. L. Marcy, salary and expenses for November. Proceed as in No. 9. The above expense bills are properly chargeable to the November business, but excepting for cost keeping, and other statistical purposes, there is no objection to charging them to the December business, since they will in either case be included in the expenses of the current fiscal pericml. Some accountants do not dose tiie voucher register until all bills for the month have been recorded. No. 11. — Invoice, Frank C. Perkins. Charge to Machinery and I-xiuipment. MANUFACTURING 293 Nos. 12, 13. — Bill, City Gas and Electric Co. Invoice, E. A. Conway Coal Co. Charge each to Manufacturing E.xpenses in Miscellaneous column and place the initials F. L. &■ P. in the Particulars column. No. 14. Invoice, Western Leather Co. No. 15. — Pay vouchers Nos. 2795, 2796, 2781, 27S5. Deduct the discount from the gas- bill. No. 16. — Petty cash memorandum. Enter each item in your petty cash book, extending the amount into the right-hand money column. Make proper explanation of each entry. (See No. 6.) No. 17. — Check, Pond & Eaton. See their account in your ledger and enter accordingly. No. 18. — Deposit all checks on hand, and indorse the note of the Providence Boot & Shoe Co. and leave it at the bank for collection. Make the proper record in your bill book. Collection charges, S2.50. Some banks request that items for collection be accompanied by a list, and left 10 days before maturity. Before making a deposit, the cash should be proved. If your cash does not prove at any time and vou are unable to find the cause of the " over,"' or •■ short," adjust the same, as heretofore explained. Make the entry in detail in the check book for the deposit, but do not enter the collection in the cash book. Instead, prepare a " Collection and Exchange " slip, and enter on it the amoujit of the collection, together with the date. Place the slip in the cash drawer. Enter all collection charges for the month on the slip, and add the amount to the disbursements when proving your cash during the month. Enter the total in cash book at end of month. By keeping a Collection and E.xchange slip, it is unnecessary to enter collection and exchange items in the cash book until the end of the month, when tlie total of the slip will be entered as one item, at which time tlie slip will be filed as a voucher for auditing purposes. December 4 No. 19. — Invoice, J. Russell & Co. Pay this bill. Charge the waste to Factory Supplies. No. 20. — Duplicate charge bill, Marsh, Fielding Co. Freight Prepaid. — The prepayment of transportation charges is usually a matter of agreement between purchaser and seller, but it is sometimes a custom in the trade, or a necessity, as in cases where there are no freight or express agents at the delivery points. Freight charges may be prepaid as the result of agreement or custom, or as an accommodation to the purchaser. In the first case, they are charged to Selling Expenses, usually through a special Freight Paid-Expense account, or a general Freight Outward account, which is analyzed at the end of each month. In the latter case they are charged to the customer. The prepayment of transportation, and the disposition to be made of the charges, are indicated on the sliip- ping order; as. " Freight Paid-Expense," •• Express Paid-Expense," or •• Freight Paid and Charge," or " E.\press Paid and Charge," or by other definite similar expressions. December 5 No. 21. — Check, Providence Boot & Shoe Co. See their account and apply tlie pav- ment accordingly. No. 22. — The bank notifies you that the sight draft on the Hamilton, Brown ShoeCo., St. Louis, for S4875.20, which was drawn Nov. 27, has been paid, and the amount placed to your credit, less collection, S5.25. Make the proper entry in the cash book for the sight draft, extending the amount into the Accounts Receivable and Net Cash Received columns, and in the check book for the credit ; also on the Collection and Exchange slip for the collection. Show in the check book the total amount of the draft, and the collection, as well as the net amount, so that the entry can be easily audited. 294 MODERN ILLUSTRATIVE ISi lOK KEEPING Nos. 23, 24. — Duplicate charge bill, Dodge & Rice. Pay vouchers Xos. 2788, 2789. No. 25. — Invoice, Charles Koss & Bro. Charge Shipping Supplies, in Miscellaneous column under Selling Expenses, and explain in Particulars column. No. 26. — Statement, United Shoe Machinery Co. Pay the amount. Charge Royalties, under Manufacturing Expenses. The Royalty System. — .Most of the machines used in the " Bottoming Room." instead of being bouglit outright, ,is are most of tlie machines in the " Fitting Room." are lea.sed from the manul'acturers. who charge a certain sum per shoe for the use of each machine. This charge is called a -royalty." and ranges from ; of a cent to 6 cents on a shoe. Manufacturers of leased machines keep them in repair, and. of course, bear any loss by depreciation. By the royalty system, the shoe manufacturer has the use of the leased m.-ichines without having any of his capital invested in them, and has no charges to pay for repairs, nor allowances to make lor depreciation. Each leased machine has a device attached to it for registering the numljer of shoes on wliich the machine has operated, and from this register the royalty record of the machine is made. No. 27. — Invoice, A. D. Jackson Saddlery Co. Pay this invoice less discount. December 6 No. 28. — Invoice, Parry Bros. & Co. This material is for use in enlarging the factory. Nos. 29. 30. — Invoice, Cutler & Porter. Duplicate charge bill, George H. Deane & Co. No. 31. -Cash sale, J. T. Ferris. Enter in the cash book only, extending the amount into the Cash Sales and Net Receipts columns. Check the entry. (See page 27S.) No. 32. — Petty cash memorandum. (See No. 16.) December 7 No. 33. — Invoice, F. A. Walsh & Co. (Be careful about the distribution.) Nos. 34, 35. — Duplicate charge bills. Rich, Lantz & Harris; New Haven Trading Co. The freight charges on No. 34 were prepaid and charged to the customer, as shown liy the duplicate charge bill. luUer only the amount of the sale in the Item column of the sales journal, and on the ne.xt line write Freight oittzcunf, on above, and place the amount, 5.36, before the Item column. Carry the freight outward items along until the end of the month, then charge the amount to P"reight Outward account. Wlien the freight charges are prepaid at tlie time tlie goods are delivered to the transportation company, the receipt is acknowledged on the bill of lading, and memorandum copy, by the agent or cashier of the com- pany. When the shipper has an account with the company, he stamps " To be Prepaid and diarized to {shipper) " on the bill of lading, to the right of the description of articles, etc. (See form of bill of lading. Appendi.x II, for places for the stamp, and the receipt, or the charge notice.) In this business The City Carting Company attends to all freight and carting matters, and renders monthly statements. The signed and receipted bills of lading, and memo- randum copies, are turned in by them to the shipping department daily. No. 36. — Letter, check, and note,. Dodge & Rice. December 8 No. 37. — Check, The Hub Shoe Co. See their account. No. 38. — Draw on P2. M. Lyons & Co. at sight, for invoice of Oct. 30, and leave the draft at the bank for collection. Deposit all cash (currency and checks) on hand. Bank charges S5.50 for collection. Write or dictate a letter to E. M. Lyons & Co., notifying them that you have drawn on them and requesting that they honor the draft. MANUFACTURING 295 No. 39. — Pay roll. No. 40. — Invoice, Diebold Safe Co. Pay the invoice. Nos. 41, 42. — Duplicate charge bill, E. F. Woods & Co. Cash sale (check), \Vm. M. Lee & Co. Nos. 43. 44. — Checks, Pittsburgh Furnishing Co.; New Haven Trading Co. Be sure to refer to the account in the ledger before entering a remittance. December io Nos. 45, 46. — Invoices, Western Leather Co. ; Charles Koss & Bro. No. 47. — Check, Geo. H. Deane & Co. Nos. 48. 49. — Deposit all checks on hand; collection charges, SS.25. The bank notifies you that your note in their favor for S3SOO, due to-day, has been charged to your account. No. 50. — Pay vouchers Nos. 2794, 27S3, 2782, 2797. December i i Nos. 51, 52. — Invoice, Collieson Bros. Duplicate charge bill. Bay State Shoe Co. December 12 Nos. 53, 54. — Invoice, O'Neil Oil & Paint Co. Cash sale, Jones & Allis. No. 55. — Check, Dodge & Rice. Payment, bill Dec. i, less freight charges. Treat the deduction from the bill as a discount on sales. Other ways of recording a deduction of this kind would l)e to charge it to Freight Outwartl. or to .-Mluwances to Customers through the journal. By any of these ways, however, the proper deduction t'rom revenue would be shown on the books. No. 56. — Note, Providence Boot & Shoe Co. and protest, petty cash memo. Charge the protest fees to the Providence Boot & Shoe Co., in the petty cash book. Post the entry. No entry is required for the note since it was merely left for collection. Make proper notation in the bill book. Write or dictate a letter to the Providence Boot & Shoe Co. requesting an explanation for allowing their note to go to protest. No. 57. — Deposit all cash on hand. Collection charge, $3.90. Leave the note of Dodge & Rice, due on the 14th inst., at the bank for collection. No. 58. — Pay vouchers Nos. 2784, 2799, 2810. December 13 No. 59. — Invoice, A. D. Jackson Saddlery Co. Pay the invoice. No. 60. — Duplicate charge bill, Hamilton, Brown Shoe Co. The terms are special. No. 61. — Letter, check, and note. Bay State Shoe Co. Enter the full amount of the discount in the cash book. December 14 No. 62. — Cash sale, Chas. D. Pomeroy. No. 63. — Pay vouchers Nos. 2S02, 2803. No. 64. — Check, The Hub Shoe Co. Payment of note as per bill book. Take the note from your Cash Drawer, write " Paid " across the face, and place it in Vouchers for Others. 