LEARNING BY DOING SERIES STUDENT'S GUIDE TO ACCOMPANY THE ELLIS Cabinet System of Teaching Bookkeeping and Business Practise WHEN USED IN CONNECTION WITH THE CABINET OF TRANSACTIONS PROVIDES A FULL COURSE OF INSTRUCTIONS IN BOOKKEEPING AND OFFICE PRACTISE, FOR USE IN COMMERCIAL SCHOOLS REVISED EDITION 1912 PUBLISHED BY ELLIS PUBLISHING COMPANY Home Office : BATTLE CREEK. MICHIGAN Branch Office : SAN FRANCISCO. CALIFORNIA Copyright, 1910 By Ellis Publishing Company F UiC 3E1 ' PREFACE The object of this book is two-fold: First, to provide the student with a full accompaniment of necessary- instructions regarding the business transactions and bookkeeping required by his "Business Directions or Cabinet;" and, Second, to afford him a reliable reference book upon business affairs and bookkeeping in general. For greater convenience, the work has been divided into two parts: Part I, containing the special instructions pertaining to the student's work, and Part II, a more general consideration of Bookkeeping and business forms and methods. The book is to be regarded as a manual of bookkeeping and business practise, rather than as a systematic treatise on bookkeeping as a science. In selecting the business and bookkeeping methods to be followed by the student, the authors have endeavored to adhere to the actual practise of the countingroom. With the beginning student more amplification is necessary than would be advisable in the economic administration of the accounts of a real business; but as soon as possible the student has been required to do everything as it would be done in actual business. The practical advantages of this requirement do not need arguing. If the student is to be trained to do real office work, he must have such work to do. Had it been desired merely to familiarize him with theoretical bookkeeping, very many of the meth- ods and devices required in his work could have been dispensed with; but the basal idea of this course of instruc- tion is that the student "learns to do by doing" and that this is really the only way for him to learn, if his learning is to be put to the test of actual use. Of course, much more variety has been required in the use of special books, forms of balance sheets, the dis- posal of accounts, etc., than would be employed by any one business house in the keeping of its accounts, but the necessity for this variety is obvious, when it is remembered that the student should receive an "all-round" training, and not be hampered by the narrowness that restricts the bookkeeper that has been familiarized with but one set of bookkeeping methods. With this brief introduction, the work is submitted to the teachers of bookkeeping and business practise, in the confident belief that they will find in the method here presented a practical and logical means for training com- mercial students to proficiency in the requirements of practical business and bookkeeping. Elus Publishing Co. 541747 TABLE OF CONTENTS Note. — When different pages with their paragraph references are set in the same line, the change from para- graph No. to page No. is indicated by a semicolon; as in Bookkeeping, pages 1, par. 1; 211. 211 is the page No. Abbreviations, Commercial Page 255 Acceptance Pages 66, 70 Accepting a Draft .'. Page 66, Par. 351 Accommodation Papers Page 103 Account Pages 1, 211 Assessment Page 186 Auxiliary Page 212 Balance of Balances Pages 36, 41 Balance of Personal Accounts Pages 115-116 Bank Account Pages 63, 120-121 Bills Payable Pages 27, 30, Par. 204 Bills Receivable Pages 49, 93, Par. 301 Bills Rediscounted Page 210 Bonus Pages 165, 243 Branch House Page 141, Par. 638 Capital Pages 36, 161 Cash Pages 20, 46-48, 63, 80-S6 Classification of Pages 35-36, 211-212 Closing Pages 35-41, 92-93 C. O. D Page 120 Collection Page 103, Par. 4S9 Commission Pages 99, 215 Concession Page 243 Controlling.. Pages 147, Par. 664; 148, 227-228, 240 Copyright Page 243 Dividend Page 182 Drayage Pages 101, 245 Exchange Page 104 Expense Pages 40, 77, 93 Franchise Pages 160, 243 Freight Pages 101, 120-121, 245 Fuel Page 241 General Page 212 Good Will Page 242 Impersonal i Page 212 Imprest Pages 85-86 Insolvency Page 242 Investment Pages 34, 36, 40 Interest and Discount Pages 105-106 Judgment Page 243 Lease Page 243 License Page 243 Liquidation Page 125 Loss and Gain Pages 36, 40, 77, 93 Machinery Page 150 Manufacturing Page 150 Merchandise Pages 26, 35, 63, 93, 245 Merchandise Discount Pages 76, 245 Merchandise Exchange Pages 103, 244 Nonspeculative Page 35 Non-personal Page 212 Personal Pages 63, 77, 115-116 Patent Page 243 Pay Roll Pages 235-236 Petty Page 143 Petty Cash Pages 85-86 Precedence of Closing Page 241 Pivotal Page 241 Postage Page 242 Proprietor's Stock Pages 36, 40, 77, 93 Rest Page 163 Account, Returned Mdse Pages 35, 37, 245 Returns and Rebates Page 244 Ruling Page 38 Sales Pages 131-132 Shipment ' Page 100 Sinking Fund Page 163 Speculative Page 35 Stock Pages 36, 161, 173 Subdivision Page 212 Summary Pages 35-36, 212 Surplus Fund Page 182 Suspended Page 224 Suspense Pages 104, 224 Trade Mark Page 242 Transferring Pages 38, 48, Par. 285 Transferring to New Ledger, Pages 38, 48, Par. 296 With Employees Page 235 Accountant, Auditor, Bookkeeper, compared. . .Page 211 Act of God Page 246 Acts of Bankruptcy Page 243 Addition, Proofs of Page 231 Eleven Method Page 231 Nine Method Page 231 Nineteen Method Page' 235 Seventeen Method Page 235 Thirteen Method Page 232 Unitate Method Page 231 Adjusting Entries Page 49, Par. 295 Advertising Page 129, Par. 603 Annual Interest Page 2.18 Meeting Page 165 Antedate Page 103, Par. 492 Answers Pages 62-63, 70-71, 77-79, 109-110, 126-127 Application of Check Figure Proofs Pages 140, 243 Appropriation of Surplus Fund Page 188 Arbitration Page 221 Articles of Incorporation Pages 159, 171 Assessment Page 164 Book Pages 185-186 Notice Page 186 Assets or Resources Pages 32, Par. 222 ; 35 \ssignee Page 221 Assignment Page 221 Of Account Page 221 Of Bill of Lading Pages 225, 246 On Back of Draft Page 221 Assignor Page 221 Attention Page 53 Auditor Page 211 Auxiliary Books Page 214 Balances Page 77 Of Personal Accounts Pages 77, 115-116 Balance of Balances Page 36 Forms of Pages 36, 41, 92, 107, 144 Balancing Pass Book Page 54 Balance Sheet Pages 32, 41, 59, 92, 107, 144 Branch House Page 142 Forms of Pages 34, 59, 92, 107, 108, 116, 142, 144, 181, 214, 215, 216 Preparing Page 33 Proof of Page 33 [V] VI TABLE OF CONTENTS Bank Account on Check Stub Pages 120-121 Overdrawn Page 44, Par. 282 Bank Draft ....Page 66, Par. 350 Banking Pages 198-2.11 Cash Book Page 206 Certificate of Deposit Register Page 208 Certified Check Register Page 207 Collection Register Pages 200-201 Discount Register Pages 200-201 Draft Register Page 207 Journal Pages 208-209 National Banks Page 198 Officers Page 198 Opening Entry Page 199 Pay Roll , Page 210 Savings Banks Page 198 State Bank Page 198 Bank Note Page 226 Bankruptcy Page 243 Be Orderly and Systematic Page 52 Best Way to Make a Journal Entry Page 53 Bill Books Pages 31, 43, 50 Inspection of Page 49, Par. 303 Bills and Invoices Page 7, Par 35 Discounted Pages 52, 75, 76 Receipted Page 8 With Discount, form of Pages 52, 75, 76 Without Discount, form of Pages 44, 74 Bills of Exchange Page 104, Par. 500-503 Bill of Lading, Assignment of Pages 225, 246 Register Page 31 Bills Payable Pages 29, 30, 70, 217-219 Account Pages 27, 30, Par. 204 Controlling Account Pages 147, Par. 664 ; 148, 227, 22S, 240 Bills Receivable Account Page 49, Par. 301 Controlling Account Pages 227-228, 240 Register Page 50 Bills Rediscounted Page 210 Blank Indorsements Pages 96, Par. 436; 222 Blotter • Page 242 Bookkeeping Pages 1, Par. 1 ; 211 Double Entry Pages 1, 211 Laws of Double Entry Page 3, Par. 15 Principles of Double Entry Page 3, Par. 15 Primitive Page 212 Single Entry Pages 1, 121 Bookkeeper's Addition Page 231 Qualifications Pages 2, 53, Par. 325; 54, Par. 336; 55, Par. 342, 343 Trinity Page 21 3 Books, Auxiliary Page 214 Of Account Page 1, Par. 1 Of Original Entry ...Pages 1, Par. 2; 96, Par. 432 Of Subsequent Entry Page 1, Par. 3 Reference Page 230 Two Sets of Corporate Page 166 Bonus Pages 165, 243 Borrowing Money Page 227 To Pay Dividends Page 185 Branch House Pages 141, 142 Account Page 141, Par. 638 Balance Sheet Page 142 Bills Page 141, Par. 640 Books Page 141, Par. 642 Duplicate Records Page 142, Par. 642 Branch House, Loose-Leaf Records. Page 142, Par. 642 Loss and Gain Page 141, Par. 641 Prices Page 141, Par. 639 Business Page 211 And Financial Statements Page 214 Ciphers and Codes Page 225 Papers in General Page 217 Transactions Page 1, Par. 1 By-Laws Page 165 Capital Stock Pages 3, Par. 17 ; 35, 38, 161 Account .Pages 3, Par. 17; 36, 38, 40, 93, 173-174 Closing • Pages 35, 36, 39, 40, 93, 186-187 Opening Pages 3, Par. 17 ; 173-174 Operating Page 162 Working Page 162 Carriers Page 246 Classes of Page 246 Liability of Page 246 Responsibility Page 247 Cash Account Pages 15-18, 80 Closing Pages 20, Par. 119 ; 80, Par. 391 Form of Page 20, Par. 121 How to Balance Pages 46-48 How to Forward Pages 46-48 How to Transfer to Cash Book ; Page 80, Par. 392 In Ledger '. Pages 20, 46-48 Petty Pages 80, 85-86 Cash, what is, in Bookkeeping. .Pages 63, 80, Par. 386 And Bank Account Page 63 Balance Page 99, Par. 438 Sales Page 240 Cash Book Pages 80-86 Balancing or Closing. .Pages 80, Par. 390, 391; 125 Columnar Pages 118, Par. 560 ; 149 Containing Bank Account Page 113 Daily Balance Page 84 Entries in, How to Make Page 80, Par. 387-388 Examination Page SG Form of Pages 82-83 Posting from credit side Page 80, Par. 388 Posting from debit side Page 80, Par. 387 Single- Entry Page 123 Special Column : Pages 119, 134-139, 149 Testing Page 81 Three ways to use two-column Pages 80-81 Certified Check Register Page 207 Certificate of Deposit Page 105 Register Page 208 Changing Partnership to Corporation Pages 183-184 Corporation to Single Proprietorship Pages 183-184 Double Entry to Single Entry •. . . . Page 125 Single Entry to Double Entry Page 125 Change List Page 235 Charges Page 129 Tickets Page 112, Par. 525 Charter Pages 159, 160 Chattels Page 99, Par. 441 Checks Pages 4-7 As Receipt Page 6, Par. 32 Form of Page 5, Par. 27 How to Write less than $1 Page 5, Par. 23 How to Write so cannot be "raised" Page^5, Par. 20 Resembling Drafts Page 7, Par. 34 Returned ' P^ge 99, Par. 447 TABLE OF CONTENTS VII Checking a Statement Page 67 Your Posting Page 54 Check Figure Proofs Pages 140, 231-234 Choice of Stock Pages 160-161 Ciphers Page 7, Par. 37 Claims, How to Make ■. . . Page 247 Classification of Accounts .... . -. Pages 35-36, 211-212 Of Ledgers Pages 227, 240 Clearing House Page . 241 Closing Accounts Pages 19, Par. 109 ; 35-41 At Liquidation Page 125 Books Pages 35-41 By Journal Entries Pages 37-41 Cash Account Page 20, Par. 119 Corporation Books Pages 181, 195 Direct, without Journal Entries. .Pages 35-36, 92-93 Steps in ' Page 92, Par. 413 C. O. D. Delivery Tickets Page 120 Orders Page 120 Register .' Page 120 Sales Book Page 120 Coin Page 226 Collections Page 103, Par. 486 Account Page 103, Par. 489 Collection Register Pages 200-201 Column Journal Page 89, Par. 399 Footings Page 89, Par. 402 Headings Page 133, Par. 632 Postings Page 118, Par. 560 Combined Journal and Day Book Page 214 Commercial Abbreviations Page 255 Agencies . . Page 229 Commission Page 99, Par. 451 ; 245 Account Page 245 Business Page 128 Cash Book Page 129 Charges Page 129 Sales Book Page 130 Sales Ledger Page 131 Comparing Cash Book and Banking Ledger. .. Page 42 Complete Each Day's Work Page 55 Conducting Business by Correspondence Page 101, Par. 470-489 Consignee, Consignor Page 99, Par. 450 Consignment Account Page 128, Par. 595 Consolidation of Corporations Pages 193-195 Constant Attention Page 53 Contingent Fund Page 163 Continued Trial Balance Page 126 Controlling Accounts Pages 147, Par. 664 ; 148, 227-228, 240 Interest Page 241 Cooperage Page 129, Par. 604 Copartnership Agreement Pages 94-96 Filing Page 96, Par. 431 Copying Letters Page 225 Copyright Page 243 Corporations Pages 158-197 Changed to Proprietorship Page 187 Compared with Partnership Page 158 Corporate Seal Page 166 Signature Page 166 Corrections— How to Make Page 49, Par. 296-299 Cost Accounting Page 237 Counter Entries Page 49, Par. 293 Credit Page 2, Par. 12 ; 211 Cross Entry Page 49, Par. 294 Cumulative Voting Page 162 Customers' Ledger Page 111, Par. 515 Daily Cash Balance Book Page 84 Deposits Page 44, Par. 281 Reminder Page 53, Par. 322 Trial Balance Page 54, Par. 336 Day Book Page 121, Par. 569 Explanation Page 121, Par. 570 Form of Page 122 Opening Entry Page 123, Par. 573 Book and Journal Combined Page 214 Days of Grace Page 30, Par. 200 Debit Page 2, Par. 11 ; 211 Deferred Stock Page 161 Deficiency Account Page 215 Denominations Required Page 235 Deposits Page 9, Par. 43 ; 49, Par. 300 Daily Page 44, Par. 281 Deposit Slips . . < Page 9, Par. 46 Use of Page 226 Directions for First Posting Pages 13-18 For Second Posting Pages 28-29 For Third Posting Page 32 For Closing Books Page 55 Discount Pages 80, Par. 392 ; 105, Par. 508 Disposal of Page 224 For Advance Payments Page 129, Par. 605 Mdse Pages 76, Par. 383 ; 245 Rates Page 44, Par. 284 Register Pages 200-201 Time Page 75, Par. 381 Trade Page 73, Par. 376 Dishonoring Drafts Page 67, Par. 355 Discounting Notes at Bank Page 73, Par. 370 Disposal of Discounts Page 224 Of Notes when Paid Page 31, Par. 210 Dissolution of Corporations Pages 160, 186 Of Partnership Pages 114-115 Dividend Pages 162-163 Account Page 182 Borrowing Money to Pay Page 185 Certificate Page 163 Crediting Page 185 Declaring Page 163 Fictitious Page 163 Preferred Page 163 Receipt Book Page 182 Stock Page 163 To Pass Page 163 Double Entry Bookkeeping Page 1, Par. 6 ; 211 Draft Pages 65-67 Bank Page 66, Par. 350 Dishonoring Page 67, Par. 355 Drawee, Drawer Page 65, Par. 346 Drawn after Date Page 67, Par. 354 Drawn after Sight Page 67, Par. 353 Form Page 65, Par. 347-348 How to Write Page 65, Par. 346 Including Exchange Page 226 Parties to Page 65, Par. 346 Sight Page 65, Par. 347 Theory of Page 65, Par. 346 Time Page 65, Par. 345 Drayage Page 101, Par. 464 Account Page 245 snii TABLE OF CONTENTS Dry Goods Business Page 118 Due Bills Page 217 Duplicates Pages 8, Par. 42 ; 72, Par. 367-363 Eleven Method of Proof Pages 140, 231-238 Enclosures Page 102, Par. 481 Endorsee Page 223 Endorser Page 29, Par. 190 Entering Railroad Claims Page 247 Entry Pages 1, Par. 9 ; 211 Adjusting Page 49, Par. 295 Best Way to Make Page 53, Par. 326 Closing Page 39, Par. 250 Counter Page 49, Par. 293 Cross Page 49, Par. 294 Double Page 1, Par. 6 Explanation of 7 Pages 1, Par. 9 ; 48, Par. 292 ; 121, Par. 570 How Made Page 3, Par. 15 Single Pages 1, Par. 7; 121, Par. 570 Transfer Page 143, Par. 647 Equated Date Page 128, Par. 596 Errors— How to Find Page 238 How to Prevent Page 239 Examinations Pages 61, 70, 86, 109, 117, 196, 197 Exchange Page 104, Par. 497 Exchanging Merchandise Pages 103, Par. 490 ; 244 Exercises in Journalizing . . Pages 63, 71, 79, 110, 126, 127 Expense Account Page 77 Explanation of Entries Pages 1, Par. 9; 48, Par. 292 Express and Telegraph Orders Page 227 Extensions Page 7, Par. 38 Fictitious Dividend Page 163 Payee Page 103, Par. 491 Figures and Penmanship Page 48, Par. 291 Filing Articles of Agreement Page 96, Par. 431 Commercial Papers Page 8, Par. 40 Invoices Pages 42-43, 145, Par. 658 Letters Pages 102, Par. 483 ; 225 Papers Page 102, Par. 484 Financial Exhibits Pages 34, 59, 92, 107, 108, 116, 142, 144, 181, 188, 214, 215, 216 Quantity Page 211 Firm Name Page 94, Par. 415 First Opening of Books Page 241 Folio Page 13, Par. 61 Footing Tests Page 202 Forfeited Stock Page 175 Form of Bill without Discount Page 44 With Discount Pages 52, 75, 76 Of Promissory Note Page 30, Par. 203 Of Statement of Account Pages 68-69 Forwarding Footings Page 44, Par. 283 Four-Column Journal Pages 89, Par. 400 ; 90-91 Fractional Parts of a Cent Page 52, Par. 321 Franchise Page 160 Freight Account Page 345 Claims Page 246 Claim Blank Page 248 Drayage, Express Page 101, Par. 464 Fuel Page 241 Fund , Contingent Page 163 Rest Page 163 Reserve Page 163 Sinking Page 163 Furniture and Fixtures Page 99, Par. 442 Gains p age 32, Par. 226 Unusual Page 243 General Merchandise Business Page 133 Review, Pages 62-64, 70-71, 109-110, 126-127, 196-197 Good Figures Page 55, Par. 343 Good Will Pages 241, 242 How Measured Page 242 Guaranteed Stock Page 161 Guaranty Page 221 General Form of Page 221 Indorsed on Note or Other Faper Page 221 Handling C. O. D. Orders Page 120 Hardware Page 121 Holidays for Business Offices Page 12, Par. 50 How Checks are Certified Page 210 To Find Errors in Trial Balance. .. .Pages 238-239 To Handle Freight Claims Pages 247-248 To Make Corrections Page 49, Par. 296 To Make Shipments Page 100, Par. 460 To Close Shipments Page 100, Par. 462 To Order Page 8, Par. 42 To Operate the Voucher System. Page 145, Par. 658 To Prevent Errors in Trial Balance. Pages 239-210 To Use Voucher Record Page 145, Par. 659 To Write Notes Page 29, Par. 192 Inclosures Page 102, Par. 481 Indexing the Ledger Page 21 Indorser Page 29, Par. 190 Indorsee Page 222 Indorsement Pages 9, 44, 222-223 Imprest Petty Cash Book Pages 85-86 Insolvency Account Page 242 Inspection of Bill Register Page 49, Par. 303 Installment Page 164 Book Page 183 Scrip . .• Page 164 Installing Controlling Accounts Pages 227-228 Insurance Pages 129, Par. 601 ; 225 Interest, Legal Rate Pages 76, Par. 385 ; 80, Par. 392 And Discount Inventory Pages 105-106 On Note Page 96, Par. 437 Inventory, Definition Page 35 Chattels Page 60 Closing Pages 35, 105-106 Discount Pages 105-106 Expense Page 60 Freight Page 35 Furniture and Fixtures Page 60 Interest Pages 105-106 Liability Pages 35, 105-106 Miscellaneous : Page 105 Resource Page 105-106 Shipments Page 60 Invoice Page 7, Par. 35 ; 77 Book Page 43 Form of Pages 8, 44, 52, 74, 75, 76, 152-156 Register and Tell Tale Combined Pages 42-43 Shipping Page 100, Par. 459 Itemizing Sales on Account Page 53 Job Ticket Page 236 Jobbing Business Page 2 Joint Stock Co Page 196 Journal Pages 1, 213 Forms of.. Pages 3, 22-25, 37-39, 87, 88, 90, 119, 134 TABLE OF CONTENTS IX Journal Entries Pages 2, 22-25, 87-88, 90-91, 97-98, 119, 134-139, 140, 173, 174, 175, 184-185, 187, 188, 190, 191, 192, 193, 194, 206, Ledger and Trial Balance Book. Page Journalizing Pages 3, 22-25, 63, 71, 79, 110, 126- Judgment Pa § e Key to Commercial Rating . . . Page Laws of Debit and Credit Page 3, Par Of Carriers Page Lead Pencil Work Page Lease— Short Form Page Ledger Pages 1, Classification of Page Closing Pages 35-41, Headings Page 72, Par. Self-Balancing Pages 227, Transferring Accounts from Page 48, Par. 285, Legal Rate of Interest Page 76, Par. Letters of Credit Page Liability Page 32, Par. • Inventory Pages 35, 105- Of Corporations Page Limited Corporations Page Liquidation Page Loan Page 99, Par. Loss and Gain Account. .Pages 36, 40, 77, 93, 144, 181, Loss Posted to Resource Account Page Losses Page 32, Par. Unusual Page Mail Orders Page 102, Par. Maker of Note Page 29, Par. Machinery Account Page Manifest Page How to Make Out Page Manufacturing Account Page 150, Par. Market Value Page Maturity of Commercial Papers. .. .Page 51, Par. 307 Of Notes Page 30, Par. Measure of Good Will Page Memorandum of Credit Page Mercantile or Commercial Agencies Page Terms Pages 249 Merchandise Account Pages 26-27, 63, 93, 234, Closing Pages 35-41, 93, Merchandise Discount Pages 76, Closing Pages 35-36, Merchandise Exchange Account Page Closing Pages 35-36, Merchandise Retd Page Closing Pages 35-38, Merits of Check Figure Systems Pages 141, Par. 635-636 ; 231 Minute Book Page Miscellaneous, Questions and Answers Page Inventory Page Miscellany Page Modern Forms and Methods Page 51, Par. Modified Voucher Method Page Money Page For Pay Rolls Page National Bank Page Negotiability Page Negotiable Words Page Net Cash Page 76, Par. Nine-Column Journal Pages 118 213 202 127 243 230 , 15 246 72 221 214 227 93 364 240 290 385 227 223 106 160 164 125 443 195 242 228 243 479 190 150 246 247 670 164 ; 71 199 242 114 229 •254 244 244 244 245 244 244 35 245 -234 167 78 105 240 315 157 226 210 198 217 217 384 -119 Nine Method of Proof Page 231 Nineteen Method of Proof Pages 235, 238 Ninety-nine Method of Proof Pages 235, 238 Nine Hundred Ninety-nine Method of Proof.... Pages 235, 238 Notes Pages 29, 99, 217-219 Payable at Bank Page 73, Par. 374 Promissory Page 29, Par. 189 Receivable Page 49, Par. 301 Renewing Page 96, Par. 435 Omission in Consolidating Companies Page 195 One Hundred One Method of Proof Pages 235, 238 Thousand One Method Pages 235, 238 Open Consignments Page 128, Par. 598 Opening Bank Books Page 199 Books, Single Proprietor Pages 2, Par. 14 ; 3, Par. 15, 17 ; 90 Corporation Pages 173-174 Entry Pages 2, 3, Par. 15 ; 89, 90, 97, 118, 133, 144, 173-174, 190-191, 199, 241 First Page 241 Partnership Pages 96, Par. 434 ; 97 With Private and Stock Account. Page 144, Par. 651 Operating Capital \ Page 162 Oral Communication Page 101, Par. 477 Orders Page 8, Par. 41 ; 219 Miscellaneous Page 219 Purchase Page 8, Par. 41-42 Order Book Page 112, Par. 524 Sheet Page 112, Par. 525 Organization of Corporations Pages 158-159, 1S9-193 Outstanding Shipment Page 101, Par. 463 Overcharges Page 247 Overdrawing Bank Account Page 44, Par. 282 Part Payment of Note Page 51, Par. 312 Parties to Note Page 29, Par. 190 Partnership Page 94, Par. 419 Par Value Page 164 Pass Book Page 41, Par. 265 And Banking Ledger Compared Page 42, Par. 267-273 Balancing Page 54, Par. 337-341 Patent Page 243 Payee Page 29. Par. 190 Pay Rolls Page 235 Paying Teller Page 198 F ersonal Accounts Page 73, Par. 365 Petty Account Pages 142-143 Cash Account " Pages 85-86 Pivotal Account Page 241 Plant Page 162 Postage Page 102, Par. 480 Account ' Page 242 Postdate Page 103, Par. 493 Posting Pages 13, 28, 32 Commission Charges Page 129, Par. 610 First Page 13 From Cash Book Page 80, Par. 387, 388, 389, 392, 397 From Columnar Journal Page 89, Par. 403 From Nine-Column Journal Page 118, Par. 560 From Petty Cash Book Page 85 From Purchase Book Page 43, Par. 279 From Sales Book Page 56, Par. 344 From Single Entry Books Page 123, Par. 571 TABLE OF CONTENTS Posting, From Sixteen-Column Journal Pages 133, Par. 623 ; 140, Par. 623 From Voucher Record Pages 146, Par. 662 ; 147, 664 Important Points Page 72, Par. 365 Proofs of Pages 140, 231-235, 238-240 Second -. Page 28 Third Page 32 Postoffice Money Order Page 226 Powers of Corporations Page 159 Power of Attorney Page 242 Precedence of Closing Accounts Page 241 Preferred Stock Page 161 Prepaying Your Own Note Page 73 Preparing a Balance Sheet Page 33 Present Worth Page 32, Par. 224 Primitive Bookkeeping Page 212 Principles of Double Entry Bookkeeping Page 3, Par. 15 Private Account Pages 89, 143-144 Bank Account Page 144, Par. 652 Bank Page 198 Closing Page 143, Par. 650 Cost Mark Page 224 Ledger Pages 227-228 Opening Pages 89, Par. 408 ; 144, Par. 651 Transfer Entry Page 143, Par. 647 Proceeds Page 99, Par. 452 Produce and Provision Business Page 94 Promissory Notes Pages 29, Par. 189; 99, 217-219 Proofs of Addition - Page 231 Bookkeeper's Method Page 231 Eleven Method Page 232 Nine Method Page 231 Nineteen Method Page 235 Seventeen Method Page 235 Thirteen Method Page 232 Unitate Method Page , 231 Of Posting Pages 124, 140, 231-235, 238-241 Proprietors Stock Account Pages 36, 77 Purchase Book Pages 43, 111 Ledger Page 228 Order Page 8, Par. 41 Questions and Answers • Pages 62-63, 70-71, 77-79, 109-110, 126-127 Quorum Pages 162, 165 Railroad Claims Page 247, Rate of Commission Page 128, Par. 594 Reasons for Making Shipments Page 100, Par. 453 For Using Red Ink Page 36 Rebates and Returns Page 244 Receipts [ Pages 88, 219-221 Receiving Book Page 131 Teller Page 198 Reference Book Page 230 Registered Letters Page 226 Regular Meeting Page 165 Renewing Notes Page 96, Par. 435 Reserve Fund Page 163 Resources or Assets Page 32, Par. 222 Rest Account Page 163 Retail C. O. D. Orders Page 120 Retail Hardware Business Page 121 Returned Checks Page 99, Par. 447 Returned Merchandise Pages 35, 36, 244 Returns and Rebates Page 244 Review Pages 62-64, 70-71, 77-79, 109-110, 126-127, 196-197 Ruling Exercise Page 45 Suggestions on Page 38 Safeguard Check Systems. . .Pages 140, Par. 633; 231-234' Application Pages 140, 231-234 Trial Balance by Page 234 Sales Book Pages 56-58, 112, Par. 526 Common Form Pages 57-58 Journal Page 112 Ledger Page 228 Special Form Pages 150-151 Sale Subject to Draft Page 103, Par. 485 Savings Bank Page 198 Self-Balancing or Self-Proving Ledgers. . .Pages 227, 240 Settling Date Page 12, Par. 54 Seventeen Check Figure Method Page 235 Shipments Page 99 Commission Page 99, Par. 451 Consignee, Consignor Page 99, Par. 450 How to Make Page 100, Par. 460 In Bond Page 246 Invoice Page 100, Par. 459 Receipt Page 100, Par. 456 Shipment Account Page 100, Par. 454 Shipping Goods Page 102, Par. 482 C. O. D. by Express Page 120 C. O. D. by Freight Page 120 In Bond Page 246 Invoice Page 100, Par. 459 Receipt Page 100, Par. 456 Signature at Bank Page 4 Book Page 4 Card Page 4 Corporate Page 166 Individual Page 241 Single Entry Bookkeeping Pages 1, 121-125 Account Page 123, Par. 579 Balance Sheet Page 124, Par. 582 Books Pages 121-123 Cash Book Page 123, Par. 575 Changing from Single to Double. Page 125, Par. 589 Changing from Double to Single. Page 125, Par. 591 Day Book Page 121, Par. 569 Journal Page 121, Par. 570 Ledger Page 123, Par. 578 Opening Entry Page 123, Par. 573 Sinking Fund Page 163 Six-Column Journal Pages 96-98 Sixteen-Column Journal Pages 133-140 Special Column Cash Book Page 149 Spot Cash Page 243 Statement of Account '..... Page 67 Forms of Pages 68-69 Of Affairs Page 215 State Bank Page 198 Steps in Closing Books Page 92 Stipulation as to Value of Goods Page 246 Stock Page 94, Par. 416 Canceled Page 187 Capital Page 161 Certificate Page 170 Certificate Book Page 169 Choice of Page 160 Common Page 161 Deferred ,.,,...,,.,.., Page 161 TABLE OF CONTENTS XI Stock Dividend Page 163 Exchange Page 164 Forfeited Page 175 Guaranteed Page 161 Journal Pages 176-177 Ledger Pages 178-180 Non-assessable Page 161 Ordinary Page 161 Preferred Page 161 Sold at Discount Page 175 Sold at Par Page 174 Sold at Premium Page 175 Surrendering Page 187 Subscription Book Page 169 Transferring Page 187 Treasury Page 161 Wanted ' Page 161 Stockholder Page 162 Stoppage in Transitu Page 246 Storage Page 129 Subdivision of Accounts Page 212 Suggestions on Ruling Page 38 Summary Account Pages 35-36 Surplus Fund Page 163 Account , Page 182 Appropriation Page 188 Suspense Account Pages 104, 224 Suspended Account Page 224 Syndicate Page 165 Tanning Business Pages 145-157 Taxes Page 241 Testing Bills Payable Account Page 54 Bills Receivable Account Page 54 Cash Page 81 Footings Pages 133, Par. 625 ; 145, Par. 655 Merchandise Account Page 54 Thirteen Method of Proof Pages 232-234 Ticket, Job or Time Page 236 Time Book Page 235 Discount Page 75, Par. 381-382 Register Clock Page 236 Trade Discount Page 73, Par. 376 Mark Page 242 Transfer Book Page 176 Entry Page 143, Par. 647 Journal Page 176 Transferring Accounts to a New Ledger ...,.,. Page 48, Par. 290 Transferring Balances Pages 38, 203 Footings Pages 26-27, 38 Ledger Accounts Page 48, Par. 285 Stock Page 187 Transmission of Money Page 226 Transpositions Page 238 How to Find Pages 235, 238 Transplacements Page 238 How to Find Pages 235, 238 Traveling Expenses Page 242 Treasury Stock Page 161 Given in Exchange for Mdse Page 185 Trial Balance by Differences Page 27, Par. 153 By Totals Pages 18, Par. 103; 34, 78, 92, 107, 108, 124, 144 Continued Page 126 Daily Page 54, Par. 336 Form of Pages 19, 34, 92, 107, 108, 144 How to Take Pages 19, 28 Questions and Answers on Page 78 Trust Page 164 Two Sets of Corporate Books Page 166 Unitate Method of Proof Page 231 Unpaid Commercial Papers Page 210 Unusual Losses or Unusual Gains Page 243 Use of Deposit Slips Page 226 of Note Stub Page 29, Par. 191 Value Page 1, Par. 10 Various Bookkeeping Methods and Require- ments Page 224 Vocabulary of Commercial Terms Pages 249-254 Voting by Proxy Page 162 By Stockholders Page 1 62 Voucher Record Page 145, Par. 655 Checks Pages 152-157 Form of Pages 146-147 Posting from Page 146, Par. 662-664 Proof of Page 145, Par. 655-657 Voucher System Pages 145-157 Applicability of Pages 151, Par. 672 Closing Books of Page 151, Par. 671 Modified Page 157 Waiver of Notice Page 165 Waive Protest Page 242 Watered Stock Page 161 Wholesale C. O. D. Freight Orders Page 120 Without Recourse Page 223 Working or Operating Capital Page 162 If a father wishes to give his son a legacy better than houses, lands, gold or silver, let him give him a practical business education. — Horace Mann. Without a thorough and practical business education, a business man is like a ship at sea without a compass or rudder. — Hon. W. T. Harris, Commissioner of Education. STUDENT'S GUIDE TO THE Ellis Method of Actual Business Practise DEFINITIONS AND PRINCIPLES 1. Bookkeeping in its general sense is the art of keeping a more or less classified record of the values exchanged in business transactions. The record is made on ruled forms or books, called books of account. The books of account will be described as the student is called on to use them. The Journal and the Ledger are the first books to be used. 2. Journal. — The word Journal comes from the French "jour," which means day. It is there- fore a Day Book, and is often spoken of as the Journal-Day Book or Day Book-Journal. It is the .book in which the transaction is first recorded, journalized, put in a bookkeeping form, showing its debit and its credit; and hence is called a book of "original entry." 3. Ledger. — The word Ledger, from the Dutch "legger," to rest, means to lie, or to rest. It is the book to which the debits and the credits of the several transactions are transferred, and grouped under accounts, each debit or credit being collected under its proper class. As entries are transferred from other books to the Ledger, the Ledger is called the book of "subsequent entry." 4. Business Transaction. — A business transaction is an exchange of values. 5. Two Methods of Bookkeeping. — Complete or incomplete classification gives rise to two methods of bookkeeping, Double Entry and Single Entry. 6. Doubly Entry. — If the classification is complete and the corresponding values received and given are named in the record, the method is called Double Entry; because for every value received the corresponding value given is named in the record; hence two entries or Double Entry. Double Entry is both a science and an art. It has complete classification. Double Entry Bookkeeping, then, may be defined as that method of recording the values exchanged in business transactions in such manner that they will balance or prove themselves beyond a reasonable doubt and from which an exhibit of the true condition of a business can be made. From this it will be seen that Double Entry Bookkeeping is in its entirety as a system a mathematical science and is properly expressed in an equation, as 4=4, 10=10, x=x. If at any time this equality is destroyed the books are said to be " out of balance." *7. Single Entry. — If the classification is incomplete and only a value received or a value given is named in the record (and in strictly Single Entry only values pertaining to personal accounts are recorded) , the method is called Single Entry ; because only a value received or a value given is named in the record of a simple transaction. Single Entry can hardly be called a science. It lacks the complete classification of a science. It also lacks the self-proving feature of Double Entry. As it lacks complete classification, its record is not susceptible of full and complete exhibit of the true con- dition of a business, and it is therefore of little value compared with Double Entry. 8. Account. — When the names of the several classes of related values are collected under a common heading, the heading is called an Account. 9. Entry. — An Entry is the record of a transaction showing the name of the value received and of the value given in Double Entry; or only the name of the value received or the value given in Single Entry. A brief but clear explanation should accompany each entry. 10. Value. — Value is the estimated worth of things or services, and is measured by dollars and cents, or the money of the country where the business is conducted. The values received are called Debits; the values given are called Credits. [1] ■: 2 •••;'• JOBBING BUSINESS LaWs.«J-/The'Iaws of the science of Double Entry Bookkeeping are based on the equilibrium of Debits and Credits. 11. Debit. — To debit an account (the name of the value received) is to write the name of the account in the left-hand or debit position of a ruled form or book of account and to set the amount in the left-hand or debit money column. The debit position in the Journal is next to the date column 12. Credit. — To credit an account (the name of a value given) is to write the name of th<* account in the right-hand or credit position of a ruled form or book of account and to set the amount in the right-hand or credit money column. The credit position in the Journal is an inch or an inch and a half to the right of the date column. Application of the Art — The specific directions for the application of the principles or laws to the art of Double Entry Bookkeeping will be found in paragraph 15. SPECIAL SUGGESTIONS In bookkeeping, as in other things, it is important to begin right. First in importance is Neat- ness. Rigidly avoid finger marks, blots, erasures, etc. Keep your hands clean, and your desk and books free from dust. Remember that in bookkeeping, slovenliness is the unpardonable sin. Do not leave your books open when you are not using them, and never place a book upon an open book, or make out business paper upon an open book. Use the blotter freely, and keep it under your hand when you write. Use but one side of the blotter for absorbing ink; write the word "Up" on the side on which the hand is to rest. Be careful to keep your hand and pen in the correct position. Use pen and ink in all your work, and avoid writing with too much, or not enough, ink on -your pen. In making out papers, use the current date (the date on which you are working) and your own name. Whenever you are in doubt about the proper procedure, consult your Guide; under no cir- cumstances trouble your teacher about any matter until you have attentively read all instructions pertaining to it, and have given your difficulty careful thought. Be methodical and orderly in taking care of your books, stationery, etc. Have a place for everything and keep it there. In effecting a business transaction, there are often several things to be done; learn to do these in their proper order. Follow your directions to the letter, and never attempt to carry out a direction until you have read the instructions concerning it. Constantly observe the above suggestions, and you will make success certain; disregard these and grow careless, slovenly, and disorderly in your work, and you will as surely fail. If you have carefully read the above instructions, you may turn to the Business Directions. THE JOBBING BUSINESS 13. For convenience, the first business in which you engage will be called the Jobbing Business. A Jobber is one who buys merchandise from the manufacturer and sells to the retailer. A jobber or wholesaler buys in large or small quantities to suit the convenience of his trade, and he sometimes buys special orders for his customers. In modern business there is practically no difference between the wholesaler and the jobber, and the terms are often used interchangeably. OPENING ENTRY 14. The first procedure in bookkeeping is to open the books. This is done by writing in the Journal a preliminary statement, called an Opening Entry. The Opening Entry formally sets forth the name, conditions, proprietorship, and investments of the business. With the exception of the date, place of business, and name of the proprietor, the following Open- ing Entry, paragraphs iO and 17, is the form required for the Jobbing Business. Make a copy of this on Journal paper, using your own name, town or city, the current date, and name and number of the street for the business you are to conduct. JOBBING BUSINESS 3 The debits and the credits are made in accordance with the following Principles of Double Entry Bookkeeping : 15. The Principles of Double Entry Bookkeeping (often called "Rules for Journalizing" or "Laws of Debit and Credit") may be set out under three heads, as follows: (1) In Double Entry Bookkeeping, the debit entry (or entries) must equal the credit entry (or entries). (2) Debit (a) what comes into the business, or (b) what costs the business; or (c) debit Resources and Losses. (3) Credit (a) what goes out of the business, or (b) what produces ; or (c) credit Liabilities and Gains. The required Journal entries for a variety of transactions are given in the various Journal forms in this Guide. See below and pages 22, 23, 24, 25, 87, 88, 90, 91, 97, 98. r~J: /^0^> 1. Cash is debited because it "comes into the business." (2) (a) Par. 15. Student is credit liecause he "produces." (3) (b) Par. 15. 18. -t^z^X^ ~/\Z^rzs^^^r' / 'rrz^r' -~^2*f sZ h ^, dse is debited because it "comes into the business." (2) (a) I'ar. 15. Cash is credited because it "goes out of the business." (3) (a) Par. 15. "T^^ZU^-^C^ 20. 0f /JZ3 & JOBBING BUSINESS SIGNATURES AT THE BANK 21. Banks require all depositors to leave their Signatures when making their first deposits, so that the bank may have some absolute method of determining the genuineness of checks or other paper offered for payment. Sometimes these signatures are kept in a Signature Book. In this book the depositor places his name in full, his signature, his address, and the date of opening the account. The more modern plan for keeping depositors' signatures and addresses is to have cards properly ruled for this purpose, the depositor placing his signature on the card, and the bank filling in any other information they desire. The accompanying forms illustrate the card method and the book plan. 22, You should study these very carefully because the bank will require you to leave your signature when you make your first deposit. It would be well for you, at this time, to submit a signature to your teacher for approval, that he may assist you in determining the best signature for you to adopt. It is a mistaken idea that a complicated signature with many curls and turns is difficult to forge. The plain signature without any additional marks of any kind is the most difficult to duplicate. When you determine upon a method of signing papers, the signature should never be varied, but all papers should be signed the same. £4/-?.. ^ yj2 sJ^^J^ X AUTHORIZED SIGNATURE {GIVE OFFICIAL TITLE IF ANT.) Name .(TiZJk,*. z*-r^/ Address ■ */■&/ *Z>jL-r^jt/,6Z, J , -V^( J /KWy J&iS^dT (Savings Dept.) (Commercial Dept.) Signature Book SURNAME GIVEN NAME SIGNATURE ADDRESS DATE y^e^^-^trr? '^Ve^^s/^, ^^S^^/c^ ^/f'-tZzJL'i&tJsr ^d£^^/(p. CHECKS 23. A Check is a written order by a bank depositor directing the bank to pay a specified amount to some person named in the check, or to his order, or to the bearer. If the maker of a check desires to cash it himself, he should make the check payable to himself, or to cash. Unless otherwise specified, checks are always payable on demand. 24. The Check-Book is a book of blank checks from which the depositor obtains his checks when- ever he wishes to draw money from the bank. A check-book should be arranged so that the checks may be torn out, leaving a stub showing the number of the check, the date of the check, to whose order it is payable, for what given, and the amount. Many check stubs are ruled so as to allow the keeping of the bank account on the check stub, which will be done later in the student's work. At the present time, how- ever, the student will keep his bank account by means of a Banking Ledger^ which is a book specially prepared for this work. JOBBING BUSINESS CHECKS — Continued 25. In writing a check, care should be taken that the body of the check exactly agrees with the stub, and the check stub should always be filled out before the check itself is written. This is done to avoid error in filling out the stub, as you will not forget to fill out the stub if you write the stub before you write the check. 26. The person to whom the check is payable is called the payee, and the person who signs the check is called the drawer or maker. In the following check A. W. Hill is the payee, and H. B. Burton is the maker; while the Merchants Bank is the payer of the check, or the bank on whom it is drawn. 27. In your present work you will make out all required checks in accordance with the following form; writing your own town, state, and current date in place of "Cincinnati, Ohio, Sept. 10, 1909," and the name of the person to whom you are to give the check instead of the name of "A. W. Hill" ; and you will sign your own name exactly as you left your signature at the bank, in place of the name " H. B. Burton." No. of Check_Z_ Bat. brought forward Am't Deposited Total in Bank Am' t of this Check Balance in Bank *r/?0o. / < ? ( ? jA-fCC No.^/_ ^~~t^S^^^^^7j!sA )tt^\s? > >4rs&*'j4 I90_£* THE MERCHANTS BANK Pay to_ sZ/sSt(£/A. nr^v*^ ^/OO^ \^Zr?^s i^A4^^^^^^tO~ DOLLARS Important Points About Checks 28. You should be careful in writing your checks so that they cannot be easily raised. It is a poor policy to write a check for any amount smaller than $1.00. If you desire to write a check for less than one dollar, you should write it in accordance with the following form : No. of rtiorl /^/^. To. 190-^. Bat. drought forward Am't Deposited Total in Bank Am't of this Check. Balance in Bank <3/J,0 6 2 ( ? < 3f^£^^^ T 9 n tf THE! MERCHANTS BANK Pay to. ?^?7^is£y S^f7-7>7y- .or v bca r cf ^ ft <-? " C7> Dollars 32. If the drawer of a check desires to do so, he may specify on the back of the check, as in the following form, that for which the check is given. This may be written on the face of the check, but it is better not to have any writing not absolutely^ necessary on the face of a check. c^/?y W t 190 a NTS BANK or ^ ear e r ^ $ ^7fc? Dollars JOBBING BUSINESS 7 Important Points About Checks — Continued 33. All checks should be promptly cashed or deposited to the credit of the holder. When the maker of the check is a responsible party and his credit is beyond dispute, there would not generally arise any harm in holding his check for a few days ; but if a Check should be held more than a reasonable length of time, and the bank on which the check was drawn failed in the meantime, the debt for which the check was given would be discharged, provided the maker had money on deposit at the time the check was written. This court decision rests on the ground that the holder of the check did not exercise due diligence in obtaining his money. 34. A large number of checks now in use by business houses resemble drafts. See accompany- ing form. J? AT TO THE 1 i^/p; , Vfif? DOLLARS College Currency Order ot ^ ^Kl?J2 ^£>^6s*4r*/Z S^^£y^y^^y /£{? jL -&L /,$<$ ,£22. Lj^rZ?^£^ Z^££^ktz ^uJ^A^L^ZtaLda^d^ ^ saj7 Dollars In College Currency _i_ DEPOSITED WITH flerchants Bank FOR ACCOUNT OF II. B. BURTON SEPT. 11, 1909. All Checks and Drafts must be Indorsed. 46. Deposit Slip — (Often called Deposit Ticket or Deposit Tag.) This is a form furnished by the bank and made out by the depositor, and which sets forth the various items of the deposit. Note. — The description of the Deposit Slip and its use, as here given, refer to its use in your preliminary work only. 4T. Direction. — Fill out your Deposit Slip in accordance with the accompanying form. When your Deposit Slip is made out, compare the entries and amounts with the checks for deposit, making sure that there are no omissions or duplicate entries, also, that no error has been made in addition or in count- ing currency ; then enter a copy of the Deposit Slip in your Banking Ledger, as the items of the accom- panying Deposit Slip are entered in Banking Ledger Form on page 10. Do no ruling in your Banking Ledger until told to do so in your instructions. 48. Direction. — Prepare your deposit for the 'banker by arranging the checks in the order that you have entered them on the Deposit Slip ; then place them in the Pass Book with the Deposit Slip, at the page where the deposit is to be recorded by the banker. 49. Take your Deposit Slip, Checks, and Pass Book to the banker, who will enter the amount of your deposit in the Pass Book and return the book to you. Cu rrency Checks Amer. Mdse. Co 1 2 9 5 3 5 4 3 5 2 3 3 7 4 ?>n (C 11 It <( II 11 1 1 1 1 8 II << II II II II 60 li II II 90 30 10 JOBBING BUSINESS Deposit Items /^0»** Total Deposit Date -7707- No. Checks /■W7" ^2ffi /3 -^^Tpc^tz^z^c^y l) V ft ^dUfc/: /*£ ^ZzzsC^Tsc^s- 3*000 /33J~0 /33 7&*J< // / // 3 // * ^0^/30 J-fe?0. ^/*£/0 -/SU dT// jt2,0 /3 r 266 Pz> /S 7 2/6 /3 /0 263 fa /J // 3/ £- M /2 / f-f /J /J ■ 2 J 2, 77 6 3~477 ch> *Bff? <7^-pt7 JL*7o A /Jr 2-jr so 3fjza / 3/P's/ 12 JOBBING BUSINESS T^^t?- ' 1 •■ ■ " ?6>fO /a AX^/ ^t4^^/> /3ffj7* 2,0 7f2,S2, 50. Holidays for Business Offices. — A business office is in a measure bound to be open for the business of the public, especially for the settlement of matured obligations, within certain recognized business hours upon all business days of the week, except those recognized by law as legal holidays. The law of the different States varies, the customary holidays being: 51. January], February 22, May 30, July 4, and December 25. Some States observe February 12, Good Friday, Labor Day, and the various election days, either state or national. 5£. The time for payment of papers maturing on holidays or Sunday greatly varies according to custom. In some States a paper maturing on these dates must be paid the nearest business day prior thereto, while in other States payment is permitted on the first business day following the holiday. This condition of affairs has resulted in large firms introducing into their work a form of notes and other commercial paper, in which, instead of specifying a time limit such as so many days or so many months after date, the actual date of maturity is fixed in the paper; thus, "on Jan. 10, after date, no grace," and papers so written are payable on the date specified and on no other. In writing such papers, particular care is given that the time shall be neither a holiday nor a Sunday. 53. Particular care should be observed when receiving commercial papers, to ascertain whether the papers should be protested or not upon non-payment. Many business houses take the position that if a paper bears no endorsement, there is no need to protest, but this is not always true, for there are many cases where the owner of a commercial paper may desire it protested with a view to bringing suit. This is especially true with banks. This may cause some inconvenience at times, and may be the means of causing hard feeling on the part of your customers toward you, hence you should exercise great care in this matter, and before having your matured commercial paper protested, you should present it to the maker for payment, and if he requests you to hold same, and is reasonably good, it is a wise plan to do so for a reasonable length of time. The better plan, however, is to obtain at least a small payment and renew the balance due by writing a new note for the amount still due, or endorsing the amount paid on the draft, if the commercial paper happens to be a draft. 54. Settling Date. — If a regular " settling date " has been adopted by your school, be sure that you have all statements made out and delivered on that date, in accordance with the instructions of your teacher. If no regular settling day has been adopted you will see that all accounts are collected when they mature according to the dates of the invoices, and you will pay all bills promptly so as to obtain the various discounts. 55. Assistance. — You are strictly forbidden to receive assistance from any student. Remember that you are paying your teachers for professional help. You are also strictly forbidden to give any assistance to other pupils. You are in school to learn and not to teach. JOBBING BUSINESS 13 DIRECTIONS FOR FIRST POSTING 56. The various debit and credit amounts in the books of original entry are transferred daily, or at other stated periods, to a book called the Ledger. Transferring these items is technically called Posting. 57. In Posting, we group the various debits and credits under their proper headings in the Ledger. Each one of these groups is called an Account. All the debit and credit amounts relating to merchandise purchases and merchandise sales are posted to the Merchandise account. All entries relating to cash paid out or cash received are posted to the Cash account. Each account in the Ledger has two sides, the debit side and the credit side. All the debit amounts in the books of original entry, that is, all the amounts in the left hand column of the Journal, are posted to the debit side of their respective accounts in the Ledger, and all the credit amounts in the books of original entry, those in the right hand column of the Journal, are posted to the credit side of their respective accounts in the Ledger. See Guide page 18. 58. If you have read the preceding instructions carefully, you may now prepare to post the amounts of your journal entries to the Ledger according to the following instructions : 59. The first entry in your Journal is Cash to Student, $5,000. Cash is Debited and you are Credited for the amount of your investment. It is the best plan in posting, to post all of the Debit items first to their respective accounts, and then to post all of the Credit items to their respective accounts. As Cash is the first debit item in your Journal, you will turn to the second page of the Ledger and write the word Cash on the light blue line at the top of the page, as shown in Cash account No. 1, Guide page 15. To post the cash to this account first enter the date of the transaction as recorded in your Journal in the date column of your Ledger. Second, enter the journal page "1" in the journal folio column of the Ledger, to show where the journal entry is found. Third, enter the amount in the money column, the same as the $5,000 is entered in the money column in Cash account No. 1, Guide page 15. 60. When an item is posted to the Ledger, the Ledger page is entered in the ledger folio of the book of original entry opposite the item posted, to show to which page in the Ledger the item has been transferred. This column is located either to the immediate right or to the immediate left of the explanation column as shown below. Use whichever column your teacher prefers. The column not used for the ledger folio may be used for the transaction number. -2. — &^dJzy J{0 O Date fooo In books of original entry, (as used in business offices), the folio column (abbreviated LF) is some- times placed next to the day column and sometimes next to the money column. In the Ledger the folio column (abbreviated J F) is nearly always placed next to the money column. 62. The next debit amount in your Journal is $1 00, which should be posted to the debit side of the Expense account. You will now turn to ledger page 3, and write the word "Expense" on the light blue line at the top of the page. Next enter the date of the transaction in the date column of your Ledger. Second, enter a figure (1) in the journal folio column of the Ledger to show the journal page from which the item is transferred. Third, enter the $100 in the dollar column. See account No. 2, Guide page 15. 63. To show that this item has been transferred to the Ledger, enter a figure (3), which is the ledger page to which it was transferred, in the ledger folio column of your Journal opposite the word Expense, just the same as you entered the figure (2) opposite the word Cash in the preceding entry. 64. The next debit amount in your Journal is Merchandise $207, which should be posted to the debit side of the Merchandise account in the Ledger. You will open an account with Merchandise in the Ledger by writing the word " Merchandise" on the light blue line at the top of Ledger page 4. See account No. 3, Guide page 16. 65. You may now enter the date of the transaction as recorded in your Journal, in the date column of the Ledger, and the journal page in the journal folio column, and the amount, $207, in the money column. As the item is now posted to the Ledger, you will enter the ledger page 4 in the ledger folio column of the Journal, opposite the word Merchandise, the same as the figure 2 is opposite the word Cash, and the figure 3 is opposite the word Expense. 14 JOBBING BUSINESS DIRECTIONS FOR FIRST POSTING — Continued 66. The next, debit amount in your Journal is $123. 50, which you will easily see should be posted to the debit side of the Cash account in your Ledger. You already have a Cash account open in your Ledger, so the only thing to do is to enter this amount in the Cash account on ledger page 2, immediately below the entry of $5,000. Be sure to record the date and the journal page on which the original entry is found. See account No. 4, Guide page 16. When you have this amount posted to the debit side of the Cash account, be sure to enter the ledger page 2 in the ledger folio column of the Journal, to show that the item has been posted. 67. Post the next debit amount, $95, to the debit side of the Cash account in your Ledger on page 2. If in doubt as to the correct way to do this, see account No. 5, Guide page 16. When the item is posted to the debit side of the Cash account, be sure to enter the ledger page 2 in the ledger folio column in the Journal opposite the entry, to show that it has been posted. 68. Post the next debit amount, $270, to the debit side of the Merchandise account on page 4 of your Ledger, the same as the $270 is posted to the debit side of account No. 6, Guide page 16. Be sure to enter the ledger page in the ledger folio column, to show that the item has been transferred to its proper ledger account. 69. When you reach the second page of your Journal, you must remember to enter journal page 2 in the journal folio column in the Ledger. In succeeding postings always enter in the journal folio column of the Ledger, the page of the Journal from which the amount is posted, without being told to do so in the directions. 70. Post the next debit amount, $152, to the debit side of the Cash account on page 2, the same as $152 is posted to the debit side of account No. 7, Guide page 17. 71. Post the next debit amount, $133, to the debit side of the Cash account on ledger page 2. See the last entry in account No. 8, Guide page 17; Be sure to enter the ledger page in the ledger folio column of the Journal, and the journal page in the journal folio column of the Ledger. 72. Post the next debit amount, $288, to the debit side of the Merchandise account on page 4. Be sure to enter the date as recorded in your Journal, and be sure to enter the journal page in the journal folio column of the Ledger. See account No. 9, Guide page 17. 73. Post the next amount, $153.60, to the debit side of the Cash account on ledger page 2. See sixth entry in account No. 10, Guide page 17. 74. Post the next debit amount, $147.20, to the debit side of the Cash account on ledger page 2. See the last entry in account No. 10, Guide page 17. Do not forget to enter the ledger page 2 in the ledger folio column in your Journal, to show that this item has been transferred to the Ledger. 75. Now that you have posted all of the debit items to your Ledger you will submit your Ledger to your teacher for approval. When the same is approved you will continue your posting, and post only the credit amounts to the credit side of their respective accounts in the Ledger, in accordance with the follow- ing instructions : 76. The first credit item as recorded in the Journal is your investment of $5,000, which should be posted to the credit side of your own account. As you have not yet opened an account with yourself in the Ledger, you will now turn to page 1, and write your own name and the word stock on the light blue line at the top of the page, as " H. B. Burton, Stock," is written at the top of account No. 11, Guide page 18. 77. To post the $5,000 credit to your account, first enter the date as recorded in your Journal ; second, enter the figure 1 in the journal folio column of the Ledger, to show on what page in the Journal this entry is found. Now, enter the $5,000 in the money column, just as the $5,000 is posted to the credit side of account No 11, Guide page 18. 78. Have you noticed in looking over these Ledger accounts, that the year date is entered at the top of every column ? If you have not entered the year date you may do so at once, and remember here- after in all your posting that the year date should be entered after every double red ink ruling, and that the year date is just as important as the month and day. JOBBING BUSINESS 15 DIRECTIONS FOR FIRST POSTING — Continued 79. Post the next credit amount in your Journal, $100, to the credit side of the Cash account on the second page of your Ledger, the same as the $100 is posted to the credit side of account No. 12, Guide page 18. First, enter the date as recorded in your Journal in the date column. Second, enter the Journal page 1, in the journal folio column of the Ledger. Next, enter the amount, $100, in the money column. Now, enter the ledger page 2 in the ledger folio column of the Journal, to show to which page of the Ledger this item has been transferred. 80. Post the next credit amount, $207, to the credit side of the Cash account on page 2 of the Ledger, as the $207 is posted to the credit side of account No. 12, Guide page 18. 81. Post the next credit item, $123.50, to the credit side of the Merchandise account on ledger page 4, as the $123.50 is entered on the credit side of account No. 13, Guide page 18. Do not forget to enter the ledger page in the ledger folio column of the Journal, at the time of posting the items to their respective accounts in the Ledger. Hereafter you are expected to do this without being told. 82. Post the next credit amount, $95, to the credit side of the Merchandise account in the Ledger. See second entry on credit side of account No. 13, Guide page 18. 83. Post the next credit amount, $270, to the credit of Cash. See third entry account No. 12, Guide page 18. 84. Post the next credit amount, $152, to the credit of Merchandise. See third entry account No. 13, Guide page 18. 85. Post the next credit amount, $133, to the credit of Merchandise. See fourth entry account No. 13, Guide page 18. 86. Post the next credit amount, $288, to the credit of Cash. 87. Post the next credit amount, $153.60, to the credit of Merchandise. 88. Post the next credit amount, $147.20, to the credit of Merchandise. 89. You will now submit your Ledger to your teacher for approval, and when approved, you will carry out in detail the instructions for taking a Trial Balance and closing the Banking Ledger and Cash account, as given in Guide pages 18 to 2 1 inclusive. 90. ACCOUNT NO. I JF / sooo JP 91. ACCOUNT NO. a ^ / /3 / / / 2, / OO .zyo art -c^^y '&#? /J2, /3 / / 3, 207 270 /o /2 /.2 /3 / s / 2, 2 / 3 3 SO fS /J3 / 3 3 / S3 6V / 472-0 TRIAL BALANCE 103. A Trial Balance is a form prepared for the purpose of testing the correctness of your posting. It should show that the total debits in your Ledger equal the total credits in your Ledger. A Trial Balance consists of a list jf the Ledger accounts, with the debit footings and the credit footings of each account. The debit and credit columns of the Trial Balance are then added to show that the sums posted to the debit side of the respective accounts equal the sums posted to the credit side of the respective accounts. If the two sides of the Trial Balance equal it is reasonable to suppose that the amounts have been correctly posted from the Book or books of Original Entry to the Ledger. 104. It should be kept in mind, however, that a Trial Balance does not absolutely prove the correctness of the work. It proves only that for every debit amount posted there has been posted an equal credit amount. Accounts that are in balance (if the debit side of the account equals the credit side of the account) may be omitted in taking a Trial Balance. Ask your teacher his preference. Trial Balance by Differences is described elsewhere. See par. 153. JOBBING BUSINESS 19 DIRECTION 105. The first thing to do in taking a Trial Balance is to find the total of each account in the Ledger, writing the result of each account in small, light and very plain figures underneath the last ink figures. The object in putting these footings in small figures is so that they will not interfere with the posting of additional amounts. 106. Sharpen your pencil to a fine point, and add the debit and the credit sides of each Ledger account. When this is done, take a sheet of journal paper and write the name of each account in the Ledger and the total sum of the debits and the total sum of the credits, as shown by the pencil foot- ings. When writing the name of the account also place the number of the ledger page of each account in the day column at the left, as shown in the accompanying form. 107. Now find the total of each column of the Trial Balance, the footings of which should be equal. If the footings are not equal, compare your Trial Balance with the accompanying form, which will enable you to locate the account or accounts containing the mistake. I f you have made an error it is more likely to be in adding or posting than in any other place. When you have this Trial Balance properly made out submit a copy of it to your teacher, and when approved enter the same on the first page of your Trial Balance book. 108. (Z\ /J, /ff'f / 3 / o o 7 6s \fo4- 3o 66^30 &66t?30 CLOSING ACCOUNTS 109. When an account is in balance, that is, when the sum of the debit column equals the sum of the credit column, the account should be ruled up and closed. See Bills Payable account, Guide page 27. Observe that the red ink rulings are always placed on the same line. 110. To close an account that is not in balance you first find the difference between the two sides of the account, which is the balance. Then write the word "Balance" on the lesser side of the account in red ink. Then rule the account the same as an account that is in balance, but bring the balance down below the red ink ruling on the opposite side in black ~'nk. See account No. 14, Guide page 20. 111. You may now close your Banking Ledger in accordance with the following instructions: 112. First, compare your Banking Ledger with your Cash account. To do this, it will be necessary to check the items entered in your Banking Ledger with the items entered in the Cash account. Also find the difference between the total amount of money you have deposited and the total amount of checks drawn, which is the amount of money you now have on deposit at the bank, or your Bank Balance. 113. As your money is all on deposit at the bank, this Bank Balance is your Cash Balance, which, if your work is correct, will agree with the difference between the two sides of your Cash account in the Ledger. 114. Ascertain the total debits and the total credits of the Cash account in your Ledger, and find the difference, which, if you have made no error, will agree with your Cash Balance as shown by the Banking Ledger. 115. You may now enter your Bank Balance on the credit side of your Banking Ledger, as the Bank Balance is entered on the credit side of the Banking Ledger on the following page. 116. Rule your Banking Ledger as shown in the accompanying form and bring the balance on deposit below the double red ink ruling. Be sure to write the year date, the month and the day of the month, and be careful that you get the figures in the right column. Submit this to your teacher for approval. 20 JOBBING BUSINESS FORM OF BANKING LEDGER 117. u M,*t *ui Merchants Bank Tout Deposit M Ctwcka w? /0 /<70? S'000 // C^???Z^u^ ¥-?3 ? J# J~f"0*Ag0 ZsTZ^C^Z.^ ^.737 3-0 CASH ACCOUNT IN THE LEDGER 118. As you probably understand by this time, the Cash account in your Ledger is a record of the separate amounts of cash received and a record of the separate amounts of cash paid out. The total of the debit column shows the total amount of cash received, and the total of the credit column shows the total of the cash paid out, providing there are no mistakes in your work. . 119. Closing the Cash Account. — The Cash account is usually closed at the end of every day's business, but sometimes its closing is deferred until a Trial Balance is taken, but the Cash account is always closed at the time of Closing the Books. 120. You may now close the Cash Account in accordance with the accompanying form and illustrations. Enter the Cash Balance as shown by your Banking Ledger on the credit side in red ink, the same as the Cash Balance is entered on the credit side of the accompanying form. Rule the account in red ink and place the footings of each column in black ink below the single red ink ruling. Draw the double red ink ruling exactly as shown in the accompanying form. Then bring down the Cash Balance on the debit side in black ink, being sure to write the date and the word " Balance." 131. ACCOUNT NO. 14 ^S^z^Ay /0 /0 /O /2 /2 /3 /3 / / / / 2 2 * /3 /3 jQeJs / / / 2 e= /oo 207 270 2/S* fy'73f 30 3f0<£30 JOBBING BUSINESS INDEXING THE LEDGER 21 122. It is necessary to index all the accounts in the Ledger in order that the accounts may be readily found. For this purpose several extra pages are usually inserted in the front part of the Ledger. Upon these pages the titles of the accounts are written alphabetically, a certain amount of space being reserved for each letter. This space varies with the nature of the business and the num- ber of accounts that are likely to be required. Your Ledger is so ruled that each column of the index page is reserved for a single letter. The letters to be used in the respective columns are indicated by the capitals printed on the margin of each right-hand page. Thus, the letters A, B, C, D on the first of these pages indicate that the first column on the left is for names beginning wi1|h "A." The second column is for names beginning with "B." The third column is for names beginning with "C," and the fourth column is for names beginning with "D." In the same manner the next group of letters, E, F, G, H, indicate the letters for the next four columns, and so on to the end of the index pages. 123. You may now index your Ledger, by writing in their respective columns the titles of the accounts, Cash, Merchandise, Expense, and your own account. In your own account write your own name, followed by your initials and the word "Stock," as the title "Burton, H. B., Stock," appears in the index form given, and a figure (1) to show on which page of the Ledger your account is found. Be sure to get your name in the proper column. 124. In the column for all accounts beginning with the letter "C" write the word "Cash" and the Ledger page on which the account is found. 125. In the column for all accounts beginning with "E" write the word "Expense" and the number of the ledger page on which the Expense account is found. 126. In the column reserved for all accounts beginning with " M " write the word " Merchandise " and the ledger page on which the Merchandise account is found. 127. Hereafter, in opening new accounts in the Ledger, first decide on what page the account is to be opened, then place the name of the account and the Ledger page in the proper column of your Index, after which you should write the title of the account on the proper page. This order should always be followed so as to avoid opening accounts in the Ledger and not having them properly indexed. (left-hand page.) (right-hand page.) A Anderson, J. P., 14 Burton, H. B., Stock, 1 Cash, 2 Dalton, J., 12 Adams, E. B., 108-93-54-18 Bills Payable, 5 s Alderson,W.G., 75-€(M4-29 c d 128. When the page assigned to an account is filled, it then becomes necessary to transfer the account to another page. When this is done, you write the new page number before the last page number given in the Index, separating the numbers with a dash in order to avoid confusion. See the page numbers after the name " E. B. Adams " in the accompanying form. This index shows that E. B. Adams' account was first entered on page 18, but afterwards transferred to pages 54, 93, and 108, respectively. The object in writing the numbers of the pages on which the account is in this order, is so that the last page is more easily noticed when looking for the account in the Index. 129. You may now present your books to your teacher for inspection. When they are approved, you will return to your work as outlined in the Business Directions. While waiting for your books to be examined you will study Part Two of the Guide, unless your teacher has other work for you to do. 22 JOBBING BUSINESS r 6. -/fcp'f \Zz>z/ 130. '/ r f, /f#f 133. / ^sv^s-^ / tb2^>^ '& ^ / %r' srrisy ^t>^-ii^t^c^~ ^00 /^^" 4L00 *foo #0 J6J 24 JOBBING BUSINESS ^ Sf0*f 140. ^StJZiriQyr. 141. 142 143. -2, ^ /Z^.^-i^^ -Jy PZ.2^ ~&J&rJ& /0. /?0f 144 jMz^^l^^ r- 2 ^* V. tp-yZ^ ^rrz^zS J~ooo £"0O «5V o ^a r- ~'J2,0 j/f JOBBING BUSINESS rv# /f#f 25 C^^^P?Z^uy^^ 145. 146. 147. .//, /?#f 6 /<70 P/0 r^f- 148. 2*S >j£^J£ ?*> ?z^ ff 6^ _^^ '^zj£j£^ts .2 />/«** S^o Sf0 Jf?6 /& jr^v ^fo/f &f-f6 /# /j „ /0 / /S2 „ // 2, 2 Z2, 3 / 42 SO n /2 s 2 6 3 „ /f 7 // 6 4o „ /f 7 203 70 „ // 7 / sjr 20 ,f /(T^y 3 / ff */o 3 / p-f 0 .2/7 <£6> £££££2^ 33-6*7 tf* .20 tTW^ -2 & r & 2 2/ 2-/ 22 23 y- /0 2S ^Czsz^A 3 7 / 6 / <£0 / 6/ */2* 200 / 60 3 t><7 &f ^V/fi/ The above merchandise account represents the postings and the postmarks if the Purchase, Cash, Sales, and Journal were used; the abbreviations P., C, J., and S., standing respectively for Pur- chase, Cash, Journal, and Sales. It also shows how the Mdse Inventory (if any) would be added to the credit side before finding the difference and closing; and how the inventory would be brought down, below the closing rulings, on the opposite side after closing. The footings at the bottom of page 26 and at top of this page show how footings are carried forward. 153. -<^L^^- 20 r?0? — /A // /f /f // 2,0 2S 2S" 3o 30 7 7 f / f f / 26> 6> Pv 2/ 6 2 6 3 70 3/3- / P-f 2S2 S 2. 