296 MODERN II.LL'STRATIVE liOOKKEEPING No. 65. — Deposit all cash on hand, and leave at the bank for collection E. F. Woods & Co.'s note, due 20th. Collection charge, S4. Have the Quaker Shoe Co.'s note, due Jan. 15, discounted, and the proceeds placed to your credit. Enter the face of the note in the Accounts Receivable Cr. column, the amount of the dis- count in the Discount on Sales column, and the proceeds in the Net Cash Receipts column, with proper explanations to support the records. Place a cross mark in the folio column to indicate the special amount. (See page 278.) In this work, discount on notes will be treated as interest, and will be charged or credited to Interest account. The amount of discount in each case will be entered in the Discount on Sales column of the cash book on the same line with the note, and a cross mark will be placed in the folio column. The Discount columns will be analyzed at the end of the month, asd the proper amounts placed as footings of the columns. The Accounts Receivable column will be analyzed in tlie same way. (.See cash book, page 27S.) This manner of treating discount on notes permits of the cash book showing, in the Net Receipts and Net Disbursemenjls columns, the actual cash received and disbursed, and, therefore, admits of rapid and easy auditing. December 15 Nos. 66, 67, 68. — Invoice, 15. S. Green & Co., Pay roll. Duplicate charge bill, Sam Stone & Co. Nos. 69, 70, 71, 72. — Checks, Rich, Lantz & Harris; E. F. Woods & Co.; Marsh, I''ielclin<^ Co. ; Hamilton, Hrown Shoe Co. No. 73. — Pay voucher No. 2804. No. 74. — Pettv cash memorandum. Your draft on E. M. Lyons & Co. was protested for nonpayment. (Sec No. 56.) December 17 Nos. 75, 76, 77. — Invoice, H. ]\I. Sci]ile & Co. (Machinery and Equipment.) Dupli- cate charge bill. Pond & Eaton. Check, Dodge & Rice. No. 78. — Letter and check, E. M. Lyons & Co. No. 78 fl. — Deposit all cash on hand; collection charges, S 13.50. No. 79. — Letter, Providence Boot & Shoe Co. Acting on instructions from the man- ager, you will write or dictate a letter to the Providence Boot & Shoe Co., expressing regret at their failure, and accepting their offer of 60 cents on a dollar, for your book" claim and their note protested on the 12th inst. December 18 Nos. 80, 81. — Duplicate charge bill, E. B. Lewis & Co. Check, Geo. H. Deane & Co. No. 82. — Pay vouchers Nos. 2807, 2808. December 19 Nos. 83, 84. — Invoice, J. H. Steele & Co. Invoice, F. A. Walsh & Co. Nos. 85, 86, 87. — Duplicate charge bill, Pittsburgh Furnishing Co. Check, Quaker Shoe Co. Petty cash memorandum. December 20 Nos. 88. 89, 90. — Invoice, Boston Last Co. Cash sale, R. S. Sherwood & Co. Duplicate charge bill, Bay State Shoe Co. No. 91. — Letter and check from New Haven Trading Co. See their account in the ledger for the terms. Give them credit for S 1530. MANUFACTURING 297 The practice in cases of this kind varies. Some concerns divide the remittance Ijy ioo%. less the rate of discount allowed by the terms, and credit the customer for the amount represented by the quotient (as, $1500 -4- .98 = $ 1530.61) ; while others credit the customer for the amount of the remittance, plus the discount on the same, as in this case. The latter method, owing to its simplicity, is the one commonly followed in many localities. No. 92. — Deposit all cash on hand. Collection charges, $ 8.90. No. 93. — Your note due to-day, favor of your bank, has been charged to your account. December 21 Nos. 94, 95, 96. — Invoice, Western Leather Co. Duplicate charge bill. The Hub Shoe Co. Check, E. F. Woods & Co. December 22 Nos. 97, 98. — Pay roll. Cash sale, Hudson & Foster. December 24 Nos. 99, 100. — Invoice, Chas. Koss & Bro. Duplicate charge bill, Empire Shoe Co. No. 101. — Check, Providence Boot & Shoe Co. In full payment of the bill of Oct. 5, and their note protested of Dec. 12. The check is for 60 % of these two amounts, as per agreement. Enter in the cash book, Providence Boot & SJioc Co. for 60 ''/ of bill, and Notes Receiva- ble for 60 9/ of note. You have lost 40 ';,' of the note, and 40 ')',• of the bill of Oct. 5 ; also the protest fees. Losses from bad debts are provided for by a Reserve for Bad Debts account, which is credited at the end of each fiscal period with a certain proportion of the profits of the business, and charged with such losses as may occur during the period. Therefore, in your journal, frame an entry, Reserve for Bad Debts, for the total loss, and Providence Boot & Shoe Co., for the loss on the book account, including the protest fees, and Bills Receivable, for the loss on the note. No. 102. — Pay vouchers Nos. 2786, 2787, and 2809. No. 103. — Deposit all cash on hand. Collection, $2.25. The note of E. F. Woods & Co., which was left for collection, has been i)aid, and the amount placed to your credit. December 26 Nos. 104, 105. — Invoice, J. Russell & Co. The nails are for use in enlarging the factory ; the belting is an addition to the equipment. Pay the bill. Invoice, Collieson Bros. Nos. 106, 107, 108. — Duplicate charge bills, The John Warner Co. ; Quaker Shoe Co. ; Pittsburgh Furnishing Co. Nos. 109, 110, 111. —Checks, E. F. Woods & Co.; Sam Stone & Co.; Hamilton, Brown Co. December 27 Nos, 112, 113, 114. — Invoice, Cutler & Porter. Duplicate charge bill, Sam Stone & Co. Check, Rich, Lantz & Harris. Nos. 115, 116. — Check, New Haven Trading Co. In payment of balance of invoice Dec. 7, less special discount, i '/,_ . Pay voucher No. 2816. December 28 Nos. 117, 117 a. — Cash sale, B. F. Howe & Co. Memo, of goods returned, The Hub Shoe Co. 20S MiiliKKN U.l.lMKAIlVl; !;< >( iKKEEriNG Nos. 118, 119. — Pay voucher No. 2815. Deposit all cash on hand. Collection charges, S 8. December 29 Nos. 120, 121, 122. — Pay roll. Duplicate charge bills, E. M. Lyons & Co. ; Rich, Lantz & Harris. No. 123. — Check, Bay Stata Shoe Co. In payment of invoice, Dec 1 1. Refer to their account, and see if the remittance is correct. There are two methods of treating overpayment. One is to return the amount of the overpayment by check, or in currency if the amount is small, and the other is to credit the customer's account for the amount of the overpayment. You will follow the second method in this case. Frame an entry in the cash book for the correct net amount of the invoice, and for the discount, and another entry for the overpayment, with proper explanation. Notify the cus- tomer (if the error, and state how j'ou have treated it. Nos. 124, 125. — Pay voucher No. 2818. Petty cash memo. December 31 Nos. 126, 127. 128. — Duplicate charge bill. Marsh, P'ielding Co. Cash sale, W. P. Hoyt & Co. I'av \-ouciier No. 2820. No. 129. — Bill, City Carting Co. Pay this bill. Charge Freight Inward, S 243.52. Freight Oittiuard, $38.48. Nos. 130, 131, 132. — Memo, goods returned. Empire Shoe Co. Bill, Mead, Mason & Co., for adilition to the factory. Pay this bill. Deposit all cash on hand. Collection, S2.75. No. 133. — The salaries of the officers and general manager for the month are due. Pre- pare voucher jackets, and draw the checks. Charge one-third of the general manager's salary to Mfg. I^.xpenses. The transactions for the month, and also for the fiscal period, are now completed, but all of the records have not been made. It usually takes a few days in which to get the reports from the different departments, showing cost of goods manufactured during the month, and of goods in process, the value of finished goods, materials and factory supplies on hand, the amount of wages and salaries accrued, inventories of office equipment and office supplies, and the salary and expense accounts of the traveling salesmen. In the meantime, the transactions of the next month would be taking place, and be recorded in the books of original entry. In this work, only the business of the fiscal period ending December 31 will be considered, anti therefore no records will be made for the transactions of the next period. You will now pencil foot your petty cash book, and analyze the entries, preparatory to transferring them to the voucher register. Rule a sheet of analysis paper with four col- unnis, which you will head, Aeets. Rev., Mfg. Exp., Sell. Exp., Gen. & Athn. Exp., respec- tively, and enter in these columns the items which appear in the petty cash book, including the personal accounts items. Be careful about the classification of the items, and when in doubt, refer to Distribution, page 285. Next, rule off and foot the analysis sheet, after which enter the titles of the accounts and the footings of the columns in the explanation column of the petty cash book, writing Siniiiihvj over the entry. Single rule and foot the summary to show that it agrees with MANUFACTURING 299 the pencil footing of the disbursements column. Next balance and rule off the petty cash book, and on a slip of paper make a memorandum of the summary under the current date. Pin the memorandum to the petty cash vouchers, and prepare a voucher jacket, usin"', for explanation. Petty cask disbursements, Decembei; ig — , for total amount, and distributing according to the summary. Enter the voucher jacket in the voucher register as follows : After writing the number and the date in the proper columns, write in the In Favor of column Lnprcst Fund, in the Particulars column, Dec. disbursements, in the Vouchers Payable Cr. column ( Total amount), in the Account column, Accojints Receivable {amount), and check the entry, as the items com- prising the amount have already been posted, and the amount will be posted in the footing of the special column. Extend the other distribution items into their respective columns, and write the current date in the Paid date column, and Imp. Fd. in the check number column. The Imprest Fund has been charged, through the general cash book, for the check drawn for petty cash expenses, and it should now be credited for the petty cash disburse- ments. The Accounts Payable account will be credited through the voucher register for the amount of the petty cash disbursements, which are not Accounts Payable items, hence an entry must be made to adjust the account. You will therefore frame a journal entry deb- iting Accounts Payable and crediting Imprest Fund for the amount of the petty cash disburse- ments for the month, with the proper explanation. Post the entry. Nos. 134, 135. — Memorandums, J. W. Evans, J. C. Marcy. Prepare voucher jackets, and enter. These expenses are to be charged to the December business, but as the reports are received after the close of the month, the vouchers will be paid in the next fiscal period. Pencil foot the voucher register and prove the footing. The amount of the Voucher Payable Cr. column should agree with the total of all the other columns. Next rule and ink foot the register. Rule off and foot the sales journal and post the footings (see No. 34). Enter in the cash book the amount of collection and exchange, from your Collection and Exchange slip. Foot separately the regular and special items in the Accounts Receivable and Discount on Sales columns of the cash book, and write the totals and titles, as shown in the form on page 278. Balance and rule off the cash book, and post the footings. No. 136. — Statement, Commercial Bank. Reconcile the bank balance, and list the out- standing checks on the stub of the check book. In business, the canceled checks would of course accompany the statement. Call at the teacher's desk for your paid jackets and canceled checks, if they have not been returned to you. Post the voucher register in accordance with the following instructions : First, post the footings of the Vouchers Payable Cr. column to the credit of Accounts Payable, and place a check mark, with the folio of the account over it, opposite the amount. Next post the unchecked Sundry Debits entries. (The footing of the General column is not posted nor checked.) Then post the footings of the remaining columns to the debit of their respective accounts, and check the amounts. You will now analyze the Miscellaneous columns of the voucher register, and enter the results in the analysis book. Prepare analysis sheets for the three main divisions of ex- penses. Rule as many money columns on each sheet as there are subsidiary titles in your 800 MODERN ILLUSTRATIVE B(X)KKEEriNG analysis book, and leave space for a few additional columns. (See your analysis book.) Head the columns, abbreviating the titles. Next analyze the items in the Miscellaneous Manufacturing Expenses column in the voucher register, placing the amounts in the proper columns on the Manufacturing Expenses analysis sheet. Refer to the Particulars column for assistance in identifying the items, and to the petty cash book or the analysis sheet of the same. Rule and head additional columns on the analysis sheets as needed. Analyze the Selling lixpenses column and the General and Administrative Expenses column, as instructed above. Foot and prove the analysis sheets. The total of the footings of each sheet should agree with the footing of the corresponding voucher register column. Enter the footings of the various columns of the analysis sheets in the second or Dec. column of the analysis book, opposite their respective titles, writing new titles if necessarv. Pencil foot each section of the analysis book, and compare with the footing in the voucher register. If correct, rule off and ink foot the sections. No. 137. — In accordance with the established policy of the company, you will charge off depreciation as follows : On machinery and equipment, and tools, 1 2.1 '/,' of book value ; on lasts and i^atterns, 25 /,' ; and on office equijiment, lO',,- Find these amounts from the accounts, and frame a journal entry, charging Reserve for Depreciation for the total dei)reciation, and crediting the other accounts for their respective amounts, with proper explanation. Post the entry and write Depreciation for explanation of the items in the ledger. It is a common practice among the large manufacturing concerns to keep separate Reserve for Depreciation accounts, as Reserve for Depreciation of .Machinery and Equipment. Reserve for Depreciation of Tools, Re.scrve for Depreciation of Buildings, etc. Next charge off 10'/, of the book value of good will, debiting Surplus. Frame and post the entry, making proper explanation in the account. No. 138. — The wages and salaries accrued, but not due, as reported by the superintendent and the secretary, are as follows: Direct labor, S676.50, indirect factory labor, S 112.50, shipping department wages, 537.50, office help, S24. The royalties accrued, but not due, as shown by the registers on the leased machines, and reported by the superintendent, amount to S312.45. Frame a journal entry charging these accruals to their proper accounts, and crediting Accrual account for the total. Post the entry. Accrual Account. — For the purpose of getting all accrued but not due assets and liabilities on the books at the close of a fiscal period, a nominal account, called .Accrual account, is constmcted. This account is debited. when constructed, for the amount of all accrued assets, and credited iar the accrued liabilities. When the books are re-opened for the next fi.scal period, the accruals are adjusted, at which time Accrual account is credited for accrued a.ssets and debited ior accrued liabilities, which will balance the account. ■ You have outstanding an interest-bearing note. Find the amount of the accrued interest, and frame the proper journal entry. Post the entry. Take off a trial balance of balances of the general ledger, and include the cash balance. Make an abstract of the sales ledger, and see if it is in agreement with the Accounts Receivable account. Make an abstract of \'ouchcrs Payable Cr. from the voucher register, and compare it with the balance of the Accounts Payable account, and with the unpaid vouchers. The following inventories have been reported by the different departments, as per schedules on file : maxl'iactl'ring 301 Inventories, December 31, 19 — Materials per schedule #1 $ 3428.60 Factory Supplies " #3 410.34 Fuel " #6 . 468.10 Goods in Process " #2 6172.15 Shipping Supplies" #5 229.85 Finished Goods " #4 17600. Office Supplies " #7 40.50 Real Estate (at book value) You will now make statements of the business similar to those made for the Wholesale Dry Goods business, e.xcepting as instructed below. Manufacturing, Trading, Profit and Loss Statement. — In a manufacturing concern, the statement showing the activities and profits and losses of the business contains a section which represents the Manufacturing account, called the Manufacturing account section, and is the first section in the statement. (See form on pages 302 and 303.) This account shows, on the debit side, the items, materials on hand at beginning of fiscal period, purchases of materials during the ])eriod, freight inward, labor paid during period, goods in process at beginning of period, manufacturing expenses for the period, factory sup- pUes on hand at beginning of period, purchases of factory supplies during the period, and depreciation of machinery and equipment, of tools, and of lasts and patterns, from the total of which is deducted the total of the items, materials, goods in process, fuel, factory supplies, on hand at the end of the period, and returned purchases. The difference between the totals is the factory cost of the finished goods, which is entered on the credit side, and brought down into the Trading account section. Some accountants place the present inventories on the credit side of the Manufacturing account section, as offsets, instead of deducting them from the debits, as described above. Prepare the Manufacturing account section of your statement, as shown in the form, obtaining the amount of the depreciation items froin your Machinery and Equipment, Tools, and Lasts and Patterns accounts. Foot and rule off the section, and bring down the finished goods item into the Trading account section. Prepare the Trading account section of the statement, and as illustrated on pages 302 and 303. Foot and rule off the section, and bring down the gross trading profit into the first section of the Profit and Loss statement. Prepare the first section of the Profit and Loss account, obtaining the inventory amounts from your schedules, and the amount of the depreciation item from your Office Equipment account. Foot and rule off the section and bring down the net profit on trading into the next section. Prepare the final .section of the statement, reserving $ loooo for depreciation, and 2'/, of the amount of the outstanding Accounts Receivable for bad debts. Credit the balance of the net profit to Surplus. Balance Sheet. — The balance sheet of a business corporation is similar in form to that of a proprietary business, excepting that the assets and liabilities are arranged in the order of fixed and floating, or current. (See form, pages 304 and 305.) 