70 t 7 7 r 2-6 6 Pv 2/ G 2C3 fo 3/3" / f? 2S2, / S02 70 153. Trial Balance by Differences. — Rule.— L In addition to taking totals of all Ledger accounts, take the differences of the Ledger accounts. Set opposite each account, the difference be- tween the two sides. Set the differences that fall on the debit side, in the debit column; and the differences that fall on the credit side, in the credit column. If your work is correct, these differences will balance. To illustrate : Suppose the debit side of the Cash account is $5892.14, and the credit side is $2848.19, the difference, $3043.95, would fall on the debit side, and would be set in the debit column. If an account had a debit and no credit, the full amount of the debit would be the difference, and the full amount of the debit would be set in the debit column. Suppose the debit of John Jones's account is $328.20, and the credit $518.40; the difference, $190.20, would fall on the credit side, and would be set in the credit column; and so on through all the accounts of your Trial Balance. 28 JOBBING BUSINESS DIRECTIONS FOR SECOND POSTING 154. In the previous directions for transferring the various amounts of the entries in your Journal to the Ledger, you were instructed to post all of the debit amounts first, after which you would post all of the credit amounts. You will, therefore, begin this posting by debiting Merchandise for $243, by entering this amount on the first line below the $288 in the Merchandise account, ledger page 4. 155. First, enter the date of the transaction as recorded in your Journal. Second, enter the journal page in the journal folio column in the Ledger. Third, enter the amount $243 in the money column. See Guide page 26. 156. To show that this entry is posted to the ledger you enter the number of the ledger page 4 in the ledger folio column of your Journal opposite the word ' ' Merchandise, ' ' as you were instructed to do in your previous posting. 157. Post the next debit amount, $190, to the debit side of the Cash account on the first line below the balance, $4939.30. Enter the date as recorded in your Journal, the journal folio, and the amount, after which you enter the ledger page in the ledger folio column of your Journal, to show that this item has been transferred to its account in the Ledger. 158. Post the next debit amount, $66.50, to the debit side of the Cash account. 159. Post the next debit amount, $261, to the debit side of the Merchandise account. 160. Post the next debit amount, $142.50, to the debit side of the Cash account. 161. Post the next debit amount, $135.80, to the debit side of the Cash account. 162. Post the next debit amount, $225, to the debit side of the Merchandise account 163. Post the next debit amount, $126.10, to the debit side of the Cash account. 164. Post the next debit amount, $114, to the debit side of the Cash account. 165. You now should have all of the debit items posted, and the postings indicated by check-marks which are the ledger pages on which the accounts are found. 166. You will now begin to post the credit items as recorded in the Journal to the credit side of their respective accounts in the Ledger, as follows : 167. Post the first credit' amount, $243, to the credit side of the Cash account on the next line below the double red ink ruling, exactly the same as the $243 is entered on the credit side of the Cash account on Guide page 46 . 168. First, enter the year date and the month and date of the transaction as recorded in your Journal ; then the journal folio, and the amount in the money column. 169. Place the proper figure in the proper column of the Journal to show that this item is transferred to the Ledger. Do this in the future without being told. 170. Post the next credit amount, $190, to the credit side of the Merchandise account. 171. Post the next credit amount, $66.50, to the credit side of the Merchandise account. 172. Post the next credit amount, $261, to the credit side of the Cash account. 173. Post the next credit amount, $142.50, to the credit side of the Merchandise account. 174. Post the next credit amount, $135.80, to the credit side of the Merchandise account. 175. Post the next credit amount, $225, to the credit side of the cash account. 176. Post the next credit amount, $126.10, to the credit side of the Merchandise account. 177. Post the next credit amount, $114, to the credit side of the Merchandise account. 178. You may now submit your Ledger to your teacher for approval. If approved, you may comply with the following instructions: DIRECTIONS FOR TRIAL BALANCE 179. Take a Trial Balance, proceeding according to your previous instructions, except that in adding the ledger columns you will not include any amounts above the double red ink ruling, that is, inasmuch as your Cash account has been balanced and the balance brought down below the double red ink ruling; begin this Trial Balance with the items below the double red ink ruling, but in all other accounts you are to take all of the amounts as recorded in the Ledger. 180. Be sure to take every account in the Ledger, whether you have posted anything to that JOBBING BUSINESS 29 account in this posting or not, as they are part of yQur Ledger just as much as those amounts which you have posted since you took your last Trial Balance. 181. In case you have trouble in getting this Trial Balance, verify each ste^ of your work as follows: 182. First look over the additions in the Ledger and then look over the amounts as recorded in the Trial Balance to see that you have made no mistake in transferring them from the Ledger to the Trial Balance. Also observe that each amount is written on the proper side of the Trial Balance. When your Trial Balance proves, submit a copy of it to your teacher, after which you will enter it in your Trial Balance Book as in previous directions. 183. You may now compare your Banking ledger and Cash account as previously instructed. If they agree, you will balance your Banking ledger and Cash account. 184. If you should have money on hand, either in the form of checks or currency, your Cash Balance would be the amount of money on deposit in the bank, plus the amount of money on hand, and the correctness of your Cash account is determined by ascertaining the difference between the two sides of the account, which should be the same as the Cash Balance. 185. Be sure to balance your Banking ledger first, because the only way you can determine your Cash Balance is to ascertain the amount of money you have on deposit. 186. If you have complied with the directions your money is all on deposit at the bank. Therefore, as you were previously told, your Bank Balance is your Cash Balance. 187. Let it be understood that your Cash Balance is not determined by finding the difference between the two sides of the Cash account, but is determined by ascertaining the amount of money which you possess. 188. You may now present your books to your teacher, and when they are approved, you will continue your work as outlined in the Business Directions. PROHISSORY NOTES 189. A Promissory Note is an unconditional promise in writing, signed by the maker, to pay at a stated time, or on demand, a specified sum of money, with or without.interest, to some particular person, or to his order, or to bearer. 190. Parties to a Note. — The parties to a note are divided into three classes. First, the Maker, who is the person who signs the note, that is, the one who is first responsible for its payment. The Payee is the person in whose favor the note is drawn, and to whom it is originally payable, or to whom it may be payable when the note is legally transferred. These parties, the maker and the first payee, are called the original parties to a note, while persons who endorse the note to transfer its title are called Endorsers and are also known as Subsequent Parties. 191. Use of Note Stubs. — Many note-books are printed so that the notes may be torn out from the book, leaving a stub for the purpose of keeping a record of the notes. This is not always done, but is very good business custom. When using a note-book with a stub provided, the stub should always be filled out, and it should be filled out before writing the note, for the same reason that the check-stub should always be filled out before writing the check. 192. How to Write a Note. — In your work in school you will make out all notes in accordance with the form on page 30, as a careful study of business custom shows this to be that most in use. If a note is not to draw interest cancel the words and characters, " Interest @ %," by drawing a heavy line through them. This will prevent a subsequent holder of the note filling in an interest rate and com- pelling the signer of the note to pay something that he did not agree to pay. 193. You should carefully read the chapter in your Commercial Law book, if you have one, relative to Promissory Notes. 194. The place of payment may or may not be specified. If any blank space in a note or any other negotiable paper is not to be filled out it should be cancelled by drawing a heavy line through the blank space as in the form on the following page. 30 JOBBING BUSINESS 195. Time to Run. — In the course of ordinary mercantile business, notes are usually drawn payable in three months, four months, six months, at the expiration of one year, on or before a certain date, or in whatever time is agreed upon between the maker and the payee of the note. 196. In order to afford the student considerable practise in the use of notes, in this course it has been decided to arrange for the notes to mature at short periods, say from one to thirty days. 197. When the time to run is expressed in months or years, the due date is always determined by compound addition, and all arithmetical computations to ascertain the present worth or interest due at maturity are figured by this method of determining the time. 198. If the time to run is expressed in days, the due date is determined by taking the actual number of days after the date expressed in the note, and all computations concerning the note are based on the actual number of days. 199. Maturity. — By the maturity of the note or any other negotiable paper is meant the time when the amount is due and collectable. 200. Days of Grace, — In some States the law allows the maker of a note or other negotiable paper three days longer than the time mentioned in the paper, in which to pay it. These three days are known as " Days of Grace." Inasmuch as days of grace cause confusion and oftentimes loss of money, many notes are written without grace, that is, the maker and the payee agree that the time for payment shall be a certain specified time without reference to days of grace. This agreement is expressed in different ways, but the most common are to write the words, "No Grace," or "Fixed," after the specified time. No days of grace are ever allowed on checks. 201. If days of grace are allowed in your State, you must add three days to the time mentioned in your notes and other time paper in order to ascertain their date of legal maturity, unless otherwise agreed at the time of writing the note. Thus, if you make a note on Jan. 15 payable one day after date, such a note, in case days of grace are allowed, would mature Jan. 19. 202. If you have carefully read your Law Book you are familiar with maturity on holidays. If you have no Law Book ask your teacher to explain this to you. 203. The following is a general form of a Promissory Note: No._^_ Date ^AyJ^J- /^ i g ^_ For ^=£^^2?^ Y Indorsed by 2s_ Int. at Due No._Z_ (y?z ^y , ^UO^L .after date_^Z_proniise to pay to the order of ~Z^2^Z^L^L^LyZ^S=Z2Lc^^ .$-2^^ V3^^^<^v4^ fo/ssr-r^ TV.TTARS payable at Due- ^^/~ .Interest at; :per cent. Value received. f f^ '? ^r^ f- '^y^&^L^^--^^/ 204. Bills Payable Account.— All promissory notes or other written obligations issued by the proprietor of the business are known in his books as Bills Payable. Written obligations include any written promise to pay on the part of the proprietor. An account is kept in the Ledger with Bills Payable. This account is credited whenever the proprietor issues any written obligation to pay and is debited whenever those obligations are paid, either in part or in whole. 205. The interest which is paid out or received by a business house is kept in a separate account and should never be entered or in any way connected with the Bills Payable account. 'g-O R DATE OF NOTE OR OF ACCEPT- ING DRAFT. S o D £ ° > 3 5 a 3 n 5 5 » ■ H ;* M Jo 3 o 1 is 1 s z p 5 s 11 H G C H ? 2 H JAN. a d c M FEB. MAR. APRIL. MAY. JUNE. JULY. AUG. s s SEPT. OCT. NOV. DEC. s YEAR. t\> a o r r > C/5 Ov Os s? > 2 n m z H 11 s Ck. No. 8 When you pay this note explain how paid, as la the notation shown abo»e. > i. p z 3 1 £L O 2 CL rt wo *— r /; CL w pj 3 O .^■O w 3- 3 rt> Qrq ST* rt- — (J & a 32 JOBBING BUSINESS DIRECTIONS FOR THIRD POSTING 212. The third posting involves identically the same class of work that has been done heretofore. However, you should give close attention to the following suggestions: 213. In posting to an account that has been ruled, write the amount to be posted on the first vacant line below the ruling. In an unruled account the amount to be posted is entered on the next line below the last pen written amount. 214. You should open an account in the Ledger with "Bills Payable," and with each person to whom you have sold goods on account, giving each new account one page. Be sure to write the name of the account in the Index before writing the name at the top of the ledger page. 215. You will begin this posting by debiting Merchandise for $266. 80. Next debit Cash for $145.50. Next debit Cash for $140. Next debit Merchandise for $216. Continue the posting of all the debit amounts. Be sure to enter the ledger page in the ledger folio column of the Journal, to show that these items are posted. After all the debit items of the Journal are posted to the Ledger, post all the credit items !o credit side of their respective accounts. 216. When the postings have been completed, proceed to find the footings of both sides of each Ledger account as previously instructed for taking a Trial Balance. In doing this, be sure not to include any amounts above double red ink rulings. 211. In accounts that have not been ruled, be sure to take all of the debit items and all of the credit items. Be careful to make your pencil footings in small light figures so that they will not interfere with further work in the Ledger. 218. You may now take a Trial Balance, following previous instructions. 219. Now, that you have your Trial Balance, you may close the Banking Ledger, after which you may close the Cash account as previously instructed. 220. If you have complied with the directions above, you may present your books to your teacher for approval. While waiting for them to be approved, you will carefully study the directions for making a Balance Sheet of this business, after which you will prepare a Balance Sheet according to the instructions given. THE BALANCE SHEET 221. A Balance Sheet is a specially prepared form showing a Trial Balance of the Ledger, followed by a statement of your resources, liabilities, gains, losses, and the present worth of the firm. 222. The Resources of a firm consist of all property belonging to the firm, such as Cash, Merchan- dise, Real Estate, Bills Receivable, Furniture and Fixtures, Chattels, etc. , and all debts owed to the firm by other business firms or persons. 223. Liabilities. — The liabilities of a firm consist of all debts owed by the firm, such as Personal Accounts Payable, Bills Payable, Interest due and unpaid, Rent due and unpaid, and everything else for which the firm is liable for payment. 224. The Present Worth of the firm, or the Net Capital, is the total resources of the business less the liabilities. If the liabilities of the firm should be larger than the total resources, a firm is said to be insolvent, or to be unable to pay its debts in full. 225. At the present time you have no liabilities, therefore, your present worth is the total of your resources. 226. Gains. — The gains of a business are the profits derived from all sources, such as merchandise, the sale of real estate, interest and discount paid or allowed to the firm, and anything else that shows a profit in handling. 227. At the present time your only gain is that shown by the Merchandise account. 228. Losses. — The losses of a business consist o! those amounts paid out for running expenses, which are usually charged to the Expense account. All amounts paid out for interest and discount, etc. , are also losses. They are charged, however, in bookkeeping work to their respective accounts. Any property account, such as Merchandise, Real Estate, etc. , would also show a loss, it the cost of the article, purchased was more than the selling price. 229. Net Gain. — If the total gains ot the business are greater than the total losses, the excess is called the Net Gain. JOBBING BUSINESS 33 230. Net Loss — If the total losses of a business are greater than the total gains, the difference between the accounts is called the Net Loss. 231. Net Capital. — If the total resources of a business are greater than the total liabilities, the difference between the resources and the liabilities is called the Net Capital or Present Worth. 232. Proof of the Balance Sheet. — A proof of the Balance Sheet is obtained by finding the net gain or net loss of the business. If the business is conducted at a profit, the net gain is added to the investment at the beginning of the business, or at the time of taking the last Balance Sheet, which should equal the present worth of the firm as shown by the difference between the resources and liabilities at the time of closing the books. 233. If the business has been conducted at a loss, the net loss is subtracted from the amount of the investment at the beginning of the business, or at the time of taking the last Balance Sheet, and should equal the present worth of the business as shown by the difference between the resources and liabilities. 234. Preparing a Balance Sheet — A Balance Sheet usually includes: 1. A Trial Balance of the Ledger, showing the total debits and the total credits of the respective accounts, and from uhich the main portion of the Balance Sheet is derived. 2. A statement of all the resources. 3. A statement of all the liabilities. 4. The firm's present worth, as shown by the difference between the resources and liabilities. 5. An itemized list of all the accounts showing a gain; from which the total gain of the business is obtained. 6. An itemized list of the accounts showing losses, from which the total loss is obtained. 7. The net gain or the net loss. If the business was conducted at a loss, the losses would be listed in the Balance Sheet before the gains, so as to make it more convenient to subtract one amount from the other. 8. The present worth of the firm at the beginning of the business, or the time of taking the last Balance Sheet, plus the gain or minus the loss, which would equal the present worth as shown by the difference between the resources and the liabilities. 235. The Balance Sheet on the following page illustrates the form required at the present time. You will note that the first portion of this Balance Sheet shows a Trial Balance in the usual form. Follow- ing this Trial Balance is a list of the resources of H. B. Burton, which in this case are, Cash, U. S. Com- mission Co. and American Merchandise Co. The total sum of these resources is $5,092.70, as you will see by studying the form. 236. Note that the total resources are brought down in red ink as the total present worth of the proprietor, there being no liabilities to deduct. 237. Below the resources is an exhibit of the Merchandise account, showing the total cost of the merchandise and the total selling price of the merchandise ; the cost of the merchandise being shown by the debit side of the Merchandise account, and the selling price of the merchandise being shown by the credit side of the Merchandise account, as the Merchandise account is debited for all purchases and credited for all sales. 238. The difference between the selling price, $3,189.40, and the cost, $2,996.70, shows the total gain for Mr. Burton's business to be $192.70. 239. An exhibit of the losses of the business as shown by the Expense account is next given, and found to be $100. This loss is then subtracted from the total gain, 1192.70, which leaves Mr. Burton's net gain $92. 70, which amount is brought down in red ink as the net gain of the Business. This net gain is then added to Mr. Burton's Stock account, $5,000, which shows the proprietor's present worth to be $5,092.70. This amount agrees with the total sum of Mr. Burton's resources, which proves, so far as possible, the correctness of the Balance Sheet. 240. The figures at the left of this Balance Sheet show the pages in the Ledger on which the various accounts may be found. 241. You may now turn to the back of the Guide and carefully read Chapter 1, Part II, after which you may prepare a Balance Sheet for your business on a sheet of journal paper, in accordance with the form given on the following page. When this Balance Sheet is completed, submit a copy of it to your teacher for inspection, and when approved, you will copy.it neatly on the second page of your Trial Balance Book, beginning at the top of the page. 34 JOBBING BUSINESS zS0OO /00 'tff&fo *3 / i/.q 70 &)q Z^t^2> <&>7£€Z^ /rer 7 7 / 00 .JUjU- /*/ PTl^u,' 7 72 70 / 7270 /f2 70 /70T ^£jj- /0 / TWer V 00 00 ^u ,*j^%^*4 f 072.70 ,J^7 s°r*7* /o / 30 o / *£ . ^^x^^rt^^&iz^rty 7 f '-2 / o o> 3 o 00 -J c o CO 3 01 CO to _ — w ^ '-> - 3 > K H S ■—. > 03 O 3 ° 00 •8 o c IO. Ilk 3 o o c* M M CO in Q -q co P Oi Ol en to l_l «-( «H 2. o *- O Oco a p p p 1 - 4 Ot in Id 5d © M H N 3 o ■=■ S 9 O o a O O ^ «-i «H fcl* a a >-* Oi *■ *. to M to > o #. 3 o o 00 w to *» — o to 00 et (-) - tfco o 9 (I ►ti p ? p w *. *fc JOBBING BUSINESS 43 CHICAGO, ILL. August 19, 1909. . Burtoiv Bought of C. H. WHEELER GENERAL JOBBER The amount of each invoice is posted to the credit of each creditor's account, just as the amount of each sale is posted to the debit of each cus- tomer's account from the Sales Book. If several Ledgers are used, the total of the purchases for each month is post- ed to the General Ledger as directed under Classification of Ledgers. If the invoices are pasted in the book, paste Invoice No. 1 in first, then No. 2 over No. 1, putting the paste on the lower edge of No. 2, allowing No. 2 to extend over and cover all of No. 1 but the name. Some paste only a small part of the lower left-hand edge to the book in order that an invoice may- be easily taken out if necessary to pre- sent in court; or for other purpose. No. 3 over No. 2, and so continuing in order. (Invoices are num- bered in the order of their receipt, the first received is No. 1, the next No. 2, etc.) Care must be taken to have the necessary information on each invoice exposed and yet to use the space of the Purchase Book economically. The Invoice Book may also be used as a receptacle for the invoices, by pasting them in the book in order, without extending the amounts into the money column. In that event it is not used as a posting medium. 280. The Invoice Register and Tell Tale combined, illustrated on page 42, is of much value in houses that do an extensive business. The Invoice Register shows under Accounts Payable the pur- chases falling due for a given period as one week or ten days as shown by an abstract of the Purchase Ledger and the amount of discount that can be saved if the payments are made within the discount period and gives the names of the creditors. The Tell Tale section shows under Accounts Receivable the amounts falling due during the same period of time as shown by an abstract of the Sales Ledger and gives the names of the debtors. Such an abstract of the Purchase and Sales Ledgers made out in periods of one week or ten days or two weeks, in advance, and laid on the manager' s desk will be of great value to him in making prompt collections and meeting obligations and saving discounts for his house. 44 . JOBBING BUSINESS 281. Daily Deposits. — You should make a deposit at, or about the close of each day, of all currency, checks, and other bankable commercial paper. Make this a custom and never fail to carry it out, even though you fail in every other part of your work. You should do this because it is a custom with every careful, shrewd business man to make a deposit of all checks and other bankable commercial papers on the very day of their receipt, if possible. In the second place, it is absolutely impossible for the banker to satisfactorily balance the Pass Book of other depositors when you are holding their checks. 282. Overdrawing Bank Account. — You should never write a check unless you have the amount of the check on deposit to your credit at the bank, unless you have first obtained the permission of the banker to do so. The bank is under no obligation to pay your checks, excepting as you have money there for that purpose, and will not do so. If, however, you should make a mistake and inadvertently overdraw your bank account, report the fact at once to your banker, after which you will report to your teacher who will advise you as to the necessary procedure. 283. Forwarding Footings. — When either page of the Banking Ledger is filled it will be necessary to forward the footings of both pages, as shown in the form on page 11. Sometimes all records for the day may be entered, but no room left for further entries of another day's transactions. At such time the balance on deposit only would be carried forward. When the Bank Balance is forwarded to a new page the balance should not be brought down below the double red ink ruling. See page 10. 284. Discount Rates. — Except by special agreement, or unless specified on the Merchandise Card or in the Business Directions, you will buy and sell according to the following discounts: For cash or for papers drawn at sight, 5 % off. For notes or other time papers, 4 % off. , On account, 3 % off. The prices printed on the cards will be followed in every instance, no discount being allowed unless specified on the Merchandise Cards, or in the Business Directions. Remember that under no circumstances whatever are you allowed to alter any of these directions or any of the prices or terms. FORM OF BILL WITH NO DISCOUNT ALLOWED Cincinnati, Ohio, June 22, .190 9 M. H. B. Burton Bought of. W. E. Devine TERMS. dealer in' GENERAL. MERCHANDISE Net Cash NO. All Claims for Shortage or IUhaoe most be) made on Receipt of Goods 20 10 15 25 brls. Cornmeal « « Oatmeal W. F. Flour « « Super « « 3.60 9.40 5.50 4.00 72 94 82 100 50 348 50 JOBBING BUSINESS 45 In the preparation of these red ink ruling exercises turn the beveled edge of your ruler down; do not make your lines too heavy and carefullv avoid blots. If possible, procure and keep on hand a special pen for red ink. — , I - f ===== 46 JOBBING BUSINESS ^ /2, /2> /2s /3 /3 /«/ /J / / / / 2, 2, 2 2 2, 3 J J J 4- S ~^o / 2\ff0 fff 60. t?09 // // // // J?*'? Z2, Z2, /2, /2, /rpr /3 /3 /3 /3 /3 /3 /3 'per /4 /s /S /S /S / / 2. 2 J J 4- 4 S S~ s s 6 / 6 2 63 fo 3/ S /?0 JOBBING BUSINESS 47 ^l^lJr' // / 34-2 ^oo / 20 30 F&fO/O /f07 '7 /fa 1 ? 7 /o /o /o /o /o // // // /2 /2 /2 /2 7 i ' v3 / */2? '/ 2,6 /0 / 3 / 20 / 4-/ 30 / #2 60 y ^A6ff / 6/ 36 / Jf 26 3:2 / 6 *£2 2 / 6 */■ 60 2 &*/■/ 20 ?/ S3 27 / / t / f/ *zjL~S. z£ 3 A/ // ff 48 JOBBING BUSINESS V ~~^^ ^^d/j2,0 /*^/ ^i^t^. 2, rfs?V)( 299. In case you should make an error that cannot be easily corrected under these suggestions your teacher will advise you as to the best method of making the correction. Much depends upon the peculiar circumstances of an error as to what method may be employed to the best advantage in correcting it, and you will acquire by experience the better plan. 300. Deposits. — In case you receive currency, deposit it at the bank, and never use it in buying goods or paying bills unless you are instructed to do so. It is the custom of large business houses to pay all accounts by check. One object in doing this is that your check is always a receipt for payment of the account whe l returned to you, and paying all bills by check avoids much trouble in keeping your Cash account in balance. 301. Bills Receivable Account. — All notes and other written promises to pay us, which would oe included among the resources of our business, are known as Bills Receivable. 302. An axount is kept in the Ledger with Bills Receivable, and ti.is account is debited for all written obligations to pay us when received, and credited whenever we receive money for Bills Receivable either wholly or in part. 303. Inspection of the Bill Register. — You should carefully examine your Bills Receivable and Bills Payable Register each morning in order to ascertain if any of your own notes, or notes of others held by you, are due. A successful business man is punctual in paying his own obligations, also in collecting the obligations of others, on the date of maturity. Bear in mind that one who is a good collector is more likely to succeed in business than a poor collector. A poor salesman who can collect for what he sells, is much more likely to be able to pay his bills, than is a good salesman who is a poor collector. 50 JOBBING BUSINESS 3 - IS m 8 « rt ps «- 3 o o , 43 .. 3 O en PQ^ CO •fi 43 •0 c ca 05 o O 43 JO > -r S 9 E ■2 *3 to ^ CD "2 ^ O 3 « CM CD rt a, - M b 2 u ^-i >H .3 0) _& "So C ■« h Ph P 43 a '53 5 2 3 •*- Pd 2 o JW .£ % V 2 ^ § m T -3 ff .• £ * .. >s C_ CU bJD rt s to c Q_ 3-3 l_H o o •« ^ ^M O jo 3 aj CU X CO cfl "3 3 ' H ^2 i « i g <« - M 2 CU « 3 *3 ^-> S O rt •- CO > '5 o CO «) .£ S "O _e +j 25 ». 4-! flj « CD t3 ^ 3 •« 3 £2 u •£ j .2 rt § ~ . „ u O ijii rt W .2 -9 CU Pi D-, 6 3 a, £ o CU 43 co 1-1 3 ■ O O a; J3 o «-• 3 cu 3 o *1 r? ' cu ii O T3 Q ^3 bJC 3 O a! u cu > '53 W5 . ° B 3 to X) . — i PQ 3 C J2 4-> U Q CO 9i rn b X cu *J X U 3 O r3 .2 M r* (1) ill 3 .> tG 3 '53 rt cu co .3 H ^2 fcJD „ Cu CU PQ & bp C rt ^ co 1 2 Ctf t3 cu - -3 > ^ O u .y '53 Xi o cj cu > K 53 co to o X 3 cu *j a: g« bt fl fcq co .£ >> 3 T) £3 CO 43 3 "+-I 3 ^ >-. cu £ -5 "S Jg .2 ^ T3 CO c fcjo fe JG & c O rt 3 o to cu cd 3 £ •3 ^2 ^ 3 cu d > 3 43 CJ -!-> ^ _ co ^3 3 CO >, £ « c^ ■RJS c3 rt o O S* W Cfl •5 co 'g ^ s »^ Ph CO co co ^ ^ 2 & CQ cu ° en ^ PQ -43 CO -a 3 . 03 £ 3 .2 3 . C Cu «3 co 43 3 £ 3 O &-. 2 ° 3 £ ^ c 2 rt ra ^^ ao 3 en X 3 rt cu ,. 3 c 3 ° 3~ ^'o XT li a, 3 co +j £ t3 r 42 (y K^ ,c 3 © CO ■« * cu o cu Ph 3 S CO c > _^ 3 o u O cfl >% a. -J < > E3 u -J E * 2 £ ° o z; a •< a. en < ►J o a o 00 =0 ^*- ^s w B w "aVHA s "oaa "AON °0 •J.OO •XdHS •onv •A'inf •3Nflf •AVW 'TIHdV •HVW •8H3 •NVf w D H to o z s WW w 3 Cm ' H vtt^^tsr , '~ sZ#^S /. 12^4/. ^7^ x £d^Li^. ^5~2.<7 / 77*° <5TS<3 y&frz. ^3-3 f -^~3 7 V 5 2 8 1 " Press Office Stationery Estimated •v. 1 2 6 3 8 4 10$ Depreciation Chattels 3 8 40 3 4 5 (50 1 Horse 1 2 5 1 Wagon $50.00 Depreciation 10jg Shipments 4 5 2 9 5 No. 3 College Produce Co. 4 2 1 No. 4 U. S. Commission Co. Expense 3 7 2 1 Unexpired Rent 4 3 Tons Coal Interest Receivable 6.00 1 s ■ 5 8 Reg. No. 3, 8 days 6£ 1 ] 26 •' 5, 3 mos. 1% Interest Payable 3 1 60 3 2 86 ■ Reg. No. 9, 30 days G% 3 42 " 10, 15 " 6% 4 21 " 16, 13 " 7% 1 1 1 46 1 9 09 EXAMINATION 1. What is a jobber or wholesaler? 2. What does an opening entry set forth and where should it be written? 3. Explain fully how a banker keeps a record of depositors' signatures. 4. What is a check? 5. How many parties are there to a check? 6. When should your checks be presented at the bank? 7. Give some important points about writing checks, and explain your reasons. 8. Explain what is meant by Filing Papers, and when should they be filed? 9. What is the difference between a bill and an invoice? 10. Explain how a bill or an invoice should be made out? 11. How should a bill be receipted? 12. Give the three principles of Double Entry Bookkeeping. 13. What is meant by journalizing a transaction? 14. What is the best proceeding if you are in doubt as to how a transaction should be recorded? 15. How does a depositor withdraw money from the bank? 16. Where should the endorsement be written on commercial paper? 17. What is the purpose of the Banking Ledger? 18. What is a deposit and how is it made? 19. On a sheet of blank paper rule a banking ledger form, and explain in full its use. 20. Do the footings in the banking ledger always agree with those of the Cash Account? 21. Explain fully what is meant by posting. 22. What is the purpose of the Folio Column in the Journal? 23. What is the purpose of the Folio Column in the Ledger? 24. For what is the Explanation Column in the Ledger used? 25. When is an account in balance? 26. What should be done with an account when it is in balance? 27. How do you transfer an account from one page of the Ledger to another, and when should this be done? 28. If the debit side of the Cash Account is the larger what does it show? 29. Define a Promissory Note. 30. How many parties are there to a note? 31. How do you determine the maturity of a note? 32. Are 'days of grace' allowed oi checks? 33. How should you dispose of a note that you have paid? 34. Define a Trial Balance. 35. Define resources. 36. Define liabilities. 37. Define losses.. 38. Define gains. 39. Define proprietor s present worth. 40. Write a detailed explanation as to how you would go .about it to prepare a Balance Sheet ol your business. 41. Define net gain. 42. What is meant when a firm is said to be insolvent? 43. How do you determine the losses or gains in the Merchandise Account? 44. How many ways are there to determine the proprietor's present worth? 45. What is the purpose of the Invoice Book? 46. For what should red ink be used in your bookkeeping work? 47. What can you say regarding business penmanship and figures? 48. What can you say of the importance of system and order in all your work? 49. What should be done every night before leaving the room? 50. In making extensions in bills, interest computations, etc., how are fractional parts of a cent disposed of? 51. What is your opinion concerning lead pencil figures, check marks, etc.? 52. What would you say of the importance of accuracy in adding and other business calculations? 53. When do you make an itemized list of merchandise or other commodities sold in the Journal Entries? When the above examination is completed hand the manuscript to your teacher. 161] 62 GENERAL REVIEW QUESTIONS AND ANSWERS INTRODUCTORY 1. "What is a business transaction f The performance of some act, or the making of some agreement relating to one's business or financial affairs, as to purchase, sell or exchange property, to borrow or loaii money, etc. 2. What is the general purpose of bookkeeping ? To keep a plain and systematic record of business transactions and of the profits or losses that result from these transactions. 3. Mention some things that are necessary in order to secure neatness in the keeping of a set of books. The hands should be kept clean, and the desk and books free from dust, etc. ; the blotter should be employed freely, but one side being used ; books should not be left lying about open when they are not being used, and care should be exercised in the management of pen, ink, and mucilage. Should any book be blotted or otherwise soiled, the disfigure- ment should at once be removed. See, also, page 1. Jf.. Name som^ aids to order and accuracy. There should be a fixed place for every book, article of stationery, or desk appliance, and it should be kept in this place except when in actual use. The regular course of procedure required in the different kin Is of transactions should never be varied. Every addition or other arithmetical computation, should be carefully verified before making any rec- ord depending upon such computation. All writing, especially of proper names and figures, should be so plain as to make mistakes in reading impossi- ble. Any tendency to carelessness or absent mind- edness must be promptly corrected. There is no safety except in acquiring permanently, the habit of fixed attention to the matter in hand. 5. What is a debit ? It is a term applied to amounts that are entered in the left-hand, or "debit," column of a book or of an account. 6. What is a credit ? A term applied to an amount entered on the right- hand, or "credit," column of a book or of an ac- count. 7. Upon what general principle is double entry bookkeeping based f Upon the principle of debit and credit. 8. What is this principle ? The debits and credits arising from any transac- tion or series of transactions, equal in amount. 9. What is an entry f Any formal record of a business transaction. 10.- W hat do you mean by debiting an account ? Making a charge, or entry, against that account, of a certain amount, which amount is to be posted 10 the debit side of the account. 11. What do you mean by crediting an account ? Making an entry of a certain sum in favor of the account, which sum is to be posted to the credit side of the account. 12. What is meant by the balance of an account t The difference between the sums obtained by add- ing the opposite sides of the account. 13. Give a general rule for debits. We debit what we receive, or what costs us value. We debit persons when we sell to them on account, or pay them on account. 11/.. Give a general ride for credits. We credit what we part with, or what produces us value. We credit persons when we buy of them on account, or when they pay us on account. 15. When do you debit Cash f When it is received. 16. When do you credit Cash ? When it is paid out. 17. When do you debit Merchandise ? When it is bought or received. 18. When do you credit Merchandise ? When it is sold or parted with. 19. When do you debit Expense ? When we pay out casb, or otherwise buy anything required for the business, as for rent, taxes, fuel, lights, clerk hire, or the like. 20. When do you debit a person ? When he becomes indebted to us, or when we pay him on account. 21. When do you credit a person ? When we become indebted to him, or when he pays us on account. 22. When do you debit Bills Payable ? When we pay wholly or in part, our own note or other written promise to pay. 23. When do you credit Bills Payable ? When we issue our own note, or other written obligation. 24. What is meant by "opening the books " ? Making a journal entry, setting forth the charac- ter and purpose of the business, the amount and kind of resources invested, and a statement of the liabili- ties, if any. 25. What is meant by a book of original entry ? A book in which the first record of a transaction appears. In the Jobbing. Business the Journal is the only book of original entry. 26. In what book are the accounts of a business kept ? In the Ledger. DEPOSITS AND CHECKS 27. Why are checks treated as cash ? Because they are payable on demand, and are ac- cepted among business men as the equivalent of cash. 28. What is the effect of the words " to the order of" f They denote that the person who receives the check may, if he wishes, by means of an indorsement, or- der the check to be paid to some other person. GENERAL REVIEW 63 29. What is an "Indorsement in Blank" or 11 Blank Indorsement " ? The act of the payee in writing hi* name only across the back of a check or other business paper. SO. What is the effect of a blank indorsement t It makes the check payable to whoever holds it ; it also makes the indorser responsible for such pay- ment. 81. When you deposit checks, why should you indorse them ? In order to transfer the title, and that the banker may know the person from whom the checks were received. 32. If the debit footing of the Pass Book is greater than the credit footing, what does the differ- ence, or balance, show ? The balance on deposit. S3. If the credit footing of the Pass Book is greater than the debit footing, what does the differ- ence show ? The amount overdrawn. THE CASH AND BANK ACCOUNTS 34- What does the term " Cash " include f Money on hand, or in bank, or any demand or sight paper immediately convertible into cash, as checks, bank drafts, express or post-office money- orders, etc. 35. What is the purpose of the Cash account ? To keep a record of all cash received and all cash paid out. 36. What is shown by the respective sides of the Cash account f The debit side shows all cash received, and the credit side all cash paid out 37. Which side of the Cash account should be the greater, and why ? The debit side, as we cannot pay out more cash than we receive. 38. What does the balance of the Cash account show ? The amount of cash on hand. 39. What is a Banking Ledger ? It is a book in which a depositor keeps his account with the bank. 40. What should the debit side of this book show ? The sums deposited. 41. What should the credit side of this book shoic ? The amount of each check drawn. 42. If the debit side of this book is the greater, what does the balance show f The sum to the depositor's credit at the bank. 43. When will the balance of the Banking Ledger agree with the balance of the Pass Book ? When all checks that we have drawn on the bank have been paid at the time the Pass Book was written up. 44- When woidd the balance disagree f When the Pass Book is balanced before all the checks have been paid. 45. When would the balance of the Banking Ledger agree with that of the Cash account? When all cash has been deposited. 46. When will the respective balances of the Pass Book, Banking Ledger, and Cash account all agree ? When all cash has been deposited and all checks nave bten paid at the time the books are balanced. THE MERCHANDISE ACCOUNT. 47. What does the term ' ' Merchandise " imply ? All goods in which we deal for purposes of profit. 48. What does the debit side of the Merchandise account show ? The various sums that merchandise has cost us. 49. What does the credit side of the Merchan- dise account show f The various sums for which we have sold mer- chandise. 50. Under what circumstances will the Merchan- dise account show a gain ? When the credit side is greater than the debit side. 51. Under what circumstances will the Merchan- dise account show) a loss f When, all goods have been sold and the debit side is greater than the credit side. PERSONAL ACCOUNTS 52. What is a personal account ? An account with a person or firm. 53. What is meant by selling goods on account ? Selling them on credit, that is, without receiving payment for them at the time of making the sale. 54- What does the debit side of a personal ac- count show. The debits, or charges, we have made for what the person has received from us. 55. W hat does the credit side show ? The credits we have allowed the person for what we have received from him. 56. If the debit side of a personal account is the greater, what does the balance show f The amount the person owes us on account. 57. If the credit side is the greater, what does the balance show? The amount we owe the person on account. JOURNALIZING 58. What is a journal entry ? A formal record in the Journal of a business transaction, together with a list of the Ledger accounts affected by the transaction, and the debit or credit amounts that are to be posted. 64 GENERAL REVIEW 59. In determining the proper journal entry re' quired for any transaction, what two questions must be decided? (1) ' < What accounts are affected P " (2) ' ' How are they affected ? " 60. If merchandise is sold for a check, what ac- counts are affected? The Merchandise account and the Cash account. 61. How are these accounts affected? The Cash account is debited and the Merchandise account is credited. 62. What is the proper order in arranging the debits and credits of a journal entry ? The debits should be given first, and then the credits. 63. Gave my clerk a check for $25 for his week's salary, what accounts are affected, and how ? Expense is debited and Cash is credited. 64- Bought a bill of goods of Cook & Co. , on account. What accounts are affected, and how ? Merchandise is debited and Cook & Co. credited. 65. How can you give a brief answer to the pre- ceding question ? By giving the form of the journal entry thus : "Mdse. to Cook & Co." EXERCISE IN JOURNALIZING 1. Sold R. Wilson mdse. on account. What entry ? Why ? R. Wilson to Mdse. ; because Wilson nas increased Vs indebtedness to us, and we have parted with mdse. 2. Bought mdse of P. Johnson on account. What entry? Why? Mdse. to P. Johnson ; because mdse. has been received, and our indebtedness to Johnson has been increased. W. Dalton, receiving in What entry is re- 3. Sold mdse to R payment his check for quired, and why ? Cash to Mdse. ; because a check is equivalent to cash, and we have parted with mdse. 4- Bought 10 brls. of salt of C W. Johnson, giving in payment my note at thirty days. What entry ? Mdse to Bills Payable. 5. Bought of Martin & Co. 50 brls. of flour. Gave my check in payment. What entry ? Mdse. to Cash. 6. Paid N. Davis cash on account. What entry ? Why ? N. Davis to Cash ; because our indebtedness to Davis has been lessened, and we have parted with cash. 7. C. Miller pays us cash on account. What entry ? Why ? Cash to C. Miller ; because we have received cash, and Miller's indebtedness to us has been lessened. 8. Gave Charles Hill a check for $50 in settle* ment of our account in full. What entry ? Charles Hill to Cash ? 9 Received of Henry Shaw a check for $100 in settlement of his account to date. What entry ? Cash to Henry Shaw. 10. Sold R. S Jones 20 brls. of apples, receiv- ing his check in payment. What entry $ Cash to Mdse. 11. R. T. Cook bought of us 50 brls. of salt on account, at thirty days. What entry ? R. T. Cook to Mdse. 12. Borrowed cash of L. T. Mason on our note at xixty days. What entry ? Cash to Bills Payable. 13. Sold C. W. Lyman 500 brls. of lard, re- ceiving in payment Mr. Lyman's check on the First National Bank. What entry ? Cash to Mdse. llf. J. Knapp sold goods to R. Day on account. Required Hnapp's entry. R. Day to Mdse. 15. Required Day's entry. Mdse to J. Knapp. 16. H Stevens paid W. Jones cash on account. Required Stevens'' entry. W. Jones to Cash. 17. Required Jones' entry. Cash to H. Stevens. 345. The first 8 1 transactions are with the offices and for the purpose of expediting the work and advancing you rapidly, you have been instructed in several instances to give or take a note at the time of purchase or sale. But from now on you will not give or take a note until maturity of the account. Your Daily Reminder is to aid you to keep track of when accounts mature. Or you may make memorandum on the student's Ledger account. Your school will set a certain number of days, as for instance, 4 days, to represent a school month, 1 day to represent a school week, etc.; and you will then figure on this basis to find the maturity of your papers. For different kinds of notes, see pages 217-219. JOBBING BUSINESS 65 DRAFTS 346. A draft is a written order on a bank, firm, or individual, directing the payment of money to some person or firm named in the draft. Parties to a Draft. — There are three parties to a draft: i. The Drawer, or person who signs the draft. 2. The Drawee, or person to whom the draft is addressed, and who is expected to pay the sum ncf.med. 3. The Payee, or person to whom the money is directed to be paid. Theory of a Draft. — In general, when a draft is drawn, it is presumed that the drawee is indebted to the drawer, also that the drawer is indebted to the payee. But circumstances often arise when drafts are drawn without the existence of such indebtedness. How To Write a Draft. — Make out all drafts according to the following general forms. Write the name of the p:.yee in that part of the form where the name "E. O. Folsom" appears, place the name cf the drawee in place of the name "A. B. Cummings," and your own name instead of "H. B. Burton." Fill out the stub before detaching the draft, as in the case of checks. 347. Sight Draft. — A sight draft is one that is payable on presentation, except in certain States, where days of grace are allowed. Some authorities say to treat sight drafts as cash, but we prefer that they be treated as Bills Rec. You will ask your teacher for instructions regarding this, as custom varies according to locality. No._Z_ Date /X-g^ / y 190^. Time C-/^' -v^Wa-^-^- /- Eavor DOLLARS ~Z?^^-/2^A^t^-y^ J^L^T^^z^jy ' \-@~gr. 348. Time Draft. — (Time reckoned from sight.) A draft may be drawn payable a certain number of days or months "after sight, " as in the following form. This draft would not be payable until ten days after acceptance (or thirteen days, in States allowing days of grace). No. ^=r Time £&- /O ^£cZ-J. _-te^^ Favor of Drawn on Fo r ^Jl^^y 2K ^. /^>— 6 *"N No. '^ZlS/V. (P^^rtA, Order of. DOLLARS Value received and charge the same to account of Value To. 66 JOBBING BUSINESS 349. Time Draft. — (Time reckoned from date.) The following form illustrates a draft payable a certain time after date. This draft matures at a definite time, November 5 (or November 8, if days of grace are allowed). No.. v5 Favor of ALn£ <^ D ^\ No. -<3- Order of. G?- cJ ^ t (Vsrst, ^ iy P^l^t^^u^^Y^ DOLLARS Value received and charge the same to account of To JSlcj 350. Bank Draft. — A Bank Draft is an ordinary draft, drawn by one bank on another, ana is used to remit money from one portion of the country to another, without actually transferring the currency. Drafts drawn on New York are called "New York drafts," and drafts drawn on Chicago are called "Chicago drafts." New York Drafts are at par anywhere in the United States, and are usually preferred for making remittances. A bank draft should always be made payable to the order of the person making the remittance, who transfers it by indorsement. Ha..4~. jjfe^e^i^.. Favor of , Sold to Mo fit- M. $4S/& ACCEPTANCES 351. "Accepting a draft" consists in -the drawee's writing across the face the word "Accepted," with the date and his signature following. This is usually done in red ink. 352. A draft thus accepted is called an Acceptance- The acceptance of a draft by the drawee is equivalent to his written promise to pay it. Hence, an acceptance is equivalent to the cJ ra wee"s prom- issory note. Date dLt^A /, tgn a\ Time ~^Z^ % .8 .8 S3 8 O <* ^ ^ Z o at u CC H UJ E a < 00 < <\) o *1 <\i Xl K * "0 o Q Q M- °0 *0 Q SO 5fi m. "*1 3 2 8 a B 9 a B 3 5 s c u 1* si i 1 OQ K "^ ^ M- M- t^ ifi O O Mi 00 s s s ^ Q 1 i <3 ^J K c .. 3 to ^> S ^ y ° c* o C m-i O X n « n *2 •5 Q ■" p £ « £ 3 *a i> o •- z o D o5 3 8 s i- UJ UJ H U S 00 -§ - 3 5 s 50 fc * £ 5, <5 s *) s s s Q S s s s fiq u o a, in < £ S «S S ^ ^ ^ a < ex s 3 o z U *tsT ^ 1 M a « h 1 a 3 O u u — ' UJ rt w C O QQ m 4J UJ en a "v J3 B <: & T! £ £ a a ■ j> "♦ > T| a r>« be a •*? B 3 00 o n 0.' w U a 01 ^ s c GENERAL REVIEW SPECIAL REVIEW QUESTIONS 1. How should an incorrect entry be corrected? 2. When the place of payment is not specified in a note, where is the note payable? 3. What reason for being prompt in making deposits at the bank ? ' 4. What is said of the importance of good figures? 5. What is the general rule for journalizing? 6. If a note or other obligation falls due on a holiday, when may it be collected? 7. What course should be pursued in the case of part payment of a note? 8. State the various uses of the Daily Reminder. 9. What is the general purpose of the Sales Book? .10. What classes of sales are recorded in the Sales Book? 11. Explain how the keeping of a Sales Book lessens the labor of a bookkeeper. 12. To what side of the Ledger accounts are the various amounts of the Sales Book posted ? 13. What is a draft? 14. Name the parties to a draft. 15. State the theory of a draft. 16. What is a sight draft? 17. Under what circumstances is a sight draft to be considered as a bill receivable? 18. What is a statement of account? 19. At what time-are statements usually made out in a retail business? 20. At what time is a statement usually made out in a wholesale business? 21. What is the general purpose of a statement? 22. What general difference between a wholesaler's and a retailer's statement? 23. What is the usual procedure on the part of both debtor and creditor when a statement is sent by mail for collection, and paid in full? 24. Under what circumstances is it unnecessary to itemize a statement? 25. When should a statement be itemized? 26. In closing the books, if there is an inventory of merchandise, where should it be entered in the Ledger? 27. Why must the merchandise inventory be added to the sales? QUESTIONS AND ANSWERS BILLS PAYABLE AND BILLS RECEIVABLE 1. In writing a note, what specifications should be set forth f The face of the note, time, date, name of the payee, rate of interest, if any, and the maker's sig- nature. 2. What is the purpose of the Bill Boole ? To afford a record of all written promissory obliga- tions, whether received or issued. 3. What ledger account is kept with the proprie- tor's own loritten obligations ? The Bills Payable account. If.. What does the credit side of this account show ? The face of all notes, acceptances, or other written obligations issued by the proprietor. 5. What does the debit side show ? The payments that have been made on the bills payable. 6. What does the debit side of the Bills Receivable account show ? The face of each bill receivable that we have received. 7. What does the credit side show f That which we have received for Bills Receivable. 8. When do you debit Bills Payable f When we pay any of our bills payable, either wholly or in part. 9. When do we credit Bills Payable ? When we issue our own written obligations. 10. When do we debit Bills Receivable f When we receive a bill receivable. 11. When 'do we credit Bills Receivable f When we receive payment, either wholly or in part, for a bill receivable. 12. What is shown by the balance of the Bills Payable account f The amount we owe on bills payable. 13. What does the balance of the Bills Receivable account show f The amount that is owed to us on bills receivable. DRAFTS AND ACCEPTANCES. llf. What is the general purpose of drafts ? To facilitate collections and remittances. 15. Illustrate this. If A who is in St. Louis owes B who is in Chicago; B may draw a draft on A for the amount of the debt, place it with his banker for collection, who for- wards it to a bank, or other collection agency in St. Louis. If paid by A the amount, less charges for collection, is then remitted to B through the bank to which the draft was originally given. If A w.shes to remit to B, he may buy a draft on Chicago of his local banker, and remit the same to B by mail. 16. What is the advantage of time drafts to the drawee f To enable the drawee, especially in the case of a large sum, to have a certain time In which to arrange for the payment. [70] GENERAL REVIEW. 71 17. What act is necessary in order that the drawee may become responsible for the payment of a draft ? The act of accepting it. 18. When we draw a draft, and deliver it to another person, what account should be credited? The drawee's account. 19. When is a sight draft payable ? Upon presentation, except where days of grace are allowed. 20. What drafts are considered as cash by the person receiving them ? Sight drafts where no days of grace are allowed. 21. By whom and when is a draft considered a bill payable ? By the drawee when he accepts it. 22. By whom and when are drafts considered as bills receivable? To the payee, and when they are not payable im- mediately on presentation. INDORSEriENTS AND NEGOTIABILITY 23. When is a note or draft said to be negotiable ? When the payee is authorized by the terms of the instrument to transfer it by indorsement. 24- What phrase in the wording of a note or draft gives the payee this right ? The words "or order," "or bearer," or "to the order of." 25. What is the effect of drawing an instrument payable to bearer ? It makes the instrument negotiable and transfer- able without indorsement. 26. Name two important effects of an indorse- ment. It authorizes the payment of the obligation to a person other than the indorser. The indorser also becomes responsible for the payment of the paper, should payment be refused by the maker when due. 27. What advantage is secured to the payee by making papers payable ' ' to order " instead of " to bearer " ? It protects the paper from collection in the event of its loss or theft, as a paper payable "to order" is not payable until indorsed by the payee; while one payable "to bearer" may be paid to any one who presents it. (For a fuller discussion of indorsements with examples of the different forms, see Part II of this book.) HATURITY OF PAPERS 28. What is meant by the maturity of a com- mercial paper ? The day on which it falls due. 29. If a note falls due (without days of grace) on Saturday, July 4) when should it be presented for collection ? On Monday, July 6. 80. If days of grace are allowcd } when would this note be due ? On Tuesday, July 7, as the legal holidays are included in computing the time. 81. If the maker of an indorsed note fails to pay the same upon presentation at maturity, what course should the holder pursue ? The holder should, within twenty-four hours, notify the indorsers that the paper has been dishonored. 82. Why is the notice necessary ? In order to hold the indorsers responsible for the payment of the paper. EXERCISE IN JOURNALIZING Bills Payable and Bills Receivable. 1. Bought a car-load of four, giving in payment my note at sixty days. What accounts are af- fected ? Mdse. and Bills Payable. 2. How are these accounts affected ? Mdse. is debited and Bills Payable credited. 8. Gave my note at thirty days, in payment of one month's rent in advance. What accounts are af- fected, and how ? Expense is debited and Bills Payable is credited. 4- Bought twenty brls. of salt, giving in payment C. W. Cook's note in favor of B. Miller and indorsed to me. What entry ? Mdse. to Bills Receivable. Give the required entry for each of the following transactions. 5. Gave five brls. of salt to Carter & Co. , in payment of my note at thirty days. Bills Payable to Mdse. 6. James Steele settled his account by note at sixty days. Bills Receivable to James Steele. 7. Gave a check for $75, in payment of my note in favor of C. W. Miller. Bills Payable to Cash. 8. Sold Henry Jones three brls. of flour on his note at thirty days. Bills Receivable to Mdse. 9. Beceived of S. Johnson his check in payment of his note. Cash to Bills Receivable. 10. Sold to B. S Gray three brls. of pork, re- ceiving inpayment G. W Thompson's note, in favor of Harvey Brown. Bills Receivable to Mdse. 11. Transferred J. W. Smith's note in my favor to B. L. Hall on account. R. L. Hall to Bills Receivable. 12. Gave my note to Cook & Sons, in settle- ment of account. Cook & Sons to Bills Payable. 18. Sold C. S. Davis three brls. of salt, the amount of the same to be indorsed on my note in his favor. Bills Payable to Mdse. 72 JOBBING BUSINESS. LEAD PENCIL WORK 363. It is a true saying that ' ' you can always tell a poor bookkeeper by the amount of lead pencil work that he does. ' ' Never use a lead pencil for writing receipts, receipting bills, statements, or for any other kind of work when it can possibly be avoided. While the law says that a signature written with a lead pencil is legal, there is no demand or appreciation for a lead pencil bookkeeper. LEDGER HEADINGS 364. Each Ledger Heading of a Personal Account should contain the customer's full name and street number, or if he lives in some other city, the name of the city should be added. When new customers are secured, their names and addresses are entered in the Order Book, if such a book is kept, otherwise with the charge in the Sales Book, or Journal, as the case may be, and the full information is transferred from the original entry to the Ledger at the time of posting. In many business houses it is the custom to enter the complete address with each charge, and this should always be done where it hap- pens that there is more than one customer of the same name. CONSOLIDATED ICE CO. 126 East State Street 19 Oct. 19 Oct. Inv. P C J 42 iriPORTANT POINTS ON POSTING 365. When you post from more than one book of original entry you should enter in or near the folio column in the Ledger a letter to indicate the book from which you posted; thus in the Ledger form given above, the first entry on the debit side shows that the amount was posted from Journal page io, the second entry on the debit side shows that the amount was posted from Sales Book page 2, the third entry on the debit side shows that the amount was posted from Cash Book page 3. The first entry on the credit side shows that the amount was posted from Purchase Book page 2, the second entry on the credit side shows that -the amount was posted from Cash Book page 4. In writing the abbre- viations for the books you will note that just one letter is used, C. for Cash Book; J. for Journal; S. for Sales Book; and P. for Purchase Book. 366. Sometimes it is customary to post the Mdse. credits direct from the Invoice File to the credit side of the Ledger Account, and the fourth entry on the credit side of the Ledger Account referred to above indicates that the item was so posted, and that to rind the original entry we would refer to Invoice No. 42. • 36*7. Duplicate Bills. — The shortest methods of making duplicates of bills which you render are the copying-press and the carbon-copy plans. If you use the copying-press method all bills you make out should be made with copying-ink, after which they are copied in the copying-book and then delivered to the customer. When the carbon-copy plan is used the copy is made out at the same time the bill is made, the form for the bill being especially prepared for this purpose. The original copy is then delivered to the customer, and the duplicate is filed by some convenient method, the principal one of which is to have what is called a loose-leaf binder in which all duplicate bills are placed at the close of the day's business. When JOBBING BUSINESS 73 either of these plans is used the footings may be carried forward each day until the end of the week or month, the same as in a regular Sales Book, at which time the total amount of the merchandise sales is posted to the credit side of the Ledger Account. 368. Corrections and Duplicate Bills. It sometimes happens in the business office that an error is made in rendering a bill for merchandise sold and the buyer returns the bill for correction. In this case the bill should be made out correctly and the words "Corrected Bill" written across the face. Some- times it is customary to write "Corrected Invoice," as the terms bill and invoice are used interchangeably. It sometimes happens that the purchaser looses the bill after receiving it, or because of some carelessness in mailing, it may never reach him. In this case you would make out a new bill and write across its face "Duplicate Bill," to show that it is a copy of some bill previously rendered. 369. Personal Accounts are those accounts which we have with the people or business firms with whom we do business, and are considered to be the most important accounts connected with any business. It is absolutely necessary to know just how much we are owing other people, and just how much other people are owing us. If it were not for this particular fact, many firms would not consider it necessary to keep books at all. However, it would be advisable for any business house to keep an account of all transactions even though they did an absolutely cash business. ' Credit is absolutely necessary in doing modern business, and in order to keep books successfully by double entry it becomes necessary for us to keep a record of accounts other than our personal accounts. These accounts, such as Merchandise, Cash, Expense, Interest and Discount, Bills Pay., Bills Rec. , Furniture and Fixtures Chattels etc., are called Non- Personal Accounts. DISCOUNTING NOTES AT THE BANK 370. The term "face" is a very common expression in business, meaning the words of a commer- cial paper, but especially the sum expressed in writing and figures exclusive of any interest or discount. 371. It frequently becomes necessary for business men to raise money quickly, and often times to do this they take unmatured notes or other commercial paper to the bank and have them discounted. If these papers do not draw sufficient interest to justify the banker in paying the face value of them, he will deduct a certain amount and pay the balance in cash, or if desired, he will place the sum which he allows you to your credit. The amount of money you thus obtain by discounting your note is called the Net Proceeds. 372. The rate, or amount of discount that the banker charges, depends upon the security of the paper, the amount involved and the time yet remaining before payment. For example, if you have a $500 note, without interest, due in 60 days, and the banker charges 6% discount, the banker would deduct $5 for discount and hand you $495 in cash, or place it to your credit as you desired. For such a transaction you would make an entry as shown in paragraph 138. PREPAYING YOUR OWN NOTES 373. Sometimes a holder of a note will advise the maker that he will allow a special discount for payment before it is due, and if the discount allowed you is sufficient to make it an object for you to do so, you should always take advantage of such opportunities. In making an entry for such a transaction you would debit Bills Pay. for the face of the note, and credit cash for the amount actually paid out, and credit Int. & Dis. for the amount of the discount that you are allowed. See page 88. NOTES PAYABLE AT THE BANK 374. It is not necessary to issue a check for the payment of a note or draft that is made payable at the bank where you have money on deposit, providing you have notified the banker to pay the note when presented, as the holder of such paper can then get his money by simply presenting the note to the banker, who will charge it to your account and return it to you with your checks. It is not advisable for a banker to do this, however, or for you to ask him to, as it is liable to cause much confusion. 375. When your Pass Book is balanced, or when you are notified by the banker of such payment of a note, you should make an entry in your Banking Ledger exactly the same as though you had given a check. You would also make the required entry in your other books. See page 88. 376. Trade Discount or Commercial Discount as it is sometimes called, is an allowance or deduc- tion made by merchants and manufacturers from the catalog or list price. Large wholesalers or jobbers distribute among their customers lists of the merchandise which they have for sale. Such a list sometimes assumes the proportions of a catalog. As prices vary from time to time customers are supplied with 74 JOBBING BUSINESS "discount sheets'* so as to enable them to determine the exact price asked for the desired article. When any of these listed goods are billed they are always billed at the catalog or list price, and the Commercial or Trade Discounts are deducted to obtain the Net Price. For example, if a Trade Discount of 10 % was allowed on a bill of $250, the net amount paid would be $225. When the rate of discount differed on the various items in the bill, it is expressed in connection with the item as in the following form. 377. In the first item the fraction Yi means a discount of 33^ %. In the second item the fraction j{ means a discount of 25%. In the third item 20 means 20%, and the word "net" in con- nection with the fourth item means that no discount is allowed on that item. Rates of discount, however, are usually expressed in figures, and the second form is the one in more common use, and the one which you will follow in your school work. M. H. B. Burton Cincinnati, Ohio, Nov. 20, .190 9 Bought of. W. E. Devine, GENERAL JOBBER TERMS. NO Net Cash All. Claims for Sbortaok or Diuagk most be made: on Receipt of Goons 20 10 15 25 brls. Cornmeal 1-3 3.60 w Oatmeal 1-4 9.40 W, F. Flour 20 5.50 " Super Net 4.00 48 70 50 66 100 284 50 1 378. The following bill is the same in form as the preceding one, except that the discount-rate on each item is entered after the price of the article instead of before it. Both forms are in common use. -jVI H. B. Burton Cincinnati, Ohio, Jan. 20, 190_ Bought of. C. Eldridge LUMBER DEALER TERMS. NO On account All. Olaims for Shortage or Damage must bhj made on Receipt of GoOD3j 30 M. Star Shingles 1.80 less 10 48 60 10 M. 6 n Clear " 1.20 " 5 11 40 • 5 M. Lath 1.60 " 15 6 80 5 M. Cedar Posts .06 300 366 80 j JOBBING BUSINESS 75 379. Sometimes two or more discounts are given in succession. To illustrate; — a man buys a bill of goods subject to a discount of 10 and 5%. This does not mean that he will get a discount of 15% from the face of the bill, but that a 10% discount is deducted from the face of the bill and then 5% is deducted frOm the remaining amount. Thus, if you bought a bill for $200 subject to a discount of 10 and 5 % you would first deduct the 10%, $20, which would net $180. From $180 deduct 5%, $9, which would leave the net amount of the bill to be paid, $171. Sometimes these discounts are expressed in a series of three, as 20, 10 and 5%, or even 20, 10, 5 & 2%, although it is seldom that the series is composed of more than three discounts. 380. For illustration, the following bill is sold, less a series of discounts of 20%, 10%, and 5%. Two or more separate discounts are not equal to their sum, as they are computed upon a different base, thus 20%, 10%, and 5%, are not the same as 35%, but are equal to 31 T 6 ff %. Taking these discounts separately, the first discount, at the rate of 20% on $200, is $40; deducting this from the $200, leaves a net amount of $160; the second discount, at the rate of 10% on $160, is $16; deducting this amount from $160, leaves a net amount of $144; the third discount, at the rate of 5% on $144, is $7.20; deducting this amount from the $144, leaves a net amount of $136.80 to be paid; or, $200, less a straight discount of 31-/0%, which also leaves $136.80. ]y/£ H. B. Burton Cincinnati, Ohio, Nov. 20, J-90. 