302 MODEK.V ILLUSTR.\T1VE BOOKKEEPING M.\.\UFACTURING, TRADING, AND Tin- Daklixgton Shoe Compaxv. t r .\laterials : Inventory. Jan. i Purchases to Dec. 31 Less Return Purchases Deduct: Inventory. Dec. 31 Cost of Materials u.sed Inventory, Goods in Process Jan. Freight Inward Labor Deduct: Goods in Process Dec. 31 Prime Cost Mfg. E.\pensc.s, per Analysis Book Fuel Less Inventory. Dec. 31 Indirect Labor Factory Supplies : Less Inventory. Dec. 31 Depreciation as under : Machinery and Equipment Tools Lasts and Patterns Finished Goods : Inventory, Jan. i Factory Output, from Mfg. Account Deduct: Inventory. Dec. 31 Factory Cost of Sales Gross Profit on Trading Selling Exjjenses Less Inventory, shipping dcpt. supplies General and Administrative Expenses Depreciation on office equipment Less Inventory, office supplies Interest, debit balance Accrued on notes payable Less accrued on notes receivable Allowances to Customers Discount on Sales Less discount on purchase Collection and Exchange Net Profit OH Trading; Reserve for Dejireciation Reserve for bad debts Surplus 12396 18 153817.62 952-35 152865 165261 14580 27 45 10 1506S1 35 24686 31 371 84 _io9345 285084 I25 75 1 7661 45 267423 30 1 1463 47 4085.75 •675. 2410 1 75 4580 "394-45 2315.70 9078 75 5103.50 545- 8267.25 '39'5 75 41448 72 308872 ; 02 14631.50 308872.02 323503 52 12713 25 310790 27 2474592 - losoyz gS 412863 .25. 327-4; 24418 47 15892.65 35S. 16250.65 536.25 15714 40 135.62 40. 175.62 log. 36 66 26 418 25 S9;2.75 I 7310.53 1642 -y^ ' 296 S8 42556 595'6 102072 18 J9^ 12500 3750 43266 80 59516 80 _i95'6 8 incaiu by cost keeping, as applied to manufacturing and its principal objects. 23. What are the elei-.'.ents of cost ? Using your own ligures. draw a diagram of cost finding, and show tlie percentages. 24. What is .1 "pi odiiction order" ? .-X " material requisition '■ ? A " labor ticket " ? A "pay roll"? 25. How is cost divided, and how are the prime cost amounts found ? 26. What is a '• cost record "' ? A " cost ledger" ? 27. Name si.^ wage systems, and explain the two which are most generally used. 28. What is •• burden." and what does it include .' What otlier names are given to it ? 29. When and how is the cost of burden found ? 50. Name five methods of distributing burden commonly used in connection with cost systems. Explain two of these methods. 31. What is a "production report," and what record is made when one is received ? 32. Wliat account in a manufacturing business corresponds to the Purchaser's account in a mercantile business ? 33. What is meant by '"goods in process," and how is their inventory value found ? 34. Name the departments into which a modern shoe factory is usually organized, and the work done in each department. 35. What materials ;ire used in the manufacture of shoes ? 36. What are '• lasts "^ and " patterns," and what purposes do they serve ? 37. How were shoes formerly produced ? How are tliey produced now ? 38. Explain the production order used in slioe manufacturing, and give some of the details of its use. 39. Name three processes of sewing the uppers to the soles of shoes, and explain each process. 40. What is an Accrual account ? When constructed, for what is it debited ? For what credited ? What entries are made in this account when tlie accruals are adjusted ? 41. When and how are tlie accrual and inventory entries adjusted ? 42. Explain in detail tlie Manufacturing account section of the Manufacturing, Trading, and Profit and Loss Statement, and state what the balance shows, and what item is brought down into the Trading account section. 43. How is the gross profit on trading found in tlie manufacturing business ? How the net profit ? To what account is the net profit or net loss of a manufacturing corporation carried .' 44. Kescribe the usual form and arrangeuTjnt of the balance sheet of a business corporation. 45. Explain in dct.iil how you closed the accounts in the Manufacturing account section of your statement ; in the Trading account section ; and in the Profit and Loss section. 46. Wliat entry should be framed, when a dividend has been declared ? When it is paid in cash ? APPENDIX I • AUDITING Auditing is the examining of the entries in books of accounts, and of the subsidiary and supporting records. Such an examination is called an " audit," and a person who makes it is called an "auditor." The practice of auditing is an established profession. The professional auditor is usually an expert accountant, and many auditors are al.so certified public accountants, who practice under the authority of a certificate granted them by a State Board of Accountancy, or other similar body, and which entitles such accountants to use the abbreviation C. P. A. after their names. Object of an Audit. — The principal object of an audit is the detection of errors and fraud in the records ; that is, to determine whether or not the records are correct and com- plete, and the bookkeeping work has been honestly and efficiently done. Term of Audit. — The space of time covered by an audit is called the " term of audit " ; and this may be any time agreed upon between the auditor and his client; as, six months, one year, five years, etc. The first date of the term of audit is called the " initial date," and the last date, the " terminating date." Kinds of Audits. — Audits are divided, with reference to time when made, into First Audit ; Continuous Audit, usually once a month ; Periodic Audit, usually once a year ; Special Audit, also called an "Inspection," made on behalf of an intending purchaser, a creditor, a retiring partner, or on account of suspected fraud; Final Audit, for the adjust- ment of a partnership, or on the discontinuance of a business. Audits are divided, with reference to different classes of business or activities, into Com- mercial Audits, which include trading, manufacturing, and mining concerns ; Financial Audits, which include banks, insurance companies, public service corporations, building and loan associations, societies, clubs, etc.; and Municipal or Public Audits, which include the accounts of towns, cities, counties, states, and governments. Only commercial audits, as they relate to trading and manufacturing concerns, will be treated in this book. For further information on auditing, the student is referred to the special books on the subject. Duties of an Auditor. — An auditor should critically exainine, or satisfy him.self as to the accuracy of, all entries in the books of account made during the period under audit, inspect all available vouchers, and compare them with the records; verify all assets and liabilities as of the terminating date ; make a report of his audit ; and certify to the accuracy of the balance sheet. Auditor's Working Papers. — The papers which an auditor uses in making an audit are called " working papers." These include trial balances, abstracts, balance sheets, analysis sheets, etc. In addition to these working papers, auditors use a notebook in which they make records of such matters as will assist them in making their report. Kinds of Errors. — In examining entries in books of accounts, there are three kinds of errors, the presence of which the auditor should detect, or the absence of which he should prove. These are intentional errors, tcclinical errors, and errors of principle. 311 312 APPENDIX I Intentional errors are errors made for the purpose of perpetrating or concealing fraud. Technical errors are errors which are made through carelessness, such as posting to the wrong account, mistakes in footing, or carrying footings forward, etc. Errors of principle are of two kinds, viz., those of oniis.sion and tho.se of commission. Errors of omission are: failure to provide proper reserves for depreciation of property- subject to deterioration, or for shrinkage of values ; failure to include in the assets and liabilities amounts accrued but not duo, such as interest, insurance, ta.\es, etc., and pre])aid charges. Errors of commission include mistakes made in framing original entries, such as charging or crediting items to capital accounts which should be placed to revenue or expense accounts, or vice versa. Method of Audit. — The general principles of auditing apply to all kinds of audits, but the particular method of making an audit will depend somewhat upon the kind of audit to be made, the class to which the business to be audited belongs, and to the way the books and accounts are kept. Some auditors check all po.stings in the ledgers, and verify all extensions and footings in the books of original entry. Other auditors use the analysis method of auditing, by which all general ledger accounts arc analyzed on analysis sheets. This method is preferable for certain classes of audits. Preparation for Audit. — Before beginning an audit the auditor should require that all postings be completed, all footings be inked in, all balances be struck, and a trial balance of the general ledger and abstracts of the subsidiary ledgers be taken, as of the termi- nating date. The trial balance and abstracts of the initial date should also be in the hands of the auditor. Vouchers for all payments, and all other available vouchers, should be arranged in proper order. When possible the cash on hand at the close of the terminating date, excepting petty cash, should be de- posited in bank on the succeeding day, and the bank balance should be reconciled .is of the terminating date. Schedules of the inventories of the stock and other property on liand, duly certified, should be ready, as well as a list of notes receivable and payable, and of securities. A list of all overdue accounts should also be prepared. A trading, profit and loss statement, if a trading concern, and a manufacturing, trading, and profit and loss statement, if a manufacturing concern, and a balance sheet, should be prepared. And, finally, a complete list of all books, with the names of the clerks in charge of them should be compiled. Order of Procedure. — The first step to take in making a commercial audit is to prove the -cash balance of the terminating date. Prove Cash Balance. — As a preliminary to this .step the bank book should be left at the bank to be written up, with a request that this be done as soon as possible. If the audit is begun on the following da\-, and all cash on hand, excepting petty cash, has been de|)osited, the check book and ])etty cash book (excepting when an Imprest Fund account is kept) will show the general cash balance to be proved. If the cash has not been de- posited, the currency of the terminating date should be counted and listed, together with any items that may be carried as currency. Ne.xt, the checks on hand should be listed, after having been compared with the entries in the cash book, which entries should, of course, be within the term of audit. The amount of these two lists should be added to the balance in the bank in tiie check book. AUDITING 3] 3 If the audit is begun some time after the terminating date, and the cash was not balanced on that date, tlie cash should be balanced and proved on the beginning day. To this amount all payments since the terminating date should be added, and all receipts deducted to find the terminating balance. After the cash balance and footing of the general cash book have been proved and checked, the petty cash balance should be proved and the currency listed, if no Imprest Fund account is kept, and the footings of the petty cash book proved and checked. A summary of the cash lists is sometimes made to be incorporated in the report. Reconcile Bank Balance. — -The bank balance should be reconciled as soon as the bank book is returned by the bank, and all deposit entries verified. The vouchers should be inspected, both as to amounts and indorsements, and any discrepancies noted. The exist- ence of the checks which appear to be outstanding should be proven, by communicatino- with the payees, unless proper vouchers are on file. Send Statements to Debtors. — Detailed statements of the open accounts in the sales ledger, showing the balances on the initial date, and the charges and credits from that date to the terminating date, with proper explanation of each item, should be sent in self-addressed and stamped envelopes to the debtors, with request to examine the statements and return them promptly to the auditor, with their approval or disapproval, and nature of the same noted thereon. When these statements are returned, they are compared with the accounts, and such accounts as are found to be in agreement are marked Correct. Note should be taken of any errors or omissions, and these should be investigated. Request Statements from Creditors. — Requests should be sent to creditors with whom there are open accounts for complete statements of the client's account covering the te'rn of audit, accompanied by self-addressed and stamped envelopes. When these statements are returned, they are compared with the accounts, and such accounts as are found to be in agreement are marked Correct. Note should be taken of any errors or omissions, and these should be investigated. While the statements are being returned and received, the auditor will be proceeding- with the auditing of the other accounts. Audit Notes Receivable. — The notes receivable on hand should be carefully examined to see that none are fictitious ; and if the auditor has any doubts as to the validity of a note, he should communicate with the apparent maker, and obtain from him a verification of its genuineness or falsity Notes that have been left at the bank for collection should be veri- fied by obtaining a certified list from the bank. The notes and the list should be compared with the schedule and checked, but not stamped, and the footing of the schedule should be checked with the balance of the Notes Receivable account. Notice should be taken of any past due notes which are unsecured, and these should be charged back to the accounts of the makers through adjustment entries in the journal at the conclusion of the audit. Some auditors when so authorized frame and post adjustment entries to correct errors or omissions, as these are detected in the progress of the' audit, while others defer this work until the concluding stage of the audit. Customers' notes which have been discounted and not paid are a contingent liability. A list of these should be made, and note should be taken whether or not a reserve has been provided for contingent liabilities. If any securities, such as stocks, bonds, etc., appear in the assets, these should be care- fully inspected, and compared with the schedule, the footing of which should be verified, and checked with the account or accounts in the ledger. This concludes the preliminary steps usually taken in making an audit. 314 APPENDIX I Audit General Cash Book. — The fccneral cash book should now be audited, and as in- tentional errors are more frequently made in this book than in any other, the auditor should be constantly on the lookout for evidences of fraud while auditing the cash book. As a special precaution against overlooking false cash entries in the accounts, the cash items in the ledger should be checked into the cash book, which is the reverse of the usual check- ing procedure. Note should be taken of items which do not check, cither in the ledger or the cash book, and proper investigation made. Debit Side. — The debit side of the cash book should be audited first. The balance of the initial period should be compared with the cash balance as shown by the initial trial balance, and checked, if found to agree. The cash items on the credit side of the general ledger, including the controlling accounts, should next be checked individually into the cash book, and if there are any available vouchers for the entries, they should be e.xamined and the entries compared with them, after which each voucher should be stamped Audited, to prevent it being used again for this purpose. When the analysis method is used, the accounts in the general ledger would be analyzed on analysis sheets before the auditing, of the cash book is begun, and the cash totals would be checked into the cash book. Auditors usually stamp audited vouchers, excepting securitie.s, notes payable, deed.s, eto.. with a rubber stamp, which contains the word .luditcti, and the name or initials of the auditor. The entries for the items in the Accounts Receivable column of the cash book will re- main unchecked, but the total receipts from customers during the term of audit have been checked tlirough the controlling account, which may be accepted at this time as proof of the accuracy of the items. If any errors exist in these items, they will be found when the state- ments sent to customers are returned. ,' When other special columns are used, such as Mdse. Disct. and Sales, the items in these columns will of course also remain unchecked, but the monthly totals will be checked through the accounts in the general ledger. The footings of ail of the columns on the receipts side of the cash book should be verified for the entire term of audit. Credit Side. — After all the general column entries and the footings of the special columns of the debit side of the general cash book have been checked, the credit side of that book should next l)e audited by checking the debit cash entries in the gener.il ledger, including the controlling accounts, into the general cash book. There should be a voucher in some form, as a returned check, a receipt, or a canceled note, for every entry on this side of the cash book, excepting for the entries representing outstanding checks ; and even for some of these there may be receipts or acknowledgments. All returned checks should be compared with the entries to see if they agree, both in respect to name of payee and amount, and the indorsements should be inspected, after which the checks should be stamped Audited. The outstanding checks should be checked from the reconciliation of bank bal- ance against the entries representing them in the cash book, and the entries proved, when possible, by recei[)tcd invoices or other vouchers. The receipts for currency disbursements should be inspected, compared with the entries, and stamped. The collection and exchange items in the cash book, or on the collection and