9 Bought of L. D. Stafford TERMS GENERAL JOBBER On acc f t. , less 20, 10, and 5X NO. All Claims tor Sboetagk ok Dihaoi must bej made on Receipt of Goods 10 10 20 brls. Oatmeal 9.00 Cornmeal 3.00 Super Flour 4.00 Less 20, 10, and 5X 90 30 80 200 63 20 136 80 381. Time Discount. Time Discount is a discount which varies with the time of payment. For illustration, the following bill of merchandise for $200 is sold on 90 days credit, subject to immediate pay- ment or at any time before the 90 days have elapsed at the option of the buyer. If this bill was paid im- mediately at the time of the purchase, a discount of 20 % would be allowed, making the net amount to be paid $160. If paid any time before the expiration of 30 days, otherwise than cash on delivery, a discount of 10% would be allowed, making the net amount to be paid $180. If paid any time between 30 and 60 days a discount of 5 % would be allowed, making the net amount to be paid $190, but if paid any time after the 60 days no discount would be allowed and the full amount of the bill is due and payable at the expiration of the 90 days from date of same. 382. Sometimes a cash payment is made upon a bill subject to a discount, but the entire bill is not paid. When this is done the buyer should be credited with an amount equal to that which the cash would buy, subject to the conditions and discounts as written on the bill. The amount for which the buyer should obtain credit is foun'd by dividing the payment by 100% less the discount rate to which he is entitled. Suppose, for illustration, that in the following bill a payment of $150 is made at the time of the purchase. For a payment at the time of purchase the buyer is entitled to a discount of 20%. Then 100% minus 20% equals 80%. $150.00 divided by 80 equals $187.50, which is the amount for which the buyer is entitled to credit. . 76 M. JOBBING BUSINESS Cincinnati, Ohio, Nov. 20, .190. H. B. Burton Bought of. L. D. Stafford TERMS GENERAL JOBBER Cash, 20%; 30 days, 10%; 60 days, 5%; 90 days, Ret. NO.. All Claims for Shortage or Damage must hh made; on Kkceipt of Goods 10 10 20 brls. Oatmeal 9.00 Cornmeal 3.00 Super Flour 4.00 Cr. by Cash, $150, dis. $37.50 90 30 80 200 187 50 12 50 383. Merchandise Discount. It often happens in purchasing bills of merchandise that such bills are bought subject to a special discount if paid within a certain time, as "Subject to 20% discount if paid within 15 days, 15% discount 30 days, otherwise net. " When such a bill of merchandise is purchased, merchandise is debited and the seller is credited for the face of the bill without reference to the discount. See paragraph 131. Such a bill should be paid within the 15 days, even if the buyer is compelled to go to the bank and borrow money to do so, and when such a bill is paid the seller would be debited for the full amount of the bill, that is, the amount for which he was credited, Merchandise Discount would be credited for the amount deducted (the 20%), and Cash would be credited for the amount of money paid out. See paragraph 132. 384. Net Cash. This term means that a bill on which the words are written is not subject to any discount in addition to those already deducted from the face of the bill, nor for any rebate charge or col- lection, nor to any deduction of any kind. Among some wholesalers or jobbers, Net Cash implies a credit of from ten to thirty days if desired; but usually when a bill is marked Net Cash, prompt payment i s expected. The terms of credit are generally clearly expressed on the face of a bill if other than immediate payment is allowed. 385. Legal Rate of Interest. In most states the law specifies an interest rate at which interest is to be paid should no rate be specified in the agreement. This rate is known as the Legal Rate of Interest, and varies in different states. When your Cabinet directions tell you to specify interest at the legal rate you should ascertain what that rate is in your state. It would be advisable at this time to read the chapter in your Commercial Law Book on Interest. GENERAL REVIEW QUESTIONS INVOICES 1. What fact should an invoice set forth ? The quantity and kind of goods sold, the price, total amount of each item, and the discount allowed, if any ; also the buyer's address, the date, terms of the sale, and a receipt by the seller 01 any payment that may have been made. 2. What should be done when an invoice is received ? It should be compared with the goods, in order to see that these agree in kind and amount with those received, the items that are found correct being checked off on the invoice. 3. In making out invoices, what special care is required ? That the writing and figures are legible, that the goods are plainly described, and agree with the buy- er's order, that the terms and discounts allowed are according to agreement, and that discounts, exten- sions, and totals are accurately and correctly com- puted. EXPENSE ACCOUNT 4- What is the purpose of the Expense account? To show the amounts expended for ordinary run- ning expenses in conducting a business. 5. Which side of this account shows the outlays for expense ? The debit side. 6. What does the credit side show ? As a rule the credit side is blank, but if we were to sell any property that had been originally charged to Expense when purchased, the sale would be en- tered on the credit side of the Expense account. Thus, a quantity of coal might have been purchased for fuel and charged to the Expense account, and afterward it might be found advisable to sell a por- tion of it. In this case whatever is received for the coal should be debited, and the Expense account credited. LOSS AND GAIN ACCOUNTS 7. What accounts are classified as ' ' loss and gain accounts " f Those accounts which show either a loss or a gain, as the Merchandise account, the Expense account, or the Interest and Discount account, etc. 8. Into what general account are the various loss and gain accounts closed? Into the Loss and Gain account. 9. This account is finally closed into what ac- count ? Into the proprietor's Stock account. To exhibit the proprietor's investments and with- drawals, and his net gains or losses during any period of the business. 11. What does the credit side of this account show ? The investment and the gains. 12. What does the debit side show ? The withdrawals and the losses. 13. If the credit side is the larger, what will the difference show ? The proprietor's present worth. lit. If the debit side is the larger, what does the balance of the account show ? The proprietor's insolvency. 15. When shoidd this account be closed ? Whenever the books are closed. PROPRIETOR'S STOCK ACCOUNT 10. What is the purpose of the proprietor's Stock account ? BALANCES 16. What is meant by the balance of an account ? The difference between the respective sums of the debit and credit sides. 17. What is meant by the resources of a busi- ness ? All property belonging to the business and all debts owed to it. 18. What are liabilities ? All debts, of whatever character, owed by the proprietor of the business to other persons. 19. When does the balance of an account repre- sent a resource ? When it represents property belonging to the busi- ness, or a debt that is owed to the proprietor. 20. If the debit side of an account is greater than the credit side, what does the balance of the account show ? Either a resource or a loss. 21. If the credit side of an account is greater than the debit side, what does the balance show? Either a liability or a gain. 22. When does a personal account show a re- source ? When the debit side is greater than the credit side. 23. When does a personal account show a lia- bility ? When the credit side is greater than the debit side. 2Jf. What is meant by the net capital of a firm ? The excess of the resources over the liabilities. 25. If the resources of a firm are S 10,000 and the liabilities $lf,000, what is the net capital? $6,000. 26. What is meant by the insolvency of a firm? The excess of the liabilities over the resources. [77] 78 GENERAL REVIEW QUESTIONS 27. If the resources of a firm are $7,000 and the liabilities $1 1,000, what is the amount of the in- solvency ? $4,000. TRIAL BALANCE 28. What is the purpose of a trial balance ? To test the accuracy of the accountant's records m the Journal and the Ledger. 29. Is the correctness of the Trial Balance ab- solute proof that the ledger amounts are correct ? It is not. It is merely one evidence to that effect. 30. What does the Trial Balance realhj prove ? If correct, it proves that the total sum of the debits in the Ledger is equal to the total sum of the credits. 31. W hat is necessary in order that the Ledger may be in balance ? The debits and credits of the original entries must have been equal, and all of these must have been posted correctly to the Ledger. 32. If, in posting, a credit item were omitted, what woidd be the effect upon the Trial Balance ? The credit side of the Trial Balance would be too small. 33. What would be the effect upon the Trial Bal- ance of posting a debit amouiif, twice f The debit side of the Trial Balance would be too large. 3 If. If a debit item of $100 shoidd be posted to the credit side of the Ledger, lohat woidd be the ef- fect upon the Trial Balance f There would be a difference of $200 between the debit and credit footings. 35. In case the two sides of the Trial Balance do not agree, ichat is the first step to take ? To ascertain the exact amount of the discrepancy, and then examine your books of original entry to see if there is an entry for that amount, which may have been omitted in the posting. 36. If nothing of this character is found, what is the next step ? To see if there is an amount equal to one half of the cliscrepanc}' in the Trial Balance, which may have been posted to the wrong side of the Ledger ; thus, if the discrepancy in the Trial Balance is $560, it might be explained by the fact that an amount of $280 had been posted to the wrong side of the Ledger. 37. If such an amount is not found, what is the next step f To examine the Ledger carefully, in order to see that there have been no errors in copying the foot- ings of the Ledger into the Trial Balance. 38. If you still fail to find the error, what shoidd be the next procedure? To go over carefully all of the additions in the Ledger. 89. If these are found correct, what next f Examine the journal entries, and see if the debits and credits are equal. JfO. If still no error is found, what is the next step ? To check off the postings to the Ledger. Jfl. What is meant by thidf It means to review the posting of each amount, entering a light check mark with lead-pencil in the Ledger, opposite each amount that is correctly posted. It is not necessary to check the Journal. 42. If the error is still undiscovered, to hat are we to conclude f Either that we have made a mistake in some of the steps taken to ascertain the errdr, or else that there is an error in our last balance of balances, through which the books were out of balance at the beginning of the business. MISCELLANEOUS 43. What is meant by the ex%>lanation of an entry ? A statement setting forth plainly the details of the transaction. 44- What is the necessity for making an expla- nation full and complete ? To enable any one who might be called upon to take charge of the books, to understand clearly the details of every transaction in connection with the business. 45. Is the form in which an explanation is en- tered important f It is not. All that is necessary is to write just what occurred, and in such a way that any one could get a clear idea of the transaction. 46. What is meant by an indebtedness (( on ac- count " ? Any indebtedness that is not based upon the debt- or's note or other promissory obligation. 47. What is meant by jwsting ? Posting is transferring the debit and credit amounts from the books of original entry to their respective accounts- in the Ledger. 48 What is an opening entry ? It is a preliminary entry setting forth the charac- ter and conditions of the business, and including an exhibit of the various resources and liabilities on commencing the business. 49. Under what circumstances shoidd the amounts of the opening entry not be posted to the Ledger ? When they are included in accounts that are al- ready in the Ledger when the business is commenced. 50. At lohat time should the folio pages be en- tered in connection with the posting f Immediately after the amount has been entered in the Ledger. 51. When goods are sold on account, why should the sale be itemized on the books f In order that the seller may have a complete his- tory of the transaction, in the event that the buyer disputes the account. 52. State the purpose of receipts. The purpose of a receipt is to supply formal and reliable evidence that money has been paid, or that property has been delivered. GENERAL REVIEW QUESTIONS 79 58. W hen should you exact a receipt f Whenever money is paid, and when property is delivered, without a formal record being made of such delivery. 51/.. Is a certified check negotiable ? It is. 55. What is meant by the "legal rate" of interest ? The rate that is prescribed by law for cases where interest is to be paid, but no rate has been agreed upon. The legal rate varies in the different States, but it is usually lower than the current rate charged by the banks. EXERCISES IN JOURNALIZING 1. Bought of Harmon <£• Sons on account, five tons of coal for use in the store. What entry ? Expense to Harmon & Sons. 2. Deciding that more coal had been bought for the tise of the store than would be needed, ice sold one ton of the same for cash. What entry ? Cash to Expense. 8. Gave Joseph Brown a check in payment of my note in his favor for $150 with interest on the same $12. W hat accounts are affected in this transaction ? Bills Payable, Interest and Discount, and Cash. If. How are these accounts affected, and why t Bills Payable is debited because our note is re- ceived ; Interest and Discount is debited because it costs us value ; and Cash is credited because cash is parted with. 5. Henry Smith gave us a check hi payment of his note in our favor for $75, interest on the same $6. W hat accounts are affected ? Bills Receivable, Interest and Discount, and Cash. 6. How are these accounts affected, and why ? Cash is debited because it is received ; Bills Re- ceivable is credited because we have parted with a bill receivable ; Interest and Discount is credited be- cause it has yielded us value. 7. Paid our note without interest, giving a check for one half of the face, and mdse for the balance. What entry f Bills Payable to Cash and Mdse. 8. Give the form of entry required for the fol- lowing transactions : 9. Sold mdse to R. Miller, receiving in payment a certified check. Cash to Mdse. 10. C. W. Jones settled his account by giving us his note at thirty days. Bills Receivable to C. W. Jones. 11. Accepted Hart & Co.'s draft on us at ten days 1 sight. Hart & Co. to Bills Payable. 12. R. J. Miller gave us a check in payment of his note vdth interest. Cash to Bills Receivable and Interest and Discount. 18. Settled our account with Stephens ayment of interest due on our note in his favor. Interest and Discount to Mdse. 29. Paid our note in favor of R. S. Harper with interest on thi same, giving our draft on King- man & Go. Bills Payable, and Interest and Discount to Kingman & Co. 30. Bought mdse of Henderson & Go. , paying cash for a part of the purchase, and our note, at thirty days, for the balance. Mdse to Cash and Bills Payable. 80 JOBBING BUSINESS CASH BOOK 386. The Cash Book is a separate book in which no other but the Cash account is kept. (Many houses keep two Cash Books, a Main or General Cash Book, and a Petty Cash Book, in the ordinary or common form, or as an Imprest Petty Cash Book. The Petty books will be explained later.) The General Cash Book for Double Entry generally has two or more money columns on each page, and two pages are used to record all transactions involving cash. The left-hand page is used as the debit side of the Cash account and contains a record of all cash received. The right-hand page is used as the credit side of the Cash account and contains a record of all cash paid out. What is Cash in bookkeeping? In general, a bookkeeper would be safe in accepting gold coins, silver coins, nickels, copper coins, gold certificates, silver certificates, greenbacks, National bank notes, personal checks from his customers, but not from strangers, personal checks certified, cashier's checks, bank drafts, bills of exchange, postoffice money orders, express money orders, telegraph money orders, and letters of credit, as cash. The illustration on pages 82 and 83 shows a Cash Book with two money columns on each page. The method of making entries in, and the posting from, the Cash Book, will depend on how the columns are used. Three of these ways are explained under A, B, and C. A. If the left-hand money column is used for Items and the right-hand money column for Totals, then, since the left-hand page is the debit side, 387. To record the name of an account on the left-hand page debits cash and credits the account. This will be made clear if the first sale of Mdse to O. C. Dailey, for cash, is journalized. The Journal entry would be Cash to Mdse $826.40. Par. 15. From this entry it will be seen that the Mdse item would post to the credit of Mdse account. Using the columns in this way the rule, then, is: Post all accounts on the left-hand page of the Cash Book to the credit side of their respective accounts in the Ledger. Since the right-hand page is the credit side, 388. To record the name of an account on the right-hand page credits Cash and debits the account. This will be made clear if the first entry on the right-hand page of the Cash Book is journalized. The Journal entry would be Expense to Cash, $200. Par. 15. From this entry it will be seen that the Expense item would post to the debit of Expense. Then, the rule is: Post all accounts on the right-hand page of the Cash Book to the debit of their respective accounts in the Ledger. 389. As the Cash Book is the Cash account, when a Cash Book is used it is not necessary to carry a Cash Account in the Ledger. Some, however, carry the cash Balance each month to the Ledger. Others carry monthly debit and credit footings to the Ledger, preparatory for Trial Balance. Perhaps most bookkeepers do not carry Cash account in any form in the Ledger, but take the monthly Balance or debit and credit footings directly from the Cash Book to the Trial Balance. 390. In actual business the Cash Book is footed in pencil and the cash account verified each day, as directed in "Testing Cash" and the "Daily Cash Balance Book," elsewhere in this book (or some similar plan is used), and the Cash Book is balanced and ruled up only at the end of the month. 391. However, in your schoolwork, for practise, you should verify, balance, and rule up your Cash Book every day, in accordance with the Cash Book illustrations in this book. 392. In transferring the Cash Account from the Ledger to the Cash Book, you should enter on the credit side of the Cash account in the Ledger, in red ink, "Balance to Cash Book page — ," and the amount. Then double rule the account and on the left-hand page of your Cash Book write the words "Balance from Ledger, page — ," and the amount. See pages 82, 83. BILLS RECEIVABLE, BILLS PAYABLE, INTEREST, AND DISCOUNT Interest is Cash allowed for the use of money. Discount is an amount deducted from a debt that is due or that may become due at some future time. 393. If you receive Cash for a Bills Receivable or for any part of the note, enter Bills Receiv- able and the amount on the left-hand page, par. 15. If you receive cash for interest, enter Int. and Dis. and the amount on the left-hand page, par. 15. 394. If you pay a Bills Payable, or any part of your note, enter Bills Payable, and the amount on the right-hand page, par. 15. If you pay cash for interest, enter Int. and Dis. and the amount on the right-hand page, par. 15. JOBBING BUSINESS 81 395. Both interest and discount are treated as losses or gains, and are generally entered under an account called Int. and Dis. 396. If you allow a discount, enter the name and the full amount of the account on the left- hand page, par. 15. Then, enter Int. and Dis. and the amount of the discount on the right-hand page, par. 15. If you are allowed a discount, enter the name and the full amount of the account on the right-hand page, par. 15. Then, enter Int. and Dis. and the amount of the discount, on the left-hand page, par. 15. 397. No entry should be made for the interest on interest-bearing notes at the time of receiving them, or giving them, unless it should be for accrued interest to date. In such case the entry would be made for the accrued interest only ; that is, for the amount of interest due at the time you receive or give the interest-bearing paper. MDSE DIS. ON INVOICES AND SALES If you pay an invoice before the discount period expires (1) make out your check for the amount of the invoice less the discount, and enter the name of the firm and the full amount of the invoice on the right-hand page, par. 15; (2) then, enter Mdse Dis. and the amount of the discount on the left- hand page, par. 15. If a customer pays you before the discount period expires, (1) enter his name and full amount of the bill on the left-hand page, par. 15 ; (2) then enter Mdse Dis. and the amount of the discount on the right-hand page, par. 15 . B. If the left-hand money column on the left-hand page is used to record Mdse Sales, and the right- hand money column on the same page, to record sundries (accounts that are to be posted daily), and the left-hand money column on the right-hand page to record Expense items, and the right-hand money column on the same page to record Sundries (accounts to be posted daily); then, the several amounts in the Sundries column on the left-hand page would be posted daily to the credit of their respective accounts in the Ledger, and the total of the Mdse Sales column would be posted to the credit of Mdse at the end of the month; and the several amounts in the Sundries column on the right-hand page would be posted daily to the debit of their respective accounts in the Ledger, and the total of the Expense column would be posted to the debit of Expense at the end of the month. Instead of Expense, Mdse Pur- chases may be used. C. If the right-hand money column on the left-hand page is used to record the amount of cash actually received, and the left-hand money column on the same page to record the amount of Mdse Dis., or vice versa, then when a customer pays us in time to get advantage of the time discount, enter his name and the amount of money received in the right-hand money column and the amount of Mdse Dis. in the left-hand money column, on the left-hand page. Post from the left-hand page the amount of Cash plus the Mdse Dis. to the credit of the customer's account. Post the total of the Mdse Dis. column on the left-hand page at the end of the month to the debit of the Mdse Dis. account. If the right-hand money column on the right-hand page is used to record the amount of cash paid and the left-hand money column, on the same page, to record the amount of Mdse Dis., or vice versa, then when we pay a creditor in time to get advantage of the time discount, enter the creditor's name and the amount of cash paid in the right-hand money column and the amount of Mdse Dis. in the left-hand money column on the right-hand page. Post from the right-hand page, the amount of the cash plus the amount of the Mdse Dis. to the debit of the creditor's account. Post the total of the Mdse Dis. column on the right-hand page, at the end of the month, to the credit of the Mdse Dis. account. Instead of Mdse Dis. or Mdse Sales, on the left-hand page, and of Mdse Dis. or Expense on the right- hand page, any other account occurring more frequently should be substituted. The naming of the columns will, of course, depend on the nature of the business. The columns of a two-column Cash Book may be used in any way the teacher may prefer, but it is suggested that they be used in at least as many different ways as suggested herein. From the advantages in the saving of entries and postings by using the columns of a two-column Cash Book in different ways, the learner will understand that by the use of an extensively columned Cash Book, there will remain little, if any, use fo- a Journal, and many business houses do not useR. Item Column * ■ ■ ■ Total Column 19 Jan. 2 224 2 Mdse 2 J. P. Lawley 2 Bills Receivable 2 Mdse 2 Harvey Brown 2 Mdse Bal. from Ledger Sale to O. C. Dailey Ck. On acct. P. O. O. Reg. No. 42 Ck. Sale to Gen. Mdse Co. Ck. Acct. in full Cy. Sales for the day Cy. 8 2 6 40 1 6 I 7 5 4 2 7 62 2 9 15 3 i 2 40 2 7 6 80 2 7 8 6 57 Balance 1 1 6 1 3 37 Jan. , 3 6 3 4 2 02 3 Mdse Sale to T. B. Hix Ck. 8 2 3 Ship.No. 3 U.S. Com. Co. Part of Net Proceeds Ck. 1 4 6 50 3 O. B. Sprague On acct. Ck. 3 9 3 25 3 Mdse Sale to A. B. Fox Ck. 7 6 5 3 Ship.No. 3 U.S. Com. Co. Balance due Ck. 1 4 5 3 Bills Receivable Reg. No. 14 Ck. 3 4 3 Int. and Dis. 6% on No. 14 for 6 mos Ck. 1 20 3 Fur. and Fix. Sold Courter Cy. 3 6 3 Chattels Sold Horse and Wagon Dft. 2 7 5 3 R. B. Munn Acct. in full Ck. 5 5 2 30 3 Mdse Sales for the day Balance Cy. _ _____ 8 5 4-|3 3 3 25 10 6 7 5 27 Jan. 4 7 2 5 12 4 E. M. Ross On acct. Ck. 3 9 8 4 Expense Rebate on Rent Ck. 2 5 4 Mdse Sales for the day Cy. 3 4 3 95 7 6 6 95 . 7 7 9 2 07 ■ Date Name of Account JOBBING BUSINESS CASH Explanation 83 OR. Item Column Total Column 19 Jan. 2 Expense 2 Mdse 2 Henry Scott 2 Mdse 2 W. H. Martin 2 Mdse 2 D. W. Gordon 2 E. O. Piper 2 Mdse 2 R. D. Lewis 2 Bills Pay. 2 Int. and Dis. 2 Jan. 3 Mdse 3 Chattels 3 Expense 3 Mdse 3 L. M. Dexter 3 Mdse 5 J Jan. One month's Rent Ck. 42 Invoice No. 37 43 On acct. 44 Inv. No. 38 45 On acct. . 46 Inv. No. 45 47 On acct. 48 Acct. in full 49 Inv. No. 42 50 On acct. 51 Reg. No. 42. 52 6% Bill 42 for 18 ds. Cy. Balance Inv. No. 57 53 Horse and Wagon 54 One Ton Hay ' 55 Inv. No. 58 56 On acct. 57 Inv. No. 61 58 Balance in Bank Balance in Cash Drawer 4 Mdse Inv. No. 73 59 4 Bills Pay To apply Reg. No. 39 60 4 Freight On Inv. No. 69 Cy. 4 Mdse Inv. No. 75 61 4 Expense Two Tons Coal 62 4 H. B. Burton, Private For Private use 63 4 Expense Water Tax 64 4 Balance Fwd. 84 200 6 7 8 20 2 6 20 1 8 86 442 6 6 5 50 100 5 o 3 8 o 40 5 5 o 5 9 2 42 1 7 77 4 7 2 1 35 6 I? 4 2 02 I 1 1 b 6 3 37 2 o o 15 225 8 067 2 o 1 3 o 6 2 2 82 4 o 2 30 3 6 5 o 15 7 o 2 5 12 1 o 6 7 5 27 7 6 4 88 6 9 7 25 1 o 80 1 1 8 50 9 50 I 1 o 6 20 o 1 7 13 7 7 4 94 7 9 2 07 64 JOBBING BUSINESS On H w Q W~ o o PQ W o PQ W < o 1-3 < 12 Balance on Hand t-. ::::::::: : o ::::::::: : ^ .:::;.::::::::: : oo o :;::;:::::::::: : 11 Balance in Bank a ::::::::::::::: : (N :.::::::::::::: : Tt< :::::::::'.::::: : io :::::•:::::::..: : s * n JQ o> 8 s o» ; . : : • • • • • 1 : : as :::::::::-..... -*:::• 1 .:::::.:::: : oo :••••: r ~ ' ; I '. ! ' I 1 '• '• ' • • • (a cD :::::::: : : : CD ::::::::::::::: : 1269 8 Balance in Drawer oo : : : : : : : : ■ : : «:::::::: ::..::: : co ■:::::::..::::: : io ::::::::::::::: : 7 Less Cash Credit Tickets o :::::■:• : : . : : o :::::::::::::■: •' 10 •::::'::::::::: : 6 Total in Drawer oo ::::::: : : co ::::::::::::::: : oo :.:;::.:.:::.:: : -* »o ::::::::::::::: : 5 Debit Cash Tickets co :::::::::: : : : • : co ::::::::::::::: : io : : : | • . ■ • • • • : * : : : : : 4 Money Orders Oi '■■■■■'■ '■ '■ '• '■ co ::■■::::::::::: : oo : : : : • t ~ h ; i '. ; \ \ ', ' '. ' t '• '• '• i : 3 Drafts ic: : : : : : : : : : : : : : : : oi ::::::::::::::: : I s - ::.:::::::;::: ° :::::::::::::: : 2 • Checks *- ::::::::::::::: i 00 ::::::::::::::: : 1 Total of Itemized List ^ ::::::::::::::: : oi ::::::::::::::: : : ■* : o : 4^^?^^^f (/^^^^J?^ .Dollars College Currency jL& ,5^S,, /pop l X^sJ^^^y^^-t-d/ CZj^Jr^/rS Collars .jm^ Jtsfeor w^Sjg^/- JOBBING BUSINESS 89 399. The Columnar Journal — The Columnar Journal is now first introduced into your work. The purpose of this class of books is to save time and labor by posting aggregate amounts instead of the separate amounts in certain classes of transactions. 400. Four-Column Journal, — As its name indicates, this book consists of four money columns,— two for the debit side and two for the credit side, — the entries being recorded in the middle of each page between the debit and credit sides. See pages 90 and 91. The sundries columns are for the entry of all amounts other than merchandise, while the merchandise columns are for the purchases and sales of merchandise except sales on account. See par. 433, 5.53, 620. 401. The amounts in the sundries columns are posted as in the common Journal, while the mer- chandise columns are posted through their aggregate footings at the close of the day, week, or month. 402. Column Footings. — In keeping this book, the footings of each of the four columns are entered in black ink at the bottom of each page (see form) ; but before making these entries their accuracy should be tested by comparing the sum of the footings of the two debit columns with that of the credit columns; these sums of course should be equal. For the purpose of making this comparison, the footings of the columns should be first written on a piece of waste paper, and when found to be correct, should be entered in black ink at the foot of each column, and then carried forward to their respective columns at the top of the next page. See forms on pages 90 and 91. 403. At the time of posting the merchandise columns, or whenever the books are closed, the columns should be balanced, as shown on the last page of the accompanying form, at which time the aggregate footings of the merchandise columns are posted to the Merchandise account in the Ledger. 404. The form of Four-column Journal herewith given will illustrate the general method of keeping this book. 405. Opening Entry. — The opening entry for this book does not differ materially from that of an ordinary Journal. All resources are entered in the . debit sundries column and all liabilities in the credit sundries column. The merchandise inventory is not entered in the merchandise column for the reason that it already appears in the Ledger; if it were entered in the merchandise column, it would be posted with the final aggregate footing of that column at the close of the business, and hence would reach the Ledger a second time. 406. Direction. — After examining the opening entry in the accompanying form, write the opening entry required on the first page of your Four-column Journal. PRIVATE ACCOUNT 407. A Private account is an account kept with the proprietor, separate from the Stock account. There are several reasons for keeping this account, in it should appear all withdrawals from the business by the proprietor to meet personal expenses, which are supposed to be paid from the profits of the business and not withdrawn from the capital. This account is not kept by all bookkeepers, but it should be, as it prevents withdrawals and unimportant changes from appearing in the Stock account, this account remaining unchanged till the end of the year, which is generally desirable, as it represents the working capital of the business. However, if large sums are permanently withdrawn from the business, they should be charged to the Stock account, and not to the Private account. 408. The Private account is sometimes opened for the purpose of reducing the Stock account to even hundreds or thousands before admitting a partner. 409. This account is sometimes provided with a credit amount, against which to draw, as in cases where the partners of a business are allowed a salary for their services. This is usually placed to the credit of each partner's Private account at the end of the month or year as desired. 410. It must not be forgotten that when salaries are allowed the partners, the business will show that much more of a loss, and if the real earnings of the business are wanted, the amount of these salaries must be taken into consideration; but as the Private accounts will snow a corresponding gain, the business is not affected by allowing the salaries. 90 JOBBING BUSINESS Cincinnati, O., Nov. i, 19 MDSE SUNDRIES L.F. EXPLANATION L.F. SUNDRIES MDSE I, H. B. Burton, have this day adopted the Four-Column Journal as a book of original entry. The resources and liabilities of my business at the present time are as follows: 6,425 50 9 Cash, per C. B., page 9 975 20 4 Mdse per Inv'ry. 1,218 40 6 Bills Rec. Reg. No. 9 340 7 W. D. Gordon on acc't. Bills Pay. Reg. No. 6 W. D. McGraw, on acc't. H. B. Burton, Stock. 8 12 1 582 456 7,919 50 80 80 742 80 Mdse Bills Pay. Gave E. C. Miller our 30 day note as per Reg. No. 20 in full for invoice No. 130. 742 80 298 10 560 50 Mdse Bills Pay. Accepted E. B. Morgan's draft at 10 days' sight, Reg. No. 21, in full for invoice No. 141. Bills Rec. Mdse Sold Mdse. as per bill rendered to Geo. Snyder for his draft at 10 days' sight on Harry Hunter, Reg. No. 36. 298 10 560 50 145 20 Mdse D. M. Grant Gave VV. J. Quinn a sight draft at 10 days on D. M. Grant in full for Inv. No. 142. 145 20 148 20 Mdse A. E. Brown Inv. No. 143 on account 146 20 460 50 300 Nov. 2, 190 Mdse Bills Pay. W. G. Evans Gave W. G. Evans my 60 day note for $200, interest at 6 %, Reg. No. 22, in part payment of Inv. No. 144, balance on account. Bills Rec. Mdse J. B. Cobb Received J. B. Cobb's 60 day note for $300, interest at 6$, Reg. No. 45, in full for Mdse as per bill rendered $100, balance of $200 to apply on his account. 200 260 200 50 100 180 Mdse Bills Pay. J. M. Griffin Gave J. M. Griffin my 90 day note for $100, interest at 4#, Reg. No. 23, in part payment of Inv. No. 44, $180, balance on account. 80 100 W 125 60 91 Bills Rec. Am. Mdse Co. Accepted my ten day draft favor self, Reg. No. 43, to apply on %. Fwd I 91 125 1,9/2 9,944 1 11,236 90 660 50 JOBBING BUSINESS Cincinnati, O., Nov. 2, 19 91 MDSE SUNDRIES L.F. L.F. 90 SUNDRIES M DSE 1,972 80 9,944 60 90 Bit Fwd 11,256 90 660 50 51 Bills Rec. Reg. No. 46. Mdse 3 brls. Beef, $12.00 $36.00 5 tons Bran, 3.00 15.00 51 * 640 O. C. Dailey. E. C. Mills Gave O. C. Dailey for % in full to date a 10 day draft on E. C. Mills. 640 480 R. W. Walters. Bills Pay. Gave him my 30 day note, Reg. No. 49, Int. 6$, in full for Inv. of 9th ult. 480 200 Bills Rec. W. B. Jones Rec'd his 30 day note, Reg. No. 48, Int. 6#, in full for bill of 3d inst. 200 360 Bills Rec. 40 Mdse Dis. J. B. Brown Rec'd his demand note, Reg. No. 50, Int. 1%, in full for bill 9th inst., less special 10$ Dis. if paid by note. Nov. 5, 190 400 600 O. M. Powers. Bills Pay. Mdse Dis. Gave my 10 day note, Reg. No. 50, in full for Inv. No. 36, less special 1 % Dis. as per agreement. 594 6 1,000 Mdse B. J. Donovan Bills Pay. Gave B. J. Donovan my 10 day note, Reg. No. 61, Int. 6#. to apply on Inv. No. 40, Bal. on %. 600 400 | 300 W. B. Brown Bills Pay. Accepted his 30 day draft, favor Merchants Bank, Reg. No. 63, in full for % to the 1st inst. 300 100 B. C. Collins C. M. Gilbert Gave B. C. Collins a ten day sight draft on C. M. Gilbert for my % in full to the 3d inst, same to apply on % with Collins. 100 1,000 60 80 O. E. Dunlap Bills Pay. Gave him my 4 months note, Int. 6 %, Reg. No. 54, for an accommodation. He agrees to pay same before ma- turity and has deposited 100 shares of Union Iron Works Stock with me as security. Dr. Mdse Cr. 1,000 90 50 711 t 1,972 80 14.715 1,972 15,976 711 50~ 16,688 40 1 16,688 40 92 JOBBING BUSINESS. 411. Balance Sheet. — The form of Balance Sheet here given has the merit of compactness, clear- ness, and convenience. The principle involved is the same as the one hitherto used, the greatest differ- ence being in the arrangement of the resources, liabilities, losses, and gains. An inspection of the accom panying form should enable the student to use it properly. Observe that the inventories are entered in red ink. Italic figures thus, 1250, indicate red ink. 412. When instructed to use this form of Balance Sheet, make it out on balance sheet paper, and submit it to your teacher for inspection. If approved, enter a copy of it in your Balance Sheet Book. For other forms of Balance Sheets, see pages 107, 108, 116, 144. Balance Sheet or Financial Exhibit of H. B. Burton's Business, Dec. 31, 19 L F LEDGER ACCOUNTS TRIAL I tALANCE BALANCE OF BALANCES LOSS AND GAIN ACCT Debits Credits Resources Liabilities Losses Gains 1 H. B. Burton Stock 5000 2 Cash 9670 50 6380 40 3290 10 3 Expense 100 100 4 Mdse 6460 40 7560 40 1250 2350 5 B. F. Stone 1150 1150 6 H. Murphy 264 945 50 681 50 7 F. B. Clark 2062 30 235 80 1826 50 8 J. F. Wyman 1520 90 24G9 65 948 75 9 D. M. Ellis 1379 75 1749 50 369 75 10 W. D. Campbell 1966 80 233 40 1733 40 24574 65 24574 65 9250 00 2000 00 100 2350 H. B. Burton Cr. by Net Stock Acct 5000 Cr. by Net Gain 2250 2250 H. B. Burton's Present W'th 7250 7250 7250 7250 9250 00 9250 00 2350 2350 STEPS IN CLOSING BOOKS 413. It is important to observe proper and regular order in the various steps required in closing a set of books. As a general guide to the student, these steps are herewith given, and he is expected to follow them in all closings. (1) Post your books; (2) Add all accounts; (3) Take a Trial Balance; (4) Test your Cash; (5) Test your Bills Receivable and Bills Payable accounts; (6) Take an inventory of stock; (7) Rule up all accounts that are in balance; (8) Make out a Balance Sheet; (9) Enter all inventories; (10) Close your books; (11) Rule up all accounts that have been balanced; (1^) Balance and rule up your Stock account; (13) Take a Balance of Balances; (14) File your invoices; (15) Make out a "Final Report and Statement of your Business" in the Report Book; (16) Prepare your books for inspection; (17) Present your books to your teacher. , 414. Closing Without Journal Entries.- Many bookkeepers close the Ledger without employing closing Journal Entries. This is done by entering in red ink the balance of the various loss and gain accounts in the Ledger and the Ledger page to which the losses or gains are transferred, and then trans- ferring these balances, together with the Ledger page from which they are obtained, to the Loss and Gain Account in black ink; the account to be closed is then ruled. The Loss and Gain Account is closed by entering the net losses or net gains in red ink, together with the page of the proprietor's account, which balance is then transferred with the page of the Loss and Gain Account to the Proprietor's Stock Account, his new present worth being entered in red ink and brought down below the ruling as heretofore. See the accounts on page 93. Also pages 35, 36. JOBBING BUSINESS 93 _ ., the term of said copartnership to continue Vne pear* from and after the 3irs/ day of feme, 19 , unless sooner dissolved. The investment of the aforesaid partners is to be as follows : 3t. ZAJ. 3/ur/on is /o inves/ /Ae resources ai s/ioton /u /Ae /as/ ^AJa/ance j/iee/ in /Ae JrAc/esa/e 3 r /our 3f usiness Aere/o/ore conduc/ed /u Aim, ana //te /ia/i/i/ies of said /usiness are /o Ae assumed /u /Ae ftar/ners/tift. V. j/. zTlarmon is /o inves/ ibasA, Jtoo JAteusand l^/)o//ars; ^MercAandise as fier inven/oru Jtoo JAousand 3ive 3lundred and 3or/u- five ±3)o//ars ana 1 ' /Air/u. - five v)en/s, ana a nc/e for Une JAtousand ±3)o//ars mat/e /u 3lc>iry ffe//s, en fan. 43, 49 , t/ae %'an. 4, 49 , ana marina in/cres/ a/ //ie ra/e of seven fier cen/. fier annum. The said partners are to share the losses or gains of the partnership business as follows : 3i^ 98. zlour/tm /aio //tiro's, ana* fe 3. 3iarmon one //lira' of said losses or gains. In regard to time and services to be contributed by the partners, it is further agreed that 2AA? zw. ZAJur/on is /o devc/e Aimse/f* en/ire/u /o //ie /usiness, ana is /o manaae ana conduc/ //te same in accordance toi/A /it's /es/ iudamen/. 3/ is a/so aareed //to/ Jf- J. ^yVarmon is no/ /o /e reauired /o fierform anu service in connection tei/A said AusineM. 3/ is fur/Aer aareed /no/ 3c. 3). zX>ur/on is /o receive comftensa/ion for Ais services in /Ae sum of f/00 fter mon/A, //te same /o Ae fiaua//e from /Ae funds of /Ae /usiness ana Aefore /Ae division of any. accrued ftrofi/s Ae/teeen //te fiar/ners, as Aerein firovided. It is also agreed that aside from the profits and compensation heretofore mentioned, neither partner is to withdraw from the business any money or other property, in excess of his investment, except with the written consent of his copartner. It is also especially agreed that neither of the parties to this contract shall sign or indorse any bond, note, draft, or commercial paper, nor sign any official or other bond, or do any other act to create a financial liability or obligation, without the written consent of his copartner. At the expiration, or in the event of the earlier dissolution of this copartnership, the business and property of this firm may be closed out by sale ; and after all debts and liabilities are paid and discharged, the amount remaining shall be divided between the partners in the ratio of their respective interests. Witness our hands this 3en/A day of fane 19 ?1d. fS. f&VLJlJlori J. y/iLw ) M ^> X^mtm Witnesses. [95] 96 PRODUCE AND PROVISION BUSINESS 431. Filing Articles of Agreement. — Fold your copy of the "Copartnership Agreement" in such a way that the blank filing form on the back will be outside. Then fill out this blank in accordance with the form here given, after which place the document in your Permanent File. H -3 C3 ^ ^ « >s ON V z 2 O 432. Books of Original Entry, — The books of original entry for this business are the Six- column Journal and Sales Book, the latter being used to record all sales of merchandise on account or for Bills Receivable, as heretofore. All sales may be recorded. See par. 344. 433. Six-Column Journal — This book is a further application of the principle introduced in the Four-column Journal; viz., of so keeping the books of original entry as to save time and labor in posting. There are three debit and three credit columns, which are used respectively for cash, mer- chandise, and sundries, as indicated by the headings in the form of the book on page 97. The sun- dries column only should be posted daily, while the totals of the other columns are not to be posted until the books are closed. The footings of the several columns are to be tested and carried forward as previously instructed under "Column Footings," par. 402. See also par. 400, 553, 557, 620. 434. Opening Entry. — After examining the opening entry in the Six-column Journal form on page 97. make your opening entry in your Six-column Journal. No firm account under the partnership title is to be opened, each partner being represented by an individual stock account. Observe that the merchandise for your own investment should be entered in the sundries column, and checked off, as it is already in your Ledger, and, therefore, is not to be posted. The merchandise contributed by your partner should be entered in the merchandise column in order that it may be posted with the total of that column at the time of closing the books. The pages of all accounts that already appear in the Ledger must be entered in the folio column, as shown in the form. 435. Renewing Notes. — It sometimes becomes necessary in business to renew a note when due in place of paying it. This is done by giving a new note for the old amount. The interest due at maturity should always be paid in renewing the note and never be allowed to become a part of the new note. It is customary in the business office when renewing a note to write the word ' 'renewal' ' on the face of the note, and especially so if the note has been discounted at a bank, as doing this prevents rediscounting the note. 436. Blank Indorsements — Notes and other commercial papers once indorsed in blank, will remain payable to bearer. Although they may afterwards be endorsed in full, or otherwise, it will have no effect whatever, excepting that of a blank indorsement, unless all previous blank indorsements are filled out so as to make them full indorsements. The holder of a paper indorsed in blank has a perfect right to fill out the indorsement in full, or otherwise, so long as he does not increase the liability of the indorser by doing so. 437. Interest on Notes — No entry, whatever, should be made for the interest on interest-bearing notes at the time of receiving them, excepting in a case where a note nas been running some time before you received it; and then an entry should be made for the accrued interest only, at the time of receiving the note; that is, for. the amount of interest due on the note up to the date of receiving it. Cincinnati, O., March i, 19 CASH MDSE SUNDRIES j 6,325 50 5,760 50 2,105 380 165 10 12,251 10 2,486 to 20 490 110 945 1,075 65 240 309 100 250 75 SO 84 3,745 GO GO cS7 EXPLANATION A copartnership for the purpose of conducting a General Produce and Pro- vision Business has this day been formed between H. B. Burton and J. C. Russell, under the firm name of H. B. Burton & Co. The terms and condi- tions of said copartnership are specified in the Agreement of Copartnership, which has this diy been signed by the said partners, and a copy of which has been delivered to each. H. B. Burton invests the following resources and liabilities : Cash, per C. B. p. 16 Bills Rec. Reg. No. 42 Bills Rec. Reg. No. 48 Lumber, per Inv'ry G. J. Wells on acct. J. P. Jones Chattels, per Inv'ry Bills Pay, Reg. No. 64 Bills Pay. Reg. No. 73 W. D. Gannon on acct. J. J. Sells on acct H. B. Burton's net investment J. C. Russell invests the following re- sources and liabilities : Cash Mdse , per'lnv'ry Bills Rec. Reg. No. 54 J. C. Russell's net investment Expense Cash For rent of store one mo. in advance. Ck. No. 941. Chattels : Furniture and Fixtures Cash Bought horse and wagon of H. M. Culler for use in the business, $250 ; also furniture and fixtures, as per Inv. No. 185. Ck. No. 942. Mdse Bills Payable For Inv. No. 143. Reg. No. 75. CriSri IVIclsp E. B. Brown & Co.'s Check No. 943. C. W. Cadle Bills Payable On acct. Reg. No. 76. Pwd 87 SUNDRIES MDSE 265 450 1,010 785 6,740 8,176 380 M 17,892 10 •10 GO 80 CASH 165 165 100 325 10 10 425 [97] Tuesday, March 2, 19 CASH MDSE SUNDRIES Ex, J EXPLANATION [X, SUNDRIES _— MDSE CASH 12,251 10 2,486 1,204 20 20 3,745 35 60 50 86 Brt Fwd Bills Payable Cash Gave A. E. Rice, Ck. No. 943, to apply on my 60-day note. Reg. No. 64. Mdse Bills Payable Inv. No. 150. Reg. No. 76. 86 17,892 1,204 80 20 165 10 425 35 50 720 50 350 210 5G0 50 195 780 50 40 74 68 Cash Mdse Sales O. C. Dailey's Ck. No. 426. Mdse James Willis Inv. No. 351. On acct March 3, 19 Mdse Arthur Armstrong Gave J. W. Smith dft. No. 33 on Arthur Armstrong at 3 days' sight, for Inv. No. 152. Mdse Bill Payable Inv. No. 153. Reg. No. 77. Bills Rec. Mdse Rec'd L. M. Spencer's note at 5 days for Mdse as per bill rendered. Reg. No. 49. Bill Rec. Mdse Rec'd S. B. Stone's accept, at 5 days for Mdse as per bill rendered. Reg. No. 50. G. E. Daley Cash For a cash loan Ck. No. 944. Dr. Mdse Cr. Dr. Cash Cr. 74 68 350 210 560 50 50 50 00 720 195 780 50 40 50 12,971 60 4,810 90 4,806 4,810 12,971 50 90 60 20,217 1,861 510 1,861 00 510 50 22,589 00 22,589 [98] PRODUCE AND PROVISION BUSINESS 99 SPECIAL SUGGESTIONS 438. Cash Balance. — See that your cash is in balance each night before leaving school. If the cash is out of balance, do not engage in other business transactions until the difficulty has been adjusted. 439. Merchandise in Stock. — You are expected to keep up your stock of merchandise by making whatever purchases may be necessary, either at wholesale, or from other students, making your own arrangements as to terms, etc ; also take advantage of every opportunity to make profitable sales. 440. Extra Transactions. — The student should improve every opportunity to engage in commer- cial transactions, and shun no transactions that will increase his knowledge of bookkeeping, even if it does involve a little extra work. Remember that you " learn by doing," and that it is the difficult transactions that give the best training. 441. Chattels. — The term chattels, as used in business, means property other than real estate, merchandise, store fixtures, etc. , and which is used in connection with the business, as teams and drays, or wagons for delivery purposes. 442. Furniture and Fixtures. — This term implies any property used in the store or office for the convenience of the business, as desks, chairs, stoves, counters, etc. 443. Loan. — When instructed to secure a loan of $5,000 from the bank by giving your firm's note, without interest, secured by an indorser, pursue either of the following plans: 1. Write the note in favor of the bank, payable ten days after date, having it indorsed by a student who is willing to secure its payment by indorsement; then deliver it to the bank for discount, having the proceeds placed to the credit of your firm. Also, enter the proceeds of the same in your Banking Ledger, the same as a deposit. The Journal entry would be "Cash and Int. and Dis. to Bills Payable." 2. Find a student who is willing to indorse your firm's note for $5,000. Write a note in his favor for ten days after date; then have the student indorse it in blank, or to your order, then discount it as previ- ously instructed. 444. Notes, Where Payable. — Business men often make their notes payable at a bank where they have money on deposit, instructing the banker to pay them at maturity, and charge the same to their bank account. Notes are frequently written without any specification as to where they are to be paid; in the absence of such specification, the general rule is that they are payable at the place where they are dated. 445. In this business, all notes made payable at the bank are to be paid by the banker, and without receiving a check from the maker of such notes, unless otherwise instructed by your teacher. 446. When the banker pays your note, he will send you a notice to that effect, and will return your note with the paid checks when he balances your Pass Book. Upon receiving notice from the bank that he has paid your note, make the same entry that you would have made, had you paid the note your- self; also make an entry on the credit side of the Banking Ledger, writing the word "Note' ' in the ex- planation column, and the number and amount of the note in the proper columns, as in the case of a check. 447. Returned Checks. — It sometimes happens in the course of business that your own check is returned to you without being cashed or deposited at the bank. When this occurs, debit Cash as usual, and then make an entry on the debit side of the Banking Ledger with explanation; thus, "Ck. 48, returned 75.25." See page 11. SHIPMENTS 448. A Shipment, or Consignment, is a quantity of goods shipped or delivered to a commission merchant, or other person, to be sold on commission. c 449. The terms shipment and consignment may be used interchangeably in all cases except when we are making shipments and receiving consignments to be sold on commission, in which case shipment applies to the goods that we ship, and consignment to those we receive. ' • 450. Parties. — The person making the shipment is known in the transaction as the Shipper or Consignor. The Consignee is the commission merchant, agent, or factor to whom the goods are shipped. 451. Commission. — As compensation for his services in disposing of the shipment, the consignee receives a certain percentage of the sum received for the goods. This compensation is called "commis- sion." In addition to his charges for "commission," the consignee, before remitting the proceeds of any consignment, deducts all charges foi freight, drayage, cooperage, insurance, etc. 452. Proceeds. — The amount remaining after the charges and commission have been deducted is called the "Net Proceeds," which belongs to the person who made the shipment, being the net amount realized by the consignor for the goods shipped. If this sum is greater than the cost of the goods, the shipment will show a gain; if less, it will show a loss. 100 PRODUCE AND PROVISION BUSINESS 453. Reasons for Hairing Shipments — Shipments are made for either of two general reasons: 1. The owner of the goods may have little or no opportunity for home trade in the article shipped. 2. By shipping the goods, the owner may make quicker sales and better profits than if he depended upon the home market. 454. Shipment Account. — A separate account is kept with each shipment, in order that you may determine the net gain or loss on any shipment. The shipments are numbered as they are made, the titles of the accounts being, "Shipment No. 1," "Shipment No. 2," etc., followed by the name of the consignee. In making the sales book entry, give the consignee's name and address. For form of entry see sales book entry No. 3, page 57. If a Sales Book is not used, make a journal entry, "Shipment No. 1 (Con- signee's name) to Mdse. ," followed by the required explanation. In opening the ledger account, give the name and address of the consignee, as in the sales book entry. Read par. 344. 455. The shipment should be charged with the actual cost of the merchandise; that is, the invoice cost, less any discounts that were allowed. The shipment should also be charged with any expenses in- curred in connection with it, as drayage, prepaid freight, boxing, etc. 450. Shipping Receipt. — Whenever goods are shipped by railroad or other means of general transportation, it is customary for the shipper to make out a Shipping Order and a Shipping Receipt, the former being signed by the shipper and delivered to the transportation company's agent, and the latter being signed by the company's agent and retained by the shipper, who forwards it by mail to the "con- signee," or person to whom the goods are shipped. . This Shipping Receipt is also called a Bill of Lading. 457. Both the Shipping Receipt and the Shipping Order contain a description of the articles with number and weight of packages, consignee's address, etc. 458. The Shipping Receipt and the Shipping Order are usually printed on the same page, being bound in tablet or book form, and supplied by the railroad companies to shippers free of charge. 459. Shipping Invoice. — When you are directed to make a shipment, select the merchandise cards and prepare an invoice of them, which invoice is to be sent to the consignee. In preparing a ship- ping invoice omit prices and amounts, as the consignee has nothing to do with these. Simply give a list of the kind and quantities of the goods shipped. SHIPPING IISTVOICE INVOICE OF MERCHANDISE shipped % ^-^(TO^Wy ^ ( ^ . end consigned to J^^^/^Z^2^ of > s^4r^^^? „ (J^^Lii ^-^ to be sold on commission. £0 2-0 460. How to Make a Shipment. — In preparing a shipment for school purposes, always enclose the merchandise cards in an envelope or in a neatly prepared package, giving the name and address of the person to whom the goods are shipped, the same as in the following example: "Geo. D. Hunter, Sacra- mento, Cal. Shipped by John Smith, Oakland." Write a letter, enclosing the shipping invoice of the goods and the shipping receipt. Be sure to copy your letter in the Letter Copying Book. 461. Note. — It should be clearly understood that the goods which you buy and have shipped to you, also the goods you sell and ship to others, are not shipmeyits in the meaning of the term as here used. 462. How to Close a Shipment. — When the commission merchant renders an Account Sales and the Net Proceeds of the shipment, make an entry in the following form: "Cash to Shipment No. 1, (Con- signee's name). For net proceeds by N. Y. draft." If the Account Sales is rendered without the proceeds, debit the commission merchant and credit Shipment No. 1 (Consignee's name), making the following explanation: "For proceeds of Shipment No. 1, as per Account Sales of June 10." When he remits the proceeds, debit Cash and credit him for the amount. Shipment accounts should stand open until the books are closed, at which time they should be closed to the Loss and Gain account. PRODUCE AND PROVISION BUSINESS ; . ! &"'**£ 463. Outstanding Shipment. — All shipments for which the proceeds have not been received at the time of closing the books, must be regarded as resources. They should be inventoried upon a reason- able estimate of what is expected to be realized on them, taking into consideration the market price (which may be either above or below or at the actual cost price), the condition of the goods, and the probable ex- penses of commission, freight, etc. 464. Freight, Drayage, and Express. — In shipping goods that have been sold, extra expenses are often involved for labor, drayage, freight, express, casing the goods, etc. These charges are entered on the bill and charged to the customer. The charges for casing and drayage may be made for our own labor, and not for cash paid out. In this case, we credit Merchandise for the charges, which is the com- mon and convenient custom. It is entirely proper to credit Merchandise for charges of this character pro- vided we debit Merchandise when we pay such charges. 465. Some merchants who desire a more detailed exhibit of the expenses connected with their busi- ness, open accounts with the different items of expense on merchandise, as freight, drayage, express, etc. , instead of charging such expenses directly to the Merchandise account. In this course, whenever freight, drayage, or express is paid, it is charged directly to the 'Freight, Drayage, and Express" account instead of being charged to the Merchandise account, as heretofore explained. At the end of the business, the "Freight, Drayage, and Express" account should be closed to the Merchandise account, and not to the Loss and Gain account. 466. Some bookkeepers and authors of bookkeeping have claimed that these charges should be charged to the Expense account. Before deciding this matter, let us consider a practical illustration. 467. Suppose a San Francisco merchant should order from New York a case of one hundred straw hats at $5 net, paying the following charges on them: in New York for packing and casing $1, drayage $.50, advance freight $2.50; in San Francisco to the R. R. Co., for back freight charges $1.50, drayage $.50 . Under these circumstances, what would be the cost price of your hats, five cents or eleven cents? Clearly it would be eleven cents. Now, should your Merchandise account be charged with $5 or with $11? It should certainly be charged with $11 as that is the actual cost of the goods. Should you sell the hats for twenty cents each, what have you gained on the invoice, $9 or $15? You could hardly fail to decide that you have gained $9. 468. Suppose you should afterward sell, for fifty cents, the box that the hats were shipped in, and charge twenty-five cents for delivering it with your own team, should you not debit Cash and credit Merchandise for the seventy-five cents? You would certainly be justified in doing this. 469. As the cost of the box has been charged to the Merchandise account, it would therefore be entirely incorrect to credit Expense for the seventy-five cents. CONDUCTING BUSINESS BY MEANS OF CORRESPONDENCE 470. General Suggestions. — Throughout the remainder of this course, the student will be fre- quently directed to transact certain business by means of letters. To learn to do this in a businesslike manner is a very important part of a commercial training. 471. It is not the purpose of these instructions to treat in detail the subject of business correspond- ence ; for information on this subject, the student should consult some good work on letter-writing 473. It is important that you should write all letters neatly, plainly, and in correct form Every letter and enclosure should be prepared with care. 473. A large portion of modern business is conducted by means of correspondence, and it is vitally important that the student should learn to conduct such business readily and accurately. 474. The letters should be brief, explicit, and businesslike, and all letters received should be answered promptly. 475. In answering any letter, refer to the date and subject matter of the letter you are answering; thus: "Referring to your favor of the sixth, regarding the draft on Mr. Wilson, I wish to inform you," etc. 476. In delivering and receiving your mail, you should conform strictly to the special arrange- ments of your school. 477. Oral Communication. — Do not, under any circumstances, communicate orally with any one regarding any matter that is to be adjusted by correspondence. 478. With Whom to Correspond. — Unless otherwise directed, do not write business letters to stu- dents who have not advanced in the course as far as the Produce and Provision Business. :102':; : PRODUCE AND PROVISION BUSINESS 4*79. Mail Orders. — In ordering goods by letter, if the order consists of but few items, it may be included in the body of the letter. See accompanying letter. If, however, the order consists of many items, it is advisable to write it upon a separate sheet, and enclose it in the letter. Firms that receive many orders by mail usually supply their customers with special order sheets for this purpose. Ask your teacher what he wishes you to do about enclosing orders. ^G^2>^ &%y y s?z<^>, &-0 sfy ^^^^Cz^>a^^ M 3# ,. ^ ^f^z^y s^fr&*^i?~& € c^L^ ^^t^Zy, 480. Postage. — College postage stamps should be used on all letters. 481. Enclosures. — Lay all enclosures, as checks, notes, etc., across the upper part of your letter and fold with the letter. 482. Shipping Goods. — In shipping goods to a customer with whom you are dealing by corre- spondence, prepare the goods for shipment as directed in "How to make a Shipment." Fill out a Shipping Receipt as directed and deliver it with the goods to your freight agent, and have him sign it; then write a letter to your customer, acknowledging the receipt of his order, also the remittance, if any. Enclose in the letter a bill of the goods, also the Shipping Receipt. 483. Filing Letters. — All letters received should be kept on permanent file. With all careful business men, this is an indispensable matter, as the letters may be wanted for reference. There are many devices for filing letters. In the absence of any special filing device, keep the letters in your Permanent File. 484. Filing Papers, etc. — Be particular to file every business paper that comes into your posses- sion. PRdDUCE AND PROVISION BUSINESS 103 485. Sale Subject to Draft. — To sell goods subject to a draft means that the goods are sold on account with the understanding that the person selling them has a right to draw a draft on the buyer when- ever he desires to do so, regardless of time, unless it is specified in the agreement that the buyer is to have a certain number of days, before the account becomes subject to a draft. In your work hereafter, it is understood that all goods bought or sold on account are sold subject to draft. 486. Collections. — It is customary for business men to make collections outside of their own city by drawing drafts, and leaving them at the bank for collections. It is not advisable to make entries for such drafts, until the collections have been made, as payment is sometimes delayed, and may be refused. 487. On drawing a draft on account, it is advisable to make a lead-pencil memorandum in the Ledger, giving the person on whom you have drawn, credit for the amount of the draft. This will prevent the drawing of a second draft, or the rendering of a statement of account until after a report has been made on the first draft. 488. The amount charged by banks for the collection of notes, drafts, acceptances, etc., depends upon the amount to be collected, the necessary correspondence, etc. , and varies from }& to }£ of one per cent. 489. Collection Account — A Collection account should be kept with the various amounts paid to banks or to collecting agencies, for the collection of accounts, notes, drafts, and other commercial papers. In case there are but few items of this kind, this account may be dispensed with, and these items charged to the Interest and Discount account. In this course you are to keep a Collection account. 490. Exchanging Mdse. — In mercantile business it is often convenient to exchange one "kind of merchandise for another kind. Thus, in a country store, it is common to buy butter, eggs, poultry, and other products, the buyer paying for the same in goods from the store. In these cases, as only the merchandise account is affected, an entry is unnecessary, although if it were thought advisable in any case, a simple memorandum of the transaction might be recorded. 491. Fictitious Payee. — The maker of a check may make the instrument payable to "self" or to "cash," or may use any other term instead of naming the payee; however, all commercial paper made payable to a fictitious payee is payable to bearer; that is, if a check is made payable to cash, it is trans- ferable without indorsement. If no payee is mentioned at all, the instrument is void. 492. Antedate. — To Antedate a paper is to give it a date preceding the date upon which the paper is drawn. Thus, if a note or other paper drawn on June 1 were to be antedated 30 days, it would bear the date May 2. Unless by special agreement, no one but the maker of an obligation has the right to ante- date it. 493. Postdate. — To Postdate a paper is to give it a date later than that upon which it is drawn. Thus, if a note or other paper given on June 1 were postdated 30 days, it would bear the date July 1. Circumstances often arise when it is desirable to postdate a commercial paper. 494. For example, a check may be postdated when issued to a traveling agent in payment of a certain article that he has sold, with the understanding that no other sales of the same article are to be made in the same city within a specified time. This gives the purchaser of the goods a chance to stop the payment of the check if the agent violates the contract, as the check, of course, could not be collected previous to the day of its date. Only the drawer of a paper has a right to postdate it. ACCOMMODATION PAPERS 495. An Accommodation Paper is a note or other negotiable paper that is loaned to a person who wishes to use it in raising money or paying a debt. Papers and indorsements of this character are merely for the accommodation of the borrower, and are not given for a bona fide consideration. They generally consist of notes, drafts, and checks; although bills of exchange and orders may be used. An accommoda- tion paper may consist merely of an acceptance or an indorsement. 496. The person who receives an accommodation paper, or indorsement, and uses it, is expected to pay it at maturity, although if he does not pay it, the person who accommodated him with his signature will have it- to pay. The person who received it as an accommodation cannot collect it at maturity, but it may be collected by any person to whom it has been transferred in good faith, and for a valid consideration. 104 PRODUCE AND PROVISION BUSINESS 497. Exchange. — Exchange is the charge made by a bank for issuing a draft, or bill of exchange. It may be a small, regular charge (from 10 to 50 cents, according to the amount of the bill), or (especially in the case of a large bill) it may be a certain per cent, usually y% % of the face of the bill. 498. If a check is given in payment for a bank draft, or bill of exchange, it should be made out for the face of the bill plus the exchange. If there are many charges for exchange, an account is kept with "Exchange." When there are but few charges for exchange, they may be charged to "Collections," or to "Interest and Discount." 499. In your present work you will keep an Exchange account. For journal entries, see page 88. 500. Bills of Exchange. — A Bill of Exchange is an order for money, issued by a bank upon some other bank in a distant city or country. 501. In effect, a Bill of Exchange is like an ordinary bank draft, but it is sometimes made out in "sets" of two or more- 502. Bills of Exchange are either Foreign or Domestic, according as they are drawn upon a bank in a foreign country, or upon a bank in the same country in which they are issued. Thus a bill drawn in New York upon a bank in Londoi or Paris, would be a "foreign bill;" but if drawn in New York upon a bank in New Orleans or San Francisco, it would be called a "domestic bill.' ' Domestic bills are also known as "inland bills," but strictly speaking, and especially in a legal sense, bills of exchange drawn in one State and payable in another are foreign bills. Domestic bills are also known as inland bills. 503. The ordinary form of a set of exchange is herewith given. The bills may be drawn payable "at sight" or at a specified number of days after date, or at a given number of days "after sight." HIBERNIA BANK gxrhraitgB fur /*. 000 S<™ f®i°aneiseo, (§>al.,_^k^iLi9 Nn. S<¥5 eeond of 4l)xehange (f®ii°st unpaid) pay to the opder> of ^)alue peeeied, and ehapge to the aeeount of the p\ibepnia d^ank. Zo tfoe Xllnion Banfe, Cbicaoo, til. ''£0. ©■ at'ieM&n, Cashier. 504. Suspense Account. — This is an account used by the wholesale merchant and retailer who has an extensive retail trade by mail, as it sometimes happens that an order is received for goods, or a remit- tance on account is received from someone who has neglected to sign or inclose his letter. This, of course, makes it impossible for the merchant to fill the order or give the proper credit on account. Under these circumstances, he is obliged to debit Cash and credit Suspense Account, and wait for someone to complain about not receiving his goods, or not having a sufficient credit on account. In this account may be entered all sums received or disbursed until their proper place on the books can be determined. PRODUCE AND PROVISION BUSINESS CERTIFICATE OF DEPOSIT 105 505. A Certificate of Deposit is a written acknowledgment of a bank that it has received, from the person named in the certificate, a sum of money on deposit, subject to withdrawal only on surrendering the certificate. Some banks, however, issue certificates of deposit, and, as an accommodation, permit the holders to make withdrawals, the same being indorsed on the certificate. The banker makes no charge for a certificate of deposit. U.-&L Vrc \ gals- Golden Syrup, 56 cents, it indicates that you have been charged with the syrup without having received it, and you should debit J. W. Jameson & Co., and credit Merchandise. 114 PRODUCE AND PROVISION BUSINESS 536. The following is a common form of a Memorandum of Credit: t\mr\ORAHD\Jt\ of Credit j» j» FROM «5t ^ J. W. JAMESON & CO., DEALERS IN Produce and Provisions, 1236 Market Street, GRAND RAPIDS, MICH. Mr. vr* *&* X \J t&* t£r* .&. d'/iLe.mo.n, . 0g£ 23,— \9 33 1-8 Gals. Golden Syrup 56 ots. 18 55 DISSOLUTION OF PARTNERSHIP 537. The manner in which a partnership may be dissolved depends upon the terms of the agree- ment under which it was formed. 538. If, as in the present business, the partnership may be dissolved at the will of either partner, a formal notice of such dissolution should be given by the partner who takes the initial step in the dissolu- tion, to the other partner, or partners. 539. It is also usual to send a notice of the dissolution to the business houses with which the firm does business, also to publish in the local newspaper a general public notice over the signatures of the partners announcing the dissolution of the partnership. In some states such published notice is required by law, in order to relieve the parties from future liabilities. 540. Direction. — You may now proceed to dissolve the partnership in accordance with the term of your agreement. 541. Notify your partner in writing that you wish to dissolve the partnership. The following is a general form for such notice. Prepare a notice suitable to the requirements of your business and deliver it to your partner. Henry M. Davis, Cincinnati, Ohio, March 10, 19 241 State St. Dear Sir. — In accordance with the terms of our copartnership agreement, I desire to give you herewith formal notice that the partnership hitherto existing between us under the firm name of Chas. H. Moore & Co. , is hereby dissolved. Respectfully yours, Chas. H. Moore. 542. Direction. — Upon the delivery of the notice of dissolution, you may proceed to effect a settlement with your partner upon the following terms : 543. He is to be paid from the funds of the business a sum equal to one fourth of his original invest- ment, and you are to deliver to him your personal note for an amount equal to one-half of such invest- ment. The remainder is to stand unsettled until such time as the books are closed and a Balance Sheet of the business is made out. PRODUCE AND PROVISION BUSINESS 115 544. In effecting the final settlement, an allowance of ten per cent for bad debts, etc., is to be made on all bills receivable and personal accounts owed to the firm. 545. After delivering to your partner the cash and note as above provided for, and taking a receipt for the same, prepare and deliver to your teacher a circular letter suitable for announcing to the firms with whom you are doing business, the dissolution of your firm; also prepare a general notice for publication. The following forms will serve as a guide in the preparation of such circular letter and notice. Request your partner to sign both the letter and the notice. 54G. CIRCULAR LETTER ANNOUNCING DISSOLUTION OF PARTNERSHIP E. M. Tanner, Cincinnati, Ohio, March 10, 19-. Omaha, Neb. Dear Sir: We desire, herewith, to apprise you that the partnership heretofore existing between Chas. H. Moore and Henry M. Davis, under the firm name of Chas. H. Moore & Co., has been this day dissolved by mutual consent. Mr. Moore will continue the business under his own name, and will assume all the firm's liabilities, also the collection of all debts owed to the firm. Very respectfully yours, Chas. H. Moore, Henry M. Davis. PUBLISHED NOTICE OF DISSOLUTION Cincinnati, Ohio, March 10, 19- 547. Notice of Dissolution. — The public is hereby notified that the partnership hitherto existing between Chas. H. Moore and Henry M. Davis, under the firm name of Chas. H. Moore & Co., has been this day dissolved by mutual consent. Chas. H. Moore hereby assumes responsibility for the payment of all debts owed by said firm, and all debts owed to the firm are by these presents declared to be payable to him only. Chas-. H. Moore, Henry M. Davis. 548. Direction. — If the required circular letter and notice for publication have been approved by your teacher, prepare a Balance Sheet in accordance with the requirements of the accompanying form, after which settle with your partner by giving him a check for the balance due him, then return to the Business Directions. 549. Balance Sheet. — The following Balance Sheet exhibits a convenient form when it is desired to allow a discount off bills receivable and the personal accounts due the business for bad debts and collections. The allowances made for this purpose are treated as inventories, and are entered in the Interest and Discount account in red ink, with the following explanation: "10% on B. Rec." "10% on Per. accts. " After the Interest and Discount account has been closed, these inventories are brought down in black ink, on the credit side of the account. The amounts of these discounts are not to be entered in any of the personal accounts or in the Bills Receivable account. 550. Balances of Personal Accounts. — When there are many personal accounts, it will be found more convenient, and will also effect a considerable saving of labor, to list the personal accounts separately, recording the balance of each account instead of the footings. See the accompanying form. 551. This list is not entered on the Balance Sheet, but the totals of the debits and credits are entered on the Trial Balance, and the sum of the debit balances is entered among the resources, and the sum of the credit balances is entered among the liabilities. 552. If there is an allowance for bad debts, etc., as in the present business, the amount is deducted from the debit balances as shown in the Balance Sheet on page 116. NET BALANCES OF PERSONAL ACCOUNTS, OCT. 3i, i9 E. Higgins M. Hendricks Fred H aines J. D. Day W. McCann C. B. Lynch Net amount of personal accounts Dr. and Cr 299 036 020 5«* 30 40 73 JJ 737 2G7 323 328 18 90 _80 88 116 PRODUCE AND PROVISION BUSINESS BALANCE SHEET OF CLARK, MAY & CO.'S BUSINESS, OCT. 31, 19 1 2 5 6 9 83 11 12 20 22 24 26 28 30 31 32 35 37 39 C. B 83 11 12 20 22 24 28 30 31 32 39 20 12 31 11 20 28 32 35 37 39 Net Amount of Personal Accounts Dr. and Cr. Wm. Geo. Clark, Stock " Private A. May, Stock " " " Private W. S. Wood, Stock Cash, per C. B Rent (Inv'ry $100) Mdse (Inv'ry $23,156.65) Expense (Inv'ry $450) Int. and Dis. (Inv'ry $18.50) Bills Receivable Bills Payable Furniture and Fixtures (Inv'ry $1,250). Gas Deposit U. P. R. R. Stock (Inv'ry $1,300) Salary Chattels (Inv'ry $750) Exchange Advertising (Inv'ry $120) RESOURCES Personal accounts Dr., $10,556.43, Dis. at 10%, $1,055.64. Cash, per C. B Rent. Inv'ry Mdse. Inv'ry Expense. Inv'ry Int. and Dis. Inv'ry Bills Receivable, $9,080, Dis. at 10 %, Furniture and Fixtures. Inv'ry Gas Deposit U. P. R. R. Stock Chattels. Inv'ry Advertising. Inv'ry LIABILITIES Personal Accounts Cr Bills Payable Firm's present worth, night of Oct. 31, 19 GAINS Mdse U. P. R. R. Stock. LOSSES Int. and Dis. Rent Expense Furniture and Fixtures Salary Chattels . .'. Exchange Advertising Firm's net gain, night of Oct. 31, 19 . . WM. CLARK, PARTNER Cr. by net stock account Cr. by net gain Dr. for net private account Net present worth, night of Oct. 31, 19 . GEO. A. MAY, PARTNER Cr. by net stock account Cr. by net private account Cr. by net gain Net present worth, night of Oct. 31, 19 . . w. S. WOOD, PARTNER Cr. by net stock account Cr. by net gain Net present worth, night of Oct. 31, 19 Firm' 8 present worth, night of Oct. 31, 19 1(1 198 2 128 2 17 13 1 1 4 385 !) 6 23 23 15 556 273 796 496 000 738 300 327 580 060 800 30 200 690 960 123 865 799 500 109 100 156 450 18 172 250 30 300 750 120 328 500 211 172 878 900 850 550 690 210 123 620 125 889 273 000 126 779 590 43 95 43 83 81 89 15 7 192 128 20 385 328 125 000 923 590 386 793 393 500 560 72 124 799 88 60 38 66 84 61 60 50 36 43 50 9 41 23 957 828 128 383 27 39 83 11 11 824 559 26 57 20 10 41 741 906 480 128 54 30 55 39 GENERAL REVIEW SPECIAL REVIEW QUESTIONS 1. What is the purpose of the Purchase Book? 2. How does the Customers' Ledger differ from the ordinary Ledger? 3. What is the object in keeping a Customers' Led- ger? 4. What is the order-book, and for what is it used? 5. What is meant by Charge Tickets? 6. Would a Sales Book be used in connection with a Customers' Ledger? Why? 7. How does a Sales Journal differ from a Sales Book? 8. How may a bank account be kept in the Cash Book? 9. What is a Memorandum of Credit? 10. Under what circumstances is it used? 11. When a Memorandum of Credit is received, what entry should be made? 12. Upon the dissolution of a partnership, what notices should be prepared? QUESTIONS AND ANSWERS 1. If you are using the Cash Book, Journal, and Customers'' Ledger, and bug merchandise for cash, in which of these books would you make the entrg f In the Cash Book on the credit side. 2. If you buy merchandise on account ? In the Journal. S. If you sell merchandise for cash f In the Cash Book, debit side. 4- When merchandise is sold on account ? In the Customers' Ledger. 5. If you make a shipment and prepay the freight ? In the Journal and Cash Book. 6. In' what books are the entries made when we buy merchandise of John Smith, paying a portion of the amount in cash, and crediting the balance to his account ? In the Journal and Cash Book. 7. What entry should be made in the Journal ? Merchandise to John Smith for the full amount of the bill. 8. What entry should be made in the Cash Book f Credit John Smith for the amount received. 9. What other entry is sometimes made for transactions like the above ? The journal entry of Merchandise to John Smith for the portion of the bill remaining unpaid, and a credit entry in the Cash Book for the amount oaid on the bill. 10. Which of the above entries is preferable f The first one, in which John Smith is credited in the Journal for the amount of the bill. 11. If you sell merchandise to John Smith, re- ceiving part payment in cash and the balance on account, in what books should the entry be made f In the Customers' Ledger and Cash Book. 12. What entry should be made in the Customers* Ledger f Smith should be charged for the full amount of the sale on account. 13. In the Cash Book ? Smith should be credited for the amount of the payment. 14- If John Smith pays cash for his note $100 and interest $10, in what book would the entry be made f On the debit side of the Cash Book, Bills Receiv- able, and Interest and Discount, each being credited with the respective amounts. 15. What advantage is gained by entering notes, drafts, etc., separately in the opening entry f We are enabled to tell what commercial papers we were holding on commencing business. 16. What is the advantage in making payment by means of checks f It is a safeguard against mistakes, and the check, when returned, serves as a receipt for payment. 17. What is the difference between a draft at three days sight and a draft at three days after date? The draft at three days' sight is hot due until three days after acceptance ; the draft at three days after date is due three days after it was issued, un- less days of grace are allowed. 18. Under what circumstances shoidd we make an entry for interest on a note at the time of receiving the note f When there is accrued interest on the note at the time it is received. 19. What is meant by ' ' transferring your bank account " when a partner is taken into the business ? It means that the balance on deposit in your name is to be transferred to the credit of the new firm. 20. Bow shoidd this be done f You should draw a check for this balance in favor of the new firm, which check is then deposited as in the case of any other check. 21. In closing the books, ichat is meant by allow- ing a discount on the personal accounts and bills receivable for bad debts and collection f It means that a certain percentage has been al- lowed on all bills receivable and personal accounts due the firm, for the purpose of reducing these to a cash basis. [117] DRY GOODS BUSINESS 553. Nine-column Journal — l n this business a Nine-column Journal will probably provide columns to classify the Speculative accounts sufficiently to reduce the entries and the postings to a minimum. The illustrative entries in the accompanying form will show how a Columnar Journal may be used. The learner can use his Six-column Journal for this purpose by drawing a column on both sides, and an extra column on the left of the explanation column. The number of columns is purposely left open that the teacher may increase or decrease the number as his judgment may dic- tate. See par. 400, 433, 620. 554. It is not at all necessary to have the same number of columns on each side of the explana- tion column. (In fact, the explanation column of a Columnar Journal may be at the extreme left or the extreme right, the debit and the credit columns of related accounts appearing side by side, or all the debits together and all the credits together. In such case the date column precedes or follows the explanation column. However, the form shown is the usual form.) Columns for Int. and Dis. or for any other item that may appear frequently, may be drawn on each side. The num- ber and the position of the columns in a Columnar Journal as to debit or credit are matters that are to be determined by the nature of the business and the judgment of the bookkeeper. The object is to provide Cash columns and to classify the items of the Speculative (Business) accounts that enter into the business so as to have the fewest possible entries and the fewest possible postings and the fullest information of the Business accounts. In providing columns for a Columnar Journal, the learner should not attempt to provide a col- umn for an account that appears frequently in one month and then very infrequently or not at all in other months; but an important point that he should bear in mind is that stress should be laid on columns for the Business accounts and not for Financial accounts except Cash. He should remem- ber that it should be his aim, as far as practical, to bring out the Business accounts in a Columnar Journal, because business men get their "success-bearings" daily from a comparison of the totals of the debits and the credits of the Business accounts. Students should be able to tell daily what their per cent of gain is, and the relative gain-producing or loss-producing power of the several Busi- ness accounts. If for any special reason, a column may be provided for a' Financial account other than Cash. See classification of accounts under par. 242. 555. The headings of the columns explain the use of the columns. 556. Opening Entry. — Write your opening entry on journal paper, and after it is approved by your teacher, copy it in your Columnar Journal. 557. Note that the Cash Bal. on hand is set in the Cash column on the debit side and the same amount is set in the Sundries column on the credit side, and the "Bal. on hand" item checked (^) in the folio column to indicate that it is not to be posted. The amount is set in the credit side to make the col'umns balance. The totals of the debit and of the credit columns in a Columnar Journal are always in balance, if the entries are correctly made. 558. Entries and How Made. — The entries are made in all Columnar Journals in practically the same way. The name of the account to be debited is entered in the left-hand side of the expla- nation column, and the amount is set in the column under its corresponding heading on the left. The name of the account to be credited is entered in the right-hand side of the explanation column and the amount is set in the column under its corresponding heading on the right. If a column is not named for an account the amount is entered in the sundries column. 559. Note that at the end of the month the total footings of the several columns on the debit side are brought into the Sundries column on the left, and the total footings of the several columns on the credit side are brought into the Sundries column on the right. Then the totals on each side are added and double ruled. The names of the several accounts are written in the center of the ex- planation column. 560. Posting. — Only the items in the Sundries column need be posted daily. The totals of the other columns are posted at the end of the month. The totals on the left are posted to the debit of their respective accounts, and the totals on the right to the credit of their respective accounts. Cash need not be posted, as the cash columns in the Columnar Journal take the place of the Cash Book. 561. It would be well in your schoolwork to total the columns, daily, in pencil, to see that the total amount of the debit columns equals the total amount of the credit columns. For further discussion of columnar work, see the Sixteen-column Journal. [118] DRY GOODS BUSINESS 119 M *-4 Ol On > m M Go NO H ^j M CC NO l-l ~J ^-1 -f* On *. on On M O 09 M ON to H i to On CO M On o o 00 hH Oo o 40. O NO o W CO H Ln 1 On ^J on to O ^1 O to O O IO O Co M nO CO O On O On NO ON 00 to 0O o . >-H M CO CO t-H o o w to O to On M w O CO cl S! O W w CO O o -J O OJ o 4k O i NO o 1 1 O p w o 3 3* P 3 a. > 3 i— CO a K en o jo" O •1 o p en ' o O pi a w X 3 en n CU en a en" K S c 3 3 O P en 3- > 5 a en a a n p en 5" O p 3 n 0. en a en p en 5* CO 3 > B aq Ct CO % Cu en o a ob" w 3 p o p p en 3- •a a> 3 en a 50 >o S -i' Eg o 3 P JQ O 3 p p en 5* 2 Q. en ro 3 < tO W r s K g 3 3 ►— 1 > 3 aq CO o -i p 3 a> SCu en CO W 3 a* 0. $ > c w W OO 3 <; to 3. o p en rti d en en 3 X) e* P ° p p en 5* > ft) GO o O c+ <-!• 3 P P en 5" > B (0 2 3 < 10 <— < 0> en en 3 &> P O M y, Xi a> 3 en 1 O S* p 3 3' 3 i ! n p en ftl X "d a> 3 en s SB re 3 r+ P P en 3- o p tn 3- a 3 B" p 3 a > 3 CO >, r > > o 5! -H Oo O On (O On •-H H to M to ^j H GO ■-j l/l NO On o to Co |h ON ■o -^1 HH HH On 00 On o o O Oo M Ol oi ^1 Jo o Oo Oo O O NO O CO to t-H H NO ^1 o to CO 00 o O > CO » ON. to M to Ol Ov M O t-c on On On Oj On NO O to O 4^ Oo to to O on to on O ° s o o --J M Ol M -^ '-n to NO OO CO 120 DRY GOODS BUSINESS HANDLING C. O. D. ORDERS 562. Retail or Local C. O. D. Orders — (C. O. D. means Collect on Delivery.) When called on to handle retail or local C. O. D. orders, open a C. O. D. account, if there are only a few such orders, and debit this account and credit merchandise when the goods go out. If there are many such orders, then a set of C. O. D. books, consisting of a C. O. D. Sales Book and a C. O. D. Register, is used. The C. O. D. Sales Order is made out in duplicate, and after the order is recorded in the Reg- ister the original Sales Order is sent to the shipping room for goods to be wrapped. Carbon copy is kept in C. O. D. Sales Book as permanent record. After the goods are wrapped, the order is attached to the package and given to the driver who enters the order in his Delivery Receipt Book. When the bill is paid or the goods returned the driver reports and the C. O. D. Register is stamped with the date when paid or when the goods are returned. Some houses use the pad of C. O. D. Delivery Tickets. Duplicates are made out and both the original and the carbon tickets are sent to the shipping clerk, who keeps the original and wraps the carbon with the package to be handed to the driver, who enters the order in his Delivery Receipt Book. 563. Wholesale or C. O. D. Freight Orders — If required to ship goods C. O. D. by freight, make out duplicate invoice in the usual way, and either mail the original to the customer or attach it to Bill of Lading. Then have the Bill of Lading, showing the number of boxes or bales, etc., made out in the name of your own firm. Then draw a draft on the customer for the amount of the invoice less any discount. Then write on the Bill of Lading the following or similar indorsement: "Upon payment of the attached draft, please indorse the within Bill of Lading over to of your city. JOHN DOE & CO., Per " To exemplify: Suppose the firm of John Doe & Co. wishes to ship C. O. D. to John Smith. John Smith, having been apprised of the amount of the invoice and the name of -the bank in his town by letter, goes to the bank, pays the invoice, and the banker delivers the indorsed Bill of Lading to John Smith, and John Smith goes to the freight office, pays the freight charges and gets his goods. Some firms put a blank indorsement on the Bill of Lading; others indorse the Bill of Lading to the customer and send it to the banker, while still others request the bank to indorse the Bill of Lading to the customer on payment of the invoice. ■ 564. Shipping Goods C. O. D. by Express — If required to ship goods C. O. D. by express, make out the duplicate invoice in the usual way, except if the transportation charges are prepaid these charges will have to be added to the invoice. Then deliver the goods to the express company and ask for a C. O. D. envelope wrapper. Fill in the money blank on the C. O. D. envelope with the amount of the invoice plus any charges for collecting and returning the money, giving the total to be collected. Also fill in the return blank with your firm's name and address, very legibly, so as to insure its safe and speedy return to your firm. The express company will transport the goods, and the company's agent at the point of desti- nation will make the. collection, deliver the goods to the customer, and return the amount to your firm by the next mail. It is well to remember that, if the package is worth more than $50 it is better to mark its full v.vlue; otherwise in case of loss your firm could collect only $50. If the full value is placed on the package the full amount can be collected in case of loss. There is an additional charge for assuming the greater risk in transporting the more valuable package, but it is prudent to pay the small additional charge in order that your firm may be able to collect the full value in case of loss. 565. Bank Account on the Check Stub — Hereafter the Banking Ledger will not be used, the bank account being kept on the stubs of the Check Book. This method of keeping the bank account is followed in many business houses, and the student should become familiar with it. The accompanying form of checks and stubs will sufficiently illustrate the method. RETAIL HARDWARE BUSINESS 121 No. of CheclcZ^_£_ Date i/a^r?; /^ 19 to_^z£; Fnr V-ZL^^^ /Zt^ 4/jV Bal. brought forward AlKt Deposited Total in Bank Am' I of this Checks Balance in Bant t f-/ £y ( >U ssY-XC ^^^^^y^y/-^ .Dollars Nn 19 THE MERCHANTS BANK Pay TO - nr liMTPr * Dolt-Ars In College Currency RETAIL HARDWARE BUSINESS In this business the books are to be kept by the method known as "Single Entry " 566. Single Entry Bookkeeping. — In this method of Bookkeeping we debit all persons when we sell them goods on account, when we pay them on account, or when they become indebted to us in any manner, but we do not make any corresponding credit entries. In like manner, we credit all persons when we buy of them on account, or when they pay us on account, without making corresponding debits. 567. If we are able to determine at any time what other people owe us on account, and what we owe others on account, we have accomplished all that is intended by single entry. 568. Strict single entry, however, is seldom employed, as it is usually desirable to keep a Cash Book, or an account with Cash, or with Expense, and sometimes, with Merchandise. But these accounts are kept merely as memoranda, and as a matter of satisfaction to the proprietor of the business. They have no essential relation to the business, and are not considered in making up a balance sheet on closing the books. 569. Day Book. — The day book as used in double entry, has a limited use in business at present ; compared with former years. When it is used, it should contain a comprehensive statement of the various business transactions, and these statements, or records, should be made at the time that the transactions take place. 570. The Day Book preserves a record of the transactions until such a time as it may be convenient to transfer them to the Journal. When the Day Book is used, there is no explanation made in the Journal following the journal entries; but the Journal should contain the page of the Day Book, and the Day Book, the page of the Journal, although a check ((/) only is sometimes used in the Day Book to denote that the transactions have been transferred to the Journal. The pages are also transferred in a like manner when items are transferred from the Day Book to the Cash Book. A Single Entry Journal entry contains the name of the account to be debited or credited. It to be debited "Dr." or "To" is written to the left of the folio column or left-hand money column, and the amount is set in the right-hand money column. If to be credited "Cr." or "By" is written to the left of the folio column or the left-hand money column, and the amount is set in the right hand money column. 122 RETAIL HARDWARE BUSINESS SINGLE ENTRY DAY BOOK Cincinnati, O., Jan. i, 19 1/ • 1/ V 1/ 2 3 4 V 5 6 10 11 1/ I, H. B. Burton, have this day leased the store at No. 236 Madison Street, for the purpose of conducting a General Hardware Business, with the following resources and liabilities: Cash Bills Rec. W. H. Warner's note at 60 days due today, with int. after maturity, at \% a month Mdse per Inv'ry Expense per Inv'ry Cunningham, Curtis & Welch Bills Payable. Demand Note, fav. Filer Thorne & Co., without interest J. S. Gannon Osborn & Alexander H. B. Burton, Stock Cunningham, Curtis & Welch Stationery for office, luv. No. 1 Dr. Dr. Dr. Cr. If « ( Cr. Cr. Hall Safe & Lock Co. Safe for office use Bought of Osborn & Alexander, Mdse per Inv. No. 2, $380.75, and gave my note in payment at 3D days, without interest G. W. Fuller 640 Mission St. 3 doz. table-knives, ft 1846 Crocker Bros., 340 Bush St. \Yz doz. Daisy Scythes, X " Sheep-Shears, ft 1242 % " Clipper Scythes, G. W. Fuller 640 Mission St. 10 lb Glue yi doz. H. D. S. P. Shovels At 30 days, less 10 % for cash Dr. 5.50 Dr. 10.30, less ^ 12.00 less 1/3 8.60 net Dr. .18 9.50 Sold to J. D. Marshall 1500 lb Barbed Wire .03 2 doz. Silver Spoons, ft 873 7.50 2 " Knives and Forks ft 262 2 50 3 " Teaspoons, ft 9644 4.00 Mr. Marshall indorsed the amount of this sale on my note of the 4th inst. in favor of Osborn & Alexander, for $380.75 11 2 4 45 15 5 12 77~ 59 25 4900 1500 7800 700 70 940 1125 840 12064 15 300 16 30 10 50 90 17 50 84 55 The Day Book used in single entry, like the double entry Journal, is used as a book of original entry and agrees with it inform. The first column is used for itemizing, and all amounts to be posted are recorded in the second column, the debits and credits being respectively indicated by the abbieviations, "Dr." and "Cr." or "To" and "By." 571. The accompanying Day Book form illustrates the proper manner of keeping this book. 572. Order Book. — The Order Book, Counter Book, or Sales Book, as it is variously called , is an important book in many businesses using, single entry. This is a small, cheap book, with flex- ible cover. It is used on the counter, or carried by salesmen, to take orders from customers. Sev- eral such books are usually kept that the bookkeeper may post from one, while the others are in use. As orders are put up for delivery, they are checked off in the margin of the book. In event the Order Books are used as Sales Book, the Day Book is used to record transactions other than Sales , and no Journal is used. Carbon is often used and a copy given to the customer. 573. Opening the Books- — The opening entry is made in the Day Book. If there are resources and liabilities, the opening entry could be made as in double entry, but such items as are not to be posted to the Ledger must be "checked off," by means of a check mark ( V ) The opening entry in the accompanying form illustrates the proper method of opening your books where there are resources and liabilities. The preliminary announcement, or opening statement, of the business is ommited, but the student is expected to write one in preparing his spring entry. Observe that the items not to be posted to the Ledger are checked off. 574. Direction — You may prepare your opening entry on journal paper and present it to your teacher for inspection, then write it in your journal, which will be used in this business as a Day Book. RETAIL HARDWARE BUSINESS 123 575. Cash Book. — While in single entry proper, no account is kept of the receipts and expendi- tures of cash, most business men, even though their books were kept by single entry, would probably prefer to keep a Cash Account. 576. The Cash Book may be kept as in double entry, but those who employ single entry gen- erally use but one page of the Cash Book at a time, recording th3 cash received in the first column and the cash paid out in the second column. 577. The following form illustrates the usual method of keeping the single entry Cash Book. The abbreviations "Dr." and "Cr." appearing after the items to be posted, are inserted for con- venience in posting, and may be omitted if desired. SINGLE ENTRY CASH BOOK DR. CR 19 Jan. Feb. 1 • G 8 l/ U 10 11 20 22 2:-! 24 26 l/ l/ 27 _— . 1 \/ Cash Paid one month's rent Paid Hall Safe & Lock Co., on acct Received Cash of G. W. Fuller on acct Cash Sale to A. B. Coon Paid J. S. Gannon on acct Received of Crocker Bros, on acct Paid Hall Safe & Lock Co. on acct Cash Sales Paid Cash for Mdse, Inv. No. 3 Paid Osborn & Alexander on acct Received of G. VV. Fuller on acct Withdrew for personal use Paid for Typewriter Paid Osborn & Alexander balance of my note, less $3 discount Paid Osborn & Alexander on acct Balance 4900 5 57 10 954 19 5946 5946 3456 13 38 50 75 500 50 500 500 75 75 300 364 2489 3456 5946 75 75 3L 13 578. Single Entry Ledger. — In form, the single entry Ledger is ruled the same as a Day Book or Journal, the first money column being used for debits and the second money column for the cred- its. If desired, the personal account maybe itemized as in the " Customer's Ledger. " See page 111. However, the form of Ledger ordinarily used in double entry is frequently used in single entry. Unlike the double entry Ledger, the single entry Ledger is never in balance. In the Hardware Business you are to use the same Ledger you have hitherto used. 579. Other Books and Accounts.— In single entry as in double entry, any auxiliary book may be used that would facilitate the work of the bookkeeper, or give any required exhibit of any por- tion of the business. Thus a Bill Book or Sales Book might be kept if desired. In fact, there is no definite line of difference between single and double entry; the one may merge gradually into the other. The more general accounts that are kept, the nearer the method will approach to full double entry. CLOSING SINGLE ENTRY BOOKS 580. The first step in closing a set of books in single entry is to prepare a statement of the face of the Ledger. This is made out on journal paper and in the same manner as an ordinary Trial Balance. But it will, of. course, not be in balance. 581. Balance Sheet. — The single entry Balance Sheet consists of a statement of the face of the Ledger, together with an itemized list of all resource-, including the cash on hand and in bank, inventories of all property on hand, a list of the personal accounts and other debts owed to the firm. This is followed by an itemized list of the liabilities, including all personal accounts or other debts owed by the firm. 582. The present worth of the business is found by deducting the total sum of the liabilities from the total sum of the resources, and this result compared with the investment gives the net loss or gain. This is, in fact, the only method of ascertaining the net loss or gain by single entry, as not all the loss and gain accounts are kept. You may now prepare a Balance Sheet in accordance with the form on the next page. 124 RETAIL HARDWARE BUSINESS 583- If there should be a gain, an entry should be made in the Day Book, crediting the proprietor with the net gain as follows: H. B. Burton Cr. $1,921.77 For Net Gain on closing Feb. 1, 19 SINGLE ENTRY BALANCE SHEET Of H. B. Burton's Business, March 1, 19 FACE OF LEDGER H. B. Burton, Stock 13040 47 Hall Safe & Lock Co. 200 300 J. S. Gannon 701 75 1125 50 G. W. Fuller 48 50 42 Expense B. B. Kerrigan Cash - RESOURCES 1074 113 5290 09 25 65 260 377 90 50 7427 59 15211 37 G. W. Fuller 6 50 Cash 4912 50 Mdse Inv'ry Expense " 8746 25 925 14590 25 LIABILITIES Hall Safe & Lock Co. 100 G. S. Gannon 423 75 B. B. Kerrigan 147 65 Bills Payable H. B. Burton' s Present IVorth 990 1661 40 = H. B. BURTON, PROPRIETOR I2Q28 ~*r Net Investment, Feb. 1, 19 13040 47 Present Worth, March 1, " 12928 85 Dr. for net loss 111 62 . ^— CLOSING ENTRIES Mdse per Inv'ry Dr. 8746 25 Expense " " " 925 H. B. Burton, Stock, 111 02 Bills payable Cr. 990 Entry necessary to change the books to double entry on this date, March 1, 19 TRIAL BALANCE • March i, 19 H. B. Burton, Stock 12928 85 Hall Safe & Lock Co. 200 300 J. S. Gannon 701 75 1125 50 G. W. Fuller 48 50 42 Expense 925 B. B. Kerrigan 113 25 260 90 Mdse 8746 25 Bills Payable 990 Cash 4912 50 = — 15647 Zb 15647 25 Proof of Single Entry Posting. — The sum of the debits and the credits in the Day Book must equal the sum of the debits and the credits in the Ledger. If there are old balances in the Ledger, add the old balances to the footing of the debits and the credits of the Day Book. Proofsheet. — Rule a sheet of paper like a Four-column Journal. Set the debit balances of Ledger accounts in the outside left-hand column and the total debit of each Ledger account in the next column, writing the names of the Ledger accounts in the explanation column. Set the total credit of each Ledger account in the first right-hand column and the credit balance of each Ledger account in the outside right- hand column. Foot, and compare items of balances with Ledger accounts showing balances, and total footing of debit and credit Ledger accounts with total footing of debits and credits of the Day Book (or books of original entry), plus old balances when there are old balanees on the Ledger. If the accounts that are in balance are omitted from the Proofsheet, the total of the several amounts that balanced the accounts will have to be deducted from the footing of books of original entry. To keep track of the amounts, open a Balanced Account, and when an account is balanced, rule it up, and carry the amount.that was necessary to balance it to the Balanced Acconnt. RETAIL HARDWARE BUSINESS 125 584. If there should be a net loss, debit the proprietor for it, by making a day book entry, in the following form: H. B. Burton Dr. $380 For net Loss on closing the books Feb. 1, 19 585. The closing entry should be posted to the proprietor's account in the Ledger. 586. The Cash Book should be closed. 587. Close the Merchandise account, as in double entry, and bring down the inventory only when it is desired to continue the use of the account. The loss or gain shown by this account is not to be trans- ferred to Loss and Gain, or to any other account; neither can it be used in any other way in ascertaining the net loss or gain of the business. The Merchandise account might also be closed by a day book entry as follows: Merchandise Dr. $1,650 Entry necessary to close this account Dec. 31, 19 588. Close expense and all other loss and gam accounts, if you have such, according to the method employed in closing the Merchandise account. The closing of these accounts is a matter of convenience rather than of necessity, as they are not taken into consideration when the books are closed. If the books are to be changed to double entry, the closing of these accounts would of course be imperative. 589. Changing a Set of Books from Single to Double Entry. — The books should be closed at the time of making this change. Make a journal entry in the Day Book, debiting or crediting the pro- prietor with the net loss or gain ; also enter in it all resources and liabilities appearing in the Balance Sheet which are not already in the Ledger; such as Merchandise inventory, Cash, Bills Receivable, Bills Payable. Shipments, etc., according to the following day book entry, which is never in balance: Cash, per C. B. 97 $1,382 Mdse Inventory 9,460 Bills Receivable, notes 40, 41, and 42 794 Furniture and Fixtures, Inventory 590 Bills Payable, notes 63 and 64 $ 584 Proprietor's Stock, for net gain 1,340 Entries necessary for changing the books from single to double entry on this date, Feb. 28, 19 ' 590. A Trial Balance should be taken immediately after posting the journal entry for changing the books, to test the corrections of the work. 591. Changing a Set of Books from Double to Single Entry. — This change may be effected by simply ruling up and discontinuing the use of all accounts that are not to be kept; but a more systematic and businesslike method of making this change is the following: Post, take a Trial Balance, make out a Balance Sheet, and close the books as heretofore in double entry, except that no inventory is to be brought down, unless it be decided to keep the account Lo which it belongs. By closing according to this method, all the loss and gain accounts, Bills Payable, Bills Receivable, etc. , are eliminated, leaving nothing but the personal accounts and such other accounts as you desire to keep. This completes the change, leaving the books as though they had been previously kept by single entry. Liquidation. — (a) Any solvent business may be liquidated in the following manner: (i) Col- lect all accounts receivable and Bills Receivable. (2) Pay all accounts payable and Bills Payable. (3) If a single proprietor, draw a check in his favor for the balance as shown by the Cash Book. (4) If a partnership or corporation, draw checks for such parts of the balance as shown by the Cash Book, as their several interests require. (5) Post. The two sides of the Cash Book will be in balance, and all Ledger accounts will be in balance, if no mistake has been made. In your schoolwork, any suspense or suspended account, will be closed into Loss and Gain. In merging an old business with a new business, if desired to liquidate the accounts of the old business as they become due (or may be collected), it is convenient to liquidate them through a Liquidation account. (b) If the business is insolvent, you would better ask your teacher for procedure. He may require you to send 10 cents to the Superintendent of Documents, c/o the Government Printing Office, at Washington, D. C, for a copy of the United States Bankruptcy Law. 126 GENERAL REVIEW The following Trial Balances are taken by totals. They are generally taken by differences. The student is to follow the teacher's preference. The Continued Trial Balance Book is made with one short leaf in order that the names need be written but once for the twelve months. CONTINUED TRIAL BALANCE, i9 LEDGER ACCOUNTS JANUARY FEBRUARY MARCH APRIL L F Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. 1 H. B. Burton, Stock 5000 7033 10 273 95 8125 60 430 45 9780 15 2 Cash 9670 50 6380 40 4779 10 1681 30 8100 90 5288 80 9840 33 6344 81 3 Expense 100 375 480 50 480 50 4 Mdse 6460 7560 40 6275 50 8200 50 8266 20 9180 90 8642 38 9979 44 5 B. F. Stone 1150 40 1520 50 1125 60 2161 80 2890 90 1944 82 358 65 6 H. Murphy 264 945 50 945 50 560 50 1580 25 2185 35 1974 34 42 49 7 F. B. Clark 2062 30 235 80 1125 75 1325 75 2960 60 1888 50- 2004 14 181 40 8 J. F. Wyman 1520 90 2469 65 295 80 395 80 2224 70 1985 78 2874 80 2292 40 9 D. M. Ellis 1379 75 1749 50 2500 2800 2934 80 3272 40 5152 76 3023 50 10 W. D. Campbell 1966 80 233 40 2100 580 1517 90 2234 80 1648 35 2342 80 11 W. D. Grimes 3785 40 4067 40 6844 29 12 James Turney 27S0 32 4334 60 2780 32 12 Bills Receivable 6548 34SS 4560 13 Suspense 100 14 R. A. Grant 1029 5V 24574 65 24574 65 23702 55 23702 55 43897 32 43897 32 42815 47 42815 47 GENERAL REVIEW SPECIAL REVIEW QUESTIONS 1. What accounts are kept in strict single entry book- keeping? 2. What other accounts are frequently kept? 3. In opening the books by single entry, what items are checked off in the opening entry? 4. What is the purpose of the Day Book? 5. How does the single entry Cash Book differ from the double entry Cash Book? 6. In what respects does the single entry Ledger differ from the double entry Ledger? 7. In closing a set of single entry books, how is the present worth found? 8. How is the loss or gain found? 9. What should be done in order to change a set of books from single to double entry? 10. How may a set of books be changed from double to single entry? QUESTIONS AND ANSWERS 1. What is the general difference between single and double entry bookkeeping f In single entry, personal accounts alone are kept, and there is, therefore, no record of the losses or gains or of the transactions affecting property alone. 2. If accounts are kept with Merchandise, Ex- pense, or other loss or gain accounts in single en- try, are they taken into consideration when the books are closed ? They are not. 3. What is the object in keeping such accounts? They are kept simply as a matter of satisfaction to the proprietor ; they are merely memorandum ac- counts. Jf. How are such accounts disposed of when the books are closed? They are simply ruled up, their balances not be- ing considered in any way. GENERAL REVIEW 127 5. Why is single entry so called ? Because but one amount is recorded in each entry. 6. What is the general object sought in single en- try bookkeeping ? To keep a record of the amounts owed to the busi- ness on personal account:;, also a record of the amounts owed by the business to other persons. 7. What entries should be made in the Day Book? Those that are intended to be posted to the Ledger. Also such memoranda of transactions as may be desirable. 8. Shoidd the opening entry in single entry differ materially from that of double entry ? It should not, as both should show all the re- sources and liabilities of the business. 9. What is meant by a " statement showing the face of the Ledger " ? A statement showing the debit and credit footings of each ledger account. 10. Should a bank account be kept in single entry ? It should, as it is necessary in any business to be able at any time to find the bank balance. 11. Is a Cash Book usually kept in single entry ? It is. 12. What entries are made in this book ? All cash received and all cash paid out. 13. What entries are posted from the single en- try Cash Book to the Ledger ? Those that affect personal accounts and such other accounts as we may be keeping. llf. Can the Banking Ledger, Sales Book, In- voice Book, etc., be used to advantage in single entry ? They may under some circumstances ; it will de- pend upon the nature of the business. 15. Is the single entry Ledger ever in balance ? It is not. 16. What information are we able to get from, a Ledger in single entry bookkeeping ? That pertaining to personal accounts only unless other accounts are kept 17. What are the only books necessary in single entry ? A Day Book or Blotter and Ledger. 18. What necessary preparation should be made in closing single entry books ? Make out a statement showing the face of the Ledger, the same as a trial balance in double entry. 19. What use would then be made of this state- ment ? From it we select all personal accounts that show a resource and all that show a liability, to which we add all inventories and outside resources and liabili- ties that belong to the business. 20. If the business shows a net gain, where should the gain be entered? Simply credit the proprietor for it by a day book entry. 21. If the business shows a loss, what entry shoidd be made ? Debit the proprietor in the same manner as you would credit him in case of a gain. 22. What real object is there in closing the loss and gain accounts in single entry ? There is no object except that of dispensing with them. 23. When merchandise is sold for cash, in what book should the entry be made ? In the Cash Book only. 2 If.. In case we are keeping a Merchandise ac- count, tohat special arrangement may be made for cash sales ? A merchandise column might be kept in the Cash Book. 25. In the absence of a merchandise column, what shoidd be done ? It would be necessary to post the merchandise items separately. 26. Suppose we have loss and gain or other ac- counts in our opening entry that we do not wish to keep in the Ledger, such as Mercliandise, Chattels, Bills Receivable, Interest and Discount, etc., how should they be treated? They should be checked off in the opening entry, thus showing that they are not to be posted. 27. Why are the terms " Dr." and " Or" used in connection with each transaction that is recorded in the Day Book ? They are used to show whether the amount is to be debited or credited when the amount is posted to the Ledger. 28. If you sell merchandise to J. M. Snoio on account, what entry ? Day book or sales book entry, debiting him for the amount of the sale. 29. If you buy merchandise for your note, what entry ? No entry is required except a simple memorandum of the transactions. 30. If you buy merchandise for cash, what en- try ? It should be entered in the Cash Book and checked off, unless a Merchandise account is kept. 31. If you buy merchandise for your accept- ance, what entry ? A simple memorandum in the Day Book without arranging amounts to be posted. 32. If you buy merchandise of John Smith and give in payment a draft on James Black, what entry ? Credit James Black only, unless a Merchandise ac- ■ count is kept, in which case separate entries should be made for the merchandise. 33. If you sell merchandise to John Smith for his note, what entry ? Enter it in the Bill Book and simply make a mem- orandum without arranging amounts in the Day Book to be posted, unless you are keeping an account with Bills Receivable. 31f. If you sell merchandise to John Smith for his sight draft on James White, what entry ? Cash book entry only, unless days of grace are allowed. 35. If you pay your rent, $75, in merchandise^ what entry ? No entry whatever, unless you are keeping Mer- chandise and Expense accounts. COMMISSION BUSINESS 592. The general purpose of a Commission Business is to buy and sell goods for others. For definitions of the terms Consignment, Consignor, Consignee, Commission, and Commission Merchant, see par. 448 to 459 inclusive. 593. General Observations. — Commission merchants are often, to a certain extent, jobbers, as they buy and fill orders for their customers. Frequently they carry a stock of goods of their own, but in some states they are forbidden, by law, to carry in stock the same kind of goods that they sell on com- mission. As a rule, it is not good policy for a commission merchant to deal, on his own account, in the same class of goods that he sells for others on commission, as he may neglect making sales for his customers in order to dispose of his own goods. Yet a commission merchant may find it advisable to carry a stock of goods, for the reason that his commission business may not be sufficiently extensive to enable him to depend upon its profits alone. He may also find it necessary to keep in stock certain classes of goods to fill the orders of his customers. 594. Rate of Commission. — The rate per cent, of commission, charged by commission merchants for buying or selling goods for others, varies with the kind of goods, the locality, and other circumstances. It usually varies from 2^ % to 8%. It is generally higher on perishable products, as vegetables, green fruits, etc. , than on salted meats, grains, potatoes, etc. 595. Consignment Accounts. — Separate accounts, called Consignment accounts, are kept with each consignment received. These are kept in the same manner as personal accounts, being debited with all charges and the amount of the net proceeds when paid, and credited with the amount of the sales. The consignment accounts are numbered in the order in which the consignments are received. It should be borne in mind that a separate account must be kept with each consignment, even though a number of con- signments may be received from the same person, or firm. The object of keeping separate accounts with each consignment is to facilitate the making out of the various account sales. 596. Equated Date. — Goods belonging to a consignment are frequently sold on time, unless the consignee has been otherwise advised by the consignor. When time is allowed on the sale of goods belonging to a consignment, the proceeds are not usually considered due until the expiration of the various credit sales. In cases where it is desired to settle for consignments of this character before the credits are actually due, the sales are equated, and the average date is found, upon which a settlement is effected, either by note, draft, acceptance, or cash. 597. Ledger Headings. — In the Commission Sales Ledger, the name and address of each con- signor should be given in connection with each ledger heading as follows: Con. No. 1, Samuel Watson, Boston, Mass.; Con. No. 2, Charles T. Benton, Chicago, 111., etc. See "Commission Sales Ledger," page 131. The word "Sales" is sometimes used instead of the word "Consignment." These consign- ment numbers are used by the consignee to represent the goods while in his possession. As the property is not his, he must have some mark or title to distinguish one consignment from another, and from his own goods, if he has such. Each article, sack, or package, belonging to a consignment, is numbered as soon as it is received, agreeing in this respect with the consignment number used in the ledger heading. In this manner, he is able readily to distinguish one consignment from another; it also saves time, as a number can be written much quicker than a name. 598. Open Consignments. — All open consignments on the commission merchant's books at the end of the year, must be considered either as resources or liabilities. (The estimate must be made on the face of each consignment account only and without reference to any inventory that may belong to it. ) The commission merchant handles goods on account and at the risk of the consignor only. If he makes favorable sales the amount realized minus the charges belongs to the consignor. If the goods must be sold at a loss, or if the goods become a total loss, the consignor is the sufferer. The only amount lost by the commission merchant being his commission which always depends on the amount realized from sales. Occasionally an arrangement is entered into by two or more parties, one of whom is a commission merchant and who lives in the city and furnishes the capital, attends to the selling and keeps the other partners informed as to the state of the market, prices, etc. The duties of the other partner or part- ners are very similar to those of purchasing agent. He travels in the country and does the buying, being guided in this by the reports from his partner in the city. He ships to the city the products bought and the gains on the sales are shared according to agreement. Though this is usually called Joint Account it is really a special partnership, [128] COMMISSION BUSINESS 129 CHARGES The Commission Merchant's charges on the different consignments are usually as follows: 599. Freight. — Freight is an amount paid to a railroad company, etc., for the transportation of goods. 600. Drayage. — Drayage is a charge for the delivery of goods from the depot or dock to the place of business. It may be charged for work of this kind done by the Commission Merchant's own teams. 601. Insurance. — It is customary for a Commission Merchant to carry a sufficient amount of in- surance to cover all goods that he has, or is likely to have, in his store. When this is the case, he charges the cost of the insurance policy to an account opened in the Ledger with "Insurance." He then charges each consignment a certain percentage for insurance, according to the amount of goods and the time they remain on hand. In some cases, the charge for insurance is the cost of extra insurance taken out on goods stored for better prices or for the purpose of carrying them over to another season. 602. Storage. — Storage is a warehouse charge made for storage of goods while they remain unsold. 603. Advertising. — Advertising may be for a certain per cent of the regular advertising of the business, the same as the charges made for insurance, or it may be for special advertising necessary on perishable goods, in order to hasten the disposal of them. 604. Cooperage. — This is a charge for the cost of making or repairing such barrels, boxes, etc., as may be required for the repacking or proper handling of the goods sold. 605. Discount for Advance Payments. — This is a charge that the Commission Merchant fre- quently makes for drafts accepted or paid, or money remitted before the consignment has been sold, or for remittances made before the various sales on time are due. 606. Exchange. — Exchange is a charge made for the amount paid a bank for bank drafts, bills of exchange, etc. , remitted as proceeds of the consignment, or it may be for any cost necessary in making collections and remittances connected with a consignment. 607. Accepting Drafts. — Sometimes the consignor draws on the consignee when the consignment of goods is not entirely sold. These drafts are usually accepted and charged to the respective consign- ments. In this business, accept only such drafts as are drawn on you through the bank, and in accepting them make it a rule to postdate them two or three days, thus giving you ample time to sell the goods and meet such acceptances at maturity. 608. Cash Book Charges. — Debit each Consignment in the Cash Book at the time of receiving it, for the freight and drayage. See second entry in Cash Book, credit side. If necessary, use more than one line for this entry. Number each Shipping Invoice to correspond with the consignment number, but continue to number the invoices of your own goods consecutively. 609. Miscellaneous Charges. — For miscellaneous charges affecting consignments, see "Freight, Drayage, and Express," par. 464. 610. Student's Charges. — In the Commission Business for this course, make the following charges on each consignment, computing the same on the total amount of sales: Commission, 2\ %; insurance, \ %; storage, \ %; advertising £ %; and cooperage, ^ %. Use the following form of journal entry for these charges: Con. No. 1 7.97 Commission 2\ 6. 25 Insurance \ 63 Storage^ 42 , Advertising \ . . . . 42 Cooperage jfc 25 611. Posting. — In posting, disregard the sum of these charges, $7.97, and post the separate charges to the debit side of the Commission Sales Ledger, as the above entry is posted in the form under par. 614. CASH BOOK 19 1 ' 9 Apr. 1 2 Balance Con. No. 1 Con. No. 1 Mdse. Sales 20 60 40 7614 18 Apr. 1 2 Expense, Rent 1 mo. Con. No.l,F't 28. 48, Dray 2. 85 Mdse., F't 43.38, Dray 3.62 Ins., Hartford Ins. Co. Adv., G. P Rowell & Co. Con. No. I, Net Proceeds 90 31 47 8 6 210 33 50 25 70 130 COMMISSION BUSINESS 612. Commission Sales Book — For a business in which all merchandise is bought or sold on commission, the ordinary Sales Book could be used, and in the same manner as usual, except that an ordi- nary journal entry would be made for each sale on account, the account affected by the sale being debited and the consignment to which the goods belong being credited. But as most commission merchants sell goods of their own, the Sales Book is usually ruled with three columns instead of two. In using a book of this kind for the first time, it is necessary to exercise great care to avoid mistakes. For school purposes, use your regular Sales Book, ruling an extra column for "Items." The following form of this book will give the student a general idea as to its use. It should be used as a book of original entry, the amounts being posted from it direct to the General Ledger and the Commission Sales Ledger. COMMISSION SALES BOOK ^i^Csivv'tvcisbij O.j sflcoLcJl J ', I a.rmJLejL LLfaJiAon, Motion, JJLclSA., to be sold on commission. & LTIJUL €.m cn : Charges Sales 1 Freight 28 2 G 48 85 25 42 G3 42 25 250 39 210 Find, enclosed. mi ft o>&FO>k for $2W. 7 ° as net proceeds of your consign- Commission ment of O.p/1. 2, ig Trusting that our disposal of this con- signment will meet with your approval and secure your future patronage, we remain, \JLnLon (—orrunjUi^Lon &o, t Advertising Cooperage 80 Dis. for Adv. Pay'ts Exc. on Proceeds fiejz St. Net Proceeds 70 The following form of Account Sales is preferred by many commission houses on account of brevity H. P. McDonnell ALL CONSIGNMENTS SHOULD BE ACCOMPANIED BY AN INVOICE. J. J. MCDONNELL aS2 71 BUTTER and COOS, » POULTRY, . . GAME, . . TOJITS, Etc. v/retf, ^MicA., jD^d. JCj,. A\cDONNELL BROS. COMMISSION J9 Reference: : Peninsular Savings Bank. % 135 W. Washington Street. SIB Lot JVb— 4-20.... Sold for account of dL. Oi. &HjJ>otl 1 Received jQlg.. 14, — 19 — d&ul/baJicL-sJion.,. Consignment s> / ' C / (Loop go-u/h 120-4-0-80 7Q. FREIGHT & CTG. { EXPRESS COMMISSION 28 1 25 NET PROCEEDS 4- CHECK TO BALANCE E. & 0. E. Dear Sir: Enclosed find check to cover above proceeds which we trust will be satisfactory. Yours truly, TTiojS) onndJi /3toA. [132] 5 97 28 1 4- GO GENERAL MERCHANDISE BUSINESS 616. This is a partnership business in which you are to secure two or more partners, allowing- each of them a salary, including yourself. The amount of salary to be paid each partner is to be settled by mutual agreement. 617. You are to invest your present worth, the firm is to assume the payment of your liabilities, and ou are to guarantee the payment of all your present outstanding personal accounts and bills receivable. 618. Books Used. — The book of original entry is the Sixteen-column Journal. Other books may be used if the teacher prefers. 619. Opening Entry. — Familiarize yourself with the use of the Sixteen-column Journal, then arrange your opening entry in it, and submit it for inspection, after which continue with the work as outlined in the Business Instructions, using the " Safeguard Check System " as explained in Part II. SIXTEEN-COLUMN JOURNAL 620. In this business a Special Column Journal is to be used, having sixteen columns. It is not essential that there should be just this number of columns, as the number may be more or less than sixteen, according to the demands of the business. 621. The book here introduced provides a method of testing and transferring footings, which is a recent feature of accounting and saves much time and labor. 622. In order to become familiar with the use and construction of this book, read carefully the following explanations, referring whenever necessary to the form on pages 134-139. 623. Column Headings. — A number of column headings are printed in the Sixteen-column Journal form to show how the columns of a Columnar Journal may be used. But providing columns on the principle stated in paragraph 554, "that it should be the aim as far as practical to bring out the Business accounts," it is suggested that beginning with the left-hand column on the left-hand page of the Sixteen-column Journal, the student write at the top of the columns in order: "Salary," "Freight," "Advertising," "Branch House." "Mdse Dis.," "Returns and Rebates," "Expense," "Mdse," "Sundries," "Cash" (if any of such accounts are not already printed there). Beginning at the right of the explanation column, write in order: "Cash," "Sundries," "Mdse," "Returns and Re- bates," "Mdse Dis.," "Branch House." Enter the amount for each account in its column. If an account should have no column provided for it, enter the amount in the Sundries Column. See par. 558. Posting. — Post the items in the Sundries column as directed in par. 560. For posting and post- marking footings or totals of the several columns, see par. 628. 624. Number Column. — The vertical columns containing numbers, are to aid the bookkeeper to find readily the proper place to enter the amounts. Thus the credit for W. S. Hull, of $127.50, is on line 16, and its place is easily found by locating this line in the column reserved for his account. 625. Testing Footings. — It will be noticed that the footings of the several columns are entered diagonally. This admits of their being added horizontally. The totals of the footings of the respective pages should of course agree, thus affording a trial balance of the book. See the total footings in the form. 626. Transfer of Footings.— It will be observed that after the first leaf, the leaves of the book are alternately shortened at the top and bottom. This device enables the accountant to effect a transfer of footings without rewriting them. When the second leaf is turned, the footings of the first debit page are visible, owing to the shortening of the second leaf at the bottom. When the second debit page is filled, the columns are added from bottom to top, the footings of the first debit page being included, and the totals being recorded at the top of the page. When the third leaf is turned, the totals of the second debit page are visible, owing to the shortening of the third leaf at the top, and these totals are included when the third debit page is added from the top downward, the debit footings being transferred thereafter in the same manner. The credit footings are transferred in the same manner. 627. Cash Balance. — In the space below the explanation column, provision is made for balancing the cash whenever the columns are added. If desired, the Cash columns may be ruled up and closed at any time. [133] 134 SIXTEEN-COLUMN JOURNAL Cxwyuv — — — \>\\^cc V\5SWu\\ Ve §\\V^e \\)bWu\\ %W^cu} •\Q oiO £\\v,v^ DMCTWSXUOj Yx^wjc. . ^0 "\b w a«j t> "Wvfc se. so. "XWdb«. V^ \5 Suuck \\ ^ lllfto bQ [>•> V**) "OvrnVv^ Cc\^\\ Car>n WW SIXTEEN-COLUMN JOURNAL 135 — ■■■■ — ■■ n n l\ « Ga*V |\5 Suwfcvws "W&vi. v^A?^ l\j.S.\-\uA\ \3\AV a ^\\^%>ovs\s$v\ \wv\jok& . 5 i JL A.aS toi iH 4M ^ v i "1 "5 A 5 ) 3 "i Ka Ija \ o r j a \ "AWtas Ccoft >x\\M\ce \Vi. v (s \Q \ 3 OftV. _\\X^\V«o&* l^Vfl> Witt ^ AAv} "i 1 J A-XWU^S.. t. CxAx. VWiWC* W. TOO^ i A ^ i >\ liftAi \\\ * > GT\1V\W\« . __J\\\a« SX&vi 4 s \ to^O "S v» vAo*tf\t*v&o. v o.-5v\ . jtv \jccvw\w«v \o 6a\« *ff \ % ^0 Vs A ^V S\u Y H« . . Ccv^ ."\\ H Q A 8 YY> S \-\ u \\ -\\\ d-*. S $. « . * v 1 A 7)0 6 <\ \AAAs Vrt Tot Vv\a<\ vc \ \0 v\ CX?Cxv^. ^\~V6s C ^"0). ^ 1 v\ toft w fl "Wl&c Ca->\\ Jnv * \Mi xl "\ ^ 'S *\Q \1 \? » UU) Y\vuV\cc Ca'jVi cm atcciv\v\\ . \i H&O \A \H Cah 1 ^ "b \0 \^ \<> ATvcH* VjAAs VavySW. W * \vs. * rt 3 \ c^ \V C asu. \\) S Wv^\ w\ cvuovjcrV iv> \«o \ n i« \A C O.'Aa \^\C\«3X\ccc\e>idS\ rt tt i t>oW^ CcvAa ycw<5V~\T\ \\v\y\v>v6<> \<\\\AA\o ^ k O V«l 30 "WWcV Y>\. WA. ao 10 J( Y_ , c\asw3* \\\ SL \YWA^o<\\ov~\o!bcA. o 3a 3^)0 %\ M Ol&\.«\w\<\0) \\AAs ^a^oSAe . °w 5v \AoV* %V\\?)Xy A M " 12 \ \ so 3^. § As ^V\oS\« C a\V.'«\\aS\<> . J. U«> CNX\ U.CCOW\ 14 2^ ( 3S (\AA^\WvmoSA< r\T\dvt 0&(x* Wo\« * 1\ YYA} 5 « °lAv\Q is 3k CaWJ GA\A . _AAwNs t . S A3 ■ ^ av > \ ft %.°i 3> si Cv 9 Cwa^ Pffv^. SV3 \\» n ^a^iq n % * ^ CvW.Wv.-b . \\)S YU\ c^ave i Q\\) . %\ br. on n n h «i ^^ 21 V.U'bH \t\^vS\^qccou<\\ \o6a\e i°i i<\ 50 u\6->e. VjAAb KA^aS\viA.V\X\«voW , b accc^\oiv\c« ^ jO °> *\ -Aft y 30 ^Qr^.X^.^. ts 1\ M a Tf^ic \V3 SV\vA\. Snvoxcc * wv, V3 i5 \ °i ft ft'j h Co,^ . Vj a\s \\ctc\\o>-At . j ,0 Oc\gqv(\cw\ b Tio\( ys i3 \ \ }H "bo cV^s.X^X^.^ y, il « U^«W« . L.0kS\v. \ SvoOOT 5 1 ) Vi I 1 ) M, L\bvi«\\~>\t\0^ CcVa^ . Vo^cc^e. lie i Jt 51 ^AA^ S a^oSAe . __ZW\6bo . jnvoxce * \^ M V i o qo 3a 5* \D. < bA\uAA,_"ATv6s«. S&.v\ » b H HO H 5A V)AAs ^«\wS\* . W) .b A-\^\ o,qvAV> S v\ 19^ w i-A % u uo 40 AAo\u a\ "bft dc^s ow accouvW. ^o ^ h\ AWa^i CXC.^an«v. Wo\c« *i \<\°> j *\ H blM 4\ «*3 y CtV\ouKA^6. "\\Aftw b.A^ AV .1 ^ A ^ VI 4 X^vWs \\ec»««S\( \\3bYUA ^«\^iW. i^VV»vtA»V5®« ^ h\ <\ ^ 1ft mise CaA\ Ss\^tn«*.\^ h^ \ °i X top ^^ \ Ys Cc\sVV\r 4\-\\ ^^ /\ /"b /' / M 5 / t Y A / °i /J Z 1 'i y s y h _Yll /_. Y J i 1 1 ^ \A)bV\AA V2) ,<^k\ \_\ bu\ \h\\Vz ~V^ .6^e \A^O\ A\s 137 136 SIXTEEN-COLUMN JOURNAL U ^ m, o ^0 50 i=> TTV6 bt y* i r o b^ fcQ tel tf> CcvbYv S o> % °i oft "5 \o a ^ so bO 10 :> 51 J 3 11 ail .'■ i ■'' J< « SIXTEEN-COLUMN JOURNAL 139 U H VATOttbfc. \_ C\^S\ \\\\ bcAss. Ca,SK\ W) S WyXV w\ auounV \^ V) Wt\c^\ v_as\\ ov\ acc&unX SoWvx, C \\ 9o\6 OVv A\* vyv}\6s \i\ avA\ \ ~\\Wc\\ \->\. YtfA. v. xnccvTi \Av vATWw^on \« AoSvyc . C\&\.«\ttv<\ \ bx. on u)b V\ \w VvxU o\ accou^X \u 6a\e Coov\ . A3A\s YV«\\oSV' . ) ,0 CVvcyamcm •» "\"\cA« X\aAt Sav\aSAe.__jY\A. invo\c« * \Vfe W) c o V\0\ . _\Y\6be . b-5 . V\ $xN\, \V t x«s\« . \\) .b .v\0\ o^vAti »VS&« \^(^^&v^« t\ \~\ . \^ _ tv Cov'^vv ^ \ h ^^i as \3 AV^ ^. r J Ccvita V^ SvxWvNuw AHitl \r^ 'bO v*C Su\\6u«b ~\Vv^ "\l U °\\ 0| Q b ~io toO \0 l* ^ \\b\ AhKo W^.WOCV \| M OilailA^ w ;iO ^i\v%c ^>o W)S\ 4 vA\ V3vW^ 137 136 SIXTEEN-COLUMN JOURNAL kkkhs hkkboll \l \kklv? Q>\^U\ hkhkoll \Nokko I l.i I ii i i i i ^«TO>e pCTVfcbt. Svraiv "-V0 W)^\Y Vo kkkko II II \lokkkk°il i i i U •^ l«j SX H MJ ■^ bb fcQ uev Ccxsh . ^W*\hk^ M°i|il t *l'>s I II i "OcAe 138 SIXTEEN-COLUMN JOURNAL 139 Grw>\w«. ___X\\o-,* b>X3 m ^\> "sk T v\« UA .~\\"XWn ^ X^X} * G Wi CaAV C asU Yo\- V^cxvx C\ 9 Gv ^ . _TRd^ b V>:\ \ TfUfte CaA\ Juv * \«A Gil) V\v\v\Vt. Co. On ot\ cvcccwA- C>is\^ T fuW Cas\\ba\ts> TTuHv> X3AV, "Savy&V W * W>. C csVv W) b> X\G\ w\ \. VifA . Ixw^t "W\. \bAYV\xu^o<\ \«"Xo5)vyt . CW«\w\ a v, C\9.G«^ !\Ktot.S§ ^ 5 GAXXA^b. *X\)S\U\ cyw* ^ GAV). *\ 6r. on \\3 b V\ \ w \\A\ v^ ace ou\A V> Oa\<> AAAi'se, ^AA^ j Y\) . b A\GA , __~\T\6« . AAs V*wkV \Alb.XA\>X\ g^AVJ b tt. I 9G., T\o\? 0.\ "SO 6cM\S OV\ o\\GSN ^G\\b\A. i\)-s.^\« a«v^8« "XW&sq C. V^ "\KUUKa ~\VV^5 01^ ^ \^^< ^ hH~\ •b HO \\^.WG\ \| \| °)KI"\60. Paying an Invoice. — When the invoice is to be paid, a Voucher Check is made out, and sent to the creditor. The Voucher Check is an ordinary check with a statement on the left-hand end containing an itemized list of the articles in the invoice for which the check is to be full pay- ment. Or the check may contain on its face: "In full payment for Voucher No. — ." The check will have to be indorsed before the creditor can get the money on it. This insures the return of the Voucher Check through the bank. When the Voucher Check is returned, it is inclosed in the voucher with the invoice or other document for which it is payment. The voucher and its voucher check constitute complete evidence of payment. If several invoices are to be paid at the same time and to the same creditor and contain the same terms, a Voucher Check may be given for the combined amount and the Voucher Check would then indicate the total of the items of the invoices for which it is payment. This is done to save writing checks and the additional postings, as one check and one posting will answer for all. If the invoices bear different terms this could not be done. The total of sundry invoices of a miscel- laneous and petty character, but bearing no discount, may be paid with one check. Record of checks issued in payment of vouchers, etc., may be kept on the stub of the Check Book or in a Check Register, or in a Banking Ledger. In case of payment of Voucher, the only record necessary on the stub of Check Book is "Payment of Voucher No. — ." As the different vouchers are paid they are entered in the Cash Book, credit side. 661- Postings. — The learner must remember that there are various ways of arranging books for the Voucher System and that the posting will vary with the planning of the system of books. 662. Posting from the Voucher Record. Debits. — The Voucher Record is a columnar journal, to classify the raw material and the items of expense of conducting the business. At the end of the month or at the close of a page, an account is opened in the Ledger with each column named in the Voucher Record; as, columns, A, B, C, D, E, F, G, H, I, J, K, L, M, N, O, etc. For brevity and also for the purpose of concealing the cost of material or article or outlay for expense from the clerks or others, the columns representing the different materials or items of outlay may be given a letter or a number and the column on the Voucher Record to be charged for the outlay is designated by a letter or a number on the back of the voucher. That is to say, an account is opened with "Hides," and the total of that column, $574.17, as illustrated by the total of the first six vouch- ers, is posted to the debit of that account. In like manner an account is opened with "Kip Skins," "Calf Skins," and so on through the list and the total of each column posted to the BOSTON TANNING COMPANY A ' B c D E F Date In whose favor Pay- ment is to be made LP Journal Column for all Credits Excepting Cash Vch No. Total Column Hides Kip Skins Calf Skins Goat Skins Sheep Pelts Tan Bark 19 LUg 1 Am. Mdse Co. 1 582 51 254 31 288 2 Am. Mdse Co. 26 Bills Pay No. 29 265 50 2 265 50 38 40 32 40 168 3 Am. Mdse Co, 42 W. E. Fowler, Dft. 3 250 16 3 250 16 95 16 3 30 8 80 142 3 A. B. Dun & Co. 4 241 15 224 70 3 Miller & Co. 5 49 95 25 65 20 70 4 Am. Mdse Co. 6 45 45 43 74 1434 72 574 17 41 70 43 74 25 65 61 90 598 Ledger Pages MANUFACTURING 147 debit of its account. Then accounts will have to be opened with any item in the Sundries column, and the amounts posted to the debit side. 663. Credits. — An account will have to be opened with each account in the column headed "Journal column for all credits except Cash," but these accounts are credits and their amounts will have to be posted to the credit side of their respective accounts; that is to say, an account is opened with Bills Payable, and its amount, $265.50, will be posted to its credit. Likewise an account is opened with W. E. Fowler and the amount, $250.16, posted to its credit, and so on, for any account that may appear in that column. 664. Accounts Payable. — At the end of the month an account should be opened in the General Ledger with "Accounts Payable," and the footing of the "Total Column," as $1434.72, posted to its credit; and the total of the two columns, "Cash," and "Sundry Payments," as, $806.76, posted to its debit. The difference between the debit and the credit sides of this account shows the amount of "Un- paid Vouchers," and the amount of the indebtedness of the business, except any notes or mortgages outstanding. In case this account is not kept the footings of these columns are not posted. This account is kept as a controlling account; that is to say, a standard by which the correctness is tested. 665. Special Column Cash Book. — While the ordinary Cash Book may be used, the labor of operating the Voucher System will be greatly reduced by using a Special Column Cash Book. See illustration, page 149. Posting from the Cash Book — Credits. — The footing of each column, except the "Mdse Dis." on Sales, on the debit or "Received" side, would be posted to the credit of its account. "Mdse Dis." on Sales is a charge against sales, and is therefore a debit. The Ledger pages to which each footing is posted are set in the first line below the double rule and are indicated on the Cash Book illustration by a dagger (j*) set before the page No. A single red ink line is drawn across the Cash Book below the folio references and the Balance carried for- ward is brought down below the single red ink line, in order that no entry may be made on the folio line, and to make the folio references stand out that they may be seen at a glance. 