exchange slips, should be verified through the check book and bank book, and the totals through the general ledger. When slips are used they should be stamped. The totals of the Accounts Payable column in the cash book are checked through the entries in the ledger, and the entries representing tiiese totals are checked through the pur- chase ledger, or the voucher register, when the Voucher System of accounting is used. AUuniNG 315 Audit Petty Cash Book. — The petty cash book should next be audited, and the support- ing vouchers inspected and stamped. Inspect and Stamp. — After both sides of the cash books have been audited, these hooks and the general ledger and the purchase ledger, or voucher register, should be ins|jei'ted for unchecked cash entries. If any e.xist, they should be noted and investigated. When the cash books have been audited, the auditor should stamp or initial each page to show that fact, and this should be done with every book audited. Verify Abstract of Purchase Ledger. — Verify the balances as shown on the abstract of purchase ledger with the accounts in that ledger, or in the voucher register, checking each account found to agree, and then check the footing of the abstract with the balance of the controlling account. Audit Purchase Book. - In auditing the jiurchase book — invoice book (when used as a book of original entry), purchase journal, or voucher register — the footings for the entire term of audit should be verified, and the totals for each month checked with the controlling account. The credit entries in the purchase ledger accounts should be supported by invoices, properly certified, and the debit entries by returned checks, by return book and allowances book, or journal, entries. And the original debit entries should be supported by proper vouchers, which should be examined. The monthly statements from creditors will serve to verify the accuracy of the accounts in the purchase ledger, or of the entries in the voucher register. A more satisfactory method would be to check all entries for purchases, direct from the original invoices, and all credits from the books of original entries. All vouchers should of course be stamped at the time they are compared with the entries. Audit Voucher Register. — The entries in the voucher register are supported by voucher jackets and voucher checks, and these should be compared and checked, and the vouchers stamped. The footings of the columns of the register should be verified and checked against the accounts in the general ledger. The iteins in the Miscellaneous columns should be analyzed and checked against the entries in the analysis book. The footings of the analysis book should be verified and checked against the footings of the proper cohimns in the register. Verify Abstract Sales Ledger. — The next step to take is to verify the abstract of the sales ledger, by comparing the balances as shown thereon, with the accounts in the sales ledger, checking each account found to agree, and then compare the footing of the abstract with the balance of the controlling accoimt checking the two amoimts if they agree, and noting any changes if they do not agree. Audit Sales Books. — Whether sales books or sales journals are kept, the footings for the term of audit should be verified, and the monthly totals comj)ared with the entries in the controlling account. It is not usually practicable or desirable to verify the extensions or footings of the individual charges in the sales book, as it may be assumed that these were verified before the bills were sent out. Neither is it usually practicable to check the indi- vidual charges to the personal accounts in the sales ledger. The balances of these accounts should be checked from the statements sent to customers, when they are returned. If any are not returned, the accounts which they represent should of course be checked, but every effort should be made to have the statements returned. Audit Return Books. — All entries in the return books, both purcha.se and sales, should be examined with the vouchers or supporting records, and checked against the entries in the :;it; APPKN'uix I subsidiary ledgers. The footings should be verified and checked with the entries in the controlling accounts. Audit Journal. — Special care should be taken in auditing the journal, as it is to this book that resort is often made to falsify the records. As now generally used, the journal contains comparatively few entries, and these should be authenticated and checked against the entries in the accounts in the ledgers. Any errors or doubtful entries should be noted and investigated. The footings for the term of audit should be verified, and the footings of the special columns checked against the entries in the general ledger. Verify Schedules. — The schedules of assets and liabilities not already verified should now be examined. The auditor should see that the inventories of merchandise and other property have been properly O.K.'d and certified as to the fact that the property repre- sented by the schedules has been purchased and is now on hand. Also that the merchan- dise stock was inventoried at prices not e.\ceedinport the state- ment should also be made. Balance Sheet. — The balance sheet should show in condensed form the actual assets, liabilities, and present worth, or capital and surplus, or deficit, of the concern on the termi- nating date, and should be supported by proper schedules. If an individual or partnership concern, the assets and liabilities are usually arranged on the balance sheet in the order of CLUTent and fi.\ed, and the proprietor's or partnership items are placed after the liabilities. If a corporation, the assets and liabilities are stated in the order of fi.xed and current, and the capital stock is placed before, and the surplus after, the liabilities. If there is a deficit, it is shown after the assets. Auditor's Report. — After the audit has been concluded, the statement, schedules, and balance sheet have been made out, and the books are in agreement with the same, the audi- tor should make a statement to his client of conditions as he found them. Tliis is called the " auditor's report." The auditor's report usually contains a balance sheet, styled " E.v-hibit A," and support- ing schedules, which are styled, "Exhibit A — Schedule i," "Schedule 2," etc.; a Profit and Loss statement. Exhibit B, and schedules; and a copy of the adjustment entries. Exhibit C. If the report is unqualified, the balance sheet is certified by the auditor. The foUovv^ing is the usual form of auditor's certificate attached to the balance sheet: We have examined the books of the Wilson Leather Company for the year ending Dec. 31, 1910, and we certify that in our opinion the above Balance Sheet sets forth the true financial position of the company on that date, and that the relative Profit and Loss account is correct. 54 WiLH.\M St., New York, Price, Waterhouse & Co. Feb. 21, 191 1. Chartered Accountants. If the report is qualified, the balance sheet is certified subject to the qualifications set forth in a separate statement. Exhibit D, and " This exhibit is subject to the qualifications set forth in Exhibit D" is written at the bottom of the balance sheet. Exhibit D contains comments on the examination, and states the reasons why the auditor qualifies his certifica- tion as to the correctness of the assets and liabilities shown in his report. It also frequently contains suggestions for the improvement of the system of accounting in use by the client. • EXERCISES The following exercises are intended to give the student such practice in auditing as will enable him to thoroughly comprehend the principles of the subject, and to become familiar with the usual procedure in making a commercial audit. While the schoolroom has its limitations in matters of this kind, as compared to the business office, the books of student bookkeepers provide good "cases" for the student auditor, and he should perform the work with the same care he would use if in actual practice. For all working papers, notebooks, and reports, loose paper may be used. If no rub- ber stamp is available, the student will write Audited and his initials where the stamp would be used. 318 APPKNUIX I 1. Audit the books of Taylor, Wood & Co. for August or for September (whichever your teacher may direct), which will represent a fiscal period. Apply to your teacher for the books and supporting records of some other student, and having obtained them, read again " I'reparation for Auditing," page 312. Next proceed with the auditing in general accordance with the instructions given in '"Order of Proce dure," page 312, and following paragraphs. Vou will not be required to send statements to debtors, or requests for statements from creditors. Only such vouchers as would be oi hand in actual business should be used in making your audit. Separate the others from these. You are at liberty to use either the straight checking method or the analysis method o*' auditing in performing this work. If you decide to use the analysis method, prepare an analysis sheet as one of your working papers, and analyze the accounts in the general ledger. X'erify the original entries by the vouchers, and check the totals of the columns of the books with the totals of the corresponding columns on your analysis sheets. Make careful notes in your notebook of any errors which you detect, but do not make any corrections in the books. After completing your audit, make a report including the necessary e-xhibits and schedules. In making E.xhibit 15, show the results in condensed form only, and give the details on the schedules. That is, show the gross revenue, the operating expenses, and other deductions from revenue, the net profit, and the disposition of the same. Hand the report, exhibits, and schedules, together with tiie books and the vouchers, to your teacher. 2. Audit the books of tlie W". J. Milton Shoe Company for December, which will represent a fiscal period. Apply to your teacher for a set of books and accompanying vouchers, and proceed as instructed in No. i. Strive to improve on your previous effort, and take special pains with your report. Make E.xhibit A in consolidated form. That is, state the different assets and liabilities in totals, and when necessary sujiport by schedules. This applies particularly to the current asset inventories, and also to the Accounts Receivable, Notes Receivable, etc. In making lOxhibit B, show gross sales, returned goods, net sales, cost of net sales (support by Exhibit B, Schedule i, which will show the Manufacturing account in detail), gross profit on trading, and state the percentage on sales and on cost. Show also the deductions for selling expenses, total selling ex])enses, and i)ercentage. based on the gross profits; the deductions for general and administrative expenses, total of the same, and the net profit on trading. •Hand your report, together with the books and vouchers, to your teacher. QUESTIONS 1. Explain wliat is meant bv (i/) ••auditing." (/>) •'audit."" (<) '•auditor." 2. Of what is C. P. A. the abbreviation ? 3. Explain how a person may Ijeconie a C. P. A. in your slate. 4. What is the principal object of an audit ? 5. What is meant by "term of audit." and wh.at may it be ? 6. Wliat are the names of the first and last dates of the audit term ? 7. Name the different kinds of audits as regards (a) time when made, and (d) classes of business or activities. AUDITING 319 8. What are the duties of an auditor ? g. What is meant bv an "auditor's worlving papers" ? 10. Name and e\:i;ain the errors tlie presence of which an auditor sliould detect, or the absence of wliicli he should prove, in malting an audit. 11. State what prepar.itiou should be made for an audit. 12. State briefly the steps to take in making a commercial audit. 13. How is the cash proved when the audit is begun some time after the terminating date .' 14. What book or books should an auditor e.\amine with special care for the detection of intentional errors ? 15. What evidence should an auditor generally require that the original entries are in accordance with the facts ? 16. How do auditois indicate that the)- have e.Kamined an entry ? a vi'icher ? 17. What should be done when an error is detected in nuking an audit .•" 18. How are the books brought into agreement with the facts, as lound by the auditur ? ig. What does the auditors report contain ? 20. If the auditor is unable or unwilling to certify to the accuracy of the balance sheet, how may he indicate that fact ? AIM'ICXDIX II BILLS OF LADING Upon the r. ' n of the Interstate Cummcrce Commission, there were adoptee in iO"i^ iinifiinu ii;, as follows: set to be used in connection with " straight " shipments, consisting of bill o lading, hhi|jping order, and memorandum acknowledgment (all to be printed on white paper] (f>} One set to apply to "order" shipments, consisting of order bill of lading (to b printed on yellow paper), shipping order, and memorandum acknowledgment (the last twi forms to be printed on blue paper). Gixxls sent as a "stnviglit" slii])n" "' "'i^ !"• il.liMnd i.i the consignee without his surriiideriii'; ih kill of lading. On the other hand, an " order " shipnicul is consigned to " Order of , " and an orde bill of lading contains the provision that "the surrender of this original order bill of ladiu] proi)erlv indorsed shall be required before the delivery of the property. " (Sec opposite. The order bill of lading is negotiable by indorsement, while the straight bill of lading i not negotiable. Order bills of lading are much used in shipping by freight goods that ar not to be delivered until paid for. Payment is often made through a local bank, to whos order the goods are consigned, and to which the order bill of lading is sent, together with draft on the piirchaser of the goods, which must be paid before the bank will give him th bill of lading. Carriers will supply shippers with these forms, l^ut for convenience' sake, a shippe may pre])are his own bills of lading with his name and list of commodities printed thereor jirovided such forms contain the ])recise language of the uniform contract and condition; and conform to the essential requirements, such as the titles of the respective forms, th color distinction for "order" shi])mcnts, the provision for shijiper's signature, and th jjrescribed width of 8.1 inches (the forms may be of any length desired). The shipper may elect to ship under the terms and conditions of th<5 uniform bill c lading and shiiijiing order, in which case the rates provided in the official classification an tariffs will aiii>ly; or he may elect not to acce])t the conditions of the new uniform bill lading and shijjping order, in which case the property will be transported at carrier's liabilit and the charge therefor will be ten ])er cent higher than the former rate. Draft with Attached Bill of Lading. The principal use of the order bill of lading where the s!iii)per desires to collect from consignee in advance of the delivery of goods I him. This is known as "shipper's order." and accomplishes the same purpose whe goods are shii)ped bv freight as C. O. U. by express does when shipment is made by e. press. The name of the bank through which the collection is to be made is inserted aftt. "Consigned to Order of " and the name of consignee after " Notify." A draft is drawn o the consignee for the amount of the shipment in favor of the bank and attached to the bi of lading. The draft with bill of lading attached is left with the bank for collection. Cni signec cannot obtain possession of bill of lading unless he pays the draft, and without th bill of lading he cannot get possession of the goods. Thus we have C. O. D. by frei^hi The invoice is .sent to consignee in the regular wav with terms " Rv. S. D. H. L. 3-.;' I ORDER BILL OF LADING 321 UolfonD BUI of Lading— Standard torm of Ordtf Bill of Lading approved by tho Interstata Commerco CommUtlon by Ordv No. 787 of Judo 27, 1908. /i -7i,:d or wrllieii, nerem cooulood iiucludins condiuoos on tuck. Iierooli, ftodnlucb &ro affreea toby Hj.' -tnj j..'i ., i, \ .i, . .[.u'U lor The lutTtndcr of thU O'ieinai O^^C^ Bill of Ladine properly indorsed shall be required before the delivery of the property. Inspc>:liiin of rropcrty covered b> Ihl* bill of Ikdidt «ill not be pcrmiflcil ualcs& provided by law or uoleu pcfmiuioo u Lndoricd on thu original bill ol ladanc or given ia wrllinf by Iho shipper. J7i« RaiQ oi ' Freight from-.-. is in Cents per 100 Lbs. IF Sptclal P« IF SHdH IF-.TImasUt IF III CUu IF U Clus IF Ru)a 7i \ If 3d Clau ' IF Ruls 2B IF Rida 2E If 4th Clan IF Sth Cim IF 6ltt Clau PIT . 1 1 Consigned to ORDER OF Dcslinalion Notify At -i^;?r2;:Z2rz'r^2.^d.:i^.j:.. If charges are to be prepaid, w-nle or slamp here, '"To be Prepaid." Keccived S _. .. to apply in prepayment of the charges on ihc properly dc- scifbed hereon. Aseai or CasLier^ Charges Advanced; $ Z<=^c;K>Z-c^!r:. Shipper. (Tbia bill ol l « riin g i» to be aicned by the abipper aad ugeal of tbe comer iisauig si For use In connection with the Standard form of Ordor BUI ol Lading apirovBd by Uw Interstato Commerco Commission by Order No. 787 of iune 27. 1908. /? /^y<><*c.<^^.^^.^-2^-->'^-^''*z-"^ Railroad Company. ■TLJIC MPMnRAMnilM ts •» adcnowl/dgment that a bill of ladlnz has been Issued and Is not the Shippers No iniO IVI tlVlV./r»«|-»wwi»» OrlElnal Bill of Lading, nor a cop^ or duplicate, covermg tho property named herein, and Is intendea solely for Ming or record, r_?^'}?^"*'- KECEiVED subject to ihe classi6atlioni and tariffs in effect on the dale of the receipt by the earner of the property described in the ^^J>ii tiie coadiuoa^. v or pickftses unkDO' las coniUUOQS o iPtl hfrpundrr d accepted (ut cr ol the Oiigtnal ^PV^KM Bill ol Lading properly indorMd shall be required bernre Ihc delivery of Iho properly. Inspection of property covered K wiU ool be permiiied unleu provided by law or unlcM pcnniuiOQ u ladorsed on Ibe orixiaaJ biU ol lading or given in writing by ibc thippcr. For use In connection wrtn tne Standard form of Order Bill of Lading approved by the Interstata Commerce Commission \)^ OfOer No. 787 of June 27, 1908. /::k^?^^;-.^^z<^-^-^^^t^<.^c^^'^ Rail road Com pa ny. THIS SHIPPING ORDER ""^ ^ '•^"''y ''"*"' '"■ '" '"''• '" '""leHblB pencil, or In Cabori, and Shippers No f taio>d by the AgonL AgfiHtS NO RECEIVf;, Bubject to the classificatjons and tari&s io effect on the data of issue of ihia Shipping Order. at — ''X^^^Syt>cJL^t^, /!^^ /2l.'Zi^..j y ,_ Ao. t'ooiiinjid" a o d'd esli ne d'iii"! , .. -^^inMioii ,1,, mmuniiy «m*m.B»if.*»fUoiirler ol all .> lorai.yof E»iJ prunvtlT. ihaii-vPri wrvlre Io Uo boiloinx; _,._ . acctpied lor placeof dellvtrrat ptoMrtrovFr all oraoT portiou ot uid ■h,ili M »iibipci Io all loa ci>odiuou».' bunaWaod r»sa*Ucns The surrender ol Ihe Original by the bill of lading wilt ool b« perm. '-'■•' * - nlccla ot pacliaB«» uiiknoac : ^ Bill of Ladinr properly indorsed shill be required bclire the delivery of (he property. Inspection of proptrty covered Kovidcd by law of unlcis pemuu.on .s indorsed on the original bill ul lading or given ir) wrinng by ihc shipper. ....... ,,.,_ the prop^rlr describe!* betniT.tTiiipp-t rent oood ■minatioii Hi* muiually ai(i«efyL>K QiAI.IFIF.II IVUAou: ol^lOi. CI. r9.-l^t.T. KrsxKXK TIVE '■'/ -^ Fl)K Df.iiisit AITI'VDIX II FORMS OF INDORSEMENT wriling ol one's name, witli or without othjr words, on the ':i'"k as notes, drafts, cheeks, etc. The forms of indorsement in most general use are the L ink and the full indorsement. Blank Indorsement. — To indorse a j)apcr in blank co: -ts in wriiiiij,- one's name across the back, without any other w- Full Indorsement. — A full indorsement consists in writing on the back of a negotiable paper aa order to pay to the order of a jjarticular person, signed by the payee of the paper. This is the safest kind of indorsement, as the paper cannot be col- lected without the indor.sement of the indor.see. When a paper is indorsed in blank as above described, the person who receives the paper may write above the name of the indorser the necessary wording to make it a full indorsement. Other forms of indorsement are the following : Qualified Indorsement. — This is often called an indorsement ■• without recourse." It may be either blank or full. The words " without recourse " written above the indorser's name have the effect of relieving him from responsibility for the pay- ment of the ])aper. Restrictive Indorsement. — A restrictive indorsement restricts the payment of the paper to some particular person named, by omitting the word " order " and adding the word " only " to the full form. Indorsement for Deposit or Collection. — When a paper is left at the bank for collection or for deposit, this may be indicated by writing " For Collection " or " For Dejjosit," above the in- dorser's name, although some banks object to this. Where and How to Indorse Name. — As a matter of business custom and convenience, all indorsements should be placed across the back of the left-hand end of the paper, about one and a half inches down from tTie end. In indorsing one's name on a note or draft, one should write it exactly as it is in the face of the paper, and if this differs from one's usual signature, or contains errors of any kind, the correct signature should be placed immediatelv underneath it. F"or instance, if a check is made payable to Henry C. Miller, while the payee's customary business signature is H. C. Mueller, be should first indorse his name as Henry C. Miller and then place his correct signature under it. INDEX Abstract, of analysis book, 2SS of card ledger, 16S of customers' ledger 177 sales book, 154 sales sheet, 153 Acceptance, log, in Account, defined, 34 accrual, 300 allowances, 295 bank, 58, 193 bills payable, 29, 30 bills receivable, 2S, 30 cash, 1 1 C. O. D., 92 collection and exchange, 141, 142 consignment, 1S2 controlling, 188, 224 discount, Si, 120 exchange, 141, 144 expense, 1 1 freight inward, 233 freight outward, 294, 295 good will, 265 interest, 46, 123, 129 ' loss and gain, 41, 42, 212 manufacturing, 272 merchandise, 12, 13, 27 merchandise discount, 77, 79, 127 profit and loss, 240 proprietor's, 1 1, 27 purchases, 272 real estate, 46, 82 royalty, 294 sales, 272 securities, 234 surplus, 260 trading, 2i6, 240, 246 Account books, 133 Account sales register, 189 Accounting, 150 'Accounts, analyzing, 224 business, 34 corporate, special, 264 division of, 224 finance, 35 nominal, 224 payable, 167, 216 personal, 22, 224 real, 224 • receivable, 167, 216 reserve, 244 Adding machine exercises, iSo, 214, 255. 30S Adjustment entries, 316 Allowances, 295 Analysis book, 272, 285, 288 Appendix I, 31 1 A]Hiendix II, 320 Articles of copartnership, 133 Assets, 225 Auditing, 31 1 Auxiliary books, 133 Auxiliary ledgers, 18S Bad debts, reserve for, 244, 246 Balance ledger, 222 Balance sheet, 148, 226, 244, 301 Bank balance, reconciliation of, 194 Bank liiscouni, 80 exercises in, 105 Bank draft, III-I13 Bank pass book, 66 Bill, 55, 56 Bill and charge system, 222 Bill book, 115, 122, 222 Bill of lading, 8S-9C, 205, 320 Blotter, 161, 198 sales from, 198 Bonds, 259, 260 Bookkeeping, 5, 150 Burden, 281 distributing, 282 Business practice, 53 Capital stock, 259 working, 260 Cash, flefined, 1 1 check, 119 differences, 220 discount, 82 in balance, 58, 59 proving, 220 register, 154 sales, 154 Cash book, 72, 156, 190, 218, 238, 277 petty, 277, 292 Changing from single- to double-entry, 16S Check, 61, 62, 119 book, 59 dividend, 264 stubs, 59, 62, 63, 65, 193 voucher, 274 Checking from journal to ledger, 25, 26 Ciphers in cents' column, 68 Circular letter, form of, 195 Closing, by journal entries, 245 books of original entry, 20S, 238 C. O. D., 91, 92, 232 Commission business, 1S2 Consignments, 1S2-184 Contingent liability, 225 Corporations, 257, 258 books of, 262 officers of, 261 32o (complete) Cost, keeping, 272, 279-281 Credit memorandum, 237 Day book, 1 34 Deposit ticket, 59, 65 Depreciation, 244, 300 reserve for, 244 Discount, how reckoned, 80 exercises in, 105 kinds of, 82, 127 Discount memorandum. Si Disposition of products, 271 Dissolution of partnership, 239, 252 Distribution, 285. Dividend book, 263 Dividends, 260 Draft, 107-H4 with attached bill of lading, 320 Drawee, of ilraft, 107 Drawer, of draft, 107 Errors, correction of, 19, 33 how to find, 32, 33 kinds of, 311 Exercises, 49, 70, 105, 141, 179, 212, 253, 268, 305, 317 Expenses, administrative, 224 classifying, 272 general, 224, 2S6 manufacturing, 272, 286 selling, 224, 272, 286 Express C. O. D., 232 Express money order, 93, 94 Factory system, 271 Findings, 2S3. Finished goods, 271, 282, 285 Flour, Grain, and Produce business, 5^ F. O. B., 291 P'ooting, pencil, 18, 19 Forwarding, S3, 84, 234 Freight, charges, 197 C. O. D., 232 prepaid, 293, 294 Gain, delined, 34 net, how found, 35 Goods in process, 282 Good will, 265 Government supervision, 258 Hardware business, 141 Holding companies, 257 Impression book, letter, 193 Imprest fund, 277. Index book, 134 Indexing, 193 :V2{ INDKX Inlcmt, exrrcitrs in, 105 on |>artncr>' invmmcnts 244 Inventories, 239 •umtry, 246 Inventory, 34, 168 ixrpctual, 27S Invoic, 55, j6 Inroicc Ux'c, 115, 221, 238 Invoices record of, 873 Jonmal, 151, 216, 33S purcbavr, 321, 24S ul<:«. 221, 24.S Joarnal-day IkmiU, 5-7, II, 47-49 Joarnali/in^;, 10; kc Rulct Ijitxir, ilircii, 28l inUirecl. 281 ticket, 280 |jul« anil patterns 283 I>cS 4 ■ i.ni »alcs register, 2co, 2oS cash Ikh.W, 200, 20S dail>'. 231 linal, 20S h ■ ' '. 25,26 in . 100, 208 jouin.ii. .1"' proof -.f, 151 sales iHHik, 200, 208 shipment leilger, 208 IVisImarking, 14, 86 Power of attorney, 53 Preliminary work, itxi, 168, 194, 225, 247, 2S6 Pic'eiit »orth. 36, 37 Price lists, (K/. 102, 137, 147 for ilry gmids business, 228-229 Principal books. 133 Process goods in, 2S2 inclliod, 279 Pro«luctti»n, 271, 283 niclhoils, 279 onler, 280 order nielhoil, 279 reports, 282 Proof, of posting, 151 of lri.d balance, 43 Propositions, 265 Proving cash, 220 b,alancc, 312 Purchase book, 155 i0urn.1l, 221, 248 ledger, 222 order blank, 273 Purchases, 221, 272 returned, 234 Questions, 20, 45, 69, 104, 137, iSl, 214. 256, 270, 309. 31S Receiving book, 1S3 Red ink, 35, 43, 83 Resource, 34, 138 Retail grocery business, 151, 1 68 Return books, 234 Royally system, 294 Rules for journali/ing. summary, 46 Ruling, general directions, 4 exercises in, 5, 20, 26, 40 Sales, abstract of, 1 54 Sales, liook, 73, 74, 78, iSS, 221, 23S cash, 154 from blotter, 19S journal, 221. 24S ledger, t)0, 222, 223 posting, 2CX3. 20S returned, 234 sheet, abslr.ict of, 153 slip, 151 Shipments. 124, 182 rule f T, I S3 '("MI'LETe) shipper's order, 232 Shipping business, 1S2 Shoe manufacturing business, 282 Single-entry, 151 changing to double-entry, 16S Sinking fund, 260 Statement, business, 3}, 34 customer's, 67, 68, 157 financial. 33. 35 nianufaciuring, trading, protit and loss, 301 of losses and gains, 177, 209 proprietor's, ibS resources and liabilities, 167, 177, 211 trading, profit and loss, 240 Stock, bock. 134, 135 capital, 25*> certificate book, 262, 263 certificates, 259 common, 259 I keeping, 239, 272, 278 kinils of. 259 I ledger. 263. 27S I outstanding, 259 I preferred, 259 I report, 272 i taking, 34 I transfer book, 263 treasury, 259 unissued, 259 Subscription book, 263 Supporting records, 228 Surplus, 260 Tea, cort'ee. and spice business, 72 Telegram, 90 Terminology, 150 Test ledgers 44. 45 Trade discount, 127 Transactions, 161, 170, 197, 230, 248, 290 Transfer book, 263 agents, 264 I Trial balance, 17, 32, 177, 23S, 287 how to find errors in, 32 post-closing, 247 Trusts. 25S Turnover, 216, 240 1 Voucher, check, 274 iackct, 274 register, 276 system, 274 Vouchers, 53 Wage systems, 281 Wholes.ile carpet business, 134 Wholesale dry goods business, 216, 247 Wholesale grocery business. 115 Wholesaling, 216 UNIVERSIT" THIS BOOK IS DUE ON THE I.a«. STAMPED EeX^'^^^^^ -- i^'Iies'-s.o'''^ °^ 25 CENTS TH.S BOOK oTth'" o:;/n ''""^ ^° "^-"N ^"-L INCREASE TO s^ J^ °''^- '^"^ PENALTY DAY AND TO J 00 o^- ^^ °'^ -^"^ ^OUR^^ OVERDUE. * ■°° °'^ THE SEVENTH oly fi 7933 SEP S71935 21AUG'52CF ^ 7 795? J. ^ MAR 2 5 ]983l rec'd cira MAR 7 1983 UJ 21-2,„.i,.33 (52m) UNIVERSITY OF CALIFORNIA LIBRARY