6,66. Debits. — Every payment with its Check No. and its Voucher No., if paid on a Voucher, is entered on the credit side. If any amount of cash is paid out that is not paid on a Voucher, in order to find the total cash paid, for balancing the Cash Book, the amount of Cash paid on Vouchers is set in the Cash column under "Not paid on Vouchers," and the total found. The several amounts under "Vouchers Paid" are posted to the Voucher Record under "Explain When and How Paid." The footings of the other columns on the credit or "Paid" side, except "Mdse Dis." on Purchases, are posted to the debit of their respective accounts. "Mdse Dis." on Purchases reduces the cost of purchases and is therefore a credit. General. — The footing of the "Total Sales Cr." column on the debit side, and of the "Total VOUCHER RECORD FOR .19. H 1 J K ' L M N C Salt Bate Material Tallow Fish Oil Caout- chouc Sulphuric Acid Iron Filings Pay Roll Sundries Explain When and How Paid Lime Date Vch No. Explanation For Ck and Cash Pay't For Sundry Payments • 15 25 20 19 1 1 70 25 , Aug. 2 2- Bills Pay 265 50 90 3 3 W.E.F.Dft. 250 16 6 70 % 75 3 4 Mer. Bank 241 15 2 25 1 35 3 5 Mer. Bank 49 95 291 10 SI 90 6 2 60 15 81 90 25 27 45 6 70 9 2 10 291 10 806 76 148 MANUFACTURING Vouchers Payable Dr." column on the credit side need not be posted as the controlling account is established from the Voucher Record by this scheme of books. The footing of the "Net Sales Cr." column on the debit side, and of the "Net Cost of Material Dr." column on the credit side may or may not be posted as the teacher may prefer, and the account used as a summary account for statistical purposes. Ordinary Cash Book. — The Cash Book for this business may be kept in the ordinary way, except that the credit columns are used respectively for sundry items and for "Vouchers Paid." The "Vouchers Paid" column contains the items of the cash payment column of the Voucher Record. The total of these columns must agree. See the accompanying form. CASH BOOK Sundries Vouchers Paid 19 Aug 1 Balance 47090 19 Aug 1 Real Estate, 2 blocks of land 800 Buildings, Etc. 1350 Machinery, Water Wheel 300 - Miscellaneous Machinery 375 For placing the same, etc. 50 Inventory 138 Tools as per Inv. 139 35 125 June 1 Labor per pay-roll 19 3 Labor per pay-roll 20 11 5 Labor per pay-roll 21 89 6 VB 1 V No. 4, A. B. Dun & Co. 241 49 15 — 7 VR 1 V No. 5, Miller & Co. 55 95 Discount 5 667. Paying Creditors and Getting Receipts or Vouchers.— i One way is to make out the voucher and the check on the same paper. This form requires the invoice to be copied on the voucher; or at least an abstract of the invoice to be made on the voucher. When the voucher-form is receipted and the check-form indorsed, the check becomes payable to the payee. This form is illustrated in Vouchers i, 2, 3. The objections to this method are the extra work in copying the invoice or an abstract of it on the voucher and the bulkiness of the document. It is also objected that this plan unnecessarily ex- poses the business. 2. A second way is to make out the voucher and the check in separate documents and to ask the creditor to receipt the voucher and to return it. To insure the return of the voucher, it is usual to print at the bottom, in bold type, "Please date, receipt, and return this voucher by first mail." This form is shown in "Remittance Voucher," illustration 4. The objection urged against this plan is that the voucher is not always returned promptly, sometimes requiring several letters to get it returned, thus requiring additional work and stamp expense. In some instances the voucher is for- gotten by both the payer and the payee and not returned at all, and the record, in that event, is incomplete. This objection is almost entirely, if not completely overcome by using the Remittance Voucher and the Classification Voucher combined, illustrations 4, 5, and 6. Carbon may be used to fill in classifications on inside of Classification Voucher, overcoming the objection of recopying. More- over, the business is not exposed because the classification is by letter or number or both. In this plan the check bears the same number as the voucher. 3. A third way is to inclose with the check an ordinary receipt, to be signed by the payee and returned. 4. A fourth way is to use a Voucher Check. The Voucher Check is an ordinary check with a' statement on the left-hand end, containing an itemized list of the articles in the invoice, and for which the check is to be full payment. Following the list of the articles, there is a printed statement that "No receipt is required; the indorsement of this check is acknowledgment that the invoice is paid in MANUFACTURING 149 00 00 po 00 M po vo PO O O O CO 00 PO PI O O 00 O O 10 00 M pt> 10 PO O 00 pi to 00 rr s PI O vo VO h-35 t^ 00 00 10 PI 00 10 00 O O VO PO CO Q 5 ■ w2 00 OB O PO Ht PO « a O IO vo pi O VO H PI PO 00 00 po 00 "O 00 PO p) -J- [v,CQ '35 fez Eg 03 VO O vo O n 1-1 Pi po 00 P) 00 00 HI PI 8« 00 00 PI -J- as O OO 10 vo PO PI M »o pi ZH 3 O M PI p< 4~ O *^ H ■< K < s a 4> • O C "(5 PQ 3 d « CO CO d CO "5 1 3 m O d O 4) *o S3 E < d O D in E < 6 u c Q < ►4 < H N PO po «^ 'sl- 2 M 3 < D < O «o ! O 1 vO Q rf IO M w t». vrj O HI 1 o§ J5 vO lO O M N N 00 SB PS *i M ir> io O O W b 1 M O ^3 O t HI Ov <\ fO ■* ■* O V « *0 *^» Qo 1 00 ^ ■* o 02 ■i IS QW HO 1 o> H K 03 ^oa 5^^ BSfi g Q OQ ■ > s h Jzj'g ■O P C3 O £ Ct ? s -^ 2 > s ^ j O O £ UG +3 _ O O to VO vO r u-> M M t^ O M < !5 S T 00 4» a VO VO vo VO vo _J S| J Q £ a> vO VO HI Total ouche ayabl uo M w VO PO in O HI VO VO HI >0h (N c» a O M O «H s j w M C-l PO PO PO O g> < 1 1 1 150 MANUFACTURING full." See illustration No. 8. Some Voucher Checks have no list of articles, but contain a printed statement on the face, "In full payment for Voucher No. — ." 668. The Cash Book Entry. — When a creditor is paid by any of these methods all that is necessary is to enter on the credit side of the Cash Book the date, in the date column, and write the "Voucher No. — "and the "Check No. — " in the proper explanation columns. It is not necessary to enter the name of the creditor paid, as the number of the voucher answers for that. Special Column Sales Book. — This book like the Special Column Cash Book is divided into columns representing the various accounts with manufactured goods. All sales may be entered in this book or only sales on account and for note, as the teacher may prefer. The student should add the items of the sale to see that the total of the several items equals the "Amount of Sale." When a page is filled, the footings of the several columns may be carried to the next page until the end of the week or month, or the totals may be posted at the close of each page as the teacher may prefer. One line should be left at the bottom of the page below the footings in which to set Ledger folios, as in the Cash Book. 669. Ledger Accounts. — Ledger accounts are opened with the various materials bought for manufacturing purposes, as indicated by the headings of the separate columns in the Voucher Record. The Ledger accounts for the sales are to be opened in accordance with the various classes of goods, as represented by the merchandise cards, which are as follows : Sole Leather, Harness Leather, Sheep Skins, Kip Skins, Goat Skins, Calf Skins, Wool, Glue Scraps, and Hair. The student must be careful to note that most accounts opened from the Voucher Record repre- sent raw materials, while accounts opened from the Sales Book represent accounts with manufactured goods. The two must not be confused. There will be other miscellaneous accounts; such as, Real -Estate, Machinery, Manufacturing, Labor, Tools, etc. No accounts are to be kept with the persons or firms from whom you buy goods on account, the accounts being represented by the Voucher Record. 670. Manufacturing Account. — In strictly manufacturing, a merchandise account is not kept, but instead, an account is opened with "Manufacturing," or in case of a single article, an account is opened with the article manufactured, or a trading account may be opened, if desired. The Manufacturing account is seldom, if ever, used except at the end of the year, of at such time as the books are closed, at which time all accounts with manufactured goods and with materials used in manufacturing, labor, and all other accounts with the necessary expenses for manufacturing,' such as Labor, Expense, Freight, Express, etc., are closed into the Manufacturing account. If improvements are made or extra furniture or other equipments are bought for the office, they should be charged to some account that could easily be distinguished from those belonging strictly to the cost of manufacturing; such as, Special Expense, or the name of the improvement or property would answer the purpose. These accounts with Interest and Discount, Collections, and all other accounts that do not in any way pertain to the manufacturing of the goods, should be closed directly to the Loss and Gain account. The actual cost of the goods manufactured is ascertained by opening separate accounts on be- ginning business with such articles and raw materials as may be necessary to buy for manufacturing purposes. A "Machinery account" should be kept which should be charged with all machinery bought. SPECIAL COLUMN LP NAME ADDRESS TERMS AM'T SOLE LEATHER HARNESS LEATHER SHEEP SKINS OP SALE Quan. Price Amount Quan. Price Amount Quan. Price Amount 19 kug. I G. E. Daley Boston, Mass. Account 472 08 1240 # 22C 272 80 I20# 40C 48 OO I A. B. Cook Baltimore, Md. Account 965 5° x 35°# 22C 297 00 235°# 28c 658 OO 2 Bills Rec. Brooklyn, N.Y. W. S. Wood's 30-day note 97 75 MANUFACTURING 151 An account should be kept with "Tools" in like manner. An account should be opened with "Repairs" and all repairs charged to it. It should be closed into Manufacturing account. At the end of the year, an inventory is taken, when an approximate value is placed on all prop- erty belonging to these accounts. A certain per cent is allowed on machinery, tools, etc., for wear and depreciation in value ; that is, if a machine is estimated to give service for ten years, a discount of ten per cent from the original cost should be deducted each year when taking the inventory, and if estimated to wear only five years, a twenty per cent discount from the original cost should be made, etc. A common way of getting at a fair inventory on machinery, tools, etc., is to have some experi- enced person to test the machinery, etc., and thereby to reach a fair value. Appraisal Companies are established in all large cities. These Appraisal Companies have men that are experts in special lines and if a flour mill or a printing office, etc., is to be inventoried, a specialist in the line required is sent to make the appraisal. At the end of the year these accounts are credited with their respective inventories, and then closed directly to the Manufacturing account. Accounts representing raw materials are closed by cr-diting each with its inventory and then closing the difference into Manufacturing account. When all accounts pertaining to manufacturing have been closed to the Manufacturing account, it will show the gross profit or loss of manufacturing. If the total expenditures and receipts of manu- facturing are wanted, it will be necessary to transfer the debit and the credit footing of all accounts pertaining to the cost of manufacturing to the "Manufacturing" account. This should be done in accordance with the instructions for "Transferring Ledger accounts," par. 285. The debit side of the Manufacturing account will show the cost of all goods manufactured, and the credit, the receipts. The difference between the two sides will be the loss or gain, which should be closed to the Loss and Gain account. Or to Trading Account, if desired to keep a Trading Account. When this work has been done, the books aie closed, the same as in any other business. 671. Closing the Books. — Close all accounts pertaining to the cost of manufacturing to the Manufacturing account. Read "Manufacturing Account." In closing the accounts, transfer the footings of the various amounts, and not the balances. Close all other amounts to the Loss and Gain account. If necessary see "Steps in Closing Books," par. 413. 672. Applicability of the Voucher System. — If the learner will reflect he will see that that part of the Voucher Record from the left, up to and including the Sundries column, 'is in reality a Purchase Register, and that it differs from other Purchase Registers in that it is a record not only of the ma- terial bought or manufuctured, but that it also contains a record, in classified form, of machinery, tools, labor, and every outlay necessary to carry on the business, and that the Voucher Record takes the place of accounts with creditors furnishing all these things, he will realize that the Voucher System is especially applicable to a business that has numerous classes of purchases, because the method saves entries and postings. Then, if he will reflect that that part of the Voucher Record under "Explain When and How Paid," is a record, also in classified form, of the payments to the sundry creditors, he will then fully realize what a great time-saver it is. The Voucher System is extensively used by factories, railroads, express companies, public and private corporations, and many other kinds of business. SALES BOOK GOAT SKINS KIP SKINS CALF SKINS WOOL HAIR — 1 GLUE SCRAPS Quan. Price Amount Quan. Price Amount Quan. Price Amount Quan. Price Amount Quan. Price Amount Quan. Price Amount 45°# 25C 112 5° 3?7# I2^C 38 38 80 4 \o 40 30 bu 35C IO 5° 6i 4 # I2^C 76 75 60 bu 35C 21 00 152 MANUFACTURING VOUCHER ILLUSTRATIONS The following invoice represents a purchase, on account, at thirty days. Cincinnati, Ohio, June 1, .19 •vr Boston Tanning Co 130UGIIT OF. American Mdse Co. Terms. dealers in GENERAL MERCHANDISE 30 days net No.. 140 All Claims for Shobtagb or Damage mhst bb made on Receipt of Goods 100 Hides 3 l-4c 254 31 20 brls. Salt gals. Fish Oil 75c 25 l-2c 15 10 20 40 50 gals. Prime Fish Oil 30c 15 288 40 cds. Tan Bark 7 20 582 51 - Upon receiving the above invoice, the several items are transferred to the voucher, as shown in the following form: As separate accounts are to be kept with the various materials used in the business, the items of the invoice are classified and combined upon the voucher, according to the ledger accounts to be affected. The several amounts are then entered upon the Voucher Record. Thus the two items of oil in the foregoing invoice are united on the voucher into one charge of $25.20 against the Oil account. ILLUSTRATION No. i VOUCHER CHECK Boston Tanning Company Pay to. American Merchandise Company, Address. Cincinnati,. Ohio. rF NOT CORRECT . RETURN WITHOUT ALTERATIONS AND STATE ERROR. 100 Hides 3-1/4? 254 31 20 brls. Salt 75^ 15 40 gals. Fish Oil 25-1/2? 10 20 50 M Prime Fish Oil 30? 15 25 20 40 cds. Tan Bark 7.20 288 582 51 EXAMINED ANDyKSftHIlD ON VOUCHER APPROVED VpR PAYMENT By ™ NO. 1. AMT. O P CHUCK, * UO«J. 51 ■^ DISTRIBUTION OF OHAHOKS CASHIER'S RECORD Hlfles 254 15 JUL _20_ S*if nil 25 288 Tan Bark ' 1 MANUFACTURING li The following form illustrates the back of Voucher No. 1 as it should be filled out before sending to the payee. When the proper official for the American Mdse. Co. signs the receipt, the paying bank will honor the check. One advantage of the Voucher Check, as you will see by studying the form, is that it is not transferable, and no one but the payee named in the check, or a collecting bank, can get the money. No detailed explanation of the form is necessary, as it is self-explanatory. NO.. Boston. Mans., .Tnnft ?.?,, _190.iL Received from. Boston Five Hundred Eighty-two and 51/100 .TANNING COMPANY --_ $582.51 BEING IN FULL PAYMENT OF ACCOUNT HEREIN. Ck/\/\AJ "'Y^L^-jULs' NOTICE : THIS RECEIPT MUST BE SIGNED ONLY HY THOSE HA\JNG SUCH AUTHORITY AND IN INK. PAYING BANK VVIL.L. NOT ACCEPT UNLESS CONDITIONS ARE COMPLIED WITH, WHEN PROPERLY RECEIPTED THIS VOUCHER IS PAYABLE AT Merchants Bank, Boston, Mass. THIS VOUCHER CHECK IS GOOD ONLY WHEN SIGNED BY American Merchandise Company. 05 W 00 K M W . H & >* hi < p fe tu B 111 H BQ H « B fc H < P5 Voucher No. 2. — The amounts of this voucher are transferred to the second line of the Voucher Record. As the invoice is paid by a note, Bills Payable is credited in the "Journal Column." Proper entries are also made in the explanation columns for payments, at the right-hand side of the book. As the purchase has been paid by note, the voucher should be receipted and then filed. VOUCHER CHECK Boston .Tanning Company Pay to. American Merchandise Company, Address. Cincinnati, Ohio. IP NOT CORRECT, RETURN WITHOUT ALTERATIONS AND STATE ERROR. m. 120 20 .500 Kip Skins. 960# ~4?" Sheep 27^ cds. Tan Bark 8.40 brl. Lim e 90$ Lime # Tallow 3Qi 5£_ EXAMINED ANB? RECORD ■B.tJ^^- ERED ON VOUCHES APPHOVKftJ'OJJI PAYMENT Bl 9h tf?. O^Zc^^^ DISTRIBUTION OB" OHAROE9 Ki p Skins Sheep " Tan Bark _LAme Tallow 90_ ao_ Cb ioked_(L£- — 52 168 4D_ 40- 7CL -25- 38 40 32 40 168 1 70 25 265 50 2. VOUCHER NO,. amt. op check, a26 5. SO OASniER'9 RECORD 154 MANUFACTURING Voucher No. 3. — The amounts of this voucher will be found properly entered on the third line of the accompanying Voucher Record. As the invoice is paid for by a draft on W. E. Fowler, he is credited in the Journal column. The proper entries are also made in the explanation columns for payments, at the right-hand side of the book. This voucher should also be receipted in due form, and permanently filed. Boston VOUCHER CHECK .Tanning Company Pay to. American Merchandise Company. Address. Cincinnati. Ohio. EP NOT OOHREOT. RETURN WITHOUT ALTERATIONS AND BTATE ERROR. _3Ql _2Q_ .10_ AQl -20_ Hides. 2579# 2-1/2^ 15S6# 2-1/4^ Kip Skins, 120# 2-5/49? Sheep 227? cds, Tan Bark 7.10 brl. Lime 90^ EXAMINED AMI) RECORD BY EKED ON VOUCHER . j APPRaVE».Fm PAYMENT BY DISTRIBUTION OP CHARGES Hi d e s Kip Skins Sheep w Tan Bark Lime 59 48 35 68 Retch.nkq/ axi> Bt {~Z 95 16 3 50 8 60 142 t>n 95 16 3 !50 8 30 142 90 250 16 VOUCHER NO.. 3. AMT. OF CHECK, * 250.16 CASHIER'S RECORD ILLUSTRATION No. 4 BOSTON TANNING COMPANY 26-28 Main Street East BOSTON, MASS. REMITTANCE VOUCHER 7b_ AMERICAN MERCHANDISE COMPANY Address. Date of Invoice DESCRIPTIVE DETAILS AMOUNT CHARGE TO 19 Invoice as Rendered, Aug. 100 Hides 3 l-4c 254 31 A 20 Brls. Salt 75c 15 00 H 40 Gals. Fish Oil 25 l-2c 10 20 K 50 Gals. Prime Fish Oil 30c 15 00 K 40 Cd. Tan Bark 7.20 288 00 F 582 51 Correct ^%S& Audited Approved for /? * Payment ^Jf-jsS^ 582 51 Correct E.J. G. Audited W. B. P. Approved for Payment C. C. Treas. o u z z z Q O o 2 TJ > Z D r r > 3) 0) ^ J. TJ > z < o 3 TJ z > < H O H I m 71 DO D m TJ U) ■n H z > < Z a W 7 = (/) so H Z s z 2 > if) 0) r r C H > 5 2 2 o CORPORATIONS GENERAL OBSERVATIONS Definition. — A Corporation is an artificial person created by law. Classification. — Corporations are broadly divided into two classes — Public and Private. We shall here consider Private Corporations, or those founded by private individuals and for the general purpose of financial gain. Corporations Compared with Partnerships. — In general, a corporation differs from a partnership in the following particulars: 1. A corporation is created by law, while a partnership is created by mutual agreement. 2. A corporation may exist only for the purpose especially prescibed by law, while a partnership may be formed for any purpose not forbidden by law. 3. The existence of a corporation is continuous during the period for which it is formed and regard- less of the persons who comprise it; a partnership, on the other hand, may be dissolved by the death or withdrawal of any member of the partnership. 4. A member, or stockholder, of a corporation may transfer his interest without affecting the legal status of the corporation; if a partner transfers his interest in the partnership, the partnership is thereby dissolved. 5. The powers of a corporation are limited to those conferred by its charter, while a partnership has all the powers of the persons comprising the firm. 6. The liabilities of the stockholders of a corporation are limited, while, in general, a partner is liable for all the debts of the firm. 1. A corporation is bound only by the contracts authorized by its board of directors; a partnership is generally bound by any contract made in the firm name by any of the partners. Purpose. — In most States private corporations may be organized only for such purposes as are set forth by the statutes of the State wherein the corporation is formed. General Outline for. the Organization of a Corporation. — The statutes of the different states vary so widely that it is well-nigh impossible to make the directions broad enough to cover all the steps in all the states, but the following will serve as a general guide for the formation of a corpo- ration in most of the states. If the teacher prefers the students to go through the steps of organiz- ing a corporation rather than to assume the organization, the following is a general outline of how to proceed: i . There should be at least five advanced students, four besides the student that is 'to conduct the business. Most states require only three incorporators, but in schoolwork' it is better to have not fewer than five. 2. The capital stock should be from $25,000 to $50,000. 3. Fill out the Articles of Incorporation, in duplicate, or triplicate (or as many as the law may require), and have your signatures on each paper witnessed. (Usually signatures are acknowledged by some one duly authorized to take acknowledgments, but in this case you may have your signatures witnessed.) After the articles are duly executed, deliver them to your teacher, who will act as Secre- tary of State, or other officer. See that your articles are accompanied with the necessary filing fee, as required in your state. If the articles are correctly made out, and the necessary amount of money paid in, and the required capital stock subscribed, as called for by the statutes of your state, the teacher will record your Articles of Incorporation, and place his filing stamp on them. You are then required to file one copy with your county recording officer (the county recorder or county clerk, [158] CORPORATIONS 159 or whatever officer the statutes of your state require) . The purpose of filing these articles of incorpora- tion with both the Secretary of State and the county officer is to give public notice to tax boards and to future creditors. 4. Having your preliminary organization completed, you now call a meeting of all stockholders, for the purpose of organization and for adopting by-laws, electing a board of directors, in accordance with your by-laws, and for the purpose of transacting any other business that may be needful to com- plete the organization. The usual parliamentary procedure is observed in conducting these pre- liminary meetings until the permanent organization is arranged for. It is usual to name Roberts' Rules of Order or Cushing's Manual to govern in all cases of dispute. Adopt by-laws, and elect direc- tors at this preliminary meeting of the stockholders. When directors are elected and other necessary business transacted, the meeting is adjourned to meet according to the directions set out in the by-laws. 5. The minutes of stockholders' meetings should be kept separate and apart from the record of directors' meetings. Make a copy of the Articles of Incorporation and of the by-laws, in the Minute Book. Minutes of all stockholders' and directors' meetings, and also all meetings of executive and other committees must be kept in the Minute Book. 6. As soon as possible, the newly elected board of directors should meet and organize by electing a permanent President, a Vice-President, a Secretary, and a Treasurer, in accordance with the by- laws, and the statutes of your state. The board of directors is the governing body of a corporation; and generally the stockholders have little to say as to how the business shall be conducted. In some states, however, a majority of the stockholders may dismiss the directors for cause. The President is the executive officer, the Secretary has charge of the corporate records and the seal. The Treasurer is custodian of and has charge of all money and valuable papers belonging to the company. The officers issue stock certificates. The directors elect a general manager or other subordinate officers to perform various duties in connection with the conduct of the business. The officers act under the general direction of the board of directors. The general manager usually selects the bookkeeper. 7. Having properly attended to all these preliminary matters, the company is ready to open the corporate and the account books as soon as the statutes permit. The Treasurer should deposit the company's money in bank to be paid out as the by-laws may direct. Articles of Incorporation. — The instrument by which a private corporation is formed is called "Articles of Incorporation." These are agreed upon by the persons forming the corporation, and in most of the States the following essentials are required to be set forth: 1. Name of corporation. 2. Purpose for which it is formed. 3. Place in which business is to be done. 4. The time during which the corporation is to exist. 5. Amount of capital stock. 6. Amount of stock actually subscribed, and by whom. 1. The number of shares into which the stock is to be divided. 8. The amount of paid-up cap'^al. The law requires that this must be a certain amount, or a certain per cent of all the capital stock. In some States additional facts are required to be set forth. The Charter. — In most States, the statute permitting the organization, and the Articles of Incor- poration effecting the organization, taken together, constitute the corporation's charter. These confer and define the company's rights and powers. In a few States, however, the Charter is a formal document issued by a State officer certifying the organization of the corporation, and usually mentioning its name, powers, purposes and duration. Powers of Corporations. — Among these are 1. The right of the corporation to exist for the period prescribed in its charter. 2. To sue and be sued in the corporation name the same as a natural person. 3. To purchase such lands or chattels as may be necessary for carrying on the business of the cor- poration; also the right to mortgage such lands or other property. 4. To possess a common seal to be used in the execution of the corporation documents. 5. To adopt' a code of by-laws not inconsistent with the charter of the corporation, or with the con- stitution and laws of the State in which the corporation is formed. 160 CORPORATIONS Duties of Corporations. — The general duties of corporations are prescribed by the laws of the several States. Corporations are usually required to provide for the annual election of their directors upon a specified date, also to give notice to the stockholders of the time and place of holding such election. The elections are usually required to be by ballot, and each stoc holder has the right to vote in person or by proxy, being allowed one vote for each share of slock standing in his name as shown by the books of the corporation. In the election of officers, the person voted for who receives the largest number of votes is declared elected. Corporations are also required to keep a record of their legal acts in books of record provided fcr the purpose. All books of record of the corporation are required to be open to the inspection of the stockholders of the corporation. In some states this right is abridged by statute. Liabilities of a Corporation. — Like persons, corporations are liable for the acts of their agents or officers when acting within the scope of their authority. Corporations are liable for trespass committed by .their agents or officers if these are acting in the name of the corporation and within the scope of their authority. Corporations are also liable for taxes upon property owned by them, also to individual stockholders for any infringement of their rights occasioned by the acts of the corporation officers or agents. The individual liability of stockholders for the debts of the corporation varies in the different States. In some, this liability extends to the amount of stock held; in others, to the amount unpaid on the stock held. The general liabilities of corporations are subject to much variation by the laws of the different States. Dissolution. — A corporation may be dissolved 1. By the surrender of its charter and its acceptance by the State authorities. 2. By forfeiture of its charter either through violation of its terms or through failure to use its privileges at all. Upon the dissolution of an insolvent corporation, the property belonging to it is placed in the hands of a person appointed by the courts; called a receiver, who closes up the affairs of the corporation , sells the property, pays the debts of the corporation, and divides the assets, if any remain, among the stockholders. LEGAL AND OTHER TERMS USED IN CORPORATION BUSINESS Charter. — This is the written instrument or instruments authorizing a corporation to exercise certain specified privileges, rights, or powers. It is a written evidence of the lawful possession of a franchise. Franchise.— This is a right, or privilege, granted to individuals or to a corporation by a govern- ment, a State, or a public corporation, as a town, city, or county, which right, or privilege, cannot be exercised without the authority of the grantor. The right of a corporation to exist, is a franchise; the powers and privileges granted to a corporation, are a franchise belonging to the corporation itself. A franchise is not a written document, but simply the legal right itself. Stock Certificates, or Certificates of Stock. — This is a paper usually signed by the president and secretary of the corporation, and issued to each stockholder, in his own name, and certifying to his title to a certain number of shares in the capital stock of the company, and the par, or face value of each share. These certificates are not security for money, neither are they negotiable in the strict sense of the term, although they may be bought and sold like other property. Transfer of title may be effected by endorsement, or by a formal written "Transfer of Stock;" the transfer must be entered on the books of the company to be binding upon the company, although it may be good as between the vendor and the vendee without such entry. Choice of Stock. — The preferences accorded to preferred stock are based upon 'contract be- tween the stockholders and the corporation. The terms of the contract are usually printed upon the certificates of the preferred shares. These terms vary greatly in different corporations. Sometimes preferred shares are made "fully participating." That is, after payment of a certain per cent of divi- dends upon them, they are entitled to share with the common stock, without distinction, in all remain- ing declared net profits. Again, we find preferred shares made "non-participating;" that is, after payment of a fixed per cent upon them at the dividend periods, they receive nothing more, no matter how great the profits of the concern. Thus, it sometimes happens that a company's preferred stock will be receiving only 6% per annum, while its common stock will be receiving, perhaps, 25% per annum. In that event, the common stock will, of course, .be of greater value than the preferred. In general, however, the preferred stock is the more valuable. — Burritt Hamilton, in Practical Law >-3blished by Ellis Pub. Co. CORPORATIONS 161 Common Stock. — This is stock that is represented by the ordinary certificates issued to stock- holders, and is subject to all the conditions of the company's by-laws. Preferred Stock, Preferred Shares, and Preference Shares. — This is special stock issued by corporations. It is usually issued for the purpose of attracting capital. Preferred stock is entitled to an annual dividend of a, certain per cent of the net earnings, before a dividend can be paid on the com- mon stock. Some companies, on organization, issue different classes of stock for the purpose of effecting immediate sale of a certain portion of the stock, thus enabling them to begin operations at once; and their object in issuing preferred stock is to attract investment. Sometimes a crisis is reached in the company's affairs, and the old stockholders are unwilling to risk more money in the enterprise, although they may be willing to encourage others to do so by giving them a preference in the profits, which the increased capital may enable the concern to gain. A class of pre- ferred stock is sometimes credited to meet this condition. Corporations are not allowed to pay dividends from the sale of capital stock. A holder of preferred stock is not a creditor of the company, but is simply a stockholder, and his only advantage is a right to the first dividends that may be declared from profits actually earned. In case these are not sufficient to meet the specified rate of the dividend on the preferred stock, the loss falls upon the holder, and he has no right or claim to be reimbursed from the future earnings of the company, unless his shares are cumulative. Guaranteed Stock. —This is a class of stock, the holders of which are entitled to a Cumulative Preference Dividend; that is, the holders are entitled to have the shortage of the dividends, if any occurs, made up to them from the future profits before other dividends can be declared on common stock. Stock having this advantage is also called Cumulative Preference Stock, as it has a guaranteed annual dividend which must be paid before any excess of net earnings can be used for any other purpose. Deferred Stock. — Deferred Stock is that upon which interest or dividends may not be paid until the ordinary stockholder has received a specified dividend per annum. Obligations of this kind resemble perpetual loans upon which interest may be indefinitely postponed. Sometimes the holder of such stock is entitled to a gradually increasing rate of interest up to a specified rate, and when this is reached, the obligations take their place as actual stock. In stock of this class, the owners do not have the rights of the ordinary stockholders, and may take no part in conducting the affairs of the concern. Non=Assessable Stock. — This stock is exempt from assessment. It may be of any of the previous kinds, and is issued under a contract that, regardless of the financial needs of the corporation, no assess- ments are to be levied upon it. Treasury Stock is authorized Capital Stock, either original or reacquired, that has been placed in the Treasury to be sold as directed or authorized by the Board of Managers. Watered Stock. — This is an issue of stock for which full cash value has not been paid. Such shares are sometimes issued for the purpose of keeping the per cent, of dividends below a certain rate. In some States and under some circumstances, dividends in excess of a certain rate are prohibited. By artificially increasing the capital stock, the percentage may be lowered, and through this evasion of the law, the stockholders may get the same amount in dividends that they would receive were the entire profits divided upon the basis of the original stock. Capital Stock. — This is the capital of the corporation, and is represented by all of the stock sub- scribed. For convenience, it is divided into an equal number of shares, usually of twenty-five, fifty, or one hundred dollars each, which shares are owned by individuals called stockholders. The "Authorized Capital Stock " is the whole or nominal capital stock permitted to the corporation and may be much more than the amount of actual property owned by the corporation. The funds of a corporation may fluctuate ; that is, they may be increased by surplus profits or dimin- ished by losses ; but the Capital Stock remains the same until changed in accordance with legislative authority. Shares of Capital Stock are usually represented by certificates. These shares may be bought, sold, and taxed like other property. The Capital Stock of a corporation may be taxed as a whole, and the individuals may also be taxed for the shares held by them. Although the shares represent a certain part of the Capital Stock, a holder has no right to the property of the corporation until the latter is dissolved. The only right conferred upon the holders of the shares is the right to their proportion of dividends and profits, and to participate in the making of by-laws, the election of officers, and the alteration of the corporate charter. Unpaid stock is as much a part of the assets of the corporation as is any other kind of property. The directors of the association are regarded as trustees of the Capital Stock, as represented by the corporation prop- erty, although they have no control over the shares which represent it, except those which are still unsold. 162 CORPORATIONS Working, or Operating Capital. — This is a specified amount of property, or unsold stock, which is set aside from the paid-up capital, or sum invested in the plant. Sometimes corporations, on organizing, place all the unsold stock to the credit of Working Capital for the purpose of selling, or otherwise disposing of this, when it is necessary to do so for operating purposes. Corporations may be short of necessary funds for carrying on the business after all the stock has been sold and paid for ; to avoid assessments in such cases, the stockholders sometimes return a certain percentage of their stock to the company, which is set aside for a working capital, and is sold, to raise the required funds to conduct the business. Plant. — This term applies to the entire outfit, buildings, land, machinery, tools, fixtures, etc., required for operating the business. A Stockholder is the owner of one or more shares of Capital Stock, his ownership of these shares constituting him a member of the corporation, and entitling him to as many votes in the election of officers, or in determining corporation affairs, as he may have shares standing to his credit on the corporation books. The subscribers to the stock of a corporation become liable as separate debtors to the company for the par value of the stock subscribed, and this liability may be enforced by suit. The issue of stock certificates is not necessary to perfect a subscription ; all that is necessary is that the subscriber shall have bound himself by subscription or otherwise, to become a contributor to the funds which the Capital Stock represents. The possession of a share of Capital Stock gives the holder the legal right to partake of -the surplus profits, and also imposes upon him the duty of paying legal assessments until his stock becomes fully paid. Voting by Stockholders. — In stockholders' meetings each stockholder is allowed to cast one vote for each share of stock he owns; that is, if Jones owns ten shares of stock he is allowed to cast ten votes on any question for stockholders to determine. Cumulative Voting. — In some states cumulative voting is allowed by stockholders; that is, if five directors are to be elected, Jones, a stockholder, who holds ten shares may elect to cast his ten votes five times for one director, instead of casting his ten votes once for each of the five directors. This power, it will be seen, will often enable a minority stockholder to elect one director favorable to him and thus protect his interests. Voting by Proxy. — In most states, a stockholder may vote in person or by proxy, that is to say, he may authorize some one else to vote in his stead, by giving such person written authority to cast his vote. Quorum to Transact Business. — The by-laws generally specify the number of stockholders or the number of shares to be voted to constitute the legal quorum, that is, the required number of stockholders or number of shares of stock, necessary to transact business. Voting by Directors. — Directors vote as individuals, each director being entitled to one vote. The fact that some of the directors may be officers does not give them any voting power, as such. A quorum in directors' meetings is generally a majority, the number of shares a director may own having nothing to do with his voting power. Gross Earnings. — These are the total receipts in money or property that are actually earned by the com pan y. Net Earnings. — These are the net profits that remain after deducting all actual expenses from the gross earnings. Dividend. — This is a specified portion of the profits set aside by the directors of a corporation to be divided pro rata among the stockholders. This term is also applied to the sum which any stockholder may receive as the result of such division, and also to the rate per cent, that the whole dividend is of the entire capital stock ; thus, we speak of a "Dividend of 5%," meaning that the sum set aside for the dividend is equal to b% of the entire Capital Stock which is paid up, also that each stockholder's share of this dividend is 5% of the par value of all paid-up shares owned by him. A dividend may be based upon the rate per cent, that the whole dividend is of the paid-up capital instead of the capital stock; thus, in the case of a capital stock of $80,000 with $20,000 paid up, a dividend of 8% on the paid-up capital would be equal to only 2% on the capital stock. The rate of dividend may be based upon the paid-up capital stock instead of upon the entire amount of capital stock; thus, if the capital stock were $80,000, of which $20,000 were paid up, instead of declar- ing a dividend of 2% on the $80,000, a dividend of 8% would be declared on the $20,000. P^ach stock- holder would in this case receive dividends in proportion tc the amount of his stock paid up instead of the amount held. It must be understood that a dividend cannot be legally declared when such dividend would im- pair the capital stock. CORPORATIONS 163 Preferred Dividend. — This is a dividend payable to the holder of preferred stock. See "Preferred Stock." Stock Dividend. — This is a dividend issued in the form of additional stock, instead of in cash. A corporation may have made large gains in its business, but these gains, instead of appearing as cash, may be in the form of increased value, in the merchandise, plant, or other company property. In. order to make this additional value available for a dividend, some of the property of the company must be sold for casn, or else its value may be distributed among the stockholders in the form of increased stock. Issuing a Stock Dividend is a convenient way of accomplishing this. To Declare a Dividend. — This is an announcement by the officers of the company of their readiness to pay a specified dividend to the stockholders. A dividend is not a corporation debt until it has been duly declared by the directors of the company. Declaring Dividends. — In general, the declaration of dividends rests with the discretion of the directors of the company. Usually the interests of the corporation are best served by making uniform and regular dividends, according to the legitimate profits of the business. Declaring dividends may be indefinitely postponed ; and unless it appears that a postponement works to the injury of the complainants, a court of equity will not ordinarily interfere. As a rule, the following financial points should be carefully considered before a dividend is decided upon. A dividend should be declared upon actual profits, excepting under special circumstances, as in the case of the existence of a surplus fund, when the directors may be justified in doing otherwise. The amount of available assets should be considered, the amount of present liabilities that must be discharged, contemplated repairs and necessary improvements to be provided for, actual amount of cash on hand, etc. After having investigated the company's operations, the secretary, for example, may be able to inform the directors that the net profits of the business appear to be three thousand two hundred dollars, which is equal to 8% of the paid-up capital of forty thousand dollars, thus enabling the trustees to declare a divi- dend of 5%, and place the remainder of the gains in the surplus funds for the purpose of defense against future financial reverses, unforeseen contingencies, bad debts, etc. It may happen in closing the books that a net gain is exhibited, and yet no cash on hand with which to pay the dividends. In this case, the company may be justified in borrowing money with which to declare a dividend. Dividend Certificate. — This is a certificate setting forth that the holder is entitled to a dividend of a specified amount which has been declared, but which, for some reason, it is not feasible to pay in cash. A Dividend Certificate may or may not bear interest. It is transferred the same as stock, and is sometimes convertible into capital stock. Dividend Certificates are liable to assessment in case the profits are not sufficient to meet the company's liabilities or expenses. To Pass a Dividend. — This is a failure to declare a dividend at the time when such dividend is usually made. Fictitious Dividend. — This is an illegitimate dividend that is paid from the capital of the company in the absence of a profit or a surplus fund, from which a legitimate dividend can be declared. In order to declare such dividends, a false showing of profits is often made by arbitrarily raising the inventory on the real estate, plant, merchandise, or other property of the company. The purpose of such forced dividend is usually to deceive the public by making it appear that the company is more prosperous than it really is, and thereby increasing the market value of the shares. Its benefit to the stockholders consists in enabling them to sell their stock for more than it is really worth. Surplus Fund. — This is an excess of the net profits that may remain after the interest, dividends, expenses, etc., have been paid. This fund may be set aside for the purpose of meeting unforeseen expendi- tures, such as enlargement of the plant, repair of buddings and machinery, etc., or it may be used in the case of sudden losses, or in the event of an unprosperous season, or for the purpose of keeping up the average per cent, of the dividends. Surplus funds may be large or small, according to the profits of the business, and, of course, may be increased or diminished by varying the percentage declared. See Account, pnge 160 Reserve, or Contingent Fund. — This is the same as a surplus fund, excepting that it is set aside, or reserved, from the net profits of the business before the declaration of a dividend. Sinking Fund. — This is a fund set aside from the net proceeds of the business for the purpose of paying an existing obligation, due at some future date, a sufficient sum being put into the sinking fund each year to make a total fund equal to the indebtedness at maturity. Rest Account. — This account is practically thejjame as a surplus-fund account, excepting that the 164 CORPORATIONS funds credited to it are to be used expressly for the purpose of protecting the corporation against losses, Teverses, or other contingencies that may arise in the business. An Assessment is a tax levied upon each individual stockholder in proportion to the amount of his stock. It is levied by the directors of the company for certain legitimate purposes, such as the payment of expenses, discharge of liabilities, etc. It is levied as a certain per cent, upon the par value of the capital stock. An Installment is a part payment upon capital itock for which a stockholder has subscribed. Stock may be issued on condition that the installments of a certain fixed percentage of the par value of the stock are to be paid at specified periods, or they may be paid on demand, or at the discretion of the directors of the company, according as the business may develop and more capital be required for operating purposes. The obligation of a stockholder to pay for stock subscriptions is, like any other debt, subject to the statute of limitations. The stock is often sold to the subscriber on condition that, in default of payment of any required installment, the company may take up the stock and sell it at public auction, keeping the amount already paid in by way of forfeiture. Or the defaulted installment may be raised by the company selling as many shares of stock belonging to the delinquent stockholder, as may be necessary to meet the unpaid installment, and the cost of advertising and selling. The rights of the company as to the collection of delinquent installments are usually regulated by the laws of the State in which the corporation is formed. When by agreement, installments are to be paid at regularly specified intervals, no formal notice to the stockholders is necessary. When stockholders pay their installments, they receive a simple receipt for the same, signed by the president and secretary, or instead, they may receive regular installment scrip. But, in either case, legal certificates of stock are not issued until the purchase price of the stock has been paid in. Sometimes, however, certificates of stock are issued with the first installment, the certificates stating the rate per cent. , and amount of stock that has been paid in. As additional installments are paid, the old certificates are surrendered, and new ones are issued in their place. Installment Scrip. — This consists of certificates issued to the stockholders for installments paid. After all the stock is paid up, these certificates are ultimately returned to the company and exchanged for a full certificate of stock. Installment scrip is transferable the same as stock. Par Value. — This is the face, or stated value, of each share of stock. If the shares are issued for one hundred dollars each, this sum is the Par Value. The term "Nominal Value" has the same meaning. Market Value. — This is the value of stock as determined by its purchase and sale on the market. It may be greater or less than the par value according to the profits and financial condition of the corporation. Quotations. — These are the published price lists, showing the market value of the various classes of stock that are dealt with in the stock market. Stock quotations are usually published in the financial columns of the leading newspapers. Stock Exchange. — This is an organization of dealers in various classes of stock, which organization Is effected for the purpose of facilitating the purchase and sale of shares. There is a general stock exchange in nearly every large city. Limited Corporations. — The laws of some States provide for the organization of Limited Associa- tions. Such associations are usually merely corporations under another name. In the case of companies of this character, the word "Limited" is always written or printed on the commercial paper and othei documents issued by the company, as "Union Iron Works, Limited." Double Liability. — United States National Banks are said to be corporations of Double Liability, as the stockholder, in case of the bank's failure, is liable for the amount of his investment plus an assess- ment equal thereto. Trust. — A trust is an organization composed of several corporations, and is effected by a transfer by the stockholders of each corporation of a majority of the stock to the control of a central committee, or board of trustees of the trust, who issues in return for the shares transferred certificates to the stock- holders, showing that they are entitled to dividends upon the shares transferred. In parting with their stock, the stockholders retain their right to the profits arising from its possession, but they lose the voting power belonging to it, thus placing entire control of the several corporations in the hands of the central committee, or Board of Trustees of the trust. The formation of trusts in this m Miner-has been forbidden by the United States laws, as well as by the laws of a number of States. Trusts are formed for the purpose of centralizing and unifying the business of CORPORATIONS 165 the several corporations composing them. Sometimes these corporations effect the same result by surrender- ing their charters, and organizing themselves into an entirely new corporation, which has for its capital the united stock of the several corporations forming it. Syndicate. — This is an association, or combination of individuals, business firms, or corporations, formed for the purpose of promoting some special enterprise, or sometimes, for the purchase of national or municipal bonds, etc. A syndicate is not a permanent organization, but merely a temporary organization of capitalists, individuals, or corporations, for the accomplishment of a single object, the syndicate being dissolved when the object for which it was formed has been accomplished. Bonus. — A Bonus is a voluntary compensation, valuable concession, or grant, which is given to individuals or corporations, as an inducement for them to engage in some business enterprise of general benefit to the persons conferring the bonus. Thus the merchants of a town, or the town corporation itself, might, grant as a bonus, buildings, land, water-power, or even cash, as an inducement to those receiving the bonus, to engage in a manufacturing enterprise within the limits of the town. Waiver of Notice. — It is customary when stockholders or directors of a corporation wish tc hold a meeting at some other date or in some other manner than provided for in the by-laws, to waive the usual notice of such meeting and agree that it shall be held at an earlier date, or at some date other than that specified in the by-laws. The usual form of such waiver is as follows : WAIVER OF NOTICE — (Of the First Stockholders') Meeting The subscribers hereto, being all of the stockholders (or directors) of the H. B. Burton Mercantile Company, do hereby waive notice of thj (first stockholders') meeting of the said company to be held at , in the city of , State of , on the day of 19. . ., at the hour of o'clock P. M.; and agree to said meeting being held at in the city of , State of , on the day of 19 , at the hour of o'clock P. M. Signed (By all Stockholders or Directors). By-Laws. — The by-laws are the rules to govern the conduct of the corporation. They must not conflict with the statute laws of the state in which the corporation is established. The following include the points to be covered, but the learner is to understand that the by-laws will be varied to meet the conditions of the business to which they apply : By-Laws of the H. B. Burton Mercantile Company 1. Annual Meeting. — The annual meeting of the stockholders of this corporation shall be held on the second Tuesday of January (or other date> in each year, at the hour of seven-thirty o'clock . P. M., at the office of the said company, in the city of , or at such other place as shall be selected from time to time by the directors. At each annual meeting these stockholders shall elect, by ballot, a board of (state number) directors who shall be stockholders in this cor- poration, and who shall be elected for a term of one (or more) year, and to hold such office until their successors shall be elected. 2. Quorum. — A quorum of stockholders shall consist of the holders of a majority of the capita] stock of this corporation at the time outstanding, being present in person or by proxy. 3. Votes. — Each share of stock in this corporation issued and outstanding shall entitle the holder thereof, or his lawful representative, to cast one vote on all questions coming before any meet- ing of the stockholders. 4. Proxies. — Stock in this corporation may be voted upon by the holder thereof either in person or by proxy; proxies to be operative must be in writing signed by the president or vice-presi- dent and the secretary of this corporation. 5. Notice of Annual Meeting. — Notice of the time and the place of holding the annual meet- ing shall be sent by the secretary of this corporation, by mail, to each stockholder (state num- ber) days prior to the date of holding such meeting. 6. Special Meeting of Stockholders. — Special meetings of stockholders may be called by 166 CORPORATIONS the president of this corporation, or by a majority of the board of directors, or by the holders of a majority of the capital stock of this company, by filing with the secretary of this corporation a written call for such meeting signed by the persons calling it. Upon receipt of such call, the secretary shall mail one copy to each stockholder in the same manner as provided for in paragraph five of these by- laws. 7. Meeting of the Board of Directors. — Meetings of the board of directors shall be held monthly and shall be held at such time and place and in such manner as the board may by resolu- tion prescribe. Or the board of directors may be convened persuant to the call of the president, who shall send each member thereof such notice as he shall deem necessary according to the circumstances. 8. Quorum of Directors. — A majority of the board of directors properly convened shall con- stitute a quorum. 9. Officers. — As soon as may be after the annual election of directors for the ensuing year, the board of directors shall convene, and it shall elect from among its members a President, a Vice- President, a Secretary, and a Treasurer. The said board of directors may also appoint such other officers and agents to act by and under the direction of the board of directors as they may see fit. (Here recite the duties of the president, vice-president, secretary, and treasurer.) 10. Joinder of Offices. — Any two of the offices herein provided may be held and exercised by one person. 11. Vacancies. — In case of a vacancy occurring in any office or in the board of directors, such vacancy may be filled by appointment of any stockholder in this corporation thereto, which appoint- ment shall be made by a quorum of the board of directors duly convened. 12. Orders for Payment of Money. — All checks, drafts, and other orders for the payment of money shall be signed by the president and treasurer of this corporation. 13. Promissory Note. — All promissory notes made payable on this corporation shall be exe- cuted in the corporation name by the president and treasurer thereof. 14. Corporate Signature. — The execution of any instrument made by this corporation may be in the following form: The Burton Mercantile Company. By (Official Designation) 15. Corporate SeQ.1. — This corporation shall have a corporate seal, and the secretary shall be the custodian thereof, with full power to affix it to such instruments as shall require its use either by law or by resolution. 16. Fiscal Year. — The fiscal year of this corporation shall end on the last secular day of December (or other date) of each year. 17. Transfer of Stock. — All transfers of stock in this corporation shall be made upon the corporate books by the holder of the shares in person or by attorney, and shall not be deemed com- plete and binding upon the company until it shall have been so made, and until the certificate thereof shall have been surrendered to the company and new certificates shall have been issued instead thereof. 18. Dividends. — Dividends when earned and declared upon the stock of this corporation shall be payable on the second Tuesday of January (or other date) of each year. 19. Amendments. — The stockholders of this corporation may be a majority vote of a quorum present at any annual meeting or at any special meeting for that purpose mentioned in the notice thereof as one of the said meeting's objects, alter, amend, or repeal these by-laws, or any of them. Two Sets of Books. — The corporation laws of the different States vary so widely that it would not only be useless but unprofitable and a hindrance to the learner for any text to attempt to give all the variations to a class. The student is to understand at the outset that the purpose of a text on corporation bookkeeping is: 1. To set out the general method of presenting corporation accounts and records in account and record form. 2. To set out the relations between the two sets of books in corporation bookkeeping which are: (1.) Books of Account, or the financial books, and account keeping, which will be practically the same as the financial books and the account keeping used in any other similar business. (2.) Corporate Books: such as, Stock Subscription Book, Stock Certificate Book, Stock Installment "Book, CORPORATIONS 167 Installment Receipt Book, Assessment Book, Stock Journal, Installment Ledger, and Stock Ledger. The Minute Book is the official record. The learner is to understand that he is to look to the statute laws of the particular State in which he may be keeping books, and to see that he does not interpret the by-laws in such way as to bring them in conflict with the statute laws of the State in which the corporation is to be conducted. The Secretary of State in most States will have printed for free distribution a pamphlet or cir- cular on the corporation laws of his State. If the teacher will write the Secretary of State about ten days before taking up the work of corporations, he can, in all probability, secure the corporation laws, with specific directions for their application in his State. Minute Book.— It is customary to keep a complete and careful record of all of the official acts of a corporation, and a detailed account of all the proceedings of the official meetings, whether of the stockholders themselves or of the Board of Directors. In some States such records are especially required by law. These records are usually kept by the secretary of the corporation, in an ordinary blank book provided for that purpose, and called a Minute Book. The president of the corporation, who is also usually president of the Board of Directors, presides at all meetings, or in his absence this duty may be performed by the vice-president. The procedure at corporation meetings is the same as that of public gatherings generally, and is governed by ordinary parliamentary usage. The following minutes of the first two meetings of the Union Iron Works will illustrate the proper method of making the required records: Minute Book of the Union Iron Works Cincinnati, O., Aug. 10, 19 — In accordance with a published call, the subscribers of stock in the proposed corporation, ' 4 The Union Iron Works," assembled upon the above date at the private office of I. 0. Chapman, 236 Main St., for the purpose of perfecting arrangements for the org nization of a corporation. The following subscribers were present : I. 0. Chapman, C. C. Campbell, W. D. Hampton, L. M Goodyear, H. B. Burton. The meeting was called to order by L 0. Chapman, who briefly stated the purpose of the meeting, concluding his remarks by nominating C. C. Campbell for chairman of the meeting. Mr. Campbell was unanimously chosen, and, on motion, H. B. Burton was appointed to act as temporary secretary. The chairman then announced that the entire amount of the proposed capital stock, Forty Thousand Dollars, had been duly subscribed, and that a sum equivalent to ten per cent, of this stock had been paid to H. B. Burton, to be held subject to the order of the company. He also announced that the Articles of Incorporation had been duly prepared, and he suggested that the same be read by the secretary, which was done. Af U r some discussion, the Articles of Incorporation as read by the secretary, were, on motion, unanimously adopted. Upon motion of W. D. Hampton, the meeting, by unanimous vote, instructed Mr. H. B. Burton, secretary pro tern., to cause the articles of incorporation to be filed with the Secretary of State, and that Mr. Burton, also, in behalf of the company, take all necessary steps to secure the legal organization of the corporation. Upon motion of L. M. Goodyear, it was resolved that the chairman appoint a committee of three subscribers, to prepare a code of by-laws for the government of the corporation, and said committee to make its report at the next meeting. The following committee was appointed to prepare such code of by-laws : L. M. Goodyear, I. 0. Chapman, H. B. Burton. After some further informal discussion of corporation affairs, the meeting adjourned to Saturday, Aug. 17, 19-, upon whieh date the permanent organization is to be effected. Signed, Approved, H. B. Burton, Secretary pro tern. C. C. Campbell, Chairman pro tern. Note. — After the minutes have been approved at a subsequent meeting, they should be countersigned by the president as above. 168 CORPORATIONS Cincinnati, 0., Ana. 17, 19 — On the above date, an adjourned meeting of the subscribers to the stock of the proposed corporation, "The Union Iron Works," was held at the private office of I. 0. Chapman, 236 Main St. The following persons were present : I. 0. Chapman, C. C. Campbell, W. D. Hampton, L. M. Goodyear, H. B. Burton. The meeting was called to order by the chairman pro tern. , C. C. Campbell. The minutes of the previous meeting were read and approved. The chairman then announced that the articles of incorporation had been filed with the State authorities in accordance with law. Mr. L. M. Goodyear, of the committee appointed at the previous meeting to prepare by-laws for the government of the corporation, then presented the report of said committee. After some discussion, the report of this committee was, with some alterations, unanimously adopted, and the secretary was instructed to transcribe the by-laws as adopted, in a book to be provided for this purpose. Upon motion, the meeting then proceeded to the election of the permanent officers, as required by the by-laws of the corporation. The following officers were chosen by ballot, to serve for one year from the date of their election : — President — I. 0. Chapman. Vice-President — C. C. Campbell. Secretary and Accountant — H. B. Burton. Treasurer — L. M. Goodyear. General Manager — W. D. Hampton. Directors — I. 0. Chapman, C. C. Campbell, H. B. Burton, L. M. Goodyear, and W. D. Hampton. The meeting then adjourned subject to the call of the president. Signed, Approved, H. B. Burton, Secretary. I. 0. Chapman, President REGULAR MEETINGS After a corporation has been duly organized, the regular meeting of the stockholders usually occurs but once a year, but special meetings may be called at any time by the president or directors of the corporation. The affairs of the corporation are then under the control of the Board of Directors, and the by-laws usually provide for the regular meetings of this board. The secretary of the corporation is usually also the secretary of the Board of Directors. The following will illustrate the usual method of recording the minutes of the regular meetings of the directors after a corporation has been duly organized. niNUTES OF A REGULAR riEETING OF THE DIRECTORS OF THE UNION IRON WORKS Detroit, Mich., Aug. 30, 19 — The regular meeting of the directors of the aforesaid company was held at the company's office upon the above date, the following officers and directors being present: President, I. 0. Chapman; Secretary H. B. Burton; Directors, C. C. Campbell, L. M. Goodyear, W. D. Hampton. The minutes of last meeting were read and approved. Director H. B. Burton offered the following resolution, which, after some discussion, was, on motion, duly adopted . Resolved, That the president and secretary be and are hereby authorized to issue notes of this company to Messrs. I. 0. Chapman and C. C. Campbell respectively, for all personal property turned over by each to this company, in excess of the amount necessary to cover their subscriptions to the capital stock of this company Secretary H. B. Burton announced his intention of being temporarily absent from the city, and suggested that a temporary secretary should be chosen to attend to the duties of- that office during the secretary's absence. On motion of Director F. R. Ott, Director Robert Long was selected to act as such temporary secretary. On motion, the Board of Directors then adjourned until the next regular meeting. Approved, - H. B. Burton, Secretary. John Alexander, President. CORPORATIONS 169 STOCK SUBSCRIPTION BOOK The Stock Subscription Book is simple in its construction and use, and generally contains a printed con- tract at the top of each page, which constitutes an agreement between the company and the stockholders that the latter will receive and pay for the stock subscribed. The act of signing this book, alone, is suffi- cient to make each subscriber personally liable to the company for the par value of the stock for which he has subscribed. This book is opened for subscriptions as soon as the formation of the company has been decided upon. The stock may all be subscribed at once, in which case this book will be closed against further sub- scription ; or the stock may be only partially subscribed at the time of organizing, the Stock Subscription Book remaining open indefinitely for additional subscriptions. When the membership of a company is limited to a small number of subscribers, and when transfers of stock are not likely to occur, the Stock Subscription Book may be dispensed with, the record of subscrip- tions being kept on a Subscription Sheet, which is preserved with the other documents of the corporation. An ordinary sheet of journal paper may be used for a Subscription Sheet, it being ruled similar to the Stock Subscription Book. Under some circumstances, when a partnership is organized into a stock com- pany, no formal subscription of stock is necessary. STOCK SUBSCRIPTION BOOK We, the undersigned, do hereby subscribe for mid agree to take the number of Shares of Capital Stock at &<& value in the ^ion &on Words {Limited) set opposite our respective names. Date Name ADDRtSS No. of Shares Am'c in Dollars 49 Sdup. 4 J. vs. io//afiman VHncinnatt Cfne //wnaret/ 400 40, 000 <#. v). vamftlc/t " C/kc ftum/rett ftftu 450 45, 000 w: Qz). 2namfifon Jo/eve/an •« & A .$ s 8 "* c< •AaNO saadSNvax hoh ARTICLES OF INCORPORATION 0/__ ^mtn $4*n fyfuA- We, the undersigned, desiring to become incorporated under the provisions of the statutes in such cases made and provided, do hereby make, execute, and adopt the following articles of association ; to wit : ARTICLE I The name assumed by this corporation, and by which it shall be known in law, is nit'en ©/ten (yfhwd ARTICLE II The purpose or purposes of this corporation are as follows : fflwe manu/ac/ieie ant/ da/e #/ d/cam en/pined tznt/ vet&id- ARTICLE III The capital stock of the corporation hereby organized is the sum of. —(G/fd/?/ @/A#f£d€M. $^ // . ^^S^-t^-y^t-A^-c-o DATB Stock Journal Folio Cer. No. Trans. No. No. of Shares Issued No. of Shares Trans. TO WHOM TRANSFERRED AND OTHER EXPLANATIONS DEBIT CREDIT iy- I / 3 75 ^°- t 75 4&<*A,*A ^C Stock Cer. Trans. No. of No. of Journal Shares Shares Foiio No. No. Issued Trans. / / C. B. 2 J 5o IO 9 TO WHOM TRANSFERRED AND OTHER EXPLANATIONS i:> 6efit. Jo-l I50 d-Aa,le-££i^e^z,'L Stock Cer. Trans. No. of No. of Journal Shares Shares Folio No No. Issued Trans. I C. B. 4 50 IO 9 TO WHOM TRANSFERRED AND OTHER EXPLANATIONS •13- Oe.Lt. ( Jo-t 50 d.Acote,UM 15,000 I5POO rjT \^. ^ ■e«s£t£ 19- ^/ IO Stock Journal Folio Cer. No. Trans. No. No. of Shares Issued No. of Shares Trans. 5 TO WHOM TRANSFERRED AND OTHER EXPLANATIONS CVlanjAcUcd ' Aom (Q. TQ. (Qatn/ivcAA ^f- <=>*£/. ^ZScAt^-^^AAo^t' DATE Stock Journal Folio Cer. No. Trans. No. No. of Shares Issued No. of Shares Trans. TO WHOM TRANSFERRED AND OTHER EXPLANATIONS DEBIT CREDIT 19- ^/ I IO 20 C. B. 9 3 8 75 5 €$01 p<5 dftaitA oAJ/oo eacA (Qfaumtnf t/i Au/fAol /Ae avaue t/oc/i 7500 7,500 ■e--i-z^^- DATE Stock Journal Folio Cer. No. Trans. No. No. of Shares Issued No. of Shares Trans. TO WHOM TRANSFERRED AND OTHER EXPLANATIONS DEBIT CREDIT 19- 4Bty/ 20 / 8 5 . (Qy4- AaMMte #n Jo 4na4e<) oAd/ocA ^>i $0 dfiaUt c^yarAeitea' t/vtrt a/ Soft) 1,000 5°0 as*/ 500 500 CORPORATIONS 181 BALANCE SHEET OF THE UNION IRON WORKS, DEC. 31, 19- Capital Stock Cash Machinery and Tools Steam Engines Expense RESOURCES Cash Machinery and Tools Company's Present Worth GAINS Steam Engines LOSSES Machinery and Tools Expense Company's Net Cain , UNION IRON WORKS Capital Stock paid up Net Gain Company's Present Worth , 6 2 1 2 1 9 9 4 3 1 2 4 3 9 5 3 5 1 5 9 9 3 2 1 5 2 4 3 2 9 4 4 3 4 3 4 3 4- 3 9 9 2 2 5 5 3 5 a o o 2 2 CLOSING CORPORATION BOOKS The method of closing corporation books varies with circumstances. The directors may prefer a par- ticular form in closing, or some special form may be required by the by-laws of the company. In any case, it is necessary to close all accounts that show a profit or loss, to the Loss and Gain account. This is done by Journal entries, as it is especially desirable in corporation bookkeeping that all entries appear in the Journal with full and complete explanation. See the following journal entries: CLOSING ENTRIES Steam Engines $3, 550 Expense \ $ 150 Machinery and Tools 200 Loss and Gain 3,200 Entry necessary for closing the loss and gain accounts as per Statement, Dec. 31, 19-. CLOSING LOSS AND GAIN ACCOUNT Conditions. — Capital stock, $40,000. Net gain, $3,200, which is disposed of by declaring a dividend of 5% on the Capital Stock and transferring the balance to the credit of a Surplus Fund account. Close the Loss and Gain account by making either of the following journal entries. We prefer the first one. Entry No. 1 Loss and Gain $3,200 Dividend No. 1 $2,000 Surplus Fund 1,200 For the amount of the first dividend of 5% declared on the Capital Stock, and the remainder of the gain, which remains undi- vided and is transferred to a Surplus Fund account on closing the books, Dec. 31, 19-. Entry No. 2 Loss and Gain $2,000 Dividend No. 1 $2,000 For the amount of first dividend of 5 % declared on the Capital Stock, Dec. 31, 19-. Loss and Gain $1 ,200 Surplus Fund $1,200 For amount of undivided gain on closing the books, Dec. 31, 1 9-, 182 CORPORATIONS Dividends. — Before paying the stockholders their dividends, observe the directions given for the use of the Dividend Receipt Book. As each stockholder is paid his dividend, make the required entry in the Cash Book. For example : If I. O. Chapman holds 100 shares and receives a dividend of 5%, an entry should be made on the credit side of the Cash Book as follows : " Div. No. 1, I. 0. Chapman, $500." In posting these payments to the Dividend account, enter the respective stockholders' names in the explanation column. See the following Dividend account : wttdmd ©W. y 19 Jan. I. O. Chapman C. C. Campbell W. D. Hampton L. M. Goodyear H. B. Burton 1 500 750 375 250 125 19 Dec. 31 000 19 Dec. 1 31 200 DIVIDEND RECEIPT BOOK cJjiapLcl&rLcl /to*. J &l £j Lj J) e,€A,cul€scL JJe^c. ?/, I O Check JSo. Name op Stockholders. No. of Shares. Am'tof Dividend. 6 @P. 0. ^da/iman /OO 600 / f JO eg 7 -. (@70oe/u*ai S60 60 f60 MO Date of Pay- ment. Signatures op Stockholders. 1!) 1-1 J iisC ^^^s-CL-e-tt- Installment No. /, of 5 ( ^°l° Acct. Due Remarks. J4. Jo. Jdu>tt<^n, y. -4ui 22 pa j j55 o ^3 l0c 5°° 24 J 20 600 2 5 3 J 5 26 200 JOO DISSOLUTION OF CORPORATIONS '9 A number of conditions may occasion the dissolution of corporations. They may be dissolved through the expiration of the time for which the charter was granted, they may voluntarily surrender their charters, or they may become insolvent. In the latter case, the adjusting of the company's affairs will be effected by a receiver. See " Dissolution," page .160. In the former cases, it is customary, previous to dissolution, to convert the entire assets of the company into cash, to liquidate all outstanding debts, and then to devote the cash that may remain to buying up the capital stock either at a premium or at a discount, according to the amount of funds on hand. In doing this, entries should be made closing every account in the Ledger. The following entries and suggestions are given upon the supposition that the business has been reduced to a cash basis. If the stockholders have paid in full for their stock, it would only be necessary to close the accounts showing a loss or a gain to the Loss and Gain account and then close the Loss and Gain account and the Surplus Fund accounts to the Capital Stock account. Then debit the Capital Stock account in the Cash Book, paying eacb stockholder in proportion to the amount of stock owned. The following cash book entry, if properly made, will balance the Cash Book and Capital Stock account: CORPORATIONS 187 Capital Stock, I. 0. Chapman $11,200 " " C.C.Campbell 16,800 « " W.D.Hampton 8,400 " " L. M. Goodyear 5,600 " " H. B. Burton 2,800 If the stockholders have not paid in full for their stock, it would be necessary after closing the Loss and Gain and Surplus Fund accounts to the Capital Stock account, to debit Capital Stock and credit each stockholder by journal entry for the amount unpaid on his stock, provided the individual stockholders were debited on the General Ledger for the amount of their subscription. Capital Stock $19,400 I. O. Chapman $4,850 C. C. Campbell 4,850 W. D. Hampton 4,850 L. M. Goodyear 2,425 H. B. Burton '. 2,425 Entry necessary for dissolution of business. After making the following entry, debit the Capital Stock account in the Cash Book for the balance of cash on hand, paying the same to the stockholders as previously illustrated. Surrendering Stock. — In all cases where stockholders surrender their stock in favor of the company at the time of closing out the business, it should bear the following indorsement: "Surrendered to the company Oct. 10, 19-. I. O. Chapman." Transferring Stock. — All stock sold by the stockholders must be properly transferred on the company's books. When a Stock Journal is used, all such transfers of stock should first be entered in the Stock Journal and then posted to the Stock Ledger. When a stockholder sells all his stock, the old certificate of stock should be taken up by the company and a new one issued to the stockholder. If only a part of the stock is sold, then two certificates of stock should be issued, one to the new stockholder for the amount of stock bought, and one to the old stockholder for the remainder of stock unsold. The old certificates should then be canceled. See "Canceled Stock" following this subject Certificates ot Stock in a Corporation or Installment Scrip may be transferred at any time by the holder thereof, or by his attorney if legally authorized to do so, or by indorsement of the Certificate or Installment Scrip and the acknowledgment of such transfer on the books of the corporation. No surrendered Certificate or Installment Scrip shall be canceled by the secretary before a new one is Issued in lieu thereof ; and the Certificate or Installment Scrip so canceled will serve as a voucher of the transfer. If, however, a Certificate of Stock or Installment Scrip should be lost or destroyed, the Board of Directors may order a new one issued upon such guarantees as they may deem satisfactory. Canceled Stock. — When stock is transferred or. the company's books, the old certificate should be canceled by the party selling the stock, as follows : " Transferred to G. B. Hess, , 19-. C. C. Campbell." The above indorsement should be used when all of the stock is sold, and the following indorsement when only a part of it is sold. "Transferred ten shares of the within stock to G. B. Hess, , 19-. C. C. Campbell." HOW TO CHANGE A CORPORATION TO A SINGLE PROPRIETORSHIP It is sometimes desirable that the stock and property of a corporation pass under the control of some individual stockholder, and that the corporation thereby go out of existence. This must be accomplished by the legal purchase of all the stock by the individual stockholder. It may happen that the stockholders are widely scattered, and that they are not personally known to the stockholder who wishes to purchase the stock, and their addresses may also be unknown. In order that the stockholder (who probably already holds a majority of the stock) may legally get possession of the remainder, an assessment is usually made for some nominal purpose. If any stockholder faijs to pay this assessment, his stock is advertised for sale, to pay such assessment, and if the same is not paid, it is bought at public auction by the stockholder who m trying to get control of th* stock. Of course, if any stockholder wishes, he may pay his assessments. 188 CORPORATIONS and in this manner retain possession of his stock, but in most cases, under the conditions we have described, the minor stockholders would not hold out against the majority stockholder, and would either part with their stock upon terms mutually satisfactory, or allow it to be sold to pay the delinquent assessments. When the stockholder who wishes to get control of the corporation property gains legal possession of all the stock, he may then represent the facts to a competent court, and secure a judicial order dissolving the corporation. When this order is granted, the stockholder will secure legal ownership of all the corpora- tion property. Appropriation of Surplus Fund — When it is desired to appropriate a part of the Surplus Fund to the payment of the unpaid capital due the company from the stockholders, you should make the follow- ing journal entry. Surplus Fund I. 0. Chapman, 100 shares $200 C. C. Campbell, 100 shares , 200 W. D. Hampton, 100 shares 200 L. M. Goodyear, 50 shares 100 H. B. Burton, 50 shares . . 100 For $800 of the Surplus fund which has been appro- priated to the discharging of the unpaid capital, accord- ing to order of the directors. These entries should be posted to the credit side of the respective stockholders' accounts in the Stock Ledger. Entries of the above character occur only when there are delinquent payments on the stock, and a credit balance in the Surplus Fund account, which the directors desire to use in discharging this delinquency On the stock, by appropriating a certain percentage of it for that purpose. BALANCE SHEET OF THE UNION IRON WORKS, JAN. i, 19 Capital Stock ... Cash Machinery and Tools Steam Engines Expense Surplus Fund RESOURCES Cash Steam Engines, Inv'ry Machinery and Tools Company's Present Worth GAINS Steam Engines LOSSES Machinery and Tools , Expense Company's Net Gain UNION IRON WORKS Capital Stock paid up Surplus Fund Net Gain Company's Present Worth Loss and Gain Surplus Fund Capital Stock Entries preparatory to dissolution of business 4 6 1 4 1 4 74 3 1 1 4 4 1 4 4 10 10 19 7 9 3 10 7 5 1 1 9 2 8 6 7 4 6 4 1 6 1 7 1 7 4 4 6 4 6 4 6 4 6 9 5 2 00 7 9 6 6 1 5 2 9 8 6 6 6 8 ORGANIZATION OF CORPORATIONS CORPORATION NO. 1 Conditions: Capital Stock $40,000, divided into 400 shares at a par value of $100 each, which are divided among the incorporators and paid for in full on commencing business. Steps for Organizing. 1. Look up the State law thoroughly on the subject of corporations. 2. Secure a charter. 3. Have each stockholder inscribe his name on the Stock Subscription Book for the amount of stock subscribed. 4. Open the books, using Opening Entry No. 1. If it is not desired to debit the stockholders in the General Ledger for the amount of their subscriptions, use any one of the Opening Entries from No. 2 to No. 7. 5. Make out a certificate of stock for the various stockholders, and enter the same into the Stock Journal. Then open an account in the Stock Ledger with each stockholder and debit him by posting the amount of his subscription from the Stock Journal. 6. Issue the certificates of stock to the stockholders and collect the full amount of their subscriptions. If Opening Entry No. 1 is used in opening the books, credit each of the stockholders in the Cash Book foi the payment, and post the same to the credit of theu* respective accounts in the General Ledger; also credit them in the Stock Ledger. When the above requirements have been complied with, the opening of the books will have been completed. CORPORATION NO. 2 Conditions: Capital Stock $40,000, divided into 400 shares at a par value of $100 each, which are divided among the incorporators and paid for by such installments as the directors may see fit to make. After meeting the necessary requirements for organizing a corporation according to the directions given under Corporation No. 1, have each stockholder sign the Stock Subscription Book for the amount of stock set opposite his name. Open the books by debiting Franchise and crediting Capital Stock according to the third entry on page 173. Charge the subscribers for their respective shares of stock on the Stock Journal, which must be posted to the Stock Ledger. Also collect 25 per cent of the stock issued, and enter it on the debit side of the Cash Book, crediting Franchise, at the same time posting it to the credit of the respective stockholders' accounts in the Stock Ledger. This will complete the opening of the books, leaving everything concerning them in a proper condition for receiving the regular transactions of the business. Installment Account. — When stock is to be paid for by installments, an Installment Book is generally used. When this book is not used, an account should be opened with each installment by debiting Install- ment and crediting Franchise. When a payment is received, Cash is debited and Installment is credited. The Installment account will always show the amount yet unpaid on the installment, and when it is all paid, the account will balance. Some companies prefer to issue Installment Scrip for the amount of each installment paid, and not issue the certificates of stock until the subscription has been paid up in full. See "Installment Scrip," page 164. CORPORATION NO. 3 Conditions: Name, "Fowler Pump Works; fixed capital of $150,000, divided into 1,000 shares of Ordinary Stock at a par value of $100 each, and 500 shares Preferred Stock of $100 each, with a stated dividend of 10% per annum on the Preferred Stock. The Preferred Stock is to be placed to the credit of a Working Capital account, as per the following entry: Franchise $150,000 Capital Stock $100,000 Working Capital 50,000 For the nominal Capital Stock of the Fowler Pump Works incor- porated upon the basis of $150,000, divided into 1,000 ordinary shares at a par value of $100 each, 500 preferred shares of $100 [189] 190 ORGANIZATION OF CORPORATIONS each with a stated dividend of 10 per cent, per annum. The 1,000 ordinary shares are placed to the credit of the Capital Stock, and the 500 preferred shares are placed to the credit of a Working Capital account. SALE OF WORKING CAPITAL Sold at Par. — When any of the Working Capital is sold at par and paid for, the following entries should be made in the Journal : Working Capital $2,000 Capital Stock $2,000 For 20 shares of Preferred Stock at a par value of $100 each, issued with a stated dividend of 10 per cent, in favor of A. D. Hunter. Cash $2,000 Franchise $2,000 For payment in full for the above sale of stock. Sold at a Discount. — When the Working Capital is sold at a discount and is to be paid for by installments, the first installment being paid, debit "Working Capital" and credit "Capital Stock" for the par value of the stock; then debit "Cash" for the amount received and "Stock Premium and Dis- count" for the amount of the discount, and credit "Franchise.'' See the following entries: Working Capital $1,000 Capital stock $1,000 For 10 shares of Preferred Stock at a par value of $100 each, with a stated dividend of 10 per cent , which stock has been credited by 'the company as a Working Capital. These 10 shares are sold at a discount of 5%. The first installment of 75% has been paid as per the following entry: Cash $250 Stock Premium and Discount $50 Franchise $300 For explanation see the above entry. Sold at a Premium. — When any of the Working Capital is sold at a premium, the same entries are to be made as when sold at a discount, except that "Stock Premium and Discount" is to be credited. CORPORATION NO. 4 Conditions: Name, "West Coast Soap Co.;" Capital Stock $80,000, divided into 800 shares at a par value of $100 each. The incorporators contribute the property, which forms the resources of the company, and in consideration of which contribution, divide the stock among themselves according to agreement. For an opening entry under the above conditions we recommend the following, or a similar entry : Plant $80,000 Capital Stock $80,000 For amount of Real Estate, Raw Material, Good Will, Chat- tels, etc. , which forms the basis of the West Coast Soap Co. , organ- ized upon the basis of $80,000 Capital Stock, divided into 800 shares at a par value of $100 each, issued to the incorporators according to agreement upon organizing, which is as follows : P. E. Gans 200 shares. W. D. Bell 175 shares. M. S. Sprague 150 shares. N. V. Taylor 125 shares. U. S. Adams „ 150 shares. ORGANIZATION OF CORPORATIONS 191 CORPORATION NO. 5 Conditions: Name, " Union Transportation Co.;" Capital Stock $100,000, divided into 100 shares at a par value of $1,000 each. By the terms of the subscriptions these shares are to be paid for by assess- ments or installments. Under these conditions, the books should be opened by debiting "Cash" and crediting "Capital Stock " for the first payment, in accordance with the following entry : Cash . . . $10, 000 Capital Stock ; $10. 000 For amount of first assessment of 10 per cent, of the Capital - Stock of the Union Transportation Co., organized upon the basis of $100,000, divided into 1C0 shares at a par value of $1,000 each, which has been issued to the following incorporators and asso- ciates : A. G Davis 25 shares. C. P. Zaner 20 shares. I. M. Quinn 20 shares. D. J. Drummond 20 shares. M. L. Barclay 15 shares. According to this method, the first assessment or installment of 10 per cent would give the Capital Stock account a credit of only $10,000, while $100,000 is the nominal value of the 100 shares which have been subscribed for and represents the incorporated capital of the company. Therefore, should this call of 10 per cent be sufficient for operating purposes and no further assessments or installments are necessary, the Capital Stock account would have a credit of $10,000 only, when it rightfully should have a credit of $100,000. If the Certificates of Stock have been issued for $100,000, it is hardly sufficient to credit the Capital Stock account only, for the $10,000 which has been paid in, when the Certificates of Stock have been issued representing $100,000, which is the full amount of the Capital Stock, and also the incorporated power of the company. When Cash is debited and Capital Stock credited for assessments or installments, it would be better to issue Installment Scrip to the stockholders for the paid-in assessments or installments, and not issue the Certificate of Stock until their shares have been fully paid up. Should the company conclude that 75 per cent of the stock would be sufficient for operating purposes, then you should carry what remains unpaid on the books by charging it to " Contingency," "Franchise," or some other suitable account, which account could, with propriety, be carried as a debit on the books without having any effect whatever on the actual resources of the business. In case it should be necessary in the future to levy assessments, we would then debit Cash and credit "Contingency," " Franchise, " or sucn other account as may nave been previously used for crediting up the Stock account in full. CORPORATION NO. 6 Conditions: Name, ''-San Francisco Windmill Manufacturing Co.;" Capital Stock $200,000, divided into 2,000 shares of $100 each. The circumstances under which this company was formed are as follows: an inventor without means has patented a windmill. He finds several capitalists who become interested in. the patent, and agree to associate themselves with him in forming a company for the purpose of manufactur- ing the windmills. These incorporators agree to pay the expenses of patenting, etc. , and allow the inventor 200 shares of paid-up stock for his patent. The stc k subscribed by the incorporators is not sufficient to take up the whole amount of the Capital Stock. The balance is to be carried as "Treasury Stock." The above conditions would require the following opening entry: Windmill Account $ 20,000 Franchise 100,000 Treasury Stock 80,000 Capital Stock ' $200,000 For amount of 2,000 shares of stock at a par value of $100 each, which represents the Capital Stock of the San Francisco Windmill Manufacturing Company, incorporated on the basis of $200,000, of which 200 shares have been issued to A in , 192 ORGANIZATION OF CORPORATIONS. payment of his right, title, claim, and interest as an individual in and to his patent windmill. A, Inventor 200 shares. B 275 shares. C 250 shares. D 225 shares. E 250 shares. CORPORATION NO. 7 Conditions: Name, " Nevada Mining Co.;" Capital Stock $150,000, divided into 300 shares of $500 each. This corporation was formed under the following circumstances: Geo. Hillard, the owner of a silver mine, sells the same to a party of capitalists, who form a company, allowing Mr. Hillard 60 shares of paid- up capital stock for his interest in the mine. Of the remaining shares 140 are subscribed for by the other incorporators, and 100 shares are reserved for "Working Capital " to be sold from time to time for opera- ting purposes. The above conditions would require the following opening entry: Hillard Mine $ 30, 000 Franchise 120,000 Capital Stock $100,000 Working Capital 50,000 For the appraised value of the Hillard Mine, located in the northern part of Humboldt Co., State of Nevada, which has been deeded to the Nevada Mining Co. , by Geo. Hillard, together with all his rights, title, claims, and privileges as per deed dated Oct. 20, 19 — i. The said company is incorporated on the basis of $150,000 Capital Stock, divided into 300 shares at a par value of $500 each. The subscribed stock has been divided and paid for according to the division made among the first seven stockholders whose names ap- pear on the Stock Subscription Book. CORPORATION NO. 8 Conditions: Name, "The Maze;" Capital Stock $160,000, divided into 3,200 shares, at a par value of $50 each. This company was organized under the following circumstances: Benjamin Patrick, a merchant owning an extensive business, desires to incorporate, in order to secure certain rights and privileges, as provided by the corporation laws of the State in which the business is conducted. Practically speaking, Mr. Patrick is still to own the whole concern, but as the law requires at least five incorporators in order legally to form the corporation, the proprietor associates with him a certain number of stockholders whom he secures by giving or selling a few shares, at a nominal price, to each. These incorporators may be his clerks, or personal friends, or even members of his own family. The property upon which the corporation is based, consists of various resources and liabilities. It is decided to name the corporation ' « The Maze. '' The following would be a suitable opening entry for the foregoing conditions: Merchandise $100,000 Personal account (to be entered separately) 10,000 . Bills Receivable 20,000 Real Estate 50,000 Bills Payable $ 5,000 Personal accounts (to be entered separately) 15,000 Capital Stock 160. 000 For amount of 3,200 shares, at a par value of $50 each, of the Capital Stock of "The Maze" at the corner of Market and Taylor streets, San Francisco, Cal., organized upon a basis of $150,000 Capital Stock, which is divided among the incorporators and associates as follows: ORGANIZATION OF CORPORATIONS 193 Ben j. Patrick 3,175 shares. J. Phillips 5 shares. E. L. Thomas 5 shares. W. L. Randolf 5 shares. Fred Loomis 5 shares. H. B. Millis 3 shares. T. Barber 2 shares. " Figure Head." — This term is a term that is sometimes applied to those stockholders who are not financially interested in the company, but who are given a small number of shares at a nominal price for the purpose of using them as officers, or for the purpose of making up the required number of stockholders which the law of the various States require on organizing. For example, all of the above stockholders might be called ''figure heads" except the first one, Benj. Patrick. CONSOLIDATION OF CORPORATIONS It is often desirable to consolidate two or more corporations into a single concern. In doing this, it is important to make an equitable adjustment of the new company's present worth, among the respective stockholders of the old companies. The following statement and opening entries are prepared to illustrate the consolidation of two companies, the "Fulton Iron Works" and the " Union Iron Works," into a new company to be called the "Pacific Coast Iron Works." STATEHENT OF THE FULTON IRON WORKS Capital Stock, $50,000, divided into 500 shares at a par value of $100 each. Resources Merchandise $10,260 50 Raw Material 16,420 30 Real Estate 15,000 00 Tools 7,360 00 Cash 1,624 20 Bills Receivable 2,300 00 $52,965 00 Liabilities Bills Payable $4,200 C. W. Wheeler 1,205 Taxes, unpaid 250 Present Worth of Company 47,310 The following is a list of the stockholders, the amount of stock held by each, the amount paid in on the same, etc. : N. S. Jones, 100 shares, par value $100, paid up in full.. . $10,000 C.E. Howard, 100 shares, par value 100, paid up in full. . . 10,000 J. A. Wiles, 90 shares, par value 100, 75 per cent, paid in 6,750 W.J. Mc Lean, 90 shares, par value 100, 75 per cent, paid in 6,750 F. M. Ray, 80 shares, par value 100, 50 per cent, paid in 4,000 W. S Hull, 80 shares, par value 100, 50 per cent, paid in 4,000 Paid-up capital of the company 41, 500 From the above statement, it will be observed that the company's present worth is $47,310 and its paid-up capital is $41,500, which will entitle each stockholder to $1.14 on each dollar paid in. These amounts are to be paid to the old stockholders by the new company in stock, and by placing all fractional sums which are less than one share to the credit of the respective stockholders as arranged in the following entry: STATEHENT OF THE UNION IRON WORKS. Capital Stock, $60,000, divided into 600 shares at a par value of $100. Machinery $20,000 Bills Receivable 10,000 Cash 4,875 Company's present worth $34,875 The following is. a list of the stockholders, the amount of stock held by each, the amount paid in on the same. etc. ; 194 ORGANIZATION OF CORPORATIONS E. K. Kingman, 150 shares, par value $100, paid up m full $15,000 H. B. Brown, 125 shares, par value 100, paid up in full 12,500 • 0t. W. Fuller, 100 shares, par value 100, 50 per cent, paid in 5,000 J. E. Martin, 75 shares, par value 100, 50 per cent, paid in 3,750 W. E. Clark, 50 shares, par value 100, 50 percent, paid in 2,500 Paid-up capital of the company 38,750 From the above statement, it will be observed that the company's present worth is $34,875 and its paid-up capital is $38,750, which will entitle each stockholder to 90 cents on each dollar paid in. These amounts are to be paid by the new company in stock, and all fractional sums which are less than one share should be placed to the credit of the respective stockholders, as arranged in the following entry : Journal entry for consolidating the Fulton Iron Works and the Union Iron Works as one company under the firm name of the Pacific Coast Iron Works, with a Capital Stock of $200,000, divided into 1,000 shares at a par value of $100 each, and 500 Founders' Shares at a par value of $200 each. The ordinary shares are to have a Cumulative Preference Dividend of eight per cent per annum, plus one half of the sur- plus profits, while the Founders' Shares are to receive the other half of the profits after the eight per cent has been paid. The vendor, N. S. Jones, of the Fulton Iron Works Company, is to receive $20,000 in fully paid-up Stock in excess of his interest in the company. Franchise Dr. for all stock subscribed $183,900 00 Treasury Stock for all stock unsubscribed 16,100 00 Mdse. furnished by Fulton Co 10,260 50 Raw Material by Fulton Co 16,420 30 Real Estate by Fulton Co 15,000 00 Tools by Fulton Co 7,360 00 Cash, Fulton Co. $1,624.20, Union Co. $4,875 6,499 20 Cash for new stock sold D. W. Springer 50,000 00 Bills Receivable, Union Co. $10,000, Fulton Co. $2,300 12,300 00 Machinery furnished by Union Co 20, 000 00 Capital Stock $200,000 00 Bills Payable Fulton Co 4,200 00 C W. Wheeler, Fulton Co 1,205 00 Taxes unpaid Fulton Co 250 00 A. J. Wiles, Cr. for Bal. due from old Co 95 00 W. S. Hull, Cr. for Bal. due from old Co . 60 00 W. J. Mc Lean, Cr. for Bal. due from old Co 95 00 F. M. Ray, Cr. for Bal. due from old Co 60 00 H. B. Brown, Cr. for Bal. due from old Co 50 00 J. E. Martin, Cr. for Bal. due from old Co 75 00 W. E. Clark, Cr. for Bal. due from old Co 50 00 Franchise for amount paid in 131,700 00 For nominal value of the Pacific Coast Iron Works Stock, incor- porated on a basis of $200,000 Capital Stock, divided into 1,000 shares at a par value of $100 each, and 500 Founders' shares at a par value of $200 each. The ordinary shares are to have a Cumula- tive Preference Dividend of 8 per cent per annum, plus one half of the surplus profits, while the founders are to receive the other half of the profits, after the 8 per cent has been paid. This company, The Pacific Coast Iron Works is the outcome of consolidating the Fulton Iron Works and Union Iron Works, and is to be conducted by the following stockholders: ORGANIZATION OF -CORPORATIONS 195 Vendor (N. S. Jones), 100 ordinary and 50 founders' shares. N. S. Jones, C. E. Howard, A. J. Wiles, W. J. McLean, F. M. Ray, W. S. Hull, E. K. Kingman, H. B. Brown, G. W. Fuller, J. E. Martin, W. F. Clark, D. W. Collins, C. J. Craddock, 114 ordinary 114 ordinary 76 ordinary 76 ordinary 45 ordinary 45 ordinary 135 ordinary 112 ordinary 45 ordinary 33 ordinary 22 ordinary 300 founders' 111 founders' shares, shares, shares, shares, shares, shares, shares, shares, shares, shares, shares, shares, shares, in full. in full in full in full in full ,.... in full in full in full in full in full in full at $200, 83£% paid in. at $200, unpaid paid up paid up paid up paid up paid up paid up paid up paid up paid up paid up paid up $20,000 11,400 11,400 7,600 7,600 4,500 4,500 13,500 11,200 4,500 3,300 2,200 50,000 Omissions in Consolidating Companies. — It sometimes happens that omissions occur in the resources or liabilities at the time of consolidating partnership or stock companies. When this is the case, it will be necessary to adjust the matter between those who were stockholders at the time of making the change. For example: If the Fulton Iron Works has made a mistake of $1,000 in their favor in taking stock of the raw material, it should be adjusted among the stockholders of that company, by either paying them cash for their proportion of the $1,000, or crediting them for the same on the new company's books, or by issuing them stock to that amount. The Raw Material account should be debited. In case the omission was a liability, then it would be necessary for the stockholders to pay in cash for their share of it, or to be charged up for the same, or surrender enough of their stock to cover the same. The Raw Material account should be credited. Closing When There is a Loss. — If the Loss and Gain account should show a loss, the loss should be disposed of, of course, according to the instruction of the directors, which would probably be either to close it into balance or into Impairment Fund as follows: Suppose the Net Loss to be $500, then the Journal entry would be: Impairment Fund $500 Loss and Gain $500 Some other name than Impairment Fund might be suggested, but the effect would be the same. If closed without Journal entry, Impairment Fund $560 would be written on the credit side of Loss and Gain account in red ink, and then carried to the debit side of Impairment Fund account in black ink. For closing "Direct," see page 35; by Journal Entries, see page 37. When there is a legitimate profit, the Impairment Fund, or loss, will have to be deducted before a dividend is distributed. Suppose at the next profit-taking period the Loss and Gain account should show a net profit of $2500, and the directors should decide to make up the loss (balance the Impair- ment Fund account) declare a dividend of $1800 and put $200 in the Surplus Fund account. Then after closing (if closed direct in red ink) the Loss and Gain account would show as follows: Loss and Gain Impairment Fund $ 500 Dividend No 1800 Surplus Fund 200 12500 $2500 >2 500 The loss may be carried to the debit side of the Reserve Fund account and allowed to remain there until sufficient profit is made to balance it or to overbalance it to sufficient extent to declare a dividend. If there should be a profit but not sufficient to meet the dividend desired, the Loss and Gain account is then generally closed into Undivided Profit account, and the profit allowed to stand in the credit of Undivided Profit account until such time as there may be sufficient profit to declare the desired dividend or until such time as the directors decide to dispose of the profit in some other way. iyt) GENERAL REVIEW JOINT STOCK COMPANIES The Century Dictionary defines a Joint Stock Company as follows: "Joint stock company, (a) An association the property or capital of which is represented by stock issued in shares to the members respectively, the object being that changes in membership shall depend, not, as in partnership, upon the consent of all the members, but upon the transfer of shares, which any member may make without the consent of the others, and also that the death of a member shall not dissolve the association, as in case of a partnership, his right being simply transferred to his executors or administrators. An- other object usually if not always involved is the rendering of the power of control separable from the right of ownership, by vesting the management in a committee or officers instead of leaving it, as in the case of a partnership, with each member. In the absence of any statute the liability of a joint stock company and its members, and its means of enforcing its right as to third persons, are never- theless precisely those of partners: all the members must join in suing; all are liable for its debts, and all must be joined when sued; and on a change of membership pending a suit a corresponding change of parties may be required. To obviate these inconveniences, statutes have been passed in several of the United States allowing such associations to sue and be sued in the name of the president or treasurer. In respect to internal controversies, the courts, even without the aid of statute, follow the analogies afforded by the law of corporations, so far as this can be done without conceding to unin- corporated associations the right to have a common seal, and to have succession and sue and be sued as a distinct artificial person. (b) An association for similar objects, but having the express sanc- tion of statute for its organization as a corporation. In both classes of companies the members contribute [to the capital]." GENERAL REVIEW SPECIAL REVIEW QUESTIONS 1. What is a corporation? 2. Name the general classes of corporations. 3. What are private corporations? 4. In what respects do corporations differ from part- nerships? 5. As a rule, how many persons are required to form % corporation? 6. Name the consecutive steps in the formation of a corporation? 7. What is meant by "Articles of Incorporation "? 8. What must the Articles of Incorporation set forth? 9. How is the charter for a corporation obtained? 10. Name the principal powers of corporations. 11. What are the general duties of corporations? 12. What are the general liabilities of corporations? 13. Are the laws regulating corporations in the differ- ent States uniform? 14. How may a corporation be dissolved? 15. When a corporation is dissolved, what disposition is made of its affairs and property? 16. What is a charter? 17. What is a franchise? 18. Distinguish between "Franchise" and "Charter." 19.. What is a Stock Certificate? 20. Are stock certificates negotiable 9 ' 21. How may they be transferred? 22. What is meant by "Ordinary Stock"? 23. What is preferred stock? 24. In the distribution of dividends, what advantage has preferred stock over ordinary stock ? 25. Why do some corporations issue different classes of stock? 26. Can corporations allow dividends out of the pro- ceeds of sales of Preferred Stock? 27. What is meant by "Guaranteed Stock''? 28. By what other name is guaranteed stock known? 29. In the matter of dividends, what advantage has guaranteed stock over other stock? 30. What is meant by " Deferred Stock "? 31. How may deferred stock become actual stock? 32. With regard to their rights as to the management of the company, how do the holders of deferred stock differ from the holders of ordinary stock. 33. What is meant by "Non-assessable Stock"? 34. What is Treasury Stock? 35. What is meant by the term "Watered Stock"? 36. What circumstances sometimes give rise to the issue of watered stock? 37. What is meant by the "Capital Stock" of a cor- poration? 38. Capital stock is usually issued in what denomina- tions? 39. Is the total capital stock of a company necessarily equal to the value of the property owned by the conv pany? GENERAL REVIEW 197 40. Does the amount of the capital stock of a company change with the fluctuations in the value of the com- pany's property? 41. How are corporations taxed? 42. Has a stockholder of a company any right to the possession of the property of the company? 43. What are the rights of stockholders? 44. Is unpaid stock to be considered as a part of the assets of a corporation? 45. Who are the trustees of the capital stock of a corporation? 46. What is meant by "Working, or Operating, Capital" ? 47. By what means is the operating capital of a com- pany sometimes increased? 48. What is meant by the term "Plant "? 49. Do the stockholders of a corporation all have an equal voice in the direction of its affairs? 50. Are the subscribers to the stock of a corporation liable to the corporation should they fail to pay for the stock subscribed? 51. Is the issuing of stock certificates necessary to per- fect a subscription? 52. What is necessary to perfect a stock subscription? 53. How are the voting rights of a stockholder regu- lated? 54. What is meant by " Gross Earnings * ? ■« Net Earn- ings " ? 55. What is a Dividend? 56. How are dividends calculated? 57. How are dividends apportioned among the stock- holders? 58. What is a"Preferred Dividend '? 59. What is a " Stock Dividend " ? 60. What circumstances give rise to the issue of stock dividends. 61. What is meant by " Declaring a Dividend "? 62. By whom are dividends declared! 63. What consideration should regulate the declaration of dividends? 64. Under what cir ,umstances might a company be justifiable in borrowing money in order to declare a dividend? 65. What is meant by a " Dividend Certificate'? 66. Are dividend certificates transferable? 67. What is meant by " Passing a Dividend " ? 68. What is a " Fictitious Dividend," and what is the purpose of issuing it? 69. What is a Surplus Fund? 70 How does a reserve, or contingent, fund differ from a surplus fund? 71. What is a Sinking Fund? 72. What is meant by "Rest Account"? 73. What is an Assessment, a? d how is it levied? 74. What is an Installment? 75. What is sometimes done when a stockholder fails to pay installments? 76. Under what circumstances is a notice to stock- holders of the collection of an installment unnecessary? 77. What is said regarding the issuing of stock cer- tificates prior to the payment of aii installments? 78. What is " Installment Script " ? 79. What is meant by "Par value"? " Market value " ? 80. What are "Quotations"? 81. What is a Stock Exchange? 82. What are " Limited Corporations"? 83. How is the public notified that a corporation is limited? 84. What is meant by "double liability" ? 85. What is a Trust and how is it formed? 86. What is a Syndicate? 87. What is meant by a "bonus"? 88. What is the purpose of a Miiaute Book? 89. How often do the regular meetings of corporation stockholders usually occur? 90. By whom are the affairs of a corporation con- trolled? 91. What is the purpose of the Stock Subscription Book? 92. Under what circumstances is a Stock Subscription Book dispensed with? In this case, what is used in its place ? 93. At what time is a Stock Subscription Book opened? 94. What is the purpose of the Stock Certificate Book? 95. How is a certificate of stock transferred? 96. What course is usually taken when stock is for feited through delinquent payments? 97. What is the purpose of a Stock Journal? 98. What is the purpose of a Stock Ledger? 99. Under what circumstances would a Stock i ...dger be used? 100. What general requirement in closing Corporation Books '( iOi. What is the purpose of the Dividend Receipt Book ? 102. In case the stockholder's signature cannot be ob- tained, how may his receipt for dividends paid be se- cured? 103. What is a dividend check? 104. What is the purpose of the Installment Book? 105. Is a stockho der allowed to transfer stock until delinquent ,nstailments have been paid? 106. What course is usually taken when it is found necessary to borrow money in order to pay dividends? 107 When are dividends credited as a payment upon unpaid stock? i08. What is the purpose of an Assessment Book? 109. How is a notice of assessment usually given? 110. Upon the dissolution of a corporation, how are the books closed? 111. How is stock surrendered? 112. What is meant by " Transferring Stock" ? 113. How are stock certificates canceled? 114. Give the general steps necessary to change a cor> poration to a single proprietorship. BANKING A Bank -is an institution for facilitating the safe keeping, borrowing, loaning, and circulation of money. Banks are divided, according to their functions and the character of their business, into several classes, each class being regulated to a greater or less extent by national or State laws. Private Banks. — These are unincorporated banking enterprises, conducted by private individuals. They are under fewer legal restrictions than are other banks, and their principal business is the loaning of money, the discounting of paper, etc. In some States private banks are not allowed to receive general deposits. State Banks. — State Banks are corporate institutions formed under the laws of the several States. There is, therefore, much variation as to their management and responsibilities. As a rule, they do a general banking business, buying and selling drafts, negotiating loans for municipal and other corporations, discounting paper, etc. Formerly they issued their own bills, which circulated as money; but since the adoption of the congressional act taxing such issue ten per cent , State banks have found the issue of their bills unprofitable, and have withdrawn them from circulation. Savings Banks. — These banks make a business of receiving small sums on deposit, upon which they pay interest at certain periods. Savings Banks are usually subject to strict legal regulations with a view to the protection of the depositors. Savings banks are regulated by State law, and are therefore State Banks. National Banks. — These are institutions incorporated under, and regulated by, the United States law known as "The National Banking Act." National banking corporations must deposit United States Bonds with the United States Treasurer equal to one-fourth of their capital stock, unless the capital ^tock is more than $150,000, when the banking association must deposit at least 850,000 par value of bonds. These bonds are called Charter Bonds. A national bank may issue circulating notes to the amount of its fully paid capital stock providing it deposits Government Securities to an equal amount. Every national bank must accept the circulating notes of every other national bank at par. If the market value of the deposited bonds should fall below the par value, the Comptroller of the Currency will call for additional bonds to cover the full face value of the circulating notes of the bank. In case of failure of the bank, the bonds deposited with the United States Treasurer will be sold and the pro- ceeds used to redeem the circulating notes of the bank. National bank notes circulate freely as money, although they are not legal tender. See '•Money," Chapter VI, Part II. National banks are by law made financial agents of the United States ; they are also required to make at least five reports a year to the Comptroller of the Currency, and are subject to national taxes upon their outstanding notes, and their paid-up capital. National banks draw interest upon the bonds deposited to secure their notes of issue, but are subject to a number of restrictions. A majority of the organizers and directors of national banks must be residents of the State wherein ihs bank is established. Bank Offices and Employees The official and working force of an incorporated bank usually consists of the President, Vice-President, Cashier, Receiving Teller, Paying Teller, and such other assistants, clerks, messengers, watchmen, etc., as the concern may require. The President is usually the responsible head of the institution, directing its policy and exercising a general supervision over the work of the other employees. The Vice=President performs the duties of the President in the latter's absence or death. In some bank organizations this office is omitted, the duties being performed by the Cashier. Cashier. — Next to that of the President, this is the most responsible position in a bank. The Cashier exercises direct supervision over all the detailed work of the bank. He acts as the secretary of the Board of Directors, and with the President signs all official documents and other obligations of the corporation. The correspondence of the bank is conducted in the name of the Cashier; he also signs all drafts, certified checks, certificates of deposit, etc. ; and he is usually the responsible custodian of the funds, and other property of the bank. The Cashier is elected by the Board of Directors, and he is often required to give a bond for the faithful performance of his duties. Paying Teller. — The duties of the Paying Teller are to pay out all money for checks, or other papers that may be presented. In responsibility, his position ranks next to that of the Cashier. Receiving Teller. — This office receives all moneys paid into the bank, also checks, bonds, and other documents for deposit. The Tellers may be regarded as assistants of the Cashier. If the bank is a small [198] BANKING 199 Institution in a country town, the Tellers are often dispensed with. On the other hand, in large city institu tions, there may be a number of both Receiving and Paying Tellers. In fact, the official force of a bank is a matter that will depend entirely upon the amount and char- acter of the business done. The general rules governing the organization and workings of banks are the Bame as those regulating the operation of other corporations. Bank Bookkeeping. — Bookkeeping in banks differs only in form from that of other commercial institutions. It usually involves only the simplest principles, and there is little variety in the accounts, the number and kind of which will depend upon the circumstances. As in other kinds of business, there is much diversity in the style, form, and kinds of books used, these depending upon the amount and character of the business and the individual preference of the bookkeeper. Those commonly used are the Cash Book, Journal, Discount Register, Collection Register, Depositors' Ledger, and General Ledger. For the purpose of acquiring a knowledge of ordinary bank bookkeeping, it will be sufficient if the Btudent acquires a familiarity with the use of these books, as other books, when used, are merely a modi- fication of some of these. OPENING ENTRY This should be entered in the Journal, and it does not materially differ from the forms required in other corporations, or business concerns. National banks keep some accounts that do not appear on the books of private or State banks. The following is a suitable opening entry for a National bank: CHICAGO, ILL., JULY 1, 19 C. B. Cash 39,300 U. S. Bonds 40,000 Premium on U. S. Bonds 6,400 U. S. Treasury 1,800 Real Estate ' 25,000 Bills Discounted 20,000 Fixtures 3,500 To Capita] Stock 100,000 " Circulating Medium 36,000 For the nominal amount of the capital stock of the First National Bank of Chicago, 111., incorporated upon the basis of $100,000 capital stock, divided into 1,000 shares of $100 each, and issued to the incorporators and associates at their par value, as per the first ten names that appear on the first page of the Stock Subscription Book. The above explanation may include a list of the stockholders if desired. See opening entry on next page. A deposit of 5 per cent of the circulating medium is required by the government for the purpose of redeeming the worn-out and torn notes of the bank that puts them into circulation. For example : In a city of 20,000 population, it would be necessary to deposit $40,000 in bonds with the government ; and in return it would issue bank notes to the bank to the amount of nine tenths of the bonds, or $36,000. On this amount of circulating medium there would be required a deposit of $1800, which is charged to U. S. Treasury Account. The government bonds that are deposited with the Secretary of the Treasury are not bought of the government, but of private individuals or corporations. It is sometimes necessary to pay a premium of X5 or 20 per cent in order to secure them. In the above opening entry the rate of premium is 16 per cent , and the amount paid, $4,000, will naturally remain on the 'book as a resource, although it will gradually decrease in value as the bonds approach maturity. The amount paid in premium ultimately becomes a total loss at the maturity of the bonds, as the government redeems them at their face value only, regardless of what may have been, paid for them. 200 ORGANIZATION OF CORPORATIONS Date Left tor Collec- tion No. of Paper Payer's Name Face of Paper Amount to be Collected Rate of Col. Amount of Collection Proceeds and How Dis- posed of, " Paid " or " Credited " < For Whom Col- lected 19 May 2 5 36 20 Henry Day A. Morton 300 500 305 500 I* 1 3 5 05 301 495 95 Credited Paid J. A. Wiles M. Wei ton COLLECTION REGISTER It is customary with business men who have papers to collect, especially at a distance, to leave them at a bank for collection. When papers of this class are received by the bank, the banker should see that they are properly indorsed, as follows: "Pay to the order of Bank, for collection, R. C. Martin." A record is then made in the Collection Register. For example: R. C. Martin has a note made by Henry Day, dated May 2, at sixty days, for $300. He wishes it collected and the proceeds placed to his credit. He takes it to the banker who records it in the Collection Register, entering in the proper column the date, name of maker, number of note, face, time to run, date of maturity, interest, if any, rate of collection to be charged, etc. See form on next page. The note is then turned over to the Collection Department. When collected, a card is sent to R. C. Martin requesting him to bring his Pass Book to the bank. He ia then given credit for the amount collected, less the charge for collecting. This appears on the books of the bank in an account called "Collections." This account is credited for all sums paid to the bank for collecting, and debited for all sums paid by the bank for this purpose. The record on the Register is then completed by entering the amount collected, the date, and whether the proceeds were paid to R. C. Martin or placed to his credit. Entries are not posted from this book, it being merely a memorandum book. DisooiLJisnr Date of Dis- count Face of Paper and Bills Dis., Dr. when Posted Separately Total Amount of Bills Dis., Dr. when Sev- eral are Added L. F. Am't of Int. at Ma- turity Am't of Dis. Total Amount of Dis. Cr. L. F. Whom or What Cr. for the Proceeds Am't of L. F. Proceeds Payer's Name For Whom Discounted 19- July Aug. 30 1 5 26 33 6 Q. L. 240 500 2500 250 O. L. 240 2750 75 5 15 2 17 G. L. 317 262 C. B. 197 495 2485 248 H. Wells D. Smiley Cash H. Wells R. Toma M. C. Haley Maker D. Smiley R. Tilley ORGANIZATION OF CORPORATIONS 20i REGISTER =^= Full Time to Run Kind of Paper, "Note" or "Draft " Rate of Int. When Due Year Date of Pap C.B. orL. Explain How Paper a gg ■-5 X5 - 03 o. < >> 4 4 £ e 3 a >-3 bb 3 < a a 5 > o S5 £ Q Collected Pay- ment Paid and General Remarks 19 Mar. Jan. 5 1 60 Da. 5 Mos. Note Note 10 1 19 19- 305 500 May June 5 1 C.B. 290 306 Paid J. Dunn, Col- lector' Paid Cash DISCOUNT REGISTER The Discount Register has the same relation to notes and drafts discounted that the Collection Register has to those collected. When persons desire to raise money by disposing of papers not yet due, they often take them to the bank and have them discounted; that is, they sell them to the bank for what the banker is willing to give. The banker usually deducts an amount from the paper, called "discount." There is no fixed rate of discount, but the amount taken off varies with the time the paper has yet to run, the amount or face, the security offered for its payment, the condition of the money market, etc. In cases where the note bears a high rate of interest, the bank may pay the full face value, retaining the interest, when collected, for its compensation. A common custom is to compute interest on the amount due at maturity, for the unexpired time, and deduct this amount from the sum due at maturity, paying the person having the note discounted, the balance. The Discount Register is usually a long, narrow book, having special columns for describing the paper, giving its date, the maker's name, date of maturity, date of discount, rate of interest the paper bears, the rate of discount, the amount of discount (in dollars), for whom discounted, and the disposition of the proceeds, whether paid or placed to the credit of the person. This book is used as an auxiliary book or book of original entry, amounts being posted directly from it to the ledger. See form on previous page. One of the first daily duties of the banker each morning is to examine the Collection and Discount registers and see what papers mature on that day, so that they may be collected. See the following form: REGISTER Full Time to Run Kind of Paper, "Note" or "Draft " Rate of Int. When Due Year Date of Explain How Date oi Paper a s fa C S3 s u a < 33 c 3 1-3 a 3 < a. do -J y O o 6 o a Collected Pay- ment Paid and General Remarks 19 July Mar. July 30 1 11 90 Da. 6 Mo. 30 Da. Note Draft X 6 X 10 1 28 19- 2575 250 Sept. Aug. 1 11 Rec'd in full Rec'd in fall JOURNAL, LEDGER, AND TRIAL BALANCE BOOK R^/iyfctn/ v |^>o>wTlfly 3. 1 9 _ Checks in Detail 85*0 710 140. 39SS _ifi& li 3.3 a. IhA / yi/v\/ , OIL 315 /AS ^JJ,. 1/; A /I Oil If li. 119 1 5 3 10 ^A Ml 30 _lili as kj_i a 115 8 10 W 7 50.SO 515.50 US »52J 5 05» US 3TU L2LL A4 Jin 1A1 tio mo 105 too 1)5 <«oo 35 580 »3 AND TRIAL BALANCE BOOK ■.-■■' 1 \maaAA^a)jw(\aj^. h , 1 9 _ ^aaAaww^VIw, 5 , 19 _ Checks in Delail Total Checks Deposits Balances Checks In Detail Total Checks Deposits Balances Checks in Detail Total Checks Deposits Balances Balance diia TremJtr Column 1 ko 330 50°tf Do i«go US 1000 2715 25 1301 3 7 4 TO in '»« 1»0 IS » 1} !50 ■• ;i; HO 10 J 5 JlM 7T 2 TOP U 1 5 30 lif iio.s» HJ.so 7\a uo 110 11 77J iiiat iJj ■fill 15 2 5 1 5 30 35 — 2 lis US )io 130 315 l»» 5)550 USio nit 5C •iioo 75 H H77 » no mis 3131 50 mi 3 °in S5 2 1,0! 31S 5« ""' till. "* 315 io 510 JCSSO 130 UlS JSI H340 50 •tl.0 75 5 15 S 30 1 33550 110.50 10 7oo kit 113 22JH, UK 15 6 31 ft OS .21501 8J, 1 513 70 150 nio 5 mi 1 q 8 fc i s I0O5 ISO DC 11515 WO 15 IKS IS 3JS 3085 50 HH15 10173 ?5 7f 1 8 J 10 15 06 n 37i 3X5-0 1 5 10111 U 3 7 1 3 1 7 o fa D i • 5H> IS. ' r — JU u < 111 a S The entries for Nov. 3, 4, and 5 require no further explanation. Transferring Balances. — It saves the bookkeeper much labor, if the balances of the various deposits can be continued through the book without the necessity of re-writing the names. This is accomplished by cutting off a portion of the right-hand margin of the page. When the page is turned, the names are still visible. When it is required to find the balances for November 8, the balances for the previous day on the preceding page may be made visible by folding over the margin of the leaf, along the ruled line immediately preceding the "Balances" column. Deposited With COMMERCIAL BANK. For Account of H. B. Burton, Nov. 3, 19- Deposited With COMMERCIAL BANK. For Account of J. M. Dunn, Nov. 3, 19- Deposited With COMMERCIAL BANK. For Account of W. S. Hull, Nov. 3, 19- Deposited With COMMERCIAL BANK. For Account of G. H. Paine, Nov. 3, 19 Deposited With COMMERCIAL BANK. For Account of C. H. Wesley, Nov. 3, 19- Cu?rency 245 Checks: J. M. Dunn.. 215 230 W.S.Hull... 150.50 G.H. Paine.. 140 175.50 O. H. Wesley 645 1,801.00 Checks : H. B. Burton 40 130 265 W. S. Hull... 760.50 G.H. Paine.. 75 60.25 O. H. Wesley 375 - 495 4,200.75 Currency 4,000 Checks : G. H. Paine.. 20.50 340 425 J. M. Dunn.. 535.50 695 H. B. Burton 330 480 C. H . Wesley 630 70 Currency 1,100 Checks : O. H. Wesley 85 40.50 450 J. M. Dunn.. 375 225.50 W.S.Hull... 272.50 H. B. Burton 1,000 3,548.50 Currency Checks : W.S.Hull... 320 485 550 G.H. Paine.. 25.25 405 J. M. Dunn.. 390 60.50 H. B. Burton 500.25 2,736.00 7,526.00 Deposited With COMMERCIAL BANK. For Account of E. B. Burton, Nov. 4, 19- Deposited With COMMERCIAL BANK. For Account of J. M. Dunn, Nov. 4, 19- Deposited With COMMERCIAL BANK. For Account of W. S. Hull, Nov. 4, 19- Currency 350 Checks: G.H. Paine.. 425 505.50 355 J. M. Dunn.. 710 275.25 H. B. Burton 1,885 O. H. Wesley 280 320 Deposited With COMMERCIAL BANK. For Account of G. H. Paine, Nov. 4, 19- Deposited With COMMERCIAL BANK. For Account of C. H. Wesley, Nov. 4, 19- Currency 550 Checks : J. M. Dunn.. 325 670 205.50 W. S. Hull... 275.25 G.H. Paine.. 70 530 0. H. Wesley 1,005 Currency 200 Checks: H. B. Burton 115 280.25 550 W.S.Hull... 335 685.50 G.H. Paine.. 915 O. H. Wesley 225.25 85 Checks: O. H. Wesley 205.25 335 630 J. M. Dunn.. 865.50 W. S. Hull... 715 870 H. B. Burton 90 845 Currency Checks : W.S.Hull.. 795 405.25 G.H. Paine.. 810 730 J. M. Dunn.. 60 820.25 H. B. Burton 315 480 3,63075 3,391.00 4,555.75 4,415.50 4,980.75 Deposited With COMMERCIAL BANK. For Account of H. B. Burton, Nov. 5. 19- Deposited With COMMERCIAL BANK. For Account of J. M. Dunn, Nov. 5, 19- Deposited With COMMERCIAL BANK. For Account of W. S. Hull, Nov. 5, 19- Deposited With COMMERCIAL BANK. For Account of G. II. Paine, Nov. 5, 19- Deposited With COMMERCIAL BANK. For Account of O. H. Wesley, Nov. 5, 19- Cuirency 1,200 Checks: J. M. Dunn.. 405 600.25 W S. Hull... 585.50 610 G.H. Paine.. 335.50 60 O. H. Wesley 695 4,491.25 Currency 1,400 Checks : H. B. Burton 530 725.50 510.25 W. S. Hull .. 1.660 G.H. Paine.. 615 O. H. Wesley 475 5,915.75 Currency 650 Checks: G. H. Paine.. 210.50 700 J. M. Dunn.. 515 335.50 H. B. Burton 575 730 O. H. Wesley 580 4,296.00 Currency Checks : C. H. Wesley 225 550 J. M. Dunn.. 70 640.50 W.S.Hull... 90 305.25 H. B. Burton 775 2,655.75 Checks: W. S. Hull... 1,210 835.5G G.H. Paine.. 295 J. M. Dunn.. 375 H. B. Burton 430.50 320 3,466.08 [203] JOURNAL, LEDGER, AND TRIAL BALANCE BOOK V\aaaJay\/\/ cm g n iaa/v\sv\j JR. sun. , ifi a 2 WAAM1J ^d llhJ^/P. A T Tn/0Yi/5 15 1,015 >0 l|15 510 W050 310 1 5 15 i' 110 7 IS 7 80 50 S i0 515 »0'5 15.25 M 3 55. 500 305 ■1» K0< ALU 11 im 2 1113 1,50 131 Mil J 7 ( 5 ,'ia 1 ) a -tl / 7 I 8 ffj_0_5 / ^ 8 3 3" li UJ (, 7 S 7 f 150 VIS.50 M80 15 (.0 LQM 11 II 2 570 mm iiai JU J_2J 1£ W.23 -IlJLflJ M. JL£ aj_Q£_i .1! 51 UU-L ilfe 9 S Explanation for November 10. — On this date more currency was -Withdrawn than was deposited, hence in proving the checks and deposits columns, the excess withdrawn must be added to the footing of the deposits column, the footing agreeing with the footing of the checks column. Explanation for November 12. — On this date two of the depositors, Hull and Dunn, have closed their accounts, and it is decided to drop their names and transfer the names of the other depositors to a new page. For this reason the margin of the page is not removed, and the balances for the day are entered in the "Balance and Transfer Column" instead of in the usual Balance column. As H. B. Burton has drawn checks on this date to an amount greater than his previous balance, and as he made no deposits during the day, his account is overdrawn to the amount of $35.55, which overdraft is entered in red ink in the balance and transfer column. This overdraft must be subtracted from the total sum of the balances col- umn to give the amount due the depositors, which sum is $48,376.95. DEPOSIT SLIPS FOR NOV. 10, 11, AND 12. Deposited With COMMERCIAL BANK. For Account of H. B. Burton, Nov. 10, 19- Deposited With COMMERCIAL BANK. For Account of J, M. Dunn, Nov. 10, 19- Deposited With COMMERCIAL BANK. For Account of W. S. Hull, Nov. 10, 19- Deposited With COMMERCIAL BANK. For Account of G. H. Paine, Nov. 10, 19- Deposited With COMMERCIAL BANK. For Account of O. H. Wesley, Nov. 10, 19- Currency Checks: J. M. Dunn.. 225 750 300 W.S.Hull... 200.50 G. H. Paine.. 430 335 C. H- Wesley 70.50 105 Checks: H. B. Burton 800 175.25 80 W.S.Hull... 550 G. H. Paine.. 630.50 O. H. Wesley 370 45 2,650.75 CTiecfrs: G. H. Paine.. 350 25 J. M. Dunn.. 600 50.50 H. B. Burton 480 240 C. H. Wesley 30.25 400 Checks: C. H. Wesley 700 345 100 J. M. Dunn.. 550 475.25 W.S.Hull... 60 H. B. Burton 280 500 Checks: W. S. Hull... 475 640.50 120 G. H. Paine,. 80 300 J.M.Dunn.. 725 H. B. Burton 160 90 2,416.00 2,175.75 3,010.25 2.590.59 Deposited With COMMERCIAL BANK. For Account of H. B. Burton, Nov. 11, 19- Deposited With COMMERCIAL BANK. For Account of J. M. Dunn, Nov. 11,19- Deposited With COMMERCIAL BANK. For Acer ant of W. S. Hull, Nov. 11, 19- Deposited With COMMERCIAL BANK. For Account of G. H. Paine, Nov. 11, 19- Deposited With COMMERCIAL BANK. For Account of O. H. Wesley, Nov. 11, 19- Cfiecks: J.M.Dunn.. 225 150 370 W. S. Hull... 730 G- B. Paine.. 410.25 C. H. Wesley 35.25 400 Checks: H. B. Burton 825 70.50 W.S.Hull... 650 G. H. Paine. 405 O. H. Wesley 300 60 Checks: G. H. Paine.. 540 J.M.Dunn.. 315.25 H. B. Burton 400 60 50 C. H. Wesley 325"' 260 Checks: C. H. Wesley 85.50 90 J.M.Dunn.. 110 605.25 W. S. Hull... 700 H. B. Burton 280.25 320 Checks: W. S. Hull... 570 840.2S 90 G. H. Paine. 280 J.M.Dunn.. 900 H. B. Burton 115 200 3,010.50 2,750.75 3.52S 50 3,541.00 2,996.2? Deposited With COMMERCIAL BANK. For Account of J. M. Dunn, Nov. 12,19- Deposited With COMMERCIAL BANK. For Account of G. H. Paine, Nov. 12, 19- Deposited With COMMERCIAL BANK. For Account of O. H. Wesley, Nov, 12, 19- m Checks: H. B. Burton 1,000 300 G. H. Paine.. 825 70.25 O. Q. Wesley 250 480.25 Checks: H. B. Burton 825 C. H. Wesley 275.50 60 J. M.Dunn.. 14,836.60 Checks: H. B. Burton 500 G. H. Paine. 800 W.S.Hull... 7,799 16,997.10 3,825.50 200 BANKING State Bank (Incorporated). — The following opening entry is a form for an incorporated State bank where the capital stock is paid up, and the corporation property consists of a number of items. For other conditions and methods of opening, the student is referred to the instructions under "Corporations." CHICAGO, ILL., DEC. 1, 19- C. B. Cash , Real Estate Fixtures Mortgages Receivable Bills Receivable To Capital Stock For the nominal amount of the Capital Stock of the College Bank, incorpo- rated upon the basis of $100,000 Capital Stock, divided into 1,000 shares of $100 each, and issued to the incorporators and associates at their par value as follows : M. J. Pease, 100 shares, Furnished Real Estate $6,000, Cash $4,000. W. S. Hull, 50 shares, Furnished Real Estate $2,000, Cash $3,000. J. E. Martin, 300 shares, Furnished Mortgages Receivable $15,000, Cash $15,000. C. E. Howard, 250 shares, Furnished Mortgages Receivable $5,000. Cash $20,000. O. L. Miller, 300 shares, Furnished Bills Receivable $5,000, Furniture $2,000, and Cash $23,000. 05,000 8,000 2,000 20,000 5,000 100,000 If the concern is a mere partnership affair and not incorporated, the opening entry will not differ materially from that of any other partnership concern, except that "Capital Stock" is credited with the net investment instead of opening different stock accounts with the several partners. If a single proprietor engages in the private banking business, his investment consisting entirely of cash, the following entry would be used: CHICAGO, ILL., DEC. 1, i9- C. B. Cash To Capital Stock For the nominal amount of the Capital Stock of the Merchants Bank, organ- ized on this date by W. S. Hull, in accordance with the laws of the State of Illinois, with a capital of $100,000. 100,000 100,000 Cash Book. — This book is used as in ordinary business, although a form with special columns for Discounts, Deposits, Bills Discounted, etc. , is sometimes used. The following form illustrates the use of a Cash Book for an ordinary banking business: CASH BOOK . July 10, 19- July 10, 19- 19- M. J. Pease on Stock acct. W. S. Hull " ; ' C. E. Howard " O. L. Miller " " D. Jacobs Dep. " W. J. Sherman " E. P. Snyder Paul Price " A. A. Anderson " 3,000 1,000 5,000 6,000 1,000 500 100 600 1,000 19- July 12 Office Fixtures, Globe Mfg. Co. Office F i x t u r es, Hall Safe & Lock Co. 2,000 3,000 Juiy j li I. Cash A. A. Anderson 1,000 BANKING DRAFT REGISTER 207 VWcfo«XWim, w ^^Q^wi^^S^y^efcwr f«J \}<\\e \o uWsq ox&e* Wo. To\oA St U^XfcX'XX %fc\6. W \7> '(Vvrtcvci \ 3.00 T> N~\W S^\uyc\ a H00 ^0 \WSWA\ a \ 00 \ fs \ ^ A r. w\ua»» 5 \%fc \Yb& W y 1 ft T, YSPtac.Xcvc 3 00 >% \T^\C,cvx\ev \ bO 2.0 Ctl Y\ SXoup 2. VoO ft .Vx^ ^ \ufc „, , — 1 \Q **>?> ■ This book is used for recording the various drafts drawn on other banks. Usually a different book is used for each bank; but if desirable, one book may be used, several pages being allotted to each bank drawn upon, the number depending upon the amount of business done with the several banks. As soon as a credit has been opened with a bank and drafts are drawn, they are recorded as shown in the accompany- ing form. At the close of each day's business the draft register is ruled with a single red ink ruling and the amounts of the various columns are transferred to the extension column, from which they are transferred to the Journal under the proper heading. The items are then posted to their respective accounts in the Ledger. Some banks post direct from the Draft Register to the Ledger, but it is preferable to transfer all items from the books of original entry to the Journal, as the Journal will then show a complete history of the day's business, and enables an auditor or examiner to ascertain much more easily just what has been done. Certified Check Register. — Part of the duty of the cashier of a bank is to certify checks, except when in the case of large institutions this duty devolves upon the paying teller or some other bank clerk to whom the authority to certify checks has been delegated. Great care should be exercised by the person certifying the check, to see that the depositor has the amount actually on deposit for which the check calls. The revised statute, according to Section 5,208, makes it an offence "for any officer, clerk, or agent of any national banking association to certify any check drawn upon the association, unless the depositor or party drawing the check has on deposit v ith the association at the time such check is certified an amount of money equal to the amount specified in such check." It is right that the law with reference to the certification of checks should be so strict, and the sentence for violating this law is to place the bank in the hands of a receiver, and the punishment of the officer by a fine of not more than $5,000, or imprison- ment for not more than five years, or both, at the discretion of the court. Every bank keeps some form of record in which is recorded the date of every check certified, to whose order the check is payable, the amount of the check, and the date of payment. When a check is certified it should be immediately charged to the account of the maker. The items are transferred from the Certified Check Register to the Bank Journal each night and are posted to the credit side of the Certified Check account of the General Ledger. When » check that has been certified comes in for payment, it is debited through the Journal to the Certified Check account in the General Ledger, and is marked "paid" in the Certified Check Register. It is customary for most banks to pay certified checks as they come in during the day, just the same as any other check would be paid, but at night, in place of charging them to the account through the Daily Deposit Ledger, the certified checks are sorted by themselves and properly recorded in the Journal. The reason why these checks are not charged to the depositors' account when they come in. is because the depositors' account should invariably be charged with the amount of the check at the time it is certified; the reason for which should be very plain to the thinking student. 208 BANKING Certificates of Deposit — A Certificate or Deposit is a writttn form, certifying that some person has deposited a certain sum of money, payable to the order of himself, or to some one else, whose name must be specified on the face of the certificate. Certificates of Deposit are made payable on demand, so many days after date, so many months after date, or at some other specified time. A Certificate of Deposit is not subject to check, and should so state on its face. A Certificate of Deposit may draw interest or not, according to the conditions expressed in the certificate. Many banks prefer to issue Certificates of Deposit for funds to be left with them at interest for any length of time, as the bank is then able to look over its Certificate of Deposit Register, and know, so far as the Certificates of Deposit are concerned, exactly what amount of money they may be called upon to pay at a certain specified time. The fact that money cannot be drawn on Certificates of Deposit makes them inconvenient for ordinary commercial purposes, but where a person has surplus funds that he wishes cared for at interest, for a few months, or a longer time, the Certificate of Deposit will be found very convenient. If the one obtaining the Certificate of Deposit should have it made payable to himself, or to his order, he should leave his own signature at the bank at the time of obtaining the Certificate of Deposit, but if the Certificate of Deposit is payable to the order of some one else, this is not necessary. A Certificate of Deposit should never be issued by a bank to an individual without the bank obtaining a receipt for the Certificate of Deposit. A form should be filled out by the one desiring the Certificate of Deposit, showing exactly to whose order ths Certificate of Deposit is to be payable, the amount for which it is issued, the time to run, and any other details in connection with it, as well as the name of the person wishing the Certificate of Deposit; just as much so as in the receipt for ordinary deposits, or for the issuance of Bank Drafts. If a check is given in payment for a Certificate of Deposit, the check should so state on its face. When Certificates of Deposit are paid by the bank, they are filed away for further reference. Certificate of Deposit Register. — In most banks, and especially where the Certificates are made in a tablet, it is necessary to keep a record of all Certificates of Deposit issued, in a book called a Certificate of Deposit Register. This book is ruled so as to show the date of issuance, the number, to whose order payable, when due, the amount, when paid, and the amount paid. The object of having a special column for the amount paid, is because that sometimes only a part of a Certificate of Deposit is paid, and a new Certificate is issued for the unpaid portion, and also because in the case of the Certificate of Deposit bearing interest, the amount paid would be larger than the amount for which the certificate was issued by the amount of interest accrued. Certificates of Deposit should be immediately entered in the Certificate of Deposit Register at the time of issuance, and at night all such entries are transferred from the Certificate of Deposit Register to the Journal, and posted from the Journal to the credit side of the Ledger account. BANK JOURNAL CR. f Tuesday DEPOSITS Bal. fwd. O. C. Dailey O. B. Mills O. E. Pratt W. B. Brown A. E. Dailey 9 6 L. F. GENERAL LEDGER ITEMS Bills Rec. Reg. No. 26 1 Int. & Dis. Reg. No. 26 8 Collection Reg. No. 42 2 5 Certified Cks. Reg. No. 91 1 Cert, of Dep. Reg. No. 38 4 Sundries 1st Nat 'IBank 3 Chem. Nat'l Bk. 9 6 4 2 1 5 4 5 2 5 4 3 7 3 8 9 6 4 4 7 8 5 4 2 1 BANKING 209 When a Certificate of Deposit is paid, an entry is made in the Bank Journal directly from the Certificate of Deposit itself, after which the payment is properly recorded in the Certificate of Deposit Register, the amount being correctly posted from the Journal to the debit side of the Ledger account. CASH BOOK OR JOURNAL As everything pertaining to a bank is called Cash, the principal book from which the various items are posted to the General Ledger is called the Bank Journal. No specific information can be given with reference to this book, as it will vary greatly according to the conditions and size of the bank. Nearly every bank has a specially ruled form for its Journal work, but the principle involved is identically the same in each bank. The form given herewith is suitable for an ordinary sized banking institution. The printed headings would vary according to the nature of its business. The headings given in the accompanying form are such as would be found in any Bank Jour- nal, and the additional headings will be very quickly understood by the student when he reaches the busi- ness office. All amounts received on deposit are entered in the column for that purpose; and all amounts affecting the credit side of depositors account must bz entered in the Deposits column. The footing of this column is used at the close of each day's business in connection with the Sundry and other columns of the Cash Journal, to test the correctness of the Cash balance. All amounts paid out on checks or any amount affecting the debit side of the Depositors' account must be entered in the column for that purpose, and the total of this column is used for determining the correctness of the Cash Balance. All items of the daily business are transferred from the original books of entry to the Bank Journal and are then posted from the Bank Journal to the General Ledger, with the exception of the checks and drafts. Items affecting the credit side of the Depositors' accounts, such as deposits, credits for drafts, collections, etc., are entered directly in the Deposits column from the Deposit Ticket, or other vouchers; while items affecting the debit side of the account, such as checks, drafts accepted and charged to account, etc., are entered directly in the column provided for that purpose from the vouchers themselves. The items of the Deposits and Check column are not posted, but the total is used for verifying the Cash Balance, and also to verify the total checks and the total deposits, as recorded in the individual ledger. The Cash Journal should be ruled and closed at the end of each day's business, and the Cash Balance transferred to the following page. Sometimes an ordinary Cash Book is used in small banks for recording these transactions, and the method of using it would not materially differ from that with which you are already familiar. BANK JOURNAL DR., July 20, 19 CHECKS O. W. Pratt $100.00 300.00 B. B Burton $300.00 200.00 A. M. Brown W. B. Brown O. E. Mills A. B. Custer R. Buider 3.40 2.10 4 5 G 4 2 1 3 2 1 5 5 5 5 2 6 7 5 L. F. GENERAL LEDGER ITEMS Bills Rec. Reg. No. 42 1 2 4 G Int. & Dis. Reg. No. 42 1 2 4 Collections Reg. No. 43 3 5 Certified Cks. Reg. No. 128 6 1 5 Cert, of Dep. Reg. No. 346 7 3 Sundries Chem. Nat'l Bk. 9 6 1st Nat'l Bank 7 1 9 1 5 1 6 4 2 6 7 5 Bal. on Hand 4 4 2 6 G 3 5 7 4 7 8 5 4 2 1 210 BANKING PAY ROLL. COLLEGE PRODUCE CO. BATTLE CREEK, MICH. How Checks are Certified. — The customary way of certifying checks is to write "Certified," together with the date and the signature of the bank official certifying such check. Another form is to write the word "good," together with the date and proper signature. Some banks write across the face of the check "Good when properly endorsed," together with the date and the signature of the officer. When presenting checks to the bank for certification, it is not necessary that the holder of the check make inquiry as to whether the bank officer who certifies it has the proper authority or not, because the bank would be holding for the amount of the check if any member of the bank force certified it; but, of course any honest bank clerk would refer the one presenting the check for certification to the proper official. A bank cannot be compelled to certify a check. If, for any reason, the banker prefers to do so, he may pay the check rather than certify it, and most banks rightly refuse to certify checks for small amounts. It is better for the bank and for the depositor to obtain some other form of paper from the bank. Money for Pay Roll — Where a bank has among its depositors a large number of manufacturing institutions, the bank is generally willing to arrange money in certain forms, or to pay the amount of a check in certain denominations for the convenience of the depositors in paying their employees their wages. Many banks have a specially prepared form which they furnish to their customers. These forms are so ruled as to indicate the name of the firm desiring the money, the date, the total amount required, and the various denominations. This is convenient both to the bank and to the customers. These blank forms are retained by the paying teller, and become one of his vouchers exactly the same as a check. Some depositors write their checks in the ordinary form for the amount required, and then on the back of the check make a list of the various denominations desired. Another plan is to furnish the paying teller a separate slip with denominations noted. All these methods employ practically the same form for indicating the required denomina- tions, but use the form in different ways. (See accompanying form.) Unpaid Commercial Paper. — As an office employee, you should take great care to refer to the business manager of the concern where you are employed, all unpaid commercial paper before resorting to extreme measures. If you give paper to a Notary Public to protest, it is a safe plan for you to obtain a receipt from the Notary Public for such paper, or to make a record of such paper in some small book. No special ruling would be necessary in such a book as it would be merely a record to enable you to determine where such commercial papers were. Bills Rediscounted. — Sometimes when a bank is in need of ready money it will discount the notes receivable it holds, to another bank, for ready money. The notes thus hypothecated are spoken of as "Bills Rediscounted." TENS FIVES ONES HALVES QUARTERS DIMES . NICKELS . CENTS . TOTAL PART II OF BOOKKEEPING AND BUSINESS IN GENERAL CHAPTER I. —Principles and Classifications Business. — A business is any commercial enterprise entered into by an individual, a firm, or a corporation for purposes of pecuniary gain. Bookkeeping. — Bookkeeping is the art of making permanent and properly classified records of all facts that affect the finances of a business. Bookkeeper, Accountant, Auditor. — There is so much misuse of the words bookkeeper, accountant, and auditor, that it seems well at this time to point out broadly the distinction. The bookkeeper is the person that has charge and custody of the books and records, and makes the entries in the books in accordance with the accountant's out- line and scheme for the accounts, just as the carpenter follows the architect's design. The central thought of accountant is that of construction and interpretation. The central thought of auditor is that of verification, which necessarily includes interpretation. Financial Quantities. — Bookkeeping deals with the measurements and the adjustment of four general classes of financial quantities. 1. Resources, including all property, debts receivable, or other things of value belonging to the business. 2. Liabilities, including all debts of whatever character, for the payment of which the business is liable. 3. Gains or profits, including all increases in the proprietor's resources arising from any transaction or series of transactions. 4. Losses, including all diminishments in the proprietor's resources, arising from any transaction or series of transactions. The Unit of Measurement for the Financial Quantities of bookkeeping consists of the legal monetary units or "money of account" of the country in which the business is conducted. Thus, in the United States and Canada the money of account is dollars and cents, while in Great Britain it is pounds, shillings, and pence. Note — Sometimes an extensive business is conducted by means of one principal establishment (Main House) and several sub- ordinate establishments (Branch Houses,) situated in different countries. In this case the money of account for each of the Branch Houses would be that of the country in which the Main House is situated. Transaction. — A Business Transaction is any arrangement entered into by two or more persons, firms, or corporations, through the terms of which the financial interest of each party is affected. Twofold Character. — Every transaction is twofold in its nature, and opposite in its effects as to the parties. Thus, in any dealing in which we receive one kind of property or resource, we part with, or agree to part with, its equivalent in the same or another kind of property, or resource; what one party to the transaction gives, the other receives. Debit and Credit. — To express the twofold nature, or effect, of a transaction, recourse is had to the terms Debit and Credit. A Debit is a charge, or a record against. A Credit is an allowance, or a record in favor of. Entry.— An Entry is any formal record of a transaction, together with the debits and credits involved in it. Account. — An Account is a systematic arrangement of the debits and credits which pertain to any one person, firm, kind of property, or source of gain or loss. The accounts of a business usually appear in the Ledger although certain accounts are often kept in special books. If both the debits and the credits arising from each transaction are entered equal in amount, the system is called Double Entry. If the debits alone, or the credits alone, are entered, the system is called Single Entry. Double Entry Bookkeeping. — Double Entry Bookkeeping proceeds upon the principle that the debits and the credits arising from any transaction are equal in amount, and, hence, that the total sum of the debits in the Ledger should equal the total sum of the credits. Classification of Accounts. — By the Classification of Accounts is meant the forming of ordinary ledger accounts into groups or classes with respect to some general difference in the nature of the accounts comprising the dif- ferent groups. Various systems of classification have been suggested by different authors, the more important of which we give here. For a more complete discussion of Classification of Accounts, see pages 35 and 36. Classification No. 1. — First with respect to the nature of the quantity measured, accounts have been divided into: 1. Real Accounts, or those representing actual resources or liabilities, as Cash, Bills Payable, Bills Receiva- ble, and all Personal accounts. 2. Nominal Accounts, or those that stand for different sources of loss or gain, as Expense, Insurance, Mer- chandise, Interest, etc. These groups have also been called respectively, Real Accounts and Representative Accounts. . [2111 212 PRINCIPLES AND CLASSIFICATIONS Classification No. 2. — With regard to their relation to the business, accounts have been divided into: 1. Personal Accounts, or those that represent all persons who owe, or are owed by the business, "on account." These accounts really have a twofold existence. Thus, our account with John Smith is the same as John Smith's account with us, except that the sides are reversed, our debits being his credits and vice versa. Personal Accounts have been grouped into: (a) Accounts Receivable, or those that represent resources; and (b) Accounts Payable, or those that' represent liabilities. 2. Proprietary Accounts, or all accounts other than personal, and for which there is no corresponding account on another person's books. Proprietary Accounts have also been called "Impersonal," "Non -personal," "Representative," "General," and the like. Classification No. 3. — With' respect both to their nature and to their relation to the business, accounts have been classified into: 1. Property Accounts, or those that represent the cash, effects, chattels, etc., belonging to the business, as Cash, Real Estate, Merchandise, Store Fixtures, etc. 2. Personal Accounts, or all accounts with persons. 3. Auxiliary Accounts, or all accounts formed for the purpose of exhibiting such gains and losses as are not shown by the property accounts, also those used merely for convenience in showing the condition of the business, as the Loss and Gain account, Expense, Proprietor's Stock account, Interest and Discount, etc. Special Classes. — Accounts have been further grouped into: 1. Current or Running Accounts, or itemized accounts in which the items occur in the order of their dates. Such accounts are not usually ruled up, but are left open, and in finding their balance, the date on which the various items are entered is taken into consideration. Current Accounts are usually either consignment accounts or personal accounts. 2. Summary Accounts, or those in which each item is an aggregate that is shown by the balance of some other account. 3. Capital Accounts, or those formed for the purpose of showing all or a part of the investment, either at the beginning or at the close of the business. Examples: The proprietor's Stock Account, also the Franchise, and the Surplus Account in Corporation Books. Remark — The author does not think it incumbent upon the student to adopt any of the above described classifications to the exclusion of the others; but it is well for him to be familiar with them all, in order that he may understand what is meant by financial writers when they employ them. Subdivision of Accounts. — By the Subdivision of an Account is meant the various divisions, or parts, into which a general account may be divided, to meet the special bookkeeping requirements of a given business. For illustration: It may be found desirable to keep the Merchandise account under a number £>{ divisions, each representing a special department or a particular class of goods, as the Produce account, Coal account, Farm Machinery account, etc. In an extensive manufacturing business, or in department stores it is often necessary thus to subdivide the Merchandise account into many divisions. This subdivision of the Merchandise account is well illustrated in the Voucher System as given in Part 1. The Expense Account is often similarly divided into Rent account, Fuel account, Employment account, etc. The number and character of the accounts that are kept will depend altogether upon the peculiarities of the business, and upon the particularity that is desired in exhibiting the various sources of losses and gains, resources and liabilities. Of course no general enumeration of all the accounts that might be kept is necessary, or even possible. In drafting a set of accounts to be used in a given business, the capable accountant will be unhampered by, any conventional rules. He should consult the proprietors as to what results they wish the books to exhibit, and then open whatever accounts seem best adapted to show these results clearly. It should constantly be borne in mind that accounting is a flexible art, and that the number and character of the accounts that are best adapted to a business, also the special devices to be employed in keeping them, must depend entirely upon the nature and requirements of the business, and the facilities at the hands of the book- keeper. CHAPTER II— Books of Record Three Processes. — Double Entry Bookkeeping as a whole comprises three distinct and fundamental processes: 1. The preparation of a plain, complete, and readily accessible record of each separate business transaction. 2. The determination of the debits and credits arising from each transaction, and the assemblage of these under their appropriate accounts in the Ledger. 3. The periodical comparison of the balances of the various accounts, with a view, first, to test the ac- curacy of the books, and second, to set forth clearly and in detail, the amounts and sources of all losses and gains during a given period, and the condition of the business as to the resources and liabilities at the close of that period. Primitive Bookkeeping. — In the early history of bookkeeping but two general books of record were used: (1) A book conveniently arranged for recording transactions, and known as a Day Book from the circumstance that it was used each day; and (2), a Ledger (so-called from an old Hollandish word meaning to lie, to rest, in a permanent place), a book in which the records of the transactions were from time to time classified and arranged for permanent reference. BOOKS OF RECORD 213 The origin of a "double entry" for corresponding debits and credits is unknown, but the custom is, without doubt, a very ancient one. About a century ago, an intermediate book, between Day Book and Ledger, was introduced, the purpose of which was the preliminary arrangement of the debits and credits with a view to facilitate posting to the Ledger. This book was called the Journal, meaning "daily" or "diurnal," from the French jour, a day. These books com- prised the "bookkeeper's trinity" of "Day Book, Journal, and Ledger," which for many years constituted the only books kept in most kinds of business; and indeed they are still the only books used in some conservative establishments. As these three books constitute the essential and fundamental books of record, out of which all of the many modern special books have been evolved, it is thought best to present here a short description of each, as it was formerly used. Day Book.— As before stated, this book was used merely to present a history of the transaction. It contained a date column and a single money column, though sometimes two money columns were used, one for the several items of a purchase, and another for the extensions. The following forms illustrate both forms of this book and the manner of recording the transactions Single Column Day Book Chicago, 111., Jan. 16, 19„ Sold to C. H. Day on % 7 tons Massillon Coal $2.00 3 cords Oak Wood 4.00 $14.00 12.00 -17— Settled my account with Jennings & Co. to date, giving them my note at 30 days. —19— Bo't of Miller & Sons on % at 60 days Mdse as per Inv. No. 18 26 75 121 00 25 40 Double Column Day Book Chicago, III., Jan. 16, iq Sold C. H. Day on % 7 tons Massillon Coal $2.00 3 cords Oak Wood 4.00 ■17- Settled my account with Jennings & Co. to date, giving them my note at 30 days. — 19— Bo't of Miller & Sons on % at 60 days Mdse as per Inv. No. 18 1-1 12 26 75 121 00 25 40 Journal. — This book was used for the recording of the debits and the credits that arise from the various trans- actions, and for facilitating their posting to the Ledger. The following form illustrates its use, the entries being those required for the transactions recorded in the foregoing Day Book forms: Chicago, III., Jan. 16, 19 16 5 21 40 5 28 C. H. Day, Dr. To Mdse Jennings & Co., Dr. To Bills Payable Mdse, Dr. To Miller & Sons -17— -19— D rs. Crs. 26 00 26 00 75 25 75 25 121 40 121 j 40 214 BOOKS OF RECORD Combined Journal and Day Book. — The advantage of combining the records of the Day Book and the Journal in a single book was soon appreciated by practical bookkeepers; and in recent years the older forms of the separate Day Book and Journal are seldom used, the form generally adopted being the one which has been used in the intro- ductory business divisions of this course. Ledger. — This book has been used from very ancient times. At first it was a mere blank page divided into two equal divisions by a vertical line surmounted by a cross line, upon which was written the heading, or title, of the account. To the left of the vertical line were entered the charges, or debits, and on the right, the allow- ances or credits. Later, other rulings were added for dates, money columns, etc. At first it was customary to itemize the ledger entries, and the practice still survives in the "Itemized Ledger" or "Account Book," "Customers' Ledger," etc. This form of the Ledger is quite useful in keeping single accounts and for the purposes of a small business, or where the books are kept by single entry. Auxiliary Books. — The Day Book and Journal, or the Combined Day Book and Journal with the Ledger, constitute what are frequently termed the "principal" or "fundamental" books of record used in bookkeeping. But accountants soon found the advantage to be gained by supplementing these with various special books, known gen- erally as "Auxiliary Books." These include the Cash Book, Bill Book, Sales Book, Invoice, or Purchase Book, Pass Book, Petty Ledger, Customers' Ledger, etc., with the use of which the student is already familiar. CHAPTER III.— Business and Financial Statements Thus far we have considered the methods and requirements of that division of accounting which involves the making of complete and classified records of the various transactions of a business. We are now to consider some of the various means of summarizing the results and conditions of a business, condensing them from the records that have been kept during any given business period. Commercial enterprises, in their extent and character, take a wide range, beginning with the simple and monot- onous transactions of the little retail shop, and extending to the vast and complicated affairs of a great corporation. As there is great variation in the books of record required for different kinds and grades of business, so, also, is there great diversity in the accounting devices required for exhibiting net results and financial conditions at the close of any business period. The terms "Statement," "Balance Sheet," "Financial Exhibit," etc., are variously employed to designate the different forms used by accountants in setting forth the conditions and results of a business. The term "Statement" is more properly applied to any schedule of the assets and liabilities of a business, while the term "Balance Sheet" implies a more comprehensive exhibit, setting forth the face of the ledger accounts, the sources and amounts of the various losses and gains, and a comparison of the present state of the business with the condition at the outset. With the Balance Sheet as used in ordinary mercantile business, the student has already been familiarized, but we exemplify here a number .of special forms adapted to various requirements. It should be noted by the student that the Trial Balance is really the basis of all statements, or other sum- maries of a business, and that the preparation of a correct trial balance is the first step to be taken in preparing any schedule of the facts and conditions of a business. L08SE8 Resources Dr. L. F. Cr. Liabilities Gains Proprietor's Stock 1 5000 3290 10 9670 50 Cash 2 6380 40 100 100 Expense 3 1000 6460 40 Merchandise 4 7560 40 2100 1150 1150 B. F. Stone 5 264 H. Murphy 6 945 50 681 50 1826 50 2062 30 B. F. Clark 7 235 80 1520 90 J. F. Wyman 8 2469 65 948 75 1379 75 D. M. Ellis 9 1749 50 369 75 1733 40 1966 80 65 F. F. Campbell 10 233 40 65 00 100 9000 00 2+574 24574 2000 2100 Summary Total Resources 9000 Total Liabilities Proprietor's Pres. Worth Total Gain 2000 7000 2100 Total Loss Net Gain 100 2000 Proprietor's Net Investment Proprietor's Pres. Worth 5000 7000 1 BUSINESS AND FINANCIAL STATEMENTS 215 Balance Sheets. — The form of balance sheet on page 216 differs from the forms already given at the beginning of the student's work in that the statement of Losses and Gains precedes instead of follows the statement of Re- sources and Liabilities. This form of balance sheet is used by one of the most noted eastern business colleges. The form of Balance Sheet on page 214 has the advantage of compactness and simplicity, and is preferred by some accountants. The columns marked "Dr." and Cr." respectively show the debit and credit sides of the Trial Balance. In the summary, the proprietor's present worth is found by subtracting the total liabilities from the total resources. The total losses are then subtracted from the total gains, and the difference, cr net gain, added to the original net investment also gives the proprietor's present worth. Statement of Affairs. — This is a schedule and summary of the assets and liabilities of an insolvent debtor, arranged so as to show both actual and contingent liabilities, also, both the nominal value of the assets, and the actual value that is expected to be realized upon them. The purpose of a Statement of Affairs is to set forth the real condition of an estate, or business, with respect to realization, and the actual deficiency as to liquidation. Deficiency Account. — This is a summary showing, in classified form, the causes so far as these may be gath- ered from the books, that have brought about a condition of insolvency. The Deficiency account is usually appended to the "Statement of Affairs." Example. — Mason & Roberts being unable to meet their obligations, it is found from their books and from the testimony of the members of the firm that their condition is as indicated by the following general statement: Cash on hand '. $ 4,950 Debtors: $900 good; $540 doubtful, but estimated to produce $1S0; $900 bad 2,340 Property estimated to produce $8,100 12,600 Bills Receivable, good 3,825 Other securities: $2,700 pledged with partially secured creditors; remainder held by fully secured creditors ' 25,200 Mason, withdrawals 8,100 Roberts, withdrawals 7,560 Sundry losses 12, 150 Trade expense 6,660 Creditors; unsecured 22,500 Creditors, partially secured 21,510 Creditors fully secured , 15,300 Preferential claims, wages, salaries, and taxes 630 Mason, capital 9,000 Roberts, capital 14,445 From the foregoing general statement the following "Statement of Affairs" and "Deficiency Account" are prepared : Note. — For explanation of the technical business terms used in this Statement, consult the "Vocabulary of Business Terms." Total Liabil- ities Liabilities Expect- ed to Rank NOMIN Asset j L Assets Esti- mated to Produce. 122,500 00 00 00 00 00 Creditors unsecured per schedule A.. Creditors partly secured per schedule B.. Securities at estimated value Creditors fully secured per schedule C. Securities at estimated value Surplus to contra $21,510 2,700 oo 00 00 00 00 S22.500 18.810 00 00 $ 4,950 12,600 2,340 3,825 25,200 $12,600 540 900 00 00 00 00 (HI 00 $ 4,950 8,100 900 l&o 3,825 7,200 25,155 630 0(1 21,510 00 00 Sundry Debtors, per schedule F Doubtful Bad 15,300 15,300 22.500 00 00 7,200 00 Bills receivable, per schedule G . 00 Other securities in hands of cred- itors, Fully secured 2,700 22,500 25.200 Preferential creditors, for wages, salaries, taxes, etc. per schedule D.. Deducted contra 630 630 00 / Surplus from securities in the hands of creditors fully se- on Deduct preferential creditors for wages, salaries, taxes, etc., 00 00 Deficiency as per Deficiency Acct. 00 24,525 16.7R5 (X) 00 59,940 41,310 00 48.915 41,310 00 DEF ICIENCY ACCOUN r. ma SON & ROBERTS To Deficiency as shown by State- To Capital brought into the busi- ness at commencement, and since, viz.— Mason, capital Roberts, capital.. 9,000 14.445 00 00 $16,785 23,445 00 00 obi By Losses on Trading, viz.— Trade Expenses By Losses and Shrinkage in Val- ues, as exhibited by State- ment of Affairs, viz.— $12,150 0,(560 4,500 360 900 00 00 00 00 00 18,810 5,760 15,660 40,230 00 Debtors, Doubtful .. " Bad By Withdrawals from the busi- ness, viz.— )0 8,100 7.560 00 (X) 1 X) 40.230 M 216 BUSINESS AND FINANCIAL STATEMENTS // -*3J£,J&y*Jls 7?£V Iff 'K J & r/?^ /3f/ f*-_ 600 O ( 7?£Z> ftfK J 7 r/ 77- 7o

ttt<4^ls£ 8 9 10 n 7 46^ 33 V s 15 40 1 1 1 1 1 Thos. Cook 10 8 9 8 7 6 8 66 y 2 35 23 28 1 3 1 3 B. H. Hill 9 8 8 to 7 6 8 66 35 23 10 1 3 1 A. C. Porter 8 8 8 8 S 8 8 64 35 22 40 1 2 1 1 1 W. S. Hull 10 8 10 7 6 8 8 68 35 23 80 1 3 1 1 1 203 91 6 4 3 24 4 7 8 5 11 236 PAY ROLLS may be, the total amount is debited to the Expense account or to the Salary account if there is one, more often to Pay Roll account, Cash being credited. Many forms and devices are used for keeping accounts with em- ployees. In some factories a timekeeper is employed for each department. It is his duty to make up the time for each employee in his department, and to turn over the record to the Bookkeeping department. In most factories each employee keeps his own time by means of a Time Register Clock and the Time or Job Tickets. The Job or Time Tickets are ruled for each employee to record the time he puts in on each job or on each kind of work he is occupied with. These Time or Job Tickets are turned in by each employee to the foreman of each department, who turns them over to the cost clerk. The cost clerk, or a clerk in the bookkeeping department, compares the total time on the time or job tickets with the employee's time in the time register clock, The cost clerk, after he apportions the cost of the several jobs to the several departments, turns the time or job tickets over to the bookkeeping department, where the time and wages of each employee are entered on the Time Sheet, or Time Account, more commonly called the Pay Roll Book. The Pay Roll Book is made up in various forms. Some factories combine the time book and the scheme for determining the number of the different denominations of money to make the required change. (See the second illustration.) Others show only the time book form in the Pay Roll Book, and have the scheme for determining the number of each denomination to make the change printed on separate sheets. This pay roll is made up on the scale of an eight-hour day. A time and a half is reckoned for time over eight hours a day. Double time is allowed for Sunday or Legal Holiday work. The student is requested to verify this pay roll. If allowances are made to employees between pay days, a column should be ruled in the pay roll to record such allowances, and the allowances would have to be deducted before the check is drawn for the amount of the pay roll. Most factories will not make allowances to employees. After the Time account is made up and recorded in the pay roll book the bookkeeper determines the number of each denomination required to make the exact change for each employee, as follows: He looks down the columns of amounts and sets down in the scheme for denominations of money to make change (see scheme of money denominations from $20 to lc.) first, the number of 2U's; next, the number of 10's; and so on down to l's, or pennies. To exemplify: John Smith's salary is $34. C9. It will require 1 twenty, 1 ten, 4 one's, 1 half dollar, 1 ten cent piece, 1 five cent piece, and 4 pennies, to pay him. In like manner he sets down the denominations required for each employee. Next, he totals the different denominations required; as, GX $20— $120; 4X$10=$40; 3X$5 = $15; 24X$1=$24; 4X50c.=$2.00; 7X25c.=r$1.75; 8X10c.=80c.; 5X5c.=25c; and llXlc.=llc. Now, $120+$40+$15+$244-$2+$1.75+80c.+25c.+llc.=$203.91, which is the total amount required to meet the pay roll. This proves the number of denominations. The bookkeeper next draws a check foi $203.91, and debits Pay Roll and credits Cash. He then goes to the bank and gets the number of different denominations as shown by the scheme for denominations. He then writes up his pay roll envelopes with the number or, name of each employee, and the amount, and fills each envelope with the required amount. If there should be money left after the last envelope was filled, or not enough to fill the last envelope, a mistake has been made, which must be found and corrected. If there is no money left when the last envelope is filled, the bookkeeper has only presumptive proof that his work was correct. He has not posi- tive proof, because he might have left $5 out of James Farley's.envelope and put $5 too much in Sam Daley's en- velope. But whatever other faults workmen may have, most of them are honest, and such a mistake would prob- ably be reported and corrected by the workmen themselves. To prevent mistakes at least two persons count the money and prove the work before the pay envelopes are sealed. In most large factories three persons verify the work before the pay envelopes are sealed. Some bookkeepers first set out all the 20's required; next, all the 10's; next, all the 5's; and so on with each different denomination. Banks often furnish blanks for Change List. See page 210. Most bookkeepers use Money Racks for filling the envelopes. Some count the money by hand. Very few ever try to use paper bills as they are too liable to stick together and cause mistake. However, some employers prefer to pay by check. They use a form of check that is good only against the Pay Roll account. They contend that the name and the amount can be written on the check as quickly as on the pay envelope. The bookkeeper fills in the name and amount on the check Then the use of checks obviates the necessity of making out the number of denominations required, and also the liability of error in filling the pay envelope. The larger factories, if they pay weekly, rule the Pay Roll Book with sufficient columns to provide for from nine to twelve weeks. This obviates the necessity Of writing the names so often. After the pay envelopes are made up and sealed, the envelopes for each department are sent to the respective foremen, who line up their employees in the order of the numbers on the pay envelopes, and each foreman hands out the pay envelopes as the workmen file by him. Some factories require each employee to sign a Receipt Card, which has blanks to be filled to show the num- ber of the employee, amount, date, name of factory, town, and name of employee. On the receipt card is printed the following or similar instruction: "Sign this Receipt and Return to the Office Promptly,. or Money Will be With- held Next Pay." Other factories do not require any receipt from their employees. Business men make loud complaint of their inability to get competent help on the pay roll. For this reason much space has been given to this subject. Teachers should dwell on this subject until the principles and the forms are thoroughly understood. Teachers may dictate names or numbers Of employees, rate by the hour, number of hours, with allowances for over-time and for Sunday or Legal Holiday work, and require each member of the class to bring a completed pay roll to the recitation. COST ACCOUNTING 237 Contractors, builders, etc., frequently have long-folding time cards made on the plan of a railway time-table, which are arranged especially for their work, having separate columns, showing just how much time has been put in on the various jobs or lines of work. By this arrangement, they can tell just how much time has been required, and what it has cost to do certain pieces of work, even though the work has been done at various times or at odd hours. CHAPTER X.— Cost Accounting There are three things to consider in determining the cost of any manufactured product. They are, first, the labor, second, the raw material, third, the fixed charges. The subject of cost accounting is one that cannot be treated exhaustively in a text of this character. Owing to conditions peculiar to each of the great variety of manufacturing concerns only a few general principles can be given. An explanation of the cost system of one manufacturer will illustrate these principles better than to give a number of general rules. A manufacturing concern, such as a machine shop, job printing establishment, food factory, sash and door mill, or others of similar character engaged in the manufacture of goods upon order of the customers, is usually divided into several departments, each of which is in direct charge of a foreman. When an order for goods is re- ceived it is passed upon by the Credit Department which determines whether or not the customer is worthy of credit and will pay for the goods as agreed upon when they are completed and delivered to him. The order then goes to tbe order clerk who enters it in a book called a Job Record, giving the order a number. If a price for the work has been agreed upon this is also noted in the job record, together with such other data as may be necessary. The job record is ruled into columns for each department, and consists of loose-leaf sheets bound in a loose-leaf binder. Instruction tickets for each department are prepared by the order clerk, containing detailed specifications for the guidance of each foreman. The order is then given out to the foreman of the department where the work will start, and passes from one department to another in regular order until completed. Each of the workmen in the several departments is given by his foreman a Daily Time Ticket in which he records date, number of order or orders, his own name, hours spent, and such other facts as may be desired. At the close of each day these time tickets are handed to the foreman of the department who O. K.'s them, if correct, and sends them to the cost clerk. The cost clerk, who in the meantime has received from the order clerk the loose-leaf sheets of the Job Record, proceeds to complete the time tickets by entering the rate of wages of the workmen and carrying out the extensions. The time ticket of a workman may show several orders to which he has devoted his time in one day. The totals of these time tickets are transferred to the several job record sheets and the amounts are placed in the columns repre- senting the departments doing the work. Each department proceeds in a like manner, no matter how many of them there may be. An Instruction Ticket is also given by the order clerk to the foreman of the stock room who delivers to the several departments the material called for by his ticket. The stock man returns to the cost clerk an accurate account of the kind, quality, weight, size, and quantity of stock so delivered. The cost clerk enters these stock items in the job record against the proper account, and later makes another entry of the stock in a Merchandise Stock Record. At the time of entering the order, the shipping clerk has received a similar ticket wherein he is instructed as to when, how, and to whom the goods are to be delivered or shipped. The order having been completed by all departments is delivered to the shipping clerk who, following his in- structions, ships or delivers the finished product. When the work of all departments is completed, each foreman returns his instruction ticket to the cost clerk. When these instruction tickets from the several departments are in the possession of the cost clerk and have all been properly entered in the job record, he incloses them in a large, strong envelope, on the outside of which is a recapitulation of the totals of the cost in the several departments, the price at which the goods are to be billed, terms of payment, and other necessary information. This envelope is called the Charge Ticket and when completed as above outlined is sent to the billing clerk. The billing clerk makes out the invoice or bill for the goods and delivers- the charge ticket together with a carbon duplicate of the invoice to the bookkeeper. The bookkeeper apportions the profit to each department and gives each department credit on his books for its proper share of profit. When the cost clerk has completed his entries from the time tickets he sends them to the bookkeeping department, where they are recorded in a pay roll book for the purpose of determining the pay to which each employee is entitled. A workman's time clock is generally used to record the arrival and departure of the employees. The record shown on the workman's time tickets must agree with that registered by the time clock, thus furnishing a check on the time of each workman. These time tickets, as returned by each foreman, in connection with the time clock, furnish the necessary data for making up the pay roll. The subject of pay rolls is more fully treated elsewhere in this text. The system above outlined may be adapted to a large number of different kinds of manufacturing concerns. If accurately kept, the raw cost of manufactured goods may easily be determined. To this cost must be added what is known as Fixed Charges, which includes such items as power, heat, light, rent, taxes, insurance, depreciation of machinery, management, clerk hire, and other expenses of a fixed character, which cannot be charged directly against any single order, but must be apportioned to the business for the year. The fixed charges are generally applied to each individual order on a percentage basis. By ascertaining the total amount of business done by the concern for a given period, and the total fixed charges for the same period, the percentage of fixed charges which should be added to the cost of production may be accurately determined. CHAPTER XI— How to Find Errors In Trial Balance If Trial Balance is off, do not "force" it or "plug" it, but proceed as follows: 1. Find the exact difference. 2. If the difference is la, 10c, or $1.00, or any number of l's, or the difference is $99.90 or $99.99, etc., the error is most likely to be in addition or subtraction. Prove your work by the unitate, the 9, the 11, or the 13, method. 3. Compare the difference with the accounts in the last balance of balances account. Compare the total footings of your posting mediums with the total of your Trial Balance, less old balances. 4. If there are more than two significant figures in the difference as $11.88, $43.56, $62.37, $143.55, $1480.05, etc., and the difference is divisible by 9, a transplacement (or slide) maybe suspected. Then divide the difference by 9, and that quotient by 11, and then look in posting mediums for the last quotient in dollars posted as cents or two places posted in cents' column or vice versa. Suppose the difference is $11.88; 1188 divided by 9 gives 132, and 132 divided by 11 gives 12, or $12.00, which is the number transplaced, or posted as cents. $1480.05 divided by 9 gives 16445, and 16445 divided by 11 gives 1495, or $1495; and the whole number has been moved to the right two places, and posted as $14.95, and so forth. (Note. — If the unitate of the difference is 9, the difference itself is divisible by 9, and this can be determined by inspection.) 5. If there are only two significant figures in the difference, and the unitate of these figures is 9, a transposi- tion may be suspected. Suppose the difference is $27,000; disregard the ciphers and divide the significant figures by 9. 27 divided by 9 gives 3, and this shows that some number has been transposed whose fifth figure is three greater than its fourth figure; as $58295 posted as $85295 or vice versa. Then look in the posting mediums for numbers that answer this condition, and trace each one to the Ledger until the transposed figure is found. Note. — By applying the principles elucidated in No. 4 and No. 5, it will be very easy to find the numbers that may be transposed to give any given difference that may occur in a trial balance by reason of a transposition. To exemplify: Suppose the trial balance shows us 18 cents long, on the credit side. 18 divided by 9 gives 2; and 2 plus 11 gives 13, and 13 transposed gives 31, and the difference between 13 and 31 is 18; which shows that 13 may have been posted as 31, because this would make us just 18 cents long on the credit side. To find the numbers that could have been transposed to give a difference of 18 cents, we have only to add 11 consecutively to 2, the quotient of 18 divided by 9, and again add 11 to their sum, 13, (2 plus 11) and so on, until we reach a number that is divisible by 10. Thus, 18 divided by 9 gives 2, and 11 added to 2 gives 13; 13 transposed gives 31. Eleven added to 13 gives 24, and 24 transposed is 42; and 11 added to 24 gives 35, and 35 transposed gives 53; and following this principle we have the numbers, 13, 24, 35, 46, 57, 68, and 79, as the numbers that may be transposed to give a difference of 18 cents. If we add 11 to 79 we have 90, but 90 is divisible by 10; and we are, therefore, at the end of our series of numbers that may be transposed to give a difference of 18 cents when we come to 79. In this illustration we have taken the column of cents and dimes as the period of two figures to be considered. If the difference should be $1.80 or $180.00 or $1800.00, and so on, we disregard the ciphers (except that they show us where the transposition occurred) and proceed in the same way as in the illustration to find the numbers that may have been transposed to give us the difference required. The same principles apply in transpositions in the first and third positions, or first and fourth, or any other position, or second and fourth and any other position, etc. ; except that we Use the 99 and the 999 method, and 101 and 1001 method, etc., in finding the number transposed, and the numbers that may be transposed to give the exact difference that the trial balance may be off. To exemplify: Suppose we are $1.98 long on the credit side. Now, 198 divided by 99 gives 2. Then 101 added to 2 gives 103, and 103 transposed gives us 301; and the differ- ence between 301 and 103 is 198, or $1.98. Then to find the other numbers that may be transposed to give $1.98, we add 101 to 2 and we get 103; then to 103 we add 101, and so on. and we have as the numbers that may be transposed to give a difference of $1.98—103, 204, 305, 406, 507, 608, and 709. If we add 101 to 709 we get 810; but 810 is divisible by 10, and, therefore, 709 is the last number of the series. Double Transpositions. — The difference produced in the trial balance by a double transposition is not necessarily divisible by 99 or 999, as it is not produced on that mathematical principle. It may so happen that the difference may be divisible by 99 or 999, but it is accidental and not mathematical. But the unitate of the differ- ence produced by a double transposition is 9, and disregarding terminal ciphers the difference is divisible by 9 ; and therefore a transposition may be suspected. If the difference in the trial balance by a double transposition should be divisible by 99 or 999, the number transposed could not be found by the principle of 99 or 999, because the difference was not produced by that prin- ciple; but the number transposed to give the difference can easily be selected by inspection by applying the mathe- matical principle that the difference in dollars in the trial balance is one less than the difference between the dollars and the cents in the number transposed. If the difference is expressed in four figures and the unitate of the difference is 9, and the difference is not divisible by 999, then it is believed that the numbers that would give the difference in the trial balance may be ' easily selected by inspection. To exemplify: Suppose $65.14 has been posted as 14.65. This would give a differ- ence in the trial balance of $50.49. Now 5049 is not divisible by 999, but the unitate of 5049 is 9; and therefore a transposition may be suspected. Suppose the credit side is $50.49 long. Then the smaller period of two figures in the cent column has been transposed into the dollar column; and the larger period of two figures in the dollar column has been transposed into the cent column. In such transpositions the difference in dollais in the trial bal- ance will be one less than the difference between the dollars and the cents of the number transposed, or in this case, 51. 65 less 14 is 51. Then since the credit side was long, we look on the credit side of our posting mediums for a number of dollars and cents in which the cents subtracted from the dollars will give 51, and trace such numbers to the Ledger, until we find the number transposed. Again suppose the difference is $65.34. 6534 is not divisible by 999, but the unitate of 6534 is 9, and there- fore a transposition may be suspected. Suppose the debit side is $65.34 long, then we look on the debit side of our posting mediums for a number of dollars and cents, the difference between whose dollars and cents will be one greater than the difference in dollars in the trial balance. $80.14 answers this condition. 14 subtracted from [238] HOW TO FIND ERRORS IN TRIAL BALANCE 239 80 leaves 66, which is one greater than the difference in dollars in the trial balance. Trace numbers that answer this condition to the Ledger till the transposed number is found. The student should understand the mathematics underlying bookkeeping well enough to enable him to deter- mine in most cases what was done to produce the difference in the trial balance by what the difference is. In other words, he should read his process to find the error out of what the difference itself expresses to him. To exemplify : Suppose the difference is $79.20. He should know the mathematical principle that when the difference is in four places and the cents added to the dollars gives 99, the error was most likely produced by a transplacement ; and the number necessary to make the difference up to even dollars was transplaced to the cent column; that is, $80.00 was posted as $.80. Again, if the difference is $72.00 he should be able to read at a glance that $91.00 has been posted as $19.00 or vice versa, as $91.00 is the only number of dollars that can be transposed to give a difference of $72.00. Or, again, if the difference is $36.00, he should be able to read at a glance that $15, $26, $37, $4S, or $59, are the only number of dollars of the series that could be tiansposed to give a difference of $36. If he under- stands the mathematics of the science, it is only a question of a very few minutes to find an error produced by a transplacement or a transposition. 6. If the difference is not divisible by 9, divide by 2 and look for the quotient posted twice to the same side. 7. Look carefully over the folio numbers of all posting mediums to see whether any posting has been omitted; or accounts not to be posted set in posted columns or vice versa. 8. See whether Balance of Cash account has not been omitted. 9. Look for some account ruled off during the month to find the balance and the balance not brought down 10. Localize the error by First — Checking all footings carried forward in the several books or in the recapitulation sheets, etc. Second — Drawing off from the Ledger the credit postings from the Sales Book, using a separate column of figures for each week's posting. Find the grand total for weeks and compare with total of Ledger for same period. Compare total by weeks. If difference is found there is only one week to check. Third — Compare Purchase Book posting in the same way. Fourth — As the Cash Book and the Journal are self-balancing, they are left to be compared last. By pro- ceeding in this systematic and sectionalized manner, checking is reduced to a minimum and great time saved, (Note — It is better to use a different colored pencil in checking postings from different posting mediums.) 11. Both sides of the Trial Balance may be off. The learner must not overlook the principle that the true trial balance is the total footing of the posting me- diums for the period covered by the trial balance. If to this sum we add the balances brought down under old accounts, we have the sum of the trial balance sought. If both sides should be off, then find the exact difference the debit side is off by taking the difference between the total debit footings of posting mediums and the true trial balance, as defined above. This test will determine whether the error has been made by failing to bring down old balances or by wrong posting. Then, having the exact difference the debit side is off, apply the tests as enum- erated above. If both sides are off, the exact amount the credit side is off may be found by taking the difference between the total debit footings of posting mediums and the true trial balance. Then, having the exact difference the credit side is off, apply the tests enumerated above. Each student should exhaust these suggestions thoroughly before he allows any one to help him. 12. If the error cannot be found, after all due diligence, then open a Discrepancy account and debit or credit the account that is off, as the case may require, with discrepancy, in red ink, for the amount of the error. If the error is not found in a reasonable time, close the Discrepancy account into the Loss and Gain account. Make no attempt at concealment, but consult your teacher or your employer freely about the error. It is important that you consult with your teacher or your employer about all your work. How to Prevent Errors. — The prevention of error Is of such great importance that many business houses will go to great expense to provide their bookkeeper with a safeguard. Many business houses have been known to pay $50.00 to $500.00 for a scheme to safeguard their book- keeper against error. 1. The 11 check figure method and the 13 check figure method, explained in this book, have been sold in many parts of the country for $50.00 each, and often for much more. To apply these methods the books of original entry and the Ledger are ruled with a column for check figures, and after each entry is made, the check figure of the amount by the 11 or by the 13 method is set in the check figure column. Then after the amount is posted to the Ledger, the check figure is again struck out of the amount and the check figure set in the check figure column in the Ledger. These check figures must agree, and therefore an error in posting is prevented. The advantages of these methods have been explained and the student is referred to the explanation, and advised to practise these methods until he can handle them with facility; because he may be required to use either in the position he may be called on to fill. Not to know how to use them would, in many instances, lose him the position. 2. Other business houses require the bookkeeper to use the Reverse Posting Proof. This is done by provid- ing the bookkeeper with slips of paper about one inch wide, and of convenient length for the books used. Two colors of paper are used. The white slips are used for the debit postings and the pink for the credit postings. When a debit amount is posted the amount is written on a white slip and the slip allowed to protrude above the Ledger at the page of the account, far enough for the amount to be seen. Then, when all the debit amounts of any posting medium have been posted the total of the amounts on the white slip should equal the total debit post- 240 HOW TO FIND ERRORS IN TRIAL BALANCE ings for that medium. The amounts on these slips are generally transferred to a sheet of paper or a small book, properly ruled for the purpose. The credit postings are duplicated in the same way on the pink slips. This, it will be seen, is double posting; and as the totals of the slips and of the amounts in the Ledger must agree it is a check against an error. 3. Other business houses require their bookkeepers to provide themselves with a small book with double money columns on each page. Then, when the bookkeeper posts from each medium, he first writes the initial or initials of the books he posts from at the top of the column in the little book; as C. B. for Cash Book, and the date. Then when he posts a debit amount to the debit side of the Ledger, he writes the amount in the debit column of the little book. When he posts a credit amount to the credit side of the Ledger, he writes the amount in the credit column of the little book. From this it will be seen that the debit and the credit amounts in the little book must equal the debit and the credit amounts respectively, in the Ledger. This, it will be seen, is double posting and is a check against an error. This safeguard is sometimes called the Perpetual Ledger Proof Posting, and the little book is generally spoken of as the Perpetual Ledger Balance Proof Book. 4. Other business houses have their Ledgers made self-balancing by having a ruling that provides for a debit and a credit balance in the Ledger. These balances are written in the balance column as the posting is done. This enables a balance of the difference to be taken daily, if desired. Balance of any account may be had instantly. Monthly statements are readily made out by use of this Ledger. See Self-balancing Ledgers under Classi- fication of Ledgers, pages 227, 228. i SELF-BALANCING LEDQER Date L F EXPLANATION Debit Credit Debit Bal. Credit Bal 5. Other business houses have their books ruled so as to apply one of the three leading columnar safeguard methods or some modification of these methods. These mathematical tests are known among accountants as (1) the "Bankers' Tests," First, the "Difference Test," and Second, the "Footings Test." The "Difference Test" proves the correctness of the work by the mathe- matical principle that the difference between the columns of the sums of the old balance and of the deposits, less the column of checks, equals the last balance; Second, The "Footings Test" by which the correctness of the work is proved by adding the footings of the checks columns and the footings of the Currency deposits together. These footings must equal the footing of the Deposit column. And (2) the "Total Tests," that the totals of several col- umns of items must equal the grand total of all such columns; (3) the "Difference Test," the ruling of columns so as to provide for the mathematical test that the difference between the columns representing receipts, and the columns representing disbursements, equals the difference between the columns representing losses and the columns representing gains. This test or some modification of it is nearly always applied to the synoptical journal or other columnar journals. 6. Other business houses require their bookkeeper to take off the footing oh the adding machine, using the black for the debits and the red for the credits. This is required to be done daily, so if an error occurs only one day's work is to be considered. CHAPTER XII.— Miscellany Cash Sales. — In the absence of a regular cash system, which is not generally used in the smaller retail houses, a certain amount of change is placed in the various money drawers each morning. All cash sales of the day are thrown in with this sum and at night the cash from these various money drawers is counted, and from it the amount deposited for change in the morning is subtracted, and the balance entered in one amount on the debit side of the Cash Book as "Mdse Sales." When this system is used, nothing but cash sales are paid over the counter, and all accounts, notes, drafts, etc., are paid at the bookkeeper's desk. If there are various departments in the store, and it is desired to keep a separate record of the sales, then each department should be debited for the change furnished in the morning, and credited for the sum returned. A record of the amount of change deposited is usually kept in a common five or ten cent memorandum book. Some MISCELLANY 241 bookkeepers also enter in this book the actual amount of cash on hand each night. This sometimes proves of great assistance to them on the following day in getting their cash balance. The cash sales are never itemized in a retail store, and seldom ever in a wholesale house; however, it is some- times done for the purpose of being able to fill country orders when customers write and request them to duplicate their last order, or some other order of a certain date. Again, merchants soon become acquainted with this class of customers and itemize each order, while other merchants itemize only such cash sales as are given verbally, depending on their order book or the customer's letter for all other orders. Fuel. — When it is desired to classify the various items of expense, an account may be kept with Fuel, charg-. ing it with everything in the way of wood, coal, and kindling. When coal oil is used for lighting purposes, it may be kept in connection with Fuel account by opening an account with Fuel and Oil. Signature. — When a person engages in business, he should establish a signature and be very particular to use it at all times, especially in signing notes, drafts, and other commercial papers; also in cases where his signa- ture is required for the purpose of identifying the signatures of other people. Taxes. — There are various minor reasons for keeping an account with taxes, but it is generally done when it is desired to classify the expense. It is also much more convenient for reference purposes, and may be somewhat gratifying in this respect. In the absence of this account, the taxes should be charged to the Expense account. Clearing House. — A Clearing House is a business place or office where bankers meet and make daily settle- ments with one another, by paying or receiving the difference between their accounts, which arises from the checks drawn by the depositors of the various banks. For example: If John Smith draws a check for $1000 on the Pacific Bank which was afterward deposited with the California Bank, the check will be presented on the following day at the clearing house to the representative of the Pacific Bank, who will give in exchange such checks as his bank has taken in against the California Bank, which have been drawn by their depositors, aggregating $750, thus paying $250, and effecting a settlement in full of account to date. A clearing house is simply a business office that has been established by an association of bankers for the purpose of settling daily their claims against one another, the same as, or similar to, the manner described. Controlling Interest. — If a stockholder owns one share more than half the total number of shares of the capital stock, he is said to hold a Controlling Interest. It is often a difficult matter to use this controlling interest to the disadvantage of other stockholders. To vote himself a large salary or to get other undue advantage, some- one must first move to give him large salary or other advantage; another must second the motion. This can be brought about by giving or selling at nominal price one or more shares to persons called "Stool Pigeons" or "Dead Heads," who will act as he directs. But persons that will stultify their manhood and self-respect in such manner are not to be trusted, and are liable to turn their balance of power with other stockholders at any time. Their honor has been bought once; it can be bought again. The Pivotal Account or Pivotal Plan of Keeping Books. — The Investment account is called Pivotal account when the purpose is not to disclose the proprietor's name and such other accounts as rent, bills payable, clerk hire, etc., which if disclosed might work detriment to the business. This plan is applicable to both large and small establishments. The account is often opened in large establishments and handled in about the same way as a private account. Whether applied in a large or a small business, the bookkeeper closes the Loss and Gain account into Undivided Profits if a gain, or into Impairment account if a loss. Precedence of Closing Accounts. — Every account affecting merchandise account should be closed into that account before the Retd Mdse. account is closed into Mdse. account. Every account affecting general expense should be closed into the Loss and Gain account before the Loss and Gain account is closed. A bookkeeper wa„ hired at $100 a month and ten per cent of the net profits. He took ten per cent of the profits before he closed his own account into the Loss and Gain account. Did he observe Precedence of closing accounts? First Opening of Books. — If a student should be called J .o a position where no books had been kept, he should proceed as follows: (a) He should make a complete and exhaustive list of Resources from such records and other data as had been kept, and from such information as he could gather from the proprietor. He should list the inventories in the Journal. List each Resource Inventory separately and set the estimated or cost value in the debit column. Set the total of the Resources in the credit column. The following is a suggestive list of Resource items: , (1) List all Cash. (2) List all unsold or unused stock (merchandise or manufactured goods unsold). (3) List all real estate. (4) List all horses, wagons, office furniture, office fixtures, tools, implements, and any other items belonging to the business. (5) List unused rent, unused fire insurance premiums, life and accident policies, if pledged for loans, unused office books and stationery, taxes paid in advance, shipments unsold, etc. (6) List accrued interest due the firm. (7) List all overdrafts due the firm, rents and salaries due the firm, etc. (8) List all bills receivable, due bills, and judgments in our favor (list due bills in names of persons giving them). (9) List all bonuses, franchises, or charters, copyrights, trademarks, leases, licenses, concessions, good will, if any basis on which to establish the measure of good will, etc. (10) List all personal accounts due the firm, 242 MISCELLANY (11) List all loans due the firm. (12) List all money paid out for material or labor on unfinished contract, less any advance payment on such contract. (13) List all notes or other property deposited with any bank or person, as collateral security, if by such deposit the business incurred a liability. (14) List any property of any nature whatever not already listed. (b) He should make complete and exhaustive list of Liabilities of the firm. The opposite of the Resource items will suggest liabilities. List each liability inventory separately and set the estimated or cost value in the debit column. Set the total in the credit column. Look especially for interest, freight, and unsold consignments. (c) Give the proprietor's account credit for the difference between the Resources and the Liabilities. (If the proprietor wants Private account opened his Stock account must be reduced by the amount of Private account.) (d) Write the Opening Statement, debiting the Resources and crediting the Liabilities. See par. 15 (2) (c) and (3) (c). (e) Post all accounts in the Opening Entry to the Ledger. (/) Take Trial Balance and the books are open. The Postage Account. — The Postage account is debited and cash credited when Postage Stamps are bought. If a customer pays part or all of his account in stamps, postage is debited and the customer credited. Each department of the business is debited daily through the Stamp Record with the stamps it uses. At each profit -taking period, the postage account is credited with the total disbursements to the several depart- ments, and each department is debited with the total amount of stamps it has used for that period. The postage account is balanced each day in the Stamp Record, and closed into balance in the Ledger -at each profit-taking period. Traveling Expenses. — This account should be kept with each traveling agent for his necessary traveling expense, such as salary, railroad, steamboat, and stage fare, hotel bills, transfer of baggage, etc. This account should include the agent's salary. Power of Attorney. — A bookkeeper may indorse checks, drafts, or other of the firm's papers, for deposit, by getting a written order from the proprietor asking the president or the cashier of the bank to recognize such indorsement. But to sign checks, drafts, notes, or other papers, he must first get the Power of Attorney, invest- ing him with such power. The Blotter. — A Blotter is a counter book in which is written in pencil memoranda of various transactions of the day, which are to be recorded in the permanent books by the bookkeeper. This book has largely taken the place of the day book, and the blotter and the day book are spoken of interchangeably. Waive Protest. — "Protest Waived," written or printed above an indorsement will prevent the paper from being protested and save protest fees, should the paper not be paid when due. A waiver may facilitate the dis- posal of a paper, but the legal effect of a waiver should be thoroughly understood before it is used. Consult your Commercial Law book or ask your teacher to explain the legal effect of a waiver. Loss Posted to Resource Accounts. — A printing press broke down and the cost for making it "as good as new" was $500. This $500 was posted to the Machinery account, which made the Machinery account show a cost of $60,500 instead of $60,000. The $500 should have been posted to Repair account, which account would have been closed into Loss and Gain. Insolvency Account. — If required to show the amount of the Insolvency in an account, open an Insolvency account, and close the Loss and Gain account into Insolvency account, and then close the Insolvency account into Proprietor's account. Good Will. — Good Will is the estimated worth of the patronage of a business. It is a fictitious asset, as it has no tangible value, and yet it is often of great worth. An account is often opened with Cood Will when there is no thought of selling the business; and the account is debited with the estimated worth of the patronage in order to swell the resources of the business. As a matter of fact, the Good Will account is sometimes put unreasonably high in order to cover up a real insolvency. When a sale of the business is contemplated, the question of Good Will always comes up. Then the Good Will account is debited for the amount paid for the patronage of the business and at each profit -taking period it is the general custom to inventory the account and to write off some per cent to the Loss and Gain account. The measure of the Good Will of a concern is found as follows: 1. Find the total profits for the five years last past. 2. Take seven per cent interest on the capital stock for five years. 3. Subtract the amount of interest from the total profits, and the remainder is the measure of the Good Will of the concern. The Good Will account is closed into Bal. Inv'ry and Loss and Gain, in red ink. The red ink Loss and Gain entry is carried to the Loss and Gain account in black ink; and the red ink Bal. Inv'ry entry is brought down on the opposite side below the ruling, and in black ink. Trade Mark. — A Trade Mark is a distinguishing mark, or device, or symbol, adopted by a manufactory or other business concern. The trade mark is impressed on all advertising literature, stationery, etc., and is often impressed on the manufactured article. A trade mark is subject to registration by the government, and when regis- tered, it is protectable by law. The value of a trade mark is largely a matter of estimate, and generally an arbitrary amount is named. When a trade mark has been adopted and registered, a Trade Mark account should be opened and the account debited for the estimated worth of the trade mark. At each profit-taking period it is the general custom to inventory the account and to write off some per cent MISCELLANY 243 to the Loss and Gain account. As the life of the trade mark is thirty years, one-thirtieth of the estimated value is often written off as each profit -taking period. Renewable for thirty years. The Trade Mark account should be closed in the same manner as the Good Will account is closed. A Bonus, a Lease, a Franchise, a License, or Concession account is handled in the same way as the Trade Mark account, except that the life of these accounts is generally different from the life of the trade mark; and therefore the per cents written off differ. Patent. — A Patent account is handled in the same way as the Trade Mark account. The life of the Patent is seventeen years, and therefore one-seventeenth is often written off at each profit -taking period. Renewable only by special act of Congress. Copyright. — A Copyright account is handled in the same way as the Trade Mark account, except that as the original life of the copyright is twenty-eight years, with privilege of renewal for fourteen years, one twenty-eighth is often written off at each profit-taking period. Judgment. — If we have an account against Jones, for $100, and sue and get judgment, then Judgment account should be debited and Jones credited for $100. As the judgment will draw interest, then, when the judgment is paid, debit Cash for the face of the judgment plus the amount of the interest, and credit Judgment for the face of the judgment, and interest for the amount of the interest. If judgment is obtained against us, then the foregoing procedure and the items of the account would be reversed. Spot Cash. — This term means that the goods must be paid for in cash upon delivery. When a discount is allowed for "cash," it is understood that they are to be sold for "spot cash," and that the usual thirty days' credit is not to be taken advantage of. Bankruptcy. — By the United States Bankruptcy Law, a "bankrupt" shall include a person against whom an involuntary petition or an application to set a composition aside or to revoke a discharge, or who has been adjudged bankrupt. Voluntary. — Who may become Bankrupts. — Any person who owes debts, except a corporation, shall be entitled to the benefits of this act as a voluntary bankrupt. Involuntary. — Any natural person except a wage-earner or a person engaged chiefly in farming, any un- incorporated company, and any corporation engaged principally in manufacturing, or mercantile pursuits, ow- ing debts to the amount of one thousand dollars or over, may be adjudged an involuntary bankrupt. Acts of Bankruptcy. — Acts of bankruptcy by a person shall consist of his having (1) conveyed, transferred, concealed or removed, or permitted such to be done with intent to hinder, delay, or defraud his creditors; (2) transferred, while insolvent, any portion of his property to one or more of his creditors; (3) suffered or permit- ted while insolvent any creditor to obtain legal preference. Insolvency. — A person shall be deemed insolvent whenever the aggregate of his property, exclusive of property which he may have transferred or concealed, with intent to defraud, shall not, at a fair valuation, be sufficient to pay his debts. Defense of Insolvency. — The defense against insolvency is to prove that one is solvent. The full text Of the law may be had by sending 10c. to the Supt. of Documents, Washington, D. C. Unusual Losses or Unusual Gains. — There are two ways of treating an unusual loss, such as loss by fire, theft of property, or death of animals, etc. One way is to debit Loss and Gain at the time of the occurrence of the loss, and credit the property lost or destroyed. The other way is to make no entry whatever, but allow the loss to be brought out in the inventory. The method to be chosen will depend on the kind of property lost and the nature of the business, and also the extent of the loss. If cash were stolen, the Cash Book would show the balance that should be on hand. A Loss and Gain entry would be the only entry. If the business were of such nature as not to admit o." keeping a stockbook, such as the retail grocery or hardware business etc., and a loss of merchandise should occur, a Loss and Gain entry would be the only entry; while if the business were such as to afford an accurate account of stock by a stockkeeper, as in many instances in factories, then only a mem- orandum note of the loss should be made, and the loss would be brought out in the inventory. If a Loss and Gain entry were made in such case, memorandum note should be made and allowance made at time inventory is taken otherwise the loss would be recorded twice, once in the Loss and Gain entry and again in the inventory. If there were complete destruction by fire the lack of any resource inventory would show the merchandise and store or factory losses. If indemnity is expected from insurance carried, the bookkeeper should not make any entry until after adjustment. If an unusual gain is met with, such as the discovery of omitted property after the inventory is taken and the books closed, the property, such as merchandise, chattels, etc., should be debited and Loss and Gain credited. A memorandum note should be made to prevent the showing of a double gain in the event of an accurate record of sales and inventory. In the formation of partnerships and in the consolidation of corporations it is customary for the seller to guarantee the payment of all outstanding personal accounts and bills receivable. In event of the failure of personal accounts or bills receivable, the seller would have to make good the loss. In such event, the seller should be debited, and Loss and Gain credited. On the other hand if some resource was regarded worthless at the time of the formation of the partnership or the consolidation of the corporation, and not included in the list of resources that th : buyer bought, and should afterward prove of value and be paid, such value belongs to the seller and does not affect the books of the part- nership or the consolidated corporation. Again, if the seller should omit some liability or understate it, or some resource included in his list of re- sources should fail or partly fail, such loss would fall on the seller and would have to be made good by him. In such case the seller should be debited and Loss and Gain credited, CHAPTER XIII. — Returns and Rebates or Returned fldse Account An account should be opened with Returned Mdse, and when you return merchandise, you should debit the firm the merchandise was returned to, and credit Returned Mdse. When merchandise is returned to you you should debit Returned Mdse, and credit the firm returning the merchandise. (In case of many "Returns" it is better to keep book of "Returns." Some bookkeepers use the right-hand money column of the Purchase Book to record any returns by us and the right-hand money column of the Sales Book to record returns to us. They then in the Purchase Book credit Accounts Payable Controlling account for the full amount of purchases and debit Accounts Payable Controlling account for the amount of the returns; and, in the Sales Book they debit MERCHANDISE Ledger Page 19- Aug. 2 1 = Bal. lnvry BBSS 1200 19- Aug 3 S 98 657 19 3 P 200 248 96 4 S 99 1700 24 5 P 201 3295 20 6 S 100 1875 25 8 p 202 68 74 Total Purchases* 4812 90 Total Sales 4232 68 10 Less Returns L ' 9 8 160 10 Less Returns L 98 95 Net Purchases 4652 90 Net Sales 4137 68 10 Freight L 48 35 60 10 Mdse Dis. L 65 25 02 10 Dray age L 44 3 50 10 Mdse Exch. L 97 75 10 Comission L 42 8 90 10 Bal. Invry Mdse 1000 10 Mdse Exch. L 97 120 10 Invy Mdse Exch . L 97 80 10 Loss and Gain 3° 496 80 5317 70 5317 70 Aug. 12 Bal. Invry 1000 Form No. 1 MDSE EXCHANGE Ledger Page 97 19- Aug. 2 Machine No. 672 J 22 50 19- Aug. 9 Machine No. 672 S 28 75 8 Machine No. 520 J 23 60 10 Mdse L 96 120 8 Repairs C 24 4 8 Laboi C 24 6 TO Mdse L 96 75 195 195 Form No. 2 MDSE EXCHANGE Ledger Page 97 19- Aug. 2 Machine No. 672 J — — 22 50 19- Aug. 9 Machine No. 672 S 28 75 8 Machine No. 520 J 23 60 10 Bal. Invry 80 8 Repairs C 24 4 8 Labor C 24 6 10 Loss and Gam 35 155 155 19- Aug. 12 Bal. Tnvrv 80 [244] RETURNS AND REBATES OR RETURNED MDSE ACCOUNT 245 Accounts Receivable Controlling account for the full amount of the sales and credit Accounts Receivable Controll- ing account for the amount of the returns; which is the same in effect as to handle the account as illustrated in this book. Others keep this account in the Journal. Much depends on what is included in the account. Some limes cash is returned to us or by us. In that event, of course, that much of it would fall in the Cash Book, and the Cash Book should have columns for Returns and Rebates.) See pages 35 and 37 for closing Retd. Mdse account. Express, Drayage, Mdse Discount, and all similar accounts affecting Mdse account would be closed into the Mdse account. All such accounts should be closed before Retd Mdse account is closed, except when it is desired to show net purchases and net sales, rather than net debits and net credits. 19- Aug Mdse RETURNS AND REBATES OR RETD MDSE Ledger Page 98 R R 20 21 96 70 25 160 255 19- Aug. R Mdse 20 96 160 95 255 FREIGHT Ledger Page 48 19- 35 60 19- Aui Mdse 96 JL 6o DRAYAGE Ledger Page 44 19- Aug. 23 50 19- Mdse 96 J2. COMMISSION Ledger Page 42 19- Aug. 21 90 70- A.ug Mdse L 96 8 90 MDSE DISCOUNT Ledger Page 65 19- Aug. 2 C 28 10 86 19- Aug. 4 C 29 49 96 7 C 29 14 08 10 Mdse L 96 25 02 49 96 49 96 If Mdse Exchange has no inventory the difference between the two sides shows the loss or the gain on the account. If Mdse Exchange has an inventory, its inventory should be added to its credit side and also to the credit side of the Mdse account. After the Mdse Exchange account is closed into Loss and Gain its inventory should be brought down on the debit side of the Mdse Exchange account See Forms No. 1 and No. 2. Form No. 1 is given to show the closing of Mdse Exchange account into the Mdse account, for the purpose of showing the loss or the gain on the Mdse account as a whole. Form No. 2 is given to show the closing of Mdse Exchange account to show the loss or the gain on the Mdse Exchange account. It is desirable to know whether it is profitable or not (and the per cent of loss or gain) to take old automobiles or other old machinery in part payment of new machinery and to add additional expense in the way of material and labor andto sell the 246 RETURNS AND REBATES OR RETURNED MDSE ACCOUNT repaired machines. If additional space should have to be rented to carry on the repairs the charge for rent should be added to the Mdse Exchange account. Note. — If the learner will notice how "Mdse Dis." "Ledger Page 65" is closed to the right-hand side of Mdse account, and how "Commission" "Ledger Page 42," is closed to the left-hand side of Mdse account, and so on, by following the Ledger references, he will see how all these accounts, which are related to Mdse, are closed into Mdse account. CHAPTER XIV.— Laws of Carriers, Shipments in Bond and Freight Claims Classes of Carriers. — Carriers are of two kinds, Private Carriers and Common Carriers. A Private Carrier is one who undertakes to carry goods for particular customers only, and by special agreement. A Common Carrier is one who undertakes to carry for all persons who offer goods and the charges of carriage. Railroad companies, express companies, steamship companies, teamsters, and truckmen, are familiar examples of common carriers. Liability of Private Carriers. — A private carrier is liable for damage or loss of goods intrusted to him for the transportation, only when the damage or loss arose through his failure to use ordinary care. Liability of Common Carriers. — When their liability is not qualified by contract or by statute common car- riers are responsible for all loss or damage during transportation arising from any cause what oever, except the act of God or the public enemy. This sweeping liability of the common carrier is usually expressly limited, and is often entirely extinguished by the contract between the carrier and the shipper. Act of God. — Under no circumstances can a carrier be held liable for loss or damage arising through an act of God. The expression "Act of God" means such irrepressible disaster as results immediately from natural causes and is not attributable to any human agency. Loss or Destruction of Goods. — If goods under transportation are lost or destroyed through means which the carrier might have prevented by the exercise of due care, the carrier will, in general, be held liable. Loss from Natural Causes. — A common carrier is not liable for loss caused by frost, fermentation, evapora- tion, or natural decay, or from the natural wear and tear in transportation, provided the carrier exercised reasonable diligence to render the loss as slight as possible. Limitation of Liability.— All courts agree that the carrier may make a valid stipulation with the shipper that the carrier shall not be held liable for loss or damage to the goods carried, arising without negligence on the part of the carrier. Some courts go even further and hold that a common carrier may contract for entire immunity from liability. This is particularly true when the carrier contracts for some special service out of the ordinary course of his business. Loss on Connecting Line. — A carrier may make a valid stipulation against liability for loss arising on the line *of a connecting carrier. Liability for Its Own Negligence. — In the absence of special reasons, it is generally held contrary to public policy to permit a carrier to contract for immunity against liability arising from the negligence of itself, its agents . and servants. Such contracts are quite generally held void. Stipulation as to Value. — A stipulation that the carrier shall not be held liable for an amount exceeding the valuation placed upon the goods by the shipper, in consideration of which the carrier undertakes to transport the goods at a less rate than would be asked if they had been appraised at a higher value, is valid. Rules. — Reasonable rules prescribed by common carriers and brought to the attention of shippers will be sus- tained by the courts. The Bill of Lading. — A bill of lading is both a receipt and a contract. It is a receipt for the goods delivered to the carrier; it is a contract to carry the goods safe so received. Bills of lading are evidence of property. A carrier who delivers goods to a consignee without production of the bill of lading, does so at his own risk. If the goods are delivered to one not entitled to receive them, the carrier will be held liable. Draft with Bill of Lading. — When a shipper names himself or his agent as consignee and sends a bill of lading with the draft attached for collection as a condition precedent to delivery, title remains in the shipper, or his as- signs, until the bill of lading passes into the hands of the consignee by a payment of the draft. Discrimination in Rates. — A common carrier has no right to discriminate between members of the public. The carrier must serve all alike and for like compensation. Stoppage in Transitu. — When a shipper, while goods are in the hands of a carrier, discovers that the con- signee is insolvent, he may stop delivery of the goods by giving the carrier notice not to deliver them. This is known as "stoppage in transitu." The carrier may lawfully require indemnity from the shipper before making the stoppage effective. The right of stoppage in transitu is based upon the plain principle that one man's goods should not be used to pay another man's debts. The right can be exercised only in cases where the vendee's insolvency was unknown to the vendor, at time of sale, or when it occured after the sale. It must be exercised, if at all, before delivery of the goods has been made to the vendee. After delivery, it is too late. If the vendor knew that the vendee was insolvent at the time of sale, and chose to take the risk, he cannot afterward exercise stoppage in transitu. How to Ship Goods in Bond . — The shipper will have to go to his nearest Customs House with his shipping order. At the Customs House he will have to fill out a manifest. A manifest is a shipping order used by the government. IN BOND means corded and sealed, and remaining in care of the government. In shipping goods in bond, it is well to observe these directions: (1) Direct your shipper to ship your goods to be cleared in your nearest or home Customs House. Clearing the goods means paying the duty on them. (2) Instruct your shipper to ship your goods "without appraisement." This he can do by writing "without appraisement" on the face of the Bill of Lading. These instructions will prevent some port broker, at landing of the vessel, from clearing the goods at an extor- tionate price. LAWS OF CARRIERS, SHIPMENTS IN BOND AND FREIGHT CLAIMS 247 To exemplify: Suppose you want to ship goods from Amsterdam, Holland, to Indianapolis, Ind. Instruct your shipper in Amsterdam to write on the Bill of Lading: "Ship in Bond direct to Indianapolis, Ind., U. S. A., con- signed Merchants' Dispatch, without appraisement. Goods to be cleared in Indianapolis, Ind., U. S. A." If you want goods shipped by some other railroad or some express company, name that railroad or express company instead of the Merchants' Dispatch. If goods are shipped in bond C. O. D., a draft need not be drawn. Such goods are shipped "to order" and after the Customs House collects its charges, the consignee will have to pay the carrier's charges before he can get the goods. Instructions for Shi pping Goods in Bond (Given by a large brokerage firm.) — These instruc- tions are correct as per U. S. Customs Laws, and should be carefully complied with : (1) Every package must be distinctly marked with name or shipping mark of consignee, and have Bill of Lading and Invoice made out bearing same mark as goods. (2) Every package must be distinctly marked "In bond to " (Insert port of destination in blank.) (3) Present your invoice to the U. S. Consul for certification. The Consul will return two copies. (4) Mail immediately one certified invoice to R. F. Downing & Co., 13 Williams St., N. Y., and the other to the consignee. (If you are not shipping through R. F. Downing & Co., name your own shipper.) (5) Instruct the Forwarding Agent to mail a copy of the Bill of Lading to R. F. Downing & Co., by steamer carrying the goods, or by first mail steamer, and mail all other documents to the address of the consignee. Note. — If the certified invoice and Bill of Lading do not reach R. F. Downing & Co, as soon as the goods arrive at New York, the goods will be sent to "General Order Warehouse" by customs officers, thereby incuning great expense and delay. If value of goods is less than One Hundred Dollars ($100.00) no consular invoice is required, and goods can go forward in bond without examination by customs at New York, but a complete detail of goods and values must be produced.) How to Handle Freight Claims. — When any difference arises between the Consignee and the Railroad Company, it will make the adjustment of such differences much easier if the matter is handled in the usual manner prescribed by the transportation companies, and the following suggestions are offered as applying to any case of a misunderstanding regarding freight or for loss or damage of goods. To Prevent Disputes. — Always look over your freight bills before you sign the receipt showing that everything is O. K. Notice whether the number of packages is correct, and also notice whether or not they are all in good con- dition. Also notice the weight at which the different items are billed. In case of any error, ask your agent to make correction before you sign for the goods and pay the freight, or, if he will not, or cannot make the correction asked, have him give you a suitable notation on your freight bill. Do not let your agent put you off with the statement that he will "send a notation in to the Company;" or the statement that "you will have to take the matter up with the shippers." There is only one way that the Railroad Company will adjust disouted matters of this kind, and that is by a proper claim being put in, and this claim will not and cannot prove anything without your agent's notation. If you sign the receipt without such notation the railroad company has your own signature to the statement that you have received all of the goods, and that they were in good condition. If you carelessly sign a freight bill for goods that you do not receive or for goods that are damaged, you should not ask shippers to assume the risk. CARRIERS' RESPONSIBILITY. — Shippers are not responsible for loss of, or damage to, goods in the hands of railroads, express or other transportation companies; neither are they responsible for overcharges of any kind on the part of such companies. Shipper's responsibility ceases when your goods are delivered to the carrier and their receipt taken for such goods. In case of any dissatisfaction resulting from error or negligence on such carrier's part, your recourse is on the carrier, and not on shippers. Shortage, or Damage. — If there is a shortage of items or if there are any of the boxes or packages that appear to have been tampered with, or that are damaged, INSIST upon your agent's making a suitable notation on your freight bill before it is paid. Then save your freight bill for prof. It is your right to insist upon this notation, for it is the only evidence that you can offer that you have not received the full amount of goods, or that everything is not as it should be. Overcharges. — In case you have been overcharged, either in rate or in the amount of weight and your agent will not voluntarily make correction before the bill is paid, insist upon correction or suitable notation just the same as if the goods had been short or had been damaged. Claims. — Any disputed matter that your agent cannot or will not adjust, will usually receive due attention if properly presented to the Railroad Company's claim department, and it is'for the purpose of giving the facts in the case that your agent's notation is insisted on. A claim should always be entered for any loss, damage, or overcharge for which the railroad company is responsible, and which cannot be adjusted by other means. Transportation companies are as desirous to treat their customers well as merchants are, and by following the plan outlined above you will protect both yourself and the shippers and secure proper adjustment of any errors on the part of the company's agents or employees. Payment. — In case of such loss, damage, or overcharge, commercial laws, as well as usage, require payment tc be made in full to shipper. 248 LAWS OF CARRIERS, SHIPMENTS IN BOND AND FREIGHT CLAIMS It would be an injustice to ask the shipper to stand a loss for which he is in no wise to blame and for which you have recourse upon the responsible party. Notes. — Goods should be carefully packed, but Railroad Companies frequently inspect packages for evidence of wrong classification, and have the power to raise weights or classifications at will of Inspector and in such cases goods are often thrown back in the boxes in disorder or more or less damaged. — Such cases are to be treated as noted above. (Loss or damage.) Railroad Companies set their own weights on goods shipped. No matter what weights are given by the ship- per, the R. R. Co. can change them at will, and on this account you should not hold shipper responsible where goods are billed above actual weights. Entering a Railroad Claim.-— Unless Railroad Claims are properly presented and accompanied by required proof, they will not receive consideration. Hence it is well to use care in making them out, and to keep a record of all waybill numbers, dates, amounts, etc., so that they may be referred to in future correspondence regarding your clam. — Your freight bills show all numbers, etc., that are required. The form, or wording, of a claim is immaterial, but the claim must show wherein the Railroad Company is at fault, and it must be accompanied by the original Bill of Lading and the original Freight Bill; and, if the claim is for loss or damage, by the original invoice for the goods. If originals cannot be found copies can usually be substituted if the claimant will guarantee against further claims. The best and most simple manner of entering a claim is about as shown below, as it contains a record of all numbers, dates, etc., and a list of papers that are attached. This list is a check against any of the papers being removed or lost. CLAIM BLANK (City and State) (Date) Mr. ( Agent V Name and Title) Agent, (Name of R. R.) -, 19 _R. R. Co. (City and State) Claimant's Number R. R. Co.'s Number Total Amount I (or we) hereby make claim for_ Shipment made from Shipped by (Loss, Damage, or Overcharge) to to on shipment as listed below: Date of Bill of Lading Date of Waybill Pro. No. • Date of Freight Bill .Waybill No. Car Number. Weight Billed (for use if overcharged) Actual Weight. (for use if overcharged) Amount Charged ( for use if overcharged) Correct Amount (for use if overcharged) Claim is for the following items (State whether lost, damaged, or overcharged) (Claim Blank should have a number of ruled lines here , a nd on them should be listed clearly each and every ite m of the claim, giving prices or amounts just as given in an invoice for *a bill of goods.) Attached find : Original Bill of Lading. (Needed in all claims.) Original rreight Bill. (Needed in all claims. Should also mention here any loss or damage shown by this paper.) Original Invoice. (If for loss or damage claim.) (Itemize here any other papers you may attach to substantiate your claim. Your carbon copy will prove just what evidence you have submitted.) Signed, (Claimant's Signature.) The claimant should keep a carbon copy of the claim, so that he may know positively just when and in what manner his claim was made out. The Railroad Company may lose your claim, but your copy will show positively just what papers you surrendered with your claim. In most cases it is preferable that the claim be sent direct to the Company's Claim Agent, rather than to your local agent If claim is not settled within a reasonable time, write your claim agent, stir him up every three or four weeks. UOCHBULHRY OF MERCANTILE TERMS Abandonment. — In marine insurance, the surrender Of a ship or of goods by the owners to the underwriters. Abatement. — A sum deducted from the face of a bill or debt, for damage, overcharge, prepayment, etc.; a dis- count or rebate. Acceptance. — The act of honoring or accepting; also the instrument accepted. Accommodation Paper. — A note, draft, acceptance, or other paper issued to enable the person receiving it to borrow money or get credit, and not as an evidence of indebtedness on the part of the person giving the paper. Account. — A subdivision of the Ledger for recording the debits and credits that relate to a person or firm, or to a special class of transactions. Accountant. — One skilled in the theory and art of accounting ; a bookkeeper. Account=Current. — A special itemized statement of the business transactions between two persons or firms, for a given period during which each has had dealings with the other on account. The account-current is usually an itemized transcript of the Ledger account, and made out with the view of ascertaining the equated cash bal- ance- Account Purchase. — A detailed statement rendered by an agent to his principal, showing the particulars of purchase, expense, and gross cost. Account Sales. — A detailed statement rendered by a commission merchant to his principal, showing the par- ticulars of sales, expenses, and net proceeds. Accrued. — Interest due to date. Adjustment. — An agreement as to an account or claim ; a settlement. In insurance, the act of ascertain- ing the amount of the indemnity due the insured, also the apportioning of the amount among the underwriters. Adjustment Entry. — An entry for the purpose of cor- recting an error. Administrator. — One who is legally appointed to man- age the affairs of the estate of a deceased person. Ad Valorem. — According to value. Adventure.— Property invested or ventured in a par- ticular enterprise; a speculation ; a shipment, especially, a shipment at sea. Advance. — Increase in price ; money paid on goods before they are delivered. Advice. — Announcement by letter, usually of goods Shipped or of bills sent for acceptance or collection. Affidavit. — A special sworn statement in writing. Agent. — One who acts. in a legal capacity for another; a legal representative. Antedate. — To date before the real time. Appraiser. — One who sets a value upon property. Appurtenances.— Things going with, or belonging to. Arbitration. — A method of settling differences, by referring the matter in controversy to the decision of dis- interested parties. Arrears. — A sum or sums not paid when due. Articles of Copartnership. — The written instrument or contract by the terms of which a copartnership is formed. Assets. — Resources consisting of property, money or collectible debts, or of anything convertible into money. Assessment. — Valuation of property for the purpose of taxation ; an amount to be collected from stockholders of corporations to meet expenses, pay debts, etc. Assignee. — One to whom is transferred the possession of property to be managed or disposed of for tne benefit of the creditors of an insolvent person, firm, or corporation. Assignor. — One who transfers his property to an as- signee for the benefit of his creditors. Assignment. — The act of transferring property to an assignee. (See "Assignee.") Assume. — To undertake a responsibility, as to assume the payment of a debt, or the disposal or control of property. Association. — A union of several persons for the carry* ing out of some undertaking. Assurance. — Guaranty against loss; insurance. Attachment. — A legal writ, or order, authorizing the seizure of property for the satisfaction of a debt or claim. Attorney. — A general agent ; a lawyer. Audit. — To examine and verify accounts. Auditor. — One who examines and verifies accounts. Avails. — Proceeds or profits. Average. — The apportionment of losses of goods at sea ; to find the equated time at which the balance of an account falls due. Average Investment. — The investment which, for a given time, as one day, or one month, is equal to one or more investments for different times. Bail. — Surety for the appearance of a person at a trial, either as a witness or to answer to a criminal charge. Bailment. — A delivery of goods to be held in trust. Balance. — The difference between the two sides of an account ; to close an account. Balance of Trade. — The difference, in value, between the imports and exp®rts of a country. Bank Balance. — The net amount due to a depositor by the bank. Bank Book. — The pass book of a depositor in which the banker records the amounts deposited, and the deposi- t n'a checks which have been paid by the bank. Bankrupt. — The condition of being unable to meet one's financial obligations ; an insolvent debtor. Bearer. — The person who presents for payment, a note, check, order, etc. Bid. — A competitive offer, oral or written, to purchase or sell property, or perform some service for a stated sum. Bill. — A general name given to various statements in writing, as of goods sold, services rendered, etc.; a note or draft, particularly a foreign draft. (See "Bill of Ex- change.") The finding of a grand jury; a proposed law when introduced into a legislative body. Bills of Exchange. — A foreign draft, sometimes called simply a "bill." Bill of Lading. — An itemized receipt for goods deliv- ered to a transportation company, and including a contract for their delivery at a specified place. Bill of Parcels. — An itemized bill or list of goods sold [249] 250 VOCABULARY OF MERCANTILE TERMS including a statement of quantities, prices, terms, etc., and given by the seller to the buyer. Bill of Sale. — A formal instrument transferring the ownership of personal property, and usually given as se- curity for the payment of a debt. The legal effect of a bill of salens to transfer ownership without possession. Board of Trade. — An incorporated association of busi- ness men, having for its object the general advancement of commercial and business interests. Virtually, the same as a Chamber of Commerce or Merchant's Exchange. Bona Fide. — In good faith ; genuine. Bond. — A written instrument given under seal by an individual, a firm, or a corporation, in which the signer pledges himself to do or not to do some specified thing. The term is also applied generally to the interest-bearing obligations of municipal and private corporations. Bonded Warehouse. — A building, or warehouse, in which goods subject to revenue duties are stored until the importer either pays the duties, or re-exports the goods. In case the goods are re-exported, the duties are not re- quired to be paid. The owner of the goods must give a bond for the payment of the duties. Bottomry Bond.— A mortgage on a vessel itself, as security, Breakage. — A deduction from the cost or from the duties due on fragile goods as glassware, bottled goods, etc. Broker. — A term applied to a class of general agents, or middlemen, through whom various business transac- tions are effected, and various contracts are entered into by other parties. Brokerage. — The percentage or commission charged by a broker for his services. Bullion.— Uncoined gold and silver. Capital. — Money or other resources invested in a business. Card System. — A method of keeping accounts by means of cards ruled in ledger form and kept in alpha- betically arranged cases, with accompanying indexes. Cargo. — The total lading or freight of a vessel. Cash. — Money of account or any current representative thereof, as banK bills, cnecks, money-orders, and the like. Cash Balance.— 1 ne equated amount due upon any open account at a given date. Cashier. — The principal financial officer of a bank and who has personal charge of the c;ish ; in general, any custodian of the cash belonging to a business enterprise. Certificate.— Awntten statement formally setting forth some fact of advantage to the holder. Certified Check — A check that has been accepted, or certified to by the bank on which it is drawn. Charges.— A general term including the expenses incurred in either the purchase or sale of goods, as coop- erage, drayage, packing, wharfage, freight, etc. ' Charter Party.— A written contract for the hiring or chartering of a ship. Chattels.— Property other than money or real estate. In a broader sense, property owned by a mercantile firm in conducting its business but which is not included in the stock in trade ; such as scales, delivery teams, trucks for removing merchandise, etc. Check.— A written order by the depositor of a bank directing the payment of a specified sum of money. Circulating fledium.— Coin and bank notes, or paper convertible into money on demand ; currency. Clearance. — A certificate authorizing a vessel to leave port. Clearing — The exchanging of drafts and settling of balances between different banks. Clearing-house. — The place where clearings are ef- fected. See "Clearing." Collaterals. — The pledges of stock, notes, or otuer valuables for loans of money, or other indebtedness. Commerce. — The general exchange of commodities between states or nations ; trade. Commercial Paper.— Bills of exchange, drafts, prom- issory notes, checks, etc., used in the course of trade. Common Carrier. — Any person who for a considera- tion undertakes the general carriage of goods or persons. Compound. — To settle with a debtor or creditor by paying or receiving a part of the amount due as settle- ment in full. Compromise. — An agreement embracing mutual con- cessions. Consignment. — Goods shipped to a commission mer- chant and to be sold on the account of the consignor. Consul. — An agent for a government, who resides in a foreign country, chiefly for the purpose of protecting the commercial interests of the citizens of the country which he represents. Contraband. — A term applied to goods, the sale, im- portation, or exportation of which is prohibited by law; also applied to goods that have been smuggled or imported into a country without payment of the legal duties. Contract. — An agreement between two or more parties for a specified consideration, to do, or not to do, a particu- lar thing. Copyright. — The right allowed bylaw to the author of any book, printed article, work of art, etc., by which he is entitled to the sole privilege of publishing the same. Cost Hark. — A private mark in cipher, and attached to goods in order that the merchant or salesman who han- dles the goods may know their original cost. Counter Entry. — An entry that cancels or annuls some previous entry. Coupon.— An interest certificate attached to a bond, and representing an installment of interest which is due at a specified time. When paid, the coupons are cut off. Coupon Bonds.— Bonds with coupons attached. (See "Coupon.") Credentials. — Written authority to act in a specified capacity ; recommendations. Credit. — Applied to the right-hand column or folio of a book of entry; financial standing; allowance of time in the payment of a debt ; favorable reputation. Cross Entry. — An entry that adjusts an erroneous entry that has previously been made in some amount. Currency. — That which circulates as lawful money; the circulating medium. Customs.— The duties imposed by law upon imports and exports. In the United States there are no customs upon exports. Custom=house. — The office where vessels are cleared and where duties are collected. Damages. — A sum demanded on account of injury to person or property. Dead Freight.— The amount of freight paid by the charterer of a vessel for that part of the vessel which he does not occupy ; in railroad business any imperishable freight, as grain, dry-goods, coal, etc., in distinction from live freight which includes live stock, dressed meats, fruits, vegetables, and other perishable products. Debenture. — A written acknowledgment under seal, of a debt, usually applied to certificates or obligations of corporations, issued in a form to be conveniently bought and sold as investments, also in customs business, a cer- tificate of drawback entitling the importer to a certain VOCABULARY OF MERCANTILE TERMS 251 sum of money from the government, on the re-exportation of specified goods, the duties on which have been paid. Debit. — A term applied to the left-hand column or folio of a book of entry; an entry on the debit side ; to enter against, or charge. Deed. — A written contract, under seal, transferring the title to real estate. Debtor. — In debt to; one who owes another. Defalcation. — A deduction ; a fraudulent deficiency in money matters ; a breach of trust. Defaulter. — One who fails to account for money or valuables entrusted to his care. Delivery. — Act of surrendering or transferring pos- session. Demand. — A legal presentment of a claim ; a formal asking for what is due. Demurrage. — Forfeit money for detaining a vessel in port longer than the specified time. Deposit Slip. — A form furnished by a bank to a de- positor for the purpose of recording an itemized statement of the different items of his deposit. Depreciation. — A falling off in value; a lessening in price as compared with a given standard, as in the case of stocks, or other credits which are said to be " depre- ciated " when they are rated at less than their face or par value. Dishonor. — A refusal to accept a draft, or to pay an obligation when presented. Dockage.— A charge for the use of a dock ; a deduc- tion from wages. Dormant.— Not acting; applied to a partner who takes Do share in the active business, but who shares in the losses or gains; often called a "silent" partner. Double Entry. — A system of bookkeeping in which equal debits and credits are made for each transaction. Draft. — A written order on a bank or person, directing the payment of money to some person or firm named in the draft. Drawback.— Duties refunded to an importer upon goods that are to be re-shipped for exportation. Drawee. — The person upon whom a draft is drawn. Drawer. — The person who signs a draft. Drayage. — A charge for the transfer of goods 4>y a drayman. Due=bill. — A brief written acknowledgment of a debt, equivalent in effect to a promissory note. Duplicate. — Consisting of two parts ; one of two things that are exactly alike ; to make an exact copy. Duties.— See "CusUms." Earnest. — Part payment of money, or delivery of a por- tion of the goods sold, as an evidence of a contract of sale. Effects. — Any kind of goods or property. Embargo. — Act of a government prohibiting ships from leaving port. Embezzlement. — Unlawful appropriation of money or other property by one holding it in trust. Emporium. — A commercial center ; a mart. Entry. — The formal recording of a transaction in any book of record ; the lodgment of a ship's papers in the custom-house on arrival at a port of entry. Exchange. — (1) A term applied to the settlement by means other than the transmission of money or goods, of accounts between persons living far apart, and separated by natural boundaries. When such adjustments are ef- fected between residents of different countries, the process is known as Foreign Exchange; when between residents of the same country it is called Domestic Exchange. Ex- change is usually effected through the agency of banks. (2) Bank drafts, Bills of Exchange, or other negotiable orders by means of which exchange is effected. (3) The amount of commission, or compensation, paid to a bank or broker, for effecting exchange. This may be a certain percentage of the face of the draft or bill, or it may be a fixed fee that is charged for the issue of a draft and within certain limits, regardless of the face amount. (4) The rate per cent, or the rate of charge per monetary unit, for the issue of a draft or bill. In England, market quotations of exchange are expressed in pence and far- things, for each pound sterling, and in the United States at certain ra^e per cent as i%, \% etc., of the face of the bill. Executor. — A person named in a will to sett.'e the estate of the testator. Exports. — Goods shipped or exported to a foreign country. Extension. — The total amounts of the separate items in a bill, invoice, or book, carried out and entered in the proper column, called the extension column. Face. — The sum of money named in a note, draft or other commercial paper; the amount of a bill or debt irre- spective of .aterest charges, discounts, etc. Factor. — An agent in buying or selling; a commission merchant. Failure. — Act of becoming insolvent. Finance. — A general term relating to money and its investment or expenditure. Financier. — One skilled in finance ; an expert in monetary affairs. Firm. — The persons forming a business partnership; the name by which a partnership is generally known, as the firm of Hart & Son. Fiscal. — Pertaining to the revenues or finances of the government, whether national, state, or municipal. Fiscal Year. — The financial year of a business firm, corporation, or governmental department, at the close of which, the accounts are balanced and statements of the financial operations made out. The fiscal year of the United States Government begins July 1 of each year and ends June 30 of the following year. Fixtures. — The immovable furniture of a store or office, as the counters, shelving, gas-pipes, etc. Floating Debt. — The miscellaneous and unfunded debts of a government or corporation, such as demand notes, treasury bills, acceptances, etc., due at different dates, and subject to liquidation or extension. Folio. — A page, or the two opposite pages, of an account book. Footing. — Adding a column of figures ; the total or sum of a column of figures. Foreclose.— To enforce the terms of a mortgage by taking legal possession of the mortgaged property. Form. — A printed blank to be filled out by the inser- tion of details, as the form for a note, deed, mortgage, or the like. Forced Sale. — A sale of goods or other property made under necessity or legal compulsion. Free Trade. — The policy of conducting international commerce without duties; also, in a restricted sense, the policy of levying the duties of a country with regard solely to revenue, and without reference to the protection of the country's own industries. Freight. — Goods in course of transportation, whether by land or water ; also, the sum charged for such trans- portation. 252 VOCABULARY OF MERCANTILE TERMS Fund. — To collect the floating debt (see " Floating Debt ") of a corporation or government into a more or less permanent form at a fixed rate of interest, and usually pay- able within a fixed period of years ; any accumulated stock or capital set apart for a special purpose. (See " Sinking Fund "); in the plural, i. e., "the funds," the interest-bear- ing national debt of Great Britain. Furniture. — The movable articles of a store or office, as chairs, tables, carpets, etc. Goods. — Any commodities or articles of trade collect- ively, wares, merchandise. Good Will. — The advantage or benefit which is ac- quired by an establishment, beyond the mere value of the capital stock, funds, or property employed therein. Good will may arise through the use of a particular name or trade mark, through extensive advertisement, or through any other agency that creates a favorable reputation for the business. Grant. — The conveyance, by government, of large bodies of land to individuals or corporations; the body of land thus conveyed. Gross. — Twelve dozen ; in bulk, including cask, box, wrappings, etc., as the gross weight of goods; whole cost or amount including charges, as gross cost, gross sales, the opposite of net. Guaranty. — A security against loss ; a contract in which one person undertakes to insure the performance *>f an agreement made by another. (Also written "Guar- antee.") High Seas. — The portion of the ocean that is not within the jurisdiction of any nation ; as a general rule, that por- tion that is not within a marine league (about three miles) of the general shore line. Honor. — To accept or pay a note, draft, or other obli- gation when presented, or when due. Hypothecate. — To pledge negotiable securities, stocks, bonds, or the like, for the payment of a debt, or as security for a loan ; to mortgage without giving possession. Imports. — The general commodities which are brought into a country from other countries. Importer.— One engaged in the business of importing goods from a foreign country. Income. — The annual receipts of a person or corpora- tion ; gains from any source. Indemnify. — To reimburse, to recompense for any loss or injury ; to make sure against future loss or liability. Indemnity. — That which is given to indemnify against Joss, either actual or possible. (See "Indemnify.") Indenture. — Any formal writing containing a contract. Indorsement. — Act of writing one's name on the back of a check or other commercial paper. Insolvency. — Inability to pay one's debts. Installment. — One of several parts into which a debt is divided for payment at different times. Installment Plan. — A widely introduced system of selling various kinds of property as town lots, furniture, bicycles, pianos, etc., by which the dealer retains the ownership of the thing sold, until it is paid for, the pay- ments being made in installments, and the seller retaining the right to retake the article without repaying any part of what has been paid, should the buyer make default in any installment. Insurance. — Guaranty of whole or partial indemnity against loss of, or damage to property, loss of life or health, or injury to body ; the sum paid for such guaranty. Insurance Policy. — The formal instrument containing the contract between an insurance company and the per- son whose life or property is insured. Interest.— A sum charged for the use of money or its equivalent. Intestate. — Applied to deceased persons who have made no provision by will for the disposal of their prop- erty ; the term is also applied to any property not thus disposed of, as an intestate estate. Investment. — The act of expending money or other capital for property with a view to future gain ; the total money or other capital that one invests in a business. Invoice Book. — A book for filling or copying the several invoices of goods purchased by a merchant. Jettison. — The throwing overboard of goods in order to ease a ship in time of storm or danger. Also written jetsam, jetsen, jetson, etc. Jobber. — A commercial " middleman " who buys goods of the importer or manufacturer, and sells to the whole- saler or to the retail dealer. Job Lot. — A quantity of goods of different kinds or of different values, that are sold as a whole, usually without invoicing and at a comparatively low price. Joint Stock Company. — A species of partnership in which the business is conducted similarly to that of cor- porations. Joint stock companies are unchartered, do not use a common seal, and as a rule, cannot exercise general corporate rights. Their powers and privileges depend upon the statutes of the several states. Owing to the facility with which corporations may be formed in most of the states, joint stock companies are becoming obsolete in the United States. Jurisdiction.— The right of a court to try a case ; the territory within which the power of a court is exercised. Judgment.— The judicial decision or decree of a court ; the document setting forth such decree especially applied to judicial awards in civil causes ; hence, a debt ascertained and supported by a judicial decision. Judgment-note. — A non-negotiable promissory note in the usual form, but containing a clause giving to the payee a power of attorney to appear before a court and confess judgment in behalf of the maker of the note. The holder of a judgment-note is relieved from the necessity of bring- ing suit for its collection, in case the maker fails to pay it at maturity. Leakage. — An allowance of a certain rate per cent, for the leaking of casks or waste by leaking. Lease. — A written contract transferring the possession and right to occupy and use lands, tenements, or other real property for a fixed period of time, and for a specified compensation to the owner ; to grant or give possession of by lease, as to lease a farm to a tenant ; to rent or take by a lease, as to lease a house from the owner. Legacy. — Money or other property left, by will ; a be- quest. Legal Tender. — A legal offer of money in satisfaction of a debt ; money which may be legally offered in satis- faction of a debt, as between private individuals, firms and corporations. All money of the United States is a legal tender except national bank-notes. The silver coins of the United States of a denomination less than one dollar are a legal tender in sums not exceeding ten dollars. The five-, three-, and one-cent pieces are a legal tender in sums not exceeding twenty-five cents. Foreign coins or bills are not a legal tender in the United States. Letter of Credit. — A letter issued by the banker for the purpose of giving the holder a credit not exceeding a specified amount, with one or more banks in distant countries. It is usually issued to travelers, and to enable VOCABULARY OF MERCANTILE TERMS 253 them to avoid the Inconvenience of carrying considerable sums of money. Liability.— A debt ; that for which one is liable. License. — Legal authority in proper form to engage in gome business or perform some act named in the license. Lien.— The legal right to retain possession of property belonging to another until some debt or charge arising in connection with the property shall have been paid. Limited. — A term affixed to the name of a corporation (or, in some States, a joint Stock Company) and signify- ing that the liabilities of the individual stockholders are limited to a specified sum, usually to the par value of the shares held by each. Liquidation. — Payment of debts or claims. Manifest.— A lisc of a ship's cargo. Maturity.— The time at which a note, draft, or other obligation falls due. Maximum.— The highest price or rate. Mercantile Agency. — A concern whose business it is to supply information relative to the financial standing, credit rating and general business reputation of persons, firms, or corporations that are engaged in mercantile enterprises. Merchandise. — Any movable object of trade or traf- fic ; specifically, the goods offered for sale by a dealer. Merchants' Exchange. — A place where merchants, bankers, brokers, and other business men of a city meet to transact business, discuss the interests of trade, or gather information regarding any line of business. Minimum. — The lowest rate or price. Money.— Originally, any co?n bearing a government Stamp, now extended to include bank bills, government notes, or other substitutes for money that may be used for the final satisfaction of debts, but not including checks, notes, or other private obligations ; in a broader sense, anything that is used as a general medium of exchange ; thus among the Virginian colonists, tobacco was used as money. Monopoly. — An exclusive right to carry on a traffic. The right may be conferred by law, as in the case of a pat- ented article, or it may arise from exclusive possession of the means for obtaining the monopolized commodity. Mortgage. — A contract by which the payment of a debt is secured by the conditional transfer of the title to property. Net. — Lowest; an amount not subject to further de- ductions, as net weight, net price, net profit, etc. Negotiate. — To arrange for or bring about a purchase, sale or loan. Negotiable Paper. — In law, any evidence of a debt, as a check, note, draft, or other instrument which the holder may transfer to another, who shall have the right to en- force payment in accordance with the terms set forth in the instrument, and regardless of the equities subsisting be- tween the original parties. In order that full negotiability may attach to an instrument, it must be obtained in good faith and for value, and before its maturity. Notary or Notary Public. — A public official who is spe- cially authorized to acknowledge instruments under seal, protest commercial paper for non payment, administer oaths, etc. ' In the United States, notaries-public are state officers, and are usually appointed by the governor and at his discretion. Note. — Any written promise to pay money. Open Account. — An unsettled or running account. Open Policy. — An insurance policy in which the value of the property covered by it is not fixed. Option.— A stockbroker's term for the privilege of taking or delivering on a future day a certain amount of given stock at a price agreed upon. An option of calling for the delivery of stock is known as a " call ; " an option of delivering stock, a "put." Both are called "futures" and in many states, transactions of this class are forbidden by law. Outlaw. — To become voidable through the statute of limitations. Said of debts that have not been collected within the time allowed by law. Overdraft. — The amount by which a bank-check or draft exceeds the bank balance to the credit or the drawer; a draft which exceeds in amount the bank-balance against which it is drawn ; the resources of a bank, consisting of debts due the bank by depositors who have overdrawn their accounts. Par. — Equality of commercial and face value, thus stocks or other commercial paper that sells for its face or issue value, is said to be at par; if sold below this value, below par; if above this value, above par. Partnership. — The relation between individuals whd unite either their property, their services, or their credit for the purpose of conducting some enterprise for their mutual advantage. Pass Book. — A book in which a trader enters the articles sold on credit, and then passes, or sends it to the purchaser ; a bank-book. Pawnbroker. — One who makes a business of loaning money that is secured by a pledge of personal property, which pledge is retained by the lender if the money is not paid within a prescribed time. Payee. — The person to whom a note, check, or other commercial paper is payable. Postdate. — To put a date on a document later than the actual date on which it was written. Posting.— Transferring the debits and credits from the Journal or other books to the Ledger. Power of Attorney. — An instrument by which one person authorizes another to do certain acts for him, as to make contracts, sign deeds, issue checks, etc. Premium. — Amount in excess of par ; the sum charged for insurance. Price Current. — A regularly published price-list of the general commodities that have been sold in the market during a given period. Principal. — The person for whom an agent acts; sum upon which interest is charged. Protest. — A formal declaration, usually by a notary public, that demand has been made for the payment of a note, draft, or other commercial obligation, and that pay- ment has been refused. Quotations. — The published market price of commodi- ties, stocks, bonds, etc. Rating. — Commercial reputation or standing of a busi- ness firm, as estimated and published by a recognized mer- cantile agency. (See "Mercantile Agency.") Real Estate. — Land and such fixtures, improvements, growing crops, buildings, etc., as go with the land when it is sold. Rebate. — An allowance by way of discount ; a deduc- tion from a gross amount. Receipt. — A written acknowledgment of having re- ceived something specified, with date, purpose, signature, and such other particulars as the case requires. Receiver. — A person appointed by a court to take the custody and management of property involved in any liti- gation, or for the purpose of closing up the business of a firm or corporation. Refund, — To pay back or return money ; to convert 9 254 VOCABULARY OF MERCANTILE TERMS funded debt into a new debt, and usually at a lower rate of interest. Registered Letter.— A letter for which, during its transmission, each postal employee gives a receipt when it passes into his hands, thus making its preservation and delivery more certain. Remittance. — Act of transmitting a sum of money or its equivalent to another place ; the money sent. Renewal. — The act of giving a new note, acceptance,* or other obligation for one that is due. Retail.— To sell in small quantities. Revenue. — Income of a state or nation derived from duties, taxes, or other sources. Revoke. — To repeal or cancel; to recall authority, as to revoke a will, or an agency. Salvage. — A legal allowance made to those who, al- though under no obligations to do so, rescue a ship and its cargo or other property from danger or destruction by shipwreck, fire, etc. Shipment. — A quantity of goods delivered at one time for transportation ; a consignment. Sight. — Upon presentation, as to draw a draft payable it sight. Signature. — The name of a person written by himself, or any mark or sign executed by him, and representing his name ; the authoritative signed name of a person, firm, or corporation, and which if authoritatively affixed to any document, is binding upon the person or firm which the signature represents. Signature-Book.— (See page 3.) Single Entry. — A system of bookkeeping in which but one record, or entry is made for each transaction. Sinking Fund. — A fund set apart from the earnings of a corporation, or from the revenues of a government or municipality, for the extinction of a bonded or other debt. Silent Partner. — A dormant partner ; see " Dormant." Solvent. — Financially sound ; able to pay all liabilities. Spot Cash, — Terms of sale where goods are to be paid for on delivery. Statement. — An itemized list of the debits and credits of a personal account, a summary of a business covering a certain period of time. Stipulation. — A special part of a bargain or contract, as a stipulation that rent is to be payable quarterly. Stock. — Amount invested in a business; goods on hand ; the capital of a corporation as represented by the shares ; often in the plural, as a dealer in stocks. Stoppage. — The right of a shipper of goods sold on credit to resume possession of them during their transit, or while they are in the carrier's warehouse, and prior to their delivery to the buyer. Storage. — A charge for keeping or storing goods in a warehouse or other place of safe keeping. Sundries.— Miscellaneous small things; in journaliz- ing, a term indicating that several accounts are involved in one entry. Surety. — A person who renders himself responsible foi the performance of another's contracts, the payment o? hi? debts, or for his appearance in court; security. Suspense Account. — An account for the collection of entries of sales made to unknown parties. Syndicate. — A combination of capitalists who unitp for the purpose of carrying out some special financial undertaking. Tare. — A deduction from the gross weight of goods, of an amount approximately equal to the weight of the box, crate, or other package containing them. Tariff. — A scale or table of charges ; a list or table of duties to be paid on imported goods. Teller.— An employee in a bank whose business it is either to receive or to pay money over the counter. There are usually two, a receiving teller and a paying teller. Tender. — An offer. (See "Legal Tender.") Terms. — The conditions under which goods are sold, usually with reference to the term of credit and the dis counts to be allowed. Trade Mark. — A distinguishing mark or device, usu- ally copyrighted, that the manufacturer of goods impresses upon his goods, or labels, or inserts in his advertisements. Tonnage.— The carrying capacity of a ship. Trust. — A union of. several corporations for. the pur- pose of placing the entire business under one management Trust Certificate. — A certificate given to a stockholder when he transfers his stock to a trust. Trust Company. — An incorporate concern that re- ceives deposits which it loans on stocks, bonds, or other safe security. Trust companies often undertake the management of funds belonging to large estates, or act as financial agents for municipalities and other cor- porations. Underwriter. — One who insures or carries on the busi- ness of insurance ; an insurance company. Usury. — An interest charge exceeding the maximum rate allowed by law. Some states have no usury laws. Valid. — Good or sufficient in point of law; as a valid contract. Vendor. — The person who vends, or sells any article. A dealer. Void.— Of no effect legally ; not enforceable. Voucher. — Anything that evidences the correctness of accounts ; a receipt, canceled check, or other evidence of payment. Waive.— To relinquish a legal right. Wares. — Goods especially manufactured ; merchandise of any kind. Way Bill. — A detailed list of the goods in a shipment sent by railroad. Wharfage.— A charge for the use of a wharf. COMMERCIAL KBBRE1ZIKTIONS A. 1 first quality acc'c acceptance A. D. The Year of our Lord. adv adventure ad advertisement acct account Act. Sales . . . Account Sales Acct. Cur Account Cur- rent. Agt agent A. M forenoon amt amount Art article Asst Assistant j,v average Asst. or as'd assorted tgm't agreement Bal Balance B Rend Bill Rendered B. S Bill of Sale B. 30. Buyer's Option to purchase within 30 days. B. Flat without Interest B. B Bill Book B. C between calls bbl., brl. or B, « .. . . .barrel B. L Bili of Lading B. Pay Bills Payable B. Rec Bills Receivable Bk bank Bk. B Bank Book Blk black Bgs .bags Bdls bundles Bis bales Bkts baskets Bot bought Brot brought B O.. or b. o. buyer's op- tion. Bu bushels Bxs boxes Cap Capital Cs cases Com i commission | commercial Cons't or Con. Consignment Cr creditor or crate cts cents Ctg cartage Cwt hundred weight Dep't Department d pence do the same D.B Day Book dep deposit dft. or dr draft Div „ dividend Dis discount doz dozen Dr debtor dray.^ drayage ds days ea each E. E Errors excepted E. & O. E Errors and omissions excepted. end endorse Eng English Ent entry Ent'd entered Exch exchange Exp. . .Expense or Expenses Ex Divi. . .Without divi- dends or flat. Fav favor Fcp foolscap Fig'd figured fir firkin F. O. B., or f. o. b. ..Free on Board. Fol folio Fwd forward Fr French or Francs frt freight ft feet or foot gal gallon gr grain or gross guar guarantee hf half hhd hogshead hdkf handkerchief hund hundred I. B Invoice Book I. I. B ...Inward Invoice Book. i. e that is in.. . inches inv invoice Inv't or Inv'ry.. . .inventory Ins insurance Insol insolvency Int interest Inst present month I. O. TJ I owe you Jr Junior J. F Journal folio L. B Letter Book lbs pounds L Ledger L. F. , .Ledger folio mf'd manufactured M thousand Mem memorandum M. Bds mortgage bonds Mo month Mos months M. A month after date mfg manufacturing man'f manufacture Mdse merchandise MS., MSS .manuscripts mols,, or Mis molasses N. B Note Book N. B take notice N L New Ledger No number Nos numbers N. P Notary Public O. A Old Account O. K All right O. I. B., Outward Invoice Book. oz ounce or ounces P., pp page, pages P. B Pass Book P. O. D Pay on delivery P. C. B. . . .Petty Cash Book Pay t payment Pes., or ps pieces Pd paid Pkgs packages Pref preferred Per by pr pair prs pairs P. S postscript pts pints Pun puncheon P & L Profit and Loss per cent by the hundred P. O Post Office prox .next month qr quarter qts quarts qnts quintals Ry Railway R. W Regular Way or Rail Way. R. R Railroad R. Bds Railroad bonds Rec'r .Receiver Rec'd Pmt Received Payment. Rect receipt Rs. , or rls roils S^B ...Sales Book s shillings Schr Schooner Sh. .ship or shares Shipt Shipment sig signature sk sack St. dr sight draft Supt Superintendent stbt . „ . . . steamboat str steamei sunds sundries S. O., or s. o seller's option. stor storage super.,orS. P superfine m d \ Time Book x - D } Trial Balance T , j telegraph } telephone Treas Treasurer tc. tierces U. S . . United States ult last month ves vessel via By the way of viz To wit, namely W. B ..Way Bill W. N without notice wt .weight yds yards Yr year COMMERCIAL CHARACTERS @. at % account fo Percentum or by the 100. c /o care of ^ cents $ dollars £ pounds sterling # number, as # 25 # ' pounds, as 25 # ^ check mark /p% old account *tfy% new account 5 1 .. . five and one fourth 7 2 . . . .seven and two fourth* 6 3 six and three fourths (These combinations are used in marking dry-goods. The small figure at the righfc indicates fourths.) [255] Q UODJO MP 54!?47 UNIVERSITY OF CALIFORNIA